As filed with the Securities and Exchange Commission on June 27, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
RIVERVIEW BANCORP, INC.
(Exact name of registrant in its charter)
Washington 6035 applied for
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(State or other jurisdiction of (Primary SIC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
700 N.E. Fourth Avenue
Camas, Washington 98607
(360) 834-2231
(Address and telephone number of principal executive offices and
place of business)
John F. Breyer, Jr., Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
(202) 737-7900
(Name, address and telephone number of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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Calculation of Registration Fee
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Title of Each Class Proposed Maximum Proposed Maximum
of Securities Amount Being Proposed Offering Aggregate Offering Amount of
Being Registered Registered(1) Price(1) Price(1) Registration Fee
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Common Stock,
$0.01 Par Value 5,447,056 $10.00 $54,470,560 $16,507
Participation Interests 50,000 -- -- (2)
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(1) Estimated solely for purposes of calculating the registration fee. As
described in the Prospectus, the actual number of shares to be issued and sold
are subject to adjustment based upon the estimated pro forma market value of the
registrant and market and financial conditions.
(2) The securities of Riverview Bancorp, Inc. to be purchased by the Riverview
Savings Bank, FSB 401(k) Plan are included in the amount shown for Common Stock.
Accordingly, pursuant to Rule 457(h) of the Securities Act of 1933, as amended,
no separate fee is required for the participation interests. Pursuant to such
rule, the amount being registered has been calculated on the basis of the number
of shares of Common Stock that may be purchased with the current assets of such
Plan.
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.
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Cross Reference Sheet showing the location in the Prospectus
of the Items of Form S-1
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1. Front of Registration Front of Registration Statement;
Statement and Outside Front Outside Front Cover Page
Cover of Prospectus
2. Inside Front and Outside Back Inside Front Cover Page; Outside Back
Cover Pages of Prospectus Cover Page
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds; Capitalization
5. Determination of Offering Price Market for Common Stock; The Conversion and
Reorganization -- Stock Pricing, Exchange Ratio and
Number of Shares to be Issued
6. Dilution *
7. Selling Security-Holders *
8. Plan of Distribution The Conversion and Reorganization
9. Legal Proceedings Business of the Savings Bank -- Legal Proceedings
10. Directors, Executive Officers, Management of the Holding Company; Management of
Promoters and Control Persons the Savings Bank
11. Security Ownership of Certain Beneficial *
Owners and Management
12. Description of Securities Description of Capital Stock of the Holding Company
13. Interest of Named Experts and Legal and Tax Opinions; Experts
Counsel
14. Disclosure of Commission Position Part II -- Item 17
on Indemnification for Securities
Act Liabilities
15. Organization Within Last Business of the Savings Bank
Five Years
16. Description of Business Business of the Holding Company;
Business of the Savings Bank
17. Management's Discussion and Management's Discussion and Analysis of
Analysis or Plan of Operation Financial Condition and Results of Operations
18. Description of Property Business of the Savings Bank -- Properties
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19. Certain Relationships and Management of the Savings Bank -- Transactions
Related Transactions with the Savings Bank
20. Market Price for Common Equity Outside Front Cover Page; Market for
and Related Stockholder Matters Common Stock; Dividend Policy
21. Executive Compensation Management of the Savings Bank -- Executive
Compensation; and -- Benefits
22. Financial Statements Financial Statements; Pro Forma Data
23. Changes in and Disagreements *
with Accountants on Accounting
and Financial Disclosure
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*Item is omitted because answer is negative or item inapplicable.
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PROSPECTUS SUPPLEMENT
RIVERVIEW BANCORP, INC.
RIVERVIEW SAVINGS BANK, FSB
EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
This Prospectus Supplement relates to the offer and sale to participants
("Participants") in the Riverview Savings Bank, FSB Employees' Savings and
Profit Sharing Plan ("Plan" or "401(k) Plan") of participation interests and
shares of Riverview Bancorp, Inc. common stock, par value $.01 per share
("Common Stock"), as set forth herein.
In connection with the proposed reorganization of Riverview Savings Bank,
FSB ("Savings Bank" or "Employer") from the mutual holding company form of
organization to a wholly owned subsidiary of a stock savings and loan holding
company, Riverview Bancorp, Inc. (the "Holding Company") has been formed. The
reorganization of the Savings Bank as a wholly-owned subsidiary of the Holding
Company, the exchange of shares of Savings Bank common stock ("Savings Bank
Common Stock") by public stockholders of the Savings Bank (the "Public
Stockholders") for Common Stock and the sale of Common Stock to the public (the
"Conversion Offerings") are herein referred to as the "Conversion and
Reorganization." Applicable provisions of the 401(k) Plan permit the investment
of the Plan assets in Common Stock at the direction of a Plan Participant. This
Prospectus Supplement relates to the election of a Participant to direct the
purchase of Common Stock in connection with the Conversion and Reorganization.
The Prospectus dated ______, 1997 of the Holding Company ("Prospectus")
which is attached to this Prospectus Supplement includes detailed information
with respect to the Conversion and Reorganization, the Conversion Offerings, the
Common Stock and the financial condition, results of operation and business of
the Savings Bank and the Holding Company. This Prospectus Supplement, which
provides detailed information with respect to the Plan, should be read only in
conjunction with the Prospectus. Terms not otherwise defined in this Prospectus
Supplement are defined in the Plan or the Prospectus.
A Participant's eligibility to purchase Common Stock in the Conversion and
Reorganization through the Plan is subject to the Participant's general
eligibility to purchase shares of Common Stock in the Conversion Offerings and
the maximum and minimum limitations set forth in the Plan of Conversion. See
"THE CONVERSION AND REORGANIZATION" and "-- Limitations on Purchases of Shares"
in the Prospectus.
For a discussion of certain factors that should be considered by each
Participant, see "RISK FACTORS" in the Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"), THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER FEDERAL AGENCY OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY OTHER
AGENCY OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus Supplement is ______, 1997.
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No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus or this Prospectus
Supplement in connection with the offering made hereby, and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Holding Company, the Savings Bank or the Plan. This Prospectus
Supplement does not constitute an offer to sell or solicitation of an offer to
buy any securities in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation in such jurisdiction. Neither the delivery of
this Prospectus Supplement and the Prospectus nor any sale made hereunder shall
under any circumstances create any implication that there has been no change in
the affairs of the Savings Bank or the Plan since the date hereof, or that the
information herein contained or incorporated by reference is correct as of any
time subsequent to the date hereof. This Prospectus Supplement should be read
only in conjunction with the Prospectus that is attached herein and should be
retained for future reference.
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TABLE OF CONTENTS
PAGE
The Offering
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Securities Offered..........................................................................................
Election to Purchase Common Stock in the Conversion.........................................................
Value of Participation Interests............................................................................
Method of Directing Transfer................................................................................
Time for Directing Transfer.................................................................................
Irrevocability of Transfer Direction........................................................................
Treatment of Savings Bank Common Stock Held in the Plan.....................................................
Direction to Purchase Common Stock After the Conversion.....................................................
Purchase Price of Common Stock..............................................................................
Nature of a Participant's Interest in the Holding Company Common Stock......................................
Voting and Tender Rights of Common Stock....................................................................
Description of the Plan
Introduction................................................................................................
Eligibility and Participation...............................................................................
Contributions Under the Plan................................................................................
Limitations on Contributions................................................................................
Investment of Contributions.................................................................................
The Employer Stock Fund.....................................................................................
Benefits Under the Plan.....................................................................................
Withdrawals and Distributions from the Plan.................................................................
Administration of the Plan..................................................................................
Reports to Plan Participants................................................................................
Plan Administrator..........................................................................................
Amendment and Termination...................................................................................
Merger, Consolidation or Transfer...........................................................................
Federal Income Tax Consequences.............................................................................
Restrictions on Resale......................................................................................
Legal Opinions.....................................................................................................
Investment Form....................................................................................................
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THE OFFERING
Securities Offered
The securities offered hereby are participation interests in the Plan and
up to ______ shares, at the actual purchase price of $10.00 per share, of Common
Stock which may be acquired by the Plan for the accounts of employees
participating in the Plan. The Holding Company is the issuer of the Common
Stock. Only employees and former employees of the Savings Bank and their
beneficiaries may participate in the Plan. Information with regard to the Plan
is contained in this Prospectus Supplement and information with regard to the
Conversion and Reorganization and the financial condition, results of operation
and business of the Savings Bank and the Holding Company is contained in the
attached Prospectus. The address of the principal executive office of the
Savings Bank is 700 N.E. Fourth Avenue, Camas, Washington 98607. The Savings
Bank's telephone number is (360) 834-2231.
Election to Purchase Common Stock in the Conversion and Reorganization
In connection with the Savings Bank's Conversion and Reorganization, each
Participant in the 401(k) Plan may direct the trustees of the Plan
(collectively, the "Trustee") to transfer up to ___% of a Participant's
beneficial interest in the assets of the Plan to the Employer Stock Fund and to
use such funds to purchase Common Stock issued in connection with the Conversion
and Reorganization. Amounts transferred may include salary deferral, Employer
matching and profit sharing contributions. The Employer Stock Fund consists of
investments in the Common Stock. Funds not transferred to the Employer Stock
Fund will be invested at the Participant's discretion in the other investment
options available under the Plan. See "DESCRIPTION OF THE PLAN -- Investment of
Contributions" below. A Participant's ability to transfer funds to the Employer
Stock Fund in the Conversion Offerings is subject to the Participant's general
eligibility to purchase shares of Common Stock in the Conversion Offerings. For
general information as to the ability of the Participants to purchase shares in
the Conversion Offerings, see "THE CONVERSION AND REORGANIZATION-- The
Subscription, Direct Community and Syndicated Community Offerings" in the
attached Prospectus.
Value of Participation Interests
The assets of the Plan are valued on an ongoing basis and each Participant
is informed of the value of his or her beneficial interest in the Plan on a
_______ basis. This value represents the market value of past contributions to
the Plan by the Savings Bank and by the Participants and earnings thereon, less
previous withdrawals, and transfers from the Savings Fund.
Method of Directing Transfer
The last page of this Prospectus Supplement is an investment form to direct
a transfer to the Employer Stock Fund ("Investment Form"). If a Participant
wishes to transfer funds to the
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Employer Stock Fund to purchase Common Stock issued in connection with the
Conversion Offerings, the Participant should indicate that decision in Part 2 of
the Investment Form. If a Participant does not wish to make such an election, he
or she does not need to take any action.
Time for Directing Transfer
The deadline for submitting a direction to transfer amounts to the Employer
Stock Fund in order to purchase Common Stock issued in connection with the
Conversion Offerings is _______, 1997. The Investment Form should be returned to
___________ at the Savings Bank no later than the close of business on such
date.
Irrevocability of Transfer Direction
A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in order to
purchase shares of Common Stock in connection with the Conversion Offerings
shall be irrevocable. Participants, however, will be able to direct the sale of
Common Stock, as explained below.
Treatment of Savings Bank Common Stock Held in the Plan
Shares of Savings Bank Common Stock held in the Employer Stock Fund prior
to the consummation of the Conversion and Reorganization will treated in the
same manner as shares held by other Public Stockholders. Such shares will be
exchanged for shares of Common Stock pursuant to the Exchange Ratio. Application
of the Exchange Ratio will result in the holders of the outstanding Savings Bank
Common Stock owning, in the aggregate, approximately the same percentage of the
Common Stock to be outstanding upon the completion of the Conversion and
Reorganization as the percentage of Savings Bank Common Stock owned by them, in
the aggregate, immediately prior to the consummation of the Conversion. For
additional information regarding the treatment of Savings Bank Common Stock,
See, "THE CONVERSION AND REORGANIZATION" in the Prospectus.
Direction to Purchase Common Stock After the Conversion and Reorganization
After the Conversion and Reorganization, a Participant will be able to
direct that a certain percentage of such Participant's interests in the trust
assets ("Trust") be transferred to the Employer Stock Fund and invested in
Common Stock or to the other investment funds available under the Plan.
Alternatively, a Participant may direct that a certain percentage of such
Participant's interest in the Employer Stock Fund be transferred from the
Employer Stock Fund to other investment funds available under the Plan.
Participants will be permitted to direct that future contributions made to the
Plan by or on their behalf be invested in Common Stock. Following the initial
election, the allocation of a Participant's interest in the Employer Stock Fund
may be changed by the Participant on a monthly basis. Special restrictions may
apply to transfers directed by those Participants who are executive officers,
directors and principal
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stockholders of the Holding Company who are subject to the provisions of Section
16(b) of the Securities and Exchange Act of 1934, as amended ("Exchange Act").
Purchase Price of Common Stock
The funds transferred to the Employer Stock Fund for the purchase of Common
Stock in connection with the Conversion will be used by the Trustee to purchase
shares of Common Stock. The price paid for such shares of Common Stock will be
the same price as is paid by all other persons who purchase shares of Common
Stock in the Conversion Offerings.
Nature of a Participant's Interest in the Holding Company Stock
The Holding Company Stock purchased for an account of a Participant will be
held in the name in the Employer Stock Fund. Any earnings, losses or expenses
with respect to the Holding Company Stock, including dividends and appreciation
or depreciation in value, will be credited or debited to the account and will
not be credited to or borne by any other accounts.
Voting and Tender Rights of Common Stock
The Trustee generally will exercise voting and tender rights attributable
to all Common Stock held by the Trust as directed by Participants with an
interest in the Employer Stock Fund. With respect to each matter as to which
holders of Common Stock have the right to vote, each Participant will be
allocated a number of voting instruction rights reflecting such Participant's
proportionate interest in the Employer Stock Fund. The percentage of shares of
Common Stock held in the Employer Stock Fund that are voted in the affirmative
or negative on each matter shall be the same percentage of the total number of
voting instruction rights that are exercised in either the affirmative or
negative, respectively.
DESCRIPTION OF THE PLAN
Introduction
The Savings Bank adopted the Plan effective April 1, 1997 as an amendment
and restatement of the Savings Bank's prior retirement plan. The Plan is a cash
or deferred arrangement established in accordance with the requirement under
Section 401(a) and Section 401(k) of the Internal Revenue Code of 1986, as
amended ("Code").
The Savings Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code. The Savings
Bank will adopt any amendments to the Plan that may be necessary to ensure the
qualified status of the Plan under the Code and applicable Treasury Regulations.
The Savings Bank has received a determination from the Internal Revenue Service
("IRS") that the Plan is qualified under Section 401(a) of the Code and that it
satisfies the requirements for a qualified cash or deferred arrangement under
Section 401(k) of the Code.
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Employee Retirement Income Security Act. The Plan is an "individual account
plan" other than a "money purchase pension plan" within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As such,
the Plan is subject to all of the provisions of Title I (Protection of Employee
Benefit Rights) and Title II (Amendments to the Internal Revenue Code Relating
to Retirement Plans) of ERISA, except the funding requirements contained in Part
3 of Title I of ERISA, which by their terms do not apply to an individual
account plan (other than a money purchase pension plan). The Plan is not subject
to Title IV (Plan Termination Insurance) of ERISA. Neither the funding
requirements contained in Title IV of ERISA nor the plan termination insurance
provisions contained in Title IV will be extended to Participants or
beneficiaries under the Plan.
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH
THE SAVINGS BANK. A SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON
WITHDRAWALS MADE PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2, UNLESS A
PARTICIPANT RETIRES AS PERMITTED UNDER THIS PLAN REGARDLESS OF WHETHER SUCH A
WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE SAVINGS BANK OR AFTER
TERMINATION OF EMPLOYMENT.
Reference to Full Text of Plan. The following statements are summaries of
the material provisions of the Plan. They are not complete and are qualified in
their entirety by the full text of the Plan, which is filed as an exhibit to the
registration statement filed with the SEC. Copies of the Plan are available to
all employees by filing a request with the Plan Administrator. Each employee is
urged to read carefully the full text of the Plan.
Eligibility and Participation
Any employee of the Savings Bank is eligible to participate and will become
a Participant in the Plan following completion of 1,000 hours of service with
the Savings Bank within a consecutive 12 month period of employment and the
attainment of age 21. The Plan fiscal year is the calendar year ("Plan Year").
Directors who are not employees of the Savings Bank are not eligible to
participate in the Plan.
During 1996, approximately _____ employees participated in the Plan.
Contributions Under the Plan
Participant Contributions. Each Participant in the Plan is permitted to
elect to reduce such Participant's Compensation (as defined below) pursuant to a
salary reduction agreement and have that amount contributed to the Plan on such
Participant's behalf. Such amounts are credited to the Participant's deferral
contributions account. For purposes of the Plan, "Compensation"
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means a Participant's total amount of earnings reportable W-2 wages for federal
income tax withholding purposes plus a Participant's elective deferrals pursuant
to a salary reduction agreement under the Plan or any elective deferrals to a
Section 125 plan. Due to recent statutory changes, the annual Compensation of
each Participant taken into account under the Plan is limited to $160,000 (as
adjusted under applicable Code provisions). A Participant may elect to modify
the amount contributed to the Plan under the participant's salary reduction
agreement during the Plan Year. Deferral contributions are generally transferred
by the Savings Bank to the Trustee of the Plan on a periodic basis.
Employer Contributions. The Savings Bank currently matches 50% of a
Participant's monthly deferral contributions to a maximum of 3% of Compensation.
In addition, the Savings Bank may make discretionary contributions in proportion
to each Participant's Compensation.
Limitations on Contributions
Limitations on Annual Additions and Benefits. Pursuant to the requirements
of the Code, the Plan provides that the amount of contributions allocated to
each Participant's Account during any Plan Year may not exceed the lesser of 25%
of the Participant's "Section 415 Compensation" for the Plan Year or $30,000 (as
adjusted periodically under applicable Code provisions). A Participant's
"Section 415 Compensation" is a Participant's Compensation, excluding any amount
contributed to the Plan under a salary reduction agreement or any employer
contribution to the Plan or to any other plan or deferred compensation or any
distributions from a plan of deferred compensation. In addition, annual
additions are limited to the extent necessary to prevent the limitations for the
combined plans of the Savings Bank from being exceeded. To the extent that these
limitations would be exceeded by reason of excess annual additions to the Plan
with respect to a Participant, the excess must be reallocated to the remaining
Participants who are eligible for an allocation of Employer contributions for
the Plan Year.
Limitation on 401(k) Plan Contributions. The annual amount of deferred
compensation of a Participant (when aggregated with any elective deferrals of
the Participant under any other employer plan, a simplified employee pension
plan or a tax-deferred annuity) may not exceed $9,500 (as adjusted periodically
under applicable Code provisions). Contributions in excess of this limitation
("excess deferrals") will be included in the Participant's gross federal income
tax purposes in the year they are made. In addition, any such excess deferral
will again be subject to federal income tax when distributed by the Plan to the
Participant, unless the excess deferral (together with any income allocable
thereto) is distributed to the Participant not later than the first April 15th
following the close of the taxable year in which the excess deferral is made.
Any income on the excess deferral that is distributed not later than such date
shall be treated, for federal income tax purposes, as earned and received by the
Participant in the taxable year in which the excess deferral is made.
Limitation on Plan Contributions for Highly Compensated Employees. Sections
401(k) and 401(m) of the Code limit the amount of deferred compensation
contributed to the Plan
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in any Plan Year on behalf of Highly Compensated Employees (defined below) in
relation to the amount of deferred compensation contributed by or on behalf of
all other employees eligible to participate in the Plan. Specifically, the
actual deferral percentage for a Plan Year (i.e., the average of the ratios,
calculated separately for each eligible employee in each group, by dividing the
amount of salary reduction contributions credited to the salary reduction
contribution account of such eligible employee by such employee's compensation
for the Plan Year) of the Highly Compensated Employees may not exceed the
greater of (a) 125% of the actual deferred percentage of all other eligible
employees, or (b) the lesser of (i) 200% of the actual deferred percentage of
all other eligible employees, or (ii) the actual deferral percentage of all
other eligible employees plus two percentage points. In addition, the actual
contribution percentage for a Plan Year (i.e., the average of the ratios
calculated separately for each eligible employee in each group, by dividing the
amount of employer contributions credited to the Matching contributions account
of such eligible employee by each eligible employee's compensation for the Plan
Year) of the Highly Compensated Employees may not exceed the greater of (a) 125%
of the actual contribution percentage of all other eligible employees, or (b)
the lesser of (i) 200% of the actual contributions percentage of all other
eligible employees, or (ii) the actual contribution percentage of all other
eligible employees plus two percentage points.
In general, a Highly Compensated Employee includes any employee who, during
the Plan Year or the preceding Plan Year, (1) was at any time a 5% owner (i.e.,
owns directly or indirectly more than 5% of the stock of the Employer, or stock
possessing more than 5% of the total combines voting power of all stock of the
Employer) or, (2) during the preceding Plan Year, received Section 415
Compensation in excess of $80,000 (as adjusted periodically under applicable
Code provisions) and, if elected by the Savings Bank, was in the top paid group
of employees for such Plan Year.
In order to prevent disqualification of the Plan, any amounts contributed
by Highly Compensated Employees that exceed the average deferral limitation in
any Plan Year ("excess contributions"), together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year. However, the Savings Bank will be subject to a
10% excise tax on any excess contributions unless such excess contributions,
together with any income allocable thereto, either are recharacterized or are
distributed before the close of the first 2 1/2 months following the Plan Year
to which such excess contributions relate. In addition, in order to avoid
disqualification of the Plan, any contributions by Highly Compensated Employees
that exceed the average contribution limitation in any Plan Year ("excess
aggregate contributions") together with any income allocable thereto, must be
distributed to such Highly Compensated Employees before the close of the
following Plan Year. However, the 10% excise tax will be imposed on the Savings
Bank with respect to any excess aggregate contributions, unless such amounts,
plus any income allocable thereto, are distributed within 2 1/2 months following
the close of the Plan Year in which they arose.
Top-Heavy Plan Requirements. If, for any Plan Year, the Plan is a
Top-Heavy Plan (as defined below), then (i) the Savings Bank may be required to
make certain minimum contributions to the Plan on behalf of non-key employees
(as defined below), and (ii) certain
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additional restrictions would apply with respect to the combination of annual
additions to the Plan and projected annual benefits under any defined plan
maintained by the Savings Bank.
In general, the Plan will be regarded as a "Top-Heavy Plan" for any Plan
Year, if as of the last day of the preceding Plan Year, the aggregate balance of
the accounts of all Participants who are key Employees exceeds 60% of the
aggregate balance of the Accounts of the Participants. "Key Employees" generally
include any employee, who at any time during the Plan Year or any other the four
preceding Plan Years, if (1) an officer of the Savings Bank having annual
compensation in excess of $60,000 who is in administrative or policy-making
capacity, (2) one of the ten employees having annual compensation in excess of
$30,000 and owing, directly or indirectly, the largest interest in the employer,
(3) a 5% owner of the employer (i.e., owns directly or indirectly more than 5%
of the stock of the employer, or stock possessing more than 5% of the total
combined voting power of all stock of the employer), or (4) a 1% of owner of the
employer having compensation in excess of $150,000.
Investment of Contributions
All amounts credited to Participant's Accounts under the Plan are held in
the Trust which is administered by the Trustee. The Trustee is appointed by the
Savings Bank's Board of Directors. The Plan provides that a Participant may
direct the Trustee to invest all or a portion of his or her Accounts in various
managed investment portfolios, as described below. A Participant may
periodically elect to change his or her investment directions with respect to
both past contributions and for more additions to the Participant's accounts
invested in these investment alternatives.
Under the Plan, the Accounts of Participant held in the Trust will be
invested by the Trustee at the direction of the Participant in the following
managed portfolios:
Investment Fund A - A passively managed, diversified equity portfolio with
the objective of simulating the performance of the
Standard & Poor's Composite Index of 500 stocks, managed
by Mellon Bank, N.A., as Trustee. An investment in Fund
A provides an opportunity for investment growth
generally consistent with that of widely traded common
stocks, but with a corresponding risk of decline in
value.
Investment Fund B - A portfolio of fixed income contracts primarily managed
by Mellon Bank, N.A., with the objective of maximizing
income at minimum risk of capital. Contributions are
invested in fixed income instruments including but not
limited to group annuity contracts issued by insurance
companies.
Investment Fund C - A passively managed, diversified portfolio of stock with
the objective of replicating the performance of the S &
P MidCap Index, managed by Mellon Bank, N.A. An
investment return generally consistent with that of
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smaller to medium sized company stocks, with an above
average potential for increase or decrease in value.
Investment Fund D - A government instrument fund with the objective of
maximizing income at minimum risk of capital with
underlying investments in obligations issued or
guaranteed by the United States government or agencies
or instrumentalities thereof, selected by Mellon Bank,
N.A., as Trustee.
Investment Fund E - A portfolio of high quality treasury, agency, corporate
and asset/mortgage- backed securities managed by Mellon
Bank, N.A. with the objective of replicating the total
performance of the Lehman Brothers Aggregate Bond index.
A Participant may also invest all or a portion of his or her Accounts in
the portfolios described above and in Fund F, described below:
Investment Fund F - The Employer Stock Fund which invests in common stock of
the Holding Company.
A Participant may elect, to have both past and future contributions and
additions to the Participant's Account invested either in the Employer Stock
Fund or in any of the other managed portfolios listed above. Any amounts
credited to a Participant's Accounts for which investment directions are not
given will be invested in Investment Fund D.
The net gain (or loss) in the Accounts from investments (including interest
payments, dividends, realized and unrealized gains and losses on securities, and
expenses paid from the Trust) are determined monthly on a quarterly basis. For
purposes of such allocation, all assets of the Trust are valued at their fair
market value.
The Employer Stock Fund
The Employer Stock Fund consists of investments in Common Stock. In
connection with the Conversion Offerings, pursuant to the attached Investment
Form, Participants will be able to change their investments at a time other than
the normal election intervals. Any cash dividends paid on Common Stock held in
the Employer Stock Fund will be credited to a cash dividend subaccount for each
Participant investing in the Employer Stock Fund. To the extent practicable, all
amounts held in the Employer Stock Fund (except the amounts credited to cash
dividend subaccounts) will be used to purchase shares of Common Stock. It is
expected that all purchases will be made at prevailing market prices. Pending
investment in Common Stock, assets held in the Employer Stock Fund will be
placed in bank deposits and other short-term investments.
When Common Stock is purchased or sold, the cost or net proceeds are
charged or credited to the Accounts of Participants affected by the purchase or
sale. A Participant's Account
S-8
<PAGE>
will be adjusted to reflect changes in the value of shares of Common Stock
resulting from stock dividends, stock splits and similar changes.
To the extent dividends are not paid on Common Stock held in the Employer
Stock Fund, the return on any investment in the Employer Stock Fund will consist
only of the market value appreciation of the Common Stock subsequent to its
purchase.
Investments in the Employer Stock Fund may involve certain risk factors
associated with investments in Common Stock of the Holding Company. For a
discussion of these risk factors, see "RISK FACTORS" on pages 1 through 7 in the
Prospectus.
Benefits Under the Plan
Vesting. A Participant, has at all times a fully vested, nonforfeitable
interest in all of his or her deferred contributions and the earnings thereon
under the Plan. A Participant is 100% vested in his or her matching
contributions account and employer discretionary contributions after the
completion of six years of service under the Plan's vesting schedule (20% per
year beginning with the completion of two years of service).
Withdrawals and Distributions from the Plan
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS OR HER
BENEFIT UNDER THE PLAN PRIOR TO THE PARTICIPANT'S ATTAINMENT OF AGE 59 1/2
UNLESS A PARTICIPANT RETIRES AS PERMITTED UNDER THE PLAN REGARDLESS OF WHETHER
SUCH A WITHDRAWAL OCCURS DURING HIS OR HER EMPLOYMENT WITH THE SAVINGS BANK.
Distribution Upon Retirement, Disability or Termination of Employment.
Payment of benefits to a Participant who retires, incurs a disability, or
otherwise terminates employment generally shall be made in a lump sum cash
payment. At the request of the Participant, the distribution may include an
in-kind distribution of Common Stock of the Holding Company credited to the
Participant's Account. A Participant whose total vested account balance equals
or exceeds $3,500 at the time of termination, may elect, in lieu of a lump sum
payments, to be paid in annual installments over a period not exceeding the life
expectancy of the Participant or the joint life expectancies of the Participant
and his or her designated beneficiary. Benefits payments ordinarily shall be
made not later than 60 days following the end of the Plan Year in which occurs
later of the Participant's: (i) termination of employment; (ii) attainment of
age 65; or (iii) tenth anniversary of commencement of participation in the Plan;
but in no event later than April 1 following the calendar year in which the
Participant attains age 70 1/2 (if the Participant is retired). However, if the
vested portion of the Participant's Account balances exceeds $3,500, no
distribution shall be made from the Plan prior to the Participant's attaining
age 65 unless the Participant consents to an earlier distribution. Special rules
may apply to the distribution of
S-9
<PAGE>
Common Stock of the Holding Company to those Participants who are executive
officers, directors and principal shareholders of the Holding Company who are
subject to the provisions of Section 16(b) of the Exchange Act.
Distribution upon Death. A Participant who dies prior to the benefit
commencement date for retirement, disability or termination of employment, and
who has a surviving spouse, shall have his or her benefits paid to the surviving
spouse in a lump sum, or if the payment of his or her benefits had commenced
before his or her death, in accordance with the distribution method in effect at
his or her death. With respect to an unmarried Participant, and in the case of a
married Participant with spousal consent to the designation of another
beneficiary, payment of benefits to the beneficiary, payments of benefits to the
beneficiary of a deceased Participant shall be made in the form of a lump sum
payment in cash or in Common Stock, or if the payment of his or her benefit had
commenced before his or her death, in accordance with the distribution method if
effect at death.
Nonalienation of Benefits. Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.
Administration of the Plan
Trustee. The Trustee with respect to Plan assets, other than the Employer
Stock Fund, is currently Mellon Bank, N.A. Mellon Bank also serves as custodian
of the Employer Stock Fund assets. Members of the Board of Directors of the
Savings Bank serve as trustees with respect to the Employer Stock Fund. Except
as otherwise indicated by the context, references in this Prospectus Supplement
to the Trustee refer to Mellon Bank.
Pursuant to the terms of the Plan, the Trustee receives and holds
contributions to the Plan in trust and has exclusive authority and discretion to
manage and control the assets of the Plan pursuant to the terms of the Plan and
to manage, invest and reinvest the Trust and income therefrom. The Trustee has
the authority to invest and reinvest the Trust and may sell or otherwise dispose
of Trust investments at any time and may hold trust funds uninvested. The
Trustee has authority to invest the assets of the Trust in "any type of
property, investment or security" as defined under ERISA.
The Trustee has full power to vote any corporate securities in the Trust in
person or by proxy; provided, however, that the Participants will direct the
Trustee as to voting and tendering of all Common Stock held in the Employer
Stock Fund.
S-10
<PAGE>
The Trustee is entitled to reasonable compensation for its services and is
also entitled to reimbursement for expenses properly and actually incurred in
the administration of the Trust. The expenses of the Trustee and the
compensation of the persons so employed is paid out of the Trust except to the
extent such expenses and compensation are paid by the Savings Bank.
The Trustee must render at least annual reports to the Savings Bank and to
the Participants in such form and containing information that the Trustee deems
necessary.
Reports to Plan Participants
The administrator will furnish to each Participant a statement at least
semiannually showing (i) the balance in the Participant's Account as of the end
of that period, (ii) the amount of contributions allocated to such Participant's
Account for that period, and (iii) the adjustments to such Participant's Account
to reflect earnings or losses (if any).
Plan Administrator
The Savings Bank currently serves as the Plan Administrator. The Plan
Administrator is responsible for the administration of the Plan, interpretation
of the provisions of the Plan, prescribing procedures for filing applications
for benefits, preparation and distribution of information explaining the Plan,
maintenance of plan records, books of account and all other data necessary for
the proper administration of the Plan, and preparation and filing of all returns
and reports relating to the Plan which are required to be filed with the U.S.
Department of Labor and the IRS, and for all disclosures required to be made to
Participants, beneficiaries and others under Sections 104 and 105 of ERISA.
Amendment and Termination
The Savings Bank may terminate the Plan at any time. If the Plan is
terminated in whole or in part, then regardless of other provisions in the Plan,
each employee who ceases to be a Participant shall have a fully vested interest
in his or her Account. The Savings Bank reserves the right to make, from time to
time, any amendment or amendments to the Plan which do not cause any part of the
Trust to be used for, or diverted to, any purpose other than the exclusive
benefit of the Participants or their beneficiaries.
Merger, Consolidation or Transfer
In the event of the merger or consolidation of the Plan with another plan,
or the transfer of the Trust to another plan, the Plan requires that each
Participant (if either the Plan or the other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
S-11
<PAGE>
Federal Income Tax Consequences
The following is only a brief summary of certain federal income tax aspects
of the Plan which are of general application under the Code and is not intended
to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan. The
summary is necessarily general in nature and does not purport to be complete.
Moreover, statutory provisions are subject to change, as are their
interpretations, and their application may vary in individual circumstances.
Finally, the consequences under applicable state and local income tax laws may
not be the same as under the federal income tax laws.
PARTICIPANTS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO ANY
DISTRIBUTION FROM THE PLAN AND TRANSACTIONS INVOLVING THE PLAN.
The Plan has received a determination from the IRS that it is qualified
under Section 401(a) and 401(k) of the Code, and that the related Trust is
exempt from tax under Section 501(a) of the Code. A plan that is "qualified"
under these sections of the Code is afforded special tax treatment which include
the following: (1) the sponsoring employer is allowed an immediate tax deduction
for the amount contributed to the Plan of each year; (2) Participants pay no
current income tax on amounts contributed by the employer on their behalf; and
(3) earnings of the Plan are tax-exempt thereby permitting the tax-free
accumulation of income and gains on investments. The Plan will be administered
to comply in operation with the requirements of the Code as of the applicable
effective date of any change in the law. The Savings Bank expects to timely
adopt any amendments to the Plan that may be necessary to maintain the qualified
status of the Plan under the Code. Following such an amendment, the Plan will be
submitted to the IRS for a determination that the Plan, as amended, continues to
qualify under Sections 401(a) and 501(a) of the Code and that it continues to
satisfy the requirements for a qualified cash or deferred arrangement under
Section 401(k) of the Code.
Assuming that the Plan is administered in accordance with the requirements
of the Code, participation in the Plan under existing federal income tax laws
will have the following effects:
(a) Amounts contributed to a Participant's 401(k) account and the
investment earnings are actually distributed or withdrawn from the Plan.
Special tax treatment may apply to the taxable portion of any distribution
that includes Common Stock or qualified as a "Lump Sum Distribution" (as
described below).
(b) Income earned on assets held by the Trust will not be taxable to
the Trust.
Lump Sum Distribution. A distribution from the Plan to a Participant or the
beneficiary of a Participant will qualify as a "Lump Sum Distribution" if it is
made: (i) within a single taxable year of the Participant or beneficiary; (ii)
on account of the Participant's death or separation from service, or after the
Participant attains age 59 1/2; and (iii) consists of the balance
S-12
<PAGE>
to the credits of the Participant under the Plan and all other profit sharing
plans, if any, maintained by the Savings Bank. The portion of any Lump Sum
Distribution that is required to be included in the Participant's or
beneficiary's taxable income for federal income tax purposes ("total taxable
amount") consists of the entire amount of such Lump Sum Distribution less the
amount of after-tax contributions, if any, made by the Participant to any other
profit sharing plans maintained by the Savings Bank which is included in such
distribution.
Averaging Rules. The portion of the total taxable amount of a Lump Sum
Distribution ("ordinary income portion") will be taxable generally as ordinary
income for federal income tax purposes. However, for distributions occurring
prior to January 1, 2000, a Participant who has completed at least five years of
participation in the Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's participation
in the Plan or any other profit sharing plan maintained by the Employer), may
elect to have the ordinary income portion of such Lump Sum Distribution taxed
according to a special averaging rule ("five-year averaging"). The election of
the special averaging rules may apply only to one Lump Sum Distribution received
by the Participant or beneficiary, provided such amount is received on or after
the Participant turns 59 1/2 and the recipient elects to have any other Lump Sum
Distribution from a qualified plan received in the same taxable year taxed under
the special averaging rule. The special five-year averaging rule has been
repealed for distributions occurring after December 31, 1999. Under a special
grandfather rule, individuals who turned 50 by 1986 may elect to have their Lump
Sum Distribution taxed under either the five-year averaging rule (if available)
or the prior law ten-year averaging rule. Such individuals also may elect to
have that portion of the Lump Sum Distribution attributable to the Participant's
pre-1974 participation in the Plan taxed at a flat 20% rate as gain from the
sale of a capital asset.
Common Stock Included in Lump Sum Distribution. If a Lump Sum Distribution
includes Common Stock, the distribution generally will be taxed in the manner
described above, except that the total taxable amount will be reduced by the
amount of any net unrealized appreciation with respect to such Common Stock,
i.e., the excess of the value of such Common Stock at the time of the
distribution over its cost to the Plan. The tax basis of such Common Stock to
the Participant or beneficiary for purposes of computing gain or loss on its
subsequent sale will be the value of the Common Stock at the time of
distribution less the amount of net unrealized appreciation. Any gain on a
subsequent sale or other taxable disposition of such Common Stock, to the extent
of the amount of net unrealized appreciation at the time of distribution, will
be considered long-term capital gain regardless of the holding period of such
Common Stock. Any gain on a subsequent sale or other taxable disposition of the
Common Stock in excess of the amount of net unrealized appreciation at the time
of distribution will be considered either short- term capital gain or long-term
capital gain depending upon the length of the holding period of the Common
Stock. The recipient of a distribution may elect to include the amount of any
net unrealized appreciation in the total taxable amount of such distribution to
the extent allowed by the regulations by the IRS.
S-13
<PAGE>
Distributions: Rollovers and Direct Transfers to Another Qualified Plan or
to an IRA. Pursuant to a change in the law, effective January 1, 1993, virtually
all distributions from the Plan may be rolled over to another qualified Plan or
to an individual retirement account ("IRA") without regard to whether the
distribution is a Lump Sum Distribution or Partial Distribution. Effective
January 1, 1993, Participants have the right to elect to have the Trustee
transfer all or any portion of an "eligible rollover distribution" directly to
another plan qualified under Section 401(a) of the Code or to an IRA. If the
Participant does not elect to have an "eligible rollover distribution"
transferred directly to another qualified plan of to an IRA, the distribution
will be subject to a mandatory federal withholding tax equal to 20% of the
taxable distribution. An "eligible rollover distribution" means any amount
distributed from the Plan except: (1) a distribution that is (a) one of a series
of substantially equal periodic payments made (not less frequently than
annually) over the Participant's life of the joint life of the Participant and
the Participant's designated beneficiary, or (b) for a specified period of ten
years or more; (2) any amount that is required to be distributed under the
minimum distribution rules; and (3) any other distributions excepted under
applicable federal law. The tax law change described above did not modify the
special tax treatment of Lump Sum Distributions, that are not rolled over or
transferred, i.e., forward averaging, capital gains tax treatment and the
nonrecognition of net unrealized appreciation, discussed earlier.
Additional Tax on Early Distributions. A Participant who receives a
distribution from the Plan prior to attaining age 59 1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, to the extent the
distribution is rolled over into an IRA or another qualified plan or the
distribution is (i) made to a beneficiary (or to the estate of a Participant) on
or after the death of the Participant, (ii) attributable to the Participant's
being disabled within the meaning of Section 72(m)(7) of the Code, (iii) part of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Participant or the joint
lives (or joint life expectancies) of the Participant and his or her
beneficiary, (iv) made to the Participant after separation from service on
account of early retirement under the Plan after attainment of age 55, (v) made
to pay medical expenses to the extent deductible for federal income tax
purposes, (vi) pursuant to a qualified domestic relations order, or (vii) made
to effect the distribution of excess contributions or excess deferrals.
THE FOREGOING IS ONLY A BRIEF SUMMARY OF CERTAIN FEDERAL INCOME TAX ASPECTS
OF THE PLAN WHICH ARE OF GENERAL APPLICATION UNDER THE CODE AND IS NOT INTENDED
TO BE A COMPLETE OR DEFINITIVE DESCRIPTION OF THE FEDERAL INCOME TAX
CONSEQUENCES OF PARTICIPATING IN OR RECEIVING DISTRIBUTIONS FROM THE PLAN.
ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT A TAX ADVISOR CONCERNING THE
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN AND RECEIVING
DISTRIBUTIONS FROM THE PLAN.
S-14
<PAGE>
Restrictions on Resale
Any person receiving shares of the Common Stock under the Plan who is an
"affiliate" of the Savings Bank or the Holding Company as the term "affiliate"
is used in Rules 144 and 405 under the Securities Act of 1933, as amended
("Securities Act") (e.g., directors, officers and substantial shareholders of
the Savings Bank) may reoffer or resell such shares only pursuant to a
registration statement filed under the Securities Act (the Holding Company and
the Savings Bank having no obligation to file such registration statement) or,
assuming the availability thereof, pursuant to Rule 144 or some other exemption
from the registration requirements of the Securities Act. Any person who may be
an "affiliate" of the Savings Bank or the Holding Company may wish to consult
with counsel before transferring any Common Stock owned by him or her. In
addition, Participants are advised to consult with counsel as to the
applicability of the reporting and short-swing profit liability rules of Section
16 of the Exchange Act which may affect the purchase and sale of the Common
Stock where acquired or sold under the Plan or otherwise.
LEGAL OPINIONS
The validity of the issuance of the Common Stock will be passed upon by
Breyer & Aguggia, Washington, D.C., which firm is acting as special counsel for
the Holding Company in connection with the Savings Bank's Conversion and
Reorganization from the mutual holding company of organization to a wholly-owned
subsidiary by the Holding Company.
S-15
<PAGE>
Investment Form
(Employer Stock Fund)
RIVERVIEW SAVINGS BANK, FSB
EMPLOYEES' SAVINGS AND PROFIT SHARING PLAN
Name of Participant:_________________________
Social Security Number:______________________
1. Instructions. In connection with the proposed reorganization of
Riverview Savings Bank, FSB ("Savings Bank") from the mutual holding form of
organization to a wholly-owned subsidiary of a savings and loan holding company
("Conversion and Reorganization"), participants in the Riverview Savings Bank,
FSB Employees' Savings and Profit Sharing Plan ("Plan") may elect to direct the
investment of up to ___% of their ___________, 1997 account balances into the
Employer Stock Fund ("Employer Stock Fund"). Amounts transferred at the
direction of Participants into the Employer Stock Fund will be used to purchase
shares of the common stock of Riverview Bancorp, Inc. ("Common Stock"), the
proposed holding company for the Savings Bank. A Participant's eligibility to
purchase shares of Common Stock is subject to the Participant's general
eligibility to purchase shares of Common Stock in the Conversion Offerings and
the maximum and minimum limitations set forth in the Plan of Conversion. See the
Prospectus for additional information.
You may use this form to direct a transfer of funds credited to your
account to the Employer Stock Fund, to purchase Common Stock in the Conversion
Offerings. To direct such a transfer to the Employer Stock Fund, you should
complete this form and return it to ___________ at the Savings Bank, no later
than the close of business on _______, 1997. The Savings Bank will keep a copy
of this form and return a copy to you. (If you need assistance in completing
this form, please contact ___________.
2. Transfer Direction. I hereby direct the Plan Administrator to transfer
$__________ (in increments of $10) from my Plan account to the Employer Stock
Fund to be applied to the purchase of Common Stock in the Conversion Offerings.
Please transfer this amount from the following investments in the amounts
indicated:
3. Effectiveness of Direction. I understand that this Investment Form shall
be subject to all of the terms and conditions of the Plan and the terms and
conditions of the Conversion and Reorganization. I acknowledge that I have
received a copy of the Prospectus and the Prospectus Supplement.
- -------------------------------- ------------------------------
Signature Date
* * * * *
4. Acknowledgement of Receipt. This Investment Form was received by the
Plan Administrator and will become effective on the date noted below.
- -------------------------------- ------------------------------
Plan Administrator Date
S-16
<PAGE>
PROSPECTUS RIVERVIEW BANCORP, INC.
(Proposed Holding Company for Riverview Savings Bank, FSB)
Up to 4,736,571 Shares of Common Stock
$10.00 Purchase Price Per Share
Riverview Bancorp, Inc. ("Holding Company"), a Washington corporation, is
offering up to 4,736,571 shares (which may be increased to 5,447,056 shares
under circumstances described in footnote 4 of the table below) of its common
stock, par value $.01 per share ("Common Stock"), in connection with (i) the
Exchange Offering, described below, to effect the reorganization of Riverview
Savings Bank, FSB ("Savings Bank") as a wholly-owned subsidiary of the Holding
Company and (ii) the Conversion Offerings, described below, to effect the
conversion of Riverview, M.H.C. ("MHC") from a mutual holding company to a stock
holding company. The Holding Company, Savings Bank and MHC are collectively
referred to herein as the "Primary Parties." The transactions contemplated by
the Exchange Offering and the Conversion Offerings, which are collectively
referred to herein as the "Conversion and Reorganization," are undertaken
pursuant to a Plan of Conversion and Agreement and Plan of Reorganization ("Plan
of Conversion") adopted by the Boards of Directors of the Primary Parties.
The Exchange Offering. Pursuant to the Plan of Conversion, each share of
common stock, par value $.01 per share, of the Savings Bank ("Savings Bank
Common Stock") held by the MHC (___ shares, or ___% of the outstanding shares,
as of the date of this Prospectus) will be canceled and each share of Savings
Bank Common Stock held by the Savings Bank's public stockholders ("Public
Savings Bank Shares" and "Public Stockholders," respectively) (____ shares, or
___% of the outstanding shares, as of the date of this Prospectus) will be
exchanged for shares of Common Stock ("Exchange Shares") pursuant to a ratio
("Exchange Ratio") that will result in the Public Stockholders' aggregate
ownership of approximately 41.73% of the outstanding shares of Common Stock
before any (i) payment of cash in lieu of issuing fractional Exchange Shares and
(ii) Conversion Shares (as defined below) purchased by the Public Stockholders
and by the Savings Bank's employee stock ownership plan ("ESOP") in the
Conversion Offerings, described below, or thereafter. As discussed under
"Independent Valuation" below, the final Exchange Ratio will be based on the
Public Stockholders' ownership interest and not on the market value of the
Public Savings Bank Shares.
FOR INFORMATION ON HOW TO SUBSCRIBE FOR SHARES OF COMMON STOCK,
CALL THE STOCK INFORMATION CENTER AT (360) ____-_____.
FORA DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE 1.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE
SAVINGS ASSOCIATION INSURANCE FUND ("SAIF") OR ANY OTHER
GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC"), THE OFFICE OF THRIFT SUPERVISION ("OTS"),
THE FDIC OR ANY OTHER FEDERAL AGENCY OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SEC, THE OTS, THE FDIC OR ANY
OTHER AGENCY OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
(cover continued on following page)
CHARLES WEBB & COMPANY, PACIFIC CREST SECURITIES, INC.
a Division of Keefe, Bruyette & Woods, Inc.
The date of this Prospectus is August ___, 1997.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Estimated Underwriting
Purchase Commissions and Estimated Net
Price(1) Other Fees and Expenses(2) Proceeds(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Price Per Share ............................... $10.00 $0.38 $9.62
- -----------------------------------------------------------------------------------------------------------------------
Midpoint Price Per Share .............................. $10.00 $0.35 $9.65
- -----------------------------------------------------------------------------------------------------------------------
Maximum Price Per Share ............................... $10.00 $0.32 $9.68
- -----------------------------------------------------------------------------------------------------------------------
Maximum Price Per Share, as adjusted(4) ............... $10.00 $0.30 $9.70
- -----------------------------------------------------------------------------------------------------------------------
Minimum Total(5) ...................................... $20,400,000 $780,000 $19,620,000
- -----------------------------------------------------------------------------------------------------------------------
Midpoint Total(6) ..................................... $24,000,000 $830,000 $23,170,000
- -----------------------------------------------------------------------------------------------------------------------
Maximum Total(7) ...................................... $27,600,000 $880,000 $26,720,000
- -----------------------------------------------------------------------------------------------------------------------
Maximum Total, as adjusted(4)(8) ...................... $31,740,000 $937,000 $30,803,000
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Determined in accordance with an independent appraisal prepared by RP
Financial, LC., Arlington, Virginia ("RP Financial"). See "Independent
Valuation" on the cover page of this Prospectus and "THE CONVERSION AND
REORGANIZATION -- Stock Pricing, Exchange Ratio and Number of Shares to be
Issued."
(2) Includes estimated expenses to the Holding Company and the Savings Bank
arising from the Conversion and Reorganization, including fees to be paid
to Charles Webb & Company, a Division of Keefe, Bruyette & Woods, Inc.
("Webb") in connection with the Conversion Offerings. Such amounts exclude
any fees to be paid to Pacific Crest Securities, Inc. ("Pacific Crest") as
compensation for its management of the Syndicated Community Offering (as
defined below), if any. Webb's fees amount to $274,000, $324,000, $373,000
and $431,000 at the minimum, midpoint, maximum and 15% above the Estimated
Valuation Range, respectively, which may be deemed to be underwriting fees.
Webb and Pacific Crest may be deemed to be underwriters. Expenses, other
than fees to be paid to Webb, are estimated to total approximately $506,000
at each of the minimum, midpoint, maximum and 15% above the Estimated
Valuation Range. Actual expenses may be more or less than estimated
amounts. The Holding Company and the Savings Bank have agreed to indemnify
Webb against certain liabilities, including liabilities that might arise
under the Securities Act of 1933, as amended ("Securities Act"). See "USE
OF PROCEEDS" and "THE CONVERSION AND REORGANIZATION -- Plan of Distribution
for the Subscription, Direct Community and Syndicated Community Offerings."
(3) Actual net proceeds can vary substantially from the estimated amounts
depending upon actual expenses and the relative number of shares sold in
the Conversion Offerings. See "USE OF PROCEEDS" and "PRO FORMA DATA."
(4) Gives effect to an increase in the number of shares that could be sold in
the Conversion Offerings resulting from an increase in the pro forma market
value of the MHC and the Savings Bank, as converted, up to 15% above the
maximum of the Estimated Valuation Range, without the resolicitation of
subscribers or any right of cancellation. The ESOP shall have a first
priority right to subscribe for such additional shares up to an aggregate
of 8% of the Common Stock issued in the Conversion. The issuance of such
additional shares will be conditioned on a determination by RP Financial
that such issuance is compatible with its determination of the estimated
pro forma market value of the Holding Company and the Savings Bank, as
converted. See "THE CONVERSION AND REORGANIZATION -- Stock Pricing,
Exchange Ratio and Number of Shares to be Issued."
(5) Assumes the issuance of 2,040,000 Conversion Shares at $10.00 per share.
(6) Assumes the issuance of 2,400,000 Conversion Shares at $10.00 per share.
(7) Assumes the issuance of 2,760,000 Conversion Shares at $10.00 per share.
(8) Assumes the issuance of 3,174,000 Conversion Shares at $10.00 per share.
The Conversion Offerings. Pursuant to the Plan of Conversion,
nontransferable rights to subscribe ("Subscription Rights") for up to 2,760,000
shares (which may be increased to 3,174,000 shares under circumstances described
in footnote 4 of the table appearing on the cover page of this Prospectus) of
Common Stock ("Conversion Shares") have been granted, in order of priority, to
(i) depositors with $50.00 or more on deposit at the Savings Bank as of December
31, 1995 ("Eligible Account Holders"), (ii) the ESOP, a tax-qualified employee
benefit plan, (iii) depositors with $50.00 or more on deposit at the Savings
Bank as of June 30, 1997 ("Supplemental Eligible
<PAGE>
Account Holders"), and (iv) depositors of the Savings Bank (other than Eligible
Account Holders and Supplemental Eligible Account Holders) as of ________, 1997
("Voting Record Date"), and borrowers of the Savings Bank with loans outstanding
as of October 22, 1993 which continue to be outstanding as of the Voting Record
Date ("Other Members"), subject to the priorities and purchase limitations set
forth in the Plan of Conversion ("Subscription Offering"). Subscription Rights
are nontransferable. Persons selling or otherwise transferring their rights to
subscribe for Common Stock in the Subscription Offering or subscribing for
Common Stock on behalf of another person will be subject to forfeiture of such
rights and possible further sanctions and penalties imposed by the OTS or other
agency of the U.S. Government. Concurrently, but subject to the prior rights of
Subscription Rights holders, the Holding Company is offering the Conversion
Shares for sale to members of the general public through a direct community
offering ("Direct Community Offering") with preference given first to Public
Stockholders (who are not Eligible Account Holders, Supplemental Eligible
Account Holders or Other Members) and then to natural persons and trusts of
natural persons who are permanent residents of Clark, Cowlitz, Klickitat and
Skamania Counties of Washington ("Local Community"). It is anticipated that any
Conversion Shares not subscribed for in the Subscription Offering or purchased
in the Direct Community Offering will be offered to eligible members of the
general public on a best efforts basis by a selling group of broker-dealers
managed by Pacific Crest in a syndicated community offering ("Syndicated
Community Offering"). The Subscription Offering, Direct Community Offering and
the Syndicated Community Offering are referred to collectively as the
"Conversion Offerings." The Primary Parties reserve the right, in their absolute
discretion, to accept or reject, in whole or in part, any or all orders in the
Direct Community Offering or Syndicated Community Offering either at the time of
receipt of an order or as soon as practicable following the termination of the
Conversion Offerings. If an order is rejected in part, the purchaser does not
have the right to cancel the remainder of the order.
The Subscription Offering will expire at ____, Pacific Time, on ________, 1997
("Expiration Date"), unless extended by the Primary Parties for up to ___ days
to __________, 1997. Such extension may be granted without additional notice to
subscribers. The Direct Community Offering is also expected to terminate at
______, Pacific Time, on _______, 1997 or at a date thereafter, however, in no
event later than ________, 1997. The Holding Company must receive at an office
of the Savings Bank by the Expiration Date the accompanying original Stock Order
Form and a fully executed Certification Form (collectively, the "Stock Order
Form") (facsimile copies and photocopies will not be accepted), along with full
payment (or appropriate instructions authorizing a withdrawal from a deposit
account at the Savings Bank) of $10.00 per share ("Purchase Price") for all
Conversion Shares subscribed for or ordered. Payment by wire transfer will not
be accepted. Funds so received will be placed in segregated accounts created for
this purpose at the Savings Bank, and interest will be paid at the Savings
Bank's passbook rate from the date payment is received until the Conversion and
Reorganization is consummated or terminated. Payments authorized by withdrawals
from deposit accounts will continue to earn interest at their contractual rate
until the Conversion and Reorganization is consummated or terminated, although
such funds will be unavailable for withdrawal until the Conversion and
Reorganization is consummated or terminated. Orders submitted are irrevocable
until the consummation or termination of the Conversion and Reorganization. If
the Conversion and Reorganization is not consummated within 45 days after the
last day of the Subscription and Direct Community Offering (which date will be
no later than ________, 1997) and the OTS consents to an extension of time to
consummate the Conversion and Reorganization, subscribers will be notified in
writing of the time period within which the subscriber must notify the Primary
Parties of his or her intention to increase, decrease or rescind his or her
subscription. If an affirmative response to any such resolicitation is not
received by the Primary Parties from subscribers, such orders will be rescinded
and all funds will be returned promptly with interest. If such period is not
extended or, in any event, if the Conversion and Reorganization is not
consummated by ________, 1997, all subscription funds will be promptly returned,
together with accrued interest, and all withdrawal authorizations terminated.
Such extensions may not go beyond ________ __, 1999.
The Primary Parties have engaged Webb as their financial advisor and to
assist the Holding Company in the sale of the Conversion Shares in the
Conversion Offerings. Webb and Pacific Crest are registered broker-dealers and
members of the National Association of Securities Dealers, Inc. ("NASD").
Neither Webb nor Pacific Crest nor any other registered broker-dealer is
obligated to take or purchase any Conversion Shares in the Conversion Offerings.
See "THE CONVERSION AND REORGANIZATION -- Plan of Distribution for the
Subscription, Direct Community and Syndicated Community Offerings."
<PAGE>
Independent Valuation. OTS regulations require that the offering of
Conversion Shares in the Conversion Offerings be based on an independent
valuation of the pro forma market value of the Savings Bank and the MHC, as
converted. OTS policy requires that the independent valuation be multiplied by
58.27%, which represents the MHC's percentage ownership interest in the Savings
Bank. Accordingly, RP Financial's independent appraisal as of June 6, 1997
states that the aggregate pro forma market value of the Savings Bank and the
MHC, as converted, ranged from $20.4 million to $27.6 million, with a midpoint
of $24.0 million ("Estimated Valuation Range").
The Primary Parties' Boards of Directors determined that the Conversion
Shares would be sold at $10.00 per share ("Purchase Price"), resulting in a
range of 2,040,000 to 2,760,000 shares of Conversion Shares, with a midpoint of
2,400,000 Conversion Shares. Upon consummation of the Conversion and
Reorganization, the Conversion Shares and the Exchange Shares will represent
approximately 58.27% and 41.73%, respectively, of the total outstanding shares
of Common Stock. Based upon the Estimated Valuation Range, the Exchange Ratio is
expected to range from 1.4488 to 1.9601, resulting in a range of 1,460,943
Exchange Shares to 1,976,571 Exchange Shares to be issued in the Exchange
Offering. The 4,736,571 shares of Common Stock offered hereby include up to
2,760,000 Conversion Shares (subject to adjustment up to 3,147,000 shares as
described herein) and up to 1,976,571 Exchange Shares (subject to adjustment up
to 2,273,056 shares as described herein). The Estimated Valuation Range may be
increased or decreased to reflect changes in market and economic conditions
prior to completion of the Conversion and Reorganization, and under certain
circumstances specified herein subscribers will be resolicited and given the
right to modify or cancel their orders. See "The CONVERSION AND REORGANIZATION
- -- Stock Pricing, Exchange Ratio and Number of Shares to be Issued."
Purchase Limitations on Conversion Shares. Except for the ESOP, which is
expected to subscribe for 8% of the shares of Conversion Shares issued in the
Conversion Offerings, the Plan of Conversion provides for the following purchase
limitations: (i) no person may purchase in either the Subscription Offering,
Direct Community Offering or Syndicated Community Offering more than 1% of the
Conversion Shares issued in the Conversion Offerings, (ii) no person, together
with associates of or persons acting in concert with such person, may purchase
in either the Subscription Offering, Direct Community Offering or Syndicated
Community Offering more than 2% of the Conversion Shares issued in the
Conversion Offerings, (iii) the maximum number of Conversion Shares which may be
subscribed for or purchased in all categories in the Conversion Offerings by any
person, when combined with any Exchange Shares received, shall not exceed 1% of
the Conversion Shares issued in the Conversion Offerings, and (iv) the maximum
number of shares of Conversion Shares which may be subscribed for or purchased
in all categories in the Conversion Offerings by any person, together with any
associate or any group of persons acting in concert, when combined with any
Exchange Shares received, shall not exceed 2% of the Conversion Shares issued in
the Conversion Offerings. The minimum order is 25 Conversion Shares. See "THE
CONVERSION AND REORGANIZATION -- The Subscription, Direct Community and
Syndicated Community Offerings," "-- Procedure for Purchasing Conversion Shares
in the Subscription and Direct Community Offerings and "-- Limitations on
Purchase of Conversion Shares."
Market for the Common Stock. The Holding Company has received conditional
approval to list the Common Stock on the Nasdaq National Market under the symbol
"RVSB." Prior to the Conversion and Reorganization, the Public Savings Bank
Shares have been listed on the Nasdaq SmallCap Market under the same trading
symbol. There can be no assurance that an active and liquid trading market for
the Common Stock will develop or, if developed, will be maintained. See "RISK
FACTORS -- Absence of Prior Market for the Common Stock" and "MARKET FOR COMMON
STOCK."
<PAGE>
RIVERVIEW SAVINGS BANK, FSB
CAMAS, WASHINGTON
[Map to be filed by amendment]
THE CONVERSION AND REORGANIZATION IS CONTINGENT UPON APPROVAL OF THE PLAN OF
CONVERSION BY AT LEAST A MAJORITY OF THE MHC'S ELIGIBLE VOTING MEMBERS, BY THE
HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF SAVINGS BANK COMMON STOCK AND
BY THE HOLDERS OF A MAJORITY OF THE PUBLIC SAVINGS BANK SHARES, THE SALE OF AT
LEAST 2,040,000 CONVERSION SHARES PURSUANT TO THE PLAN OF CONVERSION, AND THE
RECEIPT OF ALL APPLICABLE REGULATORY APPROVALS.
<PAGE>
- --------------------------------------------------------------------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS OR ACCOUNTS AND WILL NOT BE
INSURED OR GUARANTEED BY THE FDIC, THE SAIF OR ANY OTHER GOVERNMENT AGENCY.
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The information set forth below should be read in conjunction with and is
qualified in its entirety by the more detailed information and Consolidated
Financial Statements (including the Notes thereto) presented elsewhere in this
Prospectus. The purchase of Common Stock is subject to certain risks. See "RISK
FACTORS."
Riverview Bancorp, Inc.
The Holding Company was organized on __________, 1997 under Washington law
at the direction of the Savings Bank to acquire the Savings Bank as a
wholly-owned subsidiary upon consummation of the Conversion and Reorganization.
The Holding Company has only engaged in organizational activities to date. The
Holding Company has received conditional OTS approval to become a savings and
loan holding company through the acquisition of 100% of the capital stock of the
Savings Bank. Immediately following the Conversion, the only significant assets
of the Holding Company will be the outstanding capital stock of the Savings
Bank, 50% of the net investable proceeds of the Conversion Offerings (see table
under "PRO FORMA DATA") as permitted by the OTS to be retained by it) and a note
receivable from the ESOP evidencing a loan to enable the ESOP to purchase 8% of
the Conversion Shares issued in the Conversion and Reorganization. Funds
retained by the Holding Company will be used for general business activities.
See "USE OF PROCEEDS." Upon consummation of the Conversion and Reorganization,
the Holding Company will be classified as a unitary savings and loan holding
company subject to OTS regulation. See "REGULATION -- Savings and Loan Holding
Company Regulations." The main office of the Holding Company is located at 700
N.E. Fourth Avenue, Camas, Washington 98607 and its telephone number is (360)
834-2231.
Riverview, M.H.C.
The MHC is the federally-chartered mutual holding company for the Savings
Bank. The MHC was formed in October 1993 as a result of the reorganization of
the Savings Bank into a federally chartered mutual holding company ("MHC
Reorganization"). The members of the MHC consist of depositors of the Savings
Bank and those current borrowers of the Savings Bank who had loans outstanding
as of the consummation date of the MHC Reorganization (October 22, 1993).
Currently, the MHC's sole business activity is holding the _______ shares of
Savings Bank Common Stock, which represents ___% of the outstanding shares as of
the date of this Prospectus. The MHC's main office is located at 700 N.E. Fourth
Avenue, Camas, Washington 98067, and its telephone number is (360) 834-2231. As
part of the Conversion and Reorganization, the MHC will convert to a
federally-chartered interim stock savings bank and simultaneously merge with and
into the Savings Bank, with the Savings Bank as the surviving entity.
Riverview Savings Bank, FSB
The Savings Bank is a federally-chartered savings bank, founded in 1923 and
headquartered in Camas, Washington. The Savings Bank's deposits are insured by
the FDIC up to applicable legal limits under the SAIF. The Savings Bank has been
a member of the Federal Home Loan Bank ("FHLB") system since 1937. The Savings
Bank is regulated by the OTS and the FDIC. At March 31, 1997, the Savings Bank
had total assets of $224.4 million, total deposit accounts of $169.4 million,
and total shareholders' equity of $25.0 million, on a consolidated basis.
(i)
<PAGE>
On October 22, 1993, when the MHC Reorganization was consummated, the
Savings Bank completed its initial stock offering by issuing 1,725,000 shares of
Savings Bank Common Stock, of which 690,000 shares were purchased by the Public
Stockholders and 1,007,400 shares were issued to the MHC. Stock dividends issued
and stock options exercised subsequent to the initial public offering have
increased the total shares issued and outstanding to _______ as of the date of
this Prospectus, of which ________ shares are held by the Public Stockholders
and _______ shares are held by the MHC.
The Savings Bank is a community oriented financial institution offering
traditional financial services to the residents of its primary market area. The
Savings Bank considers Clark, Cowlitz, Klickitat and Skamania Counties of
Washington as its primary market area. The Savings Bank is engaged primarily in
the business of attracting deposits from the general public and using such funds
to originate fixed-rate mortgage loans and adjustable rate mortgage ("ARM")
loans secured by one- to- four family residential real estate located in its
primary market area. The Savings Bank is also an active originator of
residential construction loans and consumer loans. At March 31, 1997, one- to-
four family mortgage loans were $94.5 million, or 62.3% of total net loans
receivable and loans held for sale (collectively, "total net loans receivable"),
residential construction loans were $32.5 million, or 21.4% of total net loans
receivable, and consumer loans were $14.3 million, or 9.4% of total net loans
receivable. To a lesser extent, the Savings Bank originates land loans ($7.9
million or 5.2% of total net loans receivable at March 31, 1997) and commercial
real estate loans ($9.0 million or 5.9% of total net loans receivable at March
31, 1997). Substantially all of the Savings Bank's real estate loans are secured
by real estate located in its primary market area. Construction, consumer, land
and commercial real estate loans generally involve a greater risk of loss than
one- to- four family mortgage loans. See "RISK FACTORS -- Certain Lending
Risks."
In addition to originating one- to- four family loans for its portfolio,
the Savings Bank is an active mortgage broker for several third party mortgage
lenders. In recent periods, such mortgage brokerage activities have reduced the
volume of fixed-rate one- to- four family loans that are originated and sold by
the Savings Bank. See "-- Loan Originations, Sales and Purchases" and "--
Mortgage Brokerage."
The Savings Bank also invests in short- to- intermediate term U.S. Treasury
securities and U.S. Government agency obligations, and mortgage-backed
securities issued by U.S. Government agencies. At March 31, 1997, the Savings
Bank's investment and mortgage-backed securities portfolio had a carrying value
of $53.7 million. See "BUSINESS OF THE SAVINGS BANK -- Investment Securities."
Deposits have been the primary source of funds for the Savings Bank's
investment and lending activities. The Savings Bank plans to continue to fund
its operations primarily with deposits, although advances from the FHLB- Seattle
have been used as a supplemental source of funds. The Savings Bank has also used
FHLB advances to purchase investment securities, with the goal of recognizing
income on the difference between the interest rate earned on the investment
securities and the interest rate paid on the FHLB advances. See "BUSINESS OF THE
SAVINGS BANK -- Deposits and Other Sources of Funds."
The Savings Bank conducts its operations from its main office and eight
branch offices located in Southwest Washington State. See "BUSINESS OF THE
SAVINGS BANK -- Properties." The Savings Bank's main office is located at 700
N.E. Fourth Avenue, Camas, Washington, and its telephone number is (360)
834-2231.
The Conversion and Reorganization
Purposes of the Conversion and Reorganization. The Boards of Directors of
the Primary Parties believe that the Conversion and Reorganization is in the
best interests of the MHC and its members, the Savings Bank and its
stockholders, and the communities served by the MHC and the Savings Bank. In
their decision to pursue the Conversion and Reorganization, the Boards of
Directors considered the various regulatory uncertainties associated with the
mutual holding company structure, including the MHC's future ability to waive
any dividends from the Savings Bank and the uncertain future of the federal
thrift charter. See "RISK FACTORS -- Recent Legislation and the Future of the
Thrift Industry." In addition, the Boards of Directors considered the various
advantages of the stock
(ii)
<PAGE>
holding company form of organization, including: (i) the Holding Company's
ability to repurchase shares of its common stock without adverse tax
consequences, unlike the Savings Bank; (ii) the Holding Company's greater
flexibility under current law and regulations relative to the MHC to acquire
other financial institutions and diversify its operations; (iii) the larger
capital base of the Holding Company relative to the Savings Bank that will
result from the Conversion Offering; and (iv) the potential increased liquidity
in the Common Stock relative to the Public Savings Bank Shares because of the
larger number of shares of Common Stock to be outstanding upon consummation of
the Conversion and Reorganization. Currently, the Boards of Directors of the
Primary Parties have no specific plans, arrangements or understandings, written
or oral, regarding any stock repurchases, acquisitions or diversification of
operations. See "THE CONVERSION AND REORGANIZATION -- Purposes of Conversion and
Reorganization."
Description of the Conversion and Reorganization. The Conversion and
Reorganization are being undertaken pursuant to the Plan of Conversion that was
adopted by the Boards of Directors of the Savings Bank and the MHC on May 21,
1997 and by the Board of Directors of the Holding Company on _______, 1997.
Under the Plan of Conversion, (i) the MHC will convert to an interim federal
stock savings bank ("Interim A") and simultaneously merge with and into the
Savings Bank, pursuant to which the MHC will cease to exist and the outstanding
shares of Savings Bank Common Stock held by the MHC (_____ shares or ____% of
the outstanding Savings Bank Common Stock as of the date of this Prospectus)
will be canceled, and (ii) an interim federal stock savings bank ("Interim B")
will be formed as a wholly-owned subsidiary of the Holding Company and will
merge with and into the Savings Bank, resulting in the Savings Bank becoming a
wholly-owned subsidiary of the Holding Company and the outstanding Public
Savings Bank Shares (________ shares or _____% of the outstanding Savings Bank
Common Stock as of the date of this Prospectus) will be converted into the
Exchange Shares pursuant to the Exchange Ratio. The Exchange Ratio will result
in the holders of the outstanding Public Savings Bank Shares owning in the
aggregate approximately the same percentage of the Common Stock to be
outstanding upon the completion of the Conversion and Reorganization (i.e., the
Conversion Shares and the Exchange Shares) as the percentage of Savings Bank
Common Stock owned by them in the aggregate immediately before the consummation
of the Conversion and Reorganization, before giving effect to any (i) payment of
cash in lieu of issuing fractional Exchange Shares and (ii) shares of Conversion
Shares purchased by the Savings Bank's stockholders in the Conversion Offerings
or the ESOP thereafter.
The following diagram outlines the current organizational structure of the
Primary Parties' and their ownership interests:
--------------------- ---------------------
| MHC | | Public |
| | | Stockholders |
--------------------- ---------------------
| |
--%| |--%
| |
---------------------
| Savings Bank |
| |
---------------------
|
|100%
|
---------------------
| Holding Company |
| |
---------------------
|
|100%
|
---------------------
| Interim B |
| (in formation) |
---------------------
(iii)
<PAGE>
The following diagram reflects the post-Conversion and Reorganization
organizational structure of the Holding Company and the Savings Bank and their
ownership interests. The ownership interests presented assumes no
fractional Exchange Shares are issued, and does not give effect to purchases of
any Conversion Shares by the Public Stockholders or the exercise of outstanding
stock options.
--------------------- ---------------------
| Purchase of | | Former Public |
| Conversion Shares | | Stockholders |
--------------------- ---------------------
| |
--%| |--%
| |
---------------------
| Holding Company |
| |
---------------------
|
|
|
---------------------
| Savings Bank |
| |
---------------------
Required Approvals. The OTS has approved the Plan of Conversion subject to
(i) the approval of the holders of at least a majority of the total number of
votes eligible to be cast by the members of the MHC as of the close of business
on the Voting Record Date (______ __, 1997) at a special meeting of members
called for the purpose of submitting the Plan of Conversion for approval
("Members' Special Meeting"), (ii) the approval of the holders of at least
two-thirds of the outstanding shares of Savings Bank Common Stock (including
those shares held by the MHC) as of the close of business on the Voting Record
Date at a meeting of stockholders called for the purpose of considering the Plan
("Stockholders' Meeting"), and (iii) the approval of the holders of at least a
majority of the Public Savings Bank Shares as of the close of business on the
Voting Record Date present in person or by proxy at the Stockholders' Meeting.
The MHC intends to vote its shares of Savings Bank Common Stock, which amount to
______% of the outstanding shares, in favor of the Plan of Conversion at the
Stockholders' Meeting. In addition, as of March 31, 1997, directors and
executive officers of the Primary Parties as a group (10 persons) beneficially
owned 264,768, or 10.64%, of the outstanding shares of Savings Bank Common
Stock, which they intend to vote in favor of the Plan of Conversion at the
Stockholders' Meeting.
The Conversion Offerings
The Conversion Offerings, which consist of the Subscription Offering, the
Direct Community Offering and the Syndicated Community Offering (if any), are
being undertaken pursuant to the Plan of Conversion. The Holding Company is
offering up to 2,760,000 Conversion Shares in the Conversion Offerings.
Conversion Shares are first being offered in the Subscription Offering through
the exercise of Subscription Rights issued, in order of priority, to (i)
Eligible Account Holders; (ii) the ESOP; (iii) Supplemental Eligible Account
Holders; and (iv) Other Members. The Subscription Offering will expire at
________, Pacific Time, on _________ __, 1997, unless extended.
Subject to the prior rights of Subscription Rights holders, Conversion
Shares not subscribed for in the Subscription Offering are being offered in the
Direct Community Offering to members of the general public with preference given
first to Public Stockholders (who are not Eligible Account Holders, Supplemental
Eligible Account Holders or Other Members) and then to natural persons and
trusts of natural persons who are permanent residents of the Local Community. It
is anticipated that shares not subscribed for in the Subscription Offering and
Direct Community Offering may be offered to certain members of the general
public in the Syndicated Community Offering. The Primary Parties reserve the
absolute right to reject or accept any orders in the Direct Community Offering
or the Syndicated Community Offering (if any), in whole or in part, either at
the time of receipt of an order
(iv)
<PAGE>
or as soon as practicable following the Expiration Date. The closing with
respect to all shares sold in the Conversion Offerings will occur
simultaneously, and all Conversion Shares will be sold at a uniform price of
$10.00 per share.
The Primary Parties have retained Webb as their consultant and advisor in
connection with the Conversion Offerings and to assist in soliciting
subscriptions in the Conversion Offerings on a best efforts basis. See "The
CONVERSION AND REORGANIZATION -- The Subscription, Direct Community and
Syndicated Offerings."
Prospectus Delivery and Procedure for Purchasing Conversion Shares
To ensure that each prospective purchaser receives a Prospectus at least 48
hours prior to the Expiration Date as required by Rule 15c2-8 under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), no Prospectus will
be mailed later than five days or hand delivered later than two days prior to
the Expiration Date. Execution of the Stock Order Form will confirm receipt or
delivery of a Prospectus as required by Rule 15c2-8. Stock Order Forms will be
distributed only with a Prospectus.
To ensure that Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members are properly identified as to their stock purchase
priorities, such parties must list all deposit accounts, or in the case of Other
Members who are only borrowers, loans held at the Savings Bank, on the Stock
Order Form giving all names on each deposit account and/or loan and the account
and/or loan numbers at the applicable eligibility date.
Full payment by check, cash (only if delivered in person at an office of
the Savings Bank), money order, bank draft or withdrawal authorization (payment
by wire transfer will not be accepted) must accompany an original Stock Order
Form (facsimile copies and photocopies will not be accepted) and a fully
executed separate Certification Form. Orders cannot and will not be accepted
without execution of the Certification appearing on the reverse side of the
Stock Order Form. See "THE CONVERSION AND REORGANIZATION -- Procedure for
Purchasing Conversion Shares in the Subscription and Direct Community Offering."
Purchase Limitations
Except for the ESOP, which is expected to subscribe for 8% of the
Conversion Shares issued in the Conversion and Reorganization, the Plan of
Conversion provides for the following purchase limitations: (i) no person may
purchase in either the Subscription Offering, Direct Community Offering or
Syndicated Community Offering more than 1% of the Conversion Shares issued in
the Conversion Offerings, (ii) no person, together with associates of or persons
acting in concert with such person, may purchase in either the Subscription
Offering, Direct Community Offering or Syndicated Community Offering more than
2% of the Conversion Shares issued in the Conversion Offerings, (iii) the
maximum number of Conversion Shares which may be subscribed for or purchased in
all categories in the Conversion Offerings by any person, when combined with any
Exchange Shares received, shall not exceed 1% of the Conversion Shares issued in
the Conversion Offerings, and (iv) the maximum number of Conversion Shares which
may be subscribed for or purchased in all categories in the Conversion Offerings
by any person, together with any associate or any group of persons acting in
concert, when combined with any Exchange Shares received, shall not exceed 2% of
the Conversion Shares issued in the Conversion Offerings. The minimum order is
25 Conversion Shares. For purposes of these purchase limitations, Exchange
Shares will be valued at $10.00 per share which is the same price at which the
Conversion Shares will be issued in the Conversion Offerings. At any time during
the Conversion Offerings, and without further approval by the MHC members or the
Public Stockholders, the Primary Parties, in their sole discretion, may increase
any of the purchase limitations by up to 5% of the Conversion Shares issued in
the Conversion and Reorganization. Under certain circumstances, subscribers may
be resolicited in the event of such an increase and given the opportunity to
increase, decrease or rescind their orders. If there is an oversubscription in
the Conversion Offerings, Conversion Shares will be allocated as set forth in
the Plan of Conversion. See "THE CONVERSION AND REORGANIZATION -- The
Subscription, Direct Community and Syndicated Community Offerings," "--
Procedure for Purchasing Conversion Shares in the Subscription and Direct
Community Offerings" and "-- Limitations on Purchases of Conversion Shares."
Because the purchase limitations set forth in the Plan of Conversion take into
account the Exchange Shares to be issued to
(v)
<PAGE>
the Public Stockholders for their Public Savings Bank Shares, the ability of
certain Public Stockholders to purchase Conversion Shares in the Conversion
Offerings may be limited.
Stock Pricing and Number of Shares to be Issued in the Conversion and
Reorganization
OTS regulations require the aggregate purchase price of the Conversion
Shares be consistent with the independent appraisal of the estimated pro forma
market value of the MHC and the Savings Bank, as converted, which was estimated
by RP Financial to range from $20.4 million to $27.6 million as of June 6, 1997,
or from 2,040,000 shares to 2,760,000 shares based on the Purchase Price.
Because the Public Stockholders will continue to hold the same aggregate
percentage ownership interest in the Holding Company as they held in the Savings
Bank before the Conversion and Reorganization, before giving effect to the
payment of cash in lieu of issuing fractional Exchange Shares and any Conversion
Shares purchased by the Public Stockholders in the Conversion Offerings or the
ESOP thereafter. The independent appraisal valuation was multiplied by 58.27%
(which represents the MHC's percentage interest in the Savings Bank to determine
the midpoint of the Estimated Valuation Range, which is $24.0 million, or
2,400,000 shares based on the Purchase Price). The full text of the independent
appraisal describes the procedures followed, the assumptions made, limitations
on the review undertaken and matters considered, which included but did not
depend on the trading market for the Savings Bank Common Stock (see "MARKET FOR
COMMON STOCK"). The appraisal will be updated or confirmed at the completion of
the Conversion Offerings. The maximum of the Estimated Valuation Range may be
increased by up to 15% and the number of Conversion Shares may be increased to
3,174,000 shares due to material changes in the financial condition or results
of operations of the Savings Bank or changes in market conditions or general
financial, economic or regulatory conditions. No resolicitation of subscribers
will be made and subscribers will not be permitted to modify or cancel their
subscriptions unless the gross proceeds from the sale of the Conversion Shares
are less than the minimum or more than 15% above the maximum of the current
Estimated Valuation Range. All Conversion Shares will be sold at the uniform
Purchase Price ($10.00 per share), which was established by the Boards of
Directors of the Primary Parties. Any increase or decrease in the number of
shares of Conversion Stock will result in a corresponding change in the number
of Exchange Shares, so that upon consummation of the Conversion and
Reorganization, the Conversion Shares and the Exchange Shares will represent
approximately 58.27% and 41.73%, respectively, of the total outstanding shares
of Common Stock. Nevertheless, Exchange Shares may represent a lesser percentage
of the total outstanding shares of Common Stock if there are insufficient shares
for the ESOP to purchase 8.0% of the Conversion Shares issued in the Conversion
and Reorganization, and the Holding Company issues authorized but unissued
shares to the ESOP to satisfy its order. See "PRO FORMA DATA," "RISK FACTORS --
Possible Dilutive Effect of Benefit Programs" and "THE CONVERSION AND
REORGANIZATION -- Stock Pricing, Exchange Ratio and Number of Shares to be
Issued." The appraisal is not intended to be and should not be construed as a
recommendation of any kind as to the advisability of purchasing Common Stock in
the Conversion Offerings nor can assurance be given that purchasers of the
Common Stock in the Conversion Offerings will be able to sell such shares after
consummation of the Conversion and Reorganization at a price that is equal to or
above the Purchase Price. Furthermore, the pro forma stockholders' equity is not
intended to represent the fair market value of the Common Stock and may be
greater than amounts that would be available for distribution to stockholders in
the event of liquidation. A complete copy of the appraisal is available in the
manner set forth under "ADDITIONAL INFORMATION."
Based on the ______ Public Savings Bank Shares outstanding at the date of
this Prospectus, and assuming a minimum of 2,040,000 and a maximum of 2,760,000
Conversion Shares are issued in the Conversion Offerings, the Exchange Ratio is
expected to range from approximately 1.4488 Exchange Shares to 1.9601 Exchange
Shares for each Public Savings Bank Share issued and outstanding immediately
prior to the consummation of the Conversion and Reorganization. The Exchange
Ratio will be affected if any stock options to purchase shares of Savings Bank
Common Stock are exercised after the date of this Prospectus and before the
consummation of the Conversion and Reorganization. If any stock options are
outstanding immediately before the consummation of the Conversion and
Reorganization, they will be converted into options to purchase shares of Common
Stock, with the number of shares subject to the option and the exercise price
per share to be adjusted based upon the Exchange Ratio so that the aggregate
exercise price remains unchanged. The duration of the options will also be
unchanged. As of the date
(vi)
<PAGE>
of this Prospectus, there were outstanding options to purchase _____ shares of
Savings Bank Common Stock at a weighted-average exercise price of $____ per
share. The Savings Bank has no plans to grant additional stock options before
the consummation of the Conversion and Reorganization.
<TABLE>
<CAPTION>
Conversion Shares to Exchange Stock to Shares
Be Issued(1) Be Issued(1) of Common
------------------------- ---------------------- Stock to be Exchange
Amount Percent Amount Percent Outstanding(1) Ratio(1)
------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Minimum ......................... 2,040,000 52.27% 1,460,943 41.73% 3,500,943 1.4488
Midpoint ........................ 2,400,000 52.27 1,718,757 41.73 4,118,757 1.7044
Maximum ......................... 2,760,000 52.27 1,976,571 41.73 4,736,571 1.9601
15% above
Maximum ........................ 3,174,000 52.27 2,273,056 41.73 5,447,056 2.2541
</TABLE>
- ----------
(1) Assumes that outstanding options to purchase 72,046 shares of Savings Bank
Common Stock at March 31, 1997 are not exercised before consummation of the
Conversion and Reorganization. However, assuming exercise, the percentages
represented by the Conversion Shares and the Exchange Shares would be
56.58% and 43.42%, respectively, and the Exchange Ratio would be 1.4069,
1.6552, 1.9035, and 2.1890, at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range, respectively.
Differences in Stockholder Rights
The Holding Company is a Washington corporation subject to the provisions
of the Washington Business Corporation Act, as amended ("WBCA"), and the Savings
Bank is a federally chartered savings bank subject to federal laws and
regulations. Upon consummation of the Conversion and Reorganization, the Public
Stockholders will become stockholders of the Holding Company and their rights
will be governed by the Holding Company's Articles of Incorporation and Bylaws
and Washington law, rather than the Savings Bank's Federal Stock Charter and
Bylaws, federal law and OTS regulations. The rights of stockholders of the
Savings Bank are materially different in certain respects from the rights of
stockholders of the Holding Company. See "COMPARISON OF STOCKHOLDERS' RIGHTS"
and "DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY."
Use of Proceeds
The net proceeds from the sale of the Conversion Shares are estimated to
range from $19.6 million to $26.7 million, or to $30.8 million if the Estimated
Valuation Range is increased by 15%, depending upon the number of shares sold
and the expenses of the Conversion and Reorganization. The Holding Company has
received conditional OTS approval to purchase all of the capital stock of the
Savings Bank to be issued in the Conversion and Reorganization in exchange for
50% of the net investable proceeds of the Conversion Offerings. This will result
in the Holding Company retaining approximately $8.6 million to $11.8 million of
the net proceeds, or up to $13.5 million if the Estimated Valuation Range is
increased by 15%, and the Savings Bank receiving an equal amount. See "PRO FORMA
DATA."
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities. The Savings Bank will use the funds
contributed to it for general corporate purposes, including, initially, lending
and investment in short-term U.S. Government and agency obligations.
A portion of the net proceeds retained by the Holding Company will be used
for a loan by the Holding Company to the ESOP to enable it to refinance its
existing third party loan used to purchase shares of Savings Bank Common Stock
in the MHC Reorganization ($237,000 outstanding balance at March 31, 1997) and
to purchase 8%
(vii)
<PAGE>
of the shares of Conversion Shares issued in the Conversion and Reorganization.
Such loan would fund the entire purchase price of the Conversion Shares to be
purchased by the ESOP in the Conversion Offerings ($2.2 million at the maximum
of the Estimated Valuation Range) and would be repaid principally from the
Savings Bank's contributions to the ESOP and from dividends payable on the
Common Stock held by the ESOP. The remaining proceeds retained by the Holding
Company initially will be invested primarily in short-term U.S. Government and
agency obligations. Such proceeds will be available for additional contributions
to the Savings Bank in the form of debt or equity, to support future growth and
diversification activities, as a source of dividends to the stockholders of the
Holding Company and for future repurchases of Common Stock (including possible
repurchases to fund the Riverview Bancorp, Inc. 1997 Management Development and
Recognition Plan ("1997 MRP") or to provide shares to be issued upon exercise of
stock options) to the extent permitted under Washington law and OTS regulations.
The Holding Company may consider exploring opportunities to use such funds to
expand operations through acquiring or establishing additional branch offices
and the acquisition of other financial institutions. Currently, there are no
specific plans, arrangements, agreements or understandings, written or oral,
regarding any such activities.
Market for Common Stock
The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock. The Holding
Company has received conditional approval to have the Common Stock listed on the
Nasdaq National Market System under the symbol "RVSB" (the current symbol for
the Public Savings Bank Shares, which are listed on the Nasdaq SmallCap Market).
Keefe, Bruyette and Pacific Crest have agreed to act as a market makers for the
Holding Company's Common Stock following consummation of the Conversion and
Reorganization. No assurance can be given that an active and liquid trading
market for the Common Stock will develop or, if developed, will be maintained.
Further, no assurance can be given that purchasers will be able to sell their
shares at or above the Purchase Price after the Conversion and Reorganization.
See "RISK FACTORS -- Absence of Prior Market for the Common Stock" and "MARKET
FOR COMMON STOCK."
Dividend Policy
Following consummation of the Conversion and Reorganization, the Holding
Company's Board of Directors intends to declare cash dividends on the Common
Stock at an initial quarterly rate equal to $0.06 per share divided by the final
Exchange Ratio, commencing with the first full quarter following consummation of
the Conversion and Reorganization. Based upon the Estimated Valuation Range, the
Exchange Ratio is expected to be 1.4488, 1.7044, 1.9601 and 2.2541 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, respectively, resulting in an initial quarterly dividend rate of $0.0414,
$0.0352, $0.03606 and $0.0266 per share, respectively, following consummation of
the Conversion and Reorganization. Declarations of dividends by the Holding
Company's Board of Directors will depend upon a number of factors, including the
amount of the net proceeds from the Conversion Offerings retained by the Holding
Company, investment opportunities available to the Holding Company or the
Savings Bank, capital requirements, regulatory limitations, the Holding
Company's and the Savings Bank's financial condition and results of operations,
tax considerations and general economic conditions. Consequently, there can be
no assurance that any dividends will be paid on the Common Stock or that, if
paid, such dividends will not be reduced or eliminated in future periods. The
Savings Bank intends to continue to pay regular quarterly dividends through
either the date of consummation of the Conversion and Reorganization (on a pro
rata basis) or the end of the fiscal quarter during which the Conversion and
Reorganization is consummated. See "DIVIDEND POLICY."
Officers' and Directors' Common Stock Purchases and Beneficial Ownership
At march 31, 1997, officers and directors of the Savings Bank (10 persons)
beneficially owned 264,768 shares of Savings Bank Common Stock. See "MANAGEMENT
OF THE SAVINGS BANK -- Beneficial Ownership of Savings Bank Common Stock by
Directors and Executive Officers." In addition to an aggregate of 451,270
Exchange Shares to be received by officers and directors of the Savings Bank in
the Exchange Offering based on an Exchange Ratio of 1.7044, officers and
directors are expected to subscribe for an aggregate of approximately
(viii)
<PAGE>
9,720 Conversion Shares, or less than 1% of the shares based on both the minimum
and the maximum of the Estimated Valuation Range, respectively. See "CONVERSION
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS."
Furthermore, purchases by the ESOP, allocations under the 1997 MRP, and the
exercise of stock options issued under the Riverview Bancorp, Inc. 1997 Stock
Option Plan ("1997 Stock Option Plan"), will increase the number of shares
beneficially owned by directors, officers and employees. Assuming (i) the
Exchange Shares to be received and the Conversion Shares to be subscribed for by
officers and directors described above, (ii) implementation of the MRP and the
1997 Stock Option Plan and the exercise of remaining options under the 1993
Stock Option Plan, (iii) the open market purchase of shares on behalf of the
1997 MRP, (iv the purchase by the ESOP of 8% of the Conversion Shares sold in
the Conversion Offerings, and (v) the exercise of stock options equal to 10% of
the number of Conversion Shares issued in the Conversion and Reorganization,
directors, officers and employees of the Holding Company and the Savings Bank
would have voting control, on a fully diluted basis, of _____% and _____% of the
Common Stock, based on the issuance of the minimum and maximum of the Estimated
Valuation Range, respectively. See "RISK FACTORS -- Anti-takeover Considerations
- -- Voting Control by Insiders." The MRP and Stock Option Plan are subject to
approval by the stockholders of the Holding Company at a meeting to be held no
earlier than six months following consummation of the Conversion and
Reorganization.
Risk Factors
See "RISK FACTORS" beginning on page 1 for a discussion of certain risks
related to the Conversion and Reorganization that should be considered by all
prospective investors.
(ix)
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth certain information concerning the
consolidated financial position and results of operations of the Savings Bank
and its subsidiaries at the dates and for the periods indicated. This
information is qualified in its entirety by reference to the detailed
information contained in the Consolidated Financial Statements and Notes thereto
presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At March 31,
------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(In thousands)
SELECTED FINANCIAL CONDITION DATA:
<S> <C> <C> <C> <C> <C>
Total assets ....................................... $224,385 $209,506 $190,609 $131,511 $117,023
Loans receivable, net(1) ........................... 151,774 128,169 103,772 90,860 83,554
Mortgage-backed certificates held
to maturity, at amortized cost .................... 26,402 28,375 31,922 17,196 11,097
Mortgage-backed certificates available
for sale, at fair value ........................... 2,990 2,004 -- -- --
Cash and interest-bearing deposits ................. 6,951 5,585 6,499 7,363 7,772
Investment securities held to
maturity, at amortized cost ....................... 22,212 31,356 38,049 12,294 10,167
Investment securities available for
sale, at fair value ............................... 3,899 3,932 -- -- --
Deposit accounts ................................... 169,416 158,159 145,449 106,478 105,953
Federal Home Loan Bank advances .................... 27,180 26,050 23,000 5,000 --
Shareholders' equity (retained
earnings before 1994)(2) .......................... 25,022 23,086 20,533 18,359 9,803
</TABLE>
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Interest income ......................................... $17,476 $15,996 $13,232 $10,305 $10,230
Interest expense ........................................ 8,923 8,416 5,927 3,840 4,625
------- ------- ------- ------- -------
Net interest income ..................................... 8,553 7,580 7,305 6,465 5,605
Provision for loan losses ............................... 180 -- -- 200 187
------- ------- ------- ------- -------
Net interest income after provision
for loan losses ........................................ 8,373 7,580 7,305 6,265 5,418
Gains (losses) from sale of loans,
securities and real estate owned ....................... 106 391 111 342 1,018
Noninterest income ...................................... 1,768 1,624 1,139 1,064 1,185
Noninterest expenses(3) ................................. 7,204 5,607 4,889 3,936 3,890
------- ------- ------- ------- -------
Income before federal income tax
provision and extraordinary item
Provision for federal income taxes ...................... 1,035 1,375 1,220 1,335 1,350
------- ------- ------- ------- -------
Income before extraordinary items ....................... 2,008 2,613 2,446 2,380 2,381
Cumulative effect of accounting
changes ................................................ -- -- -- 170 --
------- ------- ------- ------- -------
Net income .............................................. $2,008 $2,613 $2,446 $2,210 $2,381
======= ======= ======= ======= =======
</TABLE>
(x)
<PAGE>
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------- ------------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (3):
Net income per share:
Before cumulative effect of
accounting changes ........................ $0.85 $1.11 $1.04 $1.02 N/A
Cumulative effect of accounting
change .................................... -- -- -- 0.07 N/A
------------- ------------- ------------- ------------- ----
Net income .................................. $0.85 $1.11 $1.04 $1.09 N/A
============= ============= ============= ============= ====
Dividends per share (4) ...................... $0.21 $0.17 $0.42 -- N/A
Weighted average shares
outstanding ................................. 2,374,077 2,362,450 2,348,306 2,236,285 --
</TABLE>
<TABLE>
<CAPTION>
At March 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
SELECTED OTHER DATA:
Number of:
Real estate loans outstanding ..................... 3,260 2,939 2,894 2,722 2,723
Deposit accounts .................................. 19,300 18,318 16,816 13,877 14,176
Full service offices .............................. 9 9 9 6 6
</TABLE>
<TABLE>
<CAPTION>
At or For the Year Ended March 31,
--------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS:
Performance Ratios:
Return on average assets .......................... 0.92% 1.31% 1.41% 2.06% 2.05%
Return on average equity .......................... 8.38 12.02 12.59 18.39 27.58
Dividend payout ratio(4)(5) ....................... 10.56 6.62 16.80 N/A N/A
Interest rate spread .............................. 3.72 3.62 4.11 5.11 4.89
Net interest margin ............................... 4.19 4.05 4.49 5.25 5.12
Noninterest expense to
average assets(6) ................................ 3.30 2.80 2.82 3.17 3.35
Efficiency ratio (non-
interest expense divided by
the sum of net interest
income and noninterest
income)(7) ....................................... 69.09 58.44 57.15 50.00 49.82
Asset Quality Ratios:
Average interest-earning assets
to interest-bearing liabilities .................. 110.80 109.63 110.39 112.66 105.32
Allowance for loan losses to
total loans at end of period ..................... 0.50 0.47 0.58 0.62 0.55
</TABLE>
(xi)
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Net charge-offs (recoveries) to
average outstanding loans during
the period ....................................... 0.00 0.00 (0.01) 0.07 0.38
Ratio of nonperforming assets
to total assets .................................. 0.10 0.26 0.13 0.38 1.41
Capital Ratios:
Average equity to average assets .................. 10.98 10.87 11.20 11.18 7.44
Equity to assets at end of fiscal year ............ 11.15 11.02 10.77 13.96 8.38
</TABLE>
- ----------
(1) Includes loans held for sale.
(2 The Savings Bank was not a public company until the consummation of the MHC
Reorganization on October 22, 1993.
(3) Includes $947,000 special SAIF assessment in the year ended March 31, 1997.
(4) All cash dividends paid by the Savings Bank have been waived by the MHC.
(5) Excludes cash dividends waived by the MHC.
(6) Noninterest expense to average assets was 2.87% at March 31, 1997 without
special SAIF assessment.
(7) Efficiency ratio was 60.00% at March 31, 1997 without special SAIF
assessment.
(xii)
<PAGE>
RISK FACTORS
Before investing in shares of the Common Stock offered hereby, prospective
investors should carefully consider the matters presented below, in addition to
matters discussed elsewhere in this Prospectus.
Certain Lending Risks
Construction Lending Risks. Prompted by the high demand for residential
housing units in its primary market area, the Savings Bank has been an active
originator of residential construction loans, including speculative loans to
approximately 50 local residential builders. Residential construction loans have
increased from $19.6 million, or 23.4% of total net loans receivable, at March
31, 1993 to $32.5 million, or 21.4% of total net loans receivable, at March 31,
1997. At March 31, 1997, speculative residential construction loans amounted to
$16.8 million, or 49.9% of the residential construction loan portfolio. Subject
to market conditions, the Savings Bank intends to continue to be an active
originator of residential construction loans.
Construction lending generally involves greater credit risk than one- to-
four family mortgage lending. Construction loans generally have higher loan
balances than one- to- four family mortgage loans. In addition, the potential
for cost overruns because of the inherent difficulties in estimating
construction costs and, therefore, collateral values and the difficulties and
costs associated with monitoring construction progress, among other things, are
major contributing factors to this greater credit risk. Speculative construction
loans have the added risk that there is not an identified buyer for the
completed home when the loan is originated, with the risk that the builder will
have to service the construction loan debt and finance the other carrying costs
of the completed home for an extended time period until a buyer is identified.
Furthermore, the demand for construction loans and the ability of construction
loan borrowers to service their debt depends highly on the state of the general
economy, including market interest rate levels, and the state of the economy of
the Savings Bank's primary market area. A material downturn in economic
conditions would be expected to have a material adverse effect on the credit
quality of the construction loan portfolio, and may require management to
reassess the adequacy of the Savings Bank's allowance for loan losses and to
establish additional provisions for loan losses, which would have a material
adverse effect on net income. See "BUSINESS OF THE SAVINGS BANK -- Lending
Activities -- Construction Lending" and "-- Allowance for Loan Losses."
Consumer Lending Risks. At March 31, 1997, the Savings Bank's consumer loan
portfolio amounted to $14.3 million, or 9.4% of total net loans receivable.
Consumer lending is also generally viewed to involve greater credit risk than
one- to- four family mortgage lending. Collateral such as automobiles, boats and
other personal property depreciate rapidly and are often an inadequate repayment
source if a borrower defaults. In addition, consumer loan repayments depend on
the borrower's continuing financial stability and are more likely to be
adversely affected by job loss, divorce, illness, personal bankruptcy and other
financial hardship. See "BUSINESS OF THE SAVINGS BANK -- Lending Activities --
Consumer Lending."
Commercial Real Estate Lending. At March 31, 1997, the Savings Bank's
commercial real estate loan portfolio amounted to $9.0 million, or 5.9% of total
net loans receivable. Commercial real estate lending generally involves greater
credit risk than one- to- four family mortgage lending. Because payments on
loans secured by commercial properties often depend upon the successful
operation and management of the properties, repayment of such loans may be
affected by adverse conditions in the real estate market or the economy, among
other things. See "BUSINESS OF THE SAVINGS BANK -- Lending Activities --
Commercial Real Estate Lending."
Commercial Business Lending. At March 31, 1997, the Savings Bank's
commercial business loan portfolio amounted to $794,000, or 0.5% of total net
loans receivable. Subject to market conditions and other factors, the Savings
Bank intends to expand its commercial business lending activities within its
primary market area. Commercial business lending generally involves greater
credit risk than one- to- four family mortgage lending. Although commercial
business loans are often collateralized by equipment, inventory, accounts
receivable or other business assets, the liquidation value of these assets in
the event of a borrower default is often an insufficient source
1
<PAGE>
of repayment because accounts receivable may be uncollectible and inventories
and equipment may be obsolete or of limited use, among other things. See
"BUSINESS OF THE SAVINGS BANK -- Lending Activities -- Commercial Business
Lending."
Concentration of Credit Risk. The Savings Bank has no significant
concentration of credit risk other than that a substantial portion of its loan
portfolio is secured by real estate, either as primary or secondary collateral,
located in its primary market area. This concentration of credit risk could have
a material adverse effect on the Savings Bank's financial condition and results
of operations to the extent there is a material deterioration in that area's
economy and real estate values. See "BUSINESS OF THE SAVINGS BANK -- Lending
Activities."
Interest Rate Risk
General. Like all financial institutions, the Savings Bank's financial
condition and results of operations are influenced significantly by general
economic conditions, the related monetary and fiscal policies of the federal
government and government regulations. Deposit flows and the cost of funds are
influenced by interest rates of competing investments and general market
interest rates. Lending activities are affected by the demand for mortgage
financing and for consumer and other types of loans, which in turn is affected
by the interest rates at which such financing may be offered and by other
factors affecting the supply of housing and the availability of funds. The
Savings Bank's profitability, like that of most financial institutions, depends
largely on its net interest income, which is the difference between the interest
income received from its interest-earning assets and the interest expense
incurred in connection with its interest-bearing liabilities. To better control
the impact of changes in interest rates, the Savings Bank has sought to improve
the match between asset and liability maturities or repricing periods and rates
by emphasizing the origination and purchase of ARM loans and shorter term
construction, commercial real estate, and consumer loans.
Potential Adverse Impact on Results of Operations. The Savings Bank's
results of operations would be adversely affected by a material prolonged
increase in market interest rates. At March 31, 1997, assuming, for example, an
instantaneous 200 basis point increase in market interest rates, the Savings
Bank's net portfolio value ("NPV") (the present value of expected cash flows
from assets, liabilities and off-balance sheet contracts) would decrease by
approximately $5.6 million, or 17%. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Asset and Liability
Management."
Potential Adverse Impact on Financial Condition. Changes in the level of
interest rates also affect the volume of loans originated or purchased by the
Savings Bank and, thus, the amount of loan and commitment fees, as well as the
market value of the Savings Bank's investment securities and other
interest-earning assets. Changes in interest rates also can affect the average
life of loans. Decreases in interest rates may result in increased prepayments
of loans, as borrowers refinance to reduce borrowing costs. Under these
circumstances, the Savings Bank is subject to reinvestment risk to the extent
that it is not able to reinvest such prepayments at rates which are comparable
to the rates on the maturing loans or securities. Moreover, volatility in
interest rates also can result in disintermediation, or the flow of funds away
from savings institutions into direct investments, such as U.S. Government and
corporate securities and other investment vehicles which, because of the absence
of federal insurance premiums and reserve requirements, generally pay higher
rates of return than savings institutions.
At March 31, 1997, out of total gross loans of $165.5 million in the
Savings Bank's portfolio, $78.2 million were ARM loans, substantially all of
which reprice every year. Furthermore, the Savings Bank's ARM loans contain
periodic and lifetime interest rate adjustment limits which, in a rising
interest rate environment, may prevent such loans from repricing to market
interest rates. While management anticipates that ARM loans will better offset
the adverse effects of an increase in interest rates as compared to fixed-rate
mortgages, the increased mortgage payments required of ARM borrowers in a rising
interest rate environment could potentially cause an increase in delinquencies
and defaults. The Savings Bank has not historically had an increase in such
delinquencies and defaults on ARM loans, but no assurance can be given that such
delinquencies or defaults would not occur in the future. The marketability of
the underlying property also may be adversely affected in a high interest rate
environment.
2
<PAGE>
Moreover, the Savings Bank's ability to originate or purchase ARM loans may be
affected by changes in the level of interest rates and by market acceptance of
the terms of such loans. In a relatively low interest rate environment, as
currently exists, borrowers generally tend to favor fixed-rate loans over ARM
loans to hedge against future increases in interest rates.
Competition
The Savings Bank has faced, and will continue to face, strong competition
both in making loans and attracting deposits. The Savings Bank's primary market
has a high concentration of financial institutions, many of which are branches
of large California and Pacific Northwest bank holding companies which have
greater financial resources than the Savings Bank and all of which compete with
the Savings Bank in varying degrees. Competition for loans principally comes
from commercial banks, thrift institutions, credit unions and mortgage banking
companies. Historically, commercial banks, thrift institutions and credit unions
have been the Savings Bank's most direct competition for deposits. The Savings
Bank also competes with short-term money market mutual funds and with other
financial institutions, such as brokerage firms and insurance companies, for
deposits. In competing for loans, the Savings Bank may be forced to offer lower
loan interest rates periodically. Conversely, in competing for deposits, the
Savings Bank may be forced to offer higher deposit interest rates periodically.
Either case or both cases could adversely affect net interest income. See
"BUSINESS OF THE SAVINGS BANK -- Competition."
Return on Equity After Conversion and Reorganization
Return on equity (net income for a given period divided by average equity
during that period) is a ratio used by many investors to compare the performance
of a particular financial institution to its peers. The Savings Bank's return on
equity for the year ended March 31, 1997 was, and the Holding Company's
post-Conversion and Reorganization return on equity will be, less than the
average return on equity for publicly traded thrift institutions and their
holding companies. See "SELECTED CONSOLIDATED FINANCIAL INFORMATION" for
numerical information regarding the Savings Bank's historical return on equity
and "CAPITALIZATION" for a discussion of the Holding Company's estimated pro
forma consolidated capitalization as a result of the Conversion and
Reorganization. In order for the Holding Company to achieve a return on equity
comparable to the historical levels of the Savings Bank, the Holding Company
either would have to increase net income or reduce stockholders' equity, or
both, commensurate with the increase in equity resulting from the Conversion and
Reorganization. Reductions in equity could be achieved by, among other things,
the payment of regular or special cash dividends (although no assurances can be
given as to their payment or, if paid, their amount and frequency), the
repurchase of shares of Common Stock subject to applicable regulatory
restrictions, or the acquisition of branch offices, other financial institutions
or related businesses (neither the Holding Company nor the Savings Bank has any
present plans, arrangements, or understandings, written or oral, regarding any
repurchase or acquisitions). See "DIVIDEND POLICY" and "USE OF PROCEEDS."
Achievement of increased net income levels will depend on several important
factors outside management's control, such as general economic conditions,
including the level of market interest rates, competition and related factors,
among others. In addition, the expenses associated with the ESOP and the MRP
(see "-- New Expenses Associated with ESOP and MRP"), along with other
post-Conversion and Reorganization expenses are expected to contribute initially
to reduced earnings levels. Subject to market conditions, initially the Savings
Bank intends to deploy the net proceeds of the Conversion Offerings to support
its core lending activities to increase earnings per share and book value per
share, with the goal of achieving a return on equity comparable to the average
for publicly traded thrift institutions and their holding companies. This goal
will likely take a number of years to achieve and no assurances can be given
that this goal can be attained. Consequently, for the foreseeable future,
investors should not expect a return on equity which will meet or exceed the
average return on equity for publicly traded thrift institutions, many of which
are not newly converted institutions and have had time to deploy their
conversion capital.
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Expenses Associated With ESOP and MRP
The Savings Bank will recognize material employee compensation and benefit
expenses assuming the ESOP and the MRP are implemented. The actual aggregate
amount of these new expenses cannot be currently predicted because applicable
accounting practices require that they be based on the fair market value of the
shares of Common Stock when the expenses are recognized, which would occur when
shares are committed to be released in the case of the ESOP and over the vesting
period of awards made to recipients in the case of the MRP. These expenses have
been reflected in the pro forma financial information under "PRO FORMA DATA"
assuming the Purchase Price ($10.00 per share) as fair market value. Actual
expenses, however, will be based on the fair market value of the Common Stock at
the time of recognition, which may be higher or lower than the Purchase Price.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Impact of Accounting Pronouncements and Regulatory Policies --
Accounting for Employee Stock Ownership Plans," "-- Accounting for Stock-Based
Compensation," "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Employee Stock
Ownership Plan" and "-- Benefits -- Management Recognition Plan."
Anti-takeover Considerations
Provisions in the Holding Company's Governing Instruments and Washington
and Federal Law. Certain provisions included in the Holding Company's Articles
of Incorporation and in the WBCA might discourage potential proxy contests and
other potential takeover attempts, particularly those that have not been
negotiated with the Board of Directors. As a result, these provisions may
preclude takeover attempts that certain stockholders may deem to be in their
best interest and may tend to perpetuate existing management. These provisions
include, among other things, a provision limiting voting rights of beneficial
owners of more than 10% of the Common Stock and supermajority voting
requirements for certain business combinations. In addition, the Articles of
Incorporation provides for the election of directors to staggered terms of three
years, eliminates cumulative voting for directors, and permits the removal of
directors without cause only upon the vote of holders of 80% of the outstanding
voting shares. Certain provisions of the Articles of Incorporation of the
Holding Company cannot be amended by stockholders unless an 80% stockholder vote
is obtained. The Articles of Incorporation also contains provisions regarding
the timing and content of stockholder proposals and nominations and limiting the
calling of special meetings. The existence of these anti-takeover provisions
could result in the Holding Company being less attractive to a potential
acquiror and in stockholders receiving less for their shares than otherwise
might be available in the event of a takeover attempt. Furthermore, federal
regulations prohibit for three years after consummation of the Conversion and
Reorganization the ownership of more than 10% of the Savings Bank or the Holding
Company without prior OTS approval. Federal law also requires OTS approval prior
to the acquisition of "control" (as defined in OTS regulations) of an insured
institution. See "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."
Voting Control by Insiders. In addition to an aggregate of 451,270 Exchange
Shares to be received by directors and officers of the Savings Bank and the
Holding Company in the Exchange Offering based on an Exchange Ratio of 1.7044,
directors and officers expect to subscribe for 10,200 Conversion Shares, or less
than 1% of the shares issued in the Conversion Offerings at both the minimum and
the maximum of the Estimated Valuation Range, respectively. Directors and
officers are also expected to control indirectly the voting of approximately 8%
of the shares of Common Stock issued in the Conversion and Reorganization
through the ESOP (assuming shares have been allocated under the ESOP). Under the
terms of the ESOP, the unallocated shares will be voted by the ESOP trustees in
the same proportion as the votes cast by participants with respect to the
allocated shares. Patrick Sheaffer, President and Chief Executive Officer of the
Holding Company and the Savings Bank, and Ron Wysaske, Treasurer of the Holding
Company and Executive Vice President of the Savings Bank, serve as the ESOP
trustees.
At a meeting of stockholders to be held no earlier than six months
following the consummation of the Conversion and Reorganization, the Holding
Company expects to seek approval of the 1997 MRP, which is a non-tax- qualified
restricted stock plan for the benefit of key employees and directors of the
Holding Company and the Savings Bank. The Holding Company expects to acquire
common stock of the Holding Company on behalf of the
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1997 MRP in an amount equal to 4% of the Common Stock issued in the Conversion
and Reorganization, or 81,600 and 110,400 shares at the minimum and the maximum
of the Estimated Valuation Range, respectively. These shares will be acquired
either through open market purchases through a trust established in conjunction
with the 1997 MRP or from authorized but unissued shares of Common Stock. A
committee of the Board of Directors of the Holding Company will administer the
1997 MRP, the members of which would also serve as trustees of the 1997 MRP
trust, if formed. Under the terms of the 1997 MRP, the 1997 MRP committee or the
MRP trustees, will have the power to vote unallocated and unvested shares. In
addition, the Holding Company intends to reserve for future issuance pursuant to
the Riverview Bancorp, Inc. 1997 Stock Option Plan ("1997 Stock Option Plan") a
number of authorized shares of Common Stock equal to 10% of the Conversion
Shares issued in the Conversion and Reorganization (204,000 and 276,000 shares
at the minimum and the maximum of the Estimated Valuation Range, respectively).
The Holding Company also intends to seek approval of the 1997 Stock Option Plan
at a meeting of stockholders to be held no earlier than six months following the
consummation of the Conversion and Reorganization.
Assuming (i) the receipt of Exchange Shares and the purchase of Conversion
Shares by the directors and officers described above, (ii) the implementation of
the 1997 MRP and the 1997 Stock Option Plan, (iii) the open market purchase of
shares on behalf of the 1997 MRP, (iv) the purchase by the ESOP of 8% of the
Conversion Shares sold in the Conversion Offerings, and (v) the exercise of
stock options equal to 10% of the number of shares of Conversion Shares issued
in the Conversion and Reorganization, directors, officers and employees of the
Holding Company and the Savings Bank would have voting control, on a fully
diluted basis, of _____% and _____% of the Common Stock, based on the issuance
of the minimum and maximum of the Estimated Valuation Range, respectively.
Management's potential voting control alone, as well as together with additional
stockholder support, might preclude or make more difficult takeover attempts
that certain stockholders may deem to be in their best interest and might tend
to perpetuate existing management.
Provisions of Employment and Severance Agreements and Severance Plan. The
employment and severance agreements of Patrick Sheaffer, Chairman of the Board,
President and Chief Executive Officer of the Holding Company and the Savings
Bank, and Ron Wysaske, Treasurer and Chief Financial Officer of the Holding
Company and Executive Vice President and Chief Financial Officer of the Savings
Bank, and other senior officers of the Holding Company and the Savings Bank
provide for cash severance payments and/or the continuation of health, life and
disability benefits in the event of their termination of employment following a
change in control of the Holding Company or the Savings Bank. Assuming a change
of control occurred as of March 31, 1997, the aggregate value of the severance
benefits available to these executive officers under the agreements would have
been approximately $1.4 million. In addition, assuming that a change in control
had occurred at March 31, 1997 and the termination of all eligible employees,
the maximum aggregate payment due under the Savings Bank's Employee Severance
Compensation Plan ("Severance Plan") would be approximately $______. These
agreements and plans may have the effect of increasing the costs of acquiring
the Holding Company, thereby discouraging future attempts to take over the
Holding Company or the Savings Bank.
See "MANAGEMENT OF THE SAVINGS BANK -- Benefits," "RESTRICTIONS ON
ACQUISITION OF THE HOLDING COMPANY" and "DESCRIPTION OF CAPITAL STOCK OF THE
HOLDING COMPANY."
Possible Dilutive Effect of Benefit Programs
The 1997 MRP intends to acquire an amount of Common Stock of the Holding
Company equal to 4% of the Conversion Shares issued in the Conversion and
Reorganization. Such shares of Common Stock may be acquired by the Holding
Company in the open market or from authorized but unissued shares of Common
Stock of the Holding Company. If the 1997 MRP acquires authorized but unissued
shares of Common Stock from the Holding Company, the voting interests of
existing stockholders will be diluted and net income per share and stockholders'
equity per share will be decreased. See "PRO FORMA DATA" and "MANAGEMENT OF THE
SAVINGS BANK -- Benefits -- Management Recognition Plan." The 1997 MRP is
subject to approval by the Holding Company's stockholders.
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The 1997 Stock Option Plan will provide for options to acquire up to a
number of shares of Common Stock of the Holding Company equal to 10% of the
Conversion Shares issued in the Conversion and Reorganization. Such shares may
be authorized but unissued shares of Common Stock of the Holding Company and,
upon exercise of the options, will result in the dilution of the voting
interests of existing stockholders and may decrease net income per share and
stockholders' equity per share. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits
- -- 1997 Stock Option Plan." The 1997 Stock Option Plan is subject to approval by
the Holding Company's stockholders.
The Savings Bank maintains a 1993 Stock Option Plan ("1993 Stock Option
Plan") that was implemented in connection with the MHC Reorganization. As of the
date of this Prospectus, no shares of Savings Bank Common Stock remain reserved
for issuance under the 1993 Stock Option Plan and options for 72,046 shares have
been granted to optionees but remain unexercised. Upon consummation of the
Conversion and Reorganization, the 1993 Stock Option Plan will be assumed by the
Holding Company and shares of Common Stock will be issued in lieu of shares of
Savings Bank Common Stock pursuant to the terms of the 1993 Stock Option Plan.
If the ESOP is not able to purchase 8% of the shares of Conversion Shares
issued in the Conversion Offerings, the ESOP may acquire newly issued shares
from the Holding Company. In such event, the voting interests of existing
stockholders will be diluted and net income per share and stockholders' equity
per share will be decreased. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits --
Employee Stock Ownership Plan."
Pursuant to OTS requirements, the Plan of Conversion provides that the
limitations on the purchase of Conversion Shares in the Conversion Offerings
take into account the Exchange Shares issued to the Public Stockholders in
exchange for their Public Savings Bank Shares. As a result, the ability of
certain Public Stockholders to purchase Conversion Shares may be limited.
Consequently, such Public Stockholders may be prevented from purchasing
Conversion Shares so as to maintain their current ownership percentage in the
Savings Bank after the Conversion and Reorganization. See "THE CONVERSION AND
REORGANIZATION -- Limitations on Purchases of Conversion Shares."
Absence of Prior Market for the Common Stock
The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock. Prior to the Conversion and
Reorganization, the Public Savings Bank Shares have been listed on the Nasdaq
Smallcap Market under the symbol "RVSB." Although the Holding Company has
received conditional approval to list the Common Stock on the Nasdaq National
Market also under the symbol "RVSB," there can be no assurance that an active
and liquid trading market for the Common Stock will develop or, if developed,
will continue. Furthermore, there can be no assurance that purchasers will be
able to sell their shares at or above the Purchase Price. See "MARKET FOR COMMON
STOCK."
Possible Increase in Estimated Price Range and Number of Shares Issued
The Estimated Valuation Range may be increased up to 15% to reflect
material changes in the financial condition or results of operations of the
Savings Bank or changes in market conditions or general financial, economic or
regulatory conditions following the commencement of the Conversion Offerings. If
the Estimated Valuation Range is increased, it is expected that the Holding
Company would increase the Estimated Price Range so that up to _________
Conversion Shares at the Purchase Price would be issued for an aggregate price
of up to $__________. This increase in the number of shares would decrease a
subscriber's pro forma net income per share and stockholders' equity per share,
increase the Holding Company's pro forma consolidated stockholders' equity and
net earnings, and increase the Purchase Price as a percentage of pro forma
stockholders' equity per share and net income per share. See "PRO FORMA DATA."
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Recent Legislation and the Future of the Thrift Industry
The Savings Bank is, and the Holding Company upon consummation of the
Conversion and Reorganization will be, subject to extensive government
regulation designed primarily to protect the federal deposit insurance fund and
depositors. Such regulation often has a material impact on the Savings Bank's
financial condition and results of operations. For example, recent legislation
required the Savings Bank to pay a one-time assessment of $625,000, after-tax,
to the FDIC to recapitalize the SAIF. See "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Comparison of Operating
Results for the Years Ended March 31, 1997 and 1996."
The U.S. Congress is expected to consider legislation that may eliminate
the thrift industry as a separate industry. The Deposit Insurance Funds Act of
1996 ("DIF Act") provides that the SAIF will be merged with the Bank Insurance
Fund ("BIF") on January 1, 1999, but only if there are no thrift institutions in
existence. The DIF Act requires the Treasury Department to study the development
of a common charter for banks and thrifts and to submit a report of its finding
to Congress. The Savings Bank cannot predict what the attributes of such common
charter would be or whether any legislation will result from this study. If
developed, the common charter may not offer all the advantages that the Savings
Bank now enjoys (e.g., unrestricted nationwide branching) or that the Holding
Company, as a unitary savings and loan holding company, will enjoy upon
consummation of the Conversion (e.g., the absence of restrictions on non-banking
activities). If Congress fails to create a common charter, or does not act
otherwise to end the thrift industry's separate existence, the merger of the
SAIF and BIF contemplated by the DIF Act would not likely occur. Although the
SAIF currently meets its statutory reserve ratios, there can be no assurance
that it will continue to do so. The financial burden of any future
recapitalization likely would fall on a smaller assessment base, potentially
increasing the burden on individual institutions, including the Savings Bank.
See "REGULATION."
Possible Adverse Income Tax Consequences of the Distribution of Subscription
Rights
If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members of the Savings Bank are
deemed to have an ascertainable value, receipt of such rights may be a taxable
event (either as capital gain or ordinary income) to those Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members who receive
and/or exercise the Subscription Rights in an amount equal to such value.
Additionally, the Savings Bank could be required to recognize a gain for tax
purposes on such distribution. Whether Subscription Rights are considered to
have ascertainable value is an inherently factual determination. The Savings
Bank has been advised by RP Financial that such rights have no value; however,
RP Financial's conclusion is not binding on the Internal Revenue Service
("IRS"). See "THE CONVERSION AND REORGANIZATION -- Effects of Conversion and
Reorganization on Depositors and Borrowers of the Savings Bank -- Tax Effects."
RIVERVIEW BANCORP, INC.
The Holding Company was organized on June 23, 1997 under Washington law at
the direction of the Savings Bank to become the holding company for the
Savings Bank upon consummation of the Conversion and Reorganization. The Holding
Company has received conditional OTS approval to become a savings and loan
holding company through the acquisition of 100% of the capital stock of the
Savings Bank. Prior to the Conversion and Reorganization, the Holding Company
will not engage in any material operations. After the Conversion and
Reorganization, the Holding Company will be classified as a unitary savings and
loan holding company subject to regulation by the OTS, and its principal
business will be the ownership of the Savings Bank. Immediately following the
Conversion and Reorganization, the only significant assets of the Holding
Company will be the capital stock of the Savings Bank, 50% of the net investable
proceeds of the Conversion Offerings as permitted by the OTS to be retained by
it, and a note receivable from the ESOP evidencing a loan to enable the ESOP to
purchase 8% of the Common Stock issued in the Conversion and Reorganization. See
"PRO FORMA DATA" and "BUSINESS OF THE HOLDING COMPANY."
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The holding company structure will permit the Holding Company to expand the
financial services currently offered through the Savings Bank. Management
believes that the holding company structure and retention of a portion of the
proceeds of the Conversion Offerings will, should it decide to do so, facilitate
the expansion and diversification of its operations. The holding company
structure will also enable the Holding Company to repurchase its stock without
adverse tax consequences, subject to applicable regulatory restrictions,
including waiting periods. There are no present plans, arrangements, agreements,
or understandings, written or oral, regarding any such activities or
repurchases. See "REGULATION -- Savings and Loan Holding Company Regulations."
RIVERVIEW SAVINGS BANK, FSB
The Savings Bank is a federally-chartered savings bank, founded in 1923 and
headquartered in Camas, Washington. The Savings Bank's deposits are insured by
the FDIC up to applicable legal limits under the SAIF. The Savings Bank has been
a member of the FHLB system since 1937. The Savings Bank is regulated by the OTS
and the FDIC. At March 31, 1997, the Savings Bank had total assets of $224.4
million, total deposit accounts of $169.4 million, and total shareholders'
equity of $25.0 million, on a consolidated basis.
The Savings Bank is a community oriented financial institution offering
traditional financial services to the residents of its primary market area. The
Savings Bank considers the Local Community as its primary market area. The
Savings Bank is engaged primarily in the business of attracting deposits from
the general public and using such funds to originate fixed-rate mortgage loans
and ARM loans secured by one- to- four family residential real estate located in
its primary market area. The Savings Bank is also an active originator of
residential construction loans and consumer loans. At March 31, 1997, one- to-
four family mortgage loans were $94.5 million, or 62.3% of total net loans
receivable, residential construction loans were $32.5 million, or 21.4% of total
net loans receivable, and consumer loans were $14.3 million, or 9.4% of total
net loans receivable. To a lesser extent, the Savings Bank originates land loans
($7.9 million, or 5.2%, of total net loans receivable at March 31, 1997) and
commercial real estate loans ($9.0 million or 5.9% of total net loans receivable
at March 31, 1997). Substantially all of the Savings Bank's real estate loans
are secured by real estate located in its primary market area. Construction,
consumer, land and commercial real estate loans generally involve a greater risk
of loss than one- to- four family mortgage loans. See "RISK FACTORS -- Certain
Lending Risks."
The Savings Bank also invests in short- to- intermediate term U.S. Treasury
securities and U.S. Government agency obligations, and mortgage-backed
securities issued by U.S. Government agencies. At March 31, 1997, the Savings
Bank's investment and mortgage-backed securities portfolio had a carrying value
of $53.7 million. See "BUSINESS OF THE SAVINGS BANK -- Investment Securities."
Deposits have been the primary source of funds for the Savings Bank's
investment and lending activities. The Savings Bank plans to continue to fund
its operations primarily with deposits, although advances from the FHLB- Seattle
have been used as a supplemental source of funds. The Savings Bank has also used
FHLB advances to purchase investment securities, with the goal of recognizing
income on the difference between the interest rate earned on the investment
securities and the interest rate paid on the FHLB advances. See "BUSINESS OF THE
SAVINGS BANK -- Deposits and Other Sources of Funds."
The Savings Bank conducts its operations from its main office and eight
branch offices located in Southwest Washington State. See "BUSINESS OF THE
SAVINGS BANK -- Properties."
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby are
estimated to range from $19.6 million to $26.7 million, or up to $30.8 million
if the Estimated Valuation Range is increased by 15%. See "PRO FORMA DATA" for
the assumptions used to arrive at such amounts. The Holding Company has received
conditional OTS approval to purchase all of the capital stock of the Savings
Bank to be issued in the Conversion and Reorganization in exchange for 50% of
the net investable proceeds of the Conversion Offerings. This will result
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in the Holding Company retaining approximately $8.6 million to $11.8 million of
net proceeds, or up to $13.5 million if the Estimated Valuation Range is
increased by 15%, and the Savings Bank receiving an equal amount. See "PRO FORMA
DATA."
Receipt of 50% of the net proceeds of the sale of the Common Stock will
increase the Savings Bank's capital and will support the expansion of the
Savings Bank's existing business activities. The Savings Bank will use the funds
contributed to it for general corporate purposes, including, initially, lending
and investment in short-term U.S. Government and agency obligations.
In connection with the Conversion and Reorganization and the ESOP, the
Holding Company intends to loan the ESOP the amount necessary to refinance the
ESOP's existing third party loan used to purchase shares of Savings Bank Common
Stock in the MHC Reorganization ($237,000 outstanding balance at March 31, 1997)
and to purchase 8% of the shares of Common Stock sold in the Conversion
Offerings. The Holding Company's loan to fund the ESOP's purchase of shares of
Common Stock in the Conversion Offerings may range from $1.6 million to $2.2
million based on the sale of 2,040,000 shares to the ESOP (at the minimum of the
Estimated Valuation Range) and 2,760,000 shares (at the maximum of the Estimated
Valuation Range), respectively, at $10.00 per share. If 15% above the maximum of
the Estimated Valuation Range, or 3,174,000 Conversion Shares, are sold in the
Conversion and Reorganization, the Holding Company's loan to the ESOP would be
approximately $2.5 million (based on the sale of 253,920 shares to the ESOP). It
is anticipated that the ESOP loan will have a ten-year term with interest
payable at the prime rate as published in The Wall Street Journal on the closing
date of the Conversion and Reorganization. The loan will be repaid principally
from the Savings Bank's contributions to the ESOP and from any dividends paid on
shares of Common Stock held by the ESOP.
The remaining net proceeds retained by the Holding Company initially will
be invested primarily in short-term U.S. Government and agency obligations or in
a deposit account either at the Savings Bank or another financial institution.
Such proceeds will be available for additional contributions to the Savings Bank
in the form of debt or equity, to support future diversification or acquisition
activities, as a source of dividends to the stockholders of the Holding Company
and for future repurchases of Common Stock to the extent permitted under
Washington law and federal regulations. The Holding Company will consider
exploring opportunities to use such funds to expand operations through acquiring
or establishing additional branch offices or acquiring other financial
institutions. Currently, there are no specific plans, arrangements, agreements
or understandings, written or oral, regarding any diversification activities.
Following consummation of the Conversion and Reorganization, the Holding
Company's Board of Directors will have the authority to adopt plans for
repurchases of Common Stock, subject to statutory and regulatory requirements.
Since the Holding Company has not yet issued stock, there currently is
insufficient information upon which an intention to repurchase stock could be
based. The facts and circumstances upon which the Board of Directors may
determine to repurchase stock in the future would include but are not limited
to: (i) market and economic factors such as the price at which the stock is
trading in the market, the volume of trading, the attractiveness of other
investment alternatives in terms of the rate of return and risk involved in the
investment, the ability to increase the book value and/or earnings per share of
the remaining outstanding shares, and the ability to improve the Holding
Company's return on equity; (ii) the avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock benefit plans; and (iii) any other circumstances in which
repurchases would be in the best interests of the Holding Company and its
stockholders. Any stock repurchases will be subject to a determination by the
Board of Directors that both the Holding Company and the Savings Bank will be
capitalized in excess of all applicable regulatory requirements after any such
repurchases and that capital will be adequate, taking into account, among other
things, the level of nonperforming and classified assets, the Holding Company's
and the Savings Bank's current and projected results of operations and
asset/liability structure, the economic environment and tax and other regulatory
considerations. For a discussion of the regulatory limitations applicable to
stock repurchases and current OTS policy with respect thereto, see "THE
CONVERSION AND REORGANIZATION -- Restrictions on Repurchase of Stock."
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DIVIDEND POLICY
General
Upon completion of the Conversion and Reorganization, the Holding Company's
Board of Directors will have the authority to declare dividends on the Common
Stock, subject to statutory and regulatory requirements. Following consummation
of the Conversion and Reorganization, the Board of Directors of the Holding
Company intends to pay cash dividends on the Common Stock at an initial
quarterly rate equal to $0.06 per share divided by the Exchange Ratio. Based
upon the Estimated Valuation Range, the Exchange Ratio is expected to be 1.4488,
1.7044, 1.9601 and 2.2541 at the minimum, midpoint, maximum and 15% above the
maximum of the Valuation Price Range, respectively, resulting in an initial
quarterly dividend rate of $0.0414, $0.0352, $0.03606 and $0.0266 per share,
respectively, commencing with the first full quarter following consummation of
the Conversion and Reorganization. In addition, the Board of Directors may
determine to pay periodic special cash dividends in addition to, or in lieu of,
regular cash dividends. Declarations or payments of any dividends (regular and
special) will be subject to determination by the Board of Directors, which will
take into account the amount of the net proceeds retained by the Holding
Company, the Holding Company's financial condition, results of operations, tax
considerations, capital requirements, industry standards, economic conditions
and other factors, including the regulatory restrictions that affect the payment
of dividends by the Savings Bank to the Holding Company discussed below. No
assurances can be given that any dividends, either regular or special, will be
declared or, if declared, what the amount of dividends will be or whether such
dividends, if commenced, will continue.
Current Restrictions
Dividends from the Holding Company may depend, in part, upon receipt of
dividends from the Savings Bank because the Holding Company initially will have
no source of income other than dividends from the Savings Bank and earnings from
the investment of the net proceeds from the Conversion Offerings retained by the
Holding Company. OTS regulations require the Savings Bank to give the OTS 30
days' advance notice of any proposed declaration of dividends to the Holding
Company, and the OTS has the authority under its supervisory powers to prohibit
the payment of dividends to the Holding Company. The OTS imposes certain
limitations on the payment of dividends from the Savings Bank to the Holding
Company which utilize a three-tiered approach that permits various levels of
distributions based primarily upon a savings association's capital level. The
Savings Bank currently meets the criteria to be designated a Tier 1 association,
as hereinafter defined, and consequently could at its option (after prior notice
to and no objection made by the OTS) distribute up to 100% of its net income
during the calendar year plus 50% of its surplus capital ratio at the beginning
of the calendar year less any distributions previously paid during the year. In
addition, the Savings Bank may not declare or pay a cash dividend on its capital
stock if the effect thereof would be to reduce the regulatory capital of the
Savings Bank below the amount required for the liquidation account to be
established pursuant to the Savings Bank's Plan of Conversion. See "REGULATION
- -- Federal Regulation of the Savings Bank -- Limitations on Capital
Distributions," "THE CONVERSION AND REORGANIZATION -- Effects of Conversion and
Reorganization on Depositors and Borrowers of the Savings Bank -- Liquidation
Account" and Note 12 of Notes to the Consolidated Financial Statements included
elsewhere herein.
Under Washington law, the Holding Company is prohibited from paying a
dividend if, as a result of its payment, the Holding Company would be unable to
pay its debts as they become due in the normal course of business, or if the
Holding Company's total liabilities would exceed its total assets.
The Holding Company has committed to the OTS not to make any tax-free
distributions to stockholders in the form of a return of capital, or take any
action in contemplation of any such distributions, within the first year
following the consummation of the Conversion and Reorganization.
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Tax Considerations
In addition to the foregoing, retained earnings of the Savings Bank
appropriated to bad debt reserves and deducted for federal income tax purposes
cannot be used by the Savings Bank to pay cash dividends to the Holding Company
without the payment of federal income taxes by the Savings Bank at the then
current income tax rate on the amount deemed distributed, which would include
the amount of any federal income taxes attributable to the distribution. See
"TAXATION -- Federal Taxation" and Note 10 of Notes to the Consolidated
Financial Statements included elsewhere herein. The Holding Company does not
contemplate any distribution by the Savings Bank that would result in a
recapture of the Savings Bank's bad debt reserve or create the above-mentioned
federal tax liabilities.
MARKET FOR COMMON STOCK
The Holding Company has never issued capital stock and, consequently, there
is no existing market for the Common Stock. Although the Holding Company has
received conditional approval to list the Common Stock on the Nasdaq National
Market System under the symbol "RVSB," there can be no assurance that the
Holding Company will meet Nasdaq National Market System listing requirements,
which include a minimum market capitalization, at least three market makers and
a minimum number of record holders. Keefe, Bruyette and Pacific Crest have
agreed to make a market for the Common Stock following consummation of the
Conversion and Reorganization and will assist the Holding Company in seeking to
encourage at least one additional market maker to establish and maintain a
market in the Common Stock. Making a market 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 Holding Company anticipates that prior to the
completion of the Conversion and Reorganization it will be able to obtain the
commitment from at least one additional broker-dealer to act as market maker for
the Common Stock. Additionally, the development of a liquid public market
depends on the existence of willing buyers and sellers, the presence of which is
not within the control of the Holding Company, the Savings Bank or any market
maker. There can be no assurance that an active and liquid trading market for
the Common Stock will develop or that, if developed, it will continue. The
number of active buyers and sellers of the Common Stock at any particular time
may be limited. Under such circumstances, investors in the Common Stock could
have difficulty disposing of their shares on short notice and should not view
the Common Stock as a short-term investment. Furthermore, there can be no
assurance that purchasers will be able to sell their shares at or above the
Purchase Price or that quotations will be available on the Nasdaq National
Market System as contemplated.
Since October 22, 1993, the Public Savings Bank Shares have been listed on
the Nasdaq SmallCap Market under the symbol "RVSB." The following table sets
forth the high and low trading prices, as reported by Nasdaq, and cash dividends
paid for each quarter during the 1996 and 1997 fiscal years. Stock dividends of
10% were also declared and paid in fiscal years 1996 and 1997. Trading prices
and cash dividends declared have been adjusted retroactively for all stock
dividends paid since the consummation of the MHC Reorganization.
Cash Dividend
Fiscal Year Ended March 31, 1996 High Low Declared
- -------------------------------- ---- ---- --------
Quarter Ended June 30, 1995 ............. $11.57 $9.50 $0.041
Quarter Ended Sept. 30, 1995 ............ $12.40 $11.15 $0.041
Quarter Ended Dec. 31, 1995 ............. $14.46 $11.77 $0.041
Quarter Ended March 31, 1996 ............ $15.08 $13.43 $0.045
Cash Dividend
Fiscal Year Ended March 31, 1997 High Low Declared
- -------------------------------- ---- --- --------
Quarter Ended June 30, 1996 ............. $15.45 $13.18 $0.05
Quarter Ended Sept. 30, 1996 ............ $14.55 $13.18 $0.05
Quarter Ended Dec. 31, 1996 ............. $15.91 $14.09 $0.05
Quarter Ended March 31, 1997 ............ $23.00 $15.23 $0.055
11
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the Savings
Bank at March 31, 1997, and the pro forma consolidated capitalization of the
Holding Company after giving effect to the assumptions set forth under "PRO
FORMA DATA," based on the sale of the number of shares of Common Stock at the
minimum, midpoint, maximum and maximum, as adjusted, of the Estimated Valuation
Range. The shares that would be issued at the maximum, as adjusted, of the
Estimated Valuation Range would be subject to receipt of OTS approval of an
updated appraisal confirming such valuation. A change in the number of shares to
be issued in the Conversion and Reorganization would materially affect pro forma
consolidated capitalization.
<TABLE>
<CAPTION>
Holding Company Pro Forma Consolidated Capitalization
Based Upon the Sale of
-----------------------------------------------------------------
2,040,000 2,400,000 2,760,000 3,174,000
Capitalization Shares at Shares at Shares at Shares at
at $10.00 $10.00 $10.00 $10.00
March 31, 1997 Per Share(1) Per Share(1) Per Share(1) Per Share(2)
-------------- ------------ ------------ ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits(3) ................................... $169,416 $169,416 $169,416 $169,416 $169,416
FHLB advances ................................. 27,180 27,180 27,180 27,180 27,180
ESOP debt(4) .................................. 237 -- -- -- --
--------- --------- --------- --------- ---------
Total deposits and
borrowed funds ............................... $196,833 $196,596 $196,596 $196,596 $196,596
========= ========= ========= ========= =========
Stockholders' equity:
Preferred stock:
250,000 shares, $.01
par value per share,
authorized; none issued
or outstanding ........................... $ -- $ -- $ -- $ -- $ --
Common Stock:
50,000,000 shares, $.01 par
value per share, authorized;
specified number of shares
assumed to be issued and
outstanding(5) ........................... 2,416 35 41 47 54
Additional paid-in capital ................. 16,043 38,044 41,588 45,132 49,208
Retained earnings(6) ....................... 7,033 7,127 7,127 7,127 7,127
Unrealized loss on securities
available-for-sale, net of tax ............ (84) (84) (84) (84) (84)
Less:
Savings Bank Common Stock
acquired by ESOP in MHC
Reorganization .......................... (386) -- -- -- --
Common Stock acquired
by ESOP(7) .............................. -- (2,018) (2,306) (2,594) (2,925)
Common Stock to be acquired
by MRP(8) ............................... -- (816) (960) (1,104) (1,270)
--------- --------- --------- --------- ---------
Total stockholders' equity .................... $25,022 $42,288 $45,406 $48,524 $52,111
========= ========= ========= ========= =========
</TABLE>
12
<PAGE>
- ----------
(1) Does not reflect the possible increase in the Estimated Valuation Range to
reflect material changes in the financial condition or results of
operations of the Savings Bank or changes in market conditions or general
financial, economic and regulatory conditions, or the issuance of
additional shares under the 1997 Stock Option Plan.
(2) This column represents the pro forma capitalization of the Holding Company
if the aggregate number of Conversion Shares issued in the Conversion and
Reorganization is 15% above the maximum of the Estimated Valuation Range.
See "PRO FORMA DATA" and Footnote 1 thereto.
(3) Withdrawals from deposit accounts for the purchase of Conversion Shares are
not reflected. Such withdrawals will reduce pro forma deposits by the
amounts thereof.
(4) Represents outstanding balance on third party loan used by ESOP to acquire
shares of Savings Bank Common Stock in the MHC Reorganization.
(5) The Savings Bank's authorized capital will consist solely of 1,000 shares
of common stock, par value $1.00 per share, 1,000 shares of which will be
issued to the Holding Company, and 9,000 shares of preferred stock, no par
value per share, none of which will be issued in connection with the
Conversion and Reorganization.
(6) Retained earnings are substantially restricted by applicable regulatory
capital requirements. Additionally, the Savings Bank will be prohibited
from paying any dividend that would reduce its regulatory capital below the
amount in the liquidation account, which will be established for the
benefit of Eligible Account Holders and Supplemental Eligible Account
Holders at the consummation of the Conversion and Reorganization and
adjusted downward thereafter as such account holders reduce their balances
or cease to be depositors. See "THE CONVERSION AND REORGANIZATION --
Effects of Conversion and Reorganization on Depositors and Borrowers of the
Savings Bank -- Liquidation Account."
(7) Assumes that 8% of the Conversion Shares sold in the Conversion and
Reorganization will be acquired by the ESOP with funds borrowed from the
Holding Company. Under generally accepted accounting principles ("GAAP"),
the amount of Conversion Shares to be purchased by the ESOP represents
unearned compensation and is, accordingly, reflected as a reduction of
capital. As shares are released to ESOP participants' accounts, a
corresponding reduction in the charge against capital will occur. Since the
funds are borrowed from the Holding Company, the borrowing will be
eliminated in consolidation and no liability will be reflected in the
consolidated financial statements of the Holding Company. See "MANAGEMENT
OF THE SAVINGS BANK -- Benefits -- Employee Stock Ownership Plan."
(8) Assumes the purchase in the open market at the Purchase Price, pursuant to
the proposed 1997 MRP, of a number of shares equal to 4% of the shares of
Conversion Shares issued in the Conversion and Reorganization at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range. The issuance of such additional Conversion Shares of the
MRP from authorized but unissued shares of Holding Company Common Stock
would dilute the ownership interest of stockholders by 2.29%. The shares
are reflected as a reduction of stockholders' equity. See "RISK FACTORS --
Possible Dilutive Effect of Benefit Programs," "PRO FORMA DATA" and
"MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Management Recognition
Plan." The 1997 MRP is subject to stockholder approval, which is expected
to be sought at a meeting to be held no earlier than six months following
consummation of the Conversion and Reorganization.
13
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table presents the Savings Bank's historical and pro forma
capital position relative to its capital requirements at March 31, 1997. The
amount of capital infused into the Savings Bank for purposes of the following
table is 50% of the net proceeds of the Conversion Offerings. For purpose of the
table below, the amount expected to be borrowed by the ESOP and the cost of the
shares expected to be acquired by the 1997 MRP are deducted from pro forma
regulatory capital. For a discussion of the assumptions underlying the pro forma
capital calculations presented below, see "USE OF PROCEEDS," "CAPITALIZATION"
and "PRO FORMA DATA." The definitions of the terms used in the table are those
provided in the OTS capital regulations as discussed under "REGULATION --
Federal Regulation of the Savings Bank -- Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31, 1997
---------------------------------------------------------------------------
15% above
Minimum of Midpoint of Maximum of Maximum of
Estimated Estimated Estimated Estimated
Valuation Range Valuation Range Valuation Range Valuation Range
--------------- --------------- ---------------- ---------------
2,040,000 Shares 2,400,000 Shares 2,760,000 Shares 3,174,000 Shares
at $10.00 at $10.00 at $10.00 at $10.00
March 31, 1997 Per Share Per Share Per Share Per Share
------------------ ------------------ ------------------ ------------------ -----------------
Percent of Percent of Percent of Percent of Percent of
Adjusted Adjusted Adjusted Adjusted Adjusted
Total Total Total Total Total
Amount Assets(1) Amount Assets(1) Amount Assets(1) Amount Assets(1) Amount Assets(1)
------ --------- ------ --------- ------ --------- ------ --------- ------ ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital(2) ................. $25,022 11.15% $32,478 13.91% $33,821 14.39% $35,164 14.85% $36,709 15.38%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tangible capital(2) ............. 22,777 10.26 30,233 13.08 31,576 13.57 32,919 14.05 34,464 14.59
Tangible capital requirement .... 3,330 1.50 3,466 1.50 3,491 1.50 3,515 1.50 3,544 1.50
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess .......................... $19,447 8.76% $26,767 11.58% $28,085 12.07% $29,404 12.55% $30,920 13.09%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Core capital(2) ................. 22,777 10.25 30,233 13.08 31,576 13.57 32,919 14.05 34,464 14.59
Core capital requirement(3) ..... 6,664 3.00 6,933 3.00 6,982 3.00 7,031 3.00 7,087 3.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess .......................... $16,113 7.25% $23,300 10.08% $24,594 10.57% $25,888 11.05% $27,377 11.59%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Total capital(4) ................ $22,986 20.89% $30,442 27.26% $31,785 28.38% $33,128 29.50% $34,673 30.77%
Risk-based
capital requirement ............ 8,804 8.00 8,932 8.00 8,959 8.00 8,985 8.00 9,015 8.00
----- ------- ----- ------- ----- ------- ----- ------- -----
Excess .......................... $14,182 12.89% $21,510 19.26% $22,826 20.38% $24,143 21.50% $25,658 22.77%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- -------------------
(1) Based upon total tangible assets of $222.0 million at March 31, 1997 and
$231.1 million, $232.7 million, $234.4 million and $236.2 million at the
minimum, midpoint, maximum, and maximum, as adjusted, of the Estimated
Valuation Range, respectively, for purposes of the tangible capital
requirement, upon total adjusted assets of $222.1 million at March 31, 1997
and $231.1 million, $232.7 million, $234.4 million and $236.2 million at
the minimum, midpoint, maximum, and maximum, as adjusted, of the Estimated
Valuation Range, respectively, and upon risk-weighted assets of $109.8
million at March 31, 1997 and $111.7 million, $112.0 million, $112.3
million and $112.7 million at the minimum, midpoint, maximum, and maximum,
as adjusted, of the Estimated Valuation Range, respectively, for purposes
of the risk-based capital requirement.
(2) An unrealized loss on securities available-for-sale, net of taxes, of
$84,000 and a core deposit intangible asset of $2.3 million account for the
difference between GAAP capital and both tangible capital and core capital.
(3) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements which
would require a core capital ratio of 3% of total adjusted assets for
thrifts that receive the highest supervisory rating for safety and
soundness and a core capital ratio of 4% to 5% for all other thrifts. See
Note 13 of Notes to Consolidated Financial Statements.
(4) Percentage represents total core and supplementary capital divided by total
risk-weighted assets. Assumes net proceeds are invested in assets that
carry a 20% risk-weighting.
14
<PAGE>
PRO FORMA DATA
Under the Plan of Conversion, the Conversion Shares must be sold at a price
equal to the estimated pro forma market value of the MHC and the Savings Bank,
as converted, based upon an independent valuation. The Estimated Valuation Range
as of June 6, 1997 is from a minimum of $20.4 million to a maximum of $27.6
million with a midpoint of $24.0 million or, at a price per share of $10.00, a
minimum number of shares of 2,040,000, a maximum number of shares of 2,760,000
and a midpoint number of shares of 2,400,000. The actual net proceeds from the
sale of the Conversion Shares cannot be determined until the Conversion and
Reorganization is completed. However, net proceeds set forth on the following
table are based upon the following assumptions: (i) Webb will receive fees of
$274,000, $324,000, $373,000 and $431,000 at the minimum, midpoint, maximum and
15% above the Estimated Valuation Range, respectively (see "THE CONVERSION AND
REORGANIZATION -- Plan of Distribution for the Subscription, Direct Community
and Syndicated Community Offerings); (ii) all of the Conversion Shares will be
sold in the Subscription and Direct Community Offerings; and (iii) Conversion
and Reorganization expenses, excluding the fees paid to Webb, will total
approximately $506,000 at each of the minimum, midpoint, maximum and 15% above
the Estimated Valuation Range. Actual expenses may vary from this estimate, and
the fees paid will depend upon the percentages and total number of shares sold
in the Subscription, Direct Community and Syndicated Community Offerings and
other factors.
The pro forma consolidated net income of the Savings Bank for the year
ended March 31, 1997 has been calculated as if the Conversion and Reorganization
had been consummated at the beginning of the period and the estimated net
proceeds received by the Holding Company and the Savings Bank had been invested
at 6.55% at the beginning of the period, which represent the arithmetic average
of the Savings Bank's yield on interest-earning assets and interest-bearing
deposits for the year ended March 31, 1997. As discussed under "USE OF
PROCEEDS," the Holding Company expects to retain 50% of the net proceeds of the
Conversion Offerings from which it will fund the ESOP loan. A pro forma
after-tax return of 4.32% is used for both the Holding Company and the Savings
Bank for the period, after giving effect to an incremental combined federal and
state income tax rate of 34.0% for the year ended March 31, 1997. Historical and
pro forma per share amounts have been calculated by dividing historical and pro
forma amounts by the number of shares of Common Stock indicated in the footnotes
to the table. Per share amounts have been computed as if the Common Stock had
been outstanding at the beginning of the period or at March 31, 1997, but
without any adjustment of per share historical or pro forma stockholders' equity
to reflect the earnings on the estimated net proceeds.
The following tables summarize the historical net income and retained
earnings of the Savings Bank and the pro forma consolidated net income and
stockholders' equity of the Holding Company for the periods and at the date
indicated, based on the minimum, midpoint and maximum of the Estimated Valuation
Range and based on a 15% increase in the maximum of the Estimated Valuation
Range. No effect has been given to: (i) the shares to be reserved for issuance
under the 1997 Stock Option Plan, which is expected to be voted upon by
stockholders at a meeting to be held no earlier than six months following
consummation of the Conversion and Reorganization; (ii) withdrawals from deposit
accounts for the purpose of purchasing Conversion Shares in the Conversion
Offerings; (iii) the issuance of shares from authorized but unissued shares to
the 1997 MRP, which is expected to be voted upon by stockholders at a meeting to
be held no earlier than six months following consummation of the Conversion and
Reorganization; or (iv) the establishment of a liquidation account for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders.
See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1997 Stock Option Plan" and
"THE CONVERSION AND REORGANIZATION -- Stock Pricing, Exchange Ratio and Number
of Shares Issued." Conversion Shares may be purchased with funds on deposit at
the Savings Bank, which will reduce deposits by the amounts of such purchases.
Accordingly, the net amount of funds available for investment will be reduced by
the amount of deposit withdrawals used to fund such purchases.
The following pro forma information may not be representative of the
financial effects of the Conversion and Reorganization at the date on which the
Conversion and Reorganization actually occurs and should not be taken as
indicative of future results of operations. Stockholders' equity represents the
difference between the stated amounts of consolidated assets and liabilities of
the Holding Company computed according to GAAP. Stockholders' equity has not
been increased or decreased to reflect the difference between the carrying value
of loans and other assets and market value. Stockholders' equity is not intended
to represent fair market value nor does it represent amounts that would be
available for distribution to stockholders in the event of liquidation.
15
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended March 31, 1997
-------------------------------------------------------------
Minimum of Midpoint of Maximum of 15% Above
Estimated Estimated Estimated Maximum of
Valuation Valuation Valuation Estimated
Range Range Range Valuation Range
--------- --------- --------- ---------------
2,040,00 2,400,000 2,760,000 3,174,000
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds ................................................. $20,400 $24,000 $27,600 $31,740
Less: estimated expenses ....................................... 780 830 880 937
-------- -------- -------- --------
Estimated net proceeds ......................................... 19,620 23,170 26,720 30,803
Less: Common Stock acquired by ESOP ............................ (1,632) (1,920) (2,208) (2,539)
Less: Common Stock to be acquired by
1997 MRP ................................................ (816) (960) (1,104) (1,270)
Add: Assets consolidated from MHC .............................. 94 94 94 94
-------- -------- -------- --------
Net investable proceeds ................................... $17,266 $20,384 $23,502 $27,088
======== ======== ======== ========
Consolidated net income:
Historical .................................................... $2,008 $2,008 $2,008 $2,008
Pro forma income on net proceeds(2) ........................... 746 881 1,016 1,171
Pro forma ESOP adjustments(3) ................................. (108) (127) (146) (168)
Pro forma 1997 MRP adjustments(4) ............................. (108) (127) (146) (168)
-------- -------- -------- --------
Pro forma net income ........................................ $2,538 $2,635 $2,732 $2,843
======== ======== ======== ========
Consolidated net income per share (5)(6):
Historical .................................................... $0.60 $0.51 $0.44 $0.38
Pro forma income on net proceeds .............................. 0.22 0.22 0.22 0.22
Pro forma ESOP adjustments(3) ................................. (0.03) (0.03) (0.03) (0.03)
Pro forma 1997 MRP adjustments(4) ............................. (0.03) (0.03) (0.03) (0.03)
-------- -------- -------- --------
Pro forma net income per share .............................. $0.76 $0.67 $0.60 $0.54
======== ======== ======== ========
Consolidated stockholders' equity (book value):
Historical(10) ................................................ $25,116 $25,116 $25,116 $25,116
Estimated net proceeds ........................................ 19,620 23,170 26,720 30,803
Less: Common Stock acquired by ESOP ........................... (1,632) (1,970) (2,208) (2,539)
Less: Common Stock to be acquired by
1997 MRP(4) ............................................ (816) (960) (1,104) (1,270)
-------- -------- -------- --------
Pro forma stockholders' equity(7) ........................... $42,288 $45,406 $48,524 $52,110
======== ======== ======== ========
Consolidated stockholders' equity per share(6)(8):
Historical(6)(10) ............................................. $7.17 $6.10 $5.30 $4.61
Estimated net proceeds ........................................ 5.61 5.62 5.64 5.66
Less: Common Stock acquired by ESOP ........................... (0.47) (0.47) (0.47) (0.47)
Less: Common Stock to be acquired by
1997 MRP(4) ............................................ (0.23) (0.23) (0.23) (0.23)
-------- -------- -------- --------
Pro forma stockholders' equity per share(9) ................. $12.08 $11.02 $10.24 $9.57
======== ======== ======== ========
Pro forma tangible stockholders' equity per share .............. $11.41 $10.46 $9.75 $9.14
======== ======== ======== ========
Purchase Price as a percentage of pro forma
stockholders' equity per share ................................ 82.78% 90.74% 97.66% 104.49%
======== ======== ======== ========
Purchase Price as a percentage of pro forma
tangible stockholders' equity per share ....................... 87.64% 95.60% 102.56% 109.41%
======== ======== ======== ========
Purchase Price as a multiple of pro forma
net income per share .......................................... 13.16x 14.93x 16.67x 18.52x
======== ======== ======== ========
</TABLE>
(footnotes on second following page)
16
<PAGE>
- -------------------
(1) Gives effect to the sale of an additional 414,000 Conversion Shares in the
Conversion and Reorganization, which may be issued to cover an increase in
the pro forma market value of the MHC and the Savings Bank, as converted,
without the resolicitation of subscribers or any right of cancellation. The
issuance of such additional shares will be conditioned on a determination
by RP Financial that such issuance is compatible with its determination of
the estimated pro forma market value of the MHC and the Savings Bank, as
converted. See "THE CONVERSION AND REORGANIZATION -- Stock Pricing,
Exchange Ratio and Number of Shares to be Issued."
(2) No effect has been given to withdrawals from savings accounts for the
purpose of purchasing Conversion Shares. Since funds on deposit at the
Savings Bank may be withdrawn to purchase shares of Common Stock (which
will reduce deposits by the amount of such purchases), the net amount of
funds available to the Savings Bank for investment following receipt of the
net proceeds of the Conversion Offerings will be reduced by the amount of
such withdrawals.
(3) It is assumed that 8% of the Conversion Shares issued in the Conversion and
Reorganization will be purchased by the ESOP. The funds used to acquire
such shares will be borrowed by the ESOP (at an interest rate equal to the
prime rate as published in The Wall Street Journal on the closing date of
the Conversion and Reorganization, which rate is currently 8.50%) from the
net proceeds from the Conversion Offerings retained by the Holding Company.
The amount of this borrowing has been reflected as a reduction from gross
proceeds to determine estimated net investable proceeds. The Savings Bank
intends to make contributions to the ESOP at least equal to the principal
and interest requirement of the debt. As the debt is repaid, stockholders'
equity will be increased. The Savings Bank's payment of the ESOP debt is
based upon equal installments of principal over a 10-year period, assuming
a combined federal and state income tax rate of 34.0%. Interest income
earned by the Holding Company on the ESOP debt offsets the interest paid by
the Savings Bank on the ESOP loan. No reinvestment is assumed on proceeds
contributed to fund the ESOP. The ESOP expense reflects adoption of
Statement of Position ("SOP") 93-6, which will require recognition of
expense based upon shares committed to be released and the exclusion of
unallocated shares from earnings per share computations. The valuation of
shares committed to be released would be based upon the average market
value of the shares during the year, which, for purposes of this
calculation, was assumed to be equal to the $10.00 per share Purchase
Price. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- Employee Stock
Ownership Plan."
(4) In calculating the pro forma effect of the 1997 MRP, it is assumed that the
required stockholder approval has been received, that the shares were
acquired by the 1997 MRP at the beginning of the period presented in open
market purchases at the Purchase Price, that 20% of the amount contributed
was an amortized expense during such period, and that the combined federal
and state income tax rate is 34.0%. The issuance of authorized but unissued
shares of the Common Stock instead of open market purchases would dilute
the voting interests of existing stockholders by approximately 2.29% and
pro forma net income per share would be $0.74, $0.65, $0.59 and $0.53 at
the minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range for the year ended March 31, 1997, respectively, and pro
forma stockholders' equity per share would be $12.03, $11.00, $10.24 and
$9.58 at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range at March 31, 1997, respectively. Shares issued
under the 1997 MRP vest 20% per year and, for purposes of this table,
compensation expense is recognized on a straight-line basis over each
vesting period. In the event the fair market value per share is greater
than $10.00 per share on the date shares are awarded under the 1997 MRP,
total 1997 MRP expense would increase. SEE "RISK FACTORS -- New Expenses
Associated with ESOP and MRP." The total estimated 1997 MRP expense was
multiplied by 20% (the total percent of shares for which expense is
recognized in the first year) resulting in pre-tax 1997 MRP expense of
$163,200, $192,000, $220,800 and $253,420 at the minimum, midpoint, maximum
and 15% above the maximum of the Estimated Valuation Range for the year
ended March 31, 1997, respectively. No effect has been given to the shares
reserved for issuance under the proposed 1997 Stock Option Plan. If
stockholders approve the 1997 Stock Option Plan following the Conversion
and Reorganization, the Holding Company will have reserved for issuance
under the 1997 Stock Option Plan authorized but unissued shares of Common
Stock representing an amount of shares equal to 10% of the Conversion
Shares sold in the Conversion Offerings. If all of the options were to be
exercised utilizing these authorized but unissued shares rather than
treasury
17
<PAGE>
shares which could be acquired, the voting and ownership interests of
existing stockholders would be diluted by approximately 5.51%. Assuming
stockholder approval of the 1997 Stock Option Plan and that all options
were exercised at the end of the year ended March 31, 1997 at an exercise
price of $10.00 per share, pro forma net earnings per share would be $0.71,
$0.63, $0.57 and $0.51, respectively, for the year ended March 31, 1997,
and pro forma stockholders' equity per share would be $11.96, $10.97,
$10.23 and $9.59, respectively, for the year ended March 31, 1997 at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range. See "MANAGEMENT OF THE SAVINGS BANK -- Benefits -- 1997
Stock Option Plan" and "-- Benefits -- Management Recognition Plan" and
"RISK FACTORS -- Possible Dilutive Effect of Benefit Programs."
(5) Per share amounts are based upon shares outstanding of 3,361,407,
3,954,597, 4,547,787 and 5,229,954 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range for the year ended
March 31, 1997, respectively, which includes the Conversion Shares sold in
the Conversion and Reorganization, less the number of shares assumed to be
held by the ESOP not committed to be released within the first year
following the Conversion and Reorganization.
(6) Historical per share amounts have been computed as if the Conversion Shares
expected to be issued in the Conversion and Reorganization had been
outstanding at the beginning of the period or on the date shown, but
without any adjustment of historical net income or historical retained
earnings to reflect the investment of the estimated net proceeds of the
sale of shares in the Conversion and Reorganization, the additional ESOP
expense or the proposed 1997 MRP expense, as described above.
(7) "Book value" represents the difference between the stated amounts of the
Savings Bank's assets and liabilities. The amounts shown do not reflect the
liquidation account which will be established for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in the Conversion
and Reorganization, or the federal income tax consequences of the
restoration to income of the Savings Bank's special bad debt reserves for
income tax purposes which would be required in the unlikely event of
liquidation. See "THE CONVERSION AND REORGANIZATION -- Effects of
Conversion and Reorganization to Stock Form on Depositors and Borrowers of
the Savings Bank" and "TAXATION." The amounts shown for book value do not
represent fair market values or amounts distributable to stockholders in
the unlikely event of liquidation.
(8) Per share amounts are based upon shares outstanding of 3,500,943,
4,118,757, 4,736,571 and 5,447,056 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, respectively.
(9) Does not represent possible future price appreciation or depreciation of
the Common Stock.
(10) Historical book value includes $94,000 of assets held by the MHC, which
will be consolidated with the Savings Bank's book value upon consummation
of the Conversion and Reorganization.
18
<PAGE>
CONVERSION SHARES TO BE PURCHASED
BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS
The following table sets forth, for each director and executive officer and
for all of the directors and executive officers as a group, (i) Exchange Shares
to be held upon consummation of the Conversion and Reorganization, based upon
their beneficial ownership of Savings Bank Common Stock as of March 31, 1997,
(ii) proposed purchases of Conversion Shares, assuming shares available to
satisfy their subscriptions, and (iii) total shares of Common Stock to be held
upon consummation of the Conversion and Reorganization, in each case assuming
that 2,400,000 Conversion Shares are sold at the midpoint of the Estimated
Valuation Range. No individual has entered into a binding agreement with respect
to such intended purchases, and, therefore, actual purchases could be more or
less than indicated below. Directors and executive officers and their associates
may not purchase in excess of 31% of the shares sold in the Conversion and
Reorganization. Directors, officers and employees will pay the Purchase Price
($10.00 per share) for each share for which they subscribe.
<TABLE>
<CAPTION>
Number of
Exchange Proposed Purchase of Total Common Stock
Shares to Conversion Shares to be Held
--------------------- -----------------------
be Held Number Number Percentage
(1)(2) Amount of Shares of Shares of Total
------------ ------ --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Patrick Sheaffer ...................................... 126,505 $ -- -- 126,506 3.1%
President, Chief Executive
Officer and Chairman of the Board
Robert K. Leick ....................................... 9,902 -- -- 9,902 *
Director
Roger Malfait ......................................... 33,680 -- -- 33,680 *
Director
Gary R. Douglass ...................................... 13,474 50,000 5,000 18,474 *
Director
Paul L. Runyan ........................................ 69,887 -- -- 69,887 1.7
Director
Dale E. Scarbrough .................................... 33,690 -- -- 33,690 *
Director
Ronald Wysaske ........................................ 86,931 -- -- 86,931 2.1
Executive Vice President and Director
Michael C. Yount ...................................... 44,273 7,200 720 44,993 1.1
Senior Vice President of Operations
Karen Nelson .......................................... 29,417 40,000 4,000 33,417 *
Vice President of Lending
Phyllis Kreibich ...................................... 2,902 5,000 500 3,402 *
Corporate Secretary
All directors and executive ........................... 451,270 102,000 10,200 461,470 11.2
officers as a group (10 persons)
</TABLE>
- ----------
(1) Excludes shares which may be received upon the exercise of outstanding
stock options granted under the 1993 Stock Option Plan. Based upon the
Exchange Ratio of 1.7044 Exchange Shares for each Public Savings Bank Share
at the midpoint of the Estimated Valuation Range, the persons named in the
table would have options to purchase Common Stock as follows: Mr. Sheaffer,
35,337 shares; Mr. Leick, 6,573 shares; Mr. Malfait, 6,573 shares; Mr.
Douglass, 1,564 shares; Mr. Runyan, 2,730 shares; Mr. Scarbrough, 6,573
shares; Mr. Wysaske, 27,776 shares; Mr. Yount, 21,366 shares; Ms. Nelson,
14,298 shares; Ms. Kreibich, none; and all directors and executive officers
as a group, 122,795 shares.
(2) Excludes stock options that may be granted under the 1997 Stock Option Plan
and awards that may be granted under 1997 MRP if such plans are approved by
stockholders at an annual or special meeting at least six months following
the Conversion and Reorganization. See "MANAGEMENT OF THE SAVINGS BANK --
Benefits."
(*) Less than 1%.
19
<PAGE>
RIVERVIEW SAVINGS BANK, FSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of Riverview Savings Bank,
FSB and Subsidiary for the fiscal years ended March 31, 1997, 1996 and 1995 have
been audited by Deloitte & Touche LLP, Portland, Oregon, independent auditors,
whose report thereon appears elsewhere in this Prospectus. These statements
should be read in conjunction with the Consolidated Financial Statements and
related Notes included elsewhere herein.
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans receivable ............................................... $13,339,000 $11,252,000 $9,223,000
Interest on investment securities ................................................... 1,832,000 2,528,000 2,180,000
Interest on mortgage-backed securities .............................................. 2,135,000 2,020,000 1,586,000
Other interest and dividends ........................................................ 170,000 196,000 243,000
------------ ------------ ------------
Total interest income .............................................................. 17,476,000 15,996,000 13,232,000
------------ ------------ ------------
INTEREST EXPENSE:
Interest on deposit accounts ........................................................ 7,034,000 6,583,000 5,121,000
Interest on borrowings .............................................................. 1,889,000 1,833,000 806,000
------------ ------------ ------------
Total interest expense ............................................................. 8,923,000 8,416,000 5,927,000
------------ ------------ ------------
Net interest income ................................................................ 8,553,000 7,580,000 7,305,000
Less provision for loan losses ....................................................... 180,000 -- --
------------ ------------ ------------
Net interest income after provision for loan losses ................................ 8,373,000 7,580,000 7,305,000
------------ ------------ ------------
NONINTEREST INCOME:
Fees and service charges ............................................................ 1,368,000 1,182,000 693,000
Loan servicing income ............................................................... 279,000 342,000 358,000
Gain on sale of mortgage-backed and
other securities available for sale ................................................ 37,000 216,000 --
Gain on sale of loans held for sale ................................................. 69,000 180,000 85,000
Trading activity gains (losses) ..................................................... -- (5,000) 26,000
Other ............................................................................... 121,000 100,000 88,000
------------ ------------ ------------
Total noninterest income ........................................................... 1,874,000 2,015,000 1,250,000
------------ ------------ ------------
NONINTEREST EXPENSES:
Salaries and employee benefits ...................................................... 3,386,000 2,851,000 2,255,000
Occupancy and depreciation .......................................................... 1,174,000 1,090,000 983,000
Special SAIF assessment ............................................................. 947,000 -- --
Amortization of core deposit intangible ............................................. 327,000 327,000 286,000
Marketing expense ................................................................... 257,000 263,000 312,000
FDIC insurance premium .............................................................. 275,000 336,000 290,000
Other ............................................................................... 838,000 740,000 763,000
------------ ------------ ------------
Total noninterest expenses ......................................................... 7,204,000 5,607,000 4,889,000
------------ ------------ ------------
INCOME BEFORE FEDERAL INCOME TAXES ................................................... $3,043,000 $3,988,000 $3,666,000
PROVISION FOR FEDERAL INCOME TAXES ................................................... 1,035,000 1,375,000 1,220,000
------------ ------------ ------------
NET INCOME ........................................................................... $2,008,000 $2,613,000 $2,446,000
============ ============ ============
PER COMMON SHARE:
Net income .......................................................................... $0.85 $1.11 $1.04
============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING ........................................................... 2,374,077 2,362,450 2,348,306
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Savings Bank. The information contained in this
section should be read in conjunction with the Consolidated Financial Statements
and accompanying Notes thereto and the other sections contained in this
Prospectus.
Operating Strategy
The Savings Bank's business consists principally of attracting retail
deposits from the general public and using these funds to originate mortgage
loans secured by one- to- four family residences located in its primary market
area. The Savings Bank also actively originates residential construction loans
secured by properties located in its primary market area. To a lesser extent,
the Savings Bank also originates consumer loans, commercial real estate loans
and land loans. In addition, the Savings Bank invests in U.S. Government and
federal agency obligations, and mortgage-backed securities. The Savings Bank
intends to continue to fund its assets primarily with retail deposits, although
FHLB- Seattle advances may be used as a supplemental source of funds.
The Savings Bank's profitability depends primarily on its net interest
income, which is the difference between the income it receives on its loan and
investment portfolio and its cost of funds, which consists of interest paid on
deposits. Net interest income is also affected by the relative amounts of
interest-earning assets and interest-bearing liabilities. When interest-earning
assets equal or exceed interest-bearing liabilities, any positive interest rate
spread will generate net interest income. The Savings Bank's profitability is
also affected by the level of other income and expenses. Other income, net,
includes income associated with the origination and sale of mortgage loans,
brokering loans, loan servicing fees, income from real estate owned and net
gains and losses on sales of interest-earning assets. Other expenses include
compensation and benefits, occupancy and equipment expenses, deposit insurance
premiums, data servicing expenses and other operating costs. The Savings Bank's
results of operations are also significantly affected by general economic and
competitive conditions, particularly changes in market interest rates,
government legislation and regulation and monetary and fiscal policies.
The Savings Bank's business strategy is to operate as a well-capitalized,
profitable and independent community savings bank, dedicated to home mortgage
lending, consumer installment lending, small business lending and providing
quality financial services to local customers. Management believes that it can
best serve an important segment of the marketplace and enhance the long-term
value of the Savings Bank by operating independently and continuing with and
expanding its community-oriented approach, especially in light of recent
consolidations of financial institutions in the Savings Bank's primary market
area. The Savings Bank has sought to implement this strategy by: (i) emphasizing
the origination of residential mortgage loans, including one- to- four family
residential construction loans; (ii) providing high quality, personalized
financial services to customers and communities served by its branch network;
(iii) operating as a mortgage banker by selling fixed rate mortgages to the
secondary market on a servicing-retained basis, thereby increasing the loan
servicing portfolio and income; (iv) brokering customer loans to third-party
lenders, which generates fee income; (v) reducing interest rate risk exposure by
matching asset and liability durations and rates; (vi) improving asset quality;
(vii) containing operating expenses; and (viii) maintaining capital in excess of
regulatory requirements combined with prudent growth.
Comparison of Financial Condition at March 31, 1997 and 1996
Total assets were $224.4 million at March 31, 1997 compared to $209.5
million at March 31, 1996. This increase resulted primarily from growth in the
loan portfolio, which was funded primarily by deposit growth and the proceeds of
maturing securities.
21
<PAGE>
Loans receivable, net, were $151.7 million at March 31, 1997 compared to
$126.2 million at March 31, 1996, a 20.2% increase. Increases primarily in
residential construction loans and consumer loans contributed to the increase in
loans receivable, net. Residential construction and consumer loans have greater
credit risk than one- to- four family mortgage loans. See "RISK FACTORS --
Certain Lending Risks" and "BUSINESS OF THE SAVINGS BANK -- Lending Activities."
Loans held-for-sale were $80,000 at March 31, 1997, compared to $1.9
million at March 31, 1996, as a result of timing differences on sales.
Investment securities held-to-maturity were $20.5 million at March 31,
1997, compared to $29.7 million at March 31, 1996, as a result of maturities,
the proceeds of which were used to fund loan growth.
Mortgage-backed securities held-to-maturity were $26.4 million at March 31,
1997, compared to $28.4 million at March 31, 1996, as a result of prepayments,
the proceeds of which funded loan growth.
Cash increased to $7.0 million at March 31, 1997 from $5.6 million at March
31, 1996 as a result of increased deposits and the maturities of investment
securities.
Total deposits were $169.4 million at March 31, 1997, compared to $158.2
million at March 31, 1996. Management attributes this increase primarily to the
growth in the Savings Bank's market area and to promotions of checking accounts.
FHLB advances increased to $27.2 million at March 31, 1997 from $26.1
million at March 31, 1996. Approximately $20.0 million of the outstanding
advances at March 31, 1997 and $23.6 million at March 31, 1996 were used to
purchase mortgage-backed securities, classified as held-to-maturity, with the
goal of recognizing income on the difference between the rate paid on the
advances and the rate earned on the mortgage-backed securities. See "BUSINESS OF
THE SAVINGS BANK -- Investment Activities" and "-- Deposit Activities and Other
Sources of Funds -- Borrowings."
Shareholders' equity increased to $25.0 million at March 31, 1997 from
$23.1 million at March 31, 1996 primarily because of growth in retained
earnings, less cash dividends of $212,000 paid to the Public Stockholders.
Comparison of Operating Results for the Years Ended March 31, 1997 and 1996
Net Income. Net income was $2.0 million, or $0.85 per share, for the year
ended March 31, 1997, compared to $2.6 million, or $1.11 per share, for the year
ended March 31, 1996. Earnings per share information has been retroactively
adjusted for stock dividends paid. The decrease in net income was primarily
attributable to the legislatively-mandated, one-time assessment levied by the
FDIC on all SAIF-insured institutions to recapitalize the SAIF. Without this
assessment, which amounted to $947,000 ($625,000 after tax), net income would
have been $2.6 million, or $1.11 per share, for the year ended March 31, 1997.
Net Interest Income. Net interest income increased $973,000 to $8.6 million
for the year ended March 31, 1997 compared to $7.6 million for the year ended
March 31, 1996. The increased net interest income resulted primarily from the
increase in the average balance of net loans to $141.4 million in 1997 compared
to $116.4 million in 1996. Net interest margin for the year ended March 31, 1997
rose to 4.19% from 4.05% for the 1996 fiscal year primarily because of a lower
average rate paid on FHLB advances as a result of the renewal of maturing
advances at lower interest rates.
Interest Income. Interest income totalled $17.5 million and $16.0 million
for fiscal years 1997 and 1996, respectively. Average interest-earning assets
increased 9.1% to $204.0 million for the year ended March 31, 1997, compared to
$187.0 million for the year ended March 31, 1996, and the yield on all
interest-earning assets increased to 8.57% from 8.55% for the fiscal years 1997
and 1996, respectively. The increase in average yield was primarily
22
<PAGE>
a result of a higher proportion of loans in portfolio, which tend to have higher
yields than securities. The proportion of loans-to-assets at March 31, 1997 was
67.6% compared to 61.2% at March 31, 1996.
Interest Expense. Interest expense for the year ended March 31, 1997
totalled $8.9 million, a $507,000, or 6.0%, increase from $8.4 million the prior
year. The increase was primarily a result of an increase in the average balances
of certificates of deposit from $90.7 million to $99.7 million for the 1996 and
1997 fiscal years, respectively, as a result of deposit growth unaffected by any
special promotions. The average cost on other interest-bearing liabilities
(primarily FHLB advances) were 6.50% in fiscal 1997 compared 6.94% in fiscal
1996 as a result of the renewal of maturing FHLB advances at lower interest
rates, while average balances increased to $29.1 million in fiscal 1997 from
$26.4 million in fiscal 1996 to fund loan growth. The combined effect was to
produce interest expense of $1.9 million for other interest-bearing liabilities
for the year ended March 31, 1997, compared to $1.8 million for the year ended
March 31, 1996.
Provision for Loan Losses. The provision for loan losses for the year ended
March 31, 1997 was $180,000 compared to no provision for loan losses for the
years ended March 31, 1996. The increase in the provision for loan losses
resulted primarily from the increased size of the loan portfolio, particularly
with respect to construction and consumer loans which involve greater risk than
residential mortgage loans, and management's desire to increase its allowance
for loan losses as a percentage of loans receivable to levels comparable with
its peers in the Pacific Northwest. The Savings Bank establishes a general
reserve for loan losses through a periodic provision for loan losses based on
management's evaluation of the loan portfolio and current economic conditions.
The provisions for loan losses are based on management's estimate of net
realizable value or fair value of the collateral, as applicable and the Savings
Bank's actual loss experience and standards applied by the OTS and the FDIC. The
Savings Bank regularly reviews its loan portfolio, including non-performing
loans, to determine whether any loans require classification or the
establishment of appropriate reserves. In addition, various regulatory agencies,
as an integral part of their examination process, periodically review the
Savings Bank's allowance for loan losses. Such agencies may require the Savings
Bank to provide additions to the allowance based upon judgments different from
management. Assessment of the adequacy of the allowance for credit losses
involves subjective judgments regarding future events, and thus there can be no
assurance that additional provisions for credit losses will not be required in
future periods. Although management uses the best information available, future
adjustments to the allowance may be necessary due to economic, operating,
regulatory and other conditions that may be beyond the Savings Bank's control.
Any increase or decrease in the provision for loan losses has a corresponding
negative or positive effect on net income. The allowance for loan losses at
March 31, 1997 was $831,000, or 0.50% of total loans receivable, compared to
$653,000, or 0.47%, at March 31, 1996. At March 31, 1997, management deemed the
allowance for loan losses adequate at that date. Non-performing assets totalled
$222,000, or 0.10%, of total assets, at March 31, 1997 as compared to $548,000
or 0.26% at March 31, 1996.
Noninterest Income. The Savings Bank's principal sources of noninterest
income include loan fees, deposit service charges, and net gains on the sale of
loans and securities available-for-sale. Noninterest income including gains on
sales of assets for fiscal years 1997 and 1996 was $1.9 million and $2.0 million
respectively. Mortgage broker fees (included in fees and service charges)
totalled $394,000 for the year ended March 31, 1997 compared to $283,000 for the
previous year and related commission compensation expense was $335,000 for the
fiscal year ended March 31, 1997 compared to $243,000 for the fiscal year ended
March 31, 1996. For the fiscal year ended March 31, 1997, gains on sale of loans
and investments totalled $106,000 compared to $391,000 of gains recorded in
1996. The total loans- serviced-for-others portfolio was $98.8 million at March
31, 1997 and generated $279,000 of servicing fees for fiscal 1997, versus
$342,000 for fiscal 1996. The purchased and originated mortgage servicing rights
assets were $402,000 and $67,000, respectively, at March 31, 1997, and were
being amortized over the life of the underlying loan servicing.
Noninterest Expense. Noninterest expense increased by $1.6 million in
fiscal 1997 compared to fiscal 1996, as total noninterest expense was $7.2
million and $5.6 million for fiscal 1997 and 1996, respectively. The primary
cause for the $1.6 million increase was the FDIC insurance premium surcharge. On
September 30, 1996, President Clinton signed into law legislation requiring all
SAIF members (like the Savings Bank) to pay a special
23
<PAGE>
one-time premium of 65.7 basis points based on assessable deposits at March 31,
1995. The special premium of $947,000, pre-tax, was accounted for as an expense
and immediately reduced the capital of the Savings Bank by the amount of the
premium, net of taxes of approximately $322,000, and reduced net income by
approximately $625,000. Effective January 1, 1997, the special assessment
increased the SAIF reserve level to the statutory requirement of 1.25%. The
legislation also reduced the Savings Bank's ongoing insurance premiums from an
average of 23.0 basis points to 6.5 basis points.
The other principal component of the Savings Bank's noninterest expense has
been and continues to be salaries and employee benefits of $3.4 million for
fiscal 1997 and $2.9 million for fiscal 1996, including the mortgage broker
commissions, as a result of full-time equivalent employees increasing to 82 at
March 31, 1997 from 73 at March 31, 1996. Other components of noninterest
expense include building, furniture, and equipment depreciation and expense,
deposit insurance premiums, data processing expense, and advertising expense.
The acquisition of the Hazel Dell and Longview branches from the Resolution
Trust Corporation ("RTC") in fiscal 1995 (see "BUSINESS OF THE SAVINGS BANK --
Properties"), and the related acquisition of $42 million in customer deposits,
gave rise to a $3.2 million core deposit intangible asset ("CDI"), representing
the excess of cost over fair value of deposits acquired. The CDI is being
amortized over the remaining life of the underlying customer relationships,
currently estimated at seven years. The amortization cost of the CDI was
$327,000 for both fiscal years 1997 and 1996.
Provision For Income Taxes. Provision for income taxes was $1.0 million for
the year ended March 31, 1997 compared to $1.4 million for the year March 31,
1996 as a result of lower income before income taxes. The effective tax rate for
fiscal year 1997 was 34.0% compared to 34.5% for fiscal 1996.
Comparison of Operating Results for the Years Ended March 31, 1996 and 1995
Net Income. Net income was $2.6 million, or $1.11 per share, for the year
ended March 31, 1996, compared to $2.4 million, or $1.04 per share, for the year
ended March 31, 1995. Earnings per share information has been retroactively
adjusted for stock dividends paid.
Net Interest Income. Net interest income increased $275,000 to $7.6 million
for the year ended March 31, 1996 compared to $7.3 million for the year ended
March 31, 1995. The increased net interest income resulted primarily from the
increased assets, particularly loans receivable, for 1996 compared to 1995. The
net interest margin for the year ended March 31, 1996 decreased to 4.05% from
4.49% for the 1995 fiscal year as a result of rising short-term market interest
rates. The Savings Bank also experienced a decline in the ratio of the average
balances of interest earning assets to interest-bearing liabilities to 109.6%
for 1996 compared to 110.4% for 1995. This occurred as a result of the
construction of a branch facility in Battle Ground, resulting in premises and
equipment, net, increasing $330,000 to $4.4 million at March 31, 1996.
Interest Income. Interest income totalled $16.0 million and $13.2 million,
for fiscal years 1996 and 1995, respectively. Average interest-earning assets
increased 14.9% to $187.0 million for the year ended March 31, 1996, compared to
$162.7 million for the year ended March 31, 1995, and the yield on all
interest-earning assets increased to 8.55% from 8.13% for the fiscal years 1996
and 1995, respectively. The increase in average yield was primarily a result of
rising market interest rates and a higher proportion of loans in portfolio,
which tend to have higher yields than securities. The proportion of
loans-to-assets at March 31, 1996 was 61.2% compared to 54.4% at March 31, 1995.
Interest Expense. Interest expense for the year ended March 31, 1996
totalled $8.4 million, a 42.0% increase from $5.9 million the prior year. The
increase was a result of an increase in average cost of interest-bearing
liabilities to 4.93% in 1996 from 4.02% in 1995, and the increase in total
average interest-bearing liabilities to $170.6 million for fiscal 1996 compared
to $147.4 million for fiscal 1995. Rising market interest rates increased the
rates paid on deposits and on FHLB advances.
24
<PAGE>
Provision for Loan Losses. There was no provision for loan losses for the
years ended March 31, 1996 and 1995. Allowance for loan losses at March 31, 1996
was $653,000, or 0.47% of total loans receivable, compared to $657,000, or
0.58%, at March 31, 1995. Non-performing assets totalled $548,000, or 0.26%, of
total assets at March 31, 1996 as compared to $240,000, or 0.13%, at March 31,
1995.
Noninterest Income. Noninterest income including gains on sales of assets
for fiscal years 1996 and 1995 was $2.0 million and $1.3 million respectively.
The increase of $765,000 was primarily a result of increased account service
charges, mortgage broker fees and gains on the sale of loans and investments.
Mortgage broker fees (included in fees and service charges) totalled $283,000
for the year ended March 31, 1996 compared to zero for the previous year as
brokerage operations commenced in fiscal 1996. For the year ended March 31,
1996, gains on sale of loans and investments totalled $391,000 compared to
$111,000 of gains recorded in 1995. The total loans-serviced-for-others
portfolio was $106.2 million at March 31, 1996 and generated $342,000 of
servicing fees for fiscal 1996, versus $358,000 for fiscal 1995. The purchased
mortgage servicing rights asset was $451,000 at March 31, 1996 and $484,000 at
March 31, 1995.
Noninterest Expense. Noninterest expense increased by $718,000 in fiscal
1996 compared to fiscal 1995, as total noninterest expense was $5.6 million and
$4.9 million for fiscal 1996 and 1995, respectively. Salaries and employee
benefits totalled $2.9 million for fiscal 1996 and $2.3 million for fiscal 1995
as a result of additional personnel associated with the three new branch
offices. Other components of noninterest expense include building, furniture,
and equipment depreciation and expense, deposit insurance premiums, data
processing expense, and advertising expense. Occupancy costs rose $107,000 to
$1,090,000 for the fiscal year 1996 compared to $983,000 for the fiscal year
1995, due to the addition of the new Battle Ground facility in July 1995. The
amortization of the CDI related to the acquisition from the RTC in May 1994 for
the fiscal year ended March 31, 1996 was $327,000 versus $286,000 for the year
ended March 31, 1995.
Provision for Income Taxes. The provision for income taxes was $1.4 million
for the year ended March 31, 1996, compared to $1.2 million for the year ended
March 31, 1995 as a result of higher income before income taxes. The effective
tax rate for fiscal year 1996 was 34.5% compared to 33.3% for fiscal 1995.
Average Balance Sheet
The following table sets forth, for the periods indicated, information
regarding average balances of assets and liabilities as well as the total dollar
amounts of interest income from average interest-earning assets and interest
expense on average interest-bearing liabilities, resultant yields, interest rate
spread, ratio of interest-earning assets to interest-bearing liabilities and net
interest margin. Average balances for a period have been calculated using the
monthly average balances during such period.
25
<PAGE>
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------------------------
1997 1996 1995
------------------------- -------------------------- --------------------------
Interest Interest Interest
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ---- ------- --------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans .......................... $128,552 $12,087 9.40% $107,902 $10,413 9.65% $93,627 $8,729 9.32%
Non-mortgage loans ...................... 12,835 1,252 9.75 8,474 839 9.90 4,763 494 10.37
-------- -------- ---- -------- -------- ---- -------- -------- ----
Total net loans ....................... 141,387 13,339 9.43 116,376 11,252 9.67 98,390 9,223 9.37
Mortgage-backed securities ............... 30,212 2,135 7.07 29,779 2,020 6.78 27,530 1,586 5.76
Investment securities .................... 29,048 1,832 6.31 36,729 2,528 6.88 31,891 2,180 6.84
Daily interest-bearing ................... 708 40 5.65 1,626 91 5.60 3,450 166 4.81
Other earning assets ..................... 2,619 130 4.96 2,491 105 4.22 1,438 77 5.35
-------- -------- ---- -------- -------- ---- -------- -------- ----
Total interest-earning assets ........... 203,974 17,476 8.57 187,001 15,996 8.55 162,699 13,232 8.13
Noninterest-earning assets:
Office properties and equipment, net 4,516 4,342 2,955
Real estate, net....................... 471 -- --
Other noninterest-earning assets 9,375 8,634 7,865
-------- -------- --------
Total assets........................... $218,336 $199,977 $173,519
======== ======== ========
Interest-earning liabilities:
Regular savings accounts ................ 21,408 588 2.75 22,259 617 2.77 28,559 919 3.22
NOW accounts ............................ 15,915 234 1.47 15,322 247 1.61 13,733 264 1.92
Money market accounts ................... 18,046 617 3.42 15,879 599 3.77 10,694 331 3.10
Certificates of deposit ................. 99,657 5,595 5.61 90,710 5,120 5.64 81,757 3,607 4.41
-------- -------- ---- -------- -------- ---- -------- -------- ----
Total deposits ......................... 155,026 7,034 4.54 144,170 6,583 4.57 134,743 5,121 3.80
Other interest-bearing liabilities ...... 29,068 1,889 6.50 26,404 1,833 6.94 12,638 806 6.38
-------- -------- ---- -------- -------- ---- -------- -------- ----
Total interest-bearing liabilities ..... 184,094 8,923 4.85 170,574 8,416 4.93 147,381 5,927 4.02
Noninterest-bearing liabilities
Noninterest-bearing deposits 7,047 5,095 4,638
Other liabilities...................... 3,229 2,570 2,070
-------- -------- --------
Total liabilities..................... 194,370 178,239 154,089
Stockholders' equity................... 23,966 21,738 19,430
-------- -------- --------
Total liabilities and stockholders'
equity................................ $218,336 $199,977 $173,519
======== ======== ========
Net interest income..................... $ 8,553 $7,580 $7,305
======== ======== =======
Interest rate spread.................... 3.72% 3.62% 4.11%
===== ===== =====
Net interest margin..................... 4.19% 4.05% 4.49%
===== ===== =====
Ratio of average interest-earning
assets to average interest-bearing
liabilities........................... 110.80% 109.63% 110.39%
\ ====== ====== ======
</TABLE>
26
<PAGE>
Yields Earned and Rates Paid
The following table sets forth for the periods and at the date
indicated and the weighted average yields earned on the Savings Bank's assets,
the weighted average interest rates paid on the Savings Bank's liabilities,
together with the net yield on interest-earning assets.
Year Ended March 31,
At March 31, --------------------
1997 1997 1996 1995
---- ---- ---- ----
Weighted average yield earned on:
Total net loans(1) ......................... 8.50 9.43% 9.67% 9.37%
Mortgage-backed securities ................. 7.13 7.07 6.78 5.76
Investment securities ...................... 6.34 6.31 6.88 6.84
All interest-earning assets ................ 8.06 8.57 8.55 8.13
Weighted average rate paid on:
Deposits ................................... 4.35 4.54 4.57 3.80
FHLB advances and other borrowings ......... 6.51 6.50 6.94 6.38
All interest-bearing liabilities ........... 4.65 4.85 4.93 4.02
Interest rate spread (spread between weighted
average rate on all interest-earning
assets and all interest-bearing liabilities) 3.41 3.72 3.62 4.11
Net interest margin (net interest income
(expense) as a percentage of average
interest-earning assets) ................... N/A 4.19 4.05 4.49
- ----------
(1) Weighted average yield on total net loans at March 31, 1997 excludes
deferred loan fees.
27
<PAGE>
Rate/Volume Analysis
The following table sets forth the effects of changing rates and
volumes on net interest income of the Savings Bank. Information is provided with
respect to (i) effects on interest income attributable to changes in volume
(changes in volume multiplied by prior rate); (ii) effects on interest income
attributable to changes in rate (changes in rate multiplied by prior volume);
and (iii) changes in rate/volume (change in rate multiplied by change in
volume).
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
------------------------------------------ ---------------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
---------------------------- Total --------------------------- Total
Rate/ Increase Rate/ Increase
Volume Rate Volume (Decrease) Volume Rate Volume (Decrease)
------ ---- ------ ---------- ------ ---- ------ ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income:
Mortgage loans ............................ $1,993 $(268) $(51) $1,674 $1,330 $ 309 $ 45 $1,684
Non-mortgage loans ........................ 432 (13) (6) 413 385 (22) (18) 345
Mortgage-backed securities ................ 2985 1 115 130 281 23 434
Investment securities ..................... (528) (212) 44 (696) 331 13 4 348
Daily interest-bearing .................... (51) -- -- (51) (88) 27 (14) (75)
Other earning assets ...................... 5 19 1 25 56 (16) (12) 28
------ ----- --- ---- ---- ----- ----- -----
Total interest-earning assets ........... 1,880 (389) (11) 1,480 2,144 592 28 2,764
------ ----- --- ---- ---- ----- ----- -----
Interest Expense:
Regular savings accounts .................. (24) (4) (1) (29) (203) (129) 30 (302)
NOW accounts .............................. 10 (23) -- (13) 31 (42) (6) (17)
Money market accounts ..................... 82 (56) (8) 18 161 72 35 268
Certificates of deposit ................... 505 (27) (3) 475 395 1,007 111 1,513
Other interest-bearing liabilities ........ 185 (118) (11) 56 878 71 78 1,027
------ ----- --- ---- ---- ----- ----- -----
Total interest-bearing liabilities ..... 758 (228) (23) 507 1,262 979 248 2,489
------ ----- --- ---- ---- ----- ----- -----
Net increase (decrease) in interest income . $1,122 $(161) $12 $973 $882 $(387) $(220) $275
====== ===== === ==== ==== ===== ===== ====
</TABLE>
Asset and Liability Management
The Savings Bank's principal financial objective is to achieve long-term
profitability while reducing its exposure to fluctuating market interest rates.
The Savings Bank has sought to reduce the exposure of its earnings to changes in
market interest rates by attempting to manage the mismatch between asset and
liability maturities and interest rates. The principal element in achieving this
objective is to increase the interest-rate sensitivity of the Savings Bank's
interest-earning assets by retaining for its portfolio loans with interest rates
subject to periodic adjustment to market conditions and selling fixed-rate one-
to- four family mortgage loans with terms of more than 15 years. The Savings
Bank relies on retail deposits as its primary source of funds. Management
believes retail deposits, compared to brokered deposits, reduce the effects of
interest rate fluctuations because they generally represent a more stable source
of funds. As part of its interest rate risk management strategy, the Savings
Bank promotes transaction accounts and certificates of deposit with terms up to
ten years.
The Savings Bank has adopted a strategy that is designed to maintain or
improve the interest rate sensitivity of assets relative to its liabilities. The
primary elements of this strategy involve the origination of ARM loans or
purchase of adjustable rate mortgage-backed securities for its portfolio;
maintaining consumer and residential construction loans as a portion of total
net loans receivable because of their generally shorter terms and higher yields
than other one-to-four- family residential mortgage loans; matching asset and
liability maturities; investing in short
28
<PAGE>
term mortgage-backed and other securities; and the origination of fixed-rate
loans for sale in the secondary market and the retention of the related loan
servicing rights. This approach has remained consistent throughout the past year
as the Savings Bank has experienced growth in assets, deposits, and FHLB
advances.
Deposit accounts typically react more quickly to changes in market interest
rates than mortgage loans because of the shorter maturities of deposits. As a
result, sharp increases in interest rates may adversely affect the Savings
Bank's earnings while decreases in interest rates may beneficially affect the
Savings Bank's earnings. To reduce the potential volatility of the Savings
Bank's earnings, management has sought to improve the match between asset and
liability maturities and rates, while maintaining an acceptable interest rate
spread. Pursuant to this strategy, the Savings Bank actively originates ARM
loans for retention in its loan portfolio. Fixed-rate mortgage loans with terms
of more than 15 years generally are originated for the intended purpose of
resale in the secondary mortgage market. The Savings Bank has also invested in
adjustable rate mortgage-backed securities to increase the level of short term
adjustable assets. At March 31, 1997, ARM loans and adjustable rate
mortgage-backed securities constituted $77.1 million, or 45.6%, of the Savings
Bank's total combined mortgage loan and mortgage-backed securities portfolio.
Although the Savings Bank has sought to originate ARM loans, the ability to
originate and purchase such loans depends to a great extent on market interest
rates and borrowers' preferences. Particularly in lower interest rate
environments, borrowers often prefer to obtain fixed rate loans.
The Savings Bank's mortgage servicing activities provide additional
protection from interest rate risk. The Savings Bank retain servicing rights on
all mortgage loans sold. As market interest rates rise the fixed rate loans held
in portfolio diminish in value. However, the value of the servicing portfolio
tends to rise as market interest rates increase because borrowers tend not to
prepay the underlying mortgages, thus providing an interest rate risk hedge
versus the fixed rate loan portfolio. The loan servicing portfolio totalled
$98.8 million at March 31, 1997, including $38.0 million of purchased mortgage
servicing. The purchase of loan servicing replaced loan servicing balances
extinguished through prepayment of the underlying loans. The average balance of
the servicing portfolio was $102.4 million and produced service fees of $279,000
for the year ended March 31, 1997. See "BUSINESS OF THE SAVINGS BANK -- Lending
Activities -- Mortgage Loan Servicing."
Consumer loans and construction loans typically have shorter terms and
higher yields than permanent residential mortgage loans, and accordingly reduce
the Savings Bank's exposure to fluctuations in interest rates. At March 31,
1997, the construction and consumer loan portfolios amounted to $33.4 million
and $14.3 million, or 22.0% and 9.4% of total net loans receivable,
respectively. See "BUSINESS OF THE SAVINGS BANK -- Lending Activities --
Construction Lending" and "-- Lending Activities -- Consumer Lending."
The Savings Bank also invests in short-term to medium-term U.S. Government
securities as well as mortgage-backed securities issued or guaranteed by U.S.
Government agencies. At March 31, 1997, the combined portfolio of $53.7 million
had an average term to repricing or maturity of 1.7 years. See "BUSINESS OF THE
SAVINGS BANK -- Investment Activities."
In order to encourage institutions to reduce their interest rate risk, the
OTS adopted a rule incorporating an interest rate risk component into the
risk-based capital rules. Using data compiled by the FHLB-Seattle, the Savings
Bank receives a report which measures interest rate risk by modeling the change
in NPV over a variety of interest rate scenarios. This procedure for measuring
interest rate risk was developed by the OTS to replace the "gap" analysis (the
difference between interest-earning assets and interest-bearing liabilities that
mature or reprice within a specific time period). NPV is the present value of
expected cash flows from assets, liabilities and off-balance sheet contracts.
The calculation is intended to illustrate the change in NPV that will occur in
the event of an immediate change in interest rates of at least 200 basis points
with no effect given to any steps that management might take to counter the
effect of that interest rate movement. Under proposed OTS regulations, an
institution with a greater than "normal" level of interest rate risk will be
subject to a deduction from total capital for purposes of calculating its
risk-based capital. An institution with a "normal" level of interest rate risk
is defined as one whose "measured interest rate risk" is less than 2.0%.
Institutions with assets of less than $300
29
<PAGE>
million and a risk-based capital ratio of more than 12.0% are exempt. The
Savings Bank is exempt because its assets are less than $300 million. Based on
the Savings Bank's regulatory capital levels at March 31, 1997, the Savings Bank
believes that, if the proposed regulation was implemented at that date, the
regulation would not have had a material adverse effect on the Savings Bank's
regulatory capital compliance.
<TABLE>
<CAPTION>
At March 31, 1997
---------------------------------------------------------------------------------------
Net Portfolio Value Net Portfolio Value as a
------------------------------------------------ Percent of Present Value of Assets
Change Dollar Dollar Percent ----------------------------------
In Rates Amount Change Change NPV Ratio Change
- -------- ------ ------ ------ --------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
400bp ...................... $20,523 $(11,830) (37)% 9.56% (445) bp
300bp ...................... 26,632 (8,721) (27) 10.80 (321) bp
200bp ...................... 26,766 (5,588) (17) 12.00 (201) bp
100bp ...................... 29,720 (2,633) (8) 13.09 (93) bp
--bp ...................... 32,353 -- -- 14.01 --
(100)bp ....................... 34,487 2,134 7 14.72 71 bp
(200)bp ....................... 35,635 3,282 10 15.06 105 bp
(300)bp ....................... 36,779 4,425 14 15.39 138 bp
(400)bp ....................... 38,401 6,048 19 15.87 186 bp
</TABLE>
The above table illustrates, for example, that an instantaneous 200 basis
point increase in market interest rates at March 31, 1997 would reduce the
Savings Bank's NPV by approximately $5.6 million, or 17%, at that date.
Certain assumptions utilized by the FHLB-Seattle in assessing the interest
rate risk of savings associations within its region were utilized in preparing
the preceding table. These assumptions relate to interest rates, loan prepayment
rates, deposit decay rates, and the market values of certain assets under
differing interest rate scenarios, among others.
As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as ARM loans, have features which restrict
changes in interest rates on a short-term basis and over the life of the asset.
Further, in the event of a change in interest rates, expected rates of
prepayments on loans and early withdrawals from certificates could deviate
significantly from those assumed in calculating the table.
Liquidity and Capital Resources
The Savings Bank's primary sources of funds are customer deposits, proceeds
from principal and interest payments on and the sale of loans, maturing
securities and FHLB advances. While maturities and scheduled amortization of
loans are a predictable source of funds, deposit flows and mortgage prepayments
are greatly influenced by general interest rates, economic conditions and
competition.
The Savings Bank must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. The Savings Bank generally maintains sufficient cash
and short-term investments to meet short-term liquidity needs. At March 31,
1997, cash and cash equivalents totalled $7.0 million, or 3.1% of total assets.
At March 31, 1997, the Savings Bank also maintained an uncommitted credit
facility with the FHLB-Seattle that provided for immediately available advances
up to an aggregate amount of $78.5 million, under which $27.2 million was
outstanding.
30
<PAGE>
OTS regulations require savings institutions to maintain an average daily
balance of liquid assets (cash and eligible investments) equal to at least 5.0%
of the average daily balance of its net withdrawable deposits and short-term
borrowings. In addition, short-term liquid assets currently must constitute 1.0%
of the sum of net withdrawable deposit accounts plus short-term borrowings. The
Savings Bank's actual short- and long-term liquidity ratios at March 31, 1997
were 8.3% and 18.0%, respectively.
Liquidity management is both a short- and long-term responsibility of the
Savings Bank's management. The Savings Bank adjusts its investments in liquid
assets based upon management's assessment of (i) expected loan demand, (ii)
projected loan sales, (iii) expected deposit flows, (iv) yields available on
interest-bearing deposits, and (v) liquidity of its asset/liability management
program. Excess liquidity is invested generally in interest-bearing overnight
deposits and other short-term government and agency obligations. If the Savings
Bank requires funds beyond its ability to generate them internally, it has
additional borrowing capacity with the FHLB and collateral for repurchase
agreements.
The Savings Bank's primary investing activity is the origination of one-
to- four family mortgage loans. During the years ended March 31, 1997, 1996 and
1995, the Savings Bank originated $67.9 million, $63.6 million and $49.7 million
of such loans, respectively. At March 31, 1997, the Savings Bank had loan
commitments totalling $2.1 million and undisbursed loans in process totalling
$11.1 million. The Savings Bank anticipates that it will have sufficient funds
available to meet current loan commitments. Certificates of deposit that are
scheduled to mature in less than one year from March 31, 1997 totalled $79.7
million. Historically, the Savings Bank has been able to retain a significant
amount of its deposits as they mature.
OTS regulations require the Savings Bank to maintain specific amounts of
regulatory capital. As of March 31, 1997, the Savings Bank complied with all
regulatory capital requirements as of that date with tangible, core and
risk-based capital ratios of 10.3%, 10.3% and 20.9%, respectively. For a
detailed discussion of regulatory capital requirements, see "REGULATION --
Federal Regulation of the Savings Bank -- Capital Requirements." See also
"HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE."
Impact of Accounting Pronouncements and Regulatory Policies
Accounting for Employee Stock Ownership Plans. In November 1993 the
American Institute of Certified Public Accountants issued SOP 93-6, which
requires an employer to record compensation expense in an amount equal to the
fair value of shares committed to be released to employees from an employee
stock ownership plan and to exclude unallocated shares from earnings per share
computations. The effect of SOP 93-6 on net income and book value per share in
future periods cannot be predicted due to the uncertainty of the fair value of
the shares at the time they will be committed to be released. See "PRO FORMA
DATA."
Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities. See Note 1 of Notes to the Consolidated Financial
Statements for a discussion of Statement of Financial Accounting Standards
("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," and of SFAS No. 127, "Deferral of the
Effective Date of Certain Provisions of FASB Statement No. 125." SFAS No. 127
defers the effective date of the application of certain portions of SFAS No. 125
until January 1, 1998. The adoption of the provisions of SFAS No. 125 did not
have a material impact on the Savings Bank's financial condition or results of
operations.
Earnings Per Share. SFAS No. 128, "Earnings Per Share," issued in February
1997, establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly-held common stock or potential
common stock. It replaces the presentation of primary EPS with a presentation of
basis EPS and requires the dual presentation of basic and diluted EPS on the
face of the income statement. SFAS No. 128 is effective for the financial
statements for the periods ending after December 15, 1997. SFAS No. 128 requires
restatement of all prior period EPS data presented. The impact of its adoption
is not expected to be material to the Savings Bank.
31
<PAGE>
Disclosure of Information About Capital Structure. SFAS No. 129,
"Disclosure of Information About Capital Structure," establishes standards for
disclosing information about an entity's capital structure and applies to all
entities. SFAS No. 129 continues the previous requirements to disclose certain
information about an entity's capital structure found in APB Opinions No. 10,
"Omnibus Opinion - 1966," and No. 15, "Earnings Per Share," and SFAS No. 47,
"Disclosure of Long-Term Obligations," for entities that were subject to those
standards. SFAS No. 129 is effective for financial statements for periods ending
after December 15, 1997. SFAS No. 129 contains no change in disclosure
requirements for entities that were previously subject to the requirements of
APB Opinions Nos. 10 and 15 and SFAS No. 47. The adoption of the provisions of
SFAS No. 129 is not expected to have a material impact on the Savings Bank.
Effect of Inflation and Changing Prices
The consolidated financial statements and related financial data presented
herein have been prepared in accordance with GAAP, which require the measurement
of financial position and operating results in terms of historical dollars
without considering the change in the relative purchasing power of money over
time due to inflation. The primary impact of inflation is reflected in the
increased cost of the Savings Bank's operations. Unlike most industrial
companies, virtually all the assets and liabilities of a financial institution
are monetary in nature. As a result, interest rates generally have a more
significant impact on a financial institution's performance than do general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.
BUSINESS OF THE HOLDING COMPANY
General
The Holding Company was organized as a Washington business corporation at
the direction of the Savings Bank on June 23, 1997 for the purpose of becoming
a holding company for the Savings Bank upon completion of the Conversion
and Reorganization. As a result of the Conversion and Reorganization, the
Savings Bank will be a wholly-owned subsidiary of the Holding Company and
all of the issued and outstanding capital stock of the Savings Bank will be
owned by the Holding Company.
Business
Prior to the Conversion and Reorganization, the Holding Company has not and
will not engage in any significant activities other than of an organizational
nature. Upon completion of the Conversion and Reorganization, the Holding
Company's primary business activity will be the ownership of the outstanding
capital stock of the Savings Bank. In the future, the Holding Company may
acquire or organize other operating subsidiaries, although there are no current
plans, arrangements, agreements or understandings, written or oral, to do so.
Initially, the Holding Company will neither own nor lease any property but
will instead use the premises, equipment and furniture of the Savings Bank with
the payment of appropriate rental fees, as required by applicable law and
regulations.
Since the Holding Company will only hold the outstanding capital stock of
the Savings Bank upon consummation of the Conversion and Reorganization, the
competitive conditions applicable to the Holding Company will be the same as
those confronting the Savings Bank. See "BUSINESS OF THE SAVINGS BANK --
Competition."
32
<PAGE>
BUSINESS OF THE SAVINGS BANK
General
The Savings Bank operates, and intends to continue to operate, as a
community oriented financial institution and is devoted to serving the needs of
its customers. The Savings Bank's business consists primarily of attracting
retail deposits from the general public and using those funds to originate real
estate loans. See "-- Lending Activities."
Market Area
The Savings Bank conducts operations from its home office in Camas and
eight branch offices in Washougal, Stevenson, White Salmon, Battle Ground,
Goldendale, Vancouver (2 branch offices) and Longview, Washington. The Savings
Bank's market area for lending and deposit taking activities encompasses Clark,
Cowlitz, Skamania and Klickitat Counties, throughout the Columbia River Gorge
area. Camas is located in Clark County which is approximately 15 miles east of
Portland, Oregon.
Several businesses are located in the Camas area because of the favorable
tax structure and relatively lower energy costs as compared to Oregon.
Washington has no state income tax and Clark County operates a public electric
utility which provides relatively lower cost electricity than does Oregon.
Located in the Camas area are Sharp Electronics, Hewlett Packard, James River,
Underwriters Laboratory and Wafer Tech, as well as several support industries.
In addition to this industrial base, the Columbia River Gorge Scenic Area has
been a source of tourism which has transformed the area from its past dependence
on the timber industry. The primary tourist destination of the Gorge area is the
Skamania Lodge, a $25 million resort complex opened in 1993. In addition, the
Hood River, Oregon, area has become internationally renowned for windsurfing and
has attracted young professionals, many of whom have purchased second residences
in the area.
The Savings Bank faces strong competition from many financial institutions
for deposits and loan originations. See "-- Competition" and "RISK FACTORS --
Competition."
Lending Activities
General. At March 31, 1997, the Savings Bank's total net loans receivable
amounted to $151.8 million, or 67.6% of total assets at that date. The principal
lending activity of the Savings Bank is the origination of residential mortgage
loans through its mortgage banking activities, including residential
construction loans, though the Savings Bank has originated loans collateralized
by commercial properties. The Savings Bank, to a lesser extent, also makes
consumer loans and has made commercial business loans. A substantial portion of
the Savings Bank's loan portfolio is secured by real estate, either as primary
or secondary collateral, located in its primary market area. See "RISK FACTORS
- -- Certain Lending Risks -- Concentration of Credit Risk."
33
<PAGE>
Loan Portfolio Analysis. The following table sets forth the composition of the
Savings Bank's loan portfolio by type of loan at the dates indicated.
<TABLE>
<CAPTION>
At March 31,
-------------------------------------------------------------------
1997 1996 1995
------------------- ------------------- ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in thousands)
Real estate loans:
One-to-four family(1) ............ $94,536 62.29% $88,140 68.77% $73,047 70.39%
Multi-family ..................... 5,439 3.58 2,958 2.31 2,048 1.97
Construction one-to-four family .. 32,529 21.43 22,596 17.63 20,822 20.07
Construction multi-family ........ 547 0.36 361 0.28 -- --
Construction commercial .......... 634 0.42 500 0.39 344 0.33
Land ............................. 7,900 5.21 7,546 5.89 5,226 5.04
Commercial real estate ........... 8,997 5.93 6,518 5.08 5,335 5.14
-------- ---------- -------- ---------- -------- ----------
Total real estate loans ....... 150,582 99.21 128,619 100.35 106,822 102.94
Commercial business ............... 794 0.53 969 0.76 925 0.89
Consumer loans:
Automobile loans ................. 2,889 1.90 2,384 1.86 1,623 1.56
Savings account loans ............ 734 0.48 613 0.48 480 0.46
Home equity loans ................ 8,254 5.44 5,107 3.99 1,743 1.68
Other consumer loans ............. 2,416 1.59 1,695 1.32 1,448 1.40
-------- ---------- -------- ---------- -------- ----------
Total consumer loans .......... 14,293 9.41 9,799 7.65 5,294 5.10
-------- ---------- -------- ---------- -------- ----------
Total loans and loans held for sale 165,669 139,387 113,041
Less:
Undisbursed loans in process ..... 11,087 7.30 8,876 6.93 7,098 6.84
Unamortized loan origination fees,
net of direct costs ............. 1,967 1.30 1,678 1.31 1,502 1.45
Unearned discounts ............... 10 0.01 11 0.01 12 0.01
Allowance for possible loan losses 831 0.55 653 0.51 657 0.63
-------- ---------- -------- ---------- -------- ----------
Total loans receivable, net(1) .... $151,774 100.00% $128,169 100.00% $103,772 100.00%
======== ========== ======== ========== ======== ==========
<CAPTION>
At March 31,
-------------------------------------------
1994 1993
----------------- --------------------
Amount Percent Amount Percent
------ ------- ------ -------
Dollars in thousands
<S> <C> <C> <C> <C>
Real estate loans:
One-to-four family(1) ............ $64,068 70.51% $57,254 68.52%
Multi-family ..................... 1,350 1.49 2,688 3.22
Construction one-to-four family .. 25,280 27.82 19,571 23.42
Construction multi-family ........ -- -- -- --
Construction commercial .......... -- -- -- --
Land ............................. 2,870 3.16 2,338 2.80
Commercial real estate ........... 6,238 6.87 7,187 8.60
-------- ---------- -------- ---------
Total real estate loans ....... 99,806 109.85 89,038 106.56
Commercial business ............... 803 0.88 972 1.16
Consumer loans:
Automobile loans ................. 1,510 1.66 1,561 1.87
Savings account loans ............ 449 0.49 561 0.67
Home equity loans ................ -- -- -- --
Other consumer loans ............. 1,358 1.50 1,385 1.66
-------- ---------- -------- ---------
Total consumer loans .......... 3,317 3.65 3,507 4.20
-------- ---------- -------- ---------
Total loans and loans held for sale 103,926 93,517
Less:
Undisbursed loans in process ..... 10,917 12.02 8,209 9.82
Unamortized loan origination fees,
net of direct costs ............. 1,502 1.65 1,206 1.44
Unearned discounts ............... -- -- 33 0.04
Allowance for possible loan losses 647 0.71 515 0.62
-------- ---------- -------- ---------
Total loans receivable, net(1) .... $90,860 100.00% $83,554 100.00%
======== ========== ======== =========
</TABLE>
- ----------
(1) Includes loans held for sale of $80,000, $1.9 million, $247,000, $4.5
million and $10.7 million at March 31, 1997, 1996, 1995, 1994 and 1993,
respectively.
34
<PAGE>
One- to- Four Family Real Estate Lending. Historically, the Savings Bank's
primary lending activity has been the origination of mortgage loans to enable
borrowers to purchase one- to- four family properties. At March 31, 1997,
approximately $94.5 million, or 62.3% of total net loans receivable, consisted
of loans secured by one- to four-family residential real estate. One- to- four
family mortgage loans accounted for $67.9 million, or 79.3% of total loan
originations, for the year ended March 31, 1997.
In addition to originating one- to- four family loans for its portfolio,
the Savings Bank is an active mortgage broker for several third party mortgage
lenders. In recent periods, such mortgage brokerage activities have reduced the
volume of fixed-rate one- to- four family loans that are originated and sold by
the Savings Bank. See "-- Loan Originations, Sales and Purchases" and "--
Mortgage Brokerage."
The Savings Bank originates both fixed-rate mortgage loans and ARM loans
secured by one- to-four family properties. Borrower demand for ARM loans versus
fixed-rate mortgage loans is a function of the level of interest rates, the
expectations of changes in the level of interest rates and the difference
between the interest rates and loan fees offered for fixed-rate mortgage loans
and the first year interest rates and loan fees for ARM loans. The relative
amount of fixed-rate mortgage loans and ARM loans that can be originated at any
time is largely determined by the demand for each in a competitive environment.
The Savings Bank originates fixed-rate mortgage loans for terms of 15 to 30
years as well as balloon mortgage loans with terms of either five or seven
years. The interest rates on the balloon mortgage loans are adjusted after the
expiration of the initial balloon term. Fixed rate mortgage loans are generally
originated to conform to standards that allow them to be sold in the secondary
mortgage market. The Savings Bank generally sells fixed-rate mortgage loans with
maturities of 15 years or more to the Federal Home Loan Mortgage Corporation
("FHLMC"), servicing retained. See "-- Lending Activities -- Loan Originations,
Sales and Purchases" and "-- Lending Activities -- Mortgage Loans Servicing."
The Savings Bank offers ARM loans at rates and terms competitive with
market conditions. At March 31, 1997, $59.6 million, or 46.9%, of the Savings
Bank's one- to- four family loan portfolio consisted of ARM loans. ARM loans are
originated with interest rates and payments that adjust annually based on a rate
equal to 2.75% to 3.75% above the prevailing rate on the one-year constant
maturity U.S. Treasury Bill Index.
At March 31, 1997, the Savings Bank charged an origination fee on ARM loans
ranging from 1% to 3% of the loan principal amount and an initial interest rate
that ranged from 6.25% to 7.25% per annum. The annual interest rate cap (the
maximum amount by which the interest rate may be increased per year) on ARM
loans is generally 2% and the lifetime interest rate cap is generally 5% to 6%
over the initial interest rate. The Savings Bank does not originate negative
amortization loans.
As a marketing incentive, the Savings Bank offers ARM loans with a
discounted or "teaser" rate of up to 2% below the normal rate offered. The
borrower, however, is qualified at the fully indexed rate. Annual and lifetime
interest rate caps are based on the initial discounted rate. "Teaser" rate loans
are subject to prepayment penalty during the first three years of the loan term
if the borrower repays more than 20% of the outstanding principal balance per
year. During the first year, the penalty is 3% of the outstanding principal
balance; during year two, it is 2% of the outstanding principal balance; and
during year three, it is 1% of the outstanding principal balance.
The retention of ARM loans in the portfolio helps reduce the Savings Bank's
exposure to changes in interest rates. There are, however, unquantifiable credit
risks resulting from the potential of increased costs arising from changed rates
to be paid by the customer. It is possible that during periods of rising
interest rates the risk of default on ARM loans may increase as a result of
repricing and the increased costs to the borrower. Furthermore, because "teaser"
rate loans originated by the Savings Bank generally provide for initial rates of
interest below the rates which would apply were the adjustment index used for
pricing initially (discounting), these loans are subject to increased risks of
default of delinquency. Another consideration is that although ARM loans allow
the Savings Bank to
35
<PAGE>
increase the sensitivity of its asset base to changes in interest rates, the
extent of this interest sensitivity is limited by the periodic and lifetime
interest rate adjustment limits. Because of these considerations, the Savings
Bank has no assurance that yields on ARM loans will be sufficient to offset
increases in its cost of funds.
While one- to- four family residential real estate loans typically are
originated with 30-year terms and the Savings Bank permits its ARM loans to be
assumed by qualified borrowers, such loans generally remain outstanding for
substantially shorter periods because borrowers often prepay their loans in full
upon sale of the property pledged as security or upon refinancing the original
loan. In addition, substantially all of the fixed interest rate loans in the
Savings Bank's loan portfolio contain due-on-sale clauses providing that the
Savings Bank may declare the unpaid amount due and payable upon the sale of the
property securing the loan. The Savings Bank enforces these due-on-sale clauses
to the extent permitted by law. Thus, average loan maturity is a function of,
among other factors, the level of purchase and sale activity in the real estate
market, prevailing interest rates and the interest rates payable on outstanding
loans.
The Savings Bank requires title insurance insuring the status of its lien
on all of the real estate secured loans and also requires that the fire and
extended coverage casualty insurance (and, if appropriate, flood insurance) be
maintained in an amount at least equal to the lesser of the loan balance and the
replacement cost of the improvements. Where the value of the unimproved real
estate exceeds the amount of the loan on the real estate, the Savings Bank may
make exceptions to its property insurance requirements.
The Savings Bank generally does not make conventional loans with
loan-to-value ratios exceeding 80% and makes loans with a loan-to-value ratio in
excess of 80% only when secured by first liens on owner-occupied one- to-four
family residences. On loans with loan-to-value ratios in excess of 80%, the
Savings Bank requires private mortgage insurance ("PMI"), with coverage ranging
from 12% to 25% of the appraised value of the property or the amount required by
the FHLMC, depending on the loan-to-value ratio. Loans with loan-to-value ratios
in excess of 80% must have a mortgage escrow account from which disbursements
are made for real estate taxes, hazard and flood insurance and PMI.
Construction Lending. Prompted by favorable economic conditions, including
a favorable long term interest rate environment, and increased residential
housing demand in its primary market area, the Savings Bank actively originates
three types of residential construction loans: (i) speculative construction
loans, (ii) custom construction loans and (iii) construction/permanent loans.
Annual originations of residential construction loans have increased from $33.6
million during the year ended March 31, 1995 to $43.9 million during the year
ended March 31, 1997. Subject to market conditions, the Savings Bank intends to
increase its residential construction lending activities. See "RISK FACTORS --
Certain Lending Risks." To a substantially lesser extent, the Savings bank also
originates construction loans for the development of multi-family and commercial
properties.
At March 31, 1997, the composition of the Savings Bank's construction loan
portfolio was as follows:
Outstanding Percent of
Balance(1) Total
---------- -----
(In thousands)
Speculative construction.................. $16,814 49.9%
Custom construction....................... 6,658 19.7
Construction/permanent.................... 10,238 30.4
-------- ------
Total................................... $33,710 100.0%
======= =====
- ----------
(1) Includes loans in process.
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<PAGE>
Speculative construction loans are made to home builders and are termed
"speculative" because the home builder does not have, at the time of loan
origination, a signed contract with a home buyer who has a commitment for
permanent financing with either the Savings Bank or another lender for the
finished home. The home buyer may be identified either during or after the
construction period, with the risk that the builder will have to debt service
the speculative construction loan and finance real estate taxes and other
carrying costs of the completed home for a significant time after the completion
of construction until the home buyer is identified. The Savings Bank lends to
approximately 50 local builders, many of whom may have only one or two
speculative loans outstanding from the Savings Bank. The Savings Bank considers
approximately 20 builders as core borrowers with several speculative loans
outstanding at any one time. Rather than originating lines of credit to home
builders to construct several homes at once, the Savings Bank originates and
underwrites a separate loan for each home. Speculative construction loans are
originated for a term of 12 months, with interest rates ranging from 1.5% to
2.0% above the prime lending rate, and with a loan-to-value ratio of no more
than 80% of the appraised estimated value of the completed property. At March
31, 1997, the Savings Bank had four borrowers each with aggregate outstanding
speculative loan balances of more than $700,000, all of which were performing
according to their respective terms and the largest of which amounted to $1.2
million.
Unlike speculative construction loans, custom construction loans are made
to home builders who, at the time of construction, have a signed contract with a
home buyer who has a commitment for permanent financing for the finished home
with the Savings Bank or another lender. Custom construction loans are generally
originated for a term of 12 months, with fixed interest rates ranging from 7.75%
to 8.25%, and with loan-to-value ratios of 80% of the appraised estimated value
of the completed property or cost, whichever is less. At March 31, 1997, the
largest outstanding custom construction loan had an outstanding balance of
$457,000 and was performing according to its terms.
Construction/permanent loans are originated to the home owner rather than
the home builder along with a commitment by the Savings Bank to originate a
permanent loan to the home owner to repay the construction loan at the
completion of construction. The construction phase of a construction/permanent
loan generally lasts six months and the interest rate charged is generally 6.25%
to 8.75%, fixed, and with loan-to-value ratios of 80% (or up to 95% with PMI) of
the appraised estimated value of the completed property or cost, whichever is
less. At the completion of construction, the Savings Bank may either originate a
fixed-rate mortgage loan or an ARM loan for retention in its portfolio or use
its mortgage brokerage capabilities to obtain permanent financing for the
customer with another lender. See "-- Mortgage Brokerage." When the Savings Bank
issues a commitment to provide permanent financing upon completion of
construction, the interest rate charged on the construction loan generally
includes an additional 0.375% to 0.625% as a protection against the risk of an
increase in interest rates before the permanent loan is funded. See "-- Lending
Activities -- Loan Originations and Sales" and "-- Lending Activities --
Mortgage Loan Servicing." At March 31, 1997, the largest outstanding
construction/permanent loan had an outstanding balance of $340,000 and was
performing according to its terms.
To a substantially lesser extent, the Savings Bank also provides
construction financing for non-residential properties (i.e., multi-family and
commercial properties). At March 31, 1997, such construction loans amounted to
$1.2 million.
All construction loans must be approved by the Savings Bank's Loan
Committee. See "-- Loan Solicitation and Processing." Prior to preliminary
approval of any construction loan application, an independent fee appraiser
inspects the site and the Savings Bank reviews the existing or proposed
improvements, identifies the market for the proposed project, analyzes the pro
forma data and assumptions on the project. In the case of a speculative or
custom construction loan, the Savings Bank reviews the experience and expertise
of the builder. After preliminary approval has been given, the application is
processed, which includes obtaining credit reports, financial statements and tax
returns on the borrowers and guarantors, an independent appraisal of the
project, and any other expert reports necessary to evaluate the proposed
project. In the event of cost overruns, the Savings Bank requires that the
borrower increase the loan amount by depositing its own funds into a loans in
process account and the Savings Bank disburses additional loan proceeds
consistent with the original loan-to-value ratio.
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<PAGE>
The construction loan documents require that construction loan proceeds be
disbursed in increments as construction progresses. Disbursements are based on
periodic on-site inspections by independent fee inspectors and Savings Bank
personnel. At inception, the Savings Bank also requires borrowers to deposit
funds to the loans-in-process account covering the difference between the actual
cost of construction and the loan amount. The Savings Bank regularly monitors
the construction loan portfolio and the economic conditions and housing
inventory. Property inspections are performed by the Savings Bank's property
inspector. The Savings Bank believes that the internal monitoring system helps
reduce many of the risks inherent in its construction lending.
Construction lending affords the Savings Bank the opportunity to achieve
higher interest rates and fees with shorter terms to maturity than does its
single-family permanent mortgage lending. Construction lending, however, is
generally considered to involve a higher degree of risk than single-family
permanent mortgage lending because of the inherent difficulty in estimating both
a property's value at completion of the project and the estimated cost of the
project. The nature of these loans is such that they are generally more
difficult to evaluate and monitor. If the estimate of construction cost proves
to be inaccurate, the Savings Bank may be required to advance funds beyond the
amount originally committed to permit completion of the project. If the estimate
of value upon completion proves to be inaccurate, the Savings Bank may be
confronted with a project whose value is insufficient to assure full repayment.
Projects may also be jeopardized by disagreements between borrowers and builders
and by the failure of builders to pay subcontractors. Loans to builders to
construct homes for which no purchaser has been identified carry more risk
because the payoff for the loan depends on the builder's ability to sell the
property prior to the time that the construction loan is due. The Savings Bank
has sought to address these risks by adhering to strict underwriting policies,
disbursement procedures, and monitoring practices. In addition, because the
Savings Bank's construction lending is in its primary market area, changes in
the local economy and real estate market could adversely affect the Savings
Bank's construction loan portfolio.
Multi-Family Lending. At March 31, 1997, the Savings Bank had $5.4 million,
or 3.6% of the Savings Bank's total net loans receivable, secured by
multi-family dwelling units (more than four units) located primarily in the
Savings Bank's primary market area. Subject to market conditions, the Savings
Bank intends to become a more active originator of multi-family loans within its
primary market area.
Multi-family loans are generally originated with variable rates of interest
equal to 3.75% over the one-year constant maturity U.S. Treasury Bill Index,
with principal and interest payments fully amortizing over terms of up to 25
years. Multi-family loans generally range in principal balance from $200,000 to
$400,000. At March 31, 1997, the largest multi-family loan had an outstanding
principal balance of $1.3 million and was secured by an 18-unit adult assisted
living center located in the Savings Bank's primary market area. At March 31,
1997, this loan was performing according to its terms.
The maximum loan-to-value ratio for multi-family loans is generally 75%.
The Savings Bank requires its multi-family loan borrowers to submit financial
statements and rent rolls on the subject property annually. The Savings Bank
also inspects the subject property annually.
Multi-family mortgage lending affords the Savings Bank an opportunity to
receive interest at rates higher than those generally available from one- to-
four family residential lending. However, loans secured by such properties
usually are greater in amount, more difficult to evaluate and monitor and,
therefore, involve a greater degree of risk than one- to- four family
residential mortgage loans. Because payments on loans secured by multi-family
properties are often dependent on the successful operation and management of the
properties, repayment of such loans may be affected by adverse conditions in the
real estate market or the economy. The Savings Bank seeks to minimize these
risks by strictly scrutinizing the financial condition of the borrower, the
quality of the collateral and the management of the property securing the loan.
The Savings Bank also generally obtains personal guarantees from financially
capable parties based on a review of personal financial statements.
Land Lending. The Savings Bank originates loans to local real estate
developers with whom it has established relationships for the purpose of
developing residential subdivisions (i.e., installing roads, sewers, water
38
<PAGE>
and other utilities), as well as loans to individuals to purchase building lots.
At March 31, 1997, subdivision development loans totalled $2.4 million, or 1.6%
of total net loans receivable, and building lot loans amounted to $5.5 million,
or 3.6% of the total net loans receivable. Land loans are secured by a lien on
the property and made for a period of five years with an interest rate that
adjusts with the prime rate, and are made with loan-to-value ratios not
exceeding 75%. Monthly interest payments are required during the term of the
loan. Subdivision loans are structured so that the Savings Bank is repaid in
full upon the sale by the borrower of approximately 90% of the subdivision lots.
All of the Savings Bank's land loans are secured by property located in its
primary market area. In addition, the Savings Bank also generally obtains
personal guarantees from financially capable parties based on a review of
personal financial statements. At March 31, 1997, the Savings Bank had no
nonaccruing land loans.
Loans secured by undeveloped land or improved lots involve greater risks
than one- to- four family residential mortgage loans because such loans are
advanced upon the predicted future value of the developed property. If the
estimate of such future value proves to be inaccurate, in the event of default
and foreclosure the Savings Bank may be confronted with a property the value of
which is insufficient to assure full repayment. The Savings Bank attempts to
minimize this risk by limiting the maximum loan-to-value ratio on land loans to
60% of the estimated developed value of the secured property. Loans on raw land
may run the risk of adverse zoning changes, environmental or other restrictions
on future use.
Commercial Real Estate Lending. Commercial real estate loans totalled $9.6
million, or 6.3% of total net loans receivable at March 31, 1997. The Savings
Bank originates commercial real estate loans generally at variable interest
rates and secured by properties, such as office buildings, retail/wholesale
facilities and industrial buildings, located in its primary market area. The
principal balance of an average commercial real estate loan generally ranges
between $300,000 and $500,000. At March 31, 1997, the largest commercial real
estate loan had an outstanding balance of $897,000 and is secured by a mobile
home park located in the Savings Bank's primary market area. Such loan was
performing according to its terms at March 31, 1997.
The Savings Bank requires appraisals of all properties securing commercial
real estate loans. Appraisals are performed by an independent appraiser
designated by the Savings Bank, all of which are reviewed by management. The
Savings Bank considers the quality and location of the real estate, the credit
of the borrower, the cash flow of the project and the quality of management
involved with the property. The Savings Bank generally imposes a debt to income
ratio of approximately 33% for originated loans secured by income producing
properties. Loan-to-value ratios on commercial real estate loans are generally
limited to 75%. The Savings Bank generally obtains loan guarantees from
financially capable parties based on a review of personal financial statements.
Commercial real estate lending affords the Savings Bank an opportunity to
receive interest at rates higher than those generally available from one- to-
four family residential lending. However, loans secured by such properties
usually are greater in amount, more difficult to evaluate and monitor and,
therefore, involve a greater degree of risk than one- to- four family
residential mortgage loans. Because payments on loans secured by commercial
properties often depend upon the successful operation and management of the
properties, repayment of such loans may be affected by adverse conditions in the
real estate market or the economy. The Savings Bank seeks to minimize these
risks by limiting the maximum loan-to-value ratio to 75% and strictly
scrutinizing the financial condition of the borrower, the quality of the
collateral and the management of the property securing the loan.
Commercial Business Lending. The Savings Bank engages in limited amounts of
commercial business lending. At March 31, 1997, commercial business loans
amounted to $794,000, or 0.5% of total net loans receivable. Commercial business
loans are generally made to customers who are well known to the Savings Bank and
are generally secured by business equipment and are made at variable rates of
interest equal to a negotiated margin above the prime rate. The Savings Bank
also generally obtains personal guarantees from financially capable parties
based on a review of personal financial statements.
Commercial business lending generally involves greater risk than
residential mortgage lending and involves risks that are different from those
associated with residential and commercial real estate lending. Real estate
lending
39
<PAGE>
is generally considered to be collateral based lending with loan amounts based
on predetermined loan to collateral values and liquidation of the underlying
real estate collateral is viewed as the primary source of repayment in the event
of borrower default. Although commercial business loans are often collateralized
by equipment, inventory, accounts receivable or other business assets, the
liquidation of collateral in the event of a borrower default is often an
insufficient source of repayment because accounts receivable may be
uncollectible and inventories and equipment may be obsolete or of limited use,
among other things. Accordingly, the repayment of a commercial business loan
depends primarily on the creditworthiness of the borrower (and any guarantors),
while liquidation of collateral is a secondary and often insufficient source of
repayment.
Consumer Lending. The Savings Bank originates a variety of consumer loans,
including home equity lines of credit, home improvement loans, loans for debt
consolidation and other purposes, automobile and boat loans and savings account
loans. At March 31, 1997, consumer loans totalled $14.3 million, or 9.4% of
total net loans receivable.
Home equity lines of credit, which are secured by a second mortgage on the
borrower's primary residence, are a large and growing portion of the consumer
loan portfolio. The Savings Bank has actively marketed home equity lines of
credit with television advertising and intends to continue to do so subject to
market conditions. At March 31, 1997, approved home equity lines of credit
totalled $9.5 million, of which $6.9 million was outstanding. Home equity lines
of credit are made at loan-to-value ratios of 90% or less, taking into
consideration the outstanding balance on the first mortgage on the property.
Lines of credit with a loan to value ratio of 80% or less are made at variable
interest rates equal to 2% above the rate on the three-year U.S. Treasury Bill
with a maximum annual interest rate adjustment of 2% and a maximum lifetime
interest rate adjustment of 8%, with an interest rate not to exceed 16%.
Otherwise, the rate is 3% above the rate on the three-year U.S. Treasury Bill
with an annual interest rate adjustment of 3% and a maximum lifetime interest
rate adjustment of 9%, with an interest rate not to exceed 16%.
The Savings Bank also originates fully amortizing second mortgage loans for
terms up to ten years with generally fixed interest rates, and with
loan-to-value ratios of more than 80% (taking into account any outstanding first
mortgage loan balance). At March 31, 1997, such second mortgage loans amounted
to $1.4 million.
The Savings Bank's procedures for underwriting consumer loans include an
assessment of the applicant's payment history on other debts and ability to meet
existing obligations and payments on the proposed loans. Although the
applicant's creditworthiness is a primary consideration, the underwriting
process also includes a comparison of the value of the security, if any, to the
proposed loan amount.
Consumer loans generally entail greater risk than do residential mortgage
loans, particularly in the case of consumer loans that are unsecured or secured
by assets that depreciate rapidly, such as mobile homes, automobiles, boats and
recreational vehicles. In such cases, repossessed collateral for a defaulted
consumer loan may not provide an adequate source of repayment for the
outstanding loan and the remaining deficiency often does not warrant further
substantial collection efforts against the borrower. In addition, consumer loan
collections are dependent on the borrower's continuing financial stability, and
thus are more likely to be adversely affected by job loss, divorce, illness or
personal bankruptcy. Furthermore, the application of various federal and state
laws, including federal and state bankruptcy and insolvency laws, may limit the
amount which can be recovered on such loans. Such loans may also give rise to
claims and defenses by the borrower against the Savings Bank as the holder of
the loan, and a borrower may be able to assert claims and defenses which it has
against the seller of the underlying collateral. The Savings Bank adds a general
provision to its consumer loan loss allowance, based on general economic
conditions and prior loss experience.
Loan Maturity and Repricing. The following table sets forth certain
information at March 31, 1997 regarding the dollar amount of loans maturing in
the Savings Bank's portfolio based on their contractual terms to maturity, but
does not include scheduled payments or potential prepayments. Demand loans,
loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as due in one year or less. Mortgage
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<PAGE>
loans which have adjustable-rates are shown as maturing at their next repricing
date. Loan balances do not include unearned discounts, unearned income and
allowance for loan losses.
<TABLE>
<CAPTION>
After One After 3 After 5
Within Year to Years to Years to Beyond
One Year 3 Years 5 Years 10 Years 10 Years Total
-------- ------- ------- -------- -------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Residential one- to-four family:
Adjustable-rate ............................... $55,266 $1,884 $ -- $281 $2,132 $59,563
Fixed-rate .................................... 6,627 4,975 6,593 12,661 36,566 67,422
Other residential and
all non-residential:
Adjustable-rate ............................... 10,815 -- -- -- 249 11,064
Fixed-rate .................................... 1,259 1,242 1,605 3,452 4,895 12,453
Consumer and commercial:
Adjustable-rate ............................... 7,547 -- -- -- -- 7,547
Fixed-rate .................................... 3,317 2,257 1,414 442 110 7,540
------- ------- ------ ------- ------- --------
Total gross loans ............................ $84,831 $10,358 $9,612 $16,836 $43,952 $165,589
======= ======= ====== ======= ======= ========
</TABLE>
The following table sets forth the dollar amount of all loans due one year
after March 31, 1997 which have fixed interest rates and have floating or
adjustable interest rates.
Fixed- Floating- or
Rates Adjustable-Rates
----- ----------------
(In thousands)
Real estate mortgage:
One- to-four family..................... $60,795 $4,297
Other mortgage loans.................... 11,194 249
Consumer and commercial.................. 4,223 --
------ -----
Total.................................. $76,212 $4,546
======= ======
Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of a loan is substantially less
than its contractual terms because of prepayments. In addition, due-on-sale
clauses on loans generally give the Savings Bank the right to declare loans
immediately due and payable in the event, among other things, that the borrower
sells the real property. The average life of mortgage loans tends to increase,
however, when current mortgage loan market rates are substantially higher than
rates on existing mortgage loans and, conversely, decrease when rates on
existing mortgage loans are substantially higher than current mortgage loan
market rates. Furthermore, management believes that a significant number of the
Savings Bank's residential mortgage loans are outstanding for a period less than
their contractual terms because of the transitory nature of many of the
borrowers who reside in its primary market area.
Loan Solicitation and Processing. The Savings Bank's lending activities are
subject to the written, non-discriminatory, underwriting standards and loan
origination procedures established by the Board of Directors and management. The
customary sources of loan originations are realtors, walk-in customers,
referrals and existing customers. The Savings Bank also uses commissioned loan
brokers and television and print advertising to market its products and
services.
Upon receipt of a loan application, a credit report is ordered to verify
specific information relating to the loan applicant's employment, income and
credit standing. A loan applicant's income is verified through the applicant's
employer or from the applicant's tax returns. In the case of a real estate loan,
an appraisal of the real
41
<PAGE>
estate intended to secure the proposed loan is undertaken, generally by an
independent appraiser approved by the Savings Bank. The Savings Bank's mortgage
loan documents conform to FHLMC standards.
Consumer loans are generally approved by individual loan officers and
authorized branch managers. Residential mortgage loans within the FHLMC lending
limit (currently $214,600) may be approved by the Vice President of Lending.
Residential mortgage loans in excess of this limit but not more than $350,000
and all other loans of $350,000 or less require the approval of the Vice
President of Lending and one other designated senior officer. All loans in
excess of $350,000 must be approved by the Executive Loan Committee consisting
of President Sheaffer and two other members of the Board of Directors. All loans
are subsequently ratified by the full Board of Directors.
The Savings Bank's policy requires borrowers to obtain certain types of
insurance to protect the Savings Bank's interest in the collateral securing the
loan. The Savings Bank requires either a title insurance policy insuring that
the Savings Bank has a valid first lien on the mortgaged real estate or an
opinion by an attorney regarding the validity of title. Fire and casualty
insurance and, if applicable, flood insurance, is also required on collateral
for loans. The Savings Bank requires escrows for insurance on all loans with a
loan-to-value exceeding 80%.
Loan Commitments. The Savings Bank issues commitments for residential
mortgage loans conditioned upon the occurrence of certain events. Such
commitments are made in writing on specified terms and conditions and are
honored for up to 10 days from approval, depending on the type of transaction.
The Savings Bank had outstanding mortgage loan commitments of approximately $2.1
million at March 31, 1997. See Note 5 of Notes to Consolidated Financial
Statements.
Loan Originations, Sales and Purchases. While the Savings Bank originates
both adjustable-rate and fixed-rate loans, its ability to generate each type of
loan depends upon relative customer demand for loans in its primary market area.
During the years ended March 31, 1997 and 1996, the Savings Bank's total loan
originations were $85.7 million and $78.0 million, respectively, of which 53.8%
and 51.4%, respectively, were subject to periodic interest rate adjustment and
46.2% and 48.6% were fixed-rate loans, respectively.
The Savings Bank customarily sells the fixed-rate loans that it originates
with maturities of 15 years or more to the FHLMC as part of its asset liability
strategy. The sale of such loans allows the Savings Bank to continue to make
loans during periods when savings flows decline or funds are not otherwise
available for lending purposes; however, the Savings Bank assumes an increased
risk if such loans cannot be sold in a rising interest rate environment. Changes
in the level of interest rates and the condition of the local and national
economies affect the amount of loans originated by the Savings Bank and demanded
by investors to whom the loans are sold. Generally, the Savings Bank's loan
origination and sale activity and, therefore, its results of operations, may be
adversely affected by an increasing interest rate environment to the extent such
environment results in decreased loan demand by borrowers and/or investors.
Accordingly, the volume of loan originations and the profitability of this
activity can vary significantly from period to period. Mortgage loans are sold
to the FHLMC on a nonrecourse basis whereby foreclosure losses are generally the
responsibility of the FHLMC and not the Savings Bank.
Between the time that origination commitments are issued and the time the
loans are sold, the Savings Bank is exposed to movements in the price (due to
changes in interest rates) of such loans (or of securities into which such loans
are sometimes converted). Differences between the volume or timing of actual
loan originations and in management's estimates or in actual sales of the loans
can expose the Savings Bank to significant losses. This activity is managed
daily. There can be no assurance that the Savings Bank will be successful in its
efforts to reduce the risk of interest rate fluctuation between the time of
origination of a mortgage loan and the time of the ultimate sale of the loan. To
the extent that the Savings Bank does not adequately manage its interest rate
risk, the Savings Bank may incur significant mark-to-market losses or losses
relating to the sale of such loans, adversely affecting financial condition and
results of operations.
The Savings Bank is not an active purchaser of loans.
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<PAGE>
The following table shows total loans originated, purchased, sold and
repaid during the periods indicated.
<TABLE>
<CAPTION>
For the Years Ended March 31,
--------------------------------------------------
1997 1996 1995
--------- --------- --------
(In thousands)
<S> <C> <C> <C>
Total net loans receivable at beginning of period ..................... $128,169 $103,772 $90,860
--------- --------- --------
Loans originated:
Residential one- to-four family ...................................... 24,039 26,397 16,115
Multi-family ......................................................... 479 790 869
Construction one- to-four family ..................................... 43,887 37,165 33,591
Construction other ................................................... 1,646 861 344
Land and non-residential ............................................. 9,983 8,250 3,839
Other loans .......................................................... 5,617 4,548 2,099
--------- --------- --------
Total loans originated ............................................. 85,651 78,011 56,857
--------- --------- --------
Loans purchased ....................................................... -- -- 53
--------- --------- --------
Residential one- to-four family loans sold ............................ 6,943 7,661 7,962
--------- --------- --------
Repayment of principal ................................................ 52,426 44,004 39,833
--------- --------- --------
Increase (decrease) in loans in process ............................... (2,677) (1,949) 3,797
--------- --------- --------
Net increase in loans ................................................. 23,605 24,397 12,912
--------- --------- --------
Total net loans receivable at end of period ........................... $151,774 $128,169 $103,772
========= ========= ========
</TABLE>
Mortgage Brokerage. In addition to originating mortgage loans for retention
in its portfolio, the Savings Bank employs three commissioned brokers who
originate mortgage loans (including construction loans) for various mortgage
companies predominately in the Portland and Seattle metropolitan areas, as well
as for the Savings Bank. The loans brokered to such mortgage companies are
closed in the name of and funded by the purchasing mortgage company and they are
not originated as an asset of the Savings Bank. In return, the Savings Bank
receives a fee ranging from 1% to 1.25% of the loan amount that it shares
equally with the commissioned broker. For loans brokered to the Savings Bank,
they are closed on the Savings Bank's books as if the Savings Bank had
originated them and the commissioned broker receives a fee of approximately
0.50% of the loan amount. During the year ended March 31, 1997, brokered loans
totalled $60.9 million (including $25.6 million brokered to the Savings Bank).
Gross fees of $394,000 (excluding the portion of fees shared with the
commissioned brokers) were recognized for the year ended March 31, 1997.
Mortgage Loan Servicing. The Savings Bank is a qualified servicer for the
FHLMC. The Savings Bank's general policy is to close its residential loans on
the FHLMC modified loan documents to facilitate future sales to the FHLMC. The
Savings Bank continues to collect payments on the loans, to supervise
foreclosure proceedings, if necessary, and otherwise to service the loans prior
to selling the servicing rights. The Savings Bank retains a portion of the
interest paid by the borrower on the loans as consideration for its servicing
activities.
The Savings Bank generally retains the servicing rights on the fixed-rate
mortgage loans that it sells to the FHLMC. At March 31, 1997, total loans
serviced for others were $98.8 million.
43
<PAGE>
In 1994, the Savings Bank purchased the servicing rights to an underlying
portfolio of residential mortgage loans secured by properties predominately
located in the Seattle Metropolitan Area. At March 31, 1997, the value of these
purchased servicing rights was $402,000 and was being amortized over the life of
the underlying loan servicing.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Impact of Accounting Pronouncements and Regulatory
Policies" for a discussion of SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities."
Loan Origination and Other Fees. The Savings Bank generally receives loan
origination fees and discount "points." Loan fees and points are a percentage of
the principal amount of the mortgage loan that are charged to the borrower for
funding the loan. The Savings Bank usually charges origination fees of 2% to 3%
on one- to four-family residential real estate loans, long-term commercial real
estate loans and residential construction loans. Current accounting standards
require fees received for originating loans to be deferred and amortized into
interest income over the contractual life of the loan. Deferred fees associated
with loans that are sold are recognized as income at the time of sale. The
Savings Bank had $2.0 million of net deferred loan fees at March 31, 1997. The
Savings Bank also receives loan servicing fees on the loans it sells and on
which it retains the servicing rights.
Delinquencies. The Savings Bank's collection procedures for all loans
except consumer loans provide for a series of contacts with delinquent
borrowers. A late charge delinquency notice is first sent to the borrower when
the loan becomes 17 days past due. A follow-up telephone call, or letter if the
borrower cannot be contacted by telephone, is made when the loan becomes 22 days
past due. A delinquency notice is sent to the borrower when the loan becomes 30
days past due. When payment becomes 60 days past due, a notice of default letter
is sent to the borrower stating that foreclosure proceedings will be commenced
unless the delinquency is cured. If a loan continues in a delinquent status for
90 days or more, the Savings Bank generally initiates foreclosure proceedings.
In certain instances, however, the Savings Bank may decide to modify the loan or
grant a limited moratorium on loan payments to enable the borrower to reorganize
their financial affairs.
A delinquent consumer loan borrower is contacted on the fifteenth day of
delinquency. A letter of intent to repossess collateral is mailed to the
borrower after the loan becomes 45 days past due and repossession proceedings
are initiated after the loan becomes 90 days delinquent.
Nonperforming Assets. Loans are reviewed regularly and when a loan become
90 days delinquent, it is placed on nonaccrual status at which time the accrual
of interest ceases and the reserve for any unrecoverable accrued interest is
established and charged against operations. Typically, payments received on a
nonaccrual loan are applied to the outstanding principal and interest as
determined at the time of collection of the loan.
44
<PAGE>
The following table sets forth information with respect to the Savings
Bank's nonperforming assets at the dates indicated. At the dates indicated, the
Savings Bank had no restructured loans within the meaning of SFAS No. 15.
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ------
(Dollars in thousands)
Loans accounted for on a nonaccrual basis:
<S> <C> <C> <C> <C> <C>
Residential real estate ................................... $76 $541 $239 $499 $518
Consumer .................................................. 11 7 1 1 52
---- ---- ---- ---- ------
Total ................................................... 87 548 240 500 570
---- ---- ---- ---- ------
Accruing loans which are contractually
past due 90 days or more .................................. -- -- -- -- --
---- ---- ---- ------
Total of nonaccrual and
90 days past due loans ................................... 87 548 240 500 570
---- ---- ---- ---- ------
Real estate owned (net) .................................... 135 -- -- -- 1,085
---- ---- ---- ---- ------
Total nonperforming assets ............................ $222 $548 $240 $500 $1,655
==== ==== ==== ==== ======
Total loans delinquent 90 days
or more to net loans ..................................... 0.06% 0.43% 0.23% 0.55% 0.68%
Total loans delinquent 90 days or
more to total assets ..................................... 0.04 0.26 0.13 0.38 0.49
Total nonperforming assets to total assets ................. 0.10 0.26 0.13 0.38 1.41
</TABLE>
The Savings Bank does not accrue interest on loans over 90 days past due.
However, if interest on nonaccrual loans had been accrued, interest income of
approximately $1,000 would have been recorded for the year ended March 31, 1997.
Income of approximately $7,000 was received and recorded on nonaccrual loans for
the year ended March 31, 1997.
Asset Classification. The OTS has adopted various regulations regarding
problem assets of savings institutions. The regulations require that each
insured institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, OTS examiners
have authority to identify problem assets and, if appropriate, require them to
be classified. There are three classifications for problem assets: substandard,
doubtful and loss. Substandard assets have one or more defined weaknesses and
are characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified as loss is considered uncollectible and
of such little value that continuance as an asset of the institution is not
warranted. If an asset or portion thereof is classified as loss, the insured
institution establishes specific allowances for loan losses for the full amount
of the portion of the asset classified as loss. All or a portion of general loan
loss allowances established to cover possible losses related to assets
classified substandard or doubtful can be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
losses generally do not qualify as regulatory capital. Assets that do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are designated "special mention" and monitored by the Savings Bank.
45
<PAGE>
The aggregate amount of the Savings Bank's classified assets, general loss
allowances and charge-offs were as follows at the dates indicated:
At or For the Year
Ended March 31,
----------------------
1997 1996
---- ----
(In thousands)
Substandard assets ............................. $346 $722
Doubtful assets ................................ -- --
Loss assets .................................... 150 150
General loss allowances ........................ 681 503
Specific loss allowances ....................... 150 150
Charge-offs .................................... 11 23
Real Estate Owned. Real estate properties acquired through foreclosure or
by deed-in-lieu of foreclosure are recorded at the lower of cost or fair value
less estimated costs of disposal. Valuations are periodically performed by
management and an allowance for losses is established by a charge to operations
if the carrying value exceeds the estimated net realizable value. At March 31,
1997, the Savings Bank had $135,000 of real estate owned and in judgment,
consisting of a one- to- four family residence. The original loan on the
property was originated as a speculative construction loan. Upon foreclosure,
the Savings Bank completed the construction. The property is under contract for
sale and the Savings Bank does not expect to incur a material loss on its sale.
Allowance for Loan Losses. The Savings Bank's management evaluates the need
to establish reserves against losses on loans and other assets each year based
on estimated losses on specific loans and on any real estate held for sale or
investment when a finding is made that a significant and permanent decline in
value has occurred. Such evaluation includes a review of all loans for which
full collectibility may not be reasonably assured and considers, among other
matters, the estimated market value of the underlying collateral of problem
loans, prior loss experience, economic conditions and overall portfolio quality.
These provisions for losses are charged against earnings in the year they are
established. At March 31, 1997, the Savings Bank had an allowance for loan
losses of $831,000, or 0.50% of total outstanding loans at that date. Based on
past experience and future expectations, management believes that loan loss
reserves are adequate.
While the Savings Bank believes it has established its existing allowance
for loan losses in accordance with GAAP, there can be no assurance that
regulators, in reviewing the Savings Bank's loan portfolio, will not request the
Savings Bank to increase significantly its allowance for loan losses, therefore
negatively affecting the Savings Bank's financial condition and results of
operations.
46
<PAGE>
The following table sets forth an analysis of the Savings Bank's allowance
for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ----- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period ............................. $653 $657 $647 $515 $687
---- ---- ----- ---- ----
Provision for loan losses .................................. 180 -- -- 200 187
Recoveries:
Residential real estate ................................... 1 8 3 15 --
Consumer .................................................. 8 11 26 41 20
---- ---- ----- ---- ----
Total recoveries ........................................ 9 19 29 56 20
---- ---- ----- ---- ----
Charge-offs:
Residential real estate ................................... -- -- -- 39 --
Commercial real estate .................................... -- -- -- -- 300
Consumer .................................................. 11 23 19 85 79
---- ---- ----- ---- ----
Total charge-offs ....................................... 11 23 19 124 379
---- ---- ----- ---- ----
Net charge-offs (recoveries) .......................... 2 4 (10) 68 359
---- ---- ----- ---- ----
Balance at end of period ................................... $831 $653 $657 $647 $515
==== ==== ===== ==== ====
Ratio of allowance to total loans
outstanding at end of period .............................. 0.50% 0.47% 0.58% 0.62% 0.55%
Ratio of net charge-offs (recoveries) to
average loans outstanding during period ................... 0.00 0.00 (0.01) 0.07 0.38
Ratio of allowance to total of nonaccrual
and 90 days past due loans ................................ 955.17 119.16 273.75 129.40 90.35
</TABLE>
47
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated.
<TABLE>
<CAPTION>
At March 31,
---------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------------- ----------------- --------------- ---------------- ----------------
% % % % %
of Out- of Out- of Out- of Out- of Out-
standing standing standing standing standing
Loans in Loans Loans in Loans in Loans in
Amount Category Amount Category Amount Category Amount Category Amount Category
------ -------- ------ -------- ------ -------- ------ -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate -- mortgage
Residential ....................... $124 0.13% $115 0.13% $97 0.13% $84 0.13% $87 0.15%
Nonresidential .................... 224 1.33 225 1.60 170 1.61 146 1.60 151 1.59
Construction ...................... 103 0.31 58 0.25 53 0.25 60 0.24 35 0.18
Consumer ............................ 153 1.07 98 1.00 63 1.19 43 1.30 63 1.80
Commercial .......................... 40 5.04 46 4.75 46 4.97 40 4.98 71 7.30
Unallocated ......................... 187 -- 111 -- 228 -- 274 -- 108 --
---- ---- ---- ---- ----
Total allowance for loan losses ... $831 0.50% $653 0.47% $657 0.58% $647 0.62% $515 0.55%
==== ==== ==== ==== ====
</TABLE>
48
<PAGE>
Investment Activities
Savings institutions have authority to invest in various types of liquid
assets, including U.S. Treasury obligations, securities of various federal
agencies and of state and municipal governments, deposits at the applicable
FHLB, certificates of deposit of federally insured institutions, certain
bankers' acceptances and federal funds. Subject to various restrictions, such
savings institutions may also invest a portion of their assets in commercial
paper, corporate debt securities and mutual funds, the assets of which conform
to the investments that federally chartered savings institutions are otherwise
authorized to make directly. Savings institutions are also required to maintain
minimum levels of liquid assets which vary from time to time. See "REGULATION --
Federal Regulation of the Savings Bank -- Federal Home Loan Bank System." The
Savings Bank may decide to increase its liquidity above the required levels
depending upon the availability of funds and comparative yields on investments
in relation to return on loans.
Federal regulations require the Savings Bank to maintain a minimum amount
of liquid assets and to make certain other securities investments. See
"REGULATION." The balance of the Savings Bank's investments in short-term
securities in excess of regulatory requirements reflects management's response
to the significantly increasing percentage of deposits with short maturities. At
March 31, 1997, the Savings Bank's short- and long-term regulatory liquidity
ratios were 8.3% and 18.0%, respectively, which exceeded regulatory
requirements. It is the intention of management to hold securities with short
maturities in the Savings Bank's investment portfolio in order to enable the
Savings Bank to match more closely the interest-rate sensitivities of its assets
and liabilities.
Investment decisions are made by the Investment Committee composed of the
Chief Executive Officer and Chief Financial Officer. The Savings Bank's
investment objectives are: (i) to provide and maintain liquidity within
regulatory guidelines; (ii) to maintain a balance of high quality, diversified
investments to minimize risk; (iii) to provide collateral for pledging
requirements; (iv) to serve as a balance to earnings; and (v) to optimize
returns. At March 31, 1997, the Savings Bank's investment and mortgage-backed
securities portfolio totalled approximately $53.7 million and consisted
primarily of obligations of the U.S. Government and agency obligations and
Federal National Mortgage Association ("FNMA") and FHLMC mortgage-backed
securities.
At March 31, 1997, the Savings Bank's investment securities portfolio did
not contain any tax-exempt securities or securities of any issuer with an
aggregate book value in excess of 10% of the Savings Bank's consolidated
shareholders' equity, excluding those securities issued by the U.S. Government
or its agencies.
The Board of Directors sets the investment policy of the Savings Bank which
dictates that investments be made based on the safety of the principal amount,
liquidity requirements of the Savings Bank and the return on the investments. At
March 31, 1997, no investment securities were held for trading. The policy does
not permit investment in non-investment grade bonds and permits investment in
various types of liquid assets permissible under OTS regulation, which includes
U.S. Treasury obligations, securities of various federal agencies, "bank
qualified" municipal bonds, certain certificates of deposits of insured banks,
repurchase agreements and federal funds.
The Savings Bank has adopted SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, which requires the classification of
securities at acquisition into one of three categories: held to maturity,
available for sale, or trading. See Note 1 of Notes to Consolidated Financial
Statements.
49
<PAGE>
The following table sets forth the investment securities portfolio and
carrying values at the dates indicated. The market value of the investment and
mortgage-backed securities portfolio was $53.8 million, $64.6 million, $67.9
million, $28.4 million and $20.1 million and at March 31, 1997, 1996, 1995, 1994
and 1993, respectively.
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------------
1997 1996 1995
---------------------- -------------------- --------------------
Carrying Percent of Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio Value Portfolio
--------- --------- --------- ---------- -------- ----------
(Dollars in thousands)
Held to maturity (at amortized cost):
<S> <C> <C> <C> <C> <C> <C>
U. S. Government treasury obligations $7,989 14.86% $11,987 18.72% $11,987 32.60%
FNMA debentures ..................... 2,000 3.72 4,005 6.25 6,004 16.33
FHLB debentures ..................... 10,467 19.47 10,737 16.77 10,011 27.23
FHLMC debentures .................... -- -- 3,000 4.68 7,765 21.12
Student Loan Marketing Association
("SLMA") debentures ................ -- -- -- -- 1,000 2.72
Real estate mortgage investment
conduits ("REMICs") ................ 6,641 12.36 5,108 7.98 -- --
FHLMC mortgage-backed securities .... 6,800 12.65 9,030 14.10 14,919 21.72
FNMA mortgage-backed securities ..... 12,961 24.12 14,237 22.23 17,003 24.75
------- ------ ------- ------ ------- ------
$46,858 87.18 $58,104 90.73 $68,689 100.00
------- ------ ------- ------ ------- ------
Available for sale (at market value):
U.S. Government treasury obligations 2,924 5.44 992 1.55 -- --
FHLB debentures ..................... 975 1.82 2,940 4.59 -- --
REMICs .............................. 1,903 3.54 2,004 3.13 -- --
FHLMC mortgage-backed securities .... 1,087 2.02 -- -- -- --
------- ------ ------- ------ ------- ------
Total investment securities ........ $53,747 100.00% $64,040 100.00% $68,689 100.00%
======= ====== ======= ====== ======= ======
<CAPTION>
At March 31,
--------------------------------------------
1994 1993
-------------------- ---------------------
Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio
-------- ---------- -------- ----------
Held to maturity (at amortized cost):
<S> <C> <C> <C> <C>
U. S. Government treasury obligations $8,088 72.94% $6,103 67.04%
FNMA debentures ..................... 2,000 18.04 3,000 32.96
FHLB debentures ..................... -- -- -- --
FHLMC debentures .................... -- -- -- --
Student Loan Marketing Association
("SLMA") debentures ................ -- -- -- --
Real estate mortgage investment
conduits ("REMICs") ................ -- -- -- --
FHLMC mortgage-backed securities .... 9,060 32.03 10,676 52.85
FNMA mortgage-backed securities ..... 8,136 28.76 421 2.09
------- ------ ------- ------
$28,284 100.00 $20,200 100.00
------- ------ ------- ------
Available for sale (at market value):
U.S. Government treasury obligations -- -- -- --
FHLB debentures ..................... -- -- -- --
REMICs .............................. -- -- -- --
FHLMC mortgage-backed securities .... -- -- -- --
------- ------ ------- ------
Total investment securities ........ $28,284 100.00% $20,200 100.00%
======= ====== ======= ======
</TABLE>
50
<PAGE>
The following table sets forth the maturities and weighted average yields
of the debt securities in the investment securities portfolio at March 31, 1997.
<TABLE>
<CAPTION>
Less Than One to More than Five More than
One Year Five Years to Ten Years Ten Years
------------------ -------------------- ----------------- -----------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1)
------ -------- ------ -------- ------ -------- ------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
treasury obligations ................ $6,989 6.28% $1,987 5.42% $1,937 6.51% $ -- --%
FNMA debentures ...................... 1,000 4.33 -- -- 1,000 6.86 -- --
FHLB debentures ...................... 999 6.60 10,443 6.67 -- -- -- --
FHLMC debentures ..................... -- -- -- -- -- -- -- --
SLMA debentures ...................... -- -- -- -- -- -- -- --
REMICs ............................... -- -- -- -- 912 6.53 7,632 7.59
FHLMC mortgage-backed
securities .......................... -- -- -- -- 4,551 6.90 3,336 7.37
FNMA mortgage-backed
securities .......................... -- -- 490 5.66 7,351 6.78 5,120 7.20
------ ------- ------- -------
Total ............................. $8,988 6.10 $12,920 6.44 $15,751 6.77 $16,088 7.42
====== ======= ======= =======
</TABLE>
(1) For available-for-sale securities carried at fair value, to weighted
average yield is computed using amortized cost.
51
<PAGE>
Aside from U.S. Government Treasury obligations, the Savings Bank invests
in mortgage-backed securities and REMICs. Mortgage-backed securities (which are
also known as mortgage participation certificates or pass-through certificates)
represent a participation interest in a pool of single-family or multi-family
mortgages, the principal and interest payments on which are passed from the
mortgage originators, through intermediaries (i.e., FNMA, FHLMC and the
Government National Mortgage Association ("GNMA") that pool and repackage the
participation interests in the form of securities, to investors such as the
Savings Bank. Mortgage-backed securities generally increase the quality of the
Savings Bank's assets by virtue of the guarantees that back them, are more
liquid than individual mortgage loans and may be used to collateralize
borrowings as other obligations of the Savings Bank. See Note 4 of Notes to
Consolidated Financial Statements for additional information.
REMICs are generally classified as derivative financial instruments because
they are created by redirecting the cash flows from the pool of mortgages or
mortgage-backed securities underlying these securities to create two or more
classes (or tranches) with different maturity or risk characteristics designed
to meet a variety of investor needs and preferences. Management believes these
securities may represent attractive alternatives relative to other investments
because of the wide variety of maturity, repayment and interest rate options
available. Current investment practices of the Savings Bank prohibit the
purchase of high risk REMICs. At March 31, 1997, the Savings Bank held REMICs
with a net carrying value of $8.5 million, of which $6.6 million were classified
as held-to-maturity and $1.9 million of which were available -for-sale. REMICs
may be sponsored by private issuers, such as mortgage bankers or money center
banks, or by U.S. Government agencies and government sponsored entities. At
March 31, 1997, the Savings Bank did not own any privately issued REMICs.
Investments in mortgage-backed securities, including REMICs, involve a risk
that actual prepayments will be greater than estimated prepayments over the life
of the security, which may require adjustments to the amortization of any
premium or accretion of any discount relating to such instruments thereby
reducing the net yield on such securities. There is also reinvestment risk
associated with the cash flows from such securities. In addition, the market
value of such securities may be adversely affected by changes in interest rates.
Deposit Activities and Other Sources of Funds
General. Deposits, loan repayments and loan sales are the major sources of
the Savings Bank's funds for lending and other investment purposes. Loan
repayments are a relatively stable source of funds, while deposit inflows and
outflows and loan prepayments are significantly influenced by general interest
rates and money market conditions. Borrowings may be used on a short-term basis
to compensate for reductions in the availability of funds from other sources.
They may also be used on a longer term basis for general business purposes.
Deposit Accounts. Deposits are attracted from within the Savings Bank's
primary market area through the offering of a broad selection of deposit
instruments, including NOW accounts, money market accounts, regular savings
accounts, certificates of deposit and retirement savings plans. Deposit account
terms vary according to the minimum balance required, the time periods the funds
must remain on deposit and the interest rate, among other factors. In
determining the terms of its deposit accounts, the Savings Bank considers the
rates offered by its competition, profitability to the Savings Bank, matching
deposit and loan products and its customer preferences and concerns. The Savings
Bank generally reviews its deposit mix and pricing weekly.
52
<PAGE>
Deposit Balances
The following table sets forth information concerning the Savings
Bank's time deposits and other interest-bearing deposits at March 31, 1997.
<TABLE>
<CAPTION>
Percent
Interest Minimum of Total
Rate Term Category Amount Balance Deposits
- ---- ---- -------- ------ ------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
1.500% None NOW Accounts $ 100 $ 18,474 10.90%
2.750 None Regular Savings 100 21,234 12.53
1.750 None Maxi Checking 2,500 1,606 0.95
3.750 None Money Market
Deposit Account 2,500 17,553 10.36
None None Noninterest Checking 100 7,085 4.18
Certificates of Deposit
4.403 28-92 Days Fixed-Term, Fixed-Rate 1,000 2,199 1.30
5.186 4-6 Months Fixed-Term, Fixed-Rate 1,000 8,233 4.86
5.549 12-17 Months Fixed-Term, Fixed-Rate 1,000 50,686 29.92
5.350 18 Months Fixed-Term, Variable
Rate Individual
Retirement Account
("IRA") 1,000 470 0.28
5.281 18-23 Months Fixed-Term, Fixed-Rate 1,000 2,795 1.65
5.837 24-35 Months Fixed-Term, Fixed-Rate 1,000 24,066 14.21
5.382 36-59 Months Fixed-Term, Fixed-Rate 1,000 2,824 1.67
6.055 60-83 Months Fixed-Term, Fixed-Rate 1,000 10,745 6.34
5.894 84-119 Months Fixed-Term, Fixed-Rate 1,000 1,446 0.85
-------- ------
Total $169,416 100.00%
======== ======
</TABLE>
At March 31, 1997, the Savings Bank's jumbo certificates of deposit
totalled $513,000, all of which were due within three months after March 31,
1997. Jumbo certificates of deposit require minimum deposits of $100,000 and
have negotiable interest rates.
53
<PAGE>
Deposit Flow
The following table sets forth the balances of savings deposits in the
various types of savings accounts offered by the Savings Bank at the dates
indicated.
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------------- ---------------------------------- -------------------
Balance Percent Increase Balance Percent Increase/ Balance Percent
------- ------- (Decrease) ------- ------- (Decrease) ------- -------
---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand .. $7,085 4.18% $1,738 $5,347 3.38% $709 $4,638 3.19%
NOW checking ................ 18,474 10.91 1,469 17,005 10.75 1,737 15,268 10.50
Regular savings accounts .... 21,234 12.53 (541) 21,775 13.77 (3,555) 25,330 17.42
Money market deposit accounts 19,159 11.31 1,388 17,771 11.24 4,752 13,019 8.95
Fixed-rate certificates which
mature(1):
Within 12 months ........ 79,709 47.05 (12,197) 67,512 42.68 3,465 64,047 44.02
Within 12-36 months ..... 18,216 10.75 (4,230) 22,446 14.19 5,884 16,562 11.39
Beyond 36 months ........ 5,539 3.27 (764) 6,303 3.99 (282) 6,585 4.53
------ -------- -------- ------ -------- -------- ------
Total .................. $169,416 100.00% $11,257 $158,159 100.00% $12,710 $145,449 100.00%
======== ====== ======== ======== ====== ======== ======== ======
<CAPTION>
At March 31,
----------------------------------------------------------------------------------------
1995 (con't) 1994 1993
---------- -------------------------------- -----------------------------------
Increase/ Balance Percent Increase/ Balance Percent Increase/
(Decrease) ------- ------- (Decrease) ------- ------- (Decrease)
---------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand .. $(352) $4,990 4.69% $1,237 $3,753 3.54% $42
NOW checking ................ 2,208 13,060 12.26 1,050 12,010 11.34 1,431
Regular savings accounts .... (2,406) 27,736 26.05 2,938 24,798 23.40 5,248
Money market deposit accounts 4,121 8,898 8.36 (643) 9,541 9.01 60
Fixed-rate certificates which
mature(1):
Within 12 months ........ 33,348 30,699 28.83 (9,617) 40,316 38.05 (6,098)
Within 12-36 months ..... 2,192 14,370 13.50 2,789 11,581 10.93 (2,955)
Beyond 36 months ........ (140) 6,725 6.31 2,771 3,954 3.73 1,631
-------- -------- ------ ------- -------- ------ -------
Total .................. $38,971 $106,478 100.00% $525 $105,953 100.00% $(641)
======== ======== ====== ======= ======== ====== =======
</TABLE>
(1) IRAs of $10.9 million, $11.0 million, $10.8 million, $8.8 million and $9.1
million at March 31, 1997, 1996, 1995, 1994 and 1993, respectively, are
included in certificate balances. At March 31, 1997, 1996, 1995, 1994 and
1993 jumbo certificates amounted to $513,000, $302,000, $706,000, $200,000
and $516,000, respectively.
(2) Increase primarily reflects assumption of deposits resulting from
acquisition of two branches from the RTC. See "-- Properties."
54
<PAGE>
Time Deposits by Rates and Maturities
The following table sets forth the time deposits in the Savings Bank
classified by rates as of the dates indicated.
<TABLE>
<CAPTION>
At March 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
--------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
Below 4.00%...................................... $ 212 $ 483 $ 5,201 $22,166 $ 9,656
4.00 - 4.99%.................................... 4,063 7,084 32,471 15,662 25,074
5.00 - 5.99%.................................... 82,336 56,739 32,740 7,807 6,649
6.00 - 7.99%.................................... 16,786 31,776 16,079 5,046 11,490
8.00 - 9.99%.................................... 67 179 666 1,077 2,722
10.00 - 11.99%.................................... -- -- 37 36 261
--------- ------- ------- ------- -------
Total.......................................... $ 103,464 $96,261 $87,194 $51,794 $55,852
========= ======= ======= ======= =======
</TABLE>
The following table sets forth the amount and maturities of time deposits
at March 31, 1997.
<TABLE>
<CAPTION>
Amount Due
---------------------------------------------------------------
Less Than 1-2 After After
One Year Years 2-3 Years 3 Years Total
------- ------- ------ ------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Below 4.00%......................... $ 212 $ -- $ -- $ -- $ 212
4.00 - 4.99%...................... 3,752 304 7 -- 4,063
5.00 - 5.99%...................... 64,571 13,212 1,734 2,819 82,336
6.00 - 7.99%...................... 11,128 1,250 1,688 2,720 16,786
8.00 - 8.99%...................... 46 12 9 -- 67
9.00 - 11.99%...................... -- -- -- -- --
Over 11.99%........................ -- -- -- -- --
------- ------- ------ ------ --------
Total............................. $79,709 $14,778 $3,438 $5,539 $103,464
======= ======= ====== ====== ========
</TABLE>
Savings Activities
The following table sets forth the savings activities of the Savings Bank
for the periods indicated.
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- -------
(In thousands)
<S> <C> <C> <C> <C> <C>
Beginning balance................. $158,159 $145,449 $106,478 $105,953 $106,594
-------- -------- -------- -------- -------
Net increase (decrease)
before interest
credited......................... 4,225 7,005 35,069 (2,599) (4,438)
Interest credited................ 7,032 5,705 3,902 3,124 3,797
-------- -------- -------- -------- ---------
Net increase (decrease) in
savings deposits................. 11,257 12,710 38,971 525 (641)
-------- --------- --------- --------- ---------
Ending balance.................... $169,416 $158,159 $145,449 $106,478 $105,953
======== ======== ======== ======== ========
</TABLE>
55
<PAGE>
In the unlikely event the Savings Bank is liquidated, depositors will be
entitled to full payment of their deposit accounts prior to any payment being
made to the stockholders of the Savings Bank. Substantially all of the Savings
Bank's depositors are residents of the States of Washington or Oregon.
Borrowings. Savings deposits are the primary source of funds for the
Savings Bank's lending and investment activities and for its general business
purposes. The Savings Bank has at times relied upon advances from the FHLB-
Seattle to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. Advances from the FHLB-Seattle are typically secured by
the Savings Bank's first mortgage loans.
The FHLB functions as a central reserve bank providing credit for savings
and loan associations and certain other member financial institutions. As a
member, the Savings Bank is required to own capital stock in the FHLB and is
authorized to apply for advances on the security of such stock and certain of
its mortgage loans and other assets (principally securities which are
obligations of, or guaranteed by, the United States) provided certain standards
related to creditworthiness have been met. Advances are made pursuant to several
different programs. Each credit program has its own interest rate and range of
maturities. Depending on the program, limitations on the amount of advances are
based either on a fixed percentage of an institution's net worth or on the
FHLB's assessment of the institution's creditworthiness. Under its current
credit policies, the FHLB generally limits advances to 20% of a member's assets,
and short-term borrowings of less than one year may not exceed 10% of the
institution's assets. The FHLB determines specific lines of credit for each
member institution and the Savings Bank has a 35% line of credit with the FHLB
of Seattle and authority to borrow up to 5% of assets under a short-term line of
credit.
At March 31, 1997, the Savings Bank had $27.2 million of outstanding
advances from the FHLB-Seattle under a available credit facility of $78.5
million. Approximately $20.0 million of such outstanding advances were used to
purchase mortgage-backed securities, classified as held-to-maturity at March 31,
1997, with the goal of recognizing income on the difference between the rate
paid on the advances and the rate earned on the mortgage-backed securities. The
success of this activity depends on maintaining over time a positive
differential between the yields earned on the securities and the rates paid on
the advances. Since the yields earned on the securities are generally capped
while the rates paid on the advances generally are not capped, there is the risk
that this differential will narrow or be eliminated in a rising interest rate
environment. See Note 4 of Notes to Consolidated Financial Statements.
The Savings Bank may occasionally enter into sales of securities under
agreements to repurchase ("repurchase agreements") with nationally recognized
primary securities dealers. The Repurchase agreements are generally for terms up
to 30 days. Repurchase agreements are accounted for as borrowings and are
secured by designated investment securities. At March 31, 1997, the Savings Bank
had no reverse repurchase agreements outstanding.
The following tables set forth certain information concerning the Savings
Bank's borrowings at the dates and for the periods indicated.
<TABLE>
<CAPTION>
At March 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average rate paid on
FHLB advances.................. 6.49% 6.66% 7.03% 4.81% --%
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Maximum amounts of FHLB
advances outstanding
at any month end ...... $32,750 $29,850 $23,000 $8,000 $410
Approximate average FHLB
advances outstanding .. 29,068 26,404 12,638 23,085 32
Approximate weighted
average rate paid on
FHLB advances ......... 6.50% 6.94% 6.38% 4.81% 3.34%
</TABLE>
Competition
There are several financial institutions in the Savings Bank's primary
market area from which the Savings Bank faces strong competition in the
attraction of savings deposits (its primary source of lendable funds) and in the
origination of loans. Its most direct competition for savings deposits and loans
has historically come from other thrift institutions, credit unions and
commercial banks located in its market area. Particularly in times of high
interest rates, the Savings Bank has faced additional significant competition
for investors' funds from money market mutual funds and other short-term money
market securities and corporate and government securities. The Savings Bank's
competition for loans comes principally from other thrift institutions, credit
unions, commercial banks, mortgage banking companies and mortgage brokers.
Subsidiary
Under OTS regulations, the Savings Bank is authorized to invest up to 3% of
its assets in subsidiary corporations, with amounts in excess of 2% only if
primarily for community purposes. At March 31, 1997, the Savings Bank's
investment of $423,000 in Riverview Services, Inc. ("Riverview Services"), its
sole wholly-owned subsidiary, was within these limitations.
Riverview Services acts as trustee for deeds of trust on mortgage loans
granted by the Savings Bank, and receives a reconveyance fee of approximately
$35 for each deed of trust. Riverview Services also operates a courier service
for the benefit of the Savings Bank. Riverview Services had net income of
$53,000 for the fiscal year ended March 31, 1997 and total assets of $423,000 at
that date. Riverview Services' operations are included in the consolidated
financial statements of the Savings Bank appearing elsewhere herein.
Properties
The following table sets forth certain information relating to the Savings
Bank's offices as of March 31, 1997.
<TABLE>
<CAPTION>
Net
Approximate Book
Location Year Opened Square Footage Deposits Value
- -------- ----------- -------------- -------- -----
(In thousands)
<S> <C> <C> <C> <C>
Main Office:
700 N.E. Fourth Avenue .............................. 1975 25,000 $37,025 $1,335
Camas, Washington
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
Net
Approximate Book
Location Year Opened Square Footage Deposits Value
- -------- ----------- -------------- -------- -----
(In thousands)
<S> <C> <C> <C> <C>
Branch Offices:
1737 B Street ....................................... 1982 2,200 $22,144 $106
Washougal, Washington
225 S.W. 2nd Street ................................. 1979 1,700 22,213 196
Stevenson, Washington
100 North Main ...................................... 1977 1,800 16,111 141
White Salmon, Washington(1)
813 West Main ....................................... 1979 2,000 15,109 775
Battle Ground, Washington
412 South Columbus .................................. 1983 2,500 8,193 70
Goldendale, Washington
11505-K Fourth Plain Boulevard ...................... 1994 3,500 7,656 1,079
Vancouver, Washington
7735 N.E. Highway 99(2) ............................. 1994 4,800 27,395 560
Vancouver, Washington
"Hazell Dell" Office
1011 Washington Way(2) .............................. 1994 2,000 13,570 370
Longview, Washington
</TABLE>
- ----------
(1) Leased.
(2) Former branches of Great American Federal Savings Association, San Diego,
California, that were acquired from the RTC on May 13, 1994. In the
acquisition, the Savings Bank assumed all insured deposit liabilities of
both branch offices totalling approximately $42.0 million.
The Savings Bank maintains two proprietary automatic teller machines in
Camas and Stevenson, Washington, which are part of a nationwide cash exchange
network.
The Savings Bank uses an outside data processing system to process customer
records and monetary transactions, post deposit and general ledger entries and
record activity in installment lending, loan servicing and loan originations. At
March 31, 1997, the net book value of the Savings Bank's office properties,
furniture, fixtures and equipment was $4.6 million.
Personnel
As of March 31, 1997, the Savings Bank had 79 full-time employees and 12
part-time employees, none of whom are represented by a collective bargaining
unit. The Savings Bank believes its relationship with its employees is good.
58
<PAGE>
Legal Proceedings
Periodically, there have been various claims and lawsuits involving the
Savings Bank, such as claims to enforce liens, condemnation proceedings on
properties in which the Savings Bank holds security interests, claims involving
the making and servicing of real property loans and other issues incident to the
Savings Bank's business. The Savings Bank is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Savings Bank.
MANAGEMENT OF THE HOLDING COMPANY
Directors shall be elected by the stockholders of the Holding Company for
staggered three-year terms, or until their successors are elected and qualified,
at the first annual meeting of stockholders following the consummation of the
Conversion and Reorganization. The Holding Company's Board of Directors consists
of seven persons divided into three classes, each of which contains
approximately one third of the Board. One class, consisting of Messrs.
_________________ has a term of office expiring at the first annual meeting of
stockholders after their election; a second class, consisting of Messrs.
_____________________, has a term of office expiring at the second annual
meeting of stockholders after their election; and a third class, consisting of
Messrs. ______________, has a term of office expiring at the third annual
meeting of stockholders after their election.
The executive officers of the Holding Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The executive
officers of the Holding Company are:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Patrick Sheaffer Chairman of the Board, President and Chief Executive Officer
Ron Wysaske Treasurer and Chief Financial Officer
Phyllis Kreibich Corporate Secretary
</TABLE>
Since the formation of the Holding Company, none of the executive officers,
directors or other personnel has received remuneration from the Holding Company.
For information concerning the principal occupations, employment and
compensation of the directors and executive officers of the Holding Company
during the past five years, see "MANAGEMENT OF THE SAVINGS BANK -- Biographical
Information."
MANAGEMENT OF THE SAVINGS BANK
Directors and Executive Officers
The Board of Directors of the Savings Bank is presently composed of seven
members who are elected for terms of three years, approximately one third of
whom are elected annually in accordance with the Bylaws of the Savings Bank. In
addition to a Chairman of the Board, a Vice Chairman of the Board is elected
annually by the non-employee directors. The executive officers of the Savings
Bank are elected annually by the Board of Directors and serve at the Board's
discretion. The following table sets forth information with respect to the
Directors and executive officers of the Savings Bank.
59
<PAGE>
Directors
<TABLE>
<CAPTION>
Current
Director Term
Name Age (1) Position with Savings Bank Since Expires
- ---- ------- -------------------------- ------- -------
<S> <C> <C> <C> <C>
Patrick Sheaffer 57 Chairman of the Board, President
and Chief Executive Officer 1979 1997
Roger Malfait(2) 67 Director 1973 1997
Gary R. Douglass 55 Director 1984 1997
Dale E. Scarbrough 69 Director 1972 1998
Ron Wysaske 45 Executive Vice President, 1985 1998
Chief Financial Officer
and Director
Robert K. Leick(3) 61 Director 1972 1999
Paul L. Runyan 62 Director 1979 1999
</TABLE>
Executive Officers Who Are Not Directors
Name Age (1) Position with Savings Bank
Michael C. Yount 47 Senior Vice President
Karen Nelson 39 Vice President of Lending
Phyllis Kreibich 64 Corporate Secretary
- ----------
(1) At March 31, 1997.
(2) Immediate past Vice-Chairman of the Board.
(3) Vice-Chairman of the Board.
Biographical Information
Set forth below is certain information regarding the Directors and
executive officers of the Savings Bank. Unless otherwise stated, each Director
and executive officer has held his or her current occupation for the last five
years. There are no family relationships among or between the Directors or
executive officers.
Patrick Sheaffer joined the Savings Bank in 1965 and has served as
President and Chief Executive Officer since 1976. He became Chairman of the
Board in March 1993. He is responsible for the daily operations and the
management of the Savings Bank. Mr. Sheaffer is active in numerous professional
and civic organizations. Mr. Sheaffer is a founding director of Epitope Biotech
Company, a Nasdaq-listed company located in Portland, Oregon.
Roger Malfait is a semi-retired real estate developer and cattle rancher.
Gary R. Douglass, a certified public accountant, is a principal with
Douglass & Paulson, P.C., Camas, Washington.
Dale E. Scarbrough is the retired Chief Financial Officer for the City of
Camas, Washington. He is a member of the American Legion and numerous
professional financial organizations.
Ron Wysaske joined the Savings Bank in 1976. Before joining the Savings
Bank, he was an audit and tax accountant at Price Waterhouse & Co. He became
Executive Vice President, Treasurer and Chief Financial Officer in 1981. He is
responsible for administering all finance, accounting and treasury functions at
the Savings Bank. He is a member of several professional organizations,
including the American Institute of Certified Public
60
<PAGE>
Accountants and the Financial Managers Society. Mr. Wysaske is a licensed
certified public accountant in the State of Washington.
Robert K. Leick, an attorney in private practice, was a prosecuting
attorney with Skamania County, Washington, from 1967 to 1997. He is an active
member of numerous community and civic organizations, including the Skamania
County Historical Society, Skamania County Chamber of Commerce, Skamania County
Economic Development Council and the American Legion.
Paul L. Runyan owns and operates Runyan's Jewelry Stores in Camas and White
Salmon, Washington. He is an active member of numerous civic and community
organizations, including the White Salmon Elks, Camas Moose Lodge, Camas Lions
Club and the Stevenson Eagles.
Michael C. Yount joined the Savings Bank in 1979 and has served in various
capacities, such as appraiser, loan officer, loan collections and supervisor of
lending. He became Senior Vice President in 1989 and is responsible for the
daily operations and mortgage brokerage operations of the Savings Bank and
reports directly to the President. Mr. Yount is a member of the Washougal City
Council.
Karen Nelson joined Savings Bank in 1979 and has served in various
capacities, such as loan servicing clerk, operations officer, checking
administrator, consumer loan officer, and loan originator, and became Vice
President of Lending in 1990. She is responsible for all lending and mortgage
servicing activities and of the Savings Bank reports directly to the President.
Phyllis Kreibich joined the Savings Bank since 1987 and has served as
Corporate Secretary since 1989. She is responsible for maintaining the corporate
books and records of the Savings Bank and reports directly to the President.
Beneficial Ownership of Savings Bank Common Stock by Directors and Executive
Officers
The following table sets forth, as of March 31, 1997, certain information
as to the beneficial ownership of Savings Bank Common Stock by: (i) persons
known by the Savings Bank to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) the directors of the Savings Bank, (iii) the
executive officers of the Savings Bank, and (iv) by all officers and directors
as a group. For purposes of this table, an individual is considered to
beneficially own shares of Savings Bank Common Stock if he or she has or shares
voting power (which includes the power to vote or direct the voting of the
shares) or investment power (which includes the power to dispose of or direct
the disposition of the shares). Unless otherwise indicated, all shares are owned
directly by the officers and directors or by the officers and directors
indirectly through a trust, corporation or association, or by the officers and
directors or their spouses as custodians or trustees for the shares of minor
children. The officers and directors effectively exercise sole voting and
investment power over such shares. Shares which are subject to stock options
that are exercisable within 60 days of March 31, 1997 are deemed to be
beneficially owned. For information regarding proposed purchases of Conversion
Shares by the directors and officers and their anticipated ownership of Common
Stock upon consummation of the Conversion and Reorganization, see "CONVERSION
SHARES TO BE PURCHASED BY MANAGEMENT PURSUANT TO SUBSCRIPTION RIGHTS."
61
<PAGE>
Shares Beneficially
Owned at March
Name 31, 1997
- ---- -------------------------
Number Percent
------ -------
Riverview, M.H.C 1,407,891 58.27%
Patrick Sheaffer 74,223(1) 3.05
Roger Malfait 19,761(2) 0.82
Gary R. Douglass 7,906(3) 0.33
Dale E. Scarbrough 19,761(4) 0.82
Ron Wysaske 51,004(5) 2.10
Robert K. Leick 5,810(6) 0.24
Paul L. Runyan 41,004(7) 1.70
Michael C. Yount 25,976(8) 1.07
Karen Nelson 17,620(9) 0.73
Phyllis Kreibich 1,703 0.07
All officers and directors
as a group (10 persons) 264,768(10) 10.64
- -------------
(1) Includes 20,733 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days of
March 31, 1997.
(2) Includes 3,857 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days of
March 31, 1997.
(3) Includes 918 shares of Savings Bank Common Stock which may be received upon
the exercise of stock options that are exercisable within 60 days from
March 31, 1997.
(4) Includes 3,857 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
March 31, 1997.
(5) Includes 16,297 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
March 31, 1997.
(6) Includes 3,857 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
March 31, 1997.
(7) Includes 1,602 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days of
March 31, 1997.
(8) Includes 12,536 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
March 31, 1997.
(9) Includes 8,389 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
March 31, 1997.
(10) Includes 72,046 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
March 31, 1997.
Meetings and Committees of the Board of Directors
The business of the Savings Bank is conducted through meetings and
activities of its Board of Directors and its committees. During the fiscal year
ended March 31, 1997, the Board of Directors held 13 regular meetings. No
director attended fewer than 75% of the total meetings of the Board of Directors
of the Savings Bank and committees on which such director served.
The Savings Bank has standing Executive, Audit, Nominating and
Personnel/Compensation Committees, among others.
62
<PAGE>
The Executive Committee of the Board of Directors, which consists of
Directors Malfait, Leick and Sheaffer (Chairman), meets as necessary in between
meetings of the full Board of Directors. The Executive Committee met 12 times
during the fiscal year ended March 31, 1997.
The Audit Committee of the Savings Bank consists of Directors Scarbrough
(Chairman), Douglass and Runyan. It is responsible for developing and monitoring
the Savings Bank's audit program. The Committee meets with the Savings Bank's
independent auditors to discuss the results of the annual audit and any related
matters. The members of the committee also receive and review all the reports
and findings and other information presented to them by the Savings Bank's
officers regarding financial reporting policies and practices. The Audit
Committee met once during the fiscal year ended March 31, 1997.
The Nominating Committee consists of Directors Malfait (Chairman), Douglass
and Scarbrough. This Committee submits nominations for the annual election of
directors. The Nominating Committee met once during the fiscal year ended March
31, 1997.
The Personnel/Compensation Committee consists of Director Runyan
(Chairman), Douglass and Leick. This Committee determines annual grade and
salary levels for employees and establishes personnel policies. The
Personnel/Compensation Committee met two times during the fiscal year ended
March 31, 1997.
Directors' Compensation
Directors receive an annual retainer of $4,600 (except for the current and
immediate past Vice-Chairman of the Board who each receive an annual retainer of
$5,000) and a monthly fee of $320 provided that they attend all meetings held
during the month. Directors also receive $200 for each committee meeting
attended, except no fees are paid for service on the Executive Committee.
Director and committee fees totalled $104,000 for the year ended March 31, 1997.
Directors may elect to defer their monthly fees until retirement with no
income tax payable by the director until retirement benefits are received. This
alternative is available through a non-qualified deferred compensation plan
adopted by the Savings Bank in December 1986, and subsequently amended. If the
participant's employment is terminated on or after the date he attains age 65 or
five years of participation in the Plan ("Normal Retirement Date"), the Savings
Bank shall pay the participant or his designated beneficiaries in annual or
monthly installments over a period of 120 months, an amount equal to the balance
in the participant's account immediately before the date on which benefits
commence, plus interest on the unpaid balance. Participants may also choose two
optional forms of benefit payments: (i) a lump-sum payment within five years of
the Normal Retirement Date or (ii) an annuity over the life of the participant,
or a joint survivor annuity over the lives of the participant and the
participant's spouse. Benefits are also payable upon disability, early
retirement, termination of service or death. The Savings Bank pays annual
interest on assets under the plans based on a formula relating to gross
revenues, which amounted to 7.9% for the year ended March 31, 1997. The
estimated liability under the plan is accrued as earned by the participant. At
March 31, 1997, the Savings Bank's aggregate liability under the plans was
$663,000.
63
<PAGE>
Executive Compensation
Summary Compensation Table. The following information is furnished for
Messrs. Sheaffer, Wysaske and Yount for the year ended March 31, 1997.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------------------------
Name and Other Annual All Other
Position Year Salary Bonus Compensation(1) Compensation(2)
- -------- ---- ------ ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Patrick Sheaffer 1997 $128,902 $56,720 $-- $19,364
President and Chief 1996 124,246 27,772 -- 20,875
Executive Officer 1995 111,896 59,178 -- 18,220
Ron Wysaske 1997 91,615 36,677 16,446
Executive Vice 1996 88,818 23,328 -- 15,560
President 1995 86,028 49,816 -- 16,393
Michael C. Yount 1997 81,528 27,384 -- 13,934
Senior Vice 1996 77,259 19,332 -- 13,333
President 1995 75,712 42,108 -- 14,111
</TABLE>
- ----------
(1) The aggregate amount of perquisites and other personal benefits was less
than 10% of the annual salary and bonus reported.
(2) Consists of contributions to profit sharing plan and ESOP. Such
contributions for 1997 amount to: Mr. Sheaffer, $4,500 and $14,864,
respectively; Mr. Wysaske, $3,833 and $12,613, respectively; and Mr. Yount,
$3,251 and $10,683, respectively.
Employment Agreements. The MHC and the Savings Bank currently maintain
employment agreements with Messrs. Sheaffer and Wysaske that were entered into
in connection with the MHC Reorganization. In connection with the Conversion and
Reorganization, the Holding Company and the Savings Bank (collectively, the
"Employers") will enter into three-year employment agreements ("Employment
Agreements") with Messrs. Sheaffer and Wysaske (individually, the "Executive"),
which have substantially the same terms as and will replace the existing
agreements.
Under the Employment Agreements, the initial salary levels for Messrs.
Sheaffer and Wysaske will be $129,000 and $92,000, respectively, which amounts
will be paid by the Savings Bank and may be increased at the discretion of the
Board of Directors of the Savings Bank or an authorized committee of the Board.
On each anniversary of the commencement date of the Employment Agreements, the
term of each agreement may be extended for an additional year at the discretion
of the Board. The agreement is terminable by the Employers at any time, by the
Executive if the Executive is assigned duties inconsistent with his initial
position, duties, responsibilities and status, or upon the occurrence of certain
events specified by federal regulations. In the event that an Executive's
employment is terminated without cause or upon the Executive's voluntary
termination following the occurrence of an event described in the preceding
sentence, the Savings Bank would be required to honor the terms of the agreement
through the expiration of the current term, including payment of current cash
compensation and continuation of employee benefits.
The Employment Agreements also provide for severance payments and other
benefits in the event of involuntary termination of employment in connection
with any change in control of the Employers. Severance payments also will be
provided on a similar basis in connection with a voluntary termination of
employment where, subsequent to a change in control, an Executive is assigned
duties inconsistent with his position, duties, responsibilities and status
immediately prior to such change in control. The term "change in control" is
defined in the agreement as having occurred when, among other things, (a) a
person other than the Holding Company purchases
64
<PAGE>
shares of Common Stock pursuant to a tender or exchange offer for such shares,
(b) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Holding Company representing 25% or more of the combined
voting power of the Holding Company's then outstanding securities, (c) the
membership of the Board of Directors changes as the result of a contested
election, or (d) shareholders of the Holding Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Holding
Company's assets, or a plan of partial or complete liquidation.
The maximum value of the severance benefits under the Employment Agreements
is 2.99 times the Executive's average annual compensation during the five-year
period preceding the effective date of the change in control (the "base
amount"). The Employment Agreements provide that the value of the maximum
benefit may be distributed, at the Executive's election, (i) in the form of a
lump sum cash payment equal to 2.99 times the Executive's base amount or (ii) a
combination of a cash payment and continued coverage under the Employers'
health, life and disability programs for a 36-month period following the change
in control, the total value of which does not exceed 2.99 times the Executive's
base amount. Assuming that a change in control had occurred at March 31, 1997
and that each Executive elected to receive a lump sum cash payment, Messrs.
Sheaffer and Wysaske would be entitled to payments of approximately $502,000 and
$381,000, respectively. Section 280G of the Internal Revenue Code of 1986, as
amended ("Code"), provides that severance payments that equal or exceed three
times the individual's base amount are deemed to be "excess parachute payments"
if they are contingent upon a change in control. Individuals receiving excess
parachute payments are subject to a 20% excise tax on the amount of such excess
payments, and the Employers would not be entitled to deduct the amount of such
excess payments.
The Employment Agreements restrict each Executive's right to compete
against the Employers for a period of one year from the date of termination of
the agreement if an Executive voluntarily terminates employment, except in the
event of a change in control.
Severance Agreements. The MHC and the Savings Bank currently maintain
employment agreements with Mr. Yount and Ms. Nelson that were entered into in
connection with the MHC Reorganization. In connection with the Conversion and
Reorganization, the Holding Company and the Savings Bank will enter into
severance agreements with Mr. Yount and Ms. Nelson, which have substantially the
same terms as and will replace the existing agreements.
It is anticipated that the new severance agreements will have an initial
term of three years. On each anniversary of the commencement date of the
severance agreements, the term of each agreement may be extended for an
additional year at the discretion of the Board of Directors of the Savings Bank.
The severance agreements will provide for severance payments and
continuation of other employee benefits in the event of involuntary termination
of employment in connection with any change in control of the Employers in the
same manner as provided for in the employment agreements. Severance payments and
benefits also will be provided on a similar basis in connection with a voluntary
termination of employment where, subsequent to a change in control, an officer
is assigned duties inconsistent with his position, duties, responsibilities and
status immediately prior to such change in control.
The term "change in control" is defined in the agreement as having occurred
when, among other things, (a) a person other than the Holding Company purchases
shares of Common Stock pursuant to a tender or exchange offer for such shares,
(b) any person (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner, directly or indirectly, of
securities of the Holding Company representing 25% or more of the combined
voting power of the Holding Company's then outstanding securities, (c) the
membership of the Board of Directors changes as the result of a contested
election, or (d) shareholders of the Holding Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Holding
Company's assets, or a plan of partial or complete liquidation.
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Assuming that a change in control had occurred at March 31, 1997, and
excluding any other benefits due under the severance agreements, the aggregate
value of the severance benefits payable to the two officers would be
approximately $552,000.
Employee Severance Compensation Plan. In connection with the Conversion and
Reorganization, the Board of Directors of the Savings Bank intends to adopt an
Employee Severance Compensation Plan (the "Severance Plan") to provide benefits
to eligible employees in the event of a change in control of the Holding Company
or the Savings Bank (as defined in the Severance Plan). In general, all
employees with _________ or more years of service (except for officers who enter
into separate employment or severance agreements with the Holding Company and
the Savings Bank) will be eligible to participate in the Severance Plan. Under
the Severance Plan, in the event of a change in control of the Holding Company
or the Savings Bank, eligible employees who are terminated or who terminate
employment (but only upon the occurrence of events specified in the Severance
Plan) within 12 months of the effective date of a change in control will be
entitled to a payment based on years of service or position with the Savings
Bank. However, the maximum payment for any eligible employee would be equal to
___ weeks of their current compensation. The Severance Plan also provides that
employees who have not met the _______-year service requirement for
participation would receive a payment equal to _____ weeks' compensation.
Assuming that a change in control had occurred at March 31, 1997 and the
termination of all eligible employees, the maximum aggregate payment due under
the Severance Plan would be approximately $_____________.
401(k) Plan. The Savings Bank maintains the Riverview Employees' Savings &
Profit Sharing Plan (the "401(k) Plan") for the benefit of eligible employees of
the Savings Bank. The 401(k) Plan is intended to be a tax-qualified plan under
Sections 401(a) and 401(k) of the Code. Employees of the Savings Bank who have
completed 1,000 hours of service during 12 consecutive months and who have
attained age 21 are eligible to participate in the 401(k) Plan. Participants may
contribute up to 15% of their annual compensation to the 401(k) Plan through a
salary reduction election. The Savings Bank matches 50% of participant
contributions to a maximum of 3% of the participant's salary. In addition to
employer matching contributions, the Savings Bank may contribute a discretionary
amount to the 401(k) Plan in any plan year which is allocated to individual
participants in the proportion that their annual compensation bears to the total
compensation of all participants during the plan year. To be eligible to receive
a discretionary employer contribution, the participant must complete 1,000 hours
of service during the plan year and remain employed by the Savings Bank on the
last day of the plan year. Participants are at all times 100% vested in their
401(k) Plan accounts. For the year ended March 31, 1997, the Savings Bank
incurred total contribution-related expenses of $52,000 in connection with the
401(k) Plan.
Generally, the investment of 401(k) Plan assets is directed by plan
participants. In connection with the Conversion and Reorganization, the
participants will be able to direct the investment of up to ___% of their 401(k)
Plan account balance to purchase shares of Common Stock. A participant in the
401(k) Plan who elects to purchase Common Stock in the Conversion and
Reorganization through the 401(k) Plan will receive the same subscription
priority and will be subject to the same individual purchase limitations as if
the participant had elected to make such purchase using other funds. See "THE
CONVERSION AND REORGANIZATION -- Limitations on Purchases of Conversion Shares."
Benefits
General. The Savings Bank currently pays 100% of the premiums for medical,
life and disability insurance benefits for full-time employees, subject to
certain deductibles.
Employee Stock Ownership Plan. In connection with the MHC Reorganization,
the Savings Bank adopted the ESOP, which acquired 55,200 shares of the Savings
Bank Common Stock with the proceeds of a $552,000 loan from an unaffiliated
financial institution ("1993 Loan"). Upon consummation of the Conversion and
Reorganization, the Savings Bank Common Stock held by the ESOP will be converted
into Exchange Shares based upon the Exchange Ratio.
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In order to fund the purchase of up to 8% of the Conversion Shares to be
issued in the Conversion and Reorganization, it is anticipated that the ESOP
will borrow funds from the Holding Company equal to 100% of the aggregate
purchase price of the Conversion Shares. In addition, the Holding Company will
lend sufficient funds to the ESOP to enable the ESOP to repay the 1993 Loan
which had an outstanding principal balance of $237,000 at March 31, 1997. The
loan to the ESOP will be repaid principally from the Savings Bank's
contributions to the ESOP and dividends payable on Common Stock held by the ESOP
over the anticipated 10-year term of the loan. The interest rate for the ESOP
loan is expected to be the prime rate as published in The Wall Street Journal on
the closing date of the Conversion and Reorganization. See "PRO FORMA DATA." To
the extent that the ESOP is unable to acquire 8% of the Common Stock issued in
the Conversion and Reorganization, it is anticipated that the additional shares
will be acquired following the Conversion and Reorganization through open market
purchases.
Shares purchased by the ESOP with the proceeds of the loan (including
shares originally acquired by the ESOP with the proceeds of the 1993 Loan) will
be held in a suspense account and released on a pro rata basis as the loan is
repaid. Discretionary contributions to the ESOP and shares released from the
suspense account will be allocated among participants on the basis of each
participant's proportional share of total compensation. Forfeitures will be
reallocated among the remaining plan participants.
In any plan year, the Savings Bank may make additional discretionary
contributions to the ESOP for the benefit of plan participants in either cash or
shares of Common Stock, which may be acquired through the purchase of
outstanding shares in the market or from individual stockholders or which
constitute authorized but unissued shares or shares held in treasury by Holding
Company. The timing, amount, and manner of such discretionary contributions will
be affected by several factors, including applicable regulatory policies, the
requirements of applicable laws and regulations, and market conditions.
Employees of the Savings Bank who have completed 1,000 hours of service
during 12 consecutive months and who have attained age 21 are eligible to
participate in the ESOP. Participants vest in their accrued benefits under the
ESOP at the rate of 20% per year, beginning upon the completion of two years of
service, with full vesting after six years of service. A participant is fully
vested at retirement, in the event of death or disability or upon termination of
the ESOP. Benefits are distributable upon a participant's retirement, early
retirement, death, disability, or termination of employment. The Savings Bank's
contributions to the ESOP are not fixed, so benefits payable under the ESOP
cannot be estimated.
Messrs. Sheaffer and Wysaske currently serve as trustees of the ESOP. Under
the ESOP, the trustees must vote all allocated shares held in the ESOP in
accordance with the instructions of plan participants and unallocated shares and
allocated shares for which no instructions are received must be voted in the
same ratio on any matter as those shares for which instructions are given.
Pursuant to SOP 93-6, compensation expense for a leveraged ESOP is recorded
at the fair market value of the ESOP shares when committed to be released to
participants' accounts. See "PRO FORMA DATA" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Comparison of
Operating Results for the Years Ended March 31, 1997 and 1996."
If the ESOP purchases newly issued shares from the Holding Company, total
stockholders' equity would neither increase nor decrease. However, on a per
share basis, stockholders' equity and per share net earnings would decrease
because of the increase in the number of outstanding shares.
The ESOP is be subject to the requirements of Employee Retirement Income
Security Act ("ERISA") and the regulations of the Internal Revenue Service
("IRS") and the Department of Labor issued thereunder. The Savings Bank has
received a favorable determination letter from the IRS regarding the
tax-qualified status of the ESOP.
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1993 Stock Option and Incentive Plan. In connection with the Public MHC
Reorganization, the Savings Bank adopted the 1993 Stock Option Plan. The plan
was approved by the Public Stockholders at the Savings Bank's 1994 annual
meeting of stockholders. Options for all shares reserved for issuance under the
1993 Stock Option Plan have been granted to nonemployee directors, officers and
employees of the Savings Bank. In connection with the Conversion and
Reorganization, the 1993 Stock Option Plan will be assumed by the Holding
Company and appropriate adjustments will be made to the exercise price and the
number of shares underlying each option to reflect the applicable Exchange
Ratio.
No options were granted to Messrs. Sheaffer, Wysaske and Yount under the
1993 Stock Option Plan during the fiscal year ended March 31, 1997.
Set forth below is certain information for Messrs. Sheaffer, Wysaske and
Yount concerning exercised and unexercisable options under the 1993 Stock Option
Plan at and for the fiscal year ended March 31, 1997.
<TABLE>
<CAPTION>
===========================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
- -------------------------------------------------------------------------------------------
Number Value of
of Number of Unexercised
Shares Unexercised In-the-Money
Acquired Dollar Options at Options at
on Value Fiscal Year End Fiscal Year End
Name Exercise Realized (Exercisable) (Exercisable)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Patrick Sheaffer -- $-- 20,733 $224,746
Ron Wysaske -- -- 16,297 176,659
Michael C. Yount -- -- 12,536 135,890
===========================================================================================
</TABLE>
1993 Management Development and Recognition Plans. In connection with the
MHC Reorganization, the Savings Bank adopted Management Development and
Recognition Plans (collectively, the "1993 MRPs") for officers, employees and
nonemployee directors of the Savings Bank. The 1993 MRPs were approved by the
Public Stockholders at the Savings Bank's 1994 annual meeting of stockholders.
All shares under the 1993 MRP have been awarded and are fully vested. For
purposes of the Conversion and Reorganization, the shares awarded under the 1993
MRP participants will be treated in the same manner as shares held by other
minority shareholders.
1997 Stock Option Plan. The Board of Directors of the Holding Company
intends to adopt the 1997 Stock Option Plan and to submit it to the stockholders
for approval at a meeting held no earlier than six months following consummation
of the Conversion and Reorganization. Under current OTS regulations, the
approval of a majority vote of the Holding Company's outstanding shares is
required prior to the implementation of the 1997 Stock Option Plan within one
year of the consummation of the Conversion and Reorganization. The Stock Option
Plan will comply with all applicable regulatory requirements. However, the 1997
Stock Option Plan will not be approved or endorsed by the OTS.
The 1997 Stock Option Plan will be designed to attract and retain qualified
management personnel and nonemployee directors, to provide such officers, key
employees and nonemployee directors with a proprietary interest in the Holding
Company as an incentive to contribute to the success of the Holding Company and
the Savings Bank, and to reward officers and key employees for outstanding
performance. The 1997 Stock Option Plan will provide for the grant of incentive
stock options ("ISOs") intended to comply with the requirements of Section 422
of the Code and for nonqualified stock options ("NQOs"). Upon receipt of
stockholder approval of the 1997 Stock Option
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Plan, stock options may be granted to key employees of the Holding Company and
its subsidiaries, including the Savings Bank. Unless sooner terminated, the 1997
Stock Option Plan will continue in effect for a period of ten years from the
date the 1997 Stock Option Plan is approved by stockholders.
A number of authorized shares of Common Stock equal to 10% of the number of
Conversion Shares of issued in connection with the Conversion and Reorganization
will be reserved for future issuance under the 1997 Stock Option Plan (276,000
shares based on the issuance of 2,760,000 Conversion Shares at the maximum of
the Estimated Valuation Range). Shares acquired upon exercise of options will be
authorized but unissued shares or treasury shares. In the event of a stock
split, reverse stock split, stock dividend, or similar event, the number of
shares of Common Stock under the 1997 Stock Option Plan, the number of shares to
which any award relates and the exercise price per share under any option may be
adjusted by the Committee (as defined below) to reflect the increase or decrease
in the total number of shares of Common Stock outstanding.
The 1997 Stock Option Plan will be administered and interpreted by a
committee of the Board of Directors ("Committee"). Subject to applicable OTS
regulations, the Committee will determine which nonemployee directors, officers
and key employees will be granted options, whether, in the case of officers and
employees, such options will be ISOs or NQOs, the number of shares subject to
each option, and the exercisability of such options. All options granted to
nonemployee directors will be NQOs. The per share exercise price of all options
will equal at least 100% of the fair market value of a share of Common Stock on
the date the option is granted.
Under current OTS regulations, if the 1997 Stock Option Plan is implemented
within one year of the consummation of the Conversion and Reorganization, (i) no
officer or employees could receive an award of options covering in excess of
25%, (ii) no nonemployee director could receive in excess of 5% and (iii)
nonemployee directors, as a group, could not receive in excess of 30% of the
number of shares reserved for issuance under the 1997 Stock Option Plan.
It is anticipated that all options granted under the 1997 Stock Option Plan
will be granted subject to a vesting schedule whereby the options become
exercisable over a specified period following the date of grant. Under OTS
regulations, if the 1997 Stock Option plan is implemented within the first year
following consummation of the Conversion and Reorganization the minimum vesting
period will be five years. All unvested options will be immediately exercisable
in the event of the recipient's death or disability. Unvested options also will
be exercisable following a change in control (as defined in the 1997 Stock
Option Plan) of the Holding Company or the Savings Bank to the extent authorized
or not prohibited by applicable law or regulations. OTS regulations currently
provide that if the 1997 Stock Option Plan is implemented prior to the first
anniversary of the Conversion and Reorganization, vesting may not be accelerated
upon a change in control of the Holding Company or the Savings Bank.
Each stock option that is awarded to an officer or key employee will remain
exercisable at any time on or after the date it vests through the earlier to
occur of the tenth anniversary of the date of grant or three months after the
date on which the optionee terminates employment (one year in the event of the
optionee's termination by reason of death or disability), unless such period is
extended by the Committee. Each stock option that is awarded to a nonemployee
director will remain exercisable through the earlier to occur of the tenth
anniversary of the date of grant or one year (two years in the event of a
nonemployee director's death or disability) following the termination of a
nonemployee director's service on the Board. All stock options are
nontransferable except by will or the laws of descent or distribution.
Under current provisions of the Code, the federal tax treatment of ISOs and
NQOs is different. With respect to ISOs, an optionee who satisfies certain
holding period requirements will not recognize income at the time the option is
granted or at the time the option is exercised. If the holding period
requirements are satisfied, the optionee will generally recognize capital gain
or loss upon a subsequent disposition of the shares of Common Stock received
upon the exercise of a stock option. If the holding period requirements are not
satisfied, the difference between the fair market value of the Common Stock on
the date of grant and the option exercise price, if any, will be taxable
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to the optionee at ordinary income tax rates. A federal income tax deduction
generally will not be available to the Holding Company as a result of the grant
or exercise of an ISO, unless the optionee fails to satisfy the holding period
requirements. With respect to NQOs, the grant of an NQO generally is not a
taxable event for the optionee and no tax deduction will be available to the
Holding Company. However, upon the exercise of an NQO, the difference between
the fair market value of the Common Stock on the date of exercise and the option
exercise price generally will be treated as compensation to the optionee upon
exercise, and the Holding Company will be entitled to a compensation expense
deduction in the amount of income realized by the optionee.
Although no specific award determinations have been made at this time, the
Holding Company and the Savings Bank anticipate that if stockholder approval is
obtained it would provide awards to its directors, officers and employees to the
extent and under terms and conditions permitted by applicable regulations. The
size of individual awards will be determined prior to submitting the 1997 Stock
Option Plan for stockholder approval, and disclosure of anticipated awards will
be included in the proxy materials for such meeting.
Management Recognition Plan. Following the Conversion and Reorganization,
the Board of Directors of the Holding Company intends to adopt the 1997 MRP for
officers, employees, and nonemployee directors of the Holding Company and the
Savings Bank, subject to shareholder approval. The 1997 MRP will enable the
Holding Company and the Savings Bank to provide participants with a proprietary
interest in the Holding Company as an incentive to contribute to the success of
the Holding Company and the Savings Bank. The 1997 MRP will comply with all
applicable regulatory requirements. However, the 1997 MRP will not be approved
or endorsed by the OTS. Under current OTS regulations, the approval of a
majority vote of the Holding Company's outstanding shares is required prior to
the implementation of the 1997 MRP within one year of the consummation of the
Conversion and Reorganization.
The MRP expects to acquire a number of shares of Common Stock equal to 4%
of the Conversion Shares issued in connection with the Conversion and
Reorganization (110,400 shares based on the issuance of 2,760,000 Conversion
Shares at the maximum of the Estimated Valuation Range). Such shares will be
acquired on the open market, if available, with funds contributed by the Holding
Company or the Savings Bank to a trust which the Holding Company may establish
in conjunction with the 1997 MRP ("1997 MRP Trust") or from authorized but
unissued shares or treasury shares of the Holding Company.
A committee of the Board of Directors of the Holding Company will
administer the 1997 MRP, the members of which will also serve as trustees of the
1997 MRP Trust, if formed. The trustees will be responsible for the investment
of all funds contributed by the Holding Company or the Savings Bank to the 1997
MRP Trust. The Board of Directors of the Holding Company may terminate the 1997
MRP at any time and, upon termination, all unallocated shares of Common Stock
will revert to the Holding Company.
Shares of Common Stock granted pursuant to the 1997 MRP will be in the form
of restricted stock payable ratably over a specified vesting period following
the date of grant. During the period of restriction, all shares will be held in
escrow by the Holding Company or by the 1997 MRP Trust. Under OTS regulations,
if the 1997 MRP is implemented within the first year following consummation of
the Conversion and Reorganization, the minimum vesting period will be five
years. All unvested 1997 MRP awards will vest in the event of the recipient's
death or disability. Unvested 1997 MRP awards will also vest following a change
in control (as defined in the 1997 MRP) of the Holding Company or the Savings
Bank to the extent authorized or not prohibited by applicable law or
regulations. OTS regulations currently provide that, if the 1997 MRP is
implemented prior to the first anniversary of the Conversion and Reorganization,
vesting may not be accelerated upon a change in control of the Holding Company
or the Savings Bank.
A recipient of an 1997 MRP award in the form of restricted stock generally
will not recognize income upon an award of shares of Common Stock, and the
Holding Company will not be entitled to a federal income tax deduction, until
the termination of the restrictions. Upon such termination, the recipient will
recognize ordinary income in an amount equal to the fair market value of the
Common Stock at the time and the Holding Company will
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be entitled to a deduction in the same amount after satisfying federal income
tax withholding requirements. However, the recipient may elect to recognize
ordinary income in the year the restricted stock is granted in an amount equal
to the fair market value of the shares at that time, determined without regard
to the restrictions. In that event, the Holding Company will be entitled to a
deduction in such year and in the same amount. Any gain or loss recognized by
the recipient upon subsequent disposition of the stock will be either a capital
gain or capital loss.
Although no specific award determinations have been made at this time, the
Holding Company and the Savings Bank anticipate that if stockholder approval is
obtained it would provide awards to its directors, officers and employees to the
extent and under terms and conditions permitted by applicable regulations. Under
current OTS regulations, if the 1997 MRP is implemented within one year of the
consummation of the Conversion and Reorganization, (i) no officer or employees
could receive an award covering in excess of 25%, (ii) no nonemployee director
could receive in excess of 5% and (iii) nonemployee directors, as a group, could
not receive in excess of 30% of the number of shares reserved for issuance under
the 1997 MRP. The size of individual awards will be determined prior to
submitting the 1997 MRP for stockholder approval, and disclosure of anticipated
awards will be included in the proxy materials for such meeting.
Transactions with the Savings Bank
Federal regulations require that all loans or extensions of credit to
executive officers and directors must generally be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons (unless the loan or
extension of credit is made under a benefit program generally available to all
other employees and does not give preference to any insider over any other
employee) and must not involve more than the normal risk of repayment or present
other unfavorable features. The Savings Bank's policy is not to make any new
loans or extensions of credit to the Savings Bank's executive officers and
directors at different rates or terms than those offered to the general public.
In addition, loans made to a director or executive officer in an amount that,
when aggregated with the amount of all other loans to such person and his
related interests, are in excess of the greater of $25,000 or 5% of the Savings
Bank's capital and surplus (up to a maximum of $500,000) must be approved in
advance by a majority of the disinterested members of the Board of Directors.
See "REGULATION -- Federal Regulation of Savings Banks -- Transactions with
Affiliates." The aggregate amount of loans by the Savings Bank to its executive
officers and directors was $1.0 million at March 31, 1997, or approximately
2.09% of pro forma stockholders' equity (based on the issuance of the maximum of
the Estimated Valuation Range).
REGULATION
General
The Savings Bank is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer of
its deposits. The activities of federal savings institutions are governed by the
Home Owners' Loan Act, as amended ("HOLA") and, in certain respects, the Federal
Deposit Insurance Act ("FDIA") and the regulations issued by the OTS and the
FDIC to implement these statutes. These laws and regulations delineate the
nature and extent of the activities in which federal savings associations may
engage. Lending activities and other investments must comply with various
statutory and regulatory capital requirements. In addition, the Savings Bank's
relationship with its depositors and borrowers is also regulated to a great
extent, especially in such matters as the ownership of deposit accounts and the
form and content of the Savings Bank's mortgage documents. The Savings Bank must
file reports with the OTS and the FDIC concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other financial
institutions. There are periodic examinations by the OTS and the FDIC to review
the Savings Bank's compliance with various regulatory requirements. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such policies, whether by the
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OTS, the FDIC or Congress, could have a material adverse impact on the Holding
Company, the Savings Bank and their operations. The Holding Company, as a
savings and loan holding company, will also be required to file certain reports
with, and otherwise comply with the rules and regulations of, the OTS and the
Securities and Exchange Commission ("SEC").
Federal Regulation of the Savings Bank
Office of Thrift Supervision. The OTS is an office in the Department of the
Treasury subject to the general oversight of the Secretary of the Treasury. The
OTS generally possesses the supervisory and regulatory duties and
responsibilities formerly vested in the Federal Home Loan Bank Board. Among
other functions, the OTS issues and enforces regulations affecting federally
insured savings associations and regularly examines these institutions.
Federal Home Loan Bank System. The FHLB System, consisting of 12 FHLBs, is
under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The
designated duties of the FHFB are to: supervise the FHLBs; ensure that the FHLBs
carry out their housing finance mission; ensure that the FHLBs remain adequately
capitalized and able to raise funds in the capital markets; and ensure that the
FHLBs operate in a safe and sound manner. The Savings Bank, as a member of the
FHLB-Seattle, is required to acquire and hold shares of capital stock in the
FHLB- Seattle in an amount equal to the greater of (i) 1.0% of the aggregate
outstanding principal amount of residential mortgage loans, home purchase
contracts and similar obligations at the beginning of each year, or (ii) 1/20 of
its advances (borrowings) from the FHLB-Seattle. At March 31, 1997, the Savings
Bank complied with this requirement with an investment in FHLB-Seattle stock of
$1.8 million. Among other benefits, the FHLB-Seattle provides a central credit
facility primarily for member institutions. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System. It makes
advances to members in accordance with policies and procedures established by
the FHFB and the Board of Directors of the FHLB-Seattle.
Federal Deposit Insurance Corporation. The FDIC is an independent federal
agency established originally to insure the deposits, up to prescribed statutory
limits, of federally insured banks and to preserve the safety and soundness of
the banking industry. The FDIC maintains two separate insurance funds: the BIF
and the SAIF. As insurer of the Savings Bank's deposits, the FDIC has
examination, supervisory and enforcement authority over all savings
associations.
The Savings Bank's deposit accounts are insured by the FDIC under the SAIF
to the maximum extent permitted by law. The Savings Bank pays deposit insurance
premiums to the FDIC based on a risk-based assessment system established by the
FDIC for all SAIF-member institutions. Under applicable regulations,
institutions are assigned to one of three capital groups that are based solely
on the level of an institution's capital ("well capitalized," "adequately
capitalized" or "undercapitalized"), which are defined in the same manner as the
regulations establishing the prompt corrective action system under the FDIA as
discussed below. The matrix so created results in nine assessment risk
classifications, with rates that until September 30, 1996 ranged from 0.23% for
well capitalized, financially sound institutions with only a few minor
weaknesses to 0.31% for undercapitalized institutions that pose a substantial
risk of loss to the SAIF unless effective corrective action is taken. The
Savings Bank's assessments expensed for the year ended March 31, 1997 equaled
$1.2 million, which includes the $947,000 special SAIF assessment.
Pursuant to the DIF Act, which was enacted on September 30, 1996, the FDIC
imposed a special assessment on each depository institution with SAIF-assessable
deposits which resulted in the SAIF achieving its designated reserve ratio. In
connection therewith, the FDIC reduced the assessment schedule for SAIF members,
effective January 1, 1997, to a range of 0% to 0.27%, with most institutions,
including the Savings Bank, paying 0%. This assessment schedule is the same as
that for the BIF, which reached its designated reserve ratio in 1995. In
addition, since January 1, 1997, SAIF members are charged an assessment of
0.065% of SAIF-assessable deposits for the purpose of paying interest on the
obligations issued by the Financing Corporation ("FICO") in the 1980s to help
fund the thrift industry cleanup. BIF-assessable deposits will be charged an
assessment to help pay interest on the FICO
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bonds at a rate of approximately .013% until the earlier of December 31, 1999 or
the date upon which the last savings association ceases to exist, after which
time the assessment will be the same for all insured deposits.
The DIF Act provides for the merger of the BIF and the SAIF into the
Deposit Insurance Fund on January 1, 1999, but only if no insured depository
institution is a savings association on that date. The DIF Act contemplates the
development of a common charter for all federally chartered depository
institutions and the abolition of separate charters for national banks and
federal savings associations. It is not known what form the common charter may
take and what effect, if any, the adoption of a new charter would have on the
operation of the Savings Bank.
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law, regulation, order or
any condition imposed by an agreement with the FDIC. It also may suspend deposit
insurance temporarily during the hearing process for the permanent termination
of insurance, if the institution has no tangible capital. If insurance of
accounts is terminated, the accounts at the institution at the time of
termination, less subsequent withdrawals, shall continue to be insured for a
period of six months to two years, as determined by the FDIC. Management is
aware of no existing circumstances that could result in termination of the
deposit insurance of the Savings Bank.
Liquidity Requirements. Under OTS regulations, each savings institution is
required to maintain an average daily balance of liquid assets (cash, certain
time deposits and savings accounts, bankers' acceptances, and specified U.S.
Government, state or federal agency obligations and certain other investments)
equal to a monthly average of not less than a specified percentage (currently
5.0%) of its net withdrawable accounts plus short-term borrowings. OTS
regulations also require each savings institution to maintain an average daily
balance of short-term liquid assets at a specified percentage (currently 1.0%)
of the total of its net withdrawable savings accounts and borrowings payable in
one year or less. Monetary penalties may be imposed for failure to meet
liquidity requirements. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
Prompt Corrective Action. Each federal banking agency is required to
implement a system of prompt corrective action for institutions that it
regulates. The federal banking agencies have promulgated substantially similar
regulations to implement this system of prompt corrective action. Under the
regulations, an institution shall be deemed to be (i) "well capitalized" if it
has a total risk-based capital ratio of 10.0% or more, has a Tier I risk-based
capital ratio of 6.0% or more, has a leverage ratio of 5.0% or more and is not
subject to specified requirements to meet and maintain a specific capital level
for any capital measure; (ii) "adequately capitalized" if it has a total
risk-based capital ratio of 8.0% or more, a Tier I risk-based capital ratio of
4.0% or more and a leverage ratio of 4.0% or more (3.0% under certain
circumstances) and does not meet the definition of "well capitalized;" (iii)
"undercapitalized" if it has a total risk-based capital ratio that is less than
8.0%, a Tier I risk-based capital ratio that is less than 4.0% or a leverage
ratio that is less than 4.0% (3.0% under certain circumstances); (iv)
"significantly undercapitalized" if it has a total risk-based capital ratio that
is less than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a
leverage ratio that is less than 3.0%; and (v) "critically undercapitalized" if
it has a ratio of tangible equity to total assets that is equal to or less than
2.0%.
A federal banking agency may, after notice and an opportunity for a
hearing, reclassify a well capitalized institution as adequately capitalized and
may require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next lower
category if the institution is in an unsafe or unsound condition or has received
in its most recent examination, and has not corrected, a less than satisfactory
rating for asset quality, management, earnings or liquidity. The OTS may not,
however, reclassify a significantly undercapitalized institution as critically
undercapitalized.
An institution generally must file a written capital restoration plan that
meets specified requirements, as well as a performance guaranty by each company
that controls the institution, with the appropriate federal banking agency
within 45 days of the date that the institution receives notice or is deemed to
have notice that it is undercapitalized,
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significantly undercapitalized or critically undercapitalized. Immediately upon
becoming undercapitalized, an institution shall become subject to various
mandatory and discretionary restrictions on its operations.
At March 31, 1997, the Savings Bank was categorized as "well capitalized"
under the prompt corrective action regulations of the OTS.
Standards for Safety and Soundness. The FDIA requires the federal banking
regulatory agencies to prescribe, by regulation, standards for all insured
depository institutions relating to: (i) internal controls, information systems
and internal audit systems; (ii) loan documentation; (iii) credit underwriting;
(iv) interest rate risk exposure; (v) asset growth; and (vi) compensation, fees
and benefits. The federal banking agencies recently adopted final regulations
and Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines"). 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. If the OTS determines
that the Savings Bank fails to meet any standard prescribed by the Guidelines,
the agency may require the Savings Bank to submit to the agency an acceptable
plan to achieve compliance with the standard. OTS regulations establish
deadlines for the submission and review of such safety and soundness compliance
plans.
Qualified Thrift Lender Test. All savings associations are required to meet
a qualified thrift lender ("QTL") test to avoid certain restrictions on their
operations. A savings institution that fails to become or remain a QTL shall
either become a national bank or be subject to the following restrictions on its
operations: (i) the association may not make any new investment or engage in
activities that would not be permissible for national banks; (ii) the
association may not establish any new branch office where a national bank
located in the savings institution's home state would not be able to establish a
branch office; (iii) the association shall be ineligible to obtain new advances
from any FHLB; and (iv) the payment of dividends by the association shall be
subject to the statutory and regulatory dividend restrictions applicable to
national banks. Also, beginning three years after the date on which the savings
institution ceases to be a QTL, the savings institution would be prohibited from
retaining any investment or engaging in any activity not permissible for a
national bank and would be required to repay any outstanding advances to any
FHLB. In addition, within one year of the date on which a savings association
controlled by a company ceases to be a QTL, the company must register as a bank
holding company and become subject to the rules applicable to such companies. A
savings institution may requalify as a QTL if it thereafter complies with the
QTL test.
Currently, the QTL test requires that either an institution qualify as a
domestic building and loan association under the Code or that 65% of an
institution's "portfolio assets" (as defined) consist of certain housing and
consumer-related assets on a monthly average basis in nine out of every 12
months. Assets that qualify without limit for inclusion as part of the 65%
requirement are loans made to purchase, refinance, construct, improve or repair
domestic residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; direct or indirect
obligations of the FDIC; and loans for educational purposes, loans to small
businesses and loans made through credit cards. In addition, the following
assets, among others, may be included in meeting the test subject to an overall
limit of 20% of the savings institution's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer loans; and stock issued by FHLMC or FNMA. Portfolio assets consist of
total assets minus the sum of (i) goodwill and other intangible assets, (ii)
property used by the savings institution to conduct its business, and (iii)
liquid assets up to 20% of the institution's total assets. At March 31, 1997,
the qualified thrift investments of the Savings Bank were approximately 93.6% of
its portfolio assets.
Capital Requirements. Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital and
risk-based capital. Savings associations must meet all of the standards in order
to comply with the capital requirements. The Holding Company is not subject to
any minimum capital requirements.
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OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core capital is
defined to include common stockholders' equity, noncumulative perpetual
preferred stock and any related surplus, and minority interests in equity
accounts of consolidated subsidiaries, less (i) any intangible assets, except
for certain qualifying intangible assets; (ii) certain mortgage servicing
rights; and (iii) equity and debt investments in subsidiaries that are not
"includable subsidiaries," which is defined as subsidiaries engaged solely in
activities not impermissible for a national bank, engaged in activities
impermissible for a national bank but only as an agent for its customers, or
engaged solely in mortgage-banking activities. In calculating adjusted total
assets, adjustments are made to total assets to give effect to the exclusion of
certain assets from capital and to account appropriately for the investments in
and assets of both includable and nonincludable subsidiaries. An institution
that fails to meet the core capital requirement would be required to file with
the OTS a capital plan that details the steps they will take to reach
compliance. In addition, the OTS's prompt corrective action regulation provides
that a savings institution that has a leverage ratio of less than 4% (3% for
institutions receiving the highest CAMEL examination rating) will be deemed to
be "undercapitalized" and may be subject to certain restrictions. See "--
Federal Regulation of the Savings Bank -- Prompt Corrective Action."
As required by federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks. The OTS has proposed that only those savings associations rated
a composite one (the highest rating) under the CAMEL rating system for savings
associations will be permitted to operate at or near the regulatory minimum
leverage ratio of 3%. All other savings associations will be required to
maintain a minimum leverage ratio of 4% to 5%. The OTS will assess each
individual savings association through the supervisory process on a case-by-case
basis to determine the applicable requirement. No assurance can be given as to
the final form of any such regulation, the date of its effectiveness or the
requirement applicable to the Savings Bank.
Savings associations also must maintain "tangible capital" not less than
1.5% of the Savings Bank's adjusted total assets. "Tangible capital" is defined,
generally, as core capital minus any "intangible assets" other than purchased
mortgage servicing rights.
Each savings institution must maintain total risk-based capital equal to at
least 8% of risk-weighted assets. Total risk-based capital consists of the sum
of core and supplementary capital, provided that supplementary capital cannot
exceed core capital, as previously defined. Supplementary capital includes (i)
permanent capital instruments such as cumulative perpetual preferred stock,
perpetual subordinated debt and mandatory convertible subordinated debt, (ii)
maturing capital instruments such as subordinated debt, intermediate-term
preferred stock and mandatory convertible subordinated debt, subject to an
amortization schedule, and (iii) general valuation loan and lease loss
allowances up to 1.25% of risk-weighted assets.
The risk-based capital regulation assigns each balance sheet asset held by
a savings institution to one of four risk categories based on the amount of
credit risk associated with that particular class of assets. Assets not included
for purposes of calculating capital are not included in calculating
risk-weighted assets. The categories range from 0% for cash and securities that
are backed by the full faith and credit of the U.S. Government to 100% for
repossessed assets or assets more than 90 days past due. Qualifying residential
mortgage loans (including multi-family mortgage loans) are assigned a 50% risk
weight. Consumer, commercial, home equity and residential construction loans are
assigned a 100% risk weight, as are nonqualifying residential mortgage loans and
that portion of land loans and nonresidential construction loans that do not
exceed an 80% loan-to-value ratio. The book value of assets in each category is
multiplied by the weighing factor (from 0% to 100%) assigned to that category.
These products are then totalled to arrive at total risk-weighted assets.
Off-balance sheet items are included in risk- weighted assets by converting them
to an approximate balance sheet "credit equivalent amount" based on a conversion
schedule. These credit equivalent amounts are then assigned to risk categories
in the same manner as balance sheet assets and included risk-weighted assets.
The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from total
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capital for purposes of calculating their risk-based capital requirements. A
savings association's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming and
outgoing discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point increase or
decrease in market interest rates divided by the estimated economic value of the
association's assets, as calculated in accordance with guidelines set forth by
the OTS. A savings association whose measured interest rate risk exposure
exceeds 2% must deduct an interest rate risk component in calculating its total
capital under the risk-based capital rule. The interest rate risk component is
an amount equal to one-half of the difference between the institution's measured
interest rate risk and 2%, multiplied by the estimated economic value of the
association's assets. That dollar amount is deducted from an association's total
capital in calculating compliance with its risk-based capital requirement. Under
the rule, there is a two quarter lag between the reporting date of an
institution's financial data and the effective date for the new capital
requirement based on that data. A savings association with assets of less than
$300 million and risk-based capital ratios in excess of 12% is not subject to
the interest rate risk component, unless the OTS determines otherwise. The rule
also provides that the Director of the OTS may waive or defer an association's
interest rate risk component on a case-by-case basis. Under certain
circumstances, a savings association may request an adjustment to its interest
rate risk component if it believes that the OTS-calculated interest rate risk
component overstates its interest rate risk exposure. In addition, certain
"well- capitalized" institutions may obtain authorization to use their own
interest rate risk model to calculate their interest rate risk component in lieu
of the OTS-calculated amount. The OTS has postponed the date that the component
will first be deducted from an institution's total capital.
See "HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE" for a table
that sets forth in terms of dollars and percentages the OTS tangible, core and
risk-based capital requirements, the Savings Bank's historical amounts and
percentages at March 31, 1997 and pro forma amounts and percentages based upon
the assumptions stated therein.
Limitations on Capital Distributions. OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers. In addition, OTS regulations require the Savings Bank to give the OTS
30 days' advance notice of any proposed declaration of dividends, and the OTS
has the authority under its supervisory powers to prohibit the payment of
dividends. The regulation utilizes a three-tiered approach which permits various
levels of distributions based primarily upon a savings association's capital
level.
A Tier 1 savings association has capital in excess of its fully phased-in
capital requirement (both before and after the proposed capital distribution). A
Tier 1 savings association may make (without application but upon prior notice
to, and no objection made by, the OTS) capital distributions during a calendar
year up to 100% of its net income to date during the calendar year plus one-half
its surplus capital ratio (i.e., the amount of capital in excess of its fully
phased-in requirement) at the beginning of the calendar year or the amount
authorized for a Tier 2 association. Capital distributions in excess of such
amount require advance notice to the OTS. A Tier 2 savings association has
capital equal to or in excess of its minimum capital requirement but below its
fully phased-in capital requirement (both before and after the proposed capital
distribution). Such an association may make (without application) capital
distributions up to an amount equal to 75% of its net income during the previous
four quarters depending on how close the association is to meeting its fully
phased-in capital requirement. Capital distributions exceeding this amount
require prior OTS approval. A Tier 3 savings association has capital below the
minimum capital requirement (either before or after the proposed capital
distribution). A Tier 3 savings association may not make any capital
distributions without prior approval from the OTS.
The Savings Bank currently meets the criteria to be designated a Tier 1
association and, consequently, could at its option (after prior notice to, and
no objection made by, the OTS) distribute up to 100% of its net income during
the calendar year plus 50% of its surplus capital ratio at the beginning of the
calendar year less any distributions previously paid during the year.
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Loans to One Borrower. Under the HOLA, savings institutions are generally
subject to the national bank limit on loans to one borrower. Generally, this
limit is 15% of the Savings 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 OTS by regulation has amended the loans to one
borrower rule to permit savings associations meeting certain requirements,
including capital requirements, to extend loans to one borrower in additional
amounts under circumstances limited essentially to loans to develop or complete
residential housing units. At March 31, 1997, the Savings Bank's largest
aggregate amount of loans to one borrower was $1.8 million, which represented
7.4% of the Savings Bank's unimpaired capital and surplus at March 31, 1997.
Activities of Savings Banks and Their Subsidiaries. When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide the
information each agency may, by regulation, require. Savings associations also
must conduct the activities of subsidiaries in accordance with existing
regulations and orders.
The OTS may determine that the continuation by a savings association of its
ownership control of, or its relationship to, the subsidiary constitutes a
serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The FDIC
also may determine by regulation or order that any specific activity poses a
serious threat to the SAIF. If so, it may require that no SAIF member engage in
that activity directly.
Transactions with Affiliates. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank. A
savings and loan holding company, its subsidiaries and any other company under
common control are considered affiliates of the subsidiary savings association
under the HOLA. Generally, Sections 23A and 23B: (i) limit the extent to which
the insured association or its subsidiaries may engage in certain covered
transactions with an affiliate to an amount equal to 10% of such institution's
capital and surplus and place an aggregate limit on all such transactions with
affiliates to an amount equal to 20% of such capital and surplus, and (ii)
require that all such transactions be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans, the
purchase of assets, the issuance of a guarantee and similar types of
transactions. Any loan or extension of credit by the Savings Bank to an
affiliate must be secured by collateral in accordance with Section 23A.
Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an affiliate
unless that affiliate is engaged only in activities permissible for bank holding
companies; (ii) a savings association may not purchase or invest in securities
issued by an affiliate (other than securities of a subsidiary); and (iii) the
OTS may, for reasons of safety and soundness, impose more stringent restrictions
on savings associations but may not exempt transactions from or otherwise
abridge Section 23A or 23B. Exemptions from Section 23A or 23B may be granted
only by the Federal Reserve Board, as is currently the case with respect to all
FDIC-insured banks. The Savings Bank has not been significantly affected by the
rules regarding transactions with affiliates.
The Savings Bank's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such persons,
is governed by Sections 22(g) and 22(h) of the Federal Reserve Act, and
Regulation O thereunder. Among other things, these regulations generally require
that such loans be made on terms and conditions substantially the same as those
offered to unaffiliated individuals and not involve more than the normal risk of
repayment. Generally, Regulation O also places individual and aggregate limits
on the amount of loans the Savings Bank may make to such persons based, in part,
on the Savings Bank's capital position, and requires
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certain board approval procedures to be followed. The OTS regulations, with
certain minor variances, apply Regulation O to savings institutions.
Community Reinvestment Act. Under the federal Community Reinvestment Act
("CRA"), all federally-insured financial institutions have a continuing and
affirmative obligation consistent with safe and sound operations to help meet
all the credit needs of its delineated community. The CRA does not establish
specific lending requirements or programs nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to meet all the credit needs of its delineated community. The CRA
requires the federal banking agencies, in connection with regulatory
examinations, to assess an institution's record of meeting the credit needs of
its delineated community and to take such record into account in evaluating
regulatory applications to establish a new branch office that will accept
deposits, relocate an existing office, or merge or consolidate with, or acquire
the assets or assume the liabilities of, a federally regulated financial
institution, among others. The CRA requires public disclosure of an
institution's CRA rating. The Savings Bank received an "outstanding" rating as a
result of its latest evaluation.
Regulatory and Criminal Enforcement Provisions. The OTS has primary
enforcement responsibility over savings institutions and has the authority to
bring action against all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured 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 $27,500 per day, or
$1.1 million per day in especially egregious cases. Under the FDIA, the FDIC has
the authority to recommend to the Director of the OTS that enforcement action be
taken with respect to a particular savings institution. 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.
Savings and Loan Holding Company Regulations
Holding Company Acquisitions. The HOLA and OTS regulations issued
thereunder generally prohibit a savings and loan holding company, without prior
OTS approval, from acquiring more than 5% of the voting stock of any other
savings association or savings and loan holding company or controlling the
assets thereof. They also prohibit, among other things, any director or officer
of a savings and loan holding company, or any individual who owns or controls
more than 25% of the voting shares of such holding company, from acquiring
control of any savings association not a subsidiary of such savings and loan
holding company, unless the acquisition is approved by the OTS.
Holding Company Activities. As a unitary savings and loan holding company,
the Holding Company generally is not subject to activity restrictions under the
HOLA. If the Holding Company acquires control of another savings association as
a separate subsidiary other than in a supervisory acquisition, it would become a
multiple savings and loan holding company. There generally are more restrictions
on the activities of a multiple savings and loan holding company than on those
of a unitary savings and loan holding company. The HOLA provides that, among
other things, no multiple savings and loan holding company or subsidiary thereof
which is not an insured association shall commence or continue for more than two
years after becoming a multiple savings and loan association holding company or
subsidiary thereof, any business activity other than: (i) furnishing or
performing management services for a subsidiary insured institution, (ii)
conducting an insurance agency or escrow business, (iii) holding, managing, or
liquidating assets owned by or acquired from a subsidiary insured institution,
(iv) holding or managing properties used or occupied by a subsidiary insured
institution, (v) acting as trustee under deeds of trust, (vi) those activities
previously directly authorized by regulation as of March 5, 1987 to be engaged
in by multiple holding companies or (vii) those activities authorized by the
Federal Reserve Board as permissible for bank holding companies, unless the OTS
by regulation, prohibits or limits such activities for savings and loan holding
companies. Those activities described in (vii) above also must be approved by
the OTS prior to being engaged in by a multiple savings and loan holding
company.
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Qualified Thrift Lender Test. The HOLA provides that any savings and loan
holding company that controls a savings association that fails the QTL test, as
explained under "-- Federal Regulation of the Savings Bank - - Qualified Thrift
Lender Test," must, within one year after the date on which the association
ceases to be a QTL, register as and be deemed a bank holding company subject to
all applicable laws and regulations.
TAXATION
Federal Taxation
General. Upon consummation of the Conversion and Reorganization, the
Holding Company and the Savings Bank will report their income on a fiscal year
basis using the accrual method of accounting and will be subject to federal
income taxation in the same manner as other corporations with some exceptions,
including particularly the Savings Bank's reserve for bad debts discussed below.
The following discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to the
Savings Bank or the Holding Company.
Bad Debt Reserve. Historically, savings institutions such as the Savings
Bank which met certain definitional tests primarily related to their assets and
the nature of their business ("qualifying thrift") were permitted to establish a
reserve for bad debts and to make annual additions thereto, which may have been
deducted in arriving at their taxable income. The Savings Bank's deductions with
respect to "qualifying real property loans," which are generally loans secured
by certain interest in real property, were computed using an amount based on the
Savings Bank's actual loss experience, or a percentage equal to 8% of the
Savings Bank's taxable income, computed with certain modifications and reduced
by the amount of any permitted additions to the non-qualifying reserve. Due to
the Savings Bank's loss experience, the Savings Bank generally recognized a bad
debt deduction equal to 8% of taxable income.
The provisions repealing the current thrift bad debt rules were passed by
Congress as part of "The Small Business Job Protection Act of 1996." The new
rules eliminate the 8% of taxable income method for deducting additions to the
tax bad debt reserves for all thrifts for tax years beginning after December 31,
1995. These rules also require that all institutions recapture all or a portion
of their bad debt reserves added since the base year (last taxable year
beginning before January 1, 1988). The Savings Bank has previously recorded a
deferred tax liability equal to the bad debt recapture and as such the new rules
will have no effect on the net income or federal income tax expense. For taxable
years beginning after December 31, 1995, the Savings Bank's bad debt deduction
will be determined under the experience method using a formula based on actual
bad debt experience over a period of years or, if the Savings Bank is a "large"
association (assets in excess of $500 million) on the basis of net charge-offs
during the taxable year. The new rules allow an institution to suspend bad debt
reserve recapture for the 1996 and 1997 tax years if the institution's lending
activity for those years is equal to or greater than the institutions average
mortgage lending activity for the six taxable years preceding 1996 adjusted for
inflation. For this purpose, only home purchase or home improvement loans are
included and the institution can elect to have the tax years with the highest
and lowest lending activity removed from the average calculation. If an
institution is permitted to postpone the reserve recapture, it must begin its
six year recapture no later than the 1998 tax year. The unrecaptured base year
reserves will not be subject to recapture as long as the institution continues
to carry on the business of banking. In addition, the balance of the pre-1988
bad debt reserves continue to be subject to provisions of present law referred
to below that require recapture in the case of certain excess distributions to
shareholders.
Distributions. To the extent that the Savings Bank makes "nondividend
distributions" to the Holding Company, such distributions will be considered to
result in distributions from the balance of its bad debt reserve as of December
31, 1987 (or a lesser amount if the Savings Bank's loan portfolio decreased
since December 31, 1987) and then from the supplemental reserve for losses on
loans ("Excess Distributions"), and an amount based on the Excess Distributions
will be included in the Savings Bank's taxable income. Nondividend distributions
include distributions in excess of the Savings Bank's current and accumulated
earnings and profits, distributions in redemption of stock and distributions in
partial or complete liquidation. However, dividends paid out of the Savings
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Bank's current or accumulated earnings and profits, as calculated for federal
income tax purposes, will not be considered to result in a distribution from the
Savings Bank's bad debt reserve. The amount of additional taxable income created
from an Excess Distribution is an amount that, when reduced by the tax
attributable to the income, is equal to the amount of the distribution. Thus,
if, after the Conversion, the Savings Bank makes a "nondividend distribution,"
then approximately one and one-half times the Excess Distribution would be
includable in gross income for federal income tax purposes, assuming a 34%
corporate income tax rate (exclusive of state and local taxes). See "REGULATION"
and "DIVIDEND POLICY" for limits on the payment of dividends by the Savings
Bank. The Savings Bank does not intend to pay dividends that would result in a
recapture of any portion of its tax bad debt reserve.
Corporate Alternative Minimum Tax. The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%. The excess of the tax bad debt
reserve deduction using the percentage of taxable income method over the
deduction that would have been allowable under the experience method is treated
as a preference item for purposes of computing the AMTI. In addition, only 90%
of AMTI can be offset by net operating loss carryovers. AMTI is increased by an
amount equal to 75% of the amount by which the Savings Bank's adjusted current
earnings exceeds its AMTI (determined without regard to this preference and
prior to reduction for net operating losses). For taxable years beginning after
December 31, 1986, and before January 1, 1996, an environmental tax of 0.12% of
the excess of AMTI (with certain modification) over $2.0 million is imposed on
corporations, including the Savings Bank, whether or not an Alternative Minimum
Tax is paid.
Dividends-Received Deduction. The Holding Company may exclude from its
income 100% of dividends received from the Savings Bank as a member of the same
affiliated group of corporations. The corporate dividends-received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Holding Company and the Savings Bank will not file a consolidated
tax return, except that if the Holding Company or the Savings Bank owns more
than 20% of the stock of a corporation distributing a dividend, then 80% of any
dividends received may be deducted.
Audits. Neither the MHC's nor the Savings Bank's federal income tax returns
have been audited within the past five years.
State Taxation
General. The Savings Bank is subject to a business and occupation tax
imposed under Washington law at the rate of 1.70% of gross receipts; however,
interest received on loans secured by mortgages or deeds of trust on residential
properties is exempt from such tax.
Audits. The Savings Bank's business and occupation tax returns were audited
for the period January 1, 1992 through December 31, 1995 resulting in an
additional tax liability of $48,000, which the Savings Bank has paid.
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THE CONVERSION AND REORGANIZATION
The OTS has approved the Plan of Conversion subject to its approval by the
members of the Savings Bank and the stockholders of the Savings Bank entitled to
vote thereon and to the satisfaction of certain other conditions imposed by the
OTS in its approval. OTS approval does not constitute a recommendation or
endorsement of the Plan of Conversion.
General
On May 21, 1997, the Boards of Directors of the MHC and the Savings Bank,
and on ________, 1997, the Holding Company's Board of Directors, unanimously
adopted the Plan of Conversion, pursuant to which the MHC will convert from a
mutual holding company to a stock holding company and the Savings Bank
simultaneously reorganize as a wholly-owned subsidiary of the Holding Company, a
newly formed Washington corporation. The following discussion of the Plan of
Conversion is qualified in its entirety by reference to the Plan of Conversion,
which is attached as Exhibit A to both the MHC's Proxy Statement and the Savings
Bank's Proxy Statement, and is available to both members of the MHC and
stockholders of the Savings Bank upon request. The Plan of Conversion is also
filed as an exhibit to the Registration Statement. See "ADDITIONAL INFORMATION."
The OTS has approved the Plan of Conversion subject to its approval by the
members of the MHC entitled to vote on the matter at the Special Meeting of
Members called for that purpose to be held on _________, 1997, its approval by
the stockholders of the Savings Bank entitled to vote on the matter at the
Stockholders' Meeting called for that purpose to be held on _________, 1997, and
subject to the satisfaction of certain other conditions imposed by the OTS in
its approval.
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) Interim A
will then merge with and into the Savings Bank. As a result of the merger of
Interim A with and into the Savings Bank, the Savings Bank will become a wholly
owned subsidiary of the Holding Company and the Public Savings Bank Shares will
be converted into the Exchange Shares pursuant to the Exchange Ratio, which will
result in the holders of such shares owning in the aggregate approximately the
same percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization (i.e., the Conversion Shares and the Exchange
Shares) as the percentage of Savings Bank Common Stock owned by them in the
aggregate immediately prior to consummation of the Conversion and
Reorganization, but before giving effect to (a) the payment of cash in lieu of
issuing fractional Exchange Shares and (b) any shares of Conversion Stock
purchased by the Savings Bank's stockholders in the Conversion Offerings or the
ESOP thereafter.
As part of the Conversion and Reorganization, the Holding Company is
offering Conversion Shares in the Subscription Offering to holders of
Subscription Rights in the following order of priority: (i) Eligible Account
Holders (depositors of the Savings Bank with $50.00 or more on deposit as of
December 31, 1995); (ii) the ESOP; (iii) Supplemental Eligible Account Holders
(depositors of the Savings Bank with $50.00 or more on deposit as of ________,
1997); and (iv) Other Members (depositors of the Savings Bank as of _______,
1997 and borrowers of the Savings Bank with loans outstanding as of October 22,
1993, which continue to be outstanding as of ________, 1997).
Concurrently with the Subscription Offering, any Conversion Shares not
subscribed for in the Subscription Offering may be offered for sale in the
Direct Community Offering to members of the general public, with priority being
given first to Public Stockholders (who are not Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members) and then to natural
persons and trusts of natural persons residing in the Local Community.
Conversion Shares not sold in the Subscription and Direct Community Offerings
may be offered in the Syndicated Community Offering. Regulations require that
the Direct Community and Syndicated Community Offerings be completed within 45
days after completion of the fully extended Subscription Offering unless
extended
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by the Savings Bank or the Holding Company with the approval of the regulatory
authorities. If the Syndicated Community Offering is determined not to be
feasible, the Board of Directors of the Savings Bank will consult with the
regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed Conversion Shares. The Plan of Conversion provides that
the Conversion and Reorganization must be completed within 24 months after the
date of the approval of the Plan of Conversion by the members of the MHC.
No sales of Common Stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offerings unless the
Plan of Conversion is approved by the members of the MHC and the stockholders of
the Savings Bank.
The completion of the Conversion Offerings, however, is subject to market
conditions and other factors beyond the Savings Bank's control. No assurance can
be given as to the length of time after approval of the Plan of Conversion at
the Special Members Meeting and the Stockholders Meeting that will be required
to complete the Direct Community or Syndicated Community Offerings or other sale
of the Conversion Shares. If delays are experienced, significant changes may
occur in the estimated pro forma market value of the MHC and the Savings Bank,
as converted, together with corresponding changes in the net proceeds realized
by the Holding Company from the sale of the Conversion Shares. If the Conversion
and Reorganization is terminated, the Savings Bank would be required to charge
all Conversion and Reorganization expenses against current income.
Orders for Conversion Shares will not be filled until at least 2,040,000
Conversion Shares have been subscribed for or sold and the OTS approves the
final valuation and the Conversion and Reorganization closes. If the Conversion
and Reorganization is not completed within 45 days after the last day of the
fully extended Subscription Offering and the OTS consents to an extension of
time to complete the Conversion and Reorganization, subscribers will be given
the right to increase, decrease or rescind their subscriptions. Unless an
affirmative indication is received from subscribers that they wish to continue
to subscribe for shares, the funds will be returned promptly, together with
accrued interest at the Savings Bank's passbook rate from the date payment is
received until the funds are returned to the subscriber. If such period is not
extended, or, in any event, if the Conversion and Reorganization is not
completed, all withdrawal authorizations will be terminated and all funds held
will be promptly returned together with accrued interest at the Savings Bank's
passbook rate from the date payment is received until the Conversion and
Reorganization is terminated.
Purposes of Conversion and Reorganization
The MHC, as a federally chartered mutual holding company, does not have
stockholders and has no authority to issue capital stock. As a result of the
Conversion and Reorganization, the Holding Company will be structured in the
form used by holding companies of commercial banks, most business entities and a
growing number of savings institutions. The holding company form of organization
will provide the Holding Company with the ability to diversify the Holding
Company's and the Savings Bank's business activities through acquisition of or
mergers with both stock savings institutions and commercial banks, as well as
other companies. Although there are no current arrangements, understandings or
agreements regarding any such opportunities, the Holding Company will be in a
position after the Conversion and Reorganization, subject to regulatory
limitations and the Holding Company's financial position, to take advantage of
any such opportunities that may arise.
In their decision to pursue the Conversion and Reorganization, the Board of
Directors of the MHC and the Savings Bank considered various regulatory
uncertainties associated with the mutual holding company structure including the
ability to waive dividends in the future as well as the general uncertainty
regarding a possible elimination of the federal savings association charter. See
"RISK FACTORS -- Recent Legislation and the Future of the Thrift Industry."
The Conversion and Reorganization will be important to the future growth
and performance of the holding company organization by providing a larger
capital base to support the operations of the Savings Bank and Holding Company
and by enhancing their future access to capital markets, their ability to
diversify into other financial
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services related activities, and their ability to provide services to the
public. Although the Savings Bank currently has the ability to raise additional
capital through the sale of additional shares of Savings Bank Common Stock, that
ability is limited by the mutual holding company structure which, among other
things, requires that the MHC hold a majority of the outstanding shares of
Savings Bank Common Stock.
The Conversion and Reorganization also will result in an increase in the
number of shares of Common Stock to be outstanding as compared to the number of
outstanding shares of Public Savings Bank Shares which will increase the
likelihood of the development of an active and liquid trading market for the
Common Stock. See "MARKET FOR COMMON STOCK." In addition, the Conversion and
Reorganization permit to the Holding Company to engage in stock repurchases
without adverse federal income tax consequences, unlike the Savings Bank.
Currently, the Holding Company has no plans or intentions to engage in any stock
repurchases.
An additional benefit of the Conversion and Reorganization will be an
increase in the accumulated earnings and profits of the Savings Bank for federal
income tax purposes. When the Savings Bank (as a mutual institution) transferred
substantially all of its assets and liabilities to its stock savings bank
successor in the MHC Reorganization, its accumulated earnings and profits tax
attribute was not able to be transferred to the Savings Bank because no tax-free
reorganization was involved. Accordingly, this tax attribute was retained by the
Savings Bank when it converted its charter to that of the MHC, even though the
underlying retained earnings were transferred to the Savings Bank. The
Conversion and Reorganization has been structured to re-unite the accumulated
earnings and profits tax attribute retained by the MHC in the MHC Reorganization
with the retained earnings of the Savings Bank by merging the MHC with and into
the Savings Bank in a tax-free reorganization. This transaction will increase
the Savings Bank's ability to pay dividends to the Holding Company in the
future. See "DIVIDEND POLICY."
If the Savings Bank had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of common stock to be sold than the amount of net
proceeds raised in the MHC Reorganization. Management believed that it was
advisable to profitably invest the $6.5 million of net proceeds raised in the
MHC Reorganization prior to raising the larger amount of capital that would have
been raised in a standard conversion. A standard conversion in 1993 also would
have immediately eliminated all aspects of the mutual form of organization.
In light of the foregoing, the Boards of Directors of the Primary Parties
believe that the Conversion and Reorganization is in the best interests of the
MHC and the Savings Bank, their respective members and stockholders, and the
communities served by the Savings Bank.
Effects of Conversion and Reorganization on Depositors and Borrowers of the
Savings Bank
General. Prior to the Conversion and Reorganization, each depositor in the
Savings Bank has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the MHC based upon the balance in his or
her account, which interest may only be realized in the event of a liquidation
of the MHC. However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account. A depositor
who reduces or closes his account receives a portion or all of the balance in
the account but nothing for his ownership interest in the net worth of the MHC,
which is lost to the extent that the balance in the account is reduced.
Consequently, the depositors of the Savings Bank normally have no way to
realize the value of their ownership interest in the MHC, which has realizable
value only in the unlikely event that the MHC is liquidated. In such event, the
depositors of record at that time, as owners, would share pro rata in any
residual surplus and reserves of the MHC after other claims are paid.
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
net worth of the Holding Company. The Common Stock is separate and apart from
deposit accounts and cannot be and is not insured by the FDIC or any other
governmental agency.
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Certificates are issued to evidence ownership of the permanent stock. The stock
certificates are transferable, and therefore the stock may be sold or traded if
a purchaser is available with no effect on any deposit and/or loan account(s)
the seller may hold in the Savings Bank.
Continuity. The Conversion and Reorganization will not interrupt the
Savings Bank's normal business of accepting deposits and making loans. The
Savings Bank will continue to be subject to regulation by the OTS and the FDIC.
After the Conversion and Reorganization, the Savings Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.
The directors and officers of the Savings Bank at the time of the
Conversion and Reorganization will continue to serve as directors and officers
of the Savings Bank after the Conversion and Reorganization. The directors and
officers of the Holding Company consist of individuals currently serving as
directors and officers of the MHC and the Savings Bank, and they generally will
retain their positions in the Holding Company after the Conversion and
Reorganization.
Effect on Public Savings Bank Shares. Under the Plan of Conversion, upon
consummation of the Conversion and Reorganization, the Public Savings Bank
Shares shall be converted into Exchange Shares based upon the Exchange Ratio
without any further action on the part of the holder thereof. Upon surrender of
the Public Savings Bank Shares, Common Stock will be issued in exchange for such
shares. See "-- Delivery and Exchange of Stock Certificates."
Upon consummation of the Conversion and Reorganization, the Public
Stockholders will become stockholders of the Holding Company. For a description
of certain changes in the rights of stockholders as a result of the Conversion
and Reorganization, see "COMPARISON OF STOCKHOLDERS" RIGHTS."
Voting Rights. Presently, depositors and borrowers of the Savings Bank are
members of, and have voting rights in, the MHC as to all matters requiring
membership action. Upon completion of the Conversion and Reorganization, the MHC
will cease to exist and all voting rights in the Savings Bank will be vested in
the Holding Company as the sole stockholder of the Savings Bank. Exclusive
voting rights with respect to the Holding Company will be vested in the holders
of Common Stock. Depositors and borrowers of the Savings Bank will not have
voting rights in the Holding Company after the Conversion and Reorganization,
except to the extent that they become stockholders of the Holding Company.
Savings Accounts and Loans. The Savings Bank's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the Conversion and Reorganization. Furthermore, the Conversion and
Reorganization will not affect the loan accounts, loan balances or obligations
of borrowers under their individual contractual arrangements with the Savings
Bank.
Tax Effects. The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion and Reorganization will
constitute a nontaxable reorganization under Section 368(a)(1)(A) of the Code.
Among other things, the opinion provides that: (i) the conversion of the MHC
from a mutual holding company to a federally-chartered interim stock savings
bank (i.e., Interim A) and its simultaneous merger with and into the Savings
Bank, with the Savings Bank as the surviving entity will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code, (ii) no
gain or loss will be recognized by the Savings Bank upon the receipt of the
assets of the MHC in such merger, (iii) the merger of Interim B with and into
the Savings Bank, with the Savings Bank as the surviving entity, will qualify as
a reorganization within the meaning of Section 368(a)(1)(A) of the Code, (iv) no
gain or loss will be recognized by Interim B upon the transfer of its assets to
the Savings Bank, (v) no gain or loss will be recognized by the Savings Bank
upon the receipt of the assets of Interim B, (vi) no gain or loss will be
recognized by the Holding Company upon the receipt of Savings Bank Common Stock
solely in exchange for Common Stock, (vii) no gain or loss will be recognized by
the Public Stockholders upon the receipt of Exchange Shares in exchange for
their Public Savings Bank Shares, (viii) the basis of the Exchange Shares to be
received by the Public Stockholders will be the same as the basis of the Public
Savings Bank Shares surrendered
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in exchange therefor, before giving effect to any payment of cash in lieu of
fractional Exchange Shares, (ix) the holding period of the Exchange Shares to be
received by the Public Stockholders will include the holding period of the
Public Savings Bank Shares, provided that the Public Savings Bank Shares were
held as a capital asset on the date of the exchange, (x) no gain or loss will be
recognized by the Holding Company upon the sale of shares of Conversion Shares
in the Conversion Offerings, (xi) the Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members will recognize gain, if any, upon the
issuance to them of withdrawable savings accounts in the Savings Bank following
the Conversion and Reorganization, interests in the liquidation account and
nontransferable subscription rights to purchase Conversion Stock, but only to
the extent of the value, if any, of the subscription rights, and (xii) the tax
basis to the holders of Conversion Shares purchased in the Conversion Offerings
will be the amount paid therefor, and the holding period for the Conversion
Shares will begin on the date of consummation of the Conversion Offerings, if
purchased through the exercise of Subscription Rights, and on the day after the
date of purchase, if purchased in the Community Offering or the Syndicated
Community Offering. Unlike a private letter ruling issued by the IRS, an opinion
of counsel is not binding on the IRS and the IRS could disagree with the
conclusions reached therein. In the event of such disagreement, no assurance can
be given that the conclusions reached in an opinion of counsel would be
sustained by a court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that the
receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value. RP Financial, a financial consulting firm retained by the
Savings Bank, whose findings are not binding on the IRS, has issued a letter
indicating that the Subscription Rights do not have any value, based on the fact
that such rights are acquired by the recipients without cost, are
nontransferable and of short duration and afford the recipients the right only
to purchase shares of the Common Stock at a price equal to its estimated fair
market value, which will be the same price paid by purchasers in the Direct
Community Offering for unsubscribed shares of Common Stock. If the Subscription
Rights are deemed to have a fair market value, the receipt of such rights may
only be taxable to those Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members who exercise their Subscription Rights. The Savings
Bank could also recognize a gain on the distribution of such Subscription
Rights. Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members are encouraged to consult with their own tax advisors as to the
tax consequences in the event the Subscription Rights are deemed to have a fair
market value.
The Savings Bank has also received an opinion from Knapp, O'Dell & Lewis,
Camas, Washington, that, assuming the Conversion and Reorganization does not
result in any federal income tax liability to the Savings Bank, its account
holders, or the Holding Company, implementation of the Plan of Conversion will
not result in any Washington tax liability to such entities or persons.
The opinions of Breyer & Aguggia and Knapp, O'Dell & Lewis and the letter
from RP Financial are filed as exhibits to the Registration Statement. See
"ADDITIONAL INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION AND REORGANIZATION PARTICULAR
TO THEM.
Liquidation Account. In the unlikely event of a complete liquidation of the
MHC, each depositor of the Savings Bank would receive his or her pro rata share
of any assets of the MHC remaining after payment of claims of all creditors.
Each depositor's pro rata share of such remaining assets would be in the same
proportion as the value of his or her deposit account was to the total value of
all deposit accounts in the Savings Bank at the time of liquidation. After the
Conversion and Reorganization, each depositor, in the event of a complete
liquidation of the Savings Bank, would have a claim as a creditor of the same
general priority as the claims of all other general creditors of the Savings
Bank. However, except as described below, his or her claim would be solely in
the amount of the balance in his or her deposit account plus accrued interest.
Each stockholder would not have an interest in the value or assets of the
Savings Bank or the Holding Company above that amount.
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The Plan of Conversion provides for the establishment, upon the completion
of the Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders in
an amount equal to the amount of any dividends waived by the MHC plus the
greater of (1) the Savings Bank's retained earnings of $9.8 million at March 31,
1993, the date of the latest statement of financial condition contained in the
final offering circular utilized in the MHC Reorganization, or (2) ______% of
the Savings Bank's total stockholders' equity as reflected in its latest
statement of financial condition contained in the final Prospectus utilized in
the Conversion Offerings. As of the date of this Prospectus, the initial balance
of the liquidation account would be $25.0 million. Each Eligible Account Holder
and Supplemental Eligible Account Holder, if he or she were to continue to
maintain his deposit account at the Savings Bank, would be entitled, upon a
complete liquidation of the Savings Bank after the Conversion and Reorganization
to an interest in the liquidation account prior to any payment to the Holding
Company as the sole stockholder of the Savings Bank. Each Eligible Account
Holder and Supplemental Eligible Account Holder would have an initial interest
in such liquidation account for each deposit account, including passbook
accounts, transaction accounts such as checking accounts, money market deposit
accounts and certificates of deposit, held in the Savings Bank at the close of
business on December 31, 1995 or June 30, 1997, as the case may be. Each
Eligible Account Holder and Supplemental Eligible Account Holder will have a pro
rata interest in the total liquidation account for each of his or her deposit
accounts based on the proportion that the balance of each such deposit account
on the December 31, 1995 Eligibility Record Date or the June 30, 1997
Supplemental Eligibility Record Date, as the case may be, bore to the balance of
all deposit accounts in the Savings Bank on such date.
If, however, on any March 31 annual closing date of the Savings Bank,
commencing March 31, 1997, the amount in any deposit account is less than the
amount in such deposit account on December 31, 1995 or June 30, 1997, as the
case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed. In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Holding Company as the sole stockholder of the Savings Bank.
The Subscription, Direct Community and Syndicated Community Offerings
Subscription Offering. In accordance with the Plan of Conversion,
nontransferable Subscription Rights to purchase the Conversion Shares have been
issued to persons and entities entitled to purchase the Conversion Shares in the
Subscription Offering. The amount of Conversion Shares which these parties may
purchase will be subject to the availability of the Conversion Shares for
purchase under the categories set forth in the Plan of Conversion. Subscription
priorities have been established for the allocation of stock to the extent that
the Conversion Shares are available. These priorities are as follows:
Category 1: Eligible Account Holders. Each depositor with $50.00 or more on
deposit at the Savings Bank as of December 31, 1995 will receive nontransferable
Subscription Rights to subscribe for up to the greater of 1% of the shares of
Conversion Stock issued in the Conversion and Reorganization, one-tenth of one
percent of the total offering of Common Stock or 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number of
shares of Common Stock to be issued by a fraction of which the numerator is the
amount of qualifying deposit of the Eligible Account Holder and the denominator
is the total amount of qualifying deposits of all Eligible Account Holders. If
the exercise of Subscription Rights in this category results in an
oversubscription, shares of Common Stock will be allocated among subscribing
Eligible Account Holders so as to permit each Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make such person's
total allocation equal 100 shares or the number of shares actually subscribed
for, whichever is less. Thereafter, unallocated shares will be allocated among
subscribing Eligible Account Holders proportionately, based on the amount of
their respective qualifying deposits as compared to total qualifying deposits of
all Eligible Account Holders. Subscription Rights received by officers and
directors in this category based on their increased deposits
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in the Savings Bank in the one year period preceding December 31, 1995 are
subordinated to the Subscription Rights of other Eligible Account Holders.
Category 2: ESOP. The Plan of Conversion provides that the ESOP shall
receive nontransferable Subscription Rights to purchase up to 10% of the shares
of Common Stock issued in the Conversion and Reorganization. The ESOP intends to
purchase 8% of the shares of Common Stock issued in the Conversion and
Reorganization. In the event the number of shares offered in the Conversion and
Reorganization is increased above the maximum of the Estimated Valuation Range,
the ESOP shall have a priority right to purchase any such shares exceeding the
maximum of the Estimated Valuation Range up to an aggregate of 8% of the Common
Stock.
Category 3: Supplemental Eligible Account Holders. Each depositor with
$50.00 or more on deposit as of June 30, 1997 will receive nontransferable
Subscription Rights to subscribe for up to the greater of 1% of the shares of
Conversion Stock issued in the Conversion and Reorganization, one-tenth of one
percent of the total offering of Common Stock or 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number of
shares of Common Stock to be issued by a fraction of which the numerator is the
amount of qualifying deposits of the Supplemental Eligible Account Holder and
the denominator is the total amount of qualifying deposits of all Supplemental
Eligible Account Holders. If the exercise of Subscription Rights in this
category results in an oversubscription, shares of Common Stock will be
allocated among subscribing Supplemental Eligible Account Holders so as to
permit each Supplemental Eligible Account Holder, to the extent possible, to
purchase a number of shares sufficient to make his total allocation equal 100
shares or the number of shares actually subscribed for, whichever is less.
Thereafter, unallocated shares will be allocated among subscribing Supplemental
Eligible Account Holders proportionately, based on the amount of their
respective qualifying deposits as compared to total qualifying deposits of all
Supplemental Eligible Account Holders.
Category 4: Other Members. Each depositor of the Savings Bank as of the
Voting Record Date (_____, 1997) and each borrower with a loan outstanding on
October 22, 1993, which continues to be outstanding as of the Voting Record
Date, will receive nontransferable Subscription Rights to purchase up to 1% of
the shares of Conversion Stock issued in the Conversion and Reorganization to
the extent shares are available following subscriptions by Eligible Account
Holders, the Savings Bank's ESOP and Supplemental Eligible Account Holders. In
the event of an oversubscription in this category, the available shares will be
allocated proportionately based on the amount of the respective subscriptions.
Subscription Rights are nontransferable. Persons selling or otherwise
transferring their rights to subscribe for Common Stock in the Subscription
Offering or subscribing for Common Stock on behalf of another person will be
subject to forfeiture of such rights and possible further sanctions and
penalties imposed by the OTS or another agency of the U.S. Government. Each
person exercising Subscription Rights will be required to certify that he or she
is purchasing such shares solely for his or her own account and that he or she
has no agreement or understanding with any other person for the sale or transfer
of such shares. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT THE
CONSENT OF THE SAVINGS BANK AND THE HOLDING COMPANY.
The Holding Company and the Savings Bank will make reasonable attempts to
provide a Prospectus and related offering materials to holders of Subscription
Rights. However, the Subscription Offering and all Subscription Rights under the
Plan of Conversion will expire at ______, Pacific Time, on the Expiration Date,
whether or not the Savings Bank has been able to locate each person entitled to
such Subscription Rights. Orders for Common Stock in the Subscription Offering
received in hand by the Savings Bank after the Expiration Date will not be
accepted. The Subscription Offering may be extended by the Holding Company and
the Savings Bank up to _____, 1997 without the OTS's approval. OTS regulations
require that the Holding Company complete the sale of Conversion Shares within
45 days after the close of the Subscription Offering. If the Direct Community
Offering and the Syndicated Community Offerings are not completed by _____, 1997
(or _______, 1997, if the Subscription Offering is fully extended), all funds
received will be promptly returned with interest at the Savings Bank's passbook
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rate and all withdrawal authorizations will be canceled or, if regulatory
approval of an extension of the time period has been granted, all subscribers
and purchasers will be given the right to increase, decrease or rescind their
orders. If an extension of time is obtained, all subscribers will be notified of
such extension and of the duration of any extension that has been granted, and
will be given the right to increase, decrease or rescind their orders. If an
affirmative response to any resolicitation is not received by the Holding
Company from a subscriber, the subscriber's order will be rescinded and all
funds received will be promptly returned with interest (or withdrawal
authorizations will be canceled). No single extension can exceed 90 days.
Direct Community Offering. Any shares of Common Stock which remain
unsubscribed for in the Subscription Offering will be offered by the Holding
Company to certain members of the general public in a Direct Community Offering,
with preference given first to Public Stockholders (who are not eligible to
subscribe for Conversion Shares in the Subscription Offering) and then to
natural persons and trusts of natural persons residing in the Local Community.
Purchasers in the Direct Community Offering are eligible to purchase up to 1% of
the shares of Conversion Stock issued in the Conversion and Reorganization. In
the event an insufficient number of shares are available to fill orders in the
Direct Community Offering, the available shares will be allocated on a pro rata
basis determined by the amount of the respective orders. The Direct Community
Offering, if held, is expected to commence immediately subsequent to the
Expiration Date, but may begin at anytime during the Subscription Offering. The
Direct Community Offering may terminate on or at any time subsequent to the
Expiration Date, but no later than 45 days after the close of the Subscription
Offering, unless extended by the Holding Company and the Savings Bank, with
approval of the OTS. Any extensions beyond 45 days after the close of the fully
extended Subscription Offering would require a resolicitation of orders, wherein
subscribers for the maximum numbers of shares of Common Stock would be, and
certain other large Subscribers in the discretion of the Holding Company and the
Savings Bank may be, given the opportunity to continue their orders, in which
case they will need to reconfirm affirmatively their subscriptions prior to the
expiration of the resolicitation offering or their subscription funds will be
promptly refunded with interest at the Savings Bank's passbook rate, or be
permitted to modify or cancel their orders. The right of any person to purchase
shares in the Direct Community Offering is subject to the absolute right of the
Holding Company and the Savings Bank to accept or reject such purchases in whole
or in part. If an order is rejected in part, the purchaser does not have the
right to cancel the remainder of the order. The Holding Company presently
intends to terminate the Direct Community Offering as soon as it has received
orders for all shares available for purchase in the Conversion and
Reorganization.
If all of the Common Stock offered in the Subscription Offering is
subscribed for, no Common Stock will be available for purchase in the Direct
Community Offering.
Syndicated Community Offering. The Plan of Conversion provides that, if
necessary, all shares of Common Stock not purchased in the Subscription Offering
and Direct Community Offering, if any, may be offered for sale to certain
members of the general public in a Syndicated Community Offering through a
syndicate of registered broker-dealers to be managed by Pacific Crest acting as
agent of the Holding Company. The Holding Company and the Savings Bank have the
right to reject orders, in whole or part, in their sole discretion in the
Syndicated Community Offering. Neither Webb nor any registered broker-dealer
shall have any obligation to take or purchase any shares of the Common Stock in
the Syndicated Community Offering; however, Webb has agreed to use its best
efforts in the sale of shares in the Syndicated Community Offering.
Conversion Shares sold in the Syndicated Community Offering also will be
sold at the $10.00 Purchase Price. See "-- Stock Pricing, Exchange Ratio and
Number of Shares to be Issued." No person will be permitted to subscribe in the
Syndicated Community Offering for Conversion Shares that exceeds 1% of the
Conversion Shares issued in the Conversion and reorganization. See "-- Plan of
Distribution for the Subscription, Direct Community and Syndicated Community
Offerings" for a description of the commission to be paid to the selected
dealers and to Webb.
Webb may enter into agreements with selected dealers to assist in the sale
of shares in the Syndicated Community Offering. During the Syndicated Community
Offering, selected dealers may only solicit indications of
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interest from their customers to place orders with the Holding Company as of a
certain date ("Order Date") for the purchase of shares of Conversion Stock. When
and if Webb and the Holding Company believe that enough indications of interest
and orders have been received in the Subscription Offering, the Direct Community
Offering and the Syndicated Community Offering to consummate the Conversion and
Reorganization, Webb will request, as of the Order Date, selected dealers to
submit orders to purchase shares for which they have received indications of
interest from their customers. Selected dealers will send confirmations to such
customers on the next business day after the Order Date. Selected dealers may
debit the accounts of their customers on a date which will be three business
days from the Order Date ("Settlement Date"). Customers who authorize selected
dealers to debit their brokerage accounts are required to have the funds for
payment in their account on but not before the Settlement Date. On the
Settlement Date, selected dealers will remit funds to the account that the
Holding Company established for each selected dealer. Each customer's funds so
forwarded to the Holding Company, along with all other accounts held in the same
title, will be insured by the FDIC up to the applicable $100,000 legal limit.
After payment has been received by the Holding Company from selected dealers,
funds will earn interest at the Savings Bank's passbook rate until the
completion of the Conversion Offerings. At the completion of the Conversion and
Reorganization, the funds received in the Conversion Offerings will be used to
purchase the shares of Common Stock ordered. The shares issued in the Conversion
and Reorganization cannot and will not be insured by the FDIC or any other
government agency. In the event the Conversion and Reorganization is not
consummated as described above, funds with interest will be returned promptly to
the selected dealers, who, in turn, will promptly credit their customers'
brokerage accounts.
The Syndicated Community Offering may terminate on or at any time
subsequent to the Expiration Date, but no later than 45 days after the close of
the Subscription Offering, unless extended by the Holding Company and the
Savings Bank, with approval of the OTS.
In the event the Savings Bank is unable to find purchasers from the general
public for all unsubscribed shares, other purchase arrangements will be made by
the Board of Directors of the Savings Bank, if feasible. Such other arrangements
will be subject to the approval of the OTS. The OTS may grant one or more
extensions of the offering period, provided that (i) no single extension exceeds
90 days, (ii) subscribers are given the right to increase, decrease or rescind
their subscriptions during the extension period, and (iii) the extensions do not
go more than two years beyond the date on which the members approved the Plan of
Conversion. If the Conversion and Reorganization is not completed within 45 days
after the close of the Subscription Offering, either all funds received will be
returned with interest (and withdrawal authorizations canceled) or, if the OTS
has granted an extension of time, all subscribers will be given the right to
increase, decrease or rescind their subscriptions at any time prior to 20 days
before the end of the extension period. If an extension of time is obtained, all
subscribers will be notified of such extension and of their rights to modify
their orders. If an affirmative response to any resolicitation is not received
by the Holding Company from a subscriber, the subscriber's order will be
rescinded and all funds received will be promptly returned with interest (or
withdrawal authorizations will be canceled).
Persons in Non-Qualified States. The Holding Company and the Savings Bank
will make reasonable efforts to comply with the securities laws of all states in
the United States in which persons entitled to subscribe for stock pursuant to
the Plan of Conversion reside. However, the Holding Company and the Savings Bank
are not required to offer stock in the Subscription Offering to any person who
resides in a foreign country or resides in a state of the United States with
respect to which (i) a small number of persons otherwise eligible to subscribe
for shares of Common Stock reside in such state or (ii) the Holding Company or
the Savings Bank determines that compliance with the securities laws of such
state would be impracticable for reasons of cost or otherwise, including but not
limited to a request or requirement that the Holding Company and the Savings
Bank or their officers, directors or trustees register as a broker, dealer,
salesman or selling agent, under the securities laws of such state, or a request
or requirement to register or otherwise qualify the Subscription Rights or
Common Stock for sale or submit any filing with respect thereto in such state.
Where the number of persons eligible to subscribe for shares in one state is
small, the Holding Company and the Savings Bank will base their decision as to
whether or not to offer the Common Stock in such state on a number of factors,
including the size of accounts held by account holders in the state, the cost of
reviewing the registration and qualification requirements of the state (and of
actually
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registering or qualifying the shares) or the need to register the Holding
Company, its officers, directors or employees as brokers, dealers or salesmen.
Plan of Distribution for the Subscription, Direct Community and Syndicated
Community Offerings
The Primary Parties have retained Webb to consult with and to advise the
Saving Bank and the Holding Company, and to assist the Holding Company on a best
efforts basis, in the distribution of the Conversion Shares in the Subscription
Offering and Direct Community Offering. The services that Webb will provide
include, but are not limited to (i) training the employees of the Savings Bank
who will perform certain ministerial functions in the Subscription Offering and
the Direct Community Offering regarding the mechanics and regulatory
requirements of the stock offering process, (ii) managing the Stock Information
Center by assisting interested stock subscribers and by keeping records of all
stock orders, (iii) preparing marketing materials, and (iv) assisting in the
solicitation of proxies from the MHC's members and the stockholders of the
Savings Bank for use at the Special Members' Meeting and the Stockholders'
Meeting, respectively. For its services, Webb will receive a management fee of
$25,000 and a success fee of 1.5% of the aggregate Purchase Price of the
Conversion Shares sold in the Subscription Offering and the Direct Community
Offering, excluding shares purchased by the ESOP and officers, directors and
employees of the Savings Bank, or members of their immediate families. The
management fee shall be applied to the success fee. If selected broker-dealers
are used to assist in the sale of the Conversion Shares in the Syndicated
Community Offering, Webb will be paid a fee of up to 5.5% of the aggregate
Purchase Price of the Conversion Shares sold by such broker-dealers and Webb
will pay to such broker-dealers an amount competitive with gross underwriting
commissions then charged for comparable amounts of stock sold at a comparable
price per share in a similar market environment. The Primary Parties have agreed
to reimburse Webb for its out-of-pocket expenses up to $15,000 and its legal
fees up to $30,000. The Primary Parties have also agreed to indemnify Webb
against certain claims or liabilities, including certain liabilities under the
Securities Act, and will contribute to payments Webb may be required to make in
connection with any such claims or liabilities.
Description of Sales Activities
The Common Stock will be offered in the Subscription Offering and Direct
Community Offering principally by the distribution of this Prospectus and
through activities conducted at the Savings Bank's Stock Information Center at
its main office facility. The Stock Information Center is expected to operate
during normal business hours throughout the Subscription Offering and Direct
Community Offering. It is expected that at any particular time one or more Webb
employees will be working at the Stock Information Center. Stock Information
Center personnel will be responsible for mailing materials relating to the
Conversion Offerings, responding to questions regarding the Conversion and
Reorganization and the Conversion Offerings and processing stock orders.
Sales of Common Stock will be made by registered representatives affiliated
with Webb or by the selected dealers managed by Pacific Crest. The management
and employees of the Savings Bank may participate in the Conversion Offerings in
clerical capacities, providing administrative support in effecting sales
transactions or, when permitted by state securities laws, answering questions of
a mechanical nature relating to the proper execution of the Order Form.
Management of the Savings Bank may answer questions regarding the business of
the Savings Bank when permitted by state securities laws. Other questions of
prospective purchasers, including questions as to the advisability or nature of
the investment, will be directed to registered representatives. The management
and employees of the Holding Company and the Savings Bank have been instructed
not to solicit offers to purchase Common Stock or provide advice regarding the
purchase of Common Stock.
No officer, director or employee of the Savings Bank or the Holding Company
will be compensated, directly or indirectly, for any activities in connection
with the offer or sale of securities issued in the Conversion and
Reorganization.
None of the Savings Bank's personnel participating in the Conversion
Offerings is registered or licensed as a broker or dealer or an agent of a
broker or dealer. The Savings Bank's personnel will assist in the above-
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described sales activities pursuant to an exemption from registration as a
broker or dealer provided by Rule 3a4-1 ("Rule 3a4-1") promulgated under the
Exchange Act. Rule 3a4-1 generally provides that an "associated person of an
issuer" of securities shall not be deemed a broker solely by reason of
participation in the sale of securities of such issuer if the associated person
meets certain conditions. Such conditions include, but are not limited to, that
the associated person participating in the sale of an issuer's securities not be
compensated in connection therewith at the time of participation, that such
person not be associated with a broker or dealer and that such person observe
certain limitations on his participation in the sale of securities. For purposes
of this exemption, "associated person of an issuer" is defined to include any
person who is a director, officer or employee of the issuer or a company that
controls, is controlled by or is under common control with the issuer.
Procedure for Purchasing Shares in the Subscription and Direct Community
Offerings
To ensure that each purchaser receives a prospectus at least 48 hours prior
to the Expiration Date in accordance with Rule 15c2-8 under the Exchange Act, no
Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of the Order
Form will confirm receipt or delivery in accordance with Rule 15c2-8. Order
Forms will only be distributed with a Prospectus. The Savings Bank will accept
for processing only orders submitted on original Order Forms. The Savings Bank
is not obligated to accept orders submitted on photocopied or telecopied Order
Forms. Orders cannot and will not be accepted without the execution of the
Certification appearing on the reverse side of the Order Form.
To purchase shares in the Subscription Offering, an executed Order Form
with the required full payment for each share subscribed for, or with
appropriate authorization for withdrawal of full payment from the subscriber's
deposit account with the Savings Bank (which may be given by completing the
appropriate blanks in the Order Form), must be received by the Savings Bank by
______, Pacific Time, on the Expiration Date. Order Forms which are not received
by such time or are executed defectively or are received without full payment
(or without appropriate withdrawal instructions) are not required to be
accepted. The Holding Company and the Savings Bank have the right to waive or
permit the correction of incomplete or improperly executed Order Forms, but do
not represent that they will do so. Pursuant to the Plan of Conversion, the
interpretation by the Holding Company and the Savings Bank of the terms and
conditions of the Plan of Conversion and of the Order Form will be final. In
order to purchase shares in the Direct Community Offering, the Order Form,
accompanied by the required payment for each share subscribed for, must be
received by the Savings Bank prior to the time the Direct Community Offering
terminates, which may be on or at any time subsequent to the Expiration Date.
Once received, an executed Order Form may not be modified, amended or rescinded
without the consent of the Savings Bank unless the Conversion and Reorganization
has not been completed within 45 days after the end of the Subscription
Offering, unless such period has been extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (December 31,
1995) and/or the Supplemental Eligibility Record Date (June 30, 1997) and/or the
Voting Record Date (_______, 1997) must list all accounts on the Order Form
giving all names in each account, the account number and the approximate account
balance as of such date.
Full payment for subscriptions may be made (i) in cash if delivered in
person at the Stock Information Center, (ii) by check, bank draft, or money
order, or (iii) by authorization of withdrawal from deposit accounts maintained
with the Savings Bank. Appropriate means by which such withdrawals may be
authorized are provided on the Order Form. No wire transfers will be accepted.
Interest will be paid on payments made by cash, check, bank draft or money order
at the Savings Bank's passbook rate from the date payment is received until the
completion or termination of the Conversion and Reorganization. If payment is
made by authorization of withdrawal from deposit accounts, the funds authorized
to be withdrawn from a deposit account will continue to accrue interest at the
contractual rates until completion or termination of the Conversion and
Reorganization (unless the certificate matures after the date of receipt of the
Order Form but prior to closing, in which case funds will earn interest at the
passbook rate from the date of maturity until consummation of the Conversion and
Reorganization), but a hold will
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be placed on such funds, thereby making them unavailable to the depositor until
completion or termination of the Conversion and Reorganization. At the
completion of the Conversion and Reorganization, the funds received in the
Conversion Offerings will be used to purchase the shares of Common Stock
ordered. The shares of Common Stock issued in the Conversion and Reorganization
cannot and will not be insured by the FDIC or any other government agency. If
the Conversion and Reorganization is not consummated for any reason, all funds
submitted will be promptly refunded with interest as described above.
If a subscriber authorizes the Savings Bank to withdraw the amount of the
aggregate Purchase Price from his or her deposit account, the Savings Bank will
do so as of the effective date of Conversion and Reorganization, though the
account must contain the full amount necessary for payment at the time the
subscription order is received. The Savings Bank will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization the certificate will be canceled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the Savings
Bank's passbook rate.
The ESOP will not be required to pay for the shares subscribed for at the
time it subscribes, but rather may pay for such shares of Common Stock
subscribed for at the Purchase Price upon consummation of the Conversion and
Reorganization, provided that there is in force from the time of its
subscription until such time, a loan commitment from an unrelated financial
institution or the Holding Company to lend to the ESOP, at such time, the
aggregate Purchase Price of the shares for which it subscribed.
IRAs maintained in the Savings Bank do not permit investment in the Common
Stock. A depositor interested in using his or her IRA funds to purchase Common
Stock must do so through a self-directed IRA. Since the Savings Bank does not
offer such accounts, it will allow such a depositor to make a trustee-to-trustee
transfer of the IRA funds to a trustee offering a self-directed IRA program with
the agreement that such funds will be used to purchase the Holding Company's
Common Stock in the Conversion Offerings. There will be no early withdrawal or
IRS interest penalties for such transfers. The new trustee would hold the Common
Stock in a self-directed account in the same manner as the Savings Bank now
holds the depositor's IRA funds. An annual administrative fee may be payable to
the new trustee. Depositors interested in using funds in a Savings Bank IRA to
purchase Common Stock should contact the Stock Information Center so that the
necessary forms may be forwarded for execution and returned prior to the
Expiration Date. In addition, the provisions of ERISA and IRS regulations
require that officers, directors and 10% shareholders who use self-directed IRA
funds to purchase shares of Common Stock in the Subscription Offering, make such
purchases for the exclusive benefit of IRAs.
Stock Pricing, Exchange Ratio and Number of Shares to be Issued
The Plan of Conversion requires that the purchase price of the Conversion
Shares must be based on the appraised pro forma market value of the Conversion
Shares, as determined on the basis of an independent valuation. The Primary
Parties have retained RP Financial to make such valuation. For its services in
making such appraisal and any expenses incurred in connection therewith, RP
Financial will receive a maximum fee of $25,000 plus out of pocket expenses,
together with a fee of no greater than $5,000 plus out of pocket expenses for
the preparation of a business plan and other services performed in connection
with the Holding Company's holding company application to the OTS. The Primary
Parties have agreed to indemnify RP Financial and its employees and affiliates
against certain losses (including any losses in connection with claims under the
federal securities laws) arising out of its services as appraiser, except where
RP Financial's liability results from its negligence or bad faith.
The appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Consolidated Financial
Statements. RP Financial also considered the following factors, among others:
the present and projected operating results and financial condition of the
Primary Parties and the economic and demographic conditions in the Savings
Bank's existing market area; certain historical, financial and other information
relating to the Savings Bank; a comparative evaluation of the operating and
financial statistics of the Savings Bank with those of other similarly situated
publicly-traded companies located in Washington and other
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regions of the United States; the aggregate size of the offering of the
Conversion Shares; the impact of the Conversion and Reorganization on the
Savings Bank's capital and earnings potential; the proposed dividend policy of
the Holding Company and the Savings Bank; and the trading market for the Savings
Bank Common Stock and securities of comparable companies and general conditions
in the market for such securities.
On the basis of the foregoing, RP Financial has advised the Primary Parties
in its opinion that the estimated pro forma market value of the MHC and the
Savings Bank, as converted, was $24.0 million as of June 6, 1997. Because the
holders of the Public Savings Bank Shares will continue to hold the same
aggregate percentage ownership interest in the Holding Company as they currently
hold in the Savings Bank (before giving effect to the payment of cash in lieu of
issuing fractional Exchange Shares and any Conversion Shares purchased by the
Savings Bank's stockholder in the Conversion Offerings), the appraisal was
multiplied by 58.27%, which represents the MHC's percentage interest in the
Savings Bank. The resulting amount represents the midpoint of the valuation
($24.0 million), and the minimum and maximum of the valuation were set at 15%
below and above the midpoint, respectively, resulting in a range of $20.4
million to $27.6 million. The Boards of Directors of the Primary Parties
determined that the Conversion Shares would be sold at $10.00 per share,
resulting in a range of 2,040,000 to 2,760,000 Conversion Shares being offered.
Upon consummation of the Conversion and Reorganization, the Conversion Shares
and the Exchange Shares will represent approximately 58.27% and 41.73,
respectively, of the Holding Company's total outstanding shares. The Boards of
Directors of the Primary Parties reviewed RP Financial's appraisal report,
including the methodology and the assumptions used by RP Financial, and
determined that the Estimated Valuation Range was reasonable and adequate. The
Boards of Directors of the Primary Parties also established the formula for
determining the Exchange Ratio. Based upon such formula and the Estimated
Valuation Range, the Exchange Ratio ranged from a minimum of 1.4488 to a maximum
of 1.9601 Exchange Shares for each Public Savings Bank Shares, with a midpoint
of 1.7044. Based upon these Exchange Ratios, the Holding Company expects to
issue between 1,460,943 and 1,976,571 shares of Exchange Shares to the holders
of Public Savings Bank Shares outstanding immediately prior to the consummation
of the Conversion and Reorganization. The Estimated Valuation Range and the
Exchange Ratio may be amended with the approval of the OTS, if required, or if
necessitated by subsequent developments in the financial condition of any of the
Primary Parties or market conditions generally. If the appraisal is updated to
below $20.4 million or above $27.6 million (the maximum of the Estimated
Valuation Range, as adjusted by 15%), such Appraisal will be filed with the SEC
by post-effective amendment.
Based upon current market and financial conditions and recent practices and
policies of the OTS, in the event the Holding Company receives orders for
Conversion Shares in excess of $27.6 million (the maximum of the Estimated
Valuation Range) and up to $31.7 million (the maximum of the Estimated Valuation
Range, as adjusted by 15%), the Holding Company may be required by the OTS to
accept all such orders. No assurances, however, can be made that the Holding
Company will receive orders for Conversion Shares in excess of the maximum of
the Estimated Valuation Range or that, if such orders are received, that all
such orders will be accepted because the Holding Company's final valuation and
number of shares to be issued are subject to the receipt of an updated appraisal
from RP Financial which reflects such an increase in the valuation and the
approval of such increase by the OTS. There is no obligation or understanding on
the part of management to take and/or pay for any shares of Conversion Shares to
complete the Conversion Offerings.
RP Financial's valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing such shares. RP
Financial did not independently verify the Savings Bank's Consolidated Financial
Statements and other information provided by the Savings Bank and the MHC, nor
did RP Financial value independently the assets or liabilities of the Savings
Bank. The valuation considers the Savings Bank and the MHC as going concerns and
should not be considered as an indication of the liquidation value of the
Savings Bank and the MHC. Moreover, because such valuation is necessarily based
upon estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons purchasing
Conversion Shares or receiving Exchange Shares in the Conversion and
Reorganization will thereafter be able to sell such shares at prices at or above
the Purchase Price or in the range of the foregoing valuation of the pro forma
market value thereof.
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No sale of Conversion Shares or issuance of Exchange Shares may be
consummated unless prior to such consummation RP Financial confirms that nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause it to conclude that the Purchase Price is materially
incompatible with the estimate of the pro forma market value of a share of
Common Stock upon consummation of the Conversion and Reorganization. If such is
not the case, a new Estimated Valuation Range may be set, a new Exchange Ratio
may be determined based upon the new Estimated Valuation Range, a new
Subscription and Community Offering and/or Syndicated Community Offering or
Public Offering may be held or such other action may be taken as the Primary
Parties shall determine and the OTS may permit or require.
Depending upon market or financial conditions following the commencement of
the Subscription Offering, the total number of Conversion Shares to be issued in
the Conversion Offerings may be increased or decreased without a resolicitation
of subscribers, provided that the product of the total number of shares times
the Purchase Price is not below the minimum or more than 15% above the maximum
of the Estimated Valuation Range. In the event market or financial conditions
change so as to cause the aggregate Purchase Price of the shares to be below the
minimum of the Estimated Valuation Range or more than 15% above the maximum of
such range, purchasers will be resolicited (i.e., permitted to continue their
orders, in which case they will need to affirmatively reconfirm their
subscriptions prior to the expiration of the resolicitation offering or their
subscription funds will be promptly refunded with interest at the Savings Bank's
passbook rate of interest, or be permitted to modify or rescind their
subscriptions). Any increase or decrease in the number of Conversion Shares will
result in a corresponding change in the number of Exchange Shares, so that upon
consummation of the Conversion and Reorganization, the Conversion Shares and the
Exchange Shares will represent approximately 58.27% and 41.73%, respectively, of
the Holding Company's total outstanding shares of Common Stock (exclusive of the
effects of the exercise of outstanding stock options).
An increase in the number of Conversion Shares as a result of an increase
in the appraisal of the estimated pro forma market value would decrease both a
subscriber's ownership interest and the Holding Company's pro forma net earnings
and stockholders' equity on a per share basis while increasing pro forma net
earnings and stockholders' equity on an aggregate basis. A decrease in the
number of Conversion Shares would increase both a subscriber's ownership
interest and the Holding Company's pro forma net earnings and stockholders'
equity on a per share basis while decreasing pro forma net earnings and
stockholders' equity on an aggregate basis. See "RISK FACTORS -- Possible
Dilutive Effect of Benefit Plans" and "PRO FORMA DATA."
The appraisal report of RP Financial has been filed as an exhibit to this
Registration Statement and Application for Conversion of which this Prospectus
is a part and is available for inspection in the manner set forth under
"ADDITIONAL INFORMATION."
Limitations on Purchases of Conversion Shares
The Plan of Conversion provides for certain limitations to be placed upon
the purchase of Common Shares by eligible subscribers and others in the
Conversion and Reorganization. Each subscriber must subscribe for a minimum of
25 Conversion Shares. Except for the ESOP, which is expected to subscribe for 8%
of the shares of Conversion Shares issued in the Conversion and Reorganization,
the Plan of Conversion provides for the following purchase limitations: (i) no
person may purchase in either the Subscription Offering, Direct Community
Offering or Syndicated Community Offering more than 1% of the shares of
Conversion Stock issued in the Conversion and Reorganization, (ii) no person,
together with associates of or persons acting in concert with such person, may
purchase in either the Subscription Offering, Direct Community Offering or
Syndicated Community Offering more than 2% of the shares of Conversion Stock
issued in the Conversion and Reorganization, (iii) the maximum number of shares
of Conversion Shares which may be subscribed for or purchased in all categories
in the Conversion and Reorganization by any person, when combined with any
Exchange Shares received, shall not exceed 1% of the Conversion Shares issued in
the Conversion and Reorganization, and (iv) the maximum number of shares of
Conversion Shares which may be subscribed for or purchased in all categories in
the Conversion and Reorganization by any person, together with any associate or
any group of persons acting in concert, when combined with any
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Exchange Shares received, shall not exceed 2% of the Conversion Shares issued in
the Conversion and Reorganization. For purposes of the Plan of Conversion, the
directors are not deemed to be acting in concert solely by reason of their Board
membership. Pro rata reductions within each Subscription Rights category will be
made in allocating shares to the extent that the maximum purchase limitations
are exceeded.
The Boards of Directors of the Primary Parties may, in their sole
discretion, increase the maximum purchase limitation set forth above up to 9.99%
of the Conversion Shares sold in the Conversion and Reorganization, provided
that orders for shares which exceed 5% of the Conversion Shares sold in the
Conversion and Reorganization may not exceed, in the aggregate, 10% of the
shares sold in the Conversion and Reorganization. The Savings Bank and the
Holding Company do not intend to increase the maximum purchase limitation unless
market conditions are such that an increase in the maximum purchase limitation
is necessary to sell a number of shares in excess of the minimum of the
Estimated Valuation Range. If the Boards of Directors decide to increase the
purchase limitation above, persons who subscribed for the maximum number of
Conversion Shares will be, and other large subscribers in the discretion of the
Holding Company and the Savings Bank may be, given the opportunity to increase
their subscriptions accordingly, subject to the rights and preferences of any
person who has priority Subscription Rights.
The term "acting in concert" is defined in the Plan of Conversion to mean
(i) knowing participation in a joint activity or interdependent conscious
parallel action towards a common goal whether or not pursuant to an express
agreement; or (ii) a combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. In general, a person who acts in concert with another party shall
also be deemed to be acting in concert with any person who is also acting in
concert with that other party.
The term "associate" of a person is defined in the Plan of Conversion to
mean (i) any corporation or organization (other than the Savings Bank or a
majority-owned subsidiary of the Savings Bank) of which such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities; (ii) any trust or other estate in which
such person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity (excluding tax-qualified
employee plans); and (iii) any relative or spouse of such person, or any
relative of such spouse, who either has the same home as such person or who is a
director or officer of the Savings Bank or any of its parents or subsidiaries.
For example, a corporation of which a person serves as an officer would be an
associate of such person and, therefore, all shares purchased by such
corporation would be included with the number of shares which such person could
purchase individually under the above limitations.
The term "officer" is defined in the Plan of Conversion to mean an
executive officer of the Savings Bank, including its Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents in
charge of principal business functions, Secretary and Treasurer.
Common Shares purchased pursuant to the Conversion and Reorganization will
be freely transferable, except for shares purchased by directors and officers of
the Savings Bank and the Holding Company and by NASD members. See "--
Restrictions on Transferability by Directors and Officers and NASD Members."
Delivery and Exchange of Stock Certificates
Conversion Stock. Certificates representing Conversion Shares will be
mailed by the Holding Company's transfer agent to the persons entitled thereto
at the addresses of such persons appearing on the Stock Order Form as soon as
practicable following the consummation of the Conversion and Reorganization. Any
undeliverable certificates will be held by the Holding Company until claimed by
persons legally entitled thereto or otherwise disposed according to applicable
law. Purchasers of Conversion Shares may be unable to sell such shares until
certificates are available and delivered to them.
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Exchange Shares. After the consummation of the Conversion and
Reorganization, each holder of a certificate(s) theretofore evidencing issued
and outstanding shares of Savings Bank Common Stock (other than the MHC), upon
surrender of the same to an agent, duly appointed by the Holding Company, which
is anticipated to be the transfer agent for the Common Stock ("Exchange Agent"),
shall be entitled to receive in exchange therefor a certificate(s) representing
the number of full Exchange Shares based on the Exchange Ratio. The Exchange
Agent shall mail a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to such certificate shall
pass, only upon delivery of such certificate to the Exchange Agent) advising
such holder of the terms of the Exchange Offering and the procedure for
surrendering to the Exchange Agent such certificates in exchange for a
certificate(s) evidencing Common Stock. The Savings Bank Stockholders should not
forward Savings Bank Common Stock certificates to the Savings Bank or the
Exchange Agent until they have received the transmittal letter.
No holder of a certificate theretofore representing shares of Savings Bank
Common Stock shall be entitled to receive any dividends on the Common Stock
until the certificate representing such shares is surrendered in exchange for
certificates representing shares of Common Stock. In the event that dividends
are declared and paid by the Holding Company in respect of Common Stock after
the consummation of the Conversion and Reorganization, but before surrender of
certificates representing shares of Savings Bank Common Stock, dividends payable
in respect of shares of Common Stock not then issued shall accrue (without
interest). Any such dividends shall be paid (without interest) upon surrender of
the certificates representing such shares of Savings Bank Common Stock. After
the consummation of the Conversion and Reorganization, the Holding Company shall
be entitled to treat certificates representing shares of Savings Bank Common
Stock as evidencing ownership of the number of full shares of Common Stock into
which the shares of Savings Bank Common Stock represented by such certificates
shall have been converted, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
The Holding Company shall not be obligated to deliver a certificate(s)
representing shares of Common Stock to which a holder of Savings Bank Common
Stock would otherwise be entitled as a result of the Conversion and
Reorganization until such holder surrenders the certificate(s) representing the
shares of Savings Bank Common Stock for exchange as provided above, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond as may be required in each case by the Holding Company. If any
certificate evidencing shares of Common Stock is to be issued in a name other
than that in which the certificate evidencing Savings Bank Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Common Stock in any name other
than that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
Restrictions on Repurchase of Stock
Pursuant to OTS regulations, OTS-regulated savings associations (and their
holding companies) may not for a period of three years from the date of an
institution's mutual-to-stock conversion repurchase any of its common stock from
any person, except in the event of (i) an offer made to all of its stockholders
to repurchase the common stock on a pro rata basis, approved by the OTS; or (ii)
the repurchase of qualifying shares of a director; or (iii) a purchase in the
open market by a tax-qualified or non-tax-qualified employee stock benefit plan
in an amount reasonable and appropriate to fund the plan. Furthermore,
repurchases of any common stock are prohibited if the effect thereof would cause
the association's regulatory capital to be reduced below (a) the amount required
for the liquidation account or (b) the regulatory capital requirements imposed
by the OTS. Repurchases are generally prohibited during the first year following
conversion. Upon ten days' written notice to the OTS, and if the OTS does not
object, an institution may make open market repurchases of its outstanding
common stock during years two and three following the conversion, provided that
certain regulatory conditions are met and that the repurchase would not
adversely affect the financial condition of the association. Any repurchases of
common stock by the Holding Company would be subject to these regulatory
restrictions unless the OTS would provide otherwise.
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Restrictions on Transferability by Directors and Officers and NASD Members
Shares of Common Stock purchased in the Conversion Offerings by directors
and officers of the Holding Company may not be sold for a period of one year
following consummation of the Conversion and Reorganization, except in the event
of the death of the stockholder or in any exchange of the Common Stock in
connection with a merger or acquisition of the Holding Company. Shares of Common
Stock received by directors or officers through the ESOP or the MRP or upon
exercise of options issued pursuant to the Stock Option Plan or purchased
subsequent to the Conversion and Reorganization are not subject to this
restriction. Accordingly, shares of Common Stock issued by the Holding Company
to directors and officers shall bear a legend giving appropriate notice of the
restriction and, in addition, the Holding Company will give appropriate
instructions to the transfer agent for the Holding Company's Common Stock with
respect to the restriction on transfers. Any shares issued to directors and
officers as a stock dividend, stock split or otherwise with respect to
restricted Common Stock shall be subject to the same restrictions.
Purchases of outstanding shares of Common Stock of the Holding Company by
directors, executive officers (or any person who was an executive officer or
director of the Savings Bank after adoption of the Plan of Conversion and
Reorganization) and their associates during the three-year period following
Conversion and Reorganization may be made only through a broker or dealer
registered with the SEC, except with the prior written approval of the OTS. This
restriction does not apply, however, to negotiated transactions involving more
than 1% of the Holding Company's outstanding Common Stock or to the purchase of
stock pursuant to the Stock Option Plan.
The Holding Company has filed with the SEC a registration statement under
the Securities Act for the registration of the Common Stock to be issued
pursuant to the Conversion and Reorganization. The registration under the
Securities Act of shares of the Common Stock to be issued in the Conversion and
Reorganization does not cover the resale of such shares. Shares of Common Stock
purchased by persons who are not affiliates of the Holding Company may be resold
without registration. Shares purchased by an affiliate of the Holding Company
will be subject to the resale restrictions of Rule 144 under the Securities Act.
If the Holding Company meets the current public information requirements of Rule
144 under the Securities Act, each affiliate of the Holding Company who complies
with the other conditions of Rule 144 (including those that require the
affiliate's sale to be aggregated with those of certain other persons) would be
able to sell in the public market, without registration, a number of shares not
to exceed, in any three-month period, the greater of (i) 1% of the outstanding
shares of the Holding Company or (ii) the average weekly volume of trading in
such shares during the preceding four calendar weeks. Provision may be made in
the future by the Holding Company to permit affiliates to have their shares
registered for sale under the Securities Act under certain circumstances.
Under guidelines of the NASD, members of the NASD and their associates are
subject to certain restrictions on the transfer of securities purchased in
accordance with Subscription Rights and to certain reporting requirements upon
purchase of such securities.
COMPARISON OF STOCKHOLDERS' RIGHTS
General. As a result of the Conversion and Reorganization, holders of the
Savings Bank Common Stock will become stockholders of the Holding Company, a
Washington corporation. There are certain differences in stockholder rights
arising from distinctions between the Savings Bank's Federal Stock Charter and
Bylaws and the Holding Company's Articles of Incorporation and Bylaws and from
distinctions between laws with respect to federally chartered savings
institutions and Washington law.
The discussion herein is not intended to be a complete statement of the
differences affecting the rights of stockholders, but rather summarizes the more
significant differences and certain important similarities. The discussion
herein is qualified in its entirety by reference to the Articles of
Incorporation and Bylaws of the Holding Company and the WBCA. See "ADDITIONAL
INFORMATION" for procedures for obtaining a copy of the Holding Company's
Articles of Incorporation and Bylaws.
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Authorized Capital Stock. The Holding Company's authorized capital stock
consists of 50,000,000 shares of Common Stock, par value $.01 per share and
250,000 shares of preferred stock, par value $.01 per share ("Preferred Stock").
The Savings Bank's authorized capital stock consists of 4,000,000 shares of
Savings Bank Common Stock and 1,000,000 shares of serial preferred stock, par
value $1.00 per share. The shares of Common Stock and Preferred Stock were
authorized in an amount greater than that to be issued in the Conversion and
Reorganization to provide the Holding Company's Board of Directors with
flexibility to effect, among other transactions, financings, acquisitions, stock
dividends, stock splits and employee stock options. However, these additional
authorized shares may also be used by the Board of Directors consistent with its
fiduciary duty to deter future attempts to gain control of the Holding Company.
The Board of Directors also has sole authority to determine the terms of any one
or more series of Preferred Stock, including voting rights, conversion rates,
and liquidation preferences. As a result of the ability to fix voting rights for
a series of Preferred Stock, the Board has the power, to the extent consistent
with its fiduciary duty, to issue a series of Preferred Stock to persons
friendly to management in order to attempt to block a post tender offer merger
or other transaction by which a third party seeks control, and thereby assist
management to retain its position. The Holding Company's Board currently has no
plan for the issuance of additional shares, other than the issuance of
additional shares pursuant to stock benefit plans.
Issuance of Capital Stock. Pursuant to applicable laws and regulations, the
MHC is required to own not less than a majority of the outstanding Savings Bank
Common Stock. There will be no such restriction applicable to the Holding
Company following consummation of the Conversion and Reorganization.
The Holding Company's Articles of Incorporation do not contain restrictions
on the issuance of shares of capital stock to directors, officers or controlling
persons of the Holding Company, whereas the Savings Bank's Federal Stock Charter
restricts such issuance to general public offerings, or if qualifying shares, to
directors, unless the share issuance or the plan under which they would be
issued has been approved by a majority of the total votes eligible to be cast at
a legal stockholders meeting. Thus, stock-related compensation plans such as
stock option plans could be adopted by the Holding Company without stockholder
approval and shares of Holding Company capital stock could be issued directly to
directors or officers without stockholder approval. The Bylaws of the NASD,
however, generally require corporations with securities which are quoted on the
Nasdaq National Market System to obtain stockholder approval of most stock
compensation plans for directors, officers and key employees of the corporation.
Moreover, although generally not required, stockholder approval of stock related
compensation plans may be sought in certain instances in order to qualify such
plans for favorable federal income tax and securities law treatment under
current laws and regulations. The Holding Company plans to submit the stock
compensation plans discussed herein to its stockholders for approval.
Voting Rights. Neither the Savings Bank's Federal Stock Charter or Bylaws
nor the Holding Company's Articles of Incorporation or Bylaws currently provide
for cumulative voting in elections of directors. For additional information
regarding voting rights, see "-- Limitations on Acquisitions of Voting Stock and
Voting Rights" below.
Payment of Dividends. The ability of the Savings Bank to pay dividends on
its capital stock is restricted by OTS regulations and by federal income tax
considerations related to savings institutions such as the Savings Bank. See
"REGULATION -- Federal Regulation of the Savings Bank -- Capital Requirements"
and "TAXATION." Although the Holding Company is not subject to these
restrictions as a Washington corporation, such restrictions will indirectly
affect the Holding Company because dividends from the Savings Bank will be a
primary source of funds of the Holding Company for the payment of dividends to
stockholders of the Holding Company.
Certain restrictions generally imposed on Washington corporations may also
have an impact on the Holding Company's ability to pay dividends. The WBCA
provides that dividends may be paid only if, after giving effect to the
dividend, the Holding Company will be able to pay its debts as they become due
in the ordinary course of business and the Holding Company's total assets will
not be less than the sum of its total liabilities plus the amount that would be
needed, if the Holding Company were to be dissolved at the time of the dividend,
to satisfy the preferential rights of persons whose right to payment is superior
to those receiving the dividend.
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Board of Directors. The Savings Bank's Federal Stock Charter and Bylaws and
the Holding Company's Articles of Incorporation and Bylaws each require the
Board of Directors of the Savings Bank and the Holding Company to be divided
into three classes as nearly equal in number as possible and that the members of
each class shall be elected for a term of three years and until their successors
are elected and qualified, with one class being elected annually.
Under the Savings Bank's Bylaws, any vacancies in the Board of Directors of
the Savings Bank may be filled by the affirmative vote of a majority of the
remaining directors although less than a quorum of the Board of Directors.
Persons elected by the directors of the Savings Bank to fill vacancies may only
serve until the next annual meeting of stockholders. Under the Holding Company's
Articles of Incorporation, any vacancy occurring in the Board of Directors of
the Holding Company, including any vacancy created by reason of an increase in
the number of directors, may be filled by the remaining directors, and any
director so chosen shall hold office for the remainder of the term to which the
director has been elected and until his or her successor is elected and
qualified.
Under the Savings Bank's Bylaws, any director may be removed for cause by
the holders of a majority of the outstanding voting shares. The Holding
Company's Articles of Incorporation provide that any director may be removed for
cause by a majority of the directors of the Holding Company or by the holders of
at least 80% of the outstanding voting shares of the Holding Company.
Limitations on Liability. The Holding Company's Articles of Incorporation
provides that the directors of the Holding Company shall not be personally
liable for monetary damages to the Holding Company for certain breaches of their
fiduciary duty as directors, except for liabilities that involve intentional
misconduct by the director, the authorization or illegal distributions or
receipt of an improper personal benefit from their actions as directors. This
provision might, in certain instances, discourage or deter shareholders or
management from bringing a lawsuit against directors for a breach of their
duties even though such an action, if successful, might have benefitted the
Holding Company.
Currently, federal law does not permit federally chartered savings
institutions such as the Savings Bank to limit the personal liability of
directors in the manner provided by the WBCA and the laws of many other states.
Indemnification of Directors, Officers, Employees and Agents. The Savings
Bank's Federal Stock Charter and Bylaws do not contain any provision relating to
indemnification of directors and officers of the Savings Bank. Under current OTS
regulations, however, the Savings Bank shall indemnify its directors, officers
and employees for any costs incurred in connection with any litigation involving
any such person's activities as a director, officer or employee if such person
obtains a final judgment on the merits in his or her favor. In addition,
indemnification is permitted in the case of a settlement, a final judgment
against such person or final judgment other than on the merits, if a majority of
disinterested directors determine that such person was acting in good faith
within the scope of his or her employment as he or she could reasonably have
perceived it under the circumstances and for a purpose he or she could
reasonably have believed under the circumstances was in the best interest of the
Savings Bank or its stockholders. The Savings Bank also is permitted to pay
ongoing expenses incurred by a director, officer or employee if a majority of
disinterested directors concludes that such person may ultimately be entitled to
indemnification. Before making any indemnification payment, the Savings Bank is
required to notify the OTS of its intention and such payment cannot be made if
the OTS objects thereto.
The officers, directors, agents and employees of the Holding Company are
indemnified with respect to certain actions pursuant to the Holding Company's
Articles of Incorporation, which complies with the WBCA regarding
indemnification. The WBCA allows the Holding Company to indemnify the
aforementioned persons for expenses, settlements, judgments and fines in suits
in which such person has made a party by reason of the fact that he or she is or
was an agent of the Holding Company. No such indemnification may be given if the
acts or omissions of the person are adjudged to be in violation of law, if such
person is liable to the corporation for an unlawful distribution, or if such
person personally received a benefit to which he or she was not entitled.
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Special Meetings of Stockholders. The Holding Company's Articles of
Incorporation provides that special meetings of the stockholders of the Holding
Company may be called by the Chairman, President, a majority of the Board of
Directors or the holders of not less than a majority of the outstanding capital
stock of the Holding Company entitled to vote at the meeting. The Savings Bank's
Federal Stock Charter provides that, until October 22, 1998 (i.e., five years
after the consummation of the MHC Reorganization), special meeting of the
Savings Bank's stockholders may only be called by the Board of Directors.
Thereafter, special meetings may be called by the Chairman, President, a
majority of the Board of Directors or the holders of not less than a majority of
the outstanding capital stock of the Savings Bank entitled to vote at the
meeting.
Stockholder Nominations and Proposals. The Savings Bank's Bylaws generally
provide that stockholders may submit nominations for election as director at an
annual meeting of stockholders and any new business to be taken up at such a
meeting by filing such in writing with the Savings Bank at least thirty days
before the date of any such meeting.
The Holding Company's Bylaws generally provide that any stockholder
desiring to make a nomination for the election of directors or a proposal for
new business at a meeting of stockholders must submit written notice to the
Holding Company at least 30 days and not more than 60 days in advance of the
meeting, together with certain information relating to the nomination or new
business. Failure to comply with these advance notice requirements will preclude
such nominations or new business from being considered at the meeting.
Management believes that it is in the best interests of the Holding Company and
its stockholders to provide sufficient time to enable management to disclose to
stockholders information about a dissident slate of nominations for directors.
This advance notice requirement may also give management time to solicit its own
proxies in an attempt to defeat any dissident slate of nominations, should
management determine that doing so is in the best interest of stockholders
generally. Similarly, adequate advance notice of stockholder proposals will give
management time to study such proposals and to determine whether to recommend to
the stockholders that such proposals be adopted. In certain instances, such
provisions could make it more difficult to oppose management's nominees or
proposals, even if stockholders believe such nominees or proposals are in their
best interests.
Stockholder Action Without a Meeting. The Bylaws of the Holding Company and
the Savings Bank provide that any action to be taken or which may be taken at
any annual or special meeting of stockholders may be taken if a consent in
writing, setting forth the actions so taken, is given by the holders of all
outstanding shares entitled to vote.
Stockholder's Right to Examine Books and Records. A federal regulation
which is applicable to the Savings Bank provides that stockholders may inspect
and copy specified books and records of a federally chartered savings
institution after proper written notice for a proper purpose. The WBCA similarly
provides that a stockholder may inspect books and records upon written demand
stating the purpose of the inspection, if such purpose is reasonably related to
such person's interest as a stockholder.
Limitations on Acquisitions of Voting Stock and Voting Rights. The Holding
Company's Articles of Incorporation provide that no person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of (i) more than
10% of the issued and outstanding shares of any class of an equity security of
the Holding Company, or (ii) any securities convertible into, or exercisable
for, any equity securities of the Holding Company if, assuming conversion or
exercise by such person of all securities of which such person is the beneficial
owner which are convertible into, or exercisable for, such equity securities
(but of no securities convertible into, or exercisable for, such equity
securities of which such person is not the beneficial owner), such person would
be the beneficial owner of more than 10% of any class of an equity security of
the Holding Company. The term "person" is broadly defined in the Articles of
Incorporation to prevent circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view toward
public resale made exclusively to the Holding Company by underwriters or a
selling group acting on its behalf, (ii) any employee benefit plan established
by the Holding Company or the Savings Bank, and (iii) any other offer or
acquisition approved in
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advance by the affirmative vote of two-thirds of the Holding Company's Board of
Directors. In the event that shares are acquired in violation of this
restriction, all shares beneficially owned by any person in excess of 10% shall
not be counted as shares entitled to vote and shall not be voted by any person
or counted as voting shares in connection with any matters submitted to
stockholders for a vote.
Neither the Charter nor the Bylaws of the Savings Bank contains a provision
which restricts voting rights of certain stockholders of the Savings Bank in the
manner set forth above.
Mergers, Consolidations and Sales of Assets. A federal regulation requires
the approval of two-thirds the Board of Directors of the Savings Bank and the
holders of two-thirds of the outstanding stock of the Savings Bank entitled to
vote thereon for mergers, consolidations and sales of all or substantially all
of the Savings Bank's assets. Such regulation permits the Savings Bank to merge
with another corporation without obtaining the approval of its stockholders if:
(i) it does not involve an interim savings institution; (ii) the Savings Bank's
Federal Stock Charter is not changed; (iii) each share of the Savings Bank's
stock outstanding immediately prior to the effective date of the transaction is
to be an identical outstanding share or a treasury share of the Savings Bank
after such effective date; and (iv) either: (A) no shares of voting stock of the
Savings Bank and no securities convertible into such stock are to be issued or
delivered under the plan of combination or (B) the authorized unissued shares or
the treasury shares of voting stock of the Savings Bank to be issued or
delivered under the plan of combination, plus those initially issuable upon
conversion of any securities to be issued or delivered under such plan, do not
exceed 15% of the total shares of voting stock of the Savings Bank outstanding
immediately prior to the effective date of the transaction.
The WBCA generally provides that the affirmative vote of the holders of at
least two-thirds of the outstanding shares entitled to vote thereon (and, if any
class or series of shares is entitled to vote thereon separately, the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of each such class or series) is required to authorize any merger, share
exchange or consolidation of the Holding Company in which the Holding Company is
not the surviving corporation, or any sale, lease, exchange, transfer or other
disposition of all, or substantially all, of the assets of the Holding Company.
The WBCA further restricts certain business combination between the Holding
Company and an interested shareholder (i.e., a person or group that beneficially
owns ten percent or more of the outstanding voting shares of the Holding
Company). The WBCA generally precludes the Holding Company from engaging in any
business combination with an interested shareholder within five years after the
acquisition pursuant to which the shareholder became an interested shareholder,
unless the business combination or the purchase of shares that caused the
shareholder to become an interested shareholder is approved by a majority of the
directors of the Holding Company prior to the person becoming an interested
shareholder.
The Holding Company's Articles of Incorporation requires the approval of
the holders of (i) at least 80% of the Holding Company's outstanding shares of
voting stock, and (ii) at least a majority of the Holding Company's outstanding
shares of voting stock, not including shares held by a "Related Person," to
approve certain "Business Combinations," except in cases where the proposed
transaction has been approved in advance by a majority of those members of the
Holding Company's Board of Directors who were directors prior to the time when
the Related Person became a Related Person. In the event the requisite approval
of the Board were given, the normal vote requirement of applicable Washington
law as described above would apply, or, for certain transactions, no shareholder
vote would be necessary. The term "Related Person" is defined to include any
individual, corporation, partnership or other entity which owns beneficially or
controls, directly or indirectly, 10% or more of the outstanding shares of
voting stock of the Holding Company. The term "Business Combination" is defined
to include among other things: (i) any merger or consolidation of the Holding
Company or any of its affiliates with or into any Related Person; (ii) any sale,
lease, exchange, mortgage, transfer, or other disposition of all or a
substantial part of the assets of the Holding Company or any of its affiliates
to any Related Person (the term "substantial part" is defined to include more
than 25% of the Holding Company's total assets); (iii) any sale, lease,
exchange, or other transfer by any Related Person to the Holding Company of all
or a substantial part of the assets of Related Person; (iv) the acquisition by
the Holding Company of any securities of the Related Person; (v) any
reclassification of the Holding Company Common Stock; and (vi) any agreement,
contract or other arrangement providing for any of the
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transactions described above. The increased shareholder vote required to approve
a Business Combination may have the effect of foreclosing mergers and other
business combinations which a majority of shareholders deem desirable and place
the power to prevent such a merger or combination in the hands of a minority of
shareholders.
The Holding Company's Articles of Incorporation requires the Holding
Company's Board of Directors to consider certain factors in addition to the
amount of consideration to be paid when evaluating certain business combinations
or a tender or exchange offer. These additional factors include: (i) the social
and economic effects of the transaction; (ii) the business and financial
condition and earnings prospects of the acquiring person or entity; and (iii)
the competence, experience, and integrity of the acquiring person or entity and
its management.
As holder of all of the outstanding Savings Bank Common Stock after
consummation of the Conversion and Reorganization, the Holding Company generally
will be able to authorize a merger, consolidation or other business combination
involving the Savings Bank without the approval of the stockholders of the
Holding Company.
Dissenters' Rights of Appraisal. An OTS regulation, which is applicable to
the Savings Bank, generally provides that a stockholder of a federally chartered
savings institution which engages in a merger, consolidation or sale of all or
substantially all of its assets shall have the right to demand from such
institution payment of the fair or appraised value of his or her stock in the
institution, subject to specified procedural requirements. This regulation also
provides, however, that the stockholders of a federally chartered savings
institution with stock which is listed on a national securities exchange or
quoted on the Nasdaq System are not entitled to dissenters' rights in connection
with a merger involving such savings institution if the stockholder is required
to accept only "qualified consideration" for his or her stock, which is defined
to include cash, shares of stock of any institution or corporation which at the
effective date of the merger will be listed on a national securities exchange or
quoted on the Nasdaq System or any combination of such shares of stock and cash.
Under the WBCA, shareholders of the Holding Company will generally have
dissenter's appraisal rights in connection with (i) a plan of merger to which
the Holding Company is a party; (ii) a plan of share exchange to which the
Holding Company is a party as the corporation whose shares will be acquired;
(iii) certain sales or exchanges of all, or substantially all, of the Holding
Company's property other than in the regular course of business; and (iv)
amendments to the Holding Company's Articles of Incorporation effecting a
material reverse stock split.
Amendment of Governing Instruments. No amendment of the Savings Bank's
Federal Stock Charter may be made unless it is first proposed by the Board of
Directors of the Savings Bank, then preliminarily approved by the OTS, and
thereafter approved by the holders of a majority of the total votes eligible to
be cast at a legal meeting. The Holding Company's Articles of Incorporation may
be amended by the vote of the holders of a majority of the outstanding shares of
Holding Company Common Stock, except that the provisions of the Articles of
Incorporation governing (i) the duration of the corporation, (ii) the purpose
and powers of the corporation, (iii) authorized capital stock, (iv) denial of
preemptive rights, (v) the number and staggered terms of directors, (vi) removal
of directors, (vii) approval of certain business combinations, (viii) the
evaluation of certain business combinations, (ix) elimination of directors'
liability, (x) indemnification of officers and directors, (xi) calling of
special meetings of shareholders, (xii) the authority to repurchase shares and
(xiii) the manner of amending the Articles of Incorporation may not be repealed,
altered, amended or rescinded except by the vote of the holders of at least 80%
of the outstanding shares of the Holding Company. This provision is intended to
prevent the holders of a lesser percentage of the outstanding stock of the
Holding Company from circumventing any of the foregoing provisions by amending
the Articles of Incorporation to delete or modify one of such provisions.
The Bylaws of the Savings Bank may be amended by a majority vote of the
full Board of Directors of the Savings Bank or by a majority vote of the votes
cast by the stockholders of the Savings Bank at any legal meeting. The Holding
Company's Bylaws only be amended by a majority vote of the Board of Directors of
the Holding Company or by the holders of at least 80% of the outstanding stock
by the Holding Company.
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Purpose and Takeover Defensive Effects of the Holding Company's Articles of
Incorporation and Bylaws. The Board of Directors of the Savings Bank believes
that the provisions described above are prudent and will reduce the Holding
Company's vulnerability to takeover attempts and certain other transactions that
have not been negotiated with and approved by its Board of Directors. These
provisions will also assist the Savings Bank in the orderly deployment of the
Conversion and Reorganization proceeds into productive assets during the initial
period after the Conversion and Reorganization. The Board of Directors believes
these provisions are in the best interest of the Savings Bank and Holding
Company and its stockholders. In the judgment of the Board of Directors, the
Holding Company's Board will be in the best position to determine the true value
of the Holding Company and to negotiate more effectively for what may be in the
best interests of its stockholders. Accordingly, the Board of Directors believes
that it is in the best interest of the Holding Company and its stockholders to
encourage potential acquirors to negotiate directly with the Board of Directors
of the Holding Company and that these provisions will encourage such
negotiations and discourage hostile takeover attempts. It is also the view of
the Board of Directors that these provisions should not discourage persons from
proposing a merger or other transaction at a price reflective of the true value
of the Holding Company and that is in the best interest of all stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts that have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms that may be less favorable than
might otherwise be available. A transaction that is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value of the Holding
Company for its stockholders, with due consideration given to matters such as
the management and business of the acquiring corporation and maximum strategic
development of the Holding Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above the current
market prices, such offers are sometimes made for less than all of the
outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous, or retaining their investment in an enterprise
that is under different management and whose objectives may not be similar to
those of the remaining stockholders. The concentration of control, which could
result from a tender offer or other takeover attempt, could also deprive the
Holding Company's remaining stockholders of benefits of certain protective
provisions of the Exchange Act, if the number of beneficial owners became less
than 300, thereby allowing for deregistration under the Exchange Act.
Despite the belief of the Savings Bank and the Holding Company as to the
benefits to stockholders of these provisions of the Holding Company's Articles
of Incorporation and Bylaws, these provisions may also have the effect of
discouraging a future takeover attempt that would not be approved by the Holding
Company's Board, but pursuant to which stockholders may receive a substantial
premium for their shares over then current market prices. As a result,
stockholders who might desire to participate in such a transaction may not have
any opportunity to do so. Such provisions will also render the removal of the
Holding Company's Board of Directors and of management more difficult. The Board
of Directors of the Savings Bank and the Holding Company, however, have
concluded that the potential benefits outweigh the possible disadvantages.
Following the Conversion and Reorganization, pursuant to applicable law
and, if required, following the approval by stockholders, the Holding Company
may adopt additional anti-takeover charter provisions or other devices regarding
the acquisition of its equity securities that would be permitted for a
Washington business corporation.
The cumulative effect of the restriction on acquisition of the Holding
Company contained in the Articles of Incorporation and Bylaws of the Holding
Company and in Federal and Washington law may be to discourage potential
takeover attempts and perpetuate incumbent management, even though certain
stockholders of the Holding Company may deem a potential acquisition to be in
their best interests, or deem existing management not to be acting in their best
interests.
103
<PAGE>
RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY
The following discussion is a summary of certain provisions of federal law
and regulations and Washington corporate law relating to stock ownership and
transfers, the Board of Directors and business combinations, all of which may be
deemed to have "anti-takeover" effects. The description of these provisions is
necessarily general and reference should be made to the actual law and
regulations.
Conversion Regulations
OTS regulations prohibit any person from making an offer, announcing an
intent to make an offer or participating in any other arrangement to purchase
stock or acquiring stock or subscription rights in a converting institution (or
its holding company) from another person prior to completion of its conversion.
Further, without the prior written approval of the OTS, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the converting institution (or its holding company) for a period of
three years from the date of the completion of the conversion if, upon the
completion of such offer, announcement or acquisition, that person would become
the beneficial owner of more than 10% of the outstanding stock of the
institution (or its holding company). The OTS has defined "person" to include
any individual, group acting in concert, corporation, partnership, association,
joint stock company, trust, unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution. However, offers made
exclusively to an association (or its holding company) or an underwriter or
member of a selling group acting on the converting institution's (or its holding
company's) behalf for resale to the general public are excepted. The regulation
also provides civil penalties for willful violation or assistance in any such
violation of the regulation by any person connected with the management of the
converting institution (or its holding company) or who controls more than 10% of
the outstanding shares or voting rights of a converting or converted institution
(or its holding company).
As permitted by OTS regulations, the Savings Bank's Federal Stock Charter
contains a provision whereby the acquisition or offer to acquire ownership of
more than 10% of the issued and outstanding shares of any class of equity
securities of the Savings Bank by any person, either directly or through an
affiliate of such person, will be prohibited for a period of five years
following the date of consummation of the Conversion and Reorganization. Any
stock in excess of 10% acquired in violation of the Federal Stock Charter
provision will not be counted as outstanding for voting purposes. Furthermore,
for five years from the consummation date of the MHC Reorganization,
stockholders of the Savings Bank will not be permitted to call a special meeting
of stockholders relating to a change of control of the Savings Bank or a charter
amendment and will not be permitted to cumulate their votes in the election of
directors.
Change of Control Regulations
Under the Change in Bank Control Act, no person may acquire control of an
insured federal savings and loan association or its parent holding company
unless the OTS has been given 60 days' prior written notice and has not issued a
notice disapproving the proposed acquisition. In addition, OTS regulations
provide that no company may acquire control of a savings association without the
prior approval of the OTS. Any company that acquires such control becomes a
"savings and loan holding company" subject to registration, examination and
regulation by the OTS.
Control, as defined under federal law, means ownership, control of or
holding irrevocable proxies representing more than 25% of any class of voting
stock, control in any manner of the election of a majority of the savings
association's directors, or a determination by the OTS that the acquiror has the
power to direct, or directly or indirectly to exercise a controlling influence
over, the management or policies of the institution. Acquisition of more than
10% of any class of a savings association's voting stock, if the acquiror also
is subject to any one of eight "control factors," constitutes a rebuttable
determination of control under the regulations. Such control factors include the
acquiror being one of the two largest stockholders. The determination of control
may be rebutted by submission
104
<PAGE>
to the OTS, prior to the acquisition of stock or the occurrence of any other
circumstances giving rise to such determination, of a statement setting forth
facts and circumstances which would support a finding that no control
relationship will exist and containing certain undertakings. The regulations
provide that persons or companies which acquire beneficial ownership exceeding
10% or more of any class of a savings association's stock must file with the OTS
a certification form that the holder is not in control of such institution, is
not subject to a rebuttable determination of control and will take no action
which would result in a determination or rebuttable determination of control
without prior notice to or approval of the OTS, as applicable. There are also
rebuttable presumptions in the regulations concerning whether a group "acting in
concert" exists, including presumed action in concert among members of an
"immediate family."
The OTS may prohibit an acquisition of control if it finds, among other
things, that (i) the acquisition would result in a monopoly or substantially
lessen competition, (ii) the financial condition of the acquiring person might
jeopardize the financial stability of the institution, or (iii) the competence,
experience or integrity of the acquiring person indicates that it would not be
in the interest of the depositors or the public to permit the acquisition of
control by such person.
DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY
General
The Holding Company is authorized to issue 50,000,000 shares of Common
Stock having a par value of $.01 per share and 250,000 shares of preferred stock
having a par value of $.01 per share. The Holding Company currently expects to
issue up to 4,736,571 shares of Common Stock and no shares of preferred stock in
the Conversion and Reorganization. Each share of the Holding Company's Common
Stock will have the same relative rights as, and will be identical in all
respects with, each other share of Common Stock. Upon payment of the Purchase
Price for the Common Stock, in accordance with the Plan of Conversion, all such
stock will be duly authorized, fully paid and nonassessable.
The Common Stock of the Holding Company will represent nonwithdrawable
capital, will not be an account of any type, and will not be insured by the FDIC
or any other government agency.
Common Stock
Dividends. The Holding Company can pay dividends out of statutory surplus
or from certain net profits if, as and when declared by its Board of Directors.
The payment of dividends by the Holding Company is subject to limitations which
are imposed by law and applicable regulation. See "DIVIDEND POLICY" and
"REGULATION." The holders of Common Stock of the Holding Company will be
entitled to receive and share equally in such dividends as may be declared by
the Board of Directors of the Holding Company out of funds legally available
therefor. If the Holding Company issues preferred stock, the holders thereof may
have a priority over the holders of the Common Stock with respect to dividends.
Stock Repurchases. The Plan of Conversion and OTS regulations place certain
limitations on the repurchase of the Holding Company's capital stock. See "THE
CONVERSION AND REORGANIZATION -- Restrictions on Repurchase of Stock" and "USE
OF PROCEEDS."
Voting Rights. Upon Conversion and Reorganization, the holders of Common
Stock of the Holding Company will possess exclusive voting rights in the Holding
Company. They will elect the Holding Company's Board of Directors and act on
such other matters as are required to be presented to them under Washington law
or as are otherwise presented to them by the Board of Directors. Except as
discussed in "RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY," each holder
of Common Stock will be entitled to one vote per share and will not have any
right to cumulate votes in the election of directors. If the Holding Company
issues preferred stock, holders of the Holding Company preferred stock may also
possess voting rights. Certain matters
105
<PAGE>
require a vote of 80% of the outstanding shares entitled to vote thereon. See
"RESTRICTIONS ON ACQUISITION OF THE HOLDING COMPANY."
As a federal stock savings bank, corporate powers and control of the
Savings Bank are vested in the Board of Directors, who elect the officers of the
Savings Bank and who fill any vacancies on the Board of Directors as it exists
upon Conversion and Reorganization. Subsequent to Conversion and Reorganization,
voting rights will be vested exclusively in the owners of the shares of capital
stock of the Savings Bank, all of which will be owned by the Holding Company,
and voted at the direction of the Holding Company's Board of Directors.
Consequently, the holders of the Common Stock will not have direct control of
the Savings Bank.
Liquidation. In the event of any liquidation, dissolution or winding up of
the Savings Bank, the Holding Company, as holder of the Savings Bank's capital
stock would be entitled to receive, after payment or provision for payment of
all debts and liabilities of the Savings Bank (including all deposit accounts
and accrued interest thereon) and after distribution of the balance in the
special liquidation account to Eligible Account Holders and Supplemental
Eligible Account Holders (see "THE CONVERSION AND REORGANIZATION"), all assets
of the Savings Bank available for distribution. In the event of liquidation,
dissolution or winding up of the Holding Company, the holders of its common
stock would be entitled to receive, after payment or provision for payment of
all its debts and liabilities, all of the assets of the Holding Company
available for distribution. If Holding Company preferred stock is issued, the
holders thereof may have a priority over the holders of the Common Stock in the
event of liquidation or dissolution.
Preemptive Rights. Holders of the Common Stock of the Holding Company will
not be entitled to preemptive rights with respect to any shares that may be
issued. The Common Stock is not subject to redemption.
Preferred Stock
None of the shares of the authorized Holding Company preferred stock will
be issued in the Conversion and Reorganization and there are no plans to issue
the preferred stock. Such stock may be issued with such designations, powers,
preferences and rights as the Board of Directors may from time to time
determine. The Board of Directors can, without stockholder approval, issue
preferred stock with voting, dividend, liquidation and conversion rights that
could dilute the voting strength of the holders of the Common Stock and may
assist management in impeding an unfriendly takeover or attempted change in
control.
Restrictions on Acquisition
Acquisitions of the Holding Company are restricted by provisions in its
Articles of Incorporation and Bylaws and by the rules and regulations of various
regulatory agencies. See "REGULATION" and "RESTRICTIONS ON ACQUISITION OF THE
HOLDING COMPANY."
REGISTRATION REQUIREMENTS
The Holding Company will register the Common Stock with the SEC pursuant to
Section 12(g) of the Exchange Act upon the completion of the Conversion and
Reorganization and will not deregister its Common Stock for a period of at least
three years following the completion of the Conversion and Reorganization. Upon
such registration, the proxy and tender offer rules, insider trading reporting
and restrictions, annual and periodic reporting and other requirements of the
Exchange Act will be applicable.
LEGAL AND TAX OPINIONS
The legality of the Common Stock has been passed upon for the Holding
Company by Breyer & Aguggia, Washington, D.C. The federal tax consequences of
the Conversion and Reorganization have been opined upon by Breyer & Aguggia and
the Washington tax consequences of the Conversion and Reorganization have been
opined
106
<PAGE>
upon by Knapp, O'Dell & Lewis, Camas, Washington. Breyer & Aguggia and Knapp,
O'Dell & Lewis have consented to the references herein to their opinions.
Certain legal matters will be passed upon for Webb by Stevens & Lee, Reading,
Pennsylvania.
EXPERTS
The consolidated financial statements of the Savings Bank as of March 31,
1997 and 1996 and for the years ended March 31, 1997, 1996 and 1995 included in
this Prospectus have been audited by Deloitte & Touche LLP, Portland, Oregon,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
RP Financial has consented to the publication herein of the summary of its
report to the Savings Bank setting forth its opinion as to the estimated pro
forma market value of the MHC and the Savings Bank, as converted, and its letter
with respect to subscription rights and to the use of its name and statements
with respect to it appearing herein.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on Form
S-1 (File No. 333-______) under the Securities Act with respect to the Common
Stock offered in the Conversion and Reorganization. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. Such information may be inspected at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at its regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies may be obtained at prescribed rates from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Registration Statement also is available through the SEC's World Wide Web site
on the Internet (http://www.sec.gov).
The MHC has filed with the OTS an Application for Approval of Conversion,
which includes proxy materials for the Special Members' Meeting and the
Stockholders' Meeting and certain other information. This Prospectus omits
certain information contained in such Application. The Application, including
the proxy materials, exhibits and certain other information that are a part
thereof, may be inspected, without charge, at the offices of the OTS, 1700 G
Street, N.W., Washington, D.C. 20552 and at the office of the Regional Director
of the OTS at the OTS West Regional Office, 1 Montgomery Street, Suite 400, San
Francisco, California 94104.
107
<PAGE>
Index To Consolidated Financial Statements
Riverview Savings Bank, FSB and Subsidiary
Page
Independent Auditors' Report ............................................. F-1
Consolidated Statements of Financial Condition
as of March 31, 1997 and 1996 ........................................... F-2
Consolidated Statements of Income for the
Years Ended March 31, 1997, 1996 and 1995 ............................... 20
Consolidated Statements of Shareholders' Equity
for the Years Ended March 31, 1997, 1996 and 1995 ....................... F-3
Consolidated Statements of Cash Flows for the
Years Ended March 31, 1997, 1996 and 1995 ............................... F-4
Notes to Consolidated Financial Statements................................ F-6
* * *
All schedules are omitted as the required information either is not
applicable or is included in the Consolidated Financial Statements or related
Notes.
Separate financial statements for the MHC have not been included herein
because the MHC has no material assets other than its shares of Savings Bank
Common Stock (which will be canceled as part of the Conversion and
Reorganization) and no significant liabilities (contingent or otherwise),
revenues or expenses, and has not engaged in any significant activities to date.
Separate financial statements for the Holding Company have not been
included herein because the Holding Company, which has engaged in only
organizational activities to date, has no significant assets, liabilities
(contingent or otherwise), revenues or expenses.
108
<PAGE>
[Letterhead of Deloitte & Touche]
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Riverview Savings Bank, FSB
We have audited the accompanying consolidated statements of financial condition
of Riverview Savings Bank, FSB and Subsidiary (the "Bank") as of March 31, 1997
and 1996, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended March 31,
1997. These financial statements are the responsibility of the Bank's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Riverview Savings Bank, FSB and
Subsidiary as of March 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1997, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
May 27, 1997
F-1
<PAGE>
RIVERVIEW SAVINGS BANK, FSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31, 1997 AND 1996
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
Cash (including interest-earning accounts of $1,450,000
and $1,793,000) $ 6,951,000 $ 5,585,000
Loans held for sale 80,000 1,941,000
Investment securities held to maturity, at amortized cost
(fair value of $20,438,000 and $29,956,000) 20,456,000 29,729,000
Investment securities available for sale, at fair value
(amortized cost of $3,993,000 and $3,994,000) 3,899,000 3,932,000
Mortgage-backed securities held to maturity, at amortized
cost (fair value of $26,488,000 and $28,716,000) 26,402,000 28,375,000
Mortgage-backed securities available for sale, at fair value
(amortized cost of $3,022,000 and $2,002,000) 2,990,000 2,004,000
Loans receivable (net of allowance of $831,000 and $653,000
for loan losses) 151,694,000 126,228,000
Real estate owned 135,000 -
Prepaid expenses and other assets 1,141,000 1,048,000
Accrued interest receivable 1,449,000 1,511,000
Federal Home Loan Bank stock 1,756,000 1,627,000
Premises and equipment 4,632,000 4,399,000
Land held for development 471,000 471,000
Core deposit intangible, net 2,329,000 2,656,000
----------- -----------
TOTAL ASSETS $ 224,385,000 $ 209,506,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposit accounts $ 169,416,000 $ 158,159,000
Accrued expenses and other liabilities 2,264,000 1,702,000
Advance payments by borrowers for taxes and
insurance 123,000 51,000
Deferred income taxes, net 143,000 143,000
Other borrowed funds 237,000 315,000
Federal Home Loan Bank advances 27,180,000 26,050,000
----------- -----------
Total liabilities 199,363,000 186,420,000
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value; 4,000,000 authorized,
1997 - 2,416,301 issued, 2,383,239 outstanding;
1996 - 2,195,281 issued, 2,155,206 outstanding 2,416,000 2,195,000
Additional paid-in capital 16,043,000 12,233,000
Unearned shares issued to employee stock ownership
trust (386,000) (439,000)
Retained earnings 7,033,000 9,137,000
Net unrealized loss on securities available for
sale, net of tax (84,000) (40,000)
--------- ---------
Total shareholders' equity 25,022,000 23,086,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 224,385,000 $209,506,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
- --------------------------------------------------------------------------------
RIVERVIEW SAVINGS BANK, FSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNEARNED
SHARES
ISSUED TO UNREALIZED
COMMON STOCK EMPLOYEE LOSS ON
-------------------------- ADDITIONAL STOCK SECURITIES
PAID-IN OWNERSHIP RETAINED AVAILABLE
SHARES AMOUNT CAPITAL TRUST EARNINGS FOR SALE TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1994 $ 1,761,523 $ 1,809,00 $ 6,884,000 $ (503,000) $ 10,169,000 $ - $ 18,359,000
Net income - - - - 2,446,000 - 2,446,000
Cash dividends - - - - (411,000) - (411,000)
Exercise of stock options 2,898 3,000 25,000 - - - 28,000
Earned ESOP shares 8,280 - 32,000 79,000 - - 111,000
10% stock dividend 177,136 183,000 2,214,000 (49,000) (2,348,000) - -
--------- --------- ----------- --------- ------------ ----------- ----------
BALANCE, MARCH 31, 1995 1,949,837 1,995,000 9,155,000 (473,000) 9,856,000 - 20,533,000
Net income - - - - 2,613,000 - 2,613,000
Cash dividends - - - - (173,000) - (173,000)
Exercise of stock options 500 1,000 4,000 - - - 5,000
Earned ESOP shares 9,108 - 55,000 93,000 - - 148,000
10% stock dividend 195,761 199,000 3,019,000 (59,000) (3,159,000) - -
Unrealized loss on securities
available for sale, net
of tax - - - - - (40,000) (40,000)
-------- -------- -------- -------- -------- --------- ----------
BALANCE, MARCH 31, 1996 2,155,206 2,195,000 12,233,000 (439,000) 9,137,000 (40,000) 23,086,000
Net income - - - - 2,008,000 - 2,008,000
Cash dividends - - - - (212,000) - (212,000)
Exercise of stock options 1,500 2,000 10,000 - - - 12,000
Earned ESOP shares 10,019 - 65,000 107,000 - - 172,000
10% stock dividend 216,514 219,000 3,735,000 (54,000) (3,900,000) - -
Increase in unrealized loss on
securities available for
sale, net of tax - - - - - (44,000) (44,000)
-------- -------- -------- -------- -------- --------- ----------
BALANCE, MARCH 31, 1997 2,383,239 $ 2,416,000 $ 16,043,000 $ (386,000) $ 7,033,000 $ (84,000) $ 25,022,000
=========== =========== ============ ========== =========== ========= ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
RIVERVIEW SAVINGS BANK, FSB AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED MARCH 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,008,000 $2,613,000 $2,446,000
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization 878,000 746,000 566,000
Provision for losses on loans and real estate owned 180,000 - -
Noncash compensation expense related to ESOP benefit 172,000 148,000 111,000
Increase in deferred loan origination fees, net of amortization 289,000 176,000 25,000
Federal Home Loan Bank stock dividend (130,000) (105,000) (76,000)
Accretion of discounts on investment securities, purchased
loans, and mortgage-backed securities (84,000) (167,000) (17,000)
Net (gain) loss on sale of real estate owned, mortgage-backed and investment
securities and premises and equipment (37,000) (301,000) 36,000
Changes in assets and liabilities:
Decrease (increase) in loans held for sale 1,861,000 (1,694,000) 4,227,000
Decrease (increase) in prepaid expenses and other assets (93,000) (98,000) 31,000
Decrease (increase) in accrued interest receivable 62,000 (113,000) (545,000)
Increase in accrued expenses and other liabilities 562,000 518,000 111,000
Decrease in net deferred taxes - 493,000 52,000
Other, net - (8,000) (111,000)
------------ ------------ ------------
Net cash provided by operating activities 5,668,000 2,208,000 6,856,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations (85,651,000) (74,568,000) (57,648,000)
Principal repayments on loans 59,369,000 51,733,000 40,479,000
Proceeds from call, maturity, or sale of securities available for sale 3,535,000 6,047,000 26,741,000
Purchase of investment securities available for sale (3,502,000) (4,996,000) (26,741,000)
Purchase of mortgage-backed securities available for sale (1,100,000) (2,002,000) -
Principal repayments on mortgage-backed securities held to maturity 5,104,000 5,656,000 4,818,000
Principal repayments on mortgage-backed securities available for sale 80,000 - -
Purchase of mortgage-backed securities held to maturity (3,035,000) (2,017,000) (19,544,000)
Purchase of investment securities held to maturity - (4,006,000) (25,651,000)
Proceeds from call or maturity of investment securities held to maturity 9,265,000 6,271,000 -
Purchase of premises and equipment (699,000) (749,000) (3,152,000)
Purchase of deposit relationships - - (3,269,000)
Purchase of Federal Home Loan Bank stock - (240,000) -
Purchase of mortgage servicing rights - - (252,000)
Proceeds from sale of real estate 140,000 225,000 -
------------ ------------ ------------
Net cash used in investing activities (16,494,000) (18,646,000) (64,219,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts 11,257,000 12,710,000 38,971,000
Dividends paid (200,000) (164,000) (373,000)
Proceeds from Federal Home Loan Bank advances 68,880,000 40,050,000 31,050,000
Repayment of Federal Home Loan Bank advances (67,750,000) (37,000,000) (13,050,000)
Net increase (decrease) in advance payments by borrowers 72,000 2,000 (48,000)
Repayment of other borrowed funds (79,000) (79,000) (79,000)
Proceeds from exercise of stock options 12,000 5,000 28,000
------------ ------------ ------------
Net cash provided by financing activities 12,192,000 15,524,000 56,499,000
------------ ------------ ------------
NET DECREASE IN CASH $ 1,366,000 $ (914,000) $ (864,000)
(continued)
F-4 (Continued)
<PAGE>
RIVERVIEW SAVINGS BANK, FSB AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED MARCH 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
NET DECREASE IN CASH $ 1,366,000 $ (914,000) $ (864,000)
CASH, BEGINNING OF YEAR 5,585,000 6,499,000 7,363,000
----------- ----------- -----------
CASH, END OF YEAR $ 6,951,000 $ 5,585,000 $ 6,499,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest $ 8,921,000 $ 8,405,000 $ 5,895,000
Income taxes 951,000 870,000 1,175,000
NONCASH INVESTING ACTIVITIES:
Transfer of loans to real estate owned $ 269,000 $ - $ -
Loans arising from sale of real estate owned and land held
for investment - 225,000 -
Real estate transferred to land held for sale - - 471,000
Compensation expense recognized for shares released for
allocation to participants of the ESOP 172,000 148,000 111,000
December 29, 1995 transfer of securities from held to maturity to available
for sale at estimated fair value - 5,061,000 -
Fair value adjustment to securities available for sale (65,000) (62,000) -
Income tax effect related to fair value adjustment 21,000 22,000 -
See notes to consolidated financial statements. (Concluded)
</TABLE>
F-5
<PAGE>
RIVERVIEW SAVINGS BANK, FSB AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED MARCH 31, 1997
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts of Riverview Savings Bank, FSB and its wholly-owned
subsidiary, Riverview Services, Inc. (collectively, the "Bank"). All
significant intercompany transactions and balances have been eliminated in
consolidation.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
NATURE OF OPERATIONS - The Bank is a nine branch community-oriented
financial institution operating in rural and suburban communities in
southwest Washington state. The Bank is engaged primarily in the business
of attracting deposits from the general public and using such funds,
together with other borrowings, to invest in various consumer-based real
estate loans, investment securities, and mortgage-backed securities.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - 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 certain assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of related
revenue and expense during the reporting period. Actual results could
differ from those estimates.
STOCK OFFERING AND REORGANIZATION - On October 22, 1993, an initial public
stock offering of 690,000 shares of common stock was completed by
Riverview Savings Bank, FSB, a federally-chartered capital stock savings
bank. The Bank was formed from the reorganization of the former Riverview
Savings Bank, a mutual savings bank, into a mutual holding company known
as Riverview M.H.C. (the "MHC"). An additional 1,007,400 shares of common
stock were issued to the MHC in exchange for substantially all of the
assets and all of the liabilities of the former mutual savings bank. Upon
completion of these transactions, the MHC owned 58.4% of the Bank's
outstanding common stock (see also Note 16).
INTEREST INCOME - Interest on loans is credited to income as earned,
unless the collectibility of the interest is in doubt, at which time the
accrual of interest ceases and a reserve for any nonrecoverable accrued
interest is established and charged against operations. If ultimate
collection of principal is in doubt, all cash receipts on nonaccrual loans
are applied to reduce the principal balance.
Premiums or discounts on loans purchased and sold are amortized or
accreted using the level yield method over a period approximating the
average life of the loans.
LOAN FEES - Loan fee income, net of the direct origination costs, is
deferred and accreted to interest income by the level yield method over
the life of the loan.
F-6
<PAGE>
SECURITIES - The Bank has adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. SFAS 115 requires the classification of securities at
acquisition into one of three categories: held to maturity, available for
sale, or trading.
In accordance with SFAS No. 115, investment securities are classified as
held to maturity where the Bank has the ability and positive intent to
hold them to maturity. Investment securities held to maturity are carried
at cost, adjusted for amortization of premiums and accretion of discounts
to maturity. Unrealized losses on securities held to maturity due to
fluctuations in fair value are recognized when it is determined that an
other than temporary decline in value has occurred. Investment securities
bought and held principally for the purpose of sale in the near term are
classified as trading securities. Investment securities not classified as
trading securities, or as held to maturity securities, are classified as
securities available for sale. For purposes of computing gains and losses,
cost of securities sold is determined using the specific identification
method. Unrealized holding gains and losses on securities available for
sale are excluded from earnings and reported net of tax as a separate
component of shareholders' equity until realized. At March 31, 1997 and
1996, the Bank had no trading securities.
On December 29, 1995, the Company reclassified $4.8 million of investment
securities held to maturity to investment securities available for sale at
fair value of $5.1 million. These investment securities were subsequently
sold for a gain of $216,000 before tax during the fiscal year 1996. The
reclassification was in accordance with the FASB issuing a special report,
A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES, that permitted this one-time
reassessment without tainting the remaining securities held to maturity.
TRADING ACCOUNT SECURITIES ACTIVITY - Under the terms of the Bank's
investment policy, the Bank is authorized to purchase and sell U.S.
Treasury and government agency securities with maturity dates not to
exceed ten years. The policy limits such investments to 5% of total Bank
assets. Securities in the Bank's trading portfolio are carried at fair
value. There was no trading activity during the year ended March 31, 1997.
During the years ended March 31, 1996 and 1995, the Bank purchased and
sold $2.0 million and $21.9 million, respectively, of U.S. Treasury and
government agency securities and realized gross trading gains of $1,000
and $42,000 and gross trading losses of $6,000 and $16,000, respectively.
REAL ESTATE OWNED ("REO") - REO consists of properties acquired through
foreclosure. Specific charge-offs are taken based upon detailed analysis
of the fair value of collateral underlying loans on which the Bank is in
the process of foreclosing. Such collateral is transferred into REO at the
lower of recorded cost or fair value less estimated costs of disposal.
Subsequently, properties are evaluated and any additional declines in
value are provided for in the REO reserve for losses. The amounts the Bank
will ultimately recover from REO may differ from the amounts used in
arriving at the net carrying value of these assets because of future
market factors beyond the Bank's control or because of changes in the
Bank's strategy for the sale of the property. At March 31, 1996, there was
no REO.
ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is maintained at
a level sufficient to provide for estimated loan losses based on
evaluating known and inherent risks in the loan portfolio. The allowance
is provided based upon management's continuing analysis of the pertinent
factors underlying the quality of the loan portfolio. These factors
include changes in the size and composition of the loan portfolio, actual
loan loss experience, current and anticipated economic conditions, and
detailed analysis of individual loans for which full collectibility may
not be assured. The detailed analysis includes techniques to estimate the
fair value of loan collateral and the existence of potential alternative
sources of repayment. The appropriate allowance level is estimated based
upon factors and trends identified by management at the time the
consolidated financial statements are prepared.
F-7
<PAGE>
SFAS No. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN, and SFAS
No. 118, an amendment of SFAS No. 114, require each impaired loan within
its scope to be measured based on the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair
value, less expected costs of disposal, of the collateral if the loan is
collateral dependent. The Bank adopted SFAS No. 114 and No. 118 as of
April 1, 1995.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is generally computed on the
straight-line method over the estimated useful lives as follows:
Buildings and improvements 3 to 60 years
Furniture and equipment 3 to 20 years
ASSET IMPAIRMENT - Effective April 1, 1996, the Company adopted SFAS No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF. This statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of SFAS No. 121 had no material impact on the financial
statements.
LOANS HELD FOR SALE - Under the terms of the Bank's investment policy, the
Bank is authorized to sell certain loans when such sales result in higher
net yields. Accordingly, such loans are classified as held for sale in the
accompanying consolidated financial statements and are carried at the
lower of aggregate cost or net realizable value.
MORTGAGE SERVICING - Fees earned for servicing loans for the FHLMC are
reported as income when the related mortgage loan payments are collected.
Loan servicing costs are charged to expense as incurred.
Effective January 1, 1997, the Bank records its mortgage servicing rights
at fair values in accordance with SFAS No. 125, ACCOUNTING FOR TRANSFERS
AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF LIABILITIES, which
amended SFAS Nos. 65 and 122. SFAS No. 125 requires the bank to allocate
the total cost of all mortgage loans, whether originated or purchased, to
the mortgage servicing rights and the loans (without the mortgage
servicing rights) based on their relative fair values if it is practicable
to estimate those fair values. The Bank is amortizing the mortgage
servicing assets over the period of estimated net servicing income.
CORE DEPOSIT INTANGIBLE - On May 13, 1994, the Bank assumed $42 million of
deposits from the Resolution Trust Corporation for a deposit premium of
$3.2 million. In conjunction with the assumption of these deposits, the
Bank also acquired two branch facilities located in Vancouver and
Longview, Washington for $688,200. The deposit premium is reflected on the
consolidated statements of financial condition as core deposit intangible
and is being amortized to noninterest expense on a straight-line basis
over ten years.
F-8
<PAGE>
INCOME TAXES - The Bank accounts for income taxes in accordance with the
provisions of SFAS No. 109, ACCOUNTING FOR INCOME TAXES, which requires
the use of the asset and liability method of accounting for income taxes
and eliminates, on a prospective basis, the exemption from deferred income
taxes of thrift bad debt reserves. These thrift bad debt reserves are
included in taxable income of later years only if the allowance for losses
is used subsequently for purposes other than to absorb bad debt losses.
Because the Bank does not intend to use the allowance for purposes other
than to absorb loan losses, no deferred taxes have been provided for the
thrift bad debt reserves. Bad debt deductions on which federal income
taxes have not been provided approximate $1,100,000 at March 31, 1997. The
Bank files a consolidated federal income tax return.
LAND HELD FOR DEVELOPMENT - Land held for development, which is carried at
the lower of cost or net realizable value, consists of a parcel of land
which the Bank intends to develop either for Bank operation or for
ultimate sale.
EMPLOYEE STOCK OWNERSHIP PLAN - The Bank sponsors a leveraged Employee
Stock Ownership Plan ("ESOP"). The ESOP is accounted for in accordance
with the American Institute of Certified Public Accountants (AICPA)
Statement of Position 93-6, EMPLOYER'S ACCOUNTING FOR EMPLOYEE STOCK
OWNERSHIP PLAN. Accordingly, the debt of the ESOP is recorded as other
borrowed funds of the Bank and the shares pledged as collateral are
reported as unearned shares issued to the employee stock ownership trust
in the statement of financial condition. As shares are released from
collateral, compensation expense is recorded equal to the then current
market price of the shares, and the shares become outstanding for
earnings-per-share calculations. Stock and cash dividends on allocated
shares are recorded as a reduction of retained earnings and paid directly
to plan participants or distributed directly to participants' accounts.
Cash dividends on unallocated shares are recorded as a reduction of debt
and accrued interest. Stock dividends on unallocated shares are recorded
as an increase to the unearned shares issued to the employee stock
ownership trust contra-equity account and distributed to participants over
the remaining debt service period.
EARNINGS PER SHARE - The weighted average number of shares of common stock
outstanding for all periods presented have been retroactively restated for
a 10% stock dividend declared on March 19, 1997 and payable on April 11,
1997. ESOP shares are not considered outstanding for earnings per share
purposes until they are allocated. Allocated ESOP shares for the year
ended March 31, 1997 were considered outstanding for three months. Shares
granted but not yet issued under the Bank's stock option plans are
considered common stock equivalents for earnings per share calculations;
however, these options had less than a 3% dilutive effect and, therefore,
are not reflected in the per share data.
SFAS No. 128, EARNINGS PER SHARE, issued in February 1997, establishes
standards for computing and presenting earnings per share ("EPS") and
applies to entities with publicly-held common stock or potential common
stock. It replaces the presentation of primary EPS with a presentation of
basic EPS and requires the dual presentation of basic and diluted EPS on
the face of the income statement. This statement is effective for the
Bank's financial statements beginning with the quarter ending December 31,
1997. This statement requires restatement of all prior period EPS data
presented. The impact of the adoption of this statement is not expected to
be material to the Bank.
STATEMENT OF CASH FLOWS - Cash includes amounts on hand, due from banks,
and interest-earning deposits in other banks with maturities of 90 days or
less.
F-9
<PAGE>
STOCK-BASED COMPENSATION - The Company accounts for stock compensation
using the intrinsic value method as prescribed in Accounting Principles
Board APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and
related interpretations. Under the intrinsic value based method,
compensation cost for stock options is measured as the excess, if any, of
the quoted market price of the stock at grant date over the amount an
employee must pay to acquire the stock. Stock options granted have no
intrinsic value at the grant date and, under APB No. 25, there is no
compensation cost to be recognized.
Effective April 1, 1996, the Company adopted SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, which encourages, but does not require,
companies to record compensation costs for stock-based employee
compensation plans at fair value. The fair value approach measures
compensation costs based on factors such as the term of the option, the
market price at grant date, and the option exercise price, with expense
recognized over the vesting period. See Note 11 for pro forma effect on
net income and earnings per share as if the fair value method encouraged
by SFAS No. 123 was used.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - During 1997, the Financial
Accounting Standards Board issued SFAS No. 129, DISCLOSURE OF INFORMATION
ABOUT CAPITAL STRUCTURE.
SFAS No. 129 establishes standards for disclosing information about an
entity's capital structure. It applies to all entities. This Statement
continues the previous requirements to disclose certain information about
an entity's capital structure found in APB Opinions No. 10, OMNIBUS
OPINION - 1966, and No. 15, EARNINGS PER SHARE, and FASB Statement No. 47,
DISCLOSURE OF LONG-TERM OBLIGATIONS, for entities that were subject to the
requirements of those standards. This Statement is effective for financial
statements beginning with the quarter ending December 31, 1997. It
contains no change in disclosure requirements for entities that were
previously subject to the requirements of Opinions 10 and 15 and
Statement 47. The adoption of the provisions of SFAS No. 129 is not
expected to have a significant impact on the financial statements of the
Bank.
2. INTEREST RATE RISK MANAGEMENT
The Bank is engaged principally in gathering deposits and providing first
mortgage loans to individuals and commercial enterprises. At March 31,
1997 and 1996, the asset portfolio consisted of fixed and variable rate
interest-earning assets. Those assets were funded primarily with
short-term deposits that have market interest rates that vary over time.
The shorter maturity of the interest-sensitive liabilities indicates that
the Bank could be exposed to interest rate risk because, generally in an
increasing rate environment, interest-bearing liabilities will be
repricing faster at higher interest rates than interest-earning assets,
thereby reducing net interest income, as well as the market value of
long-term assets. Management is aware of this interest rate risk and in
its opinion actively monitors such risk and manages it to the extent
practicable.
3. INVESTMENT SECURITIES
The amortized cost and approximate fair value of investment securities
held to maturity consisted of the following:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
MARCH 31, 1997 COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
Agency securities $ 12,467,000 $ 60,000 $ (79,000) $ 12,448,000
U.S. Treasury securities 7,989,000 12,000 (11,000) 7,990,000
------------ -------- ---------- ------------
$ 20,456,000 $ 72,000 $ (90,000) $ 20,438,000
============ ======== ========== ============
F-10
<PAGE>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
MARCH 31, 1996 COST GAINS LOSSES VALUE
Agency securities $ 17,742,000 $ 225,000 $ (70,000) $ 17,897,000
U.S. Treasury securities 11,987,000 91,000 (19,000) 12,059,000
------------ -------- ---------- ------------
$ 29,729,000 $ 316,000 $ (89,000) $ 29,956,000
============ ======== ========== ============
</TABLE>
The contractual maturities of securities held to maturity are as follows:
MARCH 31, 1997
---------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
Due in one year or less $ 8,988,000 $ 8,995,000
Due after one year through five years 10,468,000 10,476,000
Due after five years through ten years 1,000,000 967,000
-------------- ------------
$ 20,456,000 $ 20,438,000
============== ============
There were no sales of securities held to maturity during the years ended
March 31, 1997 and 1996.
The amortized cost and approximate fair value of investment securities
available for sale consisted of the following:
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
MARCH 31, 1997 COST GAINS LOSSES VALUE
Agency securities $ 1,000,000 $ - $ (25,000) $ 975,000
U.S. Treasury securities 2,993,000 $ - $ (69,000) $ 2,924,000
----------- ---------- ----------- -----------
$ 3,993,000 $ - $ (94,000) $ 3,899,000
=========== ========== =========== ===========
MARCH 31, 1996
Agency securities $ 3,002,000 $ - $ (62,000) $ 2,940,000
U.S. Treasury securities 992,000 $ - $ - $ 992,000
----------- ---------- ----------- -----------
$ 3,994,000 $ - $ (62,000) $ 3,932,000
=========== ========== =========== ===========
The contractual maturities of securities available for sale are as
follows:
MARCH 31, 1997
--------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
Due after one year through five years $ 1,995,000 $ 1,961,000
Due after five years through ten years 1,998,000 1,938,000
--------------- ---------------
$ 3,993,000 $ 3,899,000
============== == ============
Securities with a book value of $1,000,000 and a fair value of $967,000
and $1,016,000 at March 31, 1997 and 1996, respectively, were pledged as
collateral for public funds held by the Bank.
F-11
<PAGE>
4. MORTGAGE-BACKED SECURITIES
Mortgage-backed securities held to maturity consisted of the following:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
MARCH 31, 1997 COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
Real estate mortgage investment conduits $ 6,641,000 $ 139,000 $ (4,000) $ 6,776,000
FHLMC mortgage-backed securities 6,800,000 89,000 (94,000) 6,795,000
FNMA mortgage-backed securities 12,961,000 125,000 (169,000) 12,917,000
------------ --------- ----------- ------------
$ 26,402,000 $ 353,000 $ (267,000) $ 26,488,000
============ ========= =========== ============
MARCH 31, 1996
Real estate mortgage investment conduits $ 5,108,000 $ 255,000 $ - $ 5,363,000
FHLMC mortgage-backed securities 9,030,000 82,000 (40,000) 9,072,000
FNMA mortgage-backed securities 14,237,000 108,000 (64,000) 14,281,000
------------ --------- ----------- ------------
$ 28,375,000 $ 445,000 $ (104,000) $ 28,716,000
============ ========= =========== ============
</TABLE>
The contractual maturities of mortgage-backed securities held to maturity
are as follows:
MARCH 31, 1997
--------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
Due after one year through five years $ 490,000 $ 478,000
Due after five years through ten years 10,815,000 10,638,000
Due after ten years 15,097,000 15,372,000
------------- -------------
$ 26,402,000 $ 26,488,000
============= =============
There were no sales of mortgage-backed securities held to maturity during
the years ended March 31, 1997 and 1996.
Mortgage-backed securities available for sale consisted of the following:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
MARCH 31, 1997 COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
Real estate mortgage investment conduits $ 1,922,000 $ - $ (19,000) $ 1,903,000
FHLMC mortgage-backed securities
1,100,000 - (13,000) 1,087,000
----------- --------- ---------- -----------
$ 3,022,000 $ - $ (32,000) $ 2,990,000
=========== ========= ========== ===========
MARCH 31, 1996
Real estate mortgage investment conduits $ 2,002,000 $ 2,000 $ - $ 2,004,000
=========== ========= ========== ===========
</TABLE>
Expected maturities of mortgage-backed securities held to maturity will
differ from contractual maturities because borrowers may have the right to
prepay obligations with or without prepayment penalties.
F-12
<PAGE>
The contractual maturities of mortgage-backed securities available for
sale are as follows:
MARCH 31, 1997
--------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
Due after five years through ten years $ 2,019,000 $ 1,999,000
Due after ten years 1,003,000 991,000
------------- ------------
$ 3,022,000 $ 2,990,000
============= ============
Mortgage-backed securities held to maturity with a book value of $82,000
and $85,000 and a fair value of $82,000 and $84,000 at March 31, 1997 and
1996, respectively, were pledged as collateral for public funds held by
the Bank.
The Bank, as a member of the Federal Home Loan Bank System, is required to
maintain cash and certain marketable securities in an amount equal to 5%
of its deposits. The Bank met this requirement as of March 31, 1997 and
1996.
5. LOANS RECEIVABLE
Loans receivable consisted of the following:
MARCH 31,
---------------------------------------
1997 1996
Residential:
One to four family $ 94,456,000 $ 86,199,000
Multi-family 5,439,000 2,958,000
Construction:
One to four family 32,529,000 22,596,000
Multi-family 547,000 361,000
Commercial real estate 634,000 500,000
Commercial 794,000 969,000
Consumer:
Secured 12,797,000 8,545,000
Unsecured 1,496,000 1,254,000
Land 7,900,000 7,546,000
Non-residential 8,997,000 6,518,000
-------------- --------------
165,589,000 137,446,000
Less:
Undisbursed portion of loans 11,087,000 8,876,000
Deferred loan fees 1,967,000 1,678,000
Allowance for possible loan losses 831,000 653,000
Unearned discounts 10,000 11,000
-------------- --------------
Loans receivable, net $ 151,694,000 $ 126,228,000
============== ==============
F-13
<PAGE>
Loans, by maturity or repricing date, were as follows:
MARCH 31,
------------------------------------
1997 1996
Adjustable rate loans:
Within one year $ 73,628,000 $ 56,942,000
After one but within five years 1,884,000 6,864,000
After five but within ten years 281,000 -
After ten years 2,381,000 -
-------------- --------------
78,174,000 63,806,000
-------------- --------------
Fixed rate loans:
Within one year 11,203,000 3,443,000
After one but within five years 18,086,000 6,278,000
After five but within ten years 16,555,000 6,720,000
After ten years 41,571,000 57,199,000
-------------- --------------
87,415,000 73,640,000
-------------- --------------
$ 165,589,000 $ 137,446,000
================ ==============
Loans receivable with adjustable rates primarily reprice based on the one
year treasury index. The remaining adjustable rate loans adjust based on
the Federal Home Loan Bank ("FHLB") cost of funds index. Adjustable rate
loans may reprice a maximum of 2% per year and up to 6% over the life of
the loan.
At March 31, 1997, 99% of the loans in the portfolio were secured by
properties located in Washington and Oregon.
The Bank services loans for others totaling $98,751,000 and $106,167,000
as of March 31, 1997 and 1996, respectively. These loan balances are not
included in the consolidated statements of financial condition as they are
not assets of the Bank.
At March 31, 1997, the Bank had commitments to originate fixed rate
mortgage loans of $524,000 at interest rates ranging from 7.875% to
10.00%. At March 31, 1997, adjustable rate mortgage loan commitments were
$1,536,000 at interest rates ranging from 6.50% to 10.50%.
Consumer loan commitments totaled $4,428,000 at March 31, 1997.
Aggregate loans to officers and directors, all of which are current,
consist of the following:
YEAR ENDED MARCH 31,
------------------------------------------------------
1997 1996 1995
Beginning balance $ 1,000,000 $ 1,107,000 $ 764,000
Originations 155,000 243,000 540,000
-17-
<PAGE>
Principal repayments (141,000) (350,000) (197,000)
------------- -------------- ---------------
Total $ 1,014,000 $ 1,000,000 $ 1,107,000
============= ============== ===============
F-14
<PAGE>
6. ALLOWANCE FOR LOSSES ON LOANS RECEIVABLE
Valuation allowances for loans receivable were as follows:
1997 1996 1995
BEGINNING BALANCE $ 653,000 $ 657,000 $ 647,000
Provision for losses 180,000 - -
Write-offs (11,000) (23,000) (19,000)
Recoveries 9,000 19,000 29,000
----------- ----------- -----------
ENDING BALANCE $ 831,000 $ 653,000 $ 657,000
=========== =========== ===========
At March 31, 1997 and 1996, the Bank's recorded investment in loans for
which an impairment has been recognized under the guidance of SFAS No. 114
and SFAS No. 118 was $87,000 and $548,000. The allowance for loan losses
in excess of specific reserves is available to absorb losses from all
loans, although allocations have been made for certain loans and loan
categories as part of management's analysis of the allowance. The average
investment in impaired loans was approximately $326,000 and $219,000
during the years ended March 31, 1997 and 1996.
7. PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
MARCH 31,
------------------------------------
1997 1996
Land $ 1,399,000 $ 1,399,000
Buildings and improvements 3,679,000 3,552,000
Furniture and equipment 2,424,000 2,056,000
---------------- ----------------
Subtotal 7,502,000 7,007,000
Less accumulated depreciation (2,870,000) (2,608,000)
---------------- -----------------
Total $ 4,632,000 $ 4,399,000
=============== =============
Rent expense was $8,000, $12,000, and $35,000 for the years ended March
31, 1997, 1996, and 1995, respectively.
F-15
<PAGE>
8. DEPOSIT ACCOUNTS
Deposit accounts consisted of the following:
<TABLE>
<CAPTION>
AVERAGE AVERAGE
INTEREST MARCH 31, INTEREST MARCH 31,
ACCOUNT TYPE RATE 1997 RATE 1996
<S> <C> <C> <C> <C>
NOW Accounts:
Noninterest-bearing 0.00 % $ 7,085,00 0.00 % $ 5,347,000
Regular 1.50 18,474,000 1.50 17,005,000
Maxi 1.75 1,606,000 1.75 1,624,000
Insured money market 3.75 17,553,000 3.75 16,147,000
Savings accounts 2.75 21,234,000 2.75 21,775,000
Certificate accounts 5.62 103,464,000 5.72 96,261,000
------------- -------------
Total $ 169,416,000 $ 158,159,000
============= =============
Weighted average interest rate 4.35 % 4.42 %
====== ======
</TABLE>
Certificate accounts as of March 31, 1997, mature as follows:
AMOUNT
Less than one year $ 79,709,000
One year to two years 14,778,000
Two years to three years 3,438,000
Three years to four years 3,110,000
Four years to five years 1,782,000
After five years 647,000
--------------
Total $ 103,464,000
==============
Interest expense by deposit type was as follows:
YEAR ENDED MARCH 31,
--------------------------------------------------
1997 1996 1995
NOW Accounts:
Regular $ 234,000 $ 247,000 $ 264,000
Maxi 29,000 37,000 43,000
Insured money market accounts 588,000 562,000 288,000
Savings accounts 588,000 617,000 919,000
Certificate accounts 5,595,000 5,120,000 3,607,000
-------------- ------------- -------------
Total $ 7,034,000 $ 6,583,000 $ 5,121,000
============== ============= =============
F-16
<PAGE>
9. FEDERAL HOME LOAN BANK ADVANCES
At March 31, 1997, advances from the FHLB totaled $27,180,000, of which
$22,550,000 had fixed interest rates ranging from 5.54% to 8.15% with a
weighted average interest rate of 6.452%. The remaining $4,630,000
adjustable rate advance had an interest rate of 6.70%, which is the "Cash
Management Advance Rate" quoted by the FHLB from time to time, each change
in interest rate to take effect simultaneously with the corresponding
change in the Cash Management Rate.
At March 31, 1997, the Bank had additional borrowing commitments available
of $51,355,000 from the FHLB.
FHLB advances are collateralized as provided for in the Advance, Pledge
and Security Agreements with the FHLB by certain investment and
mortgage-backed securities, stock owned by the Bank, deposits with the
FHLB, and certain mortgages on deeds of trust securing such properties as
provided in the agreements with the FHLB.
Payments required to service the Bank's FHLB advances during the next five
years ended March 31 are as follows: 1998 - $12,630,000; 1999 -
$7,000,000; 2000 - $7,000,000; 2001 - $550,000; and 2002 - zero.
10. FEDERAL INCOME TAXES
Income tax expense attributable to operations for the three years ended
March 31 consisted of the following:
1997 1996 1995
Current $ 1,035,000 $ 882,000 $ 1,168,000
Deferred - 493,000 52,000
------------ ------------- ------------
Total $ 1,035,000 $ 1,375,000 $ 1,220,000
============ ============= ============
A reconciliation between the statutory federal income taxes computed at
the statutory rate and the effective tax rate for the year ended March 31
is as follows:
1997 1996 1995
Taxes computed at statutory rates $ 1,013,000 $ 1,356,000 $ 1,246,000
ESOP market value adjustment 22,000 18,000 11,000
Other, net - 1,000 (37,000)
------------ ------------- ------------
Total $ 1,035,000 $ 1,375,000 $ 1,220,000
============ ============= ============
Taxes related to gains on sales of securities were $13,000, $72,000, and
$9,000 for the years ended March 31, 1997, 1996, and 1995, respectively.
F-17
<PAGE>
The tax effect of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at March 31,
1997 and 1996 are as follows:
1997 1996
Deferred tax assets:
Deferred compensation $ 225,000 $ 186,000
Loan loss reserve 195,000 153,000
Core deposit intangible 106,000 69,000
Accrued expenses 72,000 36,000
Accumulated depreciation 56,000 24,000
Deferred loan fees 16,000 70,000
Unrealized loss on securities available for sale 43,000 20,000
---------- -----------
Total deferred tax asset 713,000 558,000
---------- -----------
Deferred tax liabilities:
FHLB stock dividend (350,000) (306,000)
Tax qualified loan loss reserve (282,000) (282,000)
Other (224,000) (113,000)
----------- -----------
Total deferred tax liability (856,000) (701,000)
----------- -----------
Deferred tax liability, net $ (143,000) $ (143,000)
=========== ===========
For the fiscal year ended March 31, 1996 and years prior, the Company
determined bad debt expense to be deducted from taxable income based on 8%
of taxable income before such deduction as provided by a provision in the
Internal Revenue Code ("IRC"). In August 1996, the provision in the IRC
allowing the 8% of taxable income deduction was repealed. Accordingly, the
Company is required to use the write-off method to record bad debt in the
current period and must recapture the excess reserve accumulated from
April 1, 1987 to March 31, 1996 from use of the 8% method ratably over a
six-taxable year period. The income tax position from 1987 to 1996
included an amount of $282,000 for the tax effect on such excess reserves.
The IRC regulation allows the Bank the opportunity to defer the recapture
of the excess reserve for a period of up to two years if the Bank meets a
residential loan requirement. The Bank met the requirement to delay
recapture for the current taxable year.
No valuation allowance for deferred tax assets was deemed necessary at
March 31, 1997 or 1996, based on the Bank's anticipated future ability to
generate taxable income from operations.
11. EMPLOYEE BENEFITS PLANS
RETIREMENT PLAN - The Riverview Retirement and Savings Plan (the "Plan")
is a defined contribution profit-sharing plan incorporating the provisions
of Section 401(k) of the Internal Revenue Code. The retirement plan covers
all employees with at least one year of service who are over the age of
21. The Bank matches 50% of the employee's elective contribution up to 3%
of the employee's compensation. Bank expenses related to this plan for the
years ended March 31, 1997, 1996, and 1995 were $52,000, $66,000, and
$49,000, respectively.
F-18
<PAGE>
DIRECTOR DEFERRED COMPENSATION PLAN - Directors may elect to defer their
monthly directors' fees until retirement with no income tax payable by the
director until retirement benefits are received. This alternative is made
available to them through a nonqualified deferred compensation plan. The
Bank accrues annual interest on assets under the plan based upon a formula
relating to gross revenues, which amounted to 7.90%, 7.65%, and 7.32% for
the years ended March 31, 1997, 1996, and 1995, respectively. The
estimated liability under the plan is accrued as earned by the
participant. At March 31, 1997 and 1996, the Bank's aggregate liability
under the plan was $663,000 and $546,000, respectively.
BONUS PROGRAMS - The Bank maintains a bonus program for senior management.
The senior management bonus represents approximately 5% of fiscal year
profits, assuming profit goals are attained, and is divided among senior
management members in proportion to their salaries. Under these programs,
the Bank paid $140,000, $87,000, and $181,000 in bonuses during the years
ended March 31, 1997, 1996, and 1995, respectively. Accrued bonuses were
$201,000 and $140,000 at March 31, 1997 and 1996.
STOCK OPTION PLANS - The Board of Directors approved a Stock Option and
Incentive Plan for officers, directors, and key employees ("Stock Plan"),
which authorizes the grant of stock options. The maximum number of shares
of common stock of the Bank which may be issued under the Stock Plan is
96,431 shares. All options granted under the Stock Plan are immediately
exercisable and expire October 22, 2003.
Stock option activity, which includes the impact of stock dividends, is
summarized in the following table:
WEIGHTED
AVERAGE
NUMBER OF OPTION PRICE
SHARES PER SHARE
OUTSTANDING AND EXERCISABLE APRIL 1, 1995 74,301 $ 7.20
Grants 6,050 11.36
Options exercised (605) 7.16
-------- --------
OUTSTANDING AND EXERCISABLE MARCH 31, 1996 79,746 7.51
Grants 5,500 15.27
Options exercised (1,650) 7.16
-------- --------
OUTSTANDING AND EXERCISABLE MARCH 31, 1997 83,596 $ 8.03
======== ========
Additional information regarding options outstanding as of March 31, 1997
is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- --------------------------
WEIGHTED AVG. WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YRS) PRICE EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C>
$7.16 to 11.36 78,096 6.58 $ 7.52 78,096 $ 7.52
14.77 to 16.03 5,500 6.58 15.27 5,500 15.27
</TABLE>
F-19
<PAGE>
The fair value of unreleased shares was $661,000, $646,000, and $569,000
at March 31, 1997, 1996, and 1995, respectively.
ADDITIONAL STOCK PLAN INFORMATION - As discussed in Note 1, the Bank
continues to account for its stock-based awards using the intrinsic value
method in accordance with Accounting Principles Board No. 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES, and its related interpretations.
Accordingly, no compensation expense has been recognized in the financial
statements for employee stock arrangements.
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires the
disclosure of pro forma net income and earnings per share had the Bank
adopted the fair value method as of the beginning of fiscal 1996. Under
SFAS No. 123, the fair value of stock-based awards to employees is
calculated through the use of option pricing models, even though such
models were developed to estimate the fair value of freely
tradable, fully transferable options without vesting restrictions,
which significantly differ from the Bank's stock option awards. These
models also require subjective assumptions, including future stock
price volatility and expected time to exercise, which greatly affect the
calculated values. The Bank's calculations were made using the
Black-Scholes option pricing model with the following weighted average
assumptions:
RISK FREE
INTEREST EXPECTED EXPECTED EXPECTED
RATE LIFE VOLATILITY DIVIDENDS
Fiscal 1997 6.85 % 6.58 yrs 25.03 % 2.46 %
Fiscal 1996 6.33 % 7.58 yrs 28.78 % 3.16 %
The Bank's calculations are based on a multiple option valuation approach
and forfeitures are recognized as they occur. The weighted average fair
value of 1997 and 1996 awards was $5.20 and $4.24, respectively. If the
accounting provisions of the new pronouncement had been adopted as of the
beginning of fiscal 1996, the effect on 1997 and 1996 net income and
earnings per share in both years would not have been material.
12. EMPLOYEE STOCK OWNERSHIP PLAN
The Bank sponsors a leveraged ESOP that covers all employees with at least
one year of service who are over the age of 21. The Bank makes annual
contributions to the ESOP equal to the ESOP's debt service. All unreleased
ESOP shares are pledged as collateral for this debt. Shares are released
for allocation and allocated to participant accounts on the same date
annual debt payments are due, which is at December 31 of each year until
1999. Dividends on allocated ESOP shares may either be paid directly to
Plan participants or retained in the participant's accounts. Cash
dividends on unallocated shares are recorded as a reduction to ESOP debt
and accrued interest. ESOP compensation expense included in salaries and
benefits was $173,000, $148,000, and $111,000 for the years ended March
31, 1997, 1996, and 1995, respectively.
F-20
<PAGE>
ESOP share activity is summarized in the following table:
UNRELEASED ALLOCATED
ESOP AND RELEASED
SHARES SHARES TOTAL
BALANCE, APRIL 1, 1995 45,540 18,216 63,756
December 31, 1995 (9,108) 9,108 -
Adjusted for stock dividend 3,644 2,732 6,376
-------- ------ ------
BALANCE, MARCH 31, 1996 40,076 30,056 70,132
December 31, 1996 (10,019) 10,019 -
Adjusted for stock dividend 3,005 4,009 7,014
-------- ------ ------
BALANCE, MARCH 31, 1997 33,062 44,084 77,146
======== ====== ======
The fair value of unreleased shares was $661,000, $646,000, and $569,000
at March 31, 1997, 1996, and 1995, respectively.
Other borrowed funds consisted of a promissory note to fund the Bank's
ESOP. Interest is payable at the prime rate (8.25% at March 31, 1997),
adjusted each December 31. Annual principal payments of $78,860 plus
interest are due through December 31, 1999. All unreleased ESOP shares are
pledged as collateral for this promissory note.
The Employee Stock Ownership Trust Term Loan Agreement contains certain
negative and affirmative covenants regarding eligible acquisitions and
investments, restrictions on incurring debt and other liabilities, and
standards of recordkeeping. The Bank was in compliance with all covenants
as of March 31, 1997.
13. SHAREHOLDERS' EQUITY AND REGULATORY CAPITAL REQUIREMENTS
The Board of Directors authorized 1,000,000 shares of serial preferred
stock as part of the stock offering and reorganization completed on
October 22, 1993. No preferred shares were issued or outstanding at March
31, 1997 or 1996.
Office of Thrift Supervision ("OTS") regulations permit the MHC to waive
receipt of dividends from the Bank with prior OTS approval. Under the
provisions of the notice of intent to waive dividends approved by the OTS,
the cumulative amount of such waived dividends, beginning March 7, 1995,
constitutes restricted retained earnings and is available for declaration
as a dividend solely to the MHC. Such dividends must be considered as
having been paid by the Bank in evaluating any proposed dividend under OTS
capital distribution regulations. As of March 31, 1997, the cumulative
amount of dividends waived by the MHC and restricted by the above
provisions was $579,000.
The Bank is subject to various regulatory capital requirements
administered by the OTS. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on
the Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgments by
the regulators about components, risk, weightings, and other factors.
F-21
<PAGE>
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier
I capital to risk-weighted assets, of Tier 1 capital to total assets, and
tangible capital to tangible assets (set forth in the table below).
Management believes the Bank meets all capital adequacy requirements to
which it is subject as of March 31, 1997.
As of March 31, 1997, the most recent notification from the OTS
categorized the Bank as "well capitalized" under the regulatory framework
for prompt corrective action. To be categorized as "well capitalized," the
Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table below. There are no conditions
or events since that notification that management believes have changed
the Bank's category.
The Bank's actual and required minimum capital amounts and ratios are
presented in the following table:
<TABLE>
<CAPTION>
CATEGORIZED AS "WELL
CAPITALIZED" UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISION
------------------------- ------------------------ -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
<S> <C> <C> <C> <C> <C> <C>
AS OF MARCH 31, 1997
Total Capital:
(To Risk Weighted Assets) $ 22,986,000 20.89 % $ 8,804,000 8.0 % $ 11,005,000 10.0 %
Tier I Capital:
(To Risk Weighted Assets) 22,777,000 20.70 % N/A N/A 6,603,000 6.0 %
Tier 1 Capital:
(To Total Assets) 22,777,000 10.25 % 6,664,000 3.0 % 11,107,000 5.0 %
Tangible Capital:
(To Tangible Assets) 22,777,000 10.26 % 3,330,000 1.5 % N/A N/A
AS OF MARCH 31, 1996
Total Capital:
(To Risk Weighted Assets) 20,502,000 21.13 % 7,763,000 8.0 % 9,704,000 10.0 %
Tier I Capital:
(To Risk Weighted Assets) 20,470,000 21.09 % N/A N/A 5,823,000 6.0 %
Tier 1 Capital:
(To Total Assets) 20,470,000 9.89 % 6,207,000 3.0 % 10,344,000 5.0 %
Tangible Capital:
(To Tangible Assets) 20,470,000 9.89 % 3,103,000 1.5 % N/A N/A
</TABLE>
The following table is a reconciliation of the Bank's capital, calculated
according to generally accepted accounting principles (GAAP), to
regulatory tangible and risk-based capital at March 31, 1997:
Equity $ 25,022,000
Unrealized securities loss, net 84,000
Core deposit intangible asset (2,329,000)
---------------
Tangible capital 22,777,000
Land held for development (471,000)
General valuation allowance 680,000
---------------
Total capital $ 22,986,000
===============
F-22
<PAGE>
On August 23, 1993, the OTS issued a regulation which would add an
interest rate risk component to the risk capital standards (the "final IRR
rule"). Institutions with a greater than normal interest rate risk
exposure will be required to take a deduction from the total capital
available to meet their risk based capital requirement. That deduction is
equal to one-half of the difference between the Bank's actual measured
exposure as defined by the regulation. Savings institutions, such as the
Bank, with less than $300,000,000 in assets and risk-based capital in
excess of 12% will not be subject to the final IRR rule.
At periodic intervals, the OTS and the Federal Deposit Insurance
Corporation ("FDIC") routinely examine the Bank's financial statements as
part of their legally prescribed oversight of the savings and loan
industry. Based on their examinations, these regulators can direct that
the Bank's financial statements be adjusted in accordance with their
findings. A future examination by the OTS or the FDIC could include a
review of certain transactions or other amounts reported in the Bank's
1997 financial statements. In view of the uncertain regulatory environment
in which the Bank operates, the extent, if any, to which a forthcoming
regulatory examination may ultimately result in adjustments to the 1997
financial statements cannot presently be determined.
On September 30, 1996, the United States Congress passed and the President
signed into law the omnibus appropriations package (C.R.), including the
Bank Insurance Fund/Savings Association Insurance Fund ("BIF/SAIF") and
Regulatory Burden Relief packages. Included in this legislation is a
requirement for SAIF-insured institutions to recapitalize the SAIF
insurance fund through a one-time special assessment to be paid within 60
days of the first of the month following the enactment. The FDIC is
charged with the ultimate responsibility of determining the specific
assessment, which was determined to be 65.7 basis points of the March 31,
1995 SAIF deposit assessment base. As the Bank is insured by the SAIF, the
assessment resulted in a pre-tax charge to other expenses of $947,000,
based on the SAIF assessment base of $144.2 million.
14. STOCK DIVIDEND
On March 19, 1997, the Bank declared a 10% stock dividend, payable April
11, 1997 to shareholders of record on March 31, 1997. Average shares
outstanding, and all per share amounts included in the financial
statements and notes, have been adjusted retroactively to reflect this
dividend.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair
value amounts have been determined by the Bank using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessary to interpret market data in the development of the
estimates of fair value. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts the Bank could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.
F-23
<PAGE>
The estimated fair value of financial instruments is as follows at March
31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------------------------------ ----------------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
<S> <C> <C> <C> <C>
Assets:
Cash $ 6,951,000 $ 6,951,000 $ 5,585,000 $ 5,585,000
Investment securities 20,456,000 20,438,000 29,729,000 29,956,000
Investment securities available 3,993,000 3,899,000 3,994,000 3,932,000
for sale
Mortgage-backed securities 26,402,000 26,488,000 28,375,000 28,716,000
Mortgage-backed securities 3,022,000 2,990,000 2,002,000 2,004,000
available for sale
Loans receivable, net 151,694,000 150,436,000 126,228,000 127,045,000
Loans held for sale, net 80,000 82,000 1,941,000 1,941,000
FHLB stock 1,756,000 1,756,000 1,627,000 1,627,000
Liabilities:
Demand deposits 65,952,000 65,952,000 61,898,000 61,898,000
Time deposits 103,464,000 103,401,000 96,261,000 96,628,000
FHLB advances - short-term 12,630,000 12,678,000 10,500,000 10,585,000
FHLB advances - long-term 14,550,000 14,401,000 15,550,000 15,643,000
Other borrowed funds 237,000 237,000 315,000 315,000
</TABLE>
Fair value estimates, methods, and assumptions are set forth below for the
Bank's financial instruments.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES - Fair values were based on
quoted market rates and dealer quotes.
LOANS RECEIVABLE - Loans were priced using a discounted cash flow method.
The discount rate used was the rate currently offered on similar products,
risk adjusted for credit concerns or dissimilar characteristics.
No adjustment was made to the entry-value interest rates for changes in
credit of performing loans for which there are no known credit concerns.
Management believes that the risk factor embedded in the entry-value
interest rates, along with the general reserves applicable to the loan
portfolio for which there are no known credit concerns, result in a fair
valuation of such loans on an entry-value basis.
DEPOSITS - The fair value of time deposits with no stated maturity such as
noninterest-bearing demand deposits, savings, NOW accounts, and money
market and checking accounts is equal to the amount payable on demand. The
fair value of time deposits was based on the discounted value of
contractual cash flows. The discount rate was estimated using rates
available in the local market.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - The estimated fair value of loan
commitments approximates fees recorded associated with such commitments
as of March 31, 1997 and 1996.
OTHER - The carrying value of other financial instruments was determined
to be a reasonable estimate of their fair value.
LIMITATIONS - The fair value estimates presented herein were based on
pertinent information available to management as of March 31, 1997 and
1996. Although management was not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have
not been comprehensively revalued for purposes of these financial
statements on those dates and, therefore, current estimates of fair value
may differ significantly from the amounts presented herein.
F-24
<PAGE>
Fair value estimates were based on existing financial instruments without
attempting to estimate the value of anticipated future business. The fair
value has not been estimated for assets and liabilities that were not
considered financial instruments. Significant assets and liabilities that
are not financial instruments include the mortgage banking operations,
deferred tax liabilities, premises and equipment.
16. PLAN OF CONVERSION AND STOCK ISSUANCE - SUBSEQUENT EVENT (UNAUDITED)
On May 21, 1997, the Board of Directors of Riverview, M.H.C., the mutual
holding company of the Bank, adopted a Plan of Conversion and Agreement
and Plan of Reorganization (the "Plan") to convert Riverview, M.H.C. to
stock form and to reorganize Riverview, M.H.C., and the Bank by forming a
new stock Washington stock corporation to become the parent company of the
Bank. The new Washington corporation will exchange certain shares of its
common stock for the outstanding common stock of the Bank and will
issue and offer for sale certain additional shares of its common
stock. The additional shares of common stock of the new Washington
corporation will be offered to eligible account holders of the Bank as
of December 31, 1995, who will receive nontransferable subscription
rights to purchase these shares, as well as certain other persons as
provided for in the Plan. The amount and pricing of the proposed stock
offering will be based on an independent appraisal of the Bank.
In connection with the proposed transaction, Riverview, M.H.C. will file
applications with the Office of Thrift Supervision and a registration
statement with the U.S. Securities and Exchange Commission with respect to
the reorganization and common stock offering. After receipt of the
required regulatory approvals, the Plan of Conversion will be submitted to
the members of Riverview, M.H.C. for approval by at least a majority of
the votes eligible to be cast at a special meeting and will also be
submitted to the Bank's stockholders for approval at a special meeting.
The transaction is expected to be completed during the third calendar
quarter of 1997.
Following the completion of the reorganization, all depositors who had
membership or liquidation rights with respect to the Bank as of the
effective date of the reorganization will continue to have such rights
solely with respect to the holding company so long as they continue to
hold deposit accounts with the Bank. In addition, all persons who become
depositors of the Bank subsequent to the reorganization will have such
membership and liquidation rights with respect to the holding company.
Borrower members of the Bank at the time of the reorganization will have
the same membership rights in the holding company that they had in the
Bank immediately prior to the reorganization so long as their existing
borrowings remain outstanding. Borrowers will not receive membership
rights in connection with any new borrowings made after the
reorganization.
Subsequent to the conversion, the Bank may not declare or pay cash
dividends on or repurchase any of its shares of common stock if the effect
thereof would cause equity to be reduced below applicable regulatory
capital maintenance requirements or if such declaration and payment would
otherwise violate regulatory requirement.
Costs relating to the conversion will be deferred and, upon conversion,
such costs and any additional costs will be charged against the proceeds
from the sale of stock.
* * * * * *
F-25
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such other information or representation must not be relied upon as having been
authorized by Riverview Bancorp, Inc., Riverview, M.H.C. or Riverview Savings
Bank, FSB. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby to any
person or in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation in such jurisdiction. Neither the delivery of this Prospectus
nor any sale hereunder shall under any circumstances create any implication that
there has been no change in the affairs of Riverview Bancorp, Inc., Riverview,
M.H.C. or Riverview Savings Bank, FSB since any of the dates as of which
information is furnished herein or since the date hereof.
Table of Contents
Page
Prospectus Summary....................................................
Selected Consolidated Financial Information...........................
Risk Factors..........................................................
Riverview Bancorp, Inc................................................
Riverview Savings Bank, FSB...........................................
Use of Proceeds.......................................................
Dividend Policy.......................................................
Market for Common Stock...............................................
Capitalization........................................................
Historical and Pro Forma Regulatory Capital Compliance
Pro Forma Data........................................................
Conversion Shares to be Purchased by Management
Pursuant to Subscription Rights.....................................
Riverview Savings Bank, FSB and Subsidiary
Consolidated Statements of Income...................................
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................
Business of the Holding Company.......................................
Business of the Savings Bank..........................................
Management of the Holding Company.....................................
Management of the Savings Bank........................................
Regulation............................................................
Taxation..............................................................
The Conversion and Reorganization.....................................
Comparison of Stockholders' Rights....................................
Restrictions on Acquisition of the Holding Company....................
Description of Capital Stock of the Holding Company...................
Registration Requirements.............................................
Legal and Tax Opinions................................................
Experts...............................................................
Additional Information................................................
Index to Consolidated Financial Statements............................
Until the later of ______, 1997, or 25 days after commencement of the Syndicated
Community Offering of Common Stock, if any, all dealers effecting transactions
in the registered securities, whether or not participating in this distribution,
may be required to deliver a prospectus. This is in addition to the obligation
of dealers to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
RIVERVIEW BANCORP, INC.
[Logo]
(Proposed Holding Company for
Riverview Savings Bank, FSB)
3,500,943 to 4,736,571 Shares of
Common Stock
----------
Prospectus
----------
CHARLES WEBB & COMPANY, a Division
of Keefe, Bruyette & Woods, Inc.
PACIFIC CREST SECURITIES, INC.
August ___, 1997
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
In accordance with the Washington Business Corporation Law, RCW
ss.23B.08.570, Article XIII of the Registrant's Articles of Incorporation
provides as follows:
"ARTICLE XIII. Indemnification. The corporation shall indemnify and advance
expenses to its directors, officers, agents and employees as follows:
A. Directors and Officers. In all circumstances and to the full extent
permitted by the Washington Business Corporation Act now or hereafter in
force, the corporation shall indemnify any person who is or was a director,
officer or agent of the corporation and who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (including an action by or in
the right of the corporation), by reason of the fact that he is or was an
agent of the corporation, against expenses, judgments, fines, and amounts
paid in settlement and incurred by him in connection with such action, suit
or proceeding. However, such indemnity shall not apply on account of: (a)
acts or omissions of the director and officer finally adjudged to be in
violation of law; (b) conduct of the director and officer finally adjudged
to be in violation of RCW 23B.08.310, or (c) any transaction with respect
to which it was finally adjudged that such director and officer personally
received a benefit in money, property, or services to which the director
was not legally entitled. The corporation shall advance expenses incurred
in a proceeding for such persons pursuant to the terms set forth in a
separate directors' resolution or contract.
B. Implementation. The Board of Directors may take such action as is
necessary to carry out these indemnification and expense advancement
provisions. It is expressly empowered to adopt, approve and amend from time
to time such Bylaws, resolutions, contracts or further indemnification and
expense advancement arrangements as may be permitted by law, implementing
these provisions. Such Bylaws, resolutions, contracts, or further
arrangements shall include, but not be limited to, implementing the manner
in which determinations as to any indemnity or advancement of expenses
shall be made.
C. Survival of Indemnification Rights. No amendment or repeal of this
Article shall apply to or have any effect on any right to indemnification
provided hereunder with respect to acts or omissions occurring prior to
such amendment or repeal.
D. Service for Other Entities. The indemnification and advancement of
expenses provided under this Article shall apply to directors, officers,
employees, or agents of the corporation for both (a) service in such
capacities for the corporation, and (b) service at the corporations's
request as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise. A person is considered to be
serving an employee benefit plan at the corporation's request if such
person's duties to the corporation also impose duties on, or otherwise
involve services by, the director to the plan or to participants in or
beneficiaries of the plan.
E. Insurance. The 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 is or was serving at the request of the corporation
as a director, trustee, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise against liability
asserted against him and incurred by him in such capacity or arising out of
his status as such, whether or not the corporation would have had the power
to indemnify him against such liability under the provisions of this bylaw
and Washington law.
F. Other Rights. The indemnification provided by this section shall
not be deemed exclusive of any other right to which those indemnified may
be entitled under any other bylaw, agreement, vote of stockholders, or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such an office,
and shall continue as to a person who has ceased to be a director, trustee,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person."
II-1
<PAGE>
Item 25. Other Expenses of Issuance and Distribution(1)
Legal fees and expenses................................ $150,000
Securities Marketing Firm legal fees................... 30,000
EDGAR, printing, copying, postage, mailing............. 150,000
Appraisal/business plan fees and expenses.............. 30,000
Accounting fees........................................ 90,000
Securities marketing fees (1).......................... 323,700
Data processing fees and expenses...................... 7,500
SEC filing fee......................................... 16,500
OTS filing fee......................................... 8,400
Blue sky legal fees and expenses....................... 7,500
Other.................................................. 16,400
--------
Total............................................ $830,000
========
- ----------
(1) Assumes a total offering of Conversion Shares of $24.0 million
(midpoint of the Estimated Valuation Range), a management fee payable to Webb
equal to $25,000 and a success fee of 1.5% of the aggregate Purchase Price of
the shares of Common Stock sold in the Subscription and Direct Community
Offering and the Syndicated Community Offering, excluding shares purchased by
the ESOP and officers and directors of the Savings Bank. See "THE CONVERSION AND
REORGANIZATION -- Plan of Distribution for the Subscription, Direct Community
and Syndicated Community Offerings."
Item 26. Recent Sales of Unregistered Securities.
Not Applicable
Item 27. Exhibits
The exhibits filed as part of this Registration Statement are as
follows:
(a) List of Exhibits
1.1 -- Form of proposed Agency Agreement among Riverview Bancorp, Inc.,
Riverview Savings Bank, FSB, Riverview, M.H.C. and Charles Webb &
Company (a)
1.2 -- Engagement Letter with Riverview Savings Bank, FSB and Charles Webb &
Company
2 -- Plan of Conversion and Agreement and Plan of Reorganization of
Riverview, M.H.C. and Riverview Savings Bank, FSB
3.1 -- Articles of Incorporation of Riverview Bancorp, Inc.
3.2 -- Bylaws of Riverview Bancorp, Inc.
4 -- Form of Certificate for Common Stock
5 -- Opinion of Breyer & Aguggia regarding legality of securities
registered
8.1 -- Form of Federal Tax Opinion of Breyer & Aguggia
8.2 -- Form of State Tax Opinion of Deloitte & Touche LLP (a)
II-2
<PAGE>
8.3 -- Opinion of RP Financial, LC. as to the value of subscription rights
10.1 -- Proposed Form of Employment Agreement for Certain Executive Officers
10.2 -- Proposed Form of Severance Agreement for Key Employees
10.3 -- Proposed Form of Employee Stock Ownership Plan
10.4 -- Proposed Form of Employee Severance Compensation Plan
21 -- Subsidiaries of Riverview Bancorp, Inc.
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Breyer & Aguggia
23.3 -- Consent of RP Financial, LC.
24 -- Power of Attorney
99.1 -- Order and Acknowledgement Form (contained in the marketing materials
included herein as Exhibit 99.2)
99.2 -- Solicitation and Marketing Materials
99.3 -- Appraisal Agreement with RP Financial, LC.
99.4 -- Appraisal Report of RP Financial, LC. (a)
99.5 -- Proxy Statement for Special Meeting of Members of Riverview, M.H.C.
99.6 -- Proxy Statement for Annual Meeting of Stockholders of Riverview
Savings Bank, FSB
- ----------
(a) To be filed by amendment.
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended ("Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
II-3
<PAGE>
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) The undersigned registrant hereby undertakes to provide the underwriter
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is therefore, unenforceable. In the event that a
claim for indemnification against liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-1 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Camas, State of Washington, on this 27th day of June 1997.
RIVERVIEW BANCORP, INC.
By: /s/ Patrick Sheaffer
-------------------------------------
Patrick Sheaffer
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Riverview Bancorp, Inc., do
hereby severally constitute and appoint Patrick Sheaffer, our true and lawful
attorney and agent, to do any and all things and acts in our names in the
capacities indicated below and to execute all instruments for us and in our
names in the capacities indicated below which said Patrick Sheaffer may deem
necessary or advisable to enable Riverview Bancorp, Inc. to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, in connection with the Registration
Statement on Form S-1 relating to the offering of Riverview Bancorp, Inc.'s
Common Stock, including specifically but not limited to, power and authority to
sign for us or any of us in our names in the capacities indicated below the
Registration Statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that Patrick Sheaffer
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Patrick Sheaffer President, Chief Executive June 27, 1997
- ------------------------- and Director
Patrick Sheaffer (Principal Executive Officer)
/s/ Ron Wysaske Treasurer, Chief Financial June 27, 1997
- ------------------------- Officer and Director
Ron Wysaske (Principal Financial and
Accounting Officer)
/s/ Roger Malfait Director June 27, 1997
- -------------------------
Roger Malfait
/s/ Gary R. Douglass Director June 27, 1997
- -------------------------
Gary R. Douglass
/s/ Dale E. Scarbrough Director June 27, 1997
- -------------------------
Dale E. Scarbrough
/s/ Paul L. Runyan Director June 27, 1997
- -------------------------
Paul L. Runyan
/s/ Robert K. Leick Director June 27, 1997
- -------------------------
Robert K. Leick
II-5
<PAGE>
As filed with the Securities and Exchange Commission on June 27, 1997
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
RIVERVIEW BANCORP, INC.
(Exact name of registrant as specified in charter)
Washington 6035 [to be applied for]
(State or other jurisdiction of (Primary SICC No.) (I.R.S. Employer
incorporation or organization) Identification No.)
700 N.E. Fourth Avenue
Camas, Washington 98607
(360) 834-2231
(Address and telephone number of principal executive offices)
John F. Breyer, Jr., Esquire
Victor L. Cangelosi, Esquire
BREYER & AGUGGIA
Suite 470 East
1300 I Street, N.W.
Washington, D.C. 20005
(Name and address of agent for service)
<PAGE>
INDEX TO EXHIBITS
1.1 -- Form of proposed Agency Agreement among Riverview Bancorp, Inc.,
Riverview Savings Bank, FSB, Riverview, M.H.C. and Charles Webb &
Company (a)
1.2 -- Engagement Letter between Riverview Savings Bank, FSB and Charles
Webb & Company
2 -- Plan of Conversion and Reorganization of Riverview Savings Bank, FSB
and Riverview, M.H.C.
3.1 -- Articles of Incorporation of Riverview Bancorp, Inc.
3.2 -- Bylaws of Riverview Bancorp, Inc.
4 -- Form of Certificate for Common Stock
5 -- Opinion of Breyer & Aguggia regarding legality of securities
registered
8.1 -- Form of Federal Tax Opinion of Breyer & Aguggia
8.2 -- Form of State Tax Opinion of Deloitte & Touche LLP
8.3 -- Opinion of RP Financial, LC. as to the value of subscription rights
10.1 -- Proposed Form of Employment Agreement For Certain Executive Officers
10.2 -- Proposed Form of Severance Agreement for Key Officers
10.3 -- Proposed Form of Employee Stock Ownership Plan
10.4 -- Proposed Form of Employee Severance Compensation Plan
21 -- Subsidiaries of Riverview Bancorp, Inc.
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Breyer & Aguggia
23.3 -- Consent of RP Financial, LC.
24 -- Power of Attorney
99.1 -- Order and Acknowledgement Form (contained in the marketing materials
included herein as Exhibit 99.2)
99.2 -- Solicitation and Marketing Materials
99.3 -- Appraisal Agreement with RP Financial, LC.
99.4 -- Appraisal Report of RP Financial, LC.
99.5 -- Proxy Statement for Special Meeting of Members of Riverview, M.H.C.
99.6 -- Proxy Statement for Annual Meeting of Stockholders of Riverview
Savings Bank, FSB
- ---------------------
(a) To be filed by amendment.
EXHIBIT 1.2
Engagement Letter Between Riverview Savings Bank
and Charles Webb & Company
<PAGE>
April 9, 1997
Mr. Patrick Sheaffer
President & Chief Executive Officer
Riverview Savings Bank, FSB
700 N. E. Fourth Street
Camas, Washington 98607
Dear Mr. Sheaffer:
This proposal is in connection with Riverview Savings Bank, FSB's (the "Bank")
intention to have its parent mutual holding company convert from a mutual to a
capital stock form of organization (the "Conversion"). In order to effect the
Conversion, it is contemplated that all of the Bank's common stock to be
outstanding pursuant to the Conversion will be issued to a holding company (the
"Company") to be formed by the Bank, and that the Company will offer and sell
shares of its common stock first to eligible persons (pursuant to the Bank's
Plan of Conversion) in a Subscription and Community Offering.
Charles Webb & Company ("Webb"), a Division of Keefe, Bruyette & Woods, Inc.
("KBW") will act as the Bank's and the Company's exclusive financial advisor and
marketing agent in connection with the Conversion. This letter sets forth
selected terms and conditions of our engagement.
1. Advisory/Conversion Services. As the Bank's and Company's financial advisor
and marketing agent, Webb will provide the Bank and the Company with a
comprehensive program of conversion services designed to promote an orderly,
efficient, cost-effective and long-term stock distribution. Webb will provide
financial and logistical advice to the Bank and the Company concerning the
offering and related issues. Webb will assist in providing conversion
enhancement services intended to maximize stock sales in the Subscription
Offering and to residents of the Bank's market area, if necessary, in the
Community Offering.
Webb shall provide financial advisory services to the Bank which are typical in
connection with an equity offering and include, but are not limited to, overall
financial analysis of the client with a focus on identifying factors which
impact the valuation of the common stock and provide the appropriate
recommendations for the betterment of the equity valuation.
<PAGE>
Mr. Patrick Sheaffer
April 9, 1997
Page 2 of 6
Additionally, post conversion financial advisory services will include advice on
shareholder relations, NASDAQ listing, dividend policy (for both regular and
special dividends), stock repurchase strategy and communication with market
makers. Prior to the closing of the offering, Webb shall furnish to client a
Post-Conversion reference manual which will include specifics relative to these
items. (The nature of the services to be provided by Webb as the Bank's and the
Company's financial advisor and marketing agent are further described in Exhibit
A attached hereto.)
2. Preparation of Offering Documents. The Bank, the Company and their counsel
will draft the Registration Statement, Application for Conversion, Prospectus
and other documents to be used in connection with the Conversion. Webb will
attend meetings to review these documents and advise you on their form and
content. Webb and its counsel will draft appropriate agency agreement and
related documents as well as marketing materials other than the Prospectus.
3. Due Diligence Review. Prior to filing the Registration Statement, Application
for Conversion or any offering or other documents naming Webb as the Bank's and
the Company's financial advisor and marketing agent, Webb and their
representatives will undertake substantial investigations to learn about the
Bank's business and operations ("due diligence review") in order to confirm
information provided to us and to evaluate information to be contained in the
Bank's and/or the Company's offering documents. The Bank agrees that it will
make available to Webb all relevant information, whether or not publicly
available, which Webb reasonably requests, and will permit Webb to discuss with
management the operations and prospects of the Bank. Webb will treat all
material non-public information as confidential. The Bank acknowledges that Webb
will rely upon the accuracy and completeness of all information received from
the Bank, its officers, directors, employees, agents and representatives,
accountants and counsel including this letter to serve as the Bank's and the
Company's financial advisor and marketing agent.
4. Regulatory Filings. The Bank and/or the Company will cause appropriate
offering documents to be filed with all regulatory agencies including, the
Securities and Exchange Commission ("SEC""), the National Association of
Securities Dealers ("NASD"), Office of Thrift Supervision ("OTS") and such state
securities commissioners as may be determined by the Bank.
5. Agency Agreement. The specific terms of the conversion services, conversion
offering enhancement and syndicated offering services contemplated in this
letter shall be set forth in an Agency Agreement between Webb and the Bank and
the Company to be executed prior to commencement of the offering, and dated the
date that the Company's Prospectus is declared
<PAGE>
Mr. Patrick Sheaffer
April 9, 1997
Page 3 of 6
effective and/or authorized to be disseminated by the appropriate regulatory
agencies, the SEC, the NASD, the OTS and such state securities commissioners and
other regulatory agencies as required by applicable law.
6. Representations, Warranties and Covenants. The Agency Agreement will provide
for customary representations, warranties and covenants by the Bank and Webb,
and for the Company to indemnify Webb and their controlling persons (and, if
applicable, the members of the selling group and their controlling persons), and
for Webb to indemnify the Bank and the Company against certain liabilities,
including, without limitation, liabilities under the Securities Act of 1933.
7. Fees. For the services hereunder, the Bank and/or Company shall pay the
following fees to Webb at closing unless stated otherwise:
(a) A Management Fee of $25,000 payable in four consecutive monthly
installments of $6,250 commencing with the signing of this letter.
Such fees shall be deemed to have been earned when due. Should the
Conversion be terminated for any reason not attributable to the action
or inaction of Webb, Webb shall have earned and be entitled to be paid
fees accruing through the stage at which point the termination
occurred. This Management Fee shall be applied against the Success Fee
described below.
(b) A Success Fee of 1.5% of the aggregate Purchase Price of Common Stock
sold in the Subscription Offering and Community Offering excluding
shares purchased by the Bank's officers, directors, or employees (or
members of their immediate families) plus any ESOP, tax-qualified or
stock based compensation plans (except IRA's) or similar plan created
by the Bank for some or all of its directors or employees.
(c) If any shares of the Company's stock remain available after the
subscription offering, at the request of the Bank, Webb will seek to
form a syndicate of registered broker-dealers to assist in the sale of
such common stock on a best efforts basis, subject to the terms and
conditions set forth in the selected dealers agreement. Webb will
endeavor to distribute the common stock among dealers in a fashion
which best meets the distribution objectives of the Bank and the Plan
of Conversion. Webb will be paid a fee not to exceed 5.5% of the
aggregate Purchase Price of the shares of common stock sold by them.
Webb will pass onto selected broker-dealers, who assist in the
syndicated community, an amount competitive with gross underwriting
discounts charged at such time for comparable amounts of stock sold at
a comparable price per share in a similar
<PAGE>
Mr. Patrick Sheaffer
April 9, 1997
Page 4 of 6
market environment. Fees with respect to purchases affected with the
assistance of a broker/dealer other than Webb shall be transmitted by
Webb to such broker/dealer. The decision to utilize selected
broker-dealers will be made by the Bank upon consultation with Webb.
In the event, with respect to any stock purchases, fees are paid
pursuant to this subparagraph 7(c), such fees shall be in lieu of, and
not in addition to, payment pursuant to subparagraph 7(a) and 7(b).
8. Additional Services. Webb further agrees to provide financial advisory
assistance to the Company and the Bank for a period of one year following
completion of the Conversion, including formation of a dividend policy and share
repurchase program, assistance with shareholder reporting and shareholder
relations matters, general advice on mergers and acquisitions and other related
financial matters, without the payment by the Company and the Bank of any fees
in addition to those set forth in Section 7 hereof. Nothing in this Agreement
shall require the Company and the Bank to obtain such services from Webb.
Following this initial one year term, if both parties wish to continue the
relationship, a fee will be negotiated and an agreement entered into at that
time.
9. Expenses. The Bank will bear those expenses of the proposed offering
customarily borne by issuers, including, without limitation, regulatory filing
fees, SEC, "Blue Sky," and NASD filing and registration fees; the fees of the
Bank's accountants, attorneys, appraiser, transfer agent and registrar,
printing, mailing and marketing and syndicate expenses associated with the
Conversion; the fees set forth in Section 7; and fees for "Blue Sky" legal work.
If Webb incurs expenses on behalf of Client, Client will reimburse Webb for such
expenses.
Webb's reasonable out-of-pocket expenses, including costs of travel, meals and
lodging, photocopying, telephone, facsimile and couriers, not to exceed $15,000,
and reasonable fees and expenses of counsel (such fees of counsel will not be
incurred without the prior approval of Client). The selection of such counsel
will be done by Webb, with the approval of the Bank. Such reimbursement of legal
fees will not exceed $30,000.
10. Conditions. Webb's willingness and obligation to proceed hereunder shall be
subject to, among other things, satisfaction of the following conditions in
Webb's opinion, which opinion shall have been formed in good faith by Webb after
reasonable determination and consideration of all relevant factors: (a) full and
satisfactory disclosure of all relevant material, financial and other
information in the disclosure documents and a determination by Webb, in its sole
discretion, that the sale of stock on the terms proposed is reasonable given
such disclosures; (b) no material adverse change in the condition or operations
of the Bank subsequent to the execution of the agreement; and (c) no adverse
market conditions at the time of offering which in Webb's opinion make the sale
of the shares by the Company inadvisable.
<PAGE>
Mr. Patrick Sheaffer
April 9, 1997
Page 5 of 6
11. Benefit. This Agreement shall inure to the benefit of the parties hereto and
their respective successors and to the parties indemnified pursuant to the terms
and conditions of the Agency Agreement and their successors, and the obligations
and liabilities assumed hereunder by the parties hereto shall be binding upon
their respective successors provided, however, that this Agreement shall not be
assignable by Webb.
12. Definitive Agreement. This letter reflects Webb's present intention of
proceeding to work with the Bank on its proposed conversion. It does not create
a binding obligation on the part of the Bank, the Company or Webb except as to
the agreement to maintain the confidentiality of non-public information set
forth in Section 3, the payment of certain fees as set forth in Section 7(a) and
7(b) and the assumption of expenses as set forth in Section 9, all of which
shall constitute the binding obligations of the parties hereto and which shall
survive the termination of this Agreement or the completion of the services
furnished hereunder and shall remain operative and in full force and effect. You
further acknowledge that any report or analysis rendered by Webb pursuant to
this engagement is rendered for use solely by the management of the Bank and its
agents in connection with the Conversion. Accordingly, you agree that you will
not provide any such information to any other person without our prior written
consent.
Webb acknowledges that in offering the Company's stock no person will be
authorized to give any information or to make any representation not contained
in the offering prospectus and related offering materials filed as part of a
registration statement to be declared effective in connection with the offering.
Accordingly, Webb agrees that in connection with the offering it will not give
any unauthorized information or make any unauthorized representation. We will be
pleased to elaborate on any of the matters discussed in this letter at your
convenience.
<PAGE>
Mr. Patrick Sheaffer
April 9, 1997
Page 6 of 6
If the foregoing correctly sets forth our mutual understanding, please so
indicate by signing and returning the original copy of this letter to the
undersigned.
Very truly yours,
CHARLES WEBB & COMPANY a Division of KEEFE, BRUYETTE & WOODS, INC.
By: /s/ Patricia A. McJoynt
------------------------------------
Patricia A. McJoynt
Executive Vice President
RIVERVIEW SAVINGS BANK, FSB
By: /s/ Patrick Shaeffer May 8, 1997
-------------------------------------- -----------
Patrick Shaeffer Date
President & Chief Executive Officer
<PAGE>
EXHIBIT A
CONVERSION SERVICES PROPOSAL
TO RIVERVIEW SAVINGS BANK, FSB
Charles Webb & Company provides thrift institutions converting from mutual to
stock form of ownership with a comprehensive program of conversion services
designed to promote an orderly, efficient, cost-effective and long-term stock
distribution. The following list is representative of the conversion services,
if appropriate, we propose to perform on behalf of the Bank.
General Services
Assist management and legal counsel with the design of the transaction
structure.
Analyze and make recommendations on bids from printing, transfer agent, and
appraisal firms.
Assist officers and directors in obtaining Bank loans to purchase stock, if
requested.
Assist in drafting and distribution of press releases as required or
appropriate.
Conversion Offering Enhancement Services
Establish and manage Stock Information Center at the Bank. Stock Information
Center personnel will track prospective investors; record stock orders; mail
order confirmations; provide the Bank's senior management with daily reports;
answer customer inquiries; and handle special situations as they arise.
Assign Webb's personnel to be at the Bank through completion of the Subscription
and Community Offerings to manage the Stock Information Center, meet with
prospective shareholders at individual and community information meetings,
solicit local investor interest through a tele-marketing campaign, answer
inquiries, and otherwise assist in the sale of stock in the Subscription and
Community Offerings. This effort will be lead by a Principal of Webb/KBW.
Create target investor list based upon review of the Bank's depositor base.
Provide intensive financial and marketing input for drafting of the prospectus.
<PAGE>
Conversion Offering Enhancement Services- Continued
Prepare other marketing materials, including prospecting letters and brochures,
and media advertisements.
Arrange logistics of community information meeting(s) as required.
Prepare audio-visual presentation by senior management for community information
meeting(s).
Prepare management for question-and-answer period at community information
meeting(s).
Attend and address community information meeting(s) and be available to answer
questions.
Broker-Assisted Sales Services.
Arrange for broker information meeting(s) as required.
Prepare audio-visual presentation for broker information meeting(s).
Prepare script for presentation by senior management at broker information
meeting(s).
Prepare management for question-and-answer period at broker information
meeting(s).
Attend and address broker information meeting(s) and be available to answer
questions.
Produce confidential broker memorandum to assist participating brokers in
selling the Bank's common stock.
Aftermarket Support Services.
Webb will use their best efforts to secure market making and on-going research
commitment from at least two NASD firms.
EXHIBIT 2
Plan of Conversion and Reorganization of
Riverview Savings Bank, FSB and Riverview, M.H.C.
<PAGE>
RIVERVIEW, M.H.C.
RIVERVIEW SAVINGS BANK, FSB
CAMAS, WASHINGTON
PLAN OF CONVERSION FROM MUTUAL HOLDING COMPANY TO STOCK
HOLDING COMPANY AND AGREEMENT AND PLAN OF REORGANIZATION
I. General
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section II unless otherwise defined herein.
Riverview, M.H.C., Camas, Washington ("MHC") was formed on October 22, 1993
to act as the federally chartered mutual holding company for Riverview Savings
Bank, FSB, Camas, Washington ("Savings Bank"), a federally chartered capital
stock savings bank. As of the date hereof, the MHC beneficially and of record
owns 1,407,891 shares of common stock, par value $1.00 per share, of the Savings
Bank ("Savings Bank Common Stock"), representing approximately 58.3% of the
outstanding voting stock of the Savings Bank and the remaining 1,008,410 shares
of Savings Bank Common Stock, or 41.7%, are owned by persons other than the MHC
("Public Stockholders").
This Plan of Conversion from Mutual Holding Company to Stock Holding
Company and Agreement and Plan of Reorganization ("Plan") provides for the
conversion of the MHC to the stock form of organization and the reorganization
of the Savings Bank as a wholly owned subsidiary of a newly formed stock holding
company (collectively, "Conversion and Reorganization"). The Boards of Directors
of the MHC and the Savings Bank believe that the Conversion and Reorganization
is in the best interests of the MHC, the members of the MHC, the Savings Bank
and its stockholders. As a result of the Conversion and Reorganization, the
Savings Bank will be wholly owned by a stock holding company, which is a more
common structure and form of ownership than a mutual holding company. The Board
of Directors determined that the Plan equitably provides for the interests of
Members through the granting of subscription rights and the establishment of a
liquidation account and that consummation of the Conversion and Reorganization
would not adversely impact the stockholders' equity of the Savings Bank.
The Conversion and Reorganization will provide the Savings Bank with a
larger capital base which will enhance the its ability to pursue lending and
investment opportunities, as well as its opportunities for growth and expansion.
The Conversion and Reorganization also will provide a more flexible operating
structure, which will enable the Savings Bank to compete more effectively with
other financial institutions. In addition, the Conversion and Reorganization
will raise additional equity capital for the Savings Bank. Finally, the
Conversion and Reorganization has been structured to reunite the accumulated
earnings and profits retained by the MHC with the retained earnings of the
Savings Bank through a tax-free reorganization.
Pursuant to the Plan, the Savings Bank will form a new first-tier
subsidiary which will be incorporated under state law as a stock corporation
("Holding Company"). The Holding Company will then form an interim federal stock
savings bank ("Interim B") as a wholly owned subsidiary. As described in greater
detail herein, simultaneously with the conversion of the MHC to an interim
federal stock savings bank ("Interim A"), the Savings Bank, MHC and Holding
Company will undergo a reorganization in which Interim A will merge with and
into the Savings Bank, Interim B will merge with and into the Savings Bank, the
Holding Company will become the parent company of the Savings Bank, and the
Holding Company will issue and sell its Conversion Stock pursuant to this Plan.
On May 21, 1997, after careful study and consideration, the Boards of
Directors of the MHC and the Savings Bank adopted this Plan. The Plan must be
approved by the affirmative vote of a majority of the total number of votes
eligible to be cast by Members of the MHC at a special meeting to be called for
that purpose and by the holders of at least two-thirds of the shares of
outstanding Savings Bank Common Stock eligible to vote at an annual meeting of
the Savings Bank Stockholders, or at a special meeting of the Savings Bank
Stockholders called for the purpose of submitting the Plan for approval. Prior
to the submission of the Plan to the Members and the Public Stockholders for
consideration, the Plan must be approved by the Office of Thrift Supervision
("OTS").
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II. Definitions
For the purposes of this Plan, the following terms have the following
meanings:
A. Acting in Concert: (i) Knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement; or (ii) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise. A Person (as defined herein) who acts in concert
with another Person ("other party") shall also be deemed to be acting in concert
with any Person who is also acting in concert with that other party, except that
any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be acting in
concert with its trustee or a Person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the Tax-Qualified Employee Benefit Plan will be aggregated.
B. Associate: When used to indicate a relationship with any Person, means
(i) any corporation or organization (other than the Primary Parties or a
majority-owned subsidiary of either thereof) of which such Person is an officer
or partner or is, directly or indirectly, the beneficial owner of ten percent or
more of any class of equity securities, (ii) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity, except that it does not
include a Tax-Qualified Employee Stock Benefit Plan and (iii) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person or who is a director or officer of either of the Primary Parties or
any of their subsidiaries.
C. Capital Stock: Any and all authorized capital stock of the Savings Bank.
D. Conversion and Reorganization: Collectively, (i) the conversion of the
MHC into an interim federal stock savings bank ("Interim A") and the
simultaneous merger of Interim A with and into the Savings Bank, with the
Savings Bank being the surviving institution; (ii) the merger of an interim
federal stock savings bank subsidiary of the Holding Company ("Interim B") with
and into the Savings Bank, with the Savings Bank being the surviving institution
and becoming a wholly owned subsidiary of the Holding Company; (iii) the
exchange of shares of Savings Bank Common Stock (other than those held by the
MHC which shall be canceled) for shares of Holding Company Common Stock; and
(iv) the issuance of Conversion Stock by the Holding Company as provided for in
this Plan.
E. Conversion Stock: Holding Company Common Stock offered and issued by the
Holding Company pursuant to this Plan.
F. Direct Community Offering: The offering for sale of Conversion Stock to
the public.
G. Eligibility Record Date: December 31, 1995.
H. Eligible Account Holder: Holder of a Qualifying Deposit on the
Eligibility Record Date.
I. Exchange Ratio: The ratio at which shares of Holding Company Common
Stock will be exchanged for shares of Savings Bank Common Stock held by the
Public Stockholders upon consummation of the Conversion and Reorganization. The
exact rate shall be determined by the MHC and the Savings Bank at the time the
Purchase Price (as defined in Section XI.B.) is determined and shall equal the
rate that will result in the Public Stockholders owning in the aggregate
approximately the same percentage of shares of common stock of the Holding
Company to be outstanding upon completion of the Conversion as the percentage of
Savings Bank Common Stock owned by them in the aggregate immediately prior to
consummation of the Conversion, before giving effect to (i) the payment of cash
in lieu of issuing fractional shares of Holding Company Common Stock, and (ii)
any shares of Conversion Stock purchased by Public Stockholders or any
Tax-Qualified Employee Stock Benefit Plans.
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J. Exchange Stock: Holding Company Common Stock issued to the Public
Stockholders in exchange for Savings Bank Common Stock.
K. FDIC: Federal Deposit Insurance Corporation.
L. Form AC Application: The application submitted by the MHC to the OTS on
OTS Form AC for approval of the Conversion and Reorganization.
M. H-(e)1 Application: The application submitted to the OTS on OTS Form
H-(e)1 or, if applicable, OTS Form H-(e)1-S, for approval of the Holding Company
acquisition of all of the Capital Stock.
N. Holding Company: The corporation to be formed by the Savings Bank under
state law initially as a first tier, wholly owned subsidiary of the Savings
Bank. Upon completion of the Conversion, the Holding Company shall hold all of
the outstanding capital stock of the Savings Bank.
O. Holding Company Common Stock: The common stock, $0.01 par value per
share, of the Holding Company.
P. Interim A: "Riverview Interim "A" Savings Bank, FSB," which will be the
interim federal stock savings bank resulting from the conversion of the MHC to
stock form immediately prior to the merger of Interim B into the Savings Bank.
Q. Interim B: "Riverview Interim "B" Savings Bank, FSB," which will be
formed as a wholly owned interim federal stock savings bank subsidiary of the
Holding Company, which will merge with and into the Savings Bank immediately
after the merger of Interim A into the Savings Bank.
R. Local Community: Clark, Cowlitz, Klickitat and Skamania Counties of the
State of Washington.
S. Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker, or principal in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide,
competitive bid and offer quotations in a recognized inter-dealer quotation
system or furnishes bona fide competitive bid and offer quotations on request
and (ii) is ready, willing and able to effect transactions in reasonable
quantities at its quoted prices with other brokers or dealers.
T. Member: Any Person qualifying as a member of the MHC pursuant to its
charter and bylaws.
U. MHC: Riverview, M.H.C., Camas, Washington
V. Offerings: Collectively, the Subscription Offering, Direct Community
Offering and Syndicated Community Offering.
W. Officer: An executive officer of any or all of the Primary Parties,
which includes the Chief Executive Officer, President, Executive Vice President,
Senior Vice Presidents, Vice Presidents in charge of principal business
functions, Secretary, Controller, and any Person performing functions similar to
those performed by the foregoing persons.
X. Order Form(s): Form(s) to be used to purchase Conversion Stock sent to
Eligible Account Holders and other parties eligible to purchase Conversion Stock
in the Subscription Offering.
Y. Other Member: A Member (other than an Eligible Account Holder or
Supplemental Eligible Account Holder) at the close of business on the Voting
Record Date.
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Z. Person: An individual, a corporation, a partnership, an association, a
joint-stock company, a trust (including Individual Retirement Accounts and KEOGH
Accounts), any unincorporated organization, a government or political
subdivision thereof or any other entity.
AA. Plan: This Plan of Conversion From Mutual Holding Company to Stock
Holding Company and Agreement and Plan of Reorganization, as originally adopted
by the Boards of Directors of the MHC and the Savings Bank, or as amended in
accordance with its terms.
BB. Primary Parties: Collectively, the MHC, the Savings Bank and the
Holding Company.
CC. Public Stockholder: Any Person who owns Savings Bank Common Stock,
other than the MHC, as of the Voting Record Date.
DD. Qualifying Deposit: The deposit balance in any Savings Account as of
the close of business on the Eligibility Record Date or the Supplemental
Eligibility Record Date, as applicable; provided, however, that no Savings
Account with a deposit balance of less than $50.00 shall constitute a Qualifying
Deposit.
EE. Registration Statement: The registration statement on SEC Form S-1 or
Form SB-2 filed by the Holding Company with the SEC for the purpose of
registering the Conversion Stock under the Securities Act of 1933, as amended.
FF. Savings Account(s): Withdrawable deposit(s) in the Savings Bank,
including certificates of deposit.
GG. Savings Bank: Riverview Savings Bank, FSB, Camas, Washington.
HH. Savings Bank Common Stock: The common stock of the Savings Bank, par
value $1.00 per share.
II. SEC: Securities and Exchange Commission.
JJ. Special Meeting of Members: The special meeting of the Members, and any
adjournments thereof, held to consider and vote upon the Plan.
KK. Meeting of Stockholders: The meeting of the stockholders of the Savings
Bank, and any adjournments thereof, to be called and held for the purpose of
submitting the Plan for their approval. Such meeting may either be an annual or
special meeting.
LL. Subscription Offering: The offering of Conversion Stock to Eligible
Account Holders, Tax- Qualified Employee Stock Benefit Plans, Supplemental
Eligible Account Holders and Other Members under the Plan.
MM. Subscription Rights: Nontransferable, non-negotiable, personal rights
of Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans,
Supplemental Eligible Account Holders and Other Members to purchase Conversion
Stock.
NN. Supplemental Eligibility Record Date: The last day of the calendar
quarter preceding the approval of the Plan by the OTS.
OO. Supplemental Eligible Account Holder: Holder of a Qualifying Deposit in
the Savings Bank (other than an Officer or director of the Savings Bank or their
Associates) on the Supplemental Eligibility Record Date.
PP. Syndicated Community Offering: The offering for sale by a syndicate of
broker-dealers to the general public of shares of Conversion Stock not purchased
in the Subscription Offering and the Direct Community Offering.
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QQ. Tax-Qualified Employee Stock Benefit Plan: Any defined benefit plan or
defined contribution plan of the Savings Bank or Holding Company, such as an
employee stock ownership plan, bonus plan, profit-sharing plan or other plan,
which, with its related trust, meets the requirements to be "qualified" under
section 401 of the Internal Revenue Code. A "non-tax-qualified employee stock
benefit plan" is any defined benefit plan or defined contribution plan that is
not so qualified.
RR. Voting Record Date(s): The date(s) fixed by the Boards of Directors of
the MHC and the Savings Bank according to OTS regulations for determining
eligibility to vote at the Special Meeting of Members and at the Meeting of
Stockholders.
III. General Procedure for Conversion and Reorganization
A. Conversion of MHC to an Interim Federal Stock Savings Bank and Merger of
Such Interim Into the Savings Bank. The MHC will convert into an interim stock
federal savings bank (i.e. "Interim A") and Interim A will simultaneously merge
with and into the Savings Bank, with the Savings Bank as the surviving entity
("MHC Merger"). As a result of the MHC Merger, the Savings Bank Common Stock
held by the MHC will be canceled and Eligible Account Holders and Supplemental
Eligible Account Holders will be granted ratable interests in a liquidation
account, to be established in accordance with the procedures set forth in
Section XIV hereof.
B. Merger of a Second Interim Federal Stock Savings Bank into Savings Bank
and Exchange of Shares. Immediately after the MHC Merger, Interim B will merge
with and into the Savings Bank, and the separate existence of Interim B will
cease ("Savings Bank Merger"). The shares of the Holding Company Common Stock
held by the Bank will be canceled. The shares of common stock of Interim B held
by the Holding Company will be converted, on a one-to-one basis, into shares of
Savings Bank Common Stock, which will result in the Savings Bank becoming a
wholly-owned subsidiary of the Holding Company. The Public Stockholders will
exchange their shares of Savings Bank Common Stock for shares of Holding Company
Common Stock based upon the Exchange Ratio. In addition, all options to purchase
shares of Savings Bank Common Stock which are outstanding immediately prior to
consummation of the Conversion and Reorganization shall be converted to options
to purchase shares of Holding Company Common Stock, with the number of shares
subject to the option and the exercise price per share to be adjusted based upon
the Exchange Ratio so that the aggregate exercise price remains unchanged, and
with the duration of the option remaining unchanged. Upon consummation of the
Conversion and Reorganization, all of the Savings Bank Common Stock will be
owned by the Holding Company and the Public Stockholders will own the same
percentage of the Holding Company Common Stock as the percentage of the Savings
Bank Common Stock owned by them prior to the Conversion and Reorganization,
before giving effect to cash paid in lieu of any fractional interests of Savings
Bank Common Stock, any shares of Conversion Stock purchased by the Public
Stockholders in the Offering or tax-qualified employee stock benefit plans of
the Holding Company or Savings Bank thereafter, and any Dissenting Shares as
defined in Section III.C. hereof. The Holding Company will then sell the
Conversion Stock in the Offerings in accordance with this Plan.
Following consummation of the Conversion and Reorganization, voting rights
with respect to the Savings Bank shall be held and exercised exclusively by the
Holding Company as holder of the outstanding Savings Bank Common Stock. Voting
rights with respect to the Holding Company shall be held and exercised
exclusively by holders of the Holding Company Common Stock. As a result of the
MHC Merger, the separate existence of the MHC and the voting rights of Members
will cease.
IV. Steps Prior to Submission of the Plan to the Members and the Savings Bank
Stockholders for Approval
Prior to submission of the Plan to the Members and to the stockholders of
the Savings Bank for approval, the Plan must be approved by the OTS. Prior to
such regulatory approval:
A. The Boards of Directors of the MHC and the Savings Bank each shall adopt
the Plan by a vote of not less than two-thirds of their entire membership.
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B. The MHC shall publish legal notice of the adoption of the Plan in a
newspaper having a general circulation in each community in which the MHC and
the Savings Bank maintains an office.
C. A press release relating to the proposed Conversion and Reorganization
may be submitted to the local media.
D. Copies of the Plan as adopted by the Boards of Directors of the MHC and
the Savings Bank shall be made available for inspection at each office of the
MHC and the Savings Bank.
E. The Savings Bank shall cause the Holding Company to be incorporated
under state law and the Board of Directors of the Holding Company shall concur
in the Plan by at least a two-thirds vote.
F. As soon as practicable following the adoption of this Plan, the MHC
shall file the Form AC Application, and the Holding Company shall file the
Registration Statement and the H-(e)1 Application. In addition, an application
to merge the MHC (following its conversion into an interim federal stock savings
bank) and the Savings Bank and an application to merge Interim B and the Savings
bank shall both be filed with the OTS, either as exhibits to the H-(e)1
Application, or separately. Upon filing the Form AC Application, the MHC shall
publish legal notice thereof in a newspaper having a general circulation in each
community in which the MHC and the Savings Bank maintains an office and/or by
mailing a letter to each Member, and also shall publish such other notices of
the Conversion and Reorganization as may be required in connection with the
H-(e)1 Application and by the regulations and policies of the OTS.
G. The MHC and the Savings Bank shall obtain an opinion of their tax
advisors or a favorable ruling from the U.S. Internal Revenue Service which
shall state that the Conversion and Reorganization shall not result in any gain
or loss for federal income tax purposes to the Primary Parties or to Eligible
Account Holders, Supplemental Eligible Account Holders and Other Members.
Receipt of a favorable opinion or ruling is a condition precedent to completion
of the Conversion and Reorganization.
V. Special Meeting of Members
Subsequent to the approval of the Plan by the OTS, the Special Meeting
shall be scheduled in accordance with the MHC's Bylaws. Promptly after receipt
of approval and at least 20 days but not more than 45 days prior to the Special
Meeting, the MHC shall distribute proxy solicitation materials to all Members
and beneficial owners of accounts held in fiduciary capacities where the
beneficial owners possess voting rights, as of the Voting Record Date. The proxy
solicitation materials shall include a copy of the proxy statement to be used in
connection with such solicitation and other documents authorized for use by the
regulatory authorities and may also include a copy of the Plan and/or a
prospectus ("Prospectus") as provided in Section VIII below. The MHC shall also
advise each Eligible Account Holder and Supplemental Eligible Account Holder not
entitled to vote at the Special Meeting of the proposed Conversion and
Reorganization and the scheduled Special Meeting, and provide a postage prepaid
card on which to indicate whether he wishes to receive a Prospectus, if the
Subscription Offering is not held concurrently with the proxy solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than a
majority of the total outstanding votes of the Members is required for approval
of the Plan. Voting may be in person or by proxy at the Special Meeting of
Members. The OTS shall be notified promptly of the actions of the Members at the
Special Meeting of Members.
VI. Meeting of Stockholders
Subsequent to the approval of the Plan by the OTS, the Meeting of
Stockholders shall be scheduled in accordance with the Savings Bank's Bylaws at
which the Plan will be considered for approval. Promptly after receipt of
approval and at least 20 days but not more than 45 days prior to such meeting,
the Savings Bank shall distribute proxy solicitation materials to Savings Bank
stockholders and beneficial owners of Savings Bank Common
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Stock held in fiduciary capacities where the beneficial owners possess voting
rights, as of the Voting Record Date. The proxy solicitation materials shall
include a copy of the proxy statement to be used in connection with such
solicitation and other documents authorized for use by the regulatory
authorities and may also include a copy of the Plan and/or a Prospectus as
provided in Paragraph VIII below. The Savings Bank shall also advise each holder
of Savings Bank Common Stock entitled to vote at the meeting of the proposed
Conversion and Reorganization and the scheduled meeting, and provide a postage
prepaid card on which to indicate whether he wishes to receive the Prospectus,
if the Subscription Offering is not held concurrently with the proxy
solicitation.
Pursuant to OTS regulations, an affirmative vote of not less than
two-thirds of the total outstanding votes of the stockholders of the Savings
Bank is required for approval of the Plan. Voting may be in person or by proxy
at the Meeting of Stockholders. The OTS shall be notified promptly of the
actions of the stockholders of the Savings Bank at the Meeting of Stockholders.
VII. Summary Proxy Statements
The Proxy Statements furnished to Members and to stockholders of the
Savings Bank may be in summary form; provided that a statement is made in
bold-face type that a more detailed description of the proposed transaction may
be obtained by returning an enclosed postage prepaid card or other written
communication requesting supplemental information. Without prior approval of the
OTS, the Special Meeting and the meeting of the stockholders of the Savings Bank
shall not be held less than 20 days after the last day on which the supplemental
information statement is mailed to requesting Members or requesting stockholder
of the Savings Bank. The supplemental information statement may be combined with
the Prospectus if the Subscription Offering is commenced concurrently with or
during the proxy solicitation of Members for the Special Meeting or of the
stockholders of the Savings Bank for the Meeting of Stockholders.
VIII. Offering Documents
The Holding Company may commence the Subscription Offering and, provided
that the Subscription Offering has commenced, may commence the Direct Community
Offering concurrently with or during the proxy solicitation relating to the
Special Meeting of Members and the Meeting of Stockholders. The Holding Company
may close the Subscription Offering before such meetings, provided that the
offer and sale of the Conversion Stock shall be conditioned upon approval of the
Plan by the Members at the Special Meeting and by the stockholders of the
Savings Bank at the Meeting of Stockholders. The MHC's and the Savings Bank's
proxy solicitation materials may require Eligible Account Holders, Supplemental
Eligible Account Holders, Other Members and the Savings Bank Stockholder to
return to the Savings Bank by a reasonable certain date a postage prepaid card
or other written communication requesting receipt of a Prospectus with respect
to the Subscription Offering, provided that if the Prospectus is not mailed
concurrently with the proxy solicitation materials, the Subscription Offering
shall not be closed until the expiration of 30 days after the mailing of the
proxy solicitation materials. If the Subscription Offering is not commenced
within 45 days after the Special Meeting, the Savings Bank may transmit, not
more than 30 days prior to the commencement of the Subscription Offering, to
each Eligible Account Holder, Supplemental Eligible Account Holder and other
eligible subscribers who had been furnished with proxy solicitation materials a
notice which shall state that the Savings Bank is not required to furnish a
Prospectus to them unless they return by a reasonable date certain a postage
prepaid card or other written communication requesting the receipt of the
Prospectus.
Prior to commencement of the Subscription Offering, the Direct Community
Offering and the Syndicated Community Offering, the Holding Company shall file
the Registration Statement. The Holding Company shall not distribute the final
Prospectus until the Registration Statement containing same has been declared
effective by the SEC and the Prospectus has been declared effective by the OTS.
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IX. Combined Subscription and Direct Community Offering
Instead of a separate Subscription Offering, all Subscription Rights may be
exercised by delivery of properly completed and executed Order Forms to the
Savings Bank or selling group utilized in connection with the Direct Community
Offering and the Syndicated Community Offering. If a separate Subscription
Offering is not held, orders for Conversion Stock in the Direct Community
Offering shall first be filled pursuant to the priorities and limitations stated
in Paragraph XI.C. below.
X. Consummation of the Conversion and Reorganization
The effective date of the Conversion and Reorganization shall be the date
upon which the last of the following actions occurs: (i) the filing of Articles
of Combination with the OTS with respect to the MHC Merger, (ii) the filing of
Articles of Combination with the OTS with respect to the Savings Bank Merger and
(iii) the closing of the issuance of the shares of Conversion Stock in the
Offerings. The filing of Articles of Combination relating to the MHC Merger and
the Savings Bank Merger and the closing of the issuance of shares of Conversion
Stock in the Offerings shall not occur until all requisite regulatory, Member
approval and approval of the stockholders of the Savings Bank have been
obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received. It is
intended that the closing of the MHC Merger, the Savings Bank Merger and the
sale of shares of Conversion Stock in the Offerings shall occur consecutively
and substantially simultaneously.
After the Conversion and Reorganization, the Savings Bank will succeed to
all the rights, interests, duties and obligations of the Savings Bank before the
Conversion and Reorganization, including but not limited to all rights and
interests of the Savings Bank in and to its assets and properties, whether real,
personal or mixed. The Savings Bank will continue to be a member of the Federal
Home Loan Bank System and all its insured savings deposits will continue to be
insured by the FDIC to the extent provided by applicable law.
XI. Conversion Stock Offering
A. Number of Shares
The number of shares of Conversion Stock to be offered pursuant to the Plan
shall be determined initially by the Boards of Directors of the Primary Parties
in conjunction with the determination of the Purchase Price (as defined in
Section XI.B. below). The number of shares to be offered may be subsequently
adjusted by the Board of Directors prior to completion of the Offerings.
B. Independent Evaluation and Purchase Price of Conversion Stock
All shares of Conversion Stock sold in the Conversion and Reorganization,
including shares sold in any Direct Community Offering, shall be sold at a
uniform price per share, referred to herein as the "Purchase Price." The
Purchase Price shall be determined by the Board of Directors of the Primary
Parties immediately prior to the simultaneous completion of all such sales
contemplated by this Plan on the basis of the estimated pro forma market value
of the MHC, as converted, and the Savings Bank at such time. Such estimated pro
forma market value shall be determined for such purpose by an independent
appraiser on the basis of such appropriate factors not inconsistent with the
regulations of the OTS. Immediately prior to the Subscription Offering, a
subscription price range shall be established which shall vary from 15% above to
15% below the average of the minimum and maximum of the estimated price range.
The maximum subscription price (i.e., the per share amount to be remitted when
subscribing for shares of Conversion Stock) shall then be determined within the
subscription price range by the Board of Directors of the Primary Parties. The
subscription price range and the number of shares to be offered may be revised
after the completion of the Subscription Offering with OTS approval without a
resolicitation of proxies or Order Forms or both.
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C. Method of Offering Shares
Subscription Rights shall be issued at no cost to Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible Account
Holders and Other Members pursuant to priorities established by this Plan and
the regulations of the OTS. In order to effect the Conversion and
Reorganization, all shares of Conversion Stock proposed to be issued in
connection with the Conversion and Reorganization must be sold and, to the
extent that shares are available, no subscriber shall be allowed to purchase
less than 25 shares; provided, however, that if the purchase price is greater
than $20.00 per share, the minimum number of shares which must be subscribed for
shall be adjusted so that the aggregate actual purchase price required to be
paid for such minimum number of shares does not exceed $500.00. The priorities
established for the purchase of shares are as follows:
1. Category 1: Eligible Account Holders
a. Each Eligible Account Holder shall receive, without payment,
Subscription Rights entitling such Eligible Account Holder to purchase
that number of shares of Conversion Stock which is equal to the
greater of the maximum purchase limitation established for the Direct
Community Offering, one-tenth of one percent of the total offering or
15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of shares of Conversion Stock to be
issued by a fraction of which the numerator is the amount of the
Qualifying Deposit of the Eligible Account Holder and the denominator
is the total amount of Qualifying Deposits of all Eligible Account
Holders. If the allocation made in this paragraph results in an
oversubscription, shares of Conversion Stock shall be allocated among
subscribing Eligible Account Holders so as to permit each such account
holder, to the extent possible, to purchase a number of shares of
Conversion Stock sufficient to make his total allocation equal to 100
shares of Conversion Stock or the total amount of his subscription,
whichever is less. Any shares of Conversion Stock not so allocated
shall be allocated among the subscribing Eligible Account Holders on
an equitable basis, related to the amounts of their respective
Qualifying Deposits as compared to the total Qualifying Deposits of
all Eligible Account Holders.
b. Subscription Rights received by Officers and directors of the
Primary Parties and their Associates, as Eligible Account Holders,
based on their increased deposits in the Savings Bank in the one-year
period preceding the Eligibility Record Date shall be subordinated to
all other subscriptions involving the exercise of Subscription Rights
pursuant to this Category.
2. Category 2: Tax-Qualified Employee Stock Benefit Plans
a. Tax-Qualified Employee Stock Benefit Plans shall receive,
without payment, nontransferable Subscription Rights to purchase in
the aggregate up to 8% of the Conversion Stock, including shares of
Conversion Stock to be issued in the Conversion and Reorganization as
result of an increase in the estimated price range after commencement
of the Subscription Offering and prior to the completion of the
Conversion and Reorganization. The Subscription Rights granted to
Tax-Qualified Stock Benefit Plans shall be subject to the availability
of shares of Conversion Stock after taking into account the shares of
Conversion Stock purchased by Eligible Account Holders; provided,
however, that in the event the number of shares offered in the
Conversion and Reorganization is increased to an amount greater than
the maximum of the estimated price range as set forth in the
Prospectus ("Maximum Shares"), the Tax-Qualified Employee Stock
Benefit Plans shall have a priority right to purchase any such shares
exceeding the Maximum Shares up to an aggregate of 8% of the
Conversion Stock. Tax-Qualified Employee Stock Benefit Plans may use
funds contributed or borrowed by the Holding Company or the Savings
Bank and/or borrowed from an independent financial institution to
exercise such Subscription Rights, and the Holding Company and the
Savings Bank may make scheduled discretionary contributions thereto,
provided
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that such contributions do not cause the Holding Company or the
Savings Bank to fail to meet any applicable capital requirements.
3. Category 3: Supplemental Eligible Account Holders
a. In the event that the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Form AC
Application filed prior to OTS approval, then, and only in that event,
each Supplemental Eligible Account Holder shall receive, without
payment, Subscription Rights entitling such Supplemental Eligible
Account Holder to purchase that number of shares of Conversion Stock
which is equal to the greater of the maximum purchase limitation
established for the Direct Community Offering, one-tenth of one
percent of the total offering or 15 times the product (rounded down to
the next whole number) obtained by multiplying the total number of
shares of Conversion Stock to be issued by a fraction of which the
numerator is the amount of the Qualifying Deposit of the Supplemental
Eligible Account Holder and the denominator is the total amount of the
Qualifying Deposits of all Supplemental Eligible Account Holders.
b. Subscription Rights received pursuant to this category shall
be subordinated to Subscription Rights granted to Eligible Account
Holders and Tax-Qualified Employee Stock Benefit Plans.
c. Any Subscription Rights to purchase shares of Conversion Stock
received by an Eligible Account Holder in accordance with Category 1
shall reduce to the extent thereof the Subscription Rights to be
distributed pursuant to this Category.
d. In the event of an oversubscription for shares of Conversion
Stock pursuant to this Category, shares of Conversion Stock shall be
allocated among the subscribing Supplemental Eligible Account Holders
as follows:
(1) Shares of Conversion Stock shall be allocated so as to
permit each such Supplemental Eligible Account Holder, to the
extent possible, to purchase a number of shares of Conversion
Stock sufficient to make his total allocation (including the
number of shares of Conversion Stock, if any, allocated in
accordance with Category Number 1) equal to 100 shares of
Conversion Stock or the total amount of his or her subscription,
whichever is less.
(2) Any shares of Conversion Stock not allocated in
accordance with subparagraph (1) above shall be allocated among
the subscribing Supplemental Eligible Account Holders on an
equitable basis, related to the amounts of their respective
Qualifying Deposits as compared to the total Qualifying Deposits
of all subscribing Supplemental Eligible Account Holders.
4. Category 4: Other Members
a. Other Members shall receive, without payment, Subscription
Rights to purchase shares of Conversion Stock, after satisfying the
subscriptions of Eligible Account Holders, Tax- Qualified Employee
Stock Benefit Plans and Supplemental Eligible Account Holders pursuant
to Category Nos. l, 2 and 3 above, subject to the following
conditions:
(1) Each such Other Member shall be entitled to subscribe
for the greater of the maximum purchase limitation established
for the Direct Community Offering or one-tenth of one percent of
the total offering.
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(2) In the event of an oversubscription for shares of
Conversion Stock pursuant to Category 4, the shares of Conversion
Stock available shall be allocated among the subscribing Other
Members pro rata on the basis of the amounts of their respective
subscriptions.
D. Direct Community Offering and Syndicated Community Offering
1. Any shares of Conversion Stock not purchased through the exercise
of Subscription Rights set forth in Category Nos. 1 through 4 above may be
sold by the Holding Company to Persons under such terms and conditions as
may be established by the Savings Bank's Board of Directors with the
concurrence of the OTS. The Direct Community Offering may commence
concurrently with or as soon as possible after the completion of the
Subscription Offering and must be completed within 45 days after completion
of the Subscription Offering, unless extended with the approval of the OTS.
No Person may purchase in the Direct Community Offering more than 1% of the
shares of Conversion Stock issued in the Conversion and Reorganization. No
Person, together with Associates of or Persons Acting in Concert with such
Person, may purchase in the Direct Community Offering more than 2% of the
shares of Conversion Stock issued in the Conversion and Reorganization. The
right to purchase shares of Conversion Stock under this Category is subject
to the right of the Savings Bank or the Holding Company to accept or reject
such subscriptions in whole or in part. In the event of an oversubscription
for shares in this Category, the shares available shall be allocated among
prospective purchasers pro rata on the basis of the amounts of their
respective orders. The offering price for which such shares are sold to the
general public in the Direct Community Offering shall be the Purchase
Price.
2. Orders received in the Direct Community Offering first shall be
filled up to a maximum of 2% of the Conversion Stock and thereafter
remaining shares shall be allocated on an equal number of shares basis per
order until all orders have been filled.
3. The Conversion Stock offered in the Direct Community Offering shall
be offered and sold in a manner that will achieve the widest distribution
thereof. Preference shall be given in the Direct Community Offering first
to the Public Stockholders (who are not Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members) and then to natural
Persons and trusts of natural Persons residing in the Local Community.
4. Subject to such terms, conditions and procedures as may be
determined by the Savings Bank and the Holding Company, all shares of
Conversion Stock not subscribed for in the Subscription Offering or ordered
in the Direct Community Offering may be sold by a syndicate of
broker-dealers to the general public in a Syndicated Community Offering. No
Person may purchase in the Syndicated Community Offering more than 1% of
the shares of Conversion Stock issued in the Conversion and Reorganization.
No Person, together with Associates of or Persons Acting in Concert with
such Person, may purchase in the Syndicated Community Offering more than 2%
of the shares of Conversion Stock issued in the Conversion and
Reorganization. Each order for Conversion Stock in the Syndicated Community
Offering shall be subject to the absolute right of the Savings Bank and the
Holding Company to accept or reject any such order in whole or in part
either at the time of receipt of an order or as soon as practicable after
completion of the Syndicated Community Offering. The Savings Bank and the
Holding Company may commence the Syndicated Community Offering concurrently
with, at any time during, or as soon as practicable after the end of the
Subscription Offering and/or Direct Community Offering, provided that the
Syndicated Community Offering must be completed within 45 days after the
completion of the Subscription Offering, unless extended by the Savings
Bank and the Holding Company with the approval of the OTS.
5. If for any reason a Syndicated Community Offering of shares of
Conversion Stock not sold in the Subscription Offering and the Direct
Community Offering cannot be effected, or in the event
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that any insignificant residue of shares of Conversion Stock is not sold in
the Subscription Offering, Direct Community Offering or Syndicated
Community Offering, the Savings Bank and the Holding Company shall use
their best efforts to obtain other purchasers for such shares in such
manner and upon such conditions as may be satisfactory to the OTS.
6. In the event a Direct Community Offering or Syndicated Community
Offering do not appear feasible, the Savings Bank will immediately consult
with the OTS to determine the most viable alternative available to effect
the completion of the Conversion. Should no viable alternative exist, the
Savings Bank may terminate the Conversion with the concurrence of the OTS.
E. Limitations Upon Purchases
The following additional limitations and exceptions shall be imposed upon
purchases of shares of Conversion Stock:
1. The maximum number of shares of Conversion Stock which may be
subscribed for or purchased in all categories in the Conversion and
Reorganization by any Person, when combined with any Exchange Stock
received, shall not exceed 1% of the Conversion Stock issued, except for
the Tax-Qualified Employee Stock Benefit Plans which may subscribe for up
to 8% of the Conversion Stock issued in addition to any Exchange Stock to
which it may be entitled.
2. The maximum number of shares of Conversion Stock which may be
subscribed for or purchased in all categories in the Conversion and
Reorganization by any Person together with any Associate or any group or
Persons Acting in Concert, when combined with any Exchange Stock received,
shall not exceed 2% of the Conversion Stock issued, except for the
Tax-Qualified Employee Stock Benefit Plans which may subscribe for up to 8%
of the Conversion Stock issued in addition to any Exchange Stock to which
it may be entitled.
3. Officers and directors of the Primary Parties and Associates
thereof may not purchase in the aggregate more than 31% of the shares
issued in the Conversion and Reorganization, including any Exchange Stock
received.
4. The Boards of Directors of the Primary Parties will not be deemed
to be Associates or a group of Persons Acting in Concert with other
directors or trustees solely as a result of membership on the Board of
Directors.
5. The Boards of Directors of the Primary Parties, with the approval
of the OTS and without further approval of Members or stockholders of the
Savings Bank, may, as a result of market conditions and other factors,
increase or decrease the purchase limitation in Section XI.D. or the number
of shares of Conversion Stock to be sold in the Conversion and
Reorganization. If the Primary Parties increases the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in the
Conversion and Reorganization, the Primary Parties are only required to
resolicit Persons who subscribed for the maximum purchase amount and may,
in the sole discretion of the Primary Parties resolicit certain other large
subscribers. If the Primary Parties decreases the maximum purchase
limitations or the number of shares of Conversion Stock to be sold in the
Conversion and Reorganization, the orders of any Person who subscribed for
the maximum purchase amount shall be decreased by the minimum amount
necessary so that such Person shall be in compliance with the then maximum
number of shares permitted to be subscribed for by such Person.
Notwithstanding anything to the contrary contained in this Plan, Public
Stockholders will not be required to sell or divest any Holding Company Common
Stock or be limited in receiving Exchange Stock even if their
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percentage ownership of the Savings Bank Common Stock when converted into
Exchange Stock would exceed an applicable purchase limitation.
Each Person purchasing Conversion Stock in the Conversion and
Reorganization shall be deemed to confirm that such purchase does not conflict
with the purchase limitations under the Plan or otherwise imposed by law, rule
or regulation. In the event that such purchase limitations are violated by any
Person (including any Associate or group of Persons affiliated or otherwise
Acting in Concert with such Person), the Holding Company shall have the right to
purchase from such Person at the actual Purchase Price per share all shares
acquired by such Person in excess of such purchase limitations or, if such
excess shares have been sold by such Person, to receive from such Person the
difference between the actual Purchase Price per share paid for such excess
shares and the price at which such excess shares were sold by such Person. This
right of the Holding Company to purchase such excess shares shall be assignable
by the Holding Company.
F. Restrictions On and Other Characteristics of the Conversion Stock
1. Transferability. Conversion Stock purchased by Officers and
directors of the Primary Parties shall not be sold or otherwise disposed of
for value for a period of one year from the effective date of Conversion
and Reorganization, except for any disposition (i) following the death of
the original purchaser or (ii) resulting from an exchange of securities in
a merger or acquisition approved by the regulatory authorities having
jurisdiction.
The Conversion Stock issued by the Holding Company to such Officers
and directors shall bear a legend giving appropriate notice of the one-year
holding period restriction. Said legend shall state as follows:
"The shares evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this certificate
pursuant to Part 563b of the Rules and Regulations of the Office of
Thrift Supervision. These shares may not be transferred prior thereto
without a legal opinion of counsel that said transfer is permissible
under the provisions of applicable laws and regulations."
In addition, the Holding Company shall give appropriate instructions
to the transfer agent of the Holding Company Common Stock with respect to
the foregoing restrictions. Any shares of Holding Company Common Stock
subsequently issued as a stock dividend, stock split or otherwise, with
respect to any such restricted stock, shall be subject to the same holding
period restrictions for such Persons as may be then applicable to such
restricted stock.
2. Subsequent Purchases by Officers and Directors. Without prior
approval of the OTS, if applicable, Officers and directors of the Savings
Bank and officers and directors of the Holding Company, and their
Associates, shall be prohibited for a period of three years following
completion of the Conversion and Reorganization from purchasing outstanding
shares of Holding Company Common Stock, except from a broker or dealer
registered with the SEC. Notwithstanding this restriction, purchases
involving more than 1% of the total outstanding shares of Holding Company
Stock and purchases made and shares held by a Tax-Qualified or
non-Tax-Qualified Employee Stock Benefit Plan which may be attributable to
such directors and Officers may be made in negotiated transactions without
OTS permission or the use of a broker or dealer.
3. Repurchase and Dividend Rights. For a period of three years
following the consummation of the Conversion and Reorganization, any
repurchases of Holding Company Stock by the Holding Company from any Person
shall be subject to the then applicable rules and regulations and policies
of the OTS. The Savings Bank may not declare or pay a cash dividend on or
repurchase any of its Capital Stock if the result thereof would be to
reduce the regulatory capital of the Savings Bank below the amount
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required for the liquidation account described in Paragraph XIV. Further,
any dividend declared or paid on the Capital Stock shall comply with the
then applicable rules and regulations of the OTS.
4. Voting Rights. After the Conversion and Reorganization, holders of
Savings Accounts in and obligors on loans of the Savings Bank will not have
voting rights in the Savings Bank. Exclusive voting rights with respect to
the Holding Company shall be vested in the holders of Holding Company
Stock; holders of Savings Accounts in and obligors on loans of the Savings
Bank will not have any voting rights in the Holding Company except and to
the extent that such Persons become stockholders of the Holding Company,
and the Holding Company will have exclusive voting rights with respect to
the Savings Bank's Capital Stock.
G. Mailing of Offering Materials and Collation of Subscriptions
The sale of all shares of Conversion Stock offered pursuant to the Plan
must be completed within 24 months after approval of the Plan at the Special
Meeting. After approval of the Plan by the OTS and the declaration of the
effectiveness of the Prospectus, the Holding Company shall distribute
Prospectuses and Order Forms for the purchase of shares of Conversion Stock in
accordance with the terms of the Plan.
The recipient of an Order Form shall be provided not less than 20 days nor
more than 45 days from the date of mailing, unless extended, properly to
complete, execute and return the Order Form to the Holding Company or the
Savings Bank. Self-addressed, postage prepaid, return envelopes shall accompany
all Order Forms when they are mailed. Failure of any eligible subscriber to
return a properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such eligible subscriber of any
rights to purchase shares of Conversion Stock under the Plan.
The sale of all shares of Conversion Stock proposed to be issued in
connection with the Conversion and Reorganization must be completed within 45
days after the last day of the Subscription Offering, unless extended by the
Holding Company with the approval of the OTS.
H. Method of Payment
Payment for all shares of Conversion Stock may be made in cash, by check or
by money order, or if a subscriber has a Savings Account(s), such subscriber may
authorize the Savings Bank to charge the subscriber's Savings Account(s). The
Savings Bank shall pay interest at not less than the passbook rate on all
amounts paid in cash or by check or money order to purchase shares of Conversion
Stock in the Subscription Offering from the date payment is received until the
Conversion and Reorganization is completed or terminated. The Savings Bank is
not permitted knowingly to loan funds or otherwise extend any credit to any
Person for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Savings Bank to charge the subscriber's
Savings Account(s), the funds shall remain in the subscriber's Savings
Account(s) and shall continue to earn interest, but may not be used by such
subscriber until the Conversion and Reorganization is completed or terminated,
whichever is earlier. The withdrawal shall be given effect only concurrently
with the sale of all shares of Conversion Stock proposed to be sold in the
Conversion and Reorganization and only to the extent necessary to satisfy the
subscription at a price equal to the aggregate Purchase Price. The Savings Bank
shall allow subscribers to purchase shares of Conversion Stock by withdrawing
funds from certificate accounts held with the Savings Bank without the
assessment of early withdrawal penalties, subject to the approval, if necessary,
of the applicable regulatory authorities. In the case of early withdrawal of
only a portion of such account, the certificate evidencing such account shall be
canceled if the remaining balance of the account is less than the applicable
minimum balance requirement. In that event, the remaining balance shall earn
interest at the passbook rate. This waiver of the early withdrawal penalty is
applicable only to withdrawals made in connection with the purchase of
Conversion Stock under the Plan.
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Tax-Qualified Employee Stock Benefit Plans may subscribe for shares by
submitting an Order Form, along with evidence of a loan commitment from a
financial institution for the purchase of shares, if applicable, during the
Subscription Offering and by making payment for the shares on the date of the
closing of the Conversion and Reorganization.
I. Undelivered, Defective or Late Order Forms; Insufficient Payment
If an Order Form (i) is not delivered and is returned to the Holding
Company or the Savings Bank by the United States Postal Service (or the Holding
Company or Savings Bank is unable to locate the addressee); (ii) is not returned
to the Holding Company or Savings Bank, or is returned to the Holding Company or
Savings Bank after expiration of the date specified thereon; (iii) is
defectively completed or executed; or (iv) is not accompanied by the total
required payment for the shares of Conversion Stock subscribed for (including
cases in which the subscribers' Savings Accounts are insufficient to cover the
authorized withdrawal for the required payment), the Subscription Rights of the
Person to whom such rights have been granted shall not be honored and shall be
treated as though such Person failed to return the completed Order Form within
the time period specified therein. Alternatively, the Holding Company or Savings
Bank may, but shall not be required to, waive any irregularity relating to any
Order Form or require the submission of a corrected Order Form or the remittance
of full payment for the shares of Conversion Stock subscribed for by such date
as the Holding Company or Savings Bank may specify. Subscription orders, once
tendered, shall not be revocable. The Holding Company's and Savings Bank's
interpretation of the terms and conditions of the Plan and of the Order Forms
shall be final.
J. Members in Non-Qualified States or in Foreign Countries
The Primary Parties will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled to
subscribe for stock pursuant to the Plan reside. However, the Primary Parties
are not required to offer stock in the Subscription Offering to any person who
resides in a foreign country or resides in a state of the United States with
respect to which (i) a small number of persons otherwise eligible to subscribe
for shares of Common Stock reside in such state; or (ii) the Primary Parties
determine that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including but not limited to a
request or requirement that the Primary Parties or their officers, directors or
trustees register as a broker, dealer, salesman or selling agent, under the
securities laws of such state, or a request or requirement to register or
otherwise qualify the Subscription Rights or Common Stock for sale or submit any
filing with respect thereto in such state. Where the number of persons eligible
to subscribe for shares in one state is small relative to other states, the
Primary Parties will base their decision as to whether or not to offer the
Common Stock in such state on a number of factors, including the size of
accounts held by account holders in the state, the cost of reviewing the
registration and qualification requirements of the state (and of actually
registering or qualifying the shares) or the need to register the Holding
Company, its officers, directors or employees as brokers, dealers or salesmen.
XII. Post Conversion and Reorganization Filing and Market Making
In connection with the Conversion and Reorganization, the Holding Company
shall register the Conversion Stock with the SEC pursuant to the Securities
Exchange Act of 1934, as amended, and shall undertake not to deregister such
Conversion Stock for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
Market Makers to establish and maintain a market for the shares of its stock.
The Holding Company shall also use its best efforts to list its stock on The
Nasdaq Stock Market or on a national or regional securities exchange.
XIII. Status of Savings Accounts and Loans Subsequent to Conversion and
Reorganization
All Savings Accounts shall retain the same status after Conversion and
Reorganization as these accounts had prior to Conversion and Reorganization.
Each Savings Account holder shall retain, without payment, a
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withdrawable Savings Account(s) after the Conversion and Reorganization, equal
in amount to the withdrawable value of such holder's Savings Account(s) prior to
Conversion and Reorganization. All Savings Accounts will continue to be insured
by the Savings Association Insurance Fund of the FDIC up to the applicable
limits of insurance coverage. All loans granted by the Savings Bank shall retain
the same status after the Conversion and Reorganization as they had prior to the
Conversion and Reorganization. See Paragraph III.B. with respect to the
termination of voting rights of Members.
XIV. Liquidation Account
After the Conversion and Reorganization, holders of Savings Accounts shall
not be entitled to share in any residual assets in the event of liquidation of
the Savings Bank. However, the Savings Bank shall, at the time of the Conversion
and Reorganization, establish a liquidation account in an amount equal to the
amount of dividends with respect to the Savings Bank Common Stock waived by the
MHC plus the greater of (i) the Savings Bank's total retained earnings as of the
date of the latest statement of financial condition contained in the final
offering circular used in connection with the Savings Bank's reorganization as a
majority owned subsidiary of the MHC, or (ii) 58.3% of the Savings Bank's total
stockholders' equity as of the date of the latest statement of financial
condition contained in the final Prospectus used in connection with the
Conversion and Reorganization. The function of the liquidation account shall be
to establish a priority on liquidation and, except as provided in Section
XI.F.3. above, the existence of the liquidation account shall not operate to
restrict the use or application of any of the net worth accounts of the Savings
Bank.
The liquidation account shall be maintained by the Savings Bank subsequent
to the Conversion and reorganization for the benefit of Eligible Account Holders
and Supplemental Eligible Account Holders who retain their Savings Accounts in
the Savings Bank. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to each Savings Account held, have a related inchoate
interest in a portion of the liquidation account balance ("subaccount").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder and/or a Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the liquidation account by a fraction of
which the numerator is the amount of such holder's Qualifying Deposit in the
Savings Account and the denominator is the total amount of the Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders. Such initial subaccount balance shall not be increased, and it shall be
subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder at the close of business on any annual
closing date subsequent to the Eligibility Record Date is less than the lesser
of (i) the deposit balance in such Savings Account at the close of business on
any other annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date or (ii) the amount of the Qualifying
Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, such subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Savings Bank, each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidation distribution from the liquidation account in the amount of
the then current adjusted subaccount balance(s) for Savings Account(s) then held
by such holder before any liquidation distribution may be made to stockholders.
No merger, consolidation, bulk purchase of assets with assumptions of Savings
Accounts and other liabilities or similar transactions with another
Federally-insured institution in which the Savings Bank is not the surviving
institution shall be considered to be a complete liquidation. In any such
transaction, the liquidation account shall be assumed by the surviving
institution.
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XV. Regulatory Restrictions on Acquisition of Holding Company
A. OTS regulations provide that for a period of three years following
completion of the Conversion and Reorganization, no Person (i.e, individual, a
group Acting in Concert, a corporation, a partnership, an association, a joint
stock company, a trust, or any unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution or its holding company) shall
directly, or indirectly, offer to purchase or actually acquire the beneficial
ownership of more than 10% of any class of equity security of the Holding
Company without the prior approval of the OTS. However, approval is not required
for purchases directly from the Holding Company or the underwriters or selling
group acting on its behalf with a view towards public resale, or for purchases
not exceeding 1% per annum of the shares outstanding. Civil penalties may be
imposed by the OTS for willful violation or assistance of any violation. Where
any Person, directly or indirectly, acquires beneficial ownership of more than
10% of any class of equity security of the Holding Company within such
three-year period, without the prior approval of the OTS, stock of the Holding
Company beneficially owned by such Person in excess of 10% shall not be counted
as shares entitled to vote and shall not be voted by any Person or counted as
voting shares in connection with any matter submitted to the stockholders for a
vote. The provisions of this regulation shall not apply to the acquisition of
securities by Tax- Qualified Employee Stock Benefit Plans provided that such
plans do not have beneficial ownership of more than 25% of any class of equity
security of the Holding Company.
B. The Holding Company may provide in its articles of incorporation, or
similar document, a provision that, for a specified period of up to five years
following the date of the completion of the Conversion and Reorganization, no
Person shall directly or indirectly offer to acquire or actually acquire the
beneficial ownership of more than 10% of any class of equity security of the
Holding Company. Such provisions would not apply to acquisition of securities by
Tax-Qualified Employee Stock Benefit Plans provided that such plans do not have
beneficial ownership of more than 25% of any class of equity security of the
Holding Company. The Holding Company may provide in its articles of
incorporation, or similar document, for such other provisions affecting the
acquisition of its stock as shall be determined by its Board of Directors.
XVI. Directors and Officers of the Savings Bank
The Conversion and Reorganization is not intended to result in any change
in the directors or Officers of the Savings Bank. Each Person serving as a
director of the Savings Bank at the time of Conversion and Reorganization shall
continue to serve as a member of the Savings Bank's Board of Directors, subject
to the Savings Bank's Federal Stock Charter and Bylaws. The Persons serving as
Officers immediately prior to the Conversion and Reorganization will continue to
serve at the discretion of the Board of Directors in their respective capacities
as Officers of the Savings Bank. In connection with the Conversion and
Reorganization, the Savings Bank and the Holding Company may enter into
employment agreements on such terms and with such officers as shall be
determined by the Boards of Directors of the Savings Bank and the Holding
Company.
XVII. Executive Compensation
The Savings Bank and the Holding Company may adopt, subject to any required
approvals, executive compensation or other benefit programs, including but not
limited to compensation plans involving stock options, stock appreciation
rights, restricted stock grants, employee recognition programs and the like.
XVIII. Amendment or Termination of Plan
If necessary or desirable, the Plan may be amended by a two-thirds vote of
the Savings Bank's Board of Directors or the MHC's Board of Directors, at any
time prior to the Special Meeting of Members and the Meeting of Stockholders. At
any time thereafter, the Plan may be amended by a two-thirds vote of the
respective Boards of Directors only with the concurrence of the OTS. The Plan
may be terminated by a two-thirds vote of the Board of Directors at any time
prior to the Special Meeting of Members or the Meeting of Stockholders, and at
any time
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following such meetings with the concurrence of the OTS. In its discretion, the
Boards of Directors of the MHC and the Savings Bank may modify or terminate the
Plan upon the order of the regulatory authorities without a resolicitation of
proxies or another Special Meeting of Members or Meeting of Stockholders.
In the event that mandatory new regulations pertaining to conversions are
adopted by the OTS prior to the completion of the Conversion and Reorganization,
the Plan shall be amended to conform to the new mandatory regulations without a
resolicitation of proxies or another Special Meeting of Members or another
Meeting of Stockholders. In the event that new conversion regulations adopted by
the OTS prior to completion of the Conversion and Reorganization contain
optional provisions, the Plan may be amended to utilize such optional provisions
at the discretion of the Board of Directors without a resolicitation of proxies
or another Special Meeting of Members or another Meeting of Stockholders.
By adoption of the Plan, the Members and the Savings Bank stockholders
authorize the Boards of Directors of the MHC and the Savings Bank to amend
and/or terminate the Plan under the circumstances set forth above.
XIX. Expenses of the Conversion and Reorganization
The Primary Parties shall use their best efforts to assure that expenses
incurred in connection with the Conversion and Reorganization shall be
reasonable.
XX. Contributions to Tax-Qualified Plans
The Holding Company and/or the Savings Bank may make discretionary
contributions to the Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Savings Bank to fail to meet its regulatory
capital requirements.
* * *
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ANNEX A
PLAN OF MERGER
This Plan of Merger, dated as of __________, 1997, is made by and between
Riverview, M.H.C. ("MHC"), a federally-chartered mutual holding company, and
Riverview Savings Bank, FSB ("Savings Bank" or "Surviving Corporation"), a
federally chartered savings bank (collectively, the "Constituent Corporations").
WITNESSETH:
WHEREAS, the MHC and the Savings Bank have adopted a Plan of Conversion
from Mutual Holding Company to Stock Holding Company and Agreement and Plan of
Reorganization ("Plan of Conversion") pursuant to which (i) the MHC will convert
to a federally-chartered interim stock savings bank and simultaneously merge
with and into the Savings Bank, with the Savings Bank as the surviving entity
("MHC Merger"), (ii) the Savings Bank and a newly-formed interim federal savings
bank will merge, pursuant to which the Savings Bank will become a wholly-owned
subsidiary of a newly formed stock corporation ("Holding Company") ("Savings
Bank Merger"), and (iii) the Holding Company will offer shares of its common
stock in the manner set forth in the Plan of Conversion (collectively, the
"Conversion and Reorganization"); and
WHEREAS, the MHC and the Savings Bank desire to provide for the terms and
conditions of the MHC Merger;
NOW, THEREFORE, the MHC and the Savings Bank hereby agree as follows:
1. EFFECTIVE DATE. The MHC Merger shall become effective on the date
specified in the endorsement of the Articles of Combination relating to the MHC
Merger by the Secretary of the Office of Thrift Supervision ("OTS") pursuant to
12 C.F.R. 552.13(k), or any successor thereto ("Effective Date").
2. THE MHC MERGER AND EFFECT THEREOF. Subject to the terms and conditions
set forth herein and the prior approval of the OTS of the Conversion and
Reorganization, as defined in the Plan of Conversion, and the expiration of all
applicable waiting periods, the MHC shall convert from the mutual form to a
federal interim stock savings bank and simultaneously merge with and into the
Savings Bank, which shall be the Surviving Corporation. Upon consummation of the
MHC Merger, the Surviving Corporation shall be considered the same business and
corporate entity as each of the Constituent Corporations and the Surviving
Corporation shall be subject to and be deemed to have assumed all of the
property, rights, privileges, powers, franchises, debts, liabilities,
obligations, duties and relationships of each of the Constituent Corporations
and shall have succeeded to all of each of their relationships, fiduciary or
otherwise, as fully and to the same extent as if such property, rights,
privileges, powers, franchises, debts, obligations, duties and relationships had
been originally acquired, incurred or entered into by the Surviving Corporation.
In addition, any reference to either of the Constituent Corporations in any
contract or document, whether executed or taking effect before or after the
Effective Date, shall be considered a reference to the Surviving Corporation if
not inconsistent with the other provisions of the contract or document; and any
pending action or other judicial proceeding to which either of the Constituent
Corporations is a party shall not be deemed to have abated or to have been
discontinued by reason of the MHC Merger, but may be prosecuted to final
judgment, order or decree in the same manner as if the MHC Merger had not
occurred or the Surviving Corporation may be substituted as a party to such
action or proceeding, and any judgment, order or decree may be rendered for or
against it that might have been rendered for or against either of the
Constituent Corporations if the MHC Merger had not occurred.
A-1
<PAGE>
3. CANCELLATION OF SAVINGS BANK COMMON STOCK HELD BY THE MUTUAL HOLDING
COMPANY AND MEMBER INTERESTS; LIQUIDATION ACCOUNT.
(a) On the Effective Date: (i) each share of common stock, $1.00 par value
per share, of the Savings Bank ("Savings Bank Common Stock") issued and
outstanding immediately prior to the Effective Date and held by the MHC shall,
by virtue of the MHC Merger and without any action on the part of the holder
thereof, be canceled, (ii) the interests in the MHC of any person, firm or
entity who or which qualified as a member of the MHC in accordance with its
mutual charter and bylaws and the laws of the United States prior to the MHC's
conversion from mutual to stock form ("Members") shall, by virtue of the MHC
Merger and without any action on the part of any Member, be canceled, and (iii)
the Savings Bank shall establish a liquidation account on behalf of each
depositor member of the MHC as provided for in the Plan of Conversion.
(b) At or after the Effective Date and prior to the Savings Bank Merger,
each certificate or certificates theretofore, evidencing issued and outstanding
shares of Savings Bank Common Stock, other than any such certificate or
certificates held by the MHC, which shall be canceled, shall continue to
represent issued and outstanding shares of Savings Bank Common Stock.
4. RIGHTS OF DISSENT AND APPRAISAL ABSENT. No holder of the Savings Bank
Common Stock shall have any dissenter or appraisal rights in connection with the
MHC Merger.
5. NAME OF SURVIVING CORPORATION. The name of the Surviving Corporation
shall be "Riverview Savings Bank, FSB."
6. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the number of directors of the Surviving
Corporation shall be seven. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Corporation are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Corporation in the year set forth after
his respective name, and until a successor is elected and qualified.
Name Term Expires
---- ------------
Roger Malfait 1997
Gary R. Douglass 1997
Patrick Sheaffer 1997
Dale E. Scarbrough 1998
Ronald Wysaske 1998
Paul L. Runyan 1999
Robert K. Leick 1999
The address of each such director is 700 N.E. Fourth Avenue, Camas,
Washington 98607.
7. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Federal Stock Charter and Bylaws of
the Surviving Corporation and applicable law, the officers of the Savings Bank
immediately prior to the Effective Date shall be the officers of the Surviving
Corporation.
8. OFFICES. Upon the Effective Date, all offices of the Savings Bank shall
be offices of the Surviving Corporation. As of the Effective Date, the home
office of the Surviving Corporation shall remain at 700 N.E. Fourth Avenue,
Camas, Washington, and the locations of the branch offices of the Surviving
Corporation shall be 1737 B Street, Washougal, Washington; 225 S.W. 2nd Street
Stevenson, Washington; 100 North Main, White Salmon, Washington, 813 West Main,
Battle Ground, Washington; 412 South Columbus, Goldendale, Washington;
A-2
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11505-K Fourth Plain Boulevard, Vancouver, Washington; 7735 N.E. Highway 99,
Vancouver, Washington; and 1011 Washington Way, Longview, Washington.
9. CHARTER AND BYLAWS. On and after the Effective Date, the Charter of the
Savings Bank as in effect immediately prior to the Effective Date shall be the
Federal Stock Charter of the Surviving Corporation until amended in accordance
with the terms thereof and applicable law, except that the Federal Stock Charter
shall be amended to provide for the establishment of a liquidation account in
accordance with applicable the Plan of Conversion.
On and after the Effective Date, the Bylaws of the Savings Bank as in
effect immediately prior to the Effective Date shall be the Bylaws of the
Surviving Corporation until amended in accordance with the terms thereof and
applicable law.
10. STOCKHOLDER AND MEMBER APPROVALS. The affirmative votes of the holders
of Savings Bank Common Stock and of the Members as set forth in the Plan of
Conversion shall be required to approve the Plan of Conversion, of which this
Plan of Merger is a part, on behalf of the Savings Bank and the MHC,
respectively.
11. ABANDONMENT OF PLAN. This Plan of Merger may be abandoned by either the
MHC or the Savings Bank at any time before the Effective Date in the manner set
forth in the Plan of Conversion.
12. AMENDMENTS. This Plan of Merger may be amended in the manner set forth
in the Plan of Conversion by a subsequent writing signed by the parties hereto
upon the approval of the Boards of Directors of the Constituent Corporations.
13. SUCCESSORS. This Agreement shall be binding on the successors of the
Constituent Corporations.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington, to the extent superseded by
the laws of the United States.
IN WITNESS WHEREOF, the MHC and the Savings Bank have caused this Plan of
Merger to be executed by their duly authorized officers as of the day and year
first above written.
RIVERVIEW, M.H.C.
Attest:
_________________________________ By: _____________________________________
Phyllis Kreibich Patrick Sheaffer
Corporate Secretary President and Chief Executive Officer
RIVERVIEW SAVINGS BANK, FSB
Attest:
_________________________________ By: _____________________________________
Phyllis Kreibich Patrick Sheaffer
Corporate Secretary President and Chief Executive Officer
A-3
<PAGE>
ANNEX B
PLAN OF REORGANIZATION
This Plan of Reorganization, dated as of _____________, 1997, is made by
and among Riverview Savings Bank, FSB ("Savings Bank" or the "Surviving
Corporation"), a federally chartered savings bank and majority owned subsidiary
of Riverview, M.H.C. ("MHC"), a federally chartered mutual holding company;
______________, Inc. ("Holding Company"), a ________ stock corporation organized
by the Savings Bank; and Riverview Interim "B" Savings Bank, FSB ("Interim B");
a to-be formed interim federal stock savings bank.
WITNESSETH:
WHEREAS, the Savings Bank has organized the Holding Company as a
first-tier, wholly owned subsidiary for the purpose of becoming the stock
holding company of the Savings Bank upon completion of the Conversion and
Reorganization as defined in the Plan of Conversion from Mutual Holding Company
to Stock Holding Company and Agreement and Plan of Reorganization ("Plan of
Conversion") adopted by the Boards of Directors of the MHC and the Savings Bank;
and
WHEREAS, the MHC owns as of the date hereof ____% of the outstanding common
stock of the Savings Bank, par value $1.00 per share ("Savings Bank Common
Stock), will convert to a federally-chartered interim stock savings bank and
simultaneously merge with and into the Savings Bank pursuant to the Plan of
Conversion and the Plan of Merger included as Annex A thereto ("MHC Merger"),
pursuant to which all shares of Savings Bank Common Stock held by the MHC will
be canceled; and
WHEREAS, the formation of a stock holding company by the Savings Bank will
be facilitated by causing the Holding Company to become the sole stockholder of
a newly-formed interim stock savings bank ("Interim B") and then merge Interim B
with and into the Savings Bank, pursuant to which the Savings Bank will
reorganize as a wholly-owned subsidiary of the Holding Company
("Reorganization") and, in connection therewith, all outstanding shares of
Savings Bank Common Stock will be converted automatically into and become shares
of common stock of the Holding Company, par value $____ per share ("Holding
Company Common Stock"); and
WHEREAS, Interim B is being organized by the officers of the Savings Bank
as an interim Federal stock savings bank with the Holding Company as its sole
stockholder in order to effect the Reorganization; and
WHEREAS, the Savings Bank and Interim B ("Constituent Corporations") and
the Holding Company desire to provide for the terms and conditions of the
Reorganization.
NOW, THEREFORE, the Savings Bank, Interim B and the Holding Company hereby
agree as follows:
1. EFFECTIVE DATE. The Reorganization shall become effective on the date
specified in the endorsement of the articles of combination relating to the
Reorganization by the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R.
ss.552.13(k), or any successor thereto ("Effective Date").
2. THE MERGER AND EFFECT THEREOF. Subject to the terms and conditions set
forth herein and the prior approval of the OTS of the Conversion and the
Reorganization, as defined in the Plan of Conversion, and the expiration of all
applicable waiting periods, Interim B shall merge with and into the Savings
Bank, with the Savings Bank as the Surviving Corporation. Upon consummation of
the Reorganization, the Surviving Corporation shall be considered the same
business and corporate entity as each of the Constituent Corporations and
thereupon and thereafter all the property, rights, powers and franchises of each
of the Constituent Corporations shall vest in the Surviving Corporation and the
Surviving Corporation shall be subject to and be deemed to have assumed all of
the property, rights, privileges, powers, franchises, debts, liabilities,
obligations and duties of each of the Constituent Corporations and shall have
succeeded to all of each of their relationships, fiduciary or otherwise, fully
and to the
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<PAGE>
same extent as if such property, rights, privileges, powers, franchises, debts,
obligations, duties and relationships had been (originally acquired, incurred or
entered into by the Surviving Corporation. In addition any reference to either
of the Constituent Corporations in any contract or document, whether executed or
taking effect before or after the Effective Date, shall be considered a
reference to the Savings Bank if not inconsistent with the other provisions of
the contract or document; and any pending action or other judicial proceeding of
which either of the Constituent Corporations is a party shall not be deemed to
have abated or to have been discontinued by reason of the Reorganization, but
may be prosecuted to final judgment, order or decree in the same manner as if
the Reorganization had not occurred or the Surviving Corporation may be
substituted as a party to such action or proceeding, and any judgment, order or
decree may be rendered for or against it that might have been rendered for or
against either of the Constituent Corporations if the Reorganization had not
occurred.
3. CONVERSION OF STOCK.
(a) On the Effective Date, (i) each share of Savings Bank Common Stock
issued and outstanding immediately prior to the Effective Date shall, by virtue
of the Reorganization and without any action on the part of the holder thereof,
be converted into the right to receive Holding Company Common Stock based on the
Exchange Ratio, as defined in the Plan of Conversion, plus the right to receive
cash in lieu of any fractional share interest, as determined in accordance with
Section 3(c) hereof, (ii) each share of common stock, par value $1.00 per share,
of Interim B ("Interim B Common Stock") issued and outstanding immediately prior
to the Effective Date shall, by virtue of the Reorganization and without any
action on the part of the holder thereof, be converted into one share of Savings
Bank Common Stock, and (ii) each share of Holding Company Common Stock issued
and outstanding immediately prior to the Effective Date shall, by virtue of the
Reorganization and without any action on the part of the holder thereof, be
canceled. By voting in favor of this Plan of Reorganization, the Holding
Company, as the sole stockholder of Interim B, shall have agreed (i) to issue
shares of Holding Company Common Stock in accordance with the terms hereof and
(ii) to cancel all previously issued and outstanding shares of Holding Company
Common Stock upon the effectiveness of the Reorganization.
(b) On and after the Effective Date, there shall be no registrations of
transfers on the stock transfer books of Interim B or the Savings Bank of shares
of Interim B Common Stock or Savings Bank Common Stock which were outstanding
immediately prior to the Effective Date.
(c) Notwithstanding any other provision hereof, no fractional shares of
Holding Company Common Stock shall be issued to holders of Savings Bank Common
Stock. In lieu thereof, the holder of shares of Savings Bank Common Stock
entitled to a fraction of a share of Holding Company Common Stock shall, at the
time of surrender of the certificate or certificates representing such holder
shares, receive an amount of cash equal to the product arrived at by multiplying
such fraction of a share of Holding Company Common Stock by the Purchase Price,
as defined in the Plan of Conversion. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
4. EXCHANGE OF SHARES.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Savings
Bank Common Stock, upon surrender of the same to an agent, duly appointed by the
Holding Company ("Exchange Agent"), shall be entitled to receive in exchange
therefor certificate(s) representing the number full shares of Holding Company
Common Stock for which the shares of Savings Bank Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted as provided in Section 3(a) hereof. The Exchange Agent shall mail to
each holder of record of an outstanding certificate which immediately prior to
the Effective Date evidenced shares of Savings Bank Common Stock, and which is
to be exchanged for Holding Company Common Stock as provided in Section 3(a)
hereof, a form of letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to such certificate shall pass, only
upon delivery of such certificate to the Exchange Agent advising such holder of
the terms of the exchange effected by the
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<PAGE>
Reorganization and of the procedure for surrendering to the Exchange Agent such
certificate in exchange for certificate or certificates evidencing Holding
Company Common Stock.
(b) No holder of a certificate theretofore represent shares of Savings Bank
Common Stock shall be entitled to receive any dividends in respect of the
Holding Company Common Stock into which such shares shall have been converted by
virtue of the Bank Merger until the certificate representing such shares of
Savings Bank Common Stock is surrendered in exchange for certificates
representing shares of Holding Company Common Stock. In the event that dividends
are declared and paid by the Holding Company in respect of Holding Company
Common Stock after the Effective Date but prior to surrender of certificates
representing shares of Savings Bank Common Stock, dividends payable in respect
of shares of Holding Company Common Stock not then issued shall accrue (without
interest). Any such dividends shall be paid (without interest) upon surrender of
the certificates representing such shares of Savings Bank Common Stock. The
Holding Company shall be entitled, after the Effective Date, to treat
certificates representing shares of Savings Bank Common Stock as evidencing
ownership of the number of full shares of Holding Company Common Stock into
which the shares of Savings Bank Common Stock represented by such certificates
shall have been converted, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
(c) The Holding Company shall not be obligated to deliver a certificate or
certificates representing shares of Holding Company Common Stock to which a
holder of Savings Bank Common Stock would otherwise be entitled as a result of
the Reorganization until such holder surrenders the certificate or certificates
representing the shares of Savings Bank Common Stock for exchange as provided in
this Section 4, or, in default thereof, an appropriate Affidavit of Loss and
Indemnification Agreement and/or an indemnity bond as may be required in each
case by the Holding Company. If any certificate evidencing shares of Holding
Company Common Stock is to be issued in a name other than that in which the
Certificate evidencing Savings Bank Common Stock surrendered in exchanged
therefor is registered, it shall be a condition of the issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
certificate for shares of Holding Company Common Stock in any name other than
that of the registered holder of the certificate surrendered or otherwise
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) If, between the date hereof and the Effective Date, the shares of
Savings Bank Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
specified in Section 3(a) hereof shall be adjusted accordingly.
5. RIGHTS OF DISSENT AND APPRAISAL ABSENT. The holders of shares of Savings
Bank Common Stock shall not have dissenter and appraisal rights in connection
with the Reorganization.
6. NAME OF SURVIVING CORPORATION. The name of the Surviving Corporation
shall be "Riverview Savings Bank, FSB."
7. DIRECTORS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the number of directors of the Surviving
Corporation shall be seven. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Corporation are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Corporation in the year set forth after
his respective name, and until a successor is elected and qualified.
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<PAGE>
Name Term Expires
---- ------------
Roger Malfait 1997
Gary R. Douglass 1997
Patrick Sheaffer 1997
Dale E. Scarbrough 1998
Ronald Wysaske 1998
Paul L. Runyan 1999
Robert K. Leick 1999
The address of each such director is 700 N.E. Fourth Avenue, Camas,
Washington 98607.
8. OFFICERS OF THE SURVIVING CORPORATION. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Corporation and applicable law, the officers of the Savings Bank immediately
prior to the Effective Date shall be the officers of the Surviving Corporation.
9. OFFICES. Upon the Effective Date, all offices of the Savings Bank shall
be offices of the Surviving Corporation. As of the Effective Date, the home
office of the Surviving Corporation shall remain at 700 N.E. Fourth Avenue,
Camas, Washington and the locations of the branch offices of the Surviving
Corporation shall be 1737 B Street, Washougal, Washington; 225 S.W. 2nd Street
Stevenson, Washington; 100 North Main, White Salmon, Washington, 813 West Main,
Battle Ground, Washington; 412 South Columbus, Goldendale, Washington; 11505-K
Fourth Plain Boulevard, Vancouver, Washington; 7735 N.E. Highway 99, Vancouver,
Washington; and 1011 Washington Way, Longview, Washington.
10. CHARTER AND BYLAWS. On and after the Effective Date, the Charter and
Bylaws of the Savings Bank as in effect immediately prior to the Effective Date
shall be the Charter and Bylaws of the Surviving Corporation until amended in
accordance with the terms thereof and applicable law.
11. SAVINGS ACCOUNTS. Upon the Effective Date, any savings accounts of
Interim, without reissue, shall be and become savings accounts of the Surviving
Corporation without change in their respective terms, including, without
limitation, maturity minimum required balances or withdrawal value.
12. STOCK COMPENSATION PLANS. By voting in favor of this Agreement, the
Holding Company shall have approved adoption of the existing Savings Bank's 1993
Stock Option Plan and the Savings Bank's 1993 Management Development and
Recognition Plan (collectively the "Plans") as plans of the Holding Company and
shall have agreed to issue Holding Company Common Stock in lieu of Savings Bank
Common Stock pursuant to the terms of such Plans. As of the Effective Date,
rights outstanding under the Plans shall be assumed by the Holding Company and
thereafter shall be rights only for shares of Holding Company Common Stock, with
each such right being for a number of shares of Holding Company Common Stock
equal to the number of shares of Savings Bank Common Stack that were available
thereunder immediately prior to the Effective Date times the Exchange Ratio, as
defined in the plan of conversion, and the price of each such right shall be
adjusted to reflect the Exchange Ratio and so that the aggregate purchase price
of the right is unaffected, but with no change in any other term or condition of
such right. The Holding Company shall make appropriate amendments to the Plans
to reflect the adoption of the Plans by the Holding Company without adverse
effect upon the rights outstanding thereunder.
13. STOCKHOLDER APPROVAL. The affirmative votes of the holders of Savings
Bank Common Stock set forth in the Plan of Conversion shall be required to
approve the Plan of Conversion and Agreement and Plan of Reorganization, of
which this Plan of Reorganization is a part, on behalf of the Savings Bank. The
approval of the Holding Company, as the sole holder of the Interim B Common
Stock, shall be required to approve the Plan of Conversion, of which this Plan
of Reorganization is a part, on behalf of Interim B.
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14. REGISTRATION; OTHER APPROVALS. In addition to the approvals set forth
in Sections 1 and 13 hereof and in the Plan of Conversion, the obligations of
the parties hereto to consummate the Reorganization shall be subject to the
Holding Company Common Stock to be issued hereunder in exchange for Savings Bank
Common Stock being registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state securities laws, as well as the
receipt of all other approvals, consents or waivers as the parties may deem
necessary or advisable.
15. ABANDONMENT OF PLAN. This Plan of Reorganization may be abandoned by
either the Savings Bank or Interim B at any time before the Effective Date in
the manner set forth in the Plan of Conversion.
16. AMENDMENTS. This Plan of Reorganization may be amended in the manner
set forth in the Plan of Conversion by a subsequent writing signed by the
parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
17. SUCCESSORS. This Plan of Reorganization shall be binding on the
successors of the parties hereto.
18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington, to the extent superseded by
the laws of the United States.
IN WITNESS WHEREOF, the Parties hereto have cause this Plan of
Reorganization to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
RIVERVIEW, M.H.C.
Attest:
________________________________ By: ______________________________________
Phyllis Kreibich Patrick Sheaffer
Corporate Secretary President and Chief Executive Officer
______________________, INC.
Attest:
________________________________ By: ______________________________________
Phyllis Kreibich Patrick Sheaffer
Corporate Secretary President and Chief Executive Officer
RIVERVIEW INTERIM "B" SAVINGS BANK, FSB
Attest:
________________________________ By: ______________________________________
Phyllis Kreibich Patrick Sheaffer
Corporate Secretary President and Chief Executive Officer
B-5
EXHIBIT 3.1
Articles of Incorporation of Riverview Bancorp, Inc.
<PAGE>
ARTICLES OF INCORPORATION
OF
RIVERVIEW BANCORP, INC.
Pursuant to the provisions of Title 23B of the Revised Code of Washington
("RCW") (the Washington Business Corporation Act), the following shall
constitute the Articles of Incorporation of Riverview Bancorp, Inc., a
Washington corporation:
ARTICLE I. Name. The name of the corporation is Riverview Bancorp, Inc.
(the "corporation").
ARTICLE II. Duration. The duration of the corporation is perpetual.
ARTICLE III. Purpose and Powers. The nature of the business and the objects
and purposes to be transacted, promoted or carried on by the corporation are to
engage in the activities of a savings and loan holding company and in any other
lawful act or business for which corporations may be organized under the
Washington Business Corporation Act (as now in existence or as may hereafter be
amended, the "WBCA").
ARTICLE IV. Capital Stock. The total number of shares of all classes of
capital stock which the corporation has authority to issue is 50,250,000, of
which 50,000,000 shall be common stock of par value of $0.01 per share, and of
which 250,000 shall be serial preferred stock of par value $0.01 per share. The
shares may be issued from time to time as authorized by the Board of Directors
without further approval of the shareholders, except to the extent that such
approval is required by governing law, rule or regulation. The consideration for
the issuance of the shares shall be paid in full before their issuance and shall
not be less than the stated par value per share. Upon payment of such
consideration such shares shall be deemed to be fully paid and nonassessable.
Upon authorization by its Board of Directors, the corporation may issue its own
shares in exchange for or in conversion of its outstanding shares or distribute
its own shares, pro rata to its shareholders or the shareholders of one or more
classes or series, to effectuate stock dividends or splits, and any such
transaction shall not require consideration.
Except as expressly provided by applicable law, these Articles of
Incorporation or by any resolution of the board of directors designating and
establishing the terms of any series of preferred stock, no holders of any class
or series of capital stock shall have any right to vote as a separate class or
series or to vote more than one vote per share. The shareholders of the
corporation shall not be entitled to cumulative voting in any election of
directors.
A description of the different classes and series (if any) of the
corporation's capital stock and a statement of the designations, and the
relative rights, preferences and limitations of the shares of each class and
series (if any) of capital stock are as follows:
A. Common Stock. On matters on which holders of common stock are entitled
to vote, each holder of shares of common stock shall be entitled to one vote for
each share held by such holder.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and of sinking fund, retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any class or series
of stock entitled to participate therewith as to dividends, out of any assets
legally available for the payment of dividends, but only when and as declared by
the board of directors.
In the event of any liquidation, dissolution or winding up of the
corporation, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the corporation available for distribution remaining after: (i)
payment or provision for payment of the corporation's debts and liabilities;
(ii) distributions or provision for distributions in settlement of its
liquidation account; and (iii) distributions or provision for
distributions
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to holders of any class or series of stock having preference over
the common stock in the liquidation, dissolution or winding up of the
corporation. Each share of common stock shall have the same relative rights as
and be identical in all respects with all the other shares of common stock.
B. Serial Preferred Stock. The board of directors of the corporation is
authorized by resolution or resolutions from time to time adopted to provide for
the issuance of preferred stock in series and to fix and state the voting
powers, designations, preferences and relative, participating, optional or other
special rights of the shares of each such series and the qualifications,
limitations and restrictions thereof, including, but not limited to,
determination of any of the following:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which, such shares
may be redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution or winding up of the
corporation;
(f) Whether the shares or such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption
of such shares, and if so entitled, the amount of such fund and the manner
of its application, including the price(s) at which such shares may be
redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
corporation, and, if so convertible or exchangeable, the conversion
price(s), or the rate or rates of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any
other series of serial preferred stock.
Each share of each series of preferred stock shall have the same relative
rights as and be identical in all respects with all other shares of the same
series.
C. 1. Notwithstanding any other provision of these Articles of
Incorporation, in no event shall any record owner of any outstanding common
stock which is beneficially owned, directly or indirectly, by a person who, as
of any record date for the determination of shareholders entitled to vote on any
matter, beneficially owns in excess of 10% of the then-outstanding shares of
common stock ("Limit"), be entitled, or permitted to any vote in respect of the
shares held in excess of the Limit, unless a majority of the Whole Board (as
hereinafter defined) shall have by resolution granted in advance such
entitlement or permission. The number of votes which may be cast by any
record owner by virtue of the provisions hereof in respect of common
stock beneficially owned by such person owning shares in excess of the Limit
shall be a number equal to the total number of votes which a single
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<PAGE>
record owner of all common stock owned by such person would be entitled to
cast, multiplied by a fraction, the numerator of which is the number of
shares of such class or series which are both beneficially owned by such
person and owned of record by such record owner and the denominator of which is
the total number of shares of common stock beneficially owned by such person
owning shares in excess of the Limit.
2. The following definitions shall apply to this Section C of this Article
VII.
(a) "Affiliate" shall have the meaning ascribed to it in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of
1934, as in effect on the date of filing of these Articles of
Incorporation.
(b) "Beneficial ownership" shall be determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Securities Exchange Act of
1934 (or any successor rule or statutory provision), or, if said Rule 13d-3
shall be rescinded and there shall be no successor rule or provision
thereto, pursuant to said Rule 13d-3 as in effect on the date of filing of
these Articles of Incorporation; provided, however, that a person shall, in
any event, also be deemed the "beneficial owner" of any common stock:
(i) which such person or any of its affiliates beneficially owns,
directly or indirectly; or
(ii) which such person or any of its affiliates has (A) the right
to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding (but shall not be deemed to be the beneficial owner of
any voting shares solely by reason of an agreement, contract, or other
arrangement with the corporation to effect any transaction which is
described in any one or more of subparagraphs A(1)(a) through (h) of
Article X hereof or upon the exercise of conversion rights, exchange
rights, warrants, or options or otherwise, or (B) sole or shared
voting or investment power with respect thereto pursuant to any
agreement, arrangement, understanding, relationship or otherwise (but
shall not be deemed to be the beneficial owner of any voting shares
solely by reason of a revocable proxy granted for a particular meeting
of shareholders, pursuant to a public solicitation of proxies for such
meeting, with respect to shares of which neither such person nor any
such affiliate is otherwise deemed the beneficial owner); or
(iii) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or any of its
affiliates acts as a partnership, limited partnership, syndicate or
other group pursuant to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any
shares of capital stock of the corporation; and provided further,
however, that (i) no director or officer of the corporation (or any
Affiliate of any such director or officer) shall, solely by reason of
any or all of such directors of officers acting in their capacities as
such, be deemed, for any purposes hereof, to beneficially own any
common stock beneficially owned by any other such director or officer
(or any Affiliate thereof), and (ii) neither any employee stock
ownership or similar plan of the corporation or any subsidiary of the
corporation, nor any trustee with respect thereto or any Affiliate of
such trustee (solely by reason of such capacity of such trustee),
shall be deemed, for any purposes hereof, to beneficially own any
common stock held under any such plan. For purposes of computing the
percentage beneficial ownership of common stock of a person, the
outstanding common stock shall include shares deemed owned by such
person through application of this subsection but shall not include
any other common stock which may be issuable by the corporation
pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise. For all other purposes, the
outstanding common stock shall include only common stock then
outstanding and shall not include any common stock which may be
issuable by the corporation pursuant to any agreement, or upon the
exercise of conversion rights, warrants or options, or otherwise.
(c) A "person" shall mean any individual, firm, corporation, or other
entity.
(d) "Whole Board" shall mean the total number of directors which the
corporation would have if there were no vacancies on the board of
directors.
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3. The board of directors shall have the power to construe and apply the
provisions of this Section C and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to (i) the number of shares of common stock beneficially owned by
any person, (ii) whether a person is an affiliate of another, (iii) whether a
person has an agreement, arrangement, or understanding with another as to the
matters referred to in the definition of beneficial ownership, (iv) the
application of any other definition or operative provision of this Section C to
the given facts, or (v) any other matter relating to the applicability or effect
of this Section C.
4. The board of directors shall have the right to demand that any person
who is reasonably believed to beneficially own common stock in excess of the
Limit (or holds of record common stock beneficially owned by any person in
excess of the Limit) supply the corporation with complete information as to (i)
the record owner(s) of all shares beneficially owned by such person who is
reasonably believed to own shares in excess of the Limit, and (ii) any other
factual matter relating to the applicability or effect of this section as may
reasonably be required of such person.
5. Except as otherwise provided by law or expressly provided in this
Section C, the presence, in person or by proxy, of the holders of record of
shares of capital stock of the corporation entitling the holders thereof to cast
a majority of the votes (after giving effect, if required, to the provisions of
this Section C) entitled to be cast by the holders of shares of capital stock of
the corporation entitled to vote shall constitute a quorum at all meetings of
the shareholders, and every reference in these Articles of Incorporation to a
majority or other proportion of capital stock (or the holders thereof) for
purposes of determining any quorum requirement or any requirement for
shareholder consent or approval shall be deemed to refer to such majority or
other proportion of the votes (or the holders thereof) then entitled to be cast
in respect of such capital stock.
6. Any constructions, applications, or determinations made by the board of
directors pursuant to this Section C in good faith and on the basis of such
information and assistance as was then reasonably available for such purpose
shall be conclusive and binding upon the corporation and its shareholders.
7. In the event any provision (or portion thereof) of this Section C shall
be found to be invalid, prohibited or unenforceable for any reason, the
remaining provisions (or portions thereof) of this Section C shall remain in
full force and effect, and shall be construed as if such invalid, prohibited or
unenforceable provision had been stricken herefrom or otherwise rendered
inapplicable, it being the intent of the corporation and its shareholders that
each such remaining provision (or portion thereof) of this Section C remain, to
the fullest extent permitted by law, applicable and enforceable as to all
shareholders, including shareholders owning an amount of stock over the Limit,
notwithstanding any such finding.
ARTICLE V. Preemptive Rights. Holders of the capital stock of the
corporation shall not be entitled to preemptive rights with respect to any
shares of the corporation which may be issued.
ARTICLE VI. Initial Directors. The persons who shall serve as the initial
directors of the corporation are: Patrick Sheaffer, Roger Malfait, Gary R.
Douglass, Dale E. Scarbrough, Ron Wysaske, Robert K. Leick and Paul L. Runyan.
The address of each initial director is 700 N.E. Fourth Avenue, Camas,
Washington 98607. The initial directors shall serve until the first annual
meeting of shareholders, at which time they may stand for reelection.
ARTICLE VII. Directors.
A. Number. The corporation shall be under the direction of a Board of
Directors. The number of directors shall be as stated in the corporation's
bylaws, but in no event shall be fewer than five nor more than 15.
B. Classified Board. The board of directors shall be divided into three
groups, with each group containing one-third of the total number of directors,
or as near as may be. The terms of the directors in the first
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group shall expire at the first annual shareholders' meeting following their
election, the terms of the second group shall expire at the second
shareholders' meeting following their election, and the terms of the third
group shall expire at the third annual shareholders' meeting following
their election. At each annual shareholders' meeting held thereafter,
directors shall be chosen for a term of three years to succeed those whose
terms expire.
C. Vacancies. Any vacancy occurring in the board of directors may be filled
only by the affirmative vote of a majority of the remaining directors, although
less than a quorum of the board of directors. A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office. A
directorship to be filled by reason of an increase in the number of directors
may be filled by election by the board of directors for a term continuing only
until the next election of directors by the shareholders.
ARTICLE VIII. Removal of Directors. Notwithstanding any other provisions of
these articles of incorporation or the corporation's bylaws (and notwithstanding
the fact that some lesser percentage may be specified by law, these articles of
incorporation or the corporation's bylaws), any director or the entire Board of
Directors may be removed only for cause and only by the affirmative vote of the
holders of at least 80% of the total votes eligible to be cast at a legal
meeting called expressly for such purpose. For purpose of this Article VIII,
"cause" shall mean fraudulent or dishonest acts, a gross abuse of authority in
discharge of duties to the corporation or acts that are detrimental or hostile
to the interests of the corporation.
ARTICLE IX. Registered Office and Agent. The registered office of the
corporation shall be located at 700 N.E. Fourth Avenue, Camas, Washington 98607.
The initial registered agent of the corporation at such address shall be Patrick
Sheaffer.
ARTICLE X. Notice for Shareholder Nominations and Proposals.
A. Nominations for the election of directors and proposals for any new
business to be taken up at any annual or special meeting of shareholders may be
made by the board of directors of the corporation or by any shareholder of the
corporation entitled to vote generally in the election of directors. In order
for a shareholder of the corporation to make any such nominations and/or
proposals, he or she shall give notice thereof in writing, delivered or mailed
by first class United States mail, postage prepaid, to the Secretary of the
corporation not less than thirty days nor more than sixty days prior to any such
meeting; provided, however, that if less than thirty-one days' notice of the
meeting is given to shareholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the corporation not later than the
close of the tenth day following the day on which notice of the meeting was
mailed to shareholders. Each such notice given by a shareholder with respect to
nominations for election of directors shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice, (ii) the principal occupation or employment of each such nominees,
(iii) the number of shares of stock of the corporation which are beneficially
owned by each such nominee, (iv) such other information as would be required to
be included in a proxy statement soliciting proxies for the election of the
proposed nominee pursuant to Regulation 14A of the General Rules and Regulations
of the Securities Exchange Act of 1934, including, without limitation, such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director, if elected, and (v) as to the shareholder giving such
notice (a) his name and address as they appear on the corporation's books and
(b) the class and number of shares of the corporation which are beneficially
owned by such shareholder. In addition, the shareholder making such nomination
shall promptly provide any other information reasonably requested by the
corporation.
B. Each such notice given by a shareholder to the Secretary with respect to
business proposals to bring before a meeting shall set forth in writing as to
each matter: (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(ii) the name and address, as they appear on the corporation's books, of the
shareholder proposing such business; (iii) the class and number of shares of the
corporation which are beneficially owned by the shareholder; and (iv) any
material interest of the
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shareholder in such business. Notwithstanding anything in this Certificate to
the contrary, no business shall be conducted at the meeting except in accordance
with the procedures set forth in this Article.
C. The Chairman of the annual or special meeting of shareholders may, if
the facts warrant, determine and declare to the meeting that a nomination or
proposal was not made in accordance with the foregoing procedure, and, if the
Chairman should so determine, the Chairman shall so declare to the meeting and
the defective nomination or proposal shall be disregarded and laid over for
action at the next succeeding adjourned, special or annual meeting of the
shareholders taking place thirty days or more thereafter. This provision shall
not require the holding of any adjourned or special meeting of shareholders for
the purpose of considering such defective nomination or proposal.
ARTICLE XI. Approval of Certain Business Combinations. The shareholder vote
required to approve Business Combinations (as hereinafter defined) shall be as
set forth in this section.
A. (1) Except as otherwise expressly provided in this Article XI, the
affirmative vote of the holders of (i) at least 80% of the outstanding shares
entitled to vote thereon (and, if any class or series of shares is entitled to
vote thereon separately, the affirmative vote of the holders of at least 80% of
the outstanding shares of each such class or series), and (ii) at least a
majority of the outstanding shares entitled to vote thereon, not including
shares deemed beneficially owned by a Related Person (as hereinafter defined),
shall be required to authorize any of the following:
(a) any merger or consolidation of the corporation with or into a
Related Person;
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage, or any other security device, of
all or any Substantial Part (as hereinafter defined) of the assets of the
corporation (including without limitation any voting securities of a
subsidiary) or of a subsidiary, to a Related Person;
(c) any merger or consolidation of a Related Person with or into the
corporation or a subsidiary of the corporation;
(d) any sale, lease, exchange, transfer or other disposition of all or
any Substantial Part of the assets of a Related Person to the corporation
or a subsidiary of the corporation;
(e) the issuance of any securities of the corporation or a subsidiary
of the corporation to a Related Person;
(f) the acquisition by the corporation or a subsidiary of the
corporation of any securities of a Related Person;
(g) any reclassification of the common stock of the corporation, or
any recapitalization involving the common stock of the corporation;
(h) any liquidation or dissolution of the corporation; and
(i) any agreement, contract or other arrangement providing for any of
the transactions described in this Article XI.
(2) Such affirmative vote shall be required notwithstanding any other
provision of these Articles of Incorporation, any provision of law, or any
agreement with any regulatory agency or national securities exchange which might
otherwise permit a lesser vote or no vote.
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(3) The term "Business Combination" as used in this Article XI shall mean
any transaction which is referred to in any one or more of subparagraphs (a)
through (i) above.
B. The provisions of Part A of this Article XI shall not be applicable to
any particular Business Combination, which shall require only such affirmative
vote as is required by any other provision of these Articles of Incorporation,
any provision of law, or any agreement with any regulatory agency or national
securities exchange, if such particular Business Combination shall have been
approved by two-thirds of the Continuing Directors (as hereinafter defined);
provided, however, that such approval shall only be effective if obtained at a
meeting at which a Continuing Director Quorum (as hereinafter defined) is
present.
C. For the purposes of this Article XI the following definitions apply:
(1) The term "Related Person" shall mean and include (a) any
individual, corporation, partnership or other person or entity which
together with its "affiliates" (as that term is defined in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of
1934), "beneficially owns" (as that term is defined in Rule 13d-3 of the
General Rules and Regulations under the Securities Act of 1934) in the
aggregate 10% or more of the outstanding shares of the common stock of the
corporation (excluding tax-qualified benefit plans of the corporation); and
(b) any "affiliate" (as that term is defined in Rule 12b-2 under the
Securities Exchange Act of 1934) of any such individual, corporation,
partnership or other person or entity. Without limitation, any shares of
the common stock of the corporation which any Related Person has the right
to acquire pursuant to any agreement, or upon exercise or conversion
rights, warrants or options, or otherwise, shall be deemed "beneficially
owned" by such Related Person.
(2) The term "Substantial Part" shall mean more than 25% of the total
assets of the corporation as of the end of its most recent fiscal year
prior to when the determination is made.
(3) The term "Continuing Director" shall mean any member of the board
of directors of the corporation who is unaffiliated with the Related Person
and was a member of the board of directors prior to the time the Related
Person became a Related Person, and any successor of a Continuing Director
who is unaffiliated with the Related Person and is recommended to succeed a
Continuing Director by a majority of Continuing Directors then on the board
of directors.
(4) The term "Continuing Director Quorum" shall mean seventy-five
percent (75%) of the Continuing Directors capable of exercising the powers
conferred on them.
D. Nothing contained in this Article XI shall be construed to relieve a
Related Person from any fiduciary obligation imposed by law. In addition,
nothing contained in the Article XI shall prevent any shareholders of the
corporation from objecting to any Business Combination and from demanding any
appraisal rights which may be available to such shareholder.
E. No amendment, alteration, change, or repeal of any provision of the
Article XI may be effected unless it is approved at a meeting of the
corporation's shareholders called for that purpose. Notwithstanding any other
provision of this charter, the affirmative vote of the holders of not less than
80% of the outstanding shares entitled to vote thereon shall be required to
amend, alter, change, or repeal, directly or indirectly, any provision of this
Article XI; provided, however, that the preceding provisions of this Part E
shall not be applicable to any amendment to this Article XI if such amendment
receives this affirmative vote required by law and any other provisions of these
Articles of Incorporation and if such amendment has been approved by a majority
of the Continuing Directors.
ARTICLE XII. Evaluation of Business Combinations. In connection with the
exercise of its judgment in determining what is in the best interests of the
corporation and of the shareholders, when evaluating a Business
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Combination (as defined in Article XI) or a tender or exchange offer, the board
of directors of the corporation, in addition to considering the adequacy of the
amount to be paid in connection with any such transaction, shall consider all of
the following factors and any other factors which it deems relevant: (i) the
social and economic effects of the transaction on the corporation and its
subsidiaries, employees, depositors, loan and other customers, creditors and
other elements of the communities in which the corporation and its subsidiaries
operate or are located; (ii) the business and financial condition and earnings
prospects of the acquiring person or entity, including, but not limited to, debt
service and other existing financial obligations, financial obligations to be
incurred in connection with the acquisition and other likely financial
obligations of the acquiring person or entity and the possible effect of such
conditions upon the corporation and its subsidiaries and the other elements of
the communities in which the corporation and its subsidiaries operate or are
located; and (iii) the competence, experience, and integrity of the acquiring
person or entity and its or their management.
ARTICLE XIII. Limitation of Directors' Liability. To the fullest extent
permitted by the WBCA, a director of the corporation shall not be personally
liable to the corporation or its shareholders for monetary damages for conduct
as a director, except for liability of the director for acts or omissions that
involve: (i) intentional misconduct by the director; (ii) a knowing violation of
law by the director; (iii) conduct violating RCW Section 23B.08.310 (relating to
unlawful distributions by the corporation); or (iv) any transaction from which
the director will personally receive a benefit in money, property or services to
which the director is not legally entitled. If the WBCA is amended in the future
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the full extent permitted by the WBCA, as so
amended, without any requirement or further action by shareholders. An amendment
or repeal of this Article XII shall not adversely affect any right or protection
of a director of the corporation existing at the time of such amendment or
repeal.
ARTICLE XIV. Indemnification. The corporation shall indemnify and advance
expenses to its directors, officers, agents and employees as follows:
A. Directors and Officers. In all circumstances and to the full extent
permitted by the WBCA, the corporation shall indemnify any person who is or
was a director, officer or agent of the corporation and who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal (including
an action by or in the right of the corporation), by reason of the fact
that he is or was an agent of the corporation, against expenses, judgments,
fines, and amounts paid in settlement and incurred by him in connection
with such action, suit or proceeding. However, such indemnity shall not
apply to: (a) acts or omissions of the director or officer finally adjudged
to violate law; (b) conduct of the director or officer finally adjudged to
violate RCW Section 23B.08.310 (relating to unlawful distributions by the
corporation), or (c) any transaction with respect to which it was finally
adjudged that such director and officer personally received a benefit in
money, property, or services to which the director was not legally
entitled. The corporation shall advance expenses incurred in a proceeding
for such persons pursuant to the terms set forth in a separate directors'
resolution or contract.
B. Implementation. The board of directors may take such action as is
necessary to carry out these indemnification and expense advancement
provisions. It is expressly empowered to adopt, approve and amend from time
to time such bylaws, resolutions, contracts or further indemnification and
expense advancement arrangements as may be permitted by law, implementing
these provisions. Such bylaws, resolutions, contracts, or further
arrangements shall include, but not be limited to, implementing the manner
in which determinations as to any indemnity or advancement of expenses
shall be made.
C. Survival of Indemnification Rights. No amendment or repeal of this
Article XIV shall apply to or have any effect on any right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal.
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D. Service for Other Entities. The indemnification and advancement of
expenses provided under this Article XIV shall apply to directors,
officers, employees, or agents of the corporation for both (a) service in
such capacities for the corporation, and (b) service at the corporations's
request as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise. A person is considered to be
serving an employee benefit plan at the corporation's request if such
person's duties to the corporation also impose duties on, or otherwise
involve services by, the director to the plan or to participants in or
beneficiaries of the plan.
E. Insurance. The 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 is or was serving at the request of the corporation
as a director, trustee, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise against liability
asserted against him and incurred by him in such capacity or arising out of
his status as such, whether or not the corporation would have had the power
to indemnify him against such liability under the provisions of this bylaw
and the WBCA.
F. Other Rights. The indemnification provided by this section shall
not be deemed exclusive of any other right to which those indemnified may
be entitled under any other bylaw, agreement, vote of shareholders, or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such an office,
and shall continue as to a person who has ceased to be a director, trustee,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
ARTICLE XV. Special Meeting of Shareholders. Special meetings of the
shareholders for any purpose or purposes may be called only by the president or
by the Board of Directors. The right of shareholders of the corporation to call
special meetings is specifically denied.
ARTICLE XVI. Repurchase of Shares. The corporation may from time to time,
pursuant to authorization by the board of directors of the corporation and
without action by the shareholders, purchase or otherwise acquire shares of any
class, bonds, debentures, notes, scrip, warrants, obligations, evidences of
indebtedness, or other securities of the corporation in such manner, upon such
terms, and in such amounts as the board of directors shall determine; subject,
however, to such limitations or restrictions, if any, as are contained in the
express terms of any class of shares of the corporation outstanding at the time
of the purchase or acquisition in question or as are imposed by law.
ARTICLE XVII. Amendment of Bylaws. In furtherance and not in limitation of
the powers conferred by statute, the board of directors of the corporation is
expressly authorized to make, repeal, alter, amend and rescind the bylaws of the
corporation by a majority vote of the board of directors. Notwithstanding any
other provision of these Articles of Incorporation or the bylaws of the
corporation (and notwithstanding the fact that some lesser percentage may be
specified by law), the bylaws shall not be adopted, repealed, altered, amended
or rescinded by the shareholders of the corporation except by the vote of the
holders of not less than 80% of the outstanding shares of capital stock of the
corporation entitled to vote generally in the election of directors (considered
for this purpose as one class) cast at a meeting of the shareholders called for
that purpose (provided that notice of such proposed adoption, repeal,
alteration, amendment or rescission is included in the notice of such meeting),
or, as set forth above, by the board of directors.
ARTICLE XVIII. Amendment of Articles of Incorporation. The corporation
reserves the right to repeal, alter, amend or rescind any provision contained in
the Articles of Incorporation in the manner now or hereafter prescribed by law,
and all rights conferred on shareholders herein are granted subject to this
reservation. Notwithstanding the foregoing, the provisions set forth in Articles
II, III, IV (other than a change to the number of authorized shares in
connection with a split of, or stock dividend in, the corporation's own shares,
provided the corporation has only one class of shares outstanding or a change in
the par value of such shares), V, VI, VIII, X,
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XI, XII, XIII, XIV, XV, XVI, XVII and this Article XVIII of these Articles of
Incorporation may not be repealed, altered, amended or rescinded in any respect
unless the same is approved by the affirmative vote of the holders of not less
than 80% of the votes entitled to be cast by each separate voting group entitled
to vote thereon, cast at a meeting of the shareholders called for that purpose
(provided that notice of such proposed adoption, repeal, alteration, amendment
or rescission is included in the notice of such meeting).
ARTICLE XIX. Incorporator. The name and mailing address of the incorporator
are Patrick Sheaffer, 700 N.E. Fourth Avenue, Camas, Washington 98607.
* * *
10
Executed this 20th day of June, 1997.
/s/ Patrick Sheaffer
_____________________________________
Patrick Sheaffer
Incorporator
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EXHIBIT 3.2
Bylaws of Riverview Bancorp, Inc.
<PAGE>
BYLAWS
OF
RIVERVIEW BANCORP, INC.
ARTICLE I
Principal Office
SECTION 1. Principal Office. The principal office and place of business of
the corporation in the state of Washington shall be located in the City of
Camas, Clark County.
SECTION 2. Other Offices. The corporation may have such other offices as
the Board of Directors may designate or the business of the corporation may
require from time to time.
ARTICLE II
Shareholders
SECTION 1. Place of Meetings. All annual and special meetings of the
shareholders shall be held at the principal office of the corporation or at such
other place within the State of Washington as the Board of Directors may
determine.
SECTION 2. Annual Meeting. A meeting of the shareholders of the corporation
for the election of directors and for the transaction of any other business of
the corporation shall be held annually on the ____________ of July, if not a
legal holiday, and if a legal holiday, then on the next day following which is
not a legal holiday, at ______ a.m., Pacific time, or at such other date and
time as the Board of Directors may determine.
SECTION 3. Special Meetings. Special meetings of the shareholders for any
purpose or purposes shall be called in accordance with the procedures set forth
in the Articles of Incorporation.
SECTION 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with rules prescribed by the presiding officer of the
meeting, unless otherwise prescribed by these bylaws. The Board of Directors
shall designate, when present, either the chairman of the board or the president
to preside at such meetings.
SECTION 5. Notice of Meeting. Written notice stating the place, day and
hour of the meeting and, in the case of a special meeting of shareholders, the
purpose or purposes for which the meeting is called, shall be delivered not less
than 10 nor more than 60 days before the date of the meeting, either personally
or by mail, by or at the direction of the chairman of the board, the president,
the secretary, or the directors calling the meeting, to each shareholder of
record entitled to vote at such meeting; provided, however, that notice of a
shareholders meeting to act on an amendment to the Articles of Incorporation, a
plan of merger or share exchange, a proposed sale of assets pursuant to Section
23B.12.020 of the Revised Code of Washington or its successor, or the
dissolution of the corporation shall be given no fewer than 20 nor more than 60
days before the meeting date. If mailed, such notice shall be deemed to be
delivered when deposited in the mail, addressed to the shareholder at the
address as it appears on the stock transfer books or records of the corporation
as of the record date prescribed in Section 6 of this Article II, with postage
thereon prepaid. When any shareholders' meeting, either annual or special, is
adjourned for 120 days or more, notice of the adjourned meeting shall be given
as in the case of an original meeting. It shall not be necessary to give any
notice of the time and place of any meeting adjourned for less than 120 days or
of the business to be transacted at the meeting, other than an announcement at
the meeting at which such adjournment is taken.
SECTION 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive payment
<PAGE>
of any dividend, or in order to make a determination of shareholders for any
other proper purpose, the Board of Directors shall fix, in advance, a date as
the record date for any such determination of shareholders. Such date in any
case shall be not more than 60 days, and in case of a meeting of shareholders,
not less than 10 days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If no record date
is fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the day before the date on which notice of the meeting is mailed or
the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment.
SECTION 7. Voting Lists. At least 10 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the corporation shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
This list of shareholders shall be kept on file at the home office of the
corporation and shall be subject to inspection by any shareholder at any time
during usual business hours, for a period of 10 days prior to such meeting. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to inspection by any shareholder during the entire time of
the meeting. The original stock transfer book shall be prima facie evidence of
the shareholders entitled to examine such list or transfer books or to vote at
any meeting of shareholders. Failure to comply with the requirements of this
bylaw shall not affect the validity of any action taken at the meeting.
SECTION 8. Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum. If a quorum is
present or represented at a meeting, a majority of those present or represented
may transact any business which comes before the meeting, unless a greater
percentage is required by law. If less than a quorum of the outstanding shares
is represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified, and in the case of any adjourned meeting called for the election of
directors, those who attend the second of the adjourned meetings, although less
than a quorum, shall nevertheless constitute a quorum for the purpose of
electing directors.
SECTION 9. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his duly authorized
attorney in fact. Proxies solicited on behalf of the management shall be voted
as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. All proxies shall be filed
with the secretary of the corporation before or at the commencement of meetings.
No proxy may be effectively revoked until notice in writing of such revocation
has been given to the secretary of the corporation by the shareholder (or his
duly authorized attorney in fact, as the case may be) granting the proxy. No
proxy shall be valid after eleven months from the date of its execution unless
it is coupled with an interest.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. A certified copy of
a resolution adopted by such directors shall be conclusive as to their action.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted
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by him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do is
contained in an appropriate order of the court or other public authority by
which such receiver was appointed.
If shares are held jointly by three or more fiduciaries, the will of the
majority of the fiduciaries shall control the manner of voting or giving of a
proxy, unless the instrument or order appointing such fiduciaries otherwise
directs.
A shareholder, whose shares are pledged, shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter, the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the corporation, nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation held by the corporation,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
SECTION 11. Voting. Every holder of outstanding shares of capital stock of
the corporation entitled to vote at any meeting shall be entitled to the number
of votes (if any) as set forth in the Articles of Incorporation. Shareholders
shall not be entitled to cumulative voting rights in the election of directors.
Unless otherwise provided in the Articles of Incorporation, by statute, or by
these bylaws, a majority of those votes cast by shareholders at a lawful meeting
shall be sufficient to pass on a transaction or matter.
SECTION 12. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III
Board of Directors
SECTION 1. General Powers. All corporate powers shall be exercised by, or
under authority of, and the business and affairs of the corporation shall be
managed under the direction of, the Board of Directors. The Board of Directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, either the chairman of the board or
the president to preside at its meetings.
SECTION 2. Number, Term and Election. The Board of Directors shall consist
of seven (7) members. The number of directors may be increased or decreased from
time to time by amendment to or in the manner provided in these bylaws, but
shall be no less than and no more than the numbers set forth in the Articles of
Incorporation. No decrease, however, shall have the effect of shortening the
term of any incumbent director unless such director is removed in accordance
with the provisions of these bylaws. Unless removed in accordance with the
Articles of Incorporation, each director shall hold office until his successor
shall have been elected and qualified.
SECTION 3. Regular Meetings. An annual meeting of the Board of Directors
shall be held without other notice than this bylaw immediately after the annual
meeting of shareholders, and at the same place as other regularly scheduled
meetings of the Board of Directors. The Board of Directors may provide, by
resolution, the time and place, for the holding of additional regular meetings
without other notice than such resolution. The president
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of the corporation, the Board of Directors or any director may call a special
meeting of the Board. Regular meetings may be held in or out of the state of
Washington.
Members of the Board of Directors may participate in regular or special
meetings by means of conference telephone or similar communications equipment by
which all persons participating in the meeting can hear each other. Such
participation shall constitute attendance in person, but shall not constitute
attendance for the purpose of compensation pursuant to SECTION 13 of this
Article.
SECTION 4. Notice of Special Meeting. Written notice of any special meeting
shall be given to each director at least two days prior thereto. If mailed to
the address at which the director is most likely to be reached, such notice
shall be deemed to be delivered when deposited in the mail so addressed, with
postage thereon prepaid. Any director may waive notice of any meeting by a
writing filed with the secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be specified in the notice or waiver of notice of such meeting.
Special meetings may be held in or out of the state of Washington.
SECTION 5. Quorum. A majority of the number of directors fixed by Section 2
of this Article III shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time. Notice of any adjourned meeting shall be given in the same manner
as prescribed by Section 6 of this Article III.
SECTION 6. Manner of Acting. The act of the majority of the directors
present at a meeting or adjourned meeting at which a quorum is present shall be
the act of the board of directors, unless a greater number is prescribed by
these bylaws.
SECTION 7. Action Without a Meeting. Any action required or permitted to be
taken by the Board of Directors at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the directors.
SECTION 8. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the principal office of the corporation
addressed to the chairman of the board or the president. Unless otherwise
specified therein, such resignation shall take effect upon receipt thereof by
the chairman of the board or the president.
SECTION 9. Removal. A director or the entire board of directors may be
removed only in accordance with the procedures set forth in the Articles of
Incorporation.
SECTION 10. Vacancies. Vacancies of the board of directors may be filled
only in accordance with the procedures set forth in the Articles of
Incorporation.
SECTION 11. Compensation. Directors, as such, may receive a stated fee for
their services. By resolution of the board of directors, a reasonable fixed sum,
and reasonable expenses of attendance, if any, may be allowed for actual
attendance at each regular or special meeting of the board of directors. Members
of either standing or special committees may be allowed such compensation for
actual attendance at committee meetings as the board of directors may determine.
Nothing herein shall be construed to preclude any director from serving the
corporation in any other capacity and receiving remuneration therefor.
SECTION 12. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on a corporation
matter is taken shall be presumed to have assented to the action
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taken unless his dissent or abstention shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the
corporation within five (5) days after the date he receives a copy of the
minutes of the meeting. Such right to dissent shall not apply to a director who
voted in favor of such action.
SECTION 13. Age Limitation. No person 70 years of age or older shall be
eligible for election, re-election, appointment or reappointment to the board of
directors of the corporation. No director shall serve as such beyond the annual
meeting of the corporation immediately following the director becoming 70 years
of age other than to complete the unexpired portion of his term as director.
This age limitation shall not apply to (i) the initial directors of the
corporation set forth in the Articles of Incorporation, who shall be allowed to
serve until age 72 and, if his term as director has not expired upon reaching
age 72, complete his term, and (ii) an advisory director or director emeritus.
ARTICLE IV
Committees of the Board of Directors
SECTION 1. Appointment. The board of directors may, by resolution adopted
by a majority of the full board, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the board of
directors. The board of directors may designate one or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of any such committee.
SECTION 2. Authority. Any such committee shall have all the authority of
the board of directors, except to the extent, if any, that such authority shall
be limited by the resolution appointing the committee; and except also that no
committee shall have the authority of the board of directors with reference to:
the declaration of dividends; the amendment of the charter or bylaws of the
Corporation, or recommending to the shareholders a plan of merger,
consolidation, or conversion; the sale, lease, or other disposition of all or
substantially all of the property and assets of the Corporation otherwise than
in the usual and regular course of its business; a voluntary dissolution of the
Corporation; a revocation of any of the foregoing; the approval of a transaction
in which any member of the committee, directly or indirectly, has any material
beneficial interest; the filling of vacancies on the board of directors or in
any committee; or the appointment of other committees of the board of directors
or members thereof.
SECTION 3. Tenure. Subject to the provisions of Section 8 of this Article
III, each member of a committee shall hold office until the next regular annual
meeting of the board of directors following his or her designation and until a
successor is designated as a member of the committee.
SECTION 4. Meetings. Unless the board of directors shall otherwise provide,
regular meetings of any committee appointed pursuant to this Article III shall
be at such times and places as are determined by the board of directors, or by
any such committee. Special meetings of any such committee may be held at the
principal executive office of the Corporation, or at any place which has been
designated from time to time by resolution of such committee or by written
consent of all members thereof, and may be called by any member thereof upon not
less than one day's notice stating the place, date, and hour of the meeting,
which notice shall been given in the manner provided for the giving of notice to
members of the board of directors of the time and place of special meetings of
the board of directors.
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SECTION 5. Quorum. A majority of the members of any committee shall
constitute a quorum for the transaction of business at any meeting thereof.
SECTION 6. Action Without a Meeting. Any action required or permitted to be
taken by any committee at a meeting may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by all of the
members of any such committee.
SECTION 7. Resignations and Removal. Any member of any committee may be
removed at any time with or without cause by resolution adopted by a majority of
the full board of directors. Any member of any committee may resign from any
such committee at any time by giving written notice to the president or
secretary of the Corporation. Unless otherwise specified, such resignation shall
take effect upon its receipt; the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 8. Procedure. Unless the board of directors otherwise provides,
each committee shall elect a presiding officer from its members and may fix its
own rules of procedure which shall not be inconsistent with these bylaws. It
shall keep regular minutes of its proceedings and report the same to the board
of directors for its information at the meeting held next after the proceedings
shall have occurred.
ARTICLE V
Officers
SECTION 1. Positions. The officers of the Corporation shall be a president,
a secretary and a treasurer, each of whom shall be elected by the board of
directors. The board of directors may also designate the chairman of the board
as an officer. The president shall be the chief executive officer unless the
board of directors designates the chairman of the board as chief executive
officer. The president shall be a director of the Corporation. The offices of
the secretary and treasurer may be held by the same person and a vice president
may also be either the secretary or the treasurer. The board of directors may
designate one or more vice presidents as executive vice president or senior vice
president. The board of directors may also elect or authorize the appointment of
such other officers as the business of the Corporation may require. The officers
shall have such authority and perform such duties as the board of directors may
from time to time authorize or determine. In the absence of action by the board
of directors, the officers shall have such powers and duties as generally
pertain to their respective offices.
SECTION 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of the shareholders. If the
election of officers is not held at such meeting, such election shall be held as
soon thereafter as possible. Each officer shall hold office until his successor
shall have been duly elected and qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided. Election
or appointment of an officer, employee or agent shall not of itself create
contract rights. The board of directors may authorize the corporation to enter
into an employment contract with any officer in accordance with applicable law.
SECTION 3. Removal. Any officer may be removed by vote of two-thirds of the
board of directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. Remuneration. The remuneration of the officers shall be fixed
from time to time by the board of directors and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the Corporation.
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ARTICLE VI
Contracts, Loans, Checks and Deposits
SECTION 1. Contracts. Except as otherwise prescribed by these bylaws
with respect to certificates for shares, the Board of Directors may authorize
any officer, employee, or agent of the bank to enter into any contract or
execute and deliver any instrument in the name of and on behalf of the
corporation. Such authority may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the corporation
and no evidence of indebtedness shall be issued in its name, unless authorized
by the Board of Directors. Such authority may be general or confined to specific
instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts, or other orders for the
payment of money, notes, or other evidences of indebtedness in the name of the
corporation shall be signed by one or more officer, employee, or agent of the
corporation in such manner as shall from time to time be determined by the Board
of Directors.
SECTION 4. Deposits. All funds of the corporation not otherwise employed
shall be deposits form time to time to the credit of the corporation in any of
its duly authorized depositories as the Board of Directors may select.
SECTION 5. Contracts with Directors and Officers. To the fullest extent
authorized by and in conformance with Washington law, the corporation may enter
into contracts with and otherwise transact business as vendor, purchaser, or
otherwise, with its directors, officers, employees and shareholders and with
corporations, associations, firms, and entities in which they are or may become
interested as directors, officers, shareholders, or otherwise, as freely as
though such interest did not exist, except that no loans shall be made by the
corporation secured by its shares. In the absence of fraud, the fact that any
director, officer, employee, shareholder, or any corporation, association, firm
or other entity of which any director, officer, employee or shareholder is
interested, is in any way interested in any transaction or contract shall not
make the transaction or contract void or voidable, or require the director,
officer, employee or shareholder to account to this corporation for any profits
therefrom if the transaction or contract is or shall be authorized, ratified, or
approved by (i) the vote of a majority of the Board of Directors excluding any
interested director or directors, (ii) the written consent of the holders of a
majority of the shares entitled to vote, or (iii) a general resolution approving
the acts of the directors and officers adopted at a shareholders meeting by vote
of the holders of the majority of the shares entitled to vote. All loans to
officers and directors shall be subject to Federal and state laws and
regulations. Nothing herein contained shall create or imply any liability in the
circumstances above described or prevent the authorization, ratification or
approval of such transactions or contracts in any other manner.
SECTION 6. Shares of Another Corporation. Shares of another corporation
held by this corporation may be voted by the president or any vice president, or
by proxy appointment form by either of them, unless the directors by resolution
shall designate some other person to vote the shares.
ARTICLE VII
Certificates for Shares and Their Transfer
SECTION 1. Certificates for Shares. Certificates representing shares of
capital stock of the corporation shall be in such form as shall be determined by
the Board of Directors. Such certificates shall be signed by the chief executive
officer or by any other officer of the corporation authorized by the Board of
Directors, attested by the secretary or an assistant secretary, and sealed with
the corporate seal or a facsimile thereof. The signatures of such officers upon
a certificate may be facsimiles if the certificate is manually signed on behalf
of a transfer agent or a registrar, other than the corporation itself or one of
its employees. Each certificate for shares of capital stock shall
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<PAGE>
be consecutively numbered or otherwise identified. The name and address of the
person to whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation. All
certificates surrendered to the corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for the like
number of shares has been surrendered and canceled, except that in case of a
lost or destroyed certificate, a new certificate may be issued therefor upon
such terms and indemnity to the corporation as the Board of Directors may
prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of capital stock of the
corporation shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney authorized by power of attorney duly executed and filed with the
corporation. Such transfer shall be made only on surrender for cancellation of
the certificate for such shares. The person in whose name of shares of capital
stock stand on the books of the corporation shall be deemed by the corporation
to be the owner thereof for all purposes.
SECTION 3. Certification of Beneficial Ownership. The Board of Directors
may adopt by resolution a procedure whereby a shareholder of the bank may
certify in writing to the corporation that all or a portion of the shares
registered in the name of such shareholder are held for the account of a
specified person or persons. Upon receipt by the corporation of a certification
complying with such procedure, the persons specified in the certification shall
be deemed, for the purpose or purposes set forth in the certification, to be the
holders of record of the number os shares specified in place of the shareholder
making the certification.
SECTION 4. Lost Certificates. The board of directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
ARTICLE VIII
Fiscal Year; Annual Audit
The fiscal year of the corporation shall end on the last day of March of
each year. The corporation shall be subject to an annual audit as of the end of
its fiscal year by the independent public accountants appointed by and
responsible to the Board of Directors.
ARTICLE IX
Dividends
Subject to the terms of the corporation's Articles of Incorporation and the
laws of the State of Washington, the Board of Directors may, from time to time,
declare, and the corporation may pay, dividends upon its outstanding shares of
capital stock.
ARTICLE X
Corporate Seal
The corporation need not have a corporate seal. If the directors adopt a
corporate seal, the seal of the corporation shall be circular in form and
consist of the name of the corporation, the state and year of incorporation, and
the words "Corporate Seal."
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ARTICLE XI
Amendments
In accordance with the corporation's Articles of Incorporation, these
bylaws may be repealed, altered, amended or rescinded by the shareholders of the
corporation only by vote of not less than 80% of the outstanding shares of
capital stock of the corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
shareholders called for that purpose (provided that notice of such proposed
repeal, alteration, amendment or rescission is included in the notice of such
meeting). In addition, the board of directors may repeal, alter, amend or
rescind these bylaws by vote of two-thirds of the board of directors at a legal
meeting held in accordance with the provisions of these bylaws.
* * *
Adopted this ____ day of _______________ 1997.
9
EXHIBIT 4
Form of Certificate for Common Stock
<PAGE>
RIVERVIEW BANCORP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF WASHINGTON
COMMON STOCK CUSIP
See Reverse For
Certain Definitions
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE,
OF
Riverview Bancorp, Inc., a stock corporation incorporated under the laws of the
State of Washington. The shares represented by this Certificate are transferable
only on the stock transfer books of the Corporation by the holder of record
hereof or by his duly authorized attorney or legal representative upon the
surrender of this Certificate properly endorsed. Such shares are
non-withdrawable and not insurable. Such shares are not insured by the Federal
government. The Articles and shares represented hereby are issued and shall be
held subject to all provisions of the Articles of Incorporation and Bylaws of
the Corporation and any amendments thereto (copies of which are on file with the
Transfer Agent), to all of which provisions the holder by acceptance hereof,
assents.
IN WITNESS WHEREOF, Riverview Bancorp, Inc. has caused this Certificate to
be executed by the facsimile signatures of its duly authorized officers and has
caused a facsimile of its corporate seal to be hereunto affixed.
CORPORATE SECRETARY PRESIDENT
TRANSFER AGENT
[SEAL]
<PAGE>
Riverview Bancorp, Inc.
The shares represented by this Certificate are issued subject to all the
provisions of the Articles of Incorporation and Bylaws of Riverview Bancorp,
Inc. ("Corporation") as from time to time amended (copies of which are on file
with the Transfer Agent and at the principal executive offices of the
Corporation).
The shares represented by this Certificate are subject to a limitation
contained in the Articles of Incorporation to the effect that in no event shall
any record owner of any outstanding common stock which is beneficially owned,
directly or indirectly, by a person who beneficially owns in excess of 10% of
the outstanding shares of common stock (the "Limit") be entitled or permitted to
vote in respect of the shares held in excess of the Limit, unless a majority of
the whole Board of Directors, as defined, shall have by resolution granted in
advance such entitlement or permission.
The Board of Directors of the Corporation is authorized by resolution(s),
from time to time adopted, to provide for the issuance of preferred stock in
series and to fix and state the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. The
Corporation will furnish to any shareholder upon request and without charge a
full description of each class of stock and any series thereof.
The shares represented by this Certificate may not be cumulatively voted on
any matter. The affirmative vote of the holders of at least 80% of the voting
stock of the Corporation, voting together as a single class, shall be required
to approve certain business combinations and other transactions, pursuant to the
Articles of Incorporation, or to amend certain provisions of the Articles of
Incorporation.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as through they were written out in full
according to applicable laws or regulations.
TEN COM -as tenants in common
TEN ENT -as tenants by the entireties
JT TEN -as joint tenants with right of survivorship and
not as tenants in common
UNIF GIFT MIN ACT -_______Custodian _______ under Uniform Gifts
(Cust) (Minor)
to Minors Act _________
(State)
Additional abbreviations may also be used though not in the above list
For value received, ___________________________________________ hereby
sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
________________________________________________________________________________
________________________________________________________________________________
Please print or typewrite name and address, including postal zip code,
of assignee
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
shares of the Common Stock evidenced by this Certificate, and do hereby
irrevocably constitute and appoint ___________________________________________
Attorney, to transfer the said shares on the books of the within named
Corporation, with full power of substitution.
Dated _________________
_____________________________________
Signature
_____________________________________
Signature
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
Certificate in every particular,
without alteration or enlargement or
any change whatever.
EXHIBIT 5
Opinion of Breyer & Aguggia Regarding
Legality of Securities Registered
<PAGE>
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
Telephone (202) 737-7900
Breyer & Aguggia Facsimile (202) 737-7979
================================================================================
June 27, 1997
Board of Directors
Riverview Bancorp, Inc.
700 N.E. Fourth Avenue
Camas, Washington 98607
RE: Riverview Bancorp, Inc.
Registration Statement on Form S-1
-----------------------------------
To the Board of Directors:
You have requested our opinion as special counsel for Riverview Bancorp,
Inc., a Washington corporation, in connection with the above-referenced
registration statement filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended.
In rendering this opinion, we understand that the common stock of Riverview
Bancorp, Inc. will be offered and sold in the manner described in the
Prospectus, which is part of the Registration Statement. We have examined such
records and documents and made such examination as we have deemed relevant in
connection with this opinion.
Based upon the foregoing, it is our opinion that the shares of common stock
of Riverview Bancorp, Inc. will upon issuance be legally issued, fully paid and
nonassessable.
This opinion is furnished for use as an exhibit to the Registration
Statement. We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "LEGAL AND
TAX OPINIONS."
Sincerely,
/s/ Breyer & Aguggia
BREYER & AGUGGIA
Washington, D.C.
EXHIBIT 8.1
Form of Federal Tax Opinion of Breyer & Aguggia
<PAGE>
__________, 1997
Boards of Directors
Riverview Savings Bank, FSB
Riverview Bancorp, Inc.
700 N.E. Fourth Avenue
Camas, Washington 98607
Gentlemen:
In accordance with your request, set forth herein is our opinion relating
to the federal income tax consequences of the two integrated transactions
described herein. Capitalized terms used herein which are not expressly defined
herein shall have the meaning ascribed to them in the Plan of Conversion and
Agreement and Plan of Reorganization (the "Plan").
The Proposed Transactions
Based upon our review of the Plan, we understand that the relevant facts
are as follows.
In October 1993, Riverview Savings Bank, FSB, a federally-chartered mutual
savings bank (the "Savings Bank"), reorganized into the mutual holding company
form of organization. To accomplish this transaction, the Savings Bank organized
a federally-chartered, stock savings bank as a wholly-owned subsidiary (the
"Stock Savings Bank"). The Savings Bank then transferred substantially all of
its assets and liabilities to the Stock Savings Bank in exchange for all of the
outstanding shares of the common stock of the Stock Savings Bank ("Stock Savings
Bank Common Stock"), and reorganized itself into a federally-chartered mutual
holding company known as Riverview, M.H.C. (the "MHC"). In connection with the
foregoing transaction, the Stock Savings Bank simultaneously sold 600,000 shares
of Stock Savings Bank Common Stock to depositors of the Stock Savings Bank,
employee stock benefit plans of the Stock Savings Bank, directors, officers and
employees of the Stock Savings Bank and members of the general public. As of the
date hereof, the MHC and the other stockholders ("Public Stockholders") own an
aggregate of ____% and ____%, respectively, of the outstanding Stock Savings
Bank Common Stock.
The reorganization of Savings Bank into the mutual holding company form of
organization, and the sale of Stock Savings Bank Common Stock are sometimes
hereinafter collectively referred to as the "MHC Transaction."
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Boards of Directors
_______, 1997
Page 2
At the present time, two transactions are being undertaken. The first
transaction, which is sometimes referred to herein as "Merger 1," is the
conversion of the MHC from the mutual form of organization to a federal interim
stock savings bank ("Interim") and the simultaneous merger of Interim with and
into the Stock Savings Bank. The second transaction, which is sometimes referred
to herein as "Merger 2," is the acquisition of the Stock Savings Bank by
Riverview Bancorp, Inc. ("the Holding Company"), a newly organized Washington
corporation, by means of the merger of the Stock Savings Bank with a federal
interim stock savings institutions (the "Interim Stock Savings Bank"), which
will be organized as a wholly-owned subsidiary of the Holding Company. Merger 1
and Merger 2 are sometimes collectively referred to herein as the "Conversion
and Reorganization."
Merger 1 and Merger 2 are being accomplished pursuant to the Plan. The Plan
complies in all material respects with the provisions of Subpart A of 12 C.F.R.
Part 563b, the Office of Thrift Supervision ("OTS") regulations governing the
conversion of mutual institutions to stock form. The Plan also complies in all
material respects with the provisions of 12 C.F.R. Section 575.12(a), governing
the conversion of mutual holding companies to stock form. Because the proposed
transaction involves two mergers, the Plan also includes two related plans of
merger with language that complies in all material respects with 12 C.F.R.
Section 552.13, governing mergers involving federal stock associations.
In Merger 1, a liquidation account is being established by the Stock
Savings Bank for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. Pursuant to Section XIV of the Plan, the initial
balance of the liquidation account will equal the amount of any dividends waived
by the MHC plus the greater of (1) $______________________, which is equal to
100% of the retained earnings of Savings Bank as of _________________, 1993, the
date of the latest statement of financial condition contained in the final
offering circular utilized in the formation of the MHC, or (2) ____% of the
Stock Savings Bank's total stockholders' equity as reflected in its latest
statement of financial condition contained in the final Prospectus to be
utilized in the Conversion and Reorganization. The $__________________ is the
amount that the liquidation account would have been if the MHC Transaction had
been a standard conversion not involving a mutual holding company.
Under the above formula, the initial balance of the liquidation account
will be at least $_________________. At March 31, 1997, the total stockholders'
equity of the Stock Savings Bank amounted to $25 million, of which ____% equaled
$________________.
Upon consummation of Merger 1, the shares of Stock Savings Bank Common
Stock held by the MHC will be canceled.
Upon consummation of Merger 2 (the "Effective Date"), all of the then
outstanding shares of Stock Savings Bank Common Stock held by the Public
Stockholders will be converted into and become shares of common stock of the
Holding Company ("Holding Company Common
<PAGE>
Boards of Directors
_______, 1997
Page 3
Stock") at the Exchange Ratio (the "Exchange Shares"). The common stock of the
Interim Stock Savings Bank owned by the Holding Company prior to Merger 2 will
be converted into and become shares of common stock of the Stock Savings Bank on
the Effective Date. The Holding Company Common Stock held by the Stock Savings
Bank immediately prior to Merger 2 will be canceled on the Effective Date.
Immediately following Merger 2, Holding Company Common Stock will be sold
pursuant to the Conversion Offerings. The stockholders of the Holding Company
will be the Public Stockholders, plus those persons who purchase Holding Company
Common Stock in the Conversion Offerings. Nontransferable rights to subscribe
for Holding Company Common Stock will be granted to eligible depositors and
other persons in the priorities set forth in the Plan (the "Subscription
Rights").
Upon the Effective Date, Interim Stock Savings Bank will be merged with and
into the Stock Savings Bank and Interim Stock Savings Bank will cease to exist
as a legal entity. As a result, the Holding Company will be a publicly held
corporation, will register the Holding Company Common Stock under Section 12(g)
of the Securities Exchange Act of 1934, as amended, and will become subject to
the rules and regulations thereunder and file periodic reports and proxy
statements with the SEC. The Stock Savings Bank will become a wholly owned
subsidiary of the Holding Company and will continue to carry on its business and
activities as conducted immediately prior to Merger 2.
Analysis
Section 368(a)(1)(A) of the Code defines the term "reorganization" to
include a "statutory merger or consolidation" of corporations such as Merger 1
and Merger 2. Section 368(a)(2)(E) of the Code provides that a transaction
otherwise qualifying as a merger under Section 368(a)(1)(A), such as Merger 2,
will not be disqualified by reason of the fact that common stock of a
corporation (referred to in the Code as the "controlling corporation")(i.e., the
Holding Company) which before the merger was in control of the merged
corporation is used in the transaction if:
(i) after the transaction, the corporation surviving the merger (i.e.,
Stock Savings Bank) holds substantially all of its properties and the
properties of the merged corporation (i.e., Interim Stock Savings
Bank) (other than common stock of the controlling corporation (i.e.,
the Holding Company) distributed in the transaction; and
(ii) in the transaction, former stockholders of the surviving corporation
(i.e., the Public Stockholders) exchanged, for an amount of voting
common stock of the controlling corporation, an amount of common stock
in the surviving corporation which constitutes control of such
corporation.
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Boards of Directors
_______, 1997
Page 4
Section 1.368-2(b)(1) of the Treasury Regulations provides that, in
order to qualify as a reorganization under Section 368(a)(1)(A), a transaction
must be a merger or consolidation effected pursuant to the corporate laws of the
United States or a state. The Plan provides that Mergers 1 and 2 will be
accomplished in accordance with applicable federal law.
Treasury Regulations and case law require that, in addition to the
existence of statutory authority for a merger, certain other conditions must be
satisfied in order to qualify a proposed transaction as a reorganization within
the meaning of Section 368(a)(1)(A) of the Code. The "business purpose test,"
which requires a proposed merger to have a bona fide business purpose, must be
satisfied. See 26 C.F.R. Section 1.368-1(c). We believe that Merger 1 and Merger
2 satisfy the business purpose test for the reasons set forth in the Prospectus
under the caption "The Conversion and Reorganization - Purposes of the
Conversion and Reorganization." The "continuity of business enterprise test"
requires an acquiring corporation either to continue an acquired corporation's
historic business or use a significant portion of its historic assets in a
business. See 26 C.F.R. Section 1.368-1(d). We believe that the continuity of
business enterprise test is satisfied since the Plan provides that the business
conducted by Stock Savings Bank prior to Merger 1 and Merger 2 will be
unaffected by the transactions.
The "continuity of interest doctrine" requires that the continuing common
stock interest of the former owners of an acquired corporation, considered in
the aggregate, represent a "substantial part" of the value of their former
interest, and provide them with a "definite and substantial interest" in the
affairs of the acquiring corporation or a corporation in control of the
acquiring corporation. Paulsen v. Comm'r., 469 U.S. 131 (1985); Helvering v.
Minnesota Tea Co., 296 U.S. 378 (1935); John A Nelson Co. v. Helvering, 296 U.S.
374 (1935); Southwest Natural Gas Co. v. Comm'r., 189 F.2d 332 (5th Cir. 1951),
cert. denied, 342 U.S. 860 (1951). We believe that Merger 1 satisfies the
continuity of interest doctrine based upon a series of private letter rulings
issued by the IRS in substantially identical transactions as the Conversion and
Reorganization and based upon the information set forth in the Registration
Statement. See e.g., PLRs 9510044 and 9437020. Specifically, the IRS has ruled
in substantially identical transactions that:
(1) The exchange of the members' equity interests in the MHC for interests
in a liquidation account established at the Stock Savings Bank in
Merger 1 will not violate the continuity of interest requirement of
Section 1.368-1(b) of the Treasury Regulations.
(2) Interests in the liquidation account established at the Stock Savings
Bank, and the shares of Stock Savings Bank Common Stock held by the
MHC prior to consummation of Merger 1, will be disregarded for the
purpose of determining whether an amount of stock in the Stock Savings
Bank which constitutes "control" of such corporation was acquired by
the Holding Company in exchange for shares of Holding Company Common
Stock pursuant to Merger 2.
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Boards of Directors
_______, 1997
Page 5
(3) The exchange of shares of Holding Company Common Stock for the shares
of the Stock Savings Bank Common Stock in Merger 2, following
consummation of Merger 1, will satisfy the continuity of interest
requirement of Section 1.368- 1(b) of the Treasury Regulations in
Merger 2.
Accordingly, we also believe that Merger 2 satisfies the continuity of
interest doctrine because those persons who are the Stock Savings Bank's
stockholders following Merger 1 will receive only Exchange Shares for their
shares of Stock Savings Bank Common Stock. In addition, we believe other
applicable requirements of the Treasury Regulations and case law which are
preconditions to qualification of Merger 1 and Merger 2 as a reorganization,
within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code, are
satisfied on the basis of the information contained in the Plan and the
Prospectus.
Section 354 of the Code provides that no gain or loss shall be recognized
by stockholders who exchange common stock in a corporation, such as the Stock
Savings Bank, which is a party to a reorganization, solely for common stock in
another corporation which is a party to the reorganization, such as the Holding
Company. Section 356 of the Code provides that stockholders shall recognize gain
to the extent they receive money as part of a reorganization, such as cash
received in lieu of fractional shares. Section 358 of the Code provides that,
with certain adjustments for money received in reorganization, such as cash
received in lieu of fractional shares, a stockholders' basis in the common stock
he or she receives in a reorganization shall equal the basis of the common stock
which he or she surrendered, he or she shall be deemed to have held the property
received for the same period as the property exchange, provided that the
property exchanged had been held as a capital asset.
Section 361 of the Code provides that no gain or loss shall be recognized
to a corporation such as the Interim Stock Savings Bank which is a party to a
reorganization on any transfer of property pursuant to a plan of reorganization
such as the Plan. Section 362 of the Code provides that if property is acquired
by a corporation such as the Stock Savings Bank in connection with a
reorganization, then the basis of such property shall be the same as it would be
in the hands of the transferor immediately prior to the transfer. Section
1223(s) of the Code states that where a corporation such as the Stock Savings
Bank will have a carryover basis in property received from another corporation
which is a party to a reorganization, the holding period of such assets in the
hands of the acquiring corporation shall include the period for which such
assets were held by the transferor, provided that the property transferred had
been held as a capital asset. Section 1032 of the Code states that no gain or
loss shall be recognized to a corporation, such as the Holding Company of the
receipt of property in exchange for common stock.
<PAGE>
Boards of Directors
_______, 1997
Page 6
Opinions
In connection with the opinions expressed herein below, we have relied upon
the assumption that the representations required for advance rulings outlined in
Rev. Proc. 86-42, 1986-2 C.B. 722, are true and correct as it applies to the
Conversion and Reorganization.
Based on the foregoing assumptions and the description of Merger 1 and
Merger 2, the representations which have been made to us by management of the
Stock Savings Bank and the Holding Company, and subject to the qualifications
and limitations set forth in this letter, we are of the opinion that, if Merger
1 were to be consummated as described above as of the date hereof, then:
1. Merger 1 qualifies as a reorganization within the meaning of Section
368(a)(1)(A) of the Code.
2. No gain or loss will be recognized by the Stock Savings Bank upon the
receipt of the assets of the MHC in Merger 1.
In addition, we are of the opinion that, if Merger 2 were to be consummated
as described above as of the date hereof, then:
1. Merger 2 qualifies as a reorganization within the meaning of Section
368(a)(1)(A) of the Code. Pursuant to Section 368(a)(2)(E) of the
Code, Merger 2 is not disqualified from qualifying as a reorganization
within the meaning of Section 368(a)(1)(A) because Holding Company
Common Stock will be conveyed to the Stock Savings Bank's stockholders
in exchange for their Stock Savings Bank Common Stock.
2. No gain or loss will be recognized by the Interim Stock Savings Bank
upon the transfer of its assets to the Stock Savings Bank.
3. No gain or loss will be recognized by the Stock Savings Bank upon the
receipt of the assets of Interim Stock Savings Bank.
4. No gain or loss will be recognized by the Holding Company on Stock
Savings Bank upon the exchange of Exchange Shares for Stock Savings
Bank Common Stock.
5. No gain or loss will be recognized by the Public Stockholders upon the
receipt of the Exchange Shares solely in exchange for their shares of
Stock Savings Bank Common Stock.
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Boards of Directors
_______, 1997
Page 7
6. The basis of the Exchange Shares to be received by the Public
Stockholders will be the same as the basis of the Stock Savings Bank
Common Stock surrendered in exchange therefor, before giving effect to
any payment of cash in lieu of fractional shares.
7. The holding period of the Exchange Shares to be received by the Public
Stockholders will include the holding period of the Stock Savings Bank
Common Stock, provided that the Stock Savings Bank Common Stock was
held as a capital asset on the date of the exchange.
8. No gain or loss will be recognized by the Holding Company upon the
sale of Holding Company Common Stock in the Conversion Offerings.
9. Eligible Account Holders and Supplemental Eligible Accounts Holders
will realize gain, if any, upon the constructive issuance to them of
Subscription Rights and/or interest in the liquidation account of
Stock Savings Bank. Any gain resulting therefrom will be recognized,
but only in an amount not in excess of the fair market value of the
liquidation accounts and/or Subscription Rights received. The
liquidation account will have normal, if any, fair market value. Based
solely on the accuracy of the conclusion reached by RP Financial, L.C.
in its written opinion to Stock Savings Bank dated ____________, 1997
(the "Appraiser's Opinion") that the Subscription Rights have no value
at the time of distribution or exercise and our reliance thereon, no
gain or loss will be required to be recognized by depositors upon
receipt or distribution of Subscription Rights. (Section 1001 of the
Code.) See Paulsen v. Commissioner, 469 U.S. 131,139 (1985).
Based solely on the accuracy of the conclusions reached in the
Appraiser's Opinion, and our reliance thereon, we are of the opinion
that: (a) no taxable income will be recognized by the borrowers,
directors, officers and employees of Stock Savings Bank upon the
distribution to them of Subscription Rights or upon the exercise or
lapse of the Subscription Rights to acquire Holding Company Common
Stock at fair market value; (b) no taxable income will be realized by
the depositors of Stock Savings Bank as result of the exercise of
lapse of the Subscription Rights to purchase Holding Company Common
Stock at fair market value. Rev. Rul. 56-572, 1956-2 C.B. 182; and (c)
no taxable income will be realized by Stock Savings Bank, or Holding
Company upon the issuance or distribution of Subscription Rights to
depositors of Stock Savings Bank to purchase shares of Holding Company
Common Stock at fair market value. (Section 311 of the Code.)
Notwithstanding the Appraiser's Opinion, if the Subscription Rights
are subsequently found to have a fair market value, income may be
recognized by
<PAGE>
Boards of Directors
_______, 1997
Page 8
various recipients of the Subscription Rights (in certain cases,
whether or not the rights are exercised) and Holding Company and/or
Stock Savings Bank may be taxable on the distribution of the
Subscription Rights. (Section 311 of the Code.) In this regard, the
Subscription Rights may be taxed partially or entirely at ordinary
income tax rates.
10. The tax basis to the holders of the Holding Company Common Stock
purchased in the Conversion Offerings will be the amount paid
therefor, and the holding period for such shares will begin on the
date of consummation of the Conversion Offerings if purchased through
the exercise of Subscription Rights. If purchased in the Community
Offering or Syndicated Community Offering, the holding period for such
stock will begin on the day after the date of purchase.
Our opinion is limited to the federal income tax matters described above
and does not address any other federal income tax considerations or any federal,
state, local, foreign or other tax considerations. If any of the information
upon which we have relied is incorrect, or if changes in the relevant facts
occur after the date hereof, our opinion could be affected thereby. Moreover,
our opinion is based on the case law, Code, Treasury Regulations thereunder and
Internal Revenue Service rulings as they now exist. These authorities are all
subject to change, and such change may be made with retroactive effect. We can
give no assurance that, after such change, our opinion would not be different.
We undertake no responsibility to update or supplement our opinion. This opinion
is not binding on the Internal Revenue Service and there can be no assurance,
and none is hereby given, that the Internal Revenue Service will not take a
position contrary to one or more of the positions reflected in the foregoing
opinion, or that our opinion will be upheld by the courts if challenged by the
Internal Revenue Service.
We hereby consent to the filing of this opinion with the OTS as an exhibit
to the Application H-(e)1-S filed by the Holding Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
We also hereby consent to the filing of this opinion with the SEC and the
OTS as exhibits to the Registration Statement and the Savings Bank's Application
for Conversion on Form AC ("Form AC"), respectively, and the reference on our
firm in the Prospectus, which is a part of both the Registration Statement and
the Form AC, under the headings "THE CONVERSION AND REORGANIZATION -- Effects of
Conversion and Reorganization on Depositors and Borrowers of the Savings Bank --
Tax Effects" and "LEGAL AND TAX OPINIONS."
Very truly yours,
BREYER & AGUGGIA
EXHIBIT 8.3
Opinion of RP Financial, LC.
as to the Value of Subscription Rights
<PAGE>
EXHIBIT 10.1
Proposed Form of Employment Agreement For Senior Officers
<PAGE>
FORM OF EMPLOYMENT AGREEMENT FOR SENIOR OFFICERS
THIS AGREEMENT is made effective as of ________________, 1997, by and
between RIVERVIEW SAVINGS BANK, FSB (the "BANK"), RIVERVIEW BANCORP, INC. (the
"COMPANY"), a Washington corporation; and _______________________ ("EXECUTIVE").
WHEREAS, EXECUTIVE serves in a position of substantial responsibility;
WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE for
the period provided in this Agreement; and
WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, EXECUTIVE agrees to serve as
_____________________________________ of the BANK. During said period, EXECUTIVE
also agrees to serve, if elected, as an officer and director of the COMPANY or
any subsidiary or affiliate of the COMPANY or the BANK. Executive shall render
administrative and management duties to the BANK such as are customarily
performed by persons situated in a similar executive capacity.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of thirty-six (36) full
calendar months thereafter. Commencing on the first anniversary date, and
continuing at each anniversary date thereafter, the Board of Directors of the
BANK (the "Board") may extend the Agreement for an additional year. Prior to the
extension of the Agreement as provided herein, the Board of Directors of the
BANK will conduct a formal performance evaluation of EXECUTIVE for purposes of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
EXECUTIVE may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not
<PAGE>
present any conflict of interest with the BANK, or materially affect the
performance of EXECUTIVE's duties pursuant to this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Sections 1 and 2. The BANK
shall pay EXECUTIVE as compensation a salary of $__________________ per year
("Base Salary"). Such Base Salary shall be payable in accordance with the
customary payroll practices of the BANK. During the period of this Agreement,
EXECUTIVE's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by a Committee designated by the Board, and the Board
may increase EXECUTIVE's Base Salary. In addition to the Base Salary provided in
this Section 3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with
all such other benefits as are provided uniformly to permanent full-time
employees of the BANK.
(b) The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the BANK will not, without
EXECUTIVE's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect EXECUTIVE's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), EXECUTIVE will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the BANK in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
EXECUTIVE will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the BANK, in which EXECUTIVE is
eligible to participate. Nothing paid to EXECUTIVE under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
EXECUTIVE is entitled under this Agreement, except as provided under Section
5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable travel
and other obligations under this Agreement and may provide such additional
compensation in such form and such amounts as the Board may from time to time
determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time
2
<PAGE>
employment hereunder for any reason other than a Change in Control, as defined
in Section 5(a) hereof; disability, as defined in Section 6(a) hereof; death;
retirement, as defined in Section 7 hereof; or Termination for Cause, as defined
in Section 8 hereof; (ii) EXECUTIVE's resignation from the BANK's employ, upon
(A) unless consented to by EXECUTIVE, a material change in EXECUTIVE's function,
duties, or responsibilities, which change would cause EXECUTIVE's position to
become one of lesser responsibility, importance, or scope from the position and
attributes thereof described in Sections 1 and 2, above (any such material
change shall be deemed a continuing breach of this Agreement), (B) a relocation
of EXECUTIVE's principal place of employment by more than 35 miles from its
location at the effective date of this Agreement, or a material reduction in the
benefits and perquisites to EXECUTIVE from those being provided as of the
effective date of this Agreement, (C) the liquidation or dissolution of the
BANK, or (D) any breach of this Agreement by the BANK. Upon the occurrence of
any event described in clauses (A), (B), (C) or (D), above, EXECUTIVE shall have
the right to elect to terminate his employment under this Agreement by
resignation upon not less than sixty (60) days prior written notice given within
a reasonable period of time not to exceed, except in case of a continuing
breach, four (4) calendar months after the event giving rise to said right to
elect.
(b) Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to EXECUTIVE for the remaining
term of the Agreement, including Base Salary, bonuses, and any other cash or
deferred compensation paid or to be paid (including the value of employer
contributions that would have been made on EXECUTIVE's behalf over the remaining
term of the agreement to any tax-qualified retirement plan sponsored by the BANK
as of the Date of Termination), to EXECUTIVE for the term of the Agreement
provided, however, that if the BANK is not in compliance with its minimum
capital requirements or if such payments would cause the BANK's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the BANK is in capital compliance. All payments made pursuant
to this Section 4(b) shall be paid in substantially equal monthly installments
over the remaining term of this Agreement following EXECUTIVE's termination;
provided, however, that if the remaining term of the Agreement is less than one
(1) year (determined as of EXECUTIVE's Date of Termination), such payments and
benefits shall be paid to EXECUTIVE in a lump sum within thirty (30) days of the
Date of Termination.
(c) Upon the occurrence of an Event of Termination, the BANK will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the BANK for EXECUTIVE prior to his
termination. Such coverage shall cease upon the expiration of the remaining term
of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall have
occurred a Change in Control of the COMPANY or the BANK. For purposes of this
Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) an offeror
3
<PAGE>
other than the Corporation purchases shares of the stock of the Corporation or
the Bank pursuant to a tender or exchange offer for such shares, (b) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or
becomes the beneficial owner, directly or indirectly, of securities of the
Corporation or the Bank representing twenty-five percent (25%) or more of the
combined voting power of the Corporation's or the Bank's then outstanding
securities, (c) the membership of the board of directors of the Corporation or
the Bank changes as the result of a contested election, such that individuals
who were directors at the beginning of any twenty-four (24) month period
(whether commencing before or after the date of adoption of this Agreement) do
not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Corporation or the Bank approve a merger, consolidation,
sale or disposition of all or substantially all of the Corporation's or the
Bank's assets, or a plan of partial or complete liquidation.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control has occurred, EXECUTIVE shall be
entitled to the benefits provided in paragraphs (c), (d) and (e) of this Section
5 upon his subsequent involuntary termination following the effective date of a
Change in Control (or voluntary termination within twelve (12) months of the
effective date of a Change in Control following any demotion, loss of title,
office or significant authority, reduction in his annual compensation or
benefits (other than a reduction affecting the BANK's personnel generally), or
relocation of his principal place of employment by more than thirty-five (35)
miles from its location immediately prior to the Change in Control), unless such
termination is because of his death, retirement as provided in Section 7,
termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of ss.280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. In addition,
EXECUTIVE shall be entitled to receive the value of employer contributions that
would have been made on EXECUTIVE's behalf over the remaining term of the
agreement to any tax-qualified retirement plan sponsored by the BANK as of the
Date of Termination. Such coverage and payments shall cease upon the expiration
of thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, EXECUTIVE shall be entitled
to receive benefits due him under, or contributed by the COMPANY or the BANK on
his behalf,
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pursuant to any retirement, incentive, profit sharing, bonus, performance,
disability or other employee benefit plan maintained by the BANK or the COMPANY
on EXECUTIVE's behalf to the extent that such benefits are not otherwise paid to
EXECUTIVE upon a Change in Control.
(f) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under ss.280G of the
Code, then, at the election of EXECUTIVE, (i) such payments or benefits shall be
payable or provided to EXECUTIVE over the minimum period necessary to reduce the
present value of such payments or benefits to an amount which is one dollar
($1.00) less than three (3) times EXECUTIVE's "base amount" under ss.280G(b)(3)
of the Code or (ii) the payments or benefits to be provided under this Section 5
shall be reduced to the extent necessary to avoid treatment as an excess
parachute payment with the allocation of the reduction among such payments and
benefits to be determined by EXECUTIVE.
6. TERMINATION FOR DISABILITY.
(a) If EXECUTIVE shall become disabled as defined in the BANK's then
current disability plan (or, if no such plan is then in effect, if EXECUTIVE is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code as determined by a physician designated by the Board), the BANK may
terminate EXECUTIVE's employment for "Disability."
(b) Upon EXECUTIVE's termination of employment for Disability, the BANK
will pay EXECUTIVE, as disability pay, a bi-weekly payment equal to
three-quarters (3/4) of EXECUTIVE's bi-weekly rate of Base Salary on the
effective date of such termination. These disability payments shall commence on
the effective date of EXECUTIVE's termination and will end on the earlier of (i)
the date EXECUTIVE returns to the full-time employment of the BANK in the same
capacity as he was employed prior to his termination for Disability and pursuant
to an employment agreement between EXECUTIVE and the BANK; (ii) EXECUTIVE's
full-time employment by another employer; (iii) EXECUTIVE attaining the age of
sixty-five (65); or (iv) EXECUTIVE's death; or (v) the expiration of the term of
this Agreement. The disability pay shall be reduced by the amount, if any, paid
to EXECUTIVE under any plan of the BANK providing disability benefits to
EXECUTIVE.
(c) The BANK will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
BANK for EXECUTIVE prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date EXECUTIVE returns to the
full-time employment of the BANK, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between EXECUTIVE and the BANK; (ii) EXECUTIVE's full-time employment by another
employer; (iii) EXECUTIVE's attaining the age of sixty-five (65); (iv)
EXECUTIVE's death; or (v) the expiration of the term of this Agreement.
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(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to EXECUTIVE during any period during which
EXECUTIVE is incapable of performing his duties hereunder by reason of temporary
disability.
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION
Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to him.
Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be entitled to
all benefits under any retirement plan of the BANK or the COMPANY and other
plans to which EXECUTIVE is a party. Upon the death of EXECUTIVE during the term
of this Agreement, the BANK shall pay to EXECUTIVE's estate the compensation due
to EXECUTIVE through the last day of the calendar month in which his death
occurred. Upon the voluntary resignation of EXECUTIVE during the term of this
Agreement, the BANK shall pay to EXECUTIVE the compensation due to EXECUTIVE
through his Date of Termination.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
For purposes of this Section, no act, or the failure to act, on EXECUTIVE's part
shall be "willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that the action or omission was in the best interest
of the BANK or its affiliates. Notwithstanding the foregoing, EXECUTIVE shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths (3/4) of the members of the
Board at a meeting of the Board called and held for that purpose (after
reasonable notice to EXECUTIVE and an opportunity for him, together with
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, EXECUTIVE was guilty of conduct justifying termination for Cause
and specifying the reasons thereof. EXECUTIVE shall not have the right to
receive compensation or other benefits for any period after termination for
Cause. Any stock options granted to EXECUTIVE under any stock option plan or any
unvested awards granted under any other stock benefit plan of the BANK, the
COMPANY, or any subsidiary or affiliate thereof, shall become null and void
effective upon EXECUTIVE's receipt of Notice of Termination for Cause pursuant
to Section 10 hereof, and shall not be exercisable by EXECUTIVE at any time
subsequent to such Termination for Cause.
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<PAGE>
9. REQUIRED PROVISIONS.
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 8 herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while its
contract obligations were suspended and (ii) reinstate (in whole or in part) any
of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the FDIA),
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement shall be terminated (except to the
extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK): (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation or the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the BANK under the authority
contained in Section 13(c) of the FDIA or (ii) by the Director, or his designee
at the time the Director or such designee approves a supervisory merger to
resolve problems related to operation of the BANK or when the BANK is determined
by the Director to be in an unsafe or unsound condition. Any rights of the
parties that have already vested, however, shall not be affected by such action.
(f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any regulations promulgated thereunder.
7
<PAGE>
10. NOTICE.
(a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision so
indicated.
(b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, other than Termination for Cause,
the date specified in the Notice of Termination . In the event of EXECUTIVE's
Termination for Cause, the Date of Termination shall be the same as the date of
the Notice of Termination.
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the BANK will continue to pay
EXECUTIVE his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.
11. NON-COMPETITION.
(a) Upon any termination of EXECUTIVE's employment hereunder pursuant to an
Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not to
compete with the BANK and/or the COMPANY for a period of one (1) year following
such termination in any city, town or county in which the BANK and/or the
COMPANY has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
EXECUTIVE agrees that during such period and within said cities, towns and
counties, EXECUTIVE shall not work for or advise, consult or otherwise serve
with, directly or
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<PAGE>
indirectly, any entity whose business materially competes with the depository,
lending or other business activities of the BANK and/or the COMPANY. The parties
hereto, recognizing that irreparable injury will result to the BANK and/or the
COMPANY, its business and property in the event of EXECUTIVE's breach of this
Subsection 11(a) agree that in the event of any such breach by EXECUTIVE, the
BANK and/or the COMPANY will be entitled, in addition to any other remedies and
damages available, to an injunction to restrain the violation hereof by
EXECUTIVE, EXECUTIVE's partners, agents, servants, employers, employees and all
persons acting for or with EXECUTIVE. EXECUTIVE represents and admits that in
the event of the termination of his employment pursuant to Section 8 hereof,
EXECUTIVE's experience and capabilities are such that EXECUTIVE can obtain
employment in a business engaged in other lines and/or of a different nature
than the BANK and/or the COMPANY, and that the enforcement of a remedy by way of
injunction will not prevent EXECUTIVE from earning a livelihood. Nothing herein
will be construed as prohibiting the BANK and/or the COMPANY from pursuing any
other remedies available to the BANK and/or the COMPANY for such breach or
threatened breach, including the recovery of damages from EXECUTIVE.
(b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the BANK. EXECUTIVE will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, EXECUTIVE may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the BANK. In the
event of a breach or threatened breach by EXECUTIVE of the provisions of this
Section, the BANK will be entitled to an injunction restraining EXECUTIVE from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof, or from
rendering any services to any person, firm, corporation, other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting the BANK from
pursuing any other remedies available to the BANK for such breach or threatened
breach, including the recovery of damages from EXECUTIVE.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
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13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.
15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
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18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Washington,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, the provisions of such law or regulation shall prevail.
19. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within one
hundred (100) miles from the location of the BANK, in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that EXECUTIVE shall be entitled to seek specific performance of his right to be
paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
20. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if successful pursuant to a legal judgment,
arbitration or settlement.
21. INDEMNIFICATION.
The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest extent
permitted under law against all expenses and liabilities reasonably incurred by
him in connection with or arising out of any action, suit or proceeding in which
he may be involved by reason of his having been a director or officer of the
BANK (whether or not he continues to be a directors or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgment, court costs and attorneys' fees and
the cost of reasonable settlements.
22. SUCCESSOR TO THE BANK OR THE COMPANY.
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent that
the BANK or the COMPANY would be required to perform if no such succession or
assignment had taken place.
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IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the ____ day of _____________,
1997.
ATTEST: RIVERVIEW SAVINGS BANK, FSB
_______________________________ BY:_____________________________
[SEAL]
ATTEST: RIVERVIEW BANCORP, INC.
_______________________________ BY:_____________________________
[SEAL]
WITNESS:
_______________________________ _____________________________
EXECUTIVE
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EXHIBIT 10.2
Proposed Form of Severance Agreement for Key Officers
<PAGE>
FORM OF SEVERANCE AGREEMENT FOR KEY OFFICERS
This AGREEMENT is made effective as of ___________________, 1997 by and
between RIVERVIEW SAVINGS BANK, FSB (the "BANK"); RIVERVIEW BANCORP, INC.
("COMPANY"); and ________________ ("EXECUTIVE").
WHEREAS, the BANK recognizes the substantial contribution EXECUTIVE has
made to the BANK and wishes to protect his position therewith for the period
provided in this Agreement in the event of a Change in Control (as defined
herein); and
WHEREAS, EXECUTIVE serves in the position of ________________________,
positions of substantial responsibility;
NOW, THEREFORE, in consideration of the foregoing and upon the other terms
and conditions hereinafter provided, the parties hereto agree as follows:
1. Term Of Agreement
The term of this Agreement shall be deemed to have commenced as of the date
first above written and shall continue for a period of ____________________ (__)
full calendar months thereafter. Commencing on the first anniversary date of
this Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the BANK ("Board") may extend the Agreement for an additional year.
The Board will conduct a performance evaluation of EXECUTIVE for purposes of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting.
2. Payments To EXECUTIVE Upon Change In Control.
(a) Upon the occurrence of a Change in Control (as herein defined) followed
within twelve (12) months of the effective date of the Change in Control by the
voluntary or involuntary termination of EXECUTIVE's employment, other than for
Cause, as defined in Section 2(c) hereof, the provisions of Section 3 shall
apply. For purposes of this Agreement, "voluntary termination" shall be limited
to the circumstances in which EXECUTIVE elects to voluntarily terminate his
employment within twelve (12) months of the effective date of a Change in
Control following any demotion, loss of title, office or significant authority,
reduction in his annual compensation or benefits (other than a reduction
affecting the Bank's personnel generally), or relocation of his principal place
of employment by more than 35 miles from its location immediately prior to the
Change in Control.
(b) A "Change in Control" of the COMPANY or the BANK shall be deemed to
occur if and when (a) an offeror other than the Corporation purchases shares of
the stock of the Corporation or the Bank pursuant to a tender or exchange offer
for such shares, (b) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation or the Bank representing
twenty-five percent (25%) or more of the combined voting power of the
Corporation's or the Bank's then outstanding securities, (c) the membership of
the board of directors of the
<PAGE>
Corporation or the Bank changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four (24) month
period (whether commencing before or after the date of adoption of this
Agreement) do not constitute a majority of the Board at the end of such period,
or (d) shareholders of the Corporation or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Corporation's or the Bank's assets, or a plan of partial or complete
liquidation.
(c) EXECUTIVE shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of EXECUTIVE's intentional failure to
perform stated duties, personal dishonesty, incompetence, willful misconduct,
any breach of fiduciary duty involving personal profit, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses) or
final cease and desist order, or any material breach of any material provision
of this Agreement. In determining incompetence, the acts or omissions shall be
measured against standards generally prevailing in the savings institution
industry. Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to EXECUTIVE and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, EXECUTIVE was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after Termination for Cause.
3. Termination
(a) Upon the occurrence of a Change in Control, followed within twelve (12)
months of the effective date of a Change in Control by the voluntary or
involuntary termination of EXECUTIVE's employment other than Termination for
Cause, the BANK shall be obligated to pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay, a sum equal to _______________________ times
EXECUTIVE's "annual compensation" as defined herein. For purposes of this
Agreement, "annual compensation" shall mean and include all wages, salary,
bonus, and other compensation, if any, paid (including accrued amounts) by the
Company or the Bank as consideration for the Participant's service during the
twelve (12) month period ending on the last day of the month preceding the
effective date of a Change in Control, which is or would be includable in the
gross income of the Participant receiving the same for federal income tax
purposes. Such amount shall be paid to EXECUTIVE in a lump sum no later than
thirty (30) days after the date of his termination.
(b) Upon the occurrence of a Change in Control of the BANK followed within
twelve (12) months of the effective date of a Change in Control by EXECUTIVE's
voluntary or involuntary termination of employment, other than Termination for
Cause, the BANK shall cause to be continued life, medical, dental and disability
coverage substantially identical to the coverage
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maintained by the BANK for EXECUTIVE prior to his severance. Such coverage and
payments shall cease upon expiration of _______________________ (___) months
from the date of EXECUTIVE's termination.
(c) Notwithstanding the preceding paragraphs of this Section 3, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under ss.280G of the
Code, then, at the election of EXECUTIVE, (i) such payments or benefits shall be
payable or provided to EXECUTIVE over the minimum period necessary to reduce the
present value of such payments or benefits to an amount which is one dollar
($1.00) less than three (3) times EXECUTIVE's "base amount" under ss.280G(b)(3)
of the Code or (ii) the payments or benefits to be provided under this Section 3
shall be reduced to the extent necessary to avoid treatment as an excess
parachute payment with the allocation of the reduction among such payments and
benefits to be determined by EXECUTIVE.
(d) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any regulations promulgated thereunder.
4. Effect On Prior Agreements And Existing Benefit Plans
This Agreement contains the entire understanding between the parties hereto
and supersedes any prior agreement between the BANK and EXECUTIVE, except that
this Agreement shall not affect or operate to reduce any benefit or compensation
inuring to EXECUTIVE of a kind elsewhere provided. No provision of this
Agreement shall be interpreted to mean that EXECUTIVE is subject to receiving
fewer benefits than those available to him without reference to this Agreement.
5. No Attachment
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the COMPANY, the BANK and their respective successors and assigns.
6. Modification And Waiver
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
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(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by an estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
7. Required Provisions
(a) The BANK may terminate EXECUTIVE's employment at any time, but any
termination by the BANK, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 2(c) herein.
(b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the BANK's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the BANK may, in its
discretion, (i) pay EXECUTIVE all or part of the compensation withheld while its
contract obligations were suspended and (ii) reinstate (in whole or in part) any
of its obligations that were suspended.
(c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.
(d) If the BANK is in default (as defined in Section 3(x)(1) of the FDIA),
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the parties.
(e) All obligations under this Agreement may be terminated: (i) by the
Director of the Office of Thrift Supervision (the "Director") or his or her
designee at the time the Federal Deposit Insurance Corporation or the Resolution
Trust Corporation enters into an agreement to provide assistance to or on behalf
of the BANK under the authority contained in Section 13(c) of the FDIA and (ii)
by the Director, or his or her designee at the time the Director or such
designee approves a supervisory merger to resolve problems related to operation
of the BANK or when the BANK is determined by the Director to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
4
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8. Severability
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
9. Headings For Reference Only
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
10. Governing Law
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Washington, unless
preempted by Federal law as now or hereafter in effect. In the event that any
provision of this Agreement conflicts with 12 C.F.R. Section 563.39(b), the
latter provision shall prevail.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within fifty
(50) miles from the location of the BANK, in accordance with the rules of the
American Arbitration Association then in effect.
11. Source of Payments
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK. The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.
12. Payment Of Legal Fees
All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK if EXECUTIVE is successful on the merits pursuant to a
legal judgment, arbitration or settlement.
13. Successor To The BANK or the COMPANY
The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent that
the BANK or the COMPANY would be required to perform if no such succession or
assignment had taken place.
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14. Signatures
IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the ____ day of _____________,
1997.
ATTEST: RIVERVIEW SAVINGS BANK, FSB
_______________________________ BY:_____________________________
[SEAL]
ATTEST: RIVERVIEW BANCORP, INC.
_______________________________ BY:_____________________________
[SEAL]
WITNESS:
_______________________________ _____________________________
EXECUTIVE
6
EXHIBIT 10.3
Proposed Form of Employee Stock Ownership Plan
<PAGE>
RIVERVIEW SAVINGS BANK
EMPLOYEE STOCK OWNERSHIP PLAN
1997 Restatement
Effective January 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
INDEX OF TERMS............................................................. iv
ARTICLE I Background; Relevant Dates; Qualification
1.01 Effective Date; Plan Year;
Limitation Year; Valuation Dates.................... 2
1.02 Qualification....................................... 2
ARTICLE II Application to the Company and Affiliates
2.01 Eligible Employers.................................. 3
2.02 Service for Affiliates.............................. 3
2.03 Adoption Procedure.................................. 4
ARTICLE III Eligibility and Service
3.01 Conditions of Eligibility........................... 5
3.02 Service............................................. 5
3.03 Leaves of Absence................................... 7
3.04 Break in Service.................................... 8
ARTICLE IV Compensation; General Contribution Rules
4.01 Application of Provisions........................... 10
4.02 Compensation........................................ 10
4.03 Deductibility....................................... 12
4.04 Limit on Annual Additions........................... 12
4.05 Adjustments to Satisfy Limits....................... 14
ARTICLE V ESOP Contributions, Allocations, etc.
5.01 ESOP Contributions.................................. 16
5.02 Time of Payment..................................... 17
5.03 Leveraged ESOP Suspense Accounts.................... 17
5.04 Allocations From Leveraged ESOP Suspense Account.... 18
5.05 Treatment of Dividends.............................. 19
5.06 Limitations on Allocations of Special Assets........ 20
5.07 Limitation on Allocations to Highly
Compensated Participants.......................... 21
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ARTICLE VI Participants' Accounts
6.01 Participants' Accounts............................... 22
6.02 Valuations and Adjustments........................... 22
6.03 Rollovers............................................ 22
ARTICLE VII Retirements Benefits
7.01 Entitlement; Retirement Dates; Participation
After Mandatory Benefit Starting Date................ 23
7.02 Amount and Form of Benefit........................... 23
7.03 Application for Benefits; Time of Payment............ 24
7.04 Distribution Rules................................... 26
7.05 Distribution and Transfer of Company Stock........... 26
7.06 Right to Sell Distributed Shares..................... 26
7.07 Right of First Refusal............................... 28
ARTICLE VIII Benefits on Death or Disability
8.01 Benefits on Death.................................... 30
8.02 Benefits on Disability............................... 30
8.03 Designation of Beneficiary........................... 30
ARTICLE IX Benefits After Termination of Employment
9.01 Vesting.............................................. 33
9.02 Distributable Amount................................. 33
9.03 Payment of Benefits.................................. 33
9.04 Forfeiture of Unvested Amounts....................... 35
9.05 Restoration of Forfeited Amounts..................... 35
9.06 Vesting After Rehire................................. 36
ARTICLE X Plan Administration
10.01 Administrative Committee............................. 38
10.02 Company and Employer Functions....................... 39
10.03 Claims Procedure..................................... 39
10.04 Expenses............................................. 40
10.05 Indemnity and Bonding................................ 40
ARTICLE XI Investment of Trust Funds
11.01 Trust Funds.......................................... 41
11.02 ESOP Trust........................................... 41
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11.03 Voting Company Stock................................. 42
11.04 ESOP Loans........................................... 42
ARTICLE XII Amendment; Termination; Merger
12.01 Amendment............................................ 44
12.02 Termination.......................................... 44
12.03 Treatment of Employers............................... 45
12.04 Merger............................................... 45
ARTICLE XIII Miscellaneous Provisions
13.01 Information Furnished................................ 46
13.02 Applicable Law....................................... 46
13.03 Plan Binding on All Parties.......................... 46
13.04 Not A Contract of Employment......................... 46
13.05 Notices.............................................. 46
13.06 Benefits Not Assignable; Qualified Domestic
Relations Orders..................................... 46
13.07 Nondiscrimination.................................... 47
13.08 Nonreversion of Assets............................... 47
ARTICLE XIV Special Top-Heavy Plan Rules
14.01 General.............................................. 48
14.02 Vesting.............................................. 48
14.03 Minimum Contribution................................. 48
14.04 Definitions.......................................... 50
14.05 Special Rules........................................ 50
-iii-
<PAGE>
INDEX OF TERMS
Term Page
Absence because of Maternity or Paternity...................................8
Affiliate...................................................................3
Annual Addition............................................................13
Beneficiary................................................................30
Break in Service............................................................8
Break-in-Service Year.......................................................8
Committee..................................................................38
Company.....................................................................1
Company Stock..............................................................16
Compensation...............................................................10
Death Benefit..............................................................30
Deferred Retirement Date...................................................23
Disabled Participant.......................................................30
ESOP........................................................................1
ESOP Loan..................................................................42
ESOP Trust.................................................................41
Effective Date..............................................................2
Eligible Rollover Distribution.............................................25
Eligibility.................................................................5
Employer....................................................................3
Employment Year.............................................................6
Entry Date..................................................................5
Highly Compensated Employee................................................11
Hours of Service............................................................6
Key Employee...............................................................49
Leave of Absence............................................................7
Leveraged Company Stock....................................................42
Leveraged ESOP Suspense Account............................................17
Limitation Year.............................................................2
Non-Key Employee...........................................................50
Normal Retirement Date.....................................................23
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Participant.................................................................5
Plan........................................................................2
Plan Year...................................................................2
Publicly Traded............................................................26
Qualified Domestic Relations Order.........................................46
Qualified Employee..........................................................5
Service.....................................................................5
Service Year................................................................5
Top-Heavy Plan.............................................................50
Trustee....................................................................41
Valuation Date..............................................................2
Year of Service.............................................................6
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<PAGE>
RIVERVIEW SAVINGS BANK
EMPLOYEE STOCK OWNERSHIP PLAN
1997 Restatement
Effective January 1, 1997
Riverview Savings Bank
700 N.E. Fourth Avenue
Camas, Washington 98607 Company
ARTICLE I
Background; Relevant Dates; Qualification
In order to provide eligible employees with the benefits of having Company
stock held for them through a tax-qualified retirement plan, the Company has
adopted this amended and restated employee stock ownership plan ("ESOP" or
"Plan") effective January 1, 1997 to invest primarily in stock of the Company or
any Affiliate of the Company. The assets of the Plan will be held in the Company
Employee Stock Ownership Trust ("Trust"), which is intended to form a part of
the ESOP.
The Company previously maintained the Riverview Savings Bank Retirement,
Savings and Employee Stock Ownership Plan (the "Former Plan"), which consisted
of two separate plans (i) a 401(k) profit sharing plan and (ii) this employee
stock ownership plan. The Former Plan's 401(k) profit sharing plan and its
related trust were amended and restated effective __________, 1997 and are now
contained in a separate plan document. This amended and restated plan relates to
the separate plan within the Former Plan which consisted of an employee stock
ownership plan. The Former Plan's employee stock ownership trust remains in
effect with respect to this Plan.
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<PAGE>
1.01 Effective Date; Plan Year; Limitation Year; Valuation Dates
1.01-1 The Plan, as amended and restated, shall be effective January
1, 1997.
1.01-2 The Plan Year and Limitation Year shall be a calendar year
beginning January 1 and ending December 31 of each year.
1.01-3 The last day of each Plan Year shall be the regular valuation
date. Each other date on which the trust assets are valued at the request
of the Committee shall be a special valuation date.
1.02 Qualification
1.02-1 The Plan and the related Trust are maintained for the exclusive
benefit of eligible employees and are intended to comply with sections
401(a), 409, 4975 and 501 of the Internal Revenue Code and applicable
regulations. The Plan and the related Trust are intended to qualify as an
employee stock ownership plan and are designed to invest primarily in
shares of Company Stock.
1.02-2 If the Commissioner of Internal Revenue rules that this amended
restated ESOP and the related Trust do not qualify under sections 401(a),
409, 4975 and 501 of the Internal Revenue Code, the Company may, within the
time permitted by applicable law and regulations, amend them retroactively
to qualify or may rescind them.
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ARTICLE II
Application to the Company and Affiliates
2.01 Eligible Employers
2.01-1 The Company has adopted this Plan, and any affiliate approved
by the Company may adopt this Plan for its employees.
2.01-2 "Affiliate" means a corporation, person or other entity that is
a member, with an Employer, of any of the following:
(a) A controlled group under section 414(b) of the Internal Revenue
Code.
(b) A group of trades or businesses under common control under section
414(c) of the Internal Revenue Code.
(c) An affiliated service group under section 414(m) of the Internal
Revenue Code.
(d) A group of businesses required to be aggregated under section
414(o) of the Internal Revenue Code.
2.01-3 "Employer" means the Company and any adopting Affiliate. This
Plan is or may be a single plan maintained by multiple employers in which
all of the Plan assets are available to pay benefits for all participants.
2.02 Service for Affiliates
2.02-1 Transfer of employment from one Affiliate to another shall not
cause a termination or Break in Service.
2.02-2 Work for any Affiliate, whether or not an adopting Employer,
shall be counted as Service after the business becomes an Affiliate or an
earlier date fixed by the Company or in a statement of adoption.
2.02-3 If a business is acquired by the Company or an Affiliate and
not continued as a separate Affiliate, Service for employees of the
acquired business who become employees of the Company or the acquiring
Affiliate shall be counted from their date of hire by the Company or the
Affiliate. Past service for the acquired business may be counted from dates
fixed by the Company, filed with the Committee and announced to affected
employees.
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2.02-4 If an employee is employed by two or more Affiliates at the
same time, the following rules shall apply:
(a) Service for both Affiliates shall count to determine whether a
Service Year is a Year of Service.
(b) The employee shall receive an allocation of ESOP contributions, if
any, based on compensation from each Employer.
2.03 Adoption Procedure
An Affiliate may adopt this Plan by a written statement signed by the
Affiliate, approved by the Company and filed with the Trustee. The statement
shall include the effective date of adoption and any special provisions that are
to be applicable only to employees of the adopting Affiliate.
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<PAGE>
ARTICLE III
Eligibility and Service
3.01 Conditions of Eligibility
3.01-1 An Employee shall participate as follows:
(a) Participation shall start on the first Entry Date on or next after
the date the employee satisfies the following requirements:
(1) The employee is at least age 21.
(2) The employee has completed one Year of Service.
(3) The employee is a Qualified Employee.
(b) Participation in ESOP contributions and related forfeitures shall
continue as provided in 5.01-4.
3.01-2 "Qualified Employee" means any employee of Employer except the
following:
(a) An employee covered by a collective bargaining agreement that does
not provide for participation in this Plan.
(b) A leased employee treated as an employee for qualified retirement
plan purposes solely because of section 414(n) of the Internal Revenue
Code.
3.01-3 Every employee having an account under this Plan shall be known
as a participant. The Committee shall inform participants about the Plan
and furnish enrollment forms to provide such information as may be required
by the Committee and designating beneficiaries.
3.01-4 "Entry Date" means any January 1 or July 1, and any other date
designated by the Committee.
3.02 Service
3.02-1 "Service Year" means:
(a) For initial eligibility under 3.01 and Break in Service under 3.04
the initial Employment Year and each Plan Year starting with the Plan
Year in which the initial Employment Year ends.
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(b) For vesting under 9.01 - a Plan Year.
(c) For continued participation in contributions and forfeitures - a
Plan Year.
3.02-2 "Employment Year" means the 12-month period starting on the
date the employee first performs an Hour of Service.
3.02-3 "Year of Service" means the following:
(a) Each Service Year in which an employee has 1,000 or more Hours of
Service.
(b) A Plan Year in which a participant is employed at an annual rate
of 1,000 Hours of Service or more in part of the year shall be a Year
of Service for participation in contributions and forfeitures (not for
vesting) if one of the following applies:
(1) The partial year ends due to death or disability under 8.02
or retirement.
(2) The partial year begins on rehire as a Qualified Employee,
employment continues through the end of the Plan Year and either
a Break in Service has not occurred or pre-Break Service is
counted for participation under 3.04-2.
3.02-4 "Hours of Service" are the following:
(a) Hours, whether or not worked, for which an employee is directly or
indirectly paid or entitled to payment, subject to 3.02-5.
(b) Regularly scheduled hours during leave of absence under 3.03.
(c) Hours covered by a back pay award or agreement, regardless of
mitigation of damages, unless already counted.
(d) Hours paid for at or after termination of employment for vacation,
holiday, layoff, sick leave, disability or jury duty.
(e) Hours as a leased employee under 3.01-2(b) or in another
non-Qualified Employment capacity.
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<PAGE>
3.02-5 The following shall apply to Hours of Service for periods not
worked:
(a) Hours shall be computed and attributed to Service Years in
accordance with Department of Labor Regulations sections
2530.200b-2(b) and (c).
(b) Hours directly or indirectly paid for under 3.02-4(a) include
regularly scheduled hours during periods of disability when an
individual is receiving payments from Employer or from an insurance
company under a policy maintained by Employer or under workers'
compensation laws.
(c) Hours directly or indirectly paid for under 3.02-4(a) do not
include hours during periods in which an individual receives payments
only under unemployment compensation laws, regardless of the source of
payment.
(d) Hours counted under 3.02-4(d) do not include any hours on account
of severance pay, except severance pay measured by applying a rate of
pay to a period of time.
3.02-6 Hours of Service shall be credited as follows:
(a) For an hourly paid employee, actual hours shall be credited under
3.02-4.
(b) For a salaried employee, 45 hours shall be credited for each week
in which the employee has one or more hours as defined in 3.02-4.
3.03 Leaves of Absence
3.03-1 An employee on leave of absence shall be treated as employed
for all purposed under this plan.
3.03-2 Leave of absence under 3.03-1 shall mean the following:
(a) Leave of absence authorized by Employer if the employee returns or
retires within the time prescribed and otherwise fulfills all
conditions imposed by Employer.
(b) Leave of absence in accordance with Employer policies because of
illness or accident, including disability that does not result in
retirement, if the employee returns promptly after recovery.
(c) Periods of military service if the employee returns with
employment rights protected by law.
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<PAGE>
3.03-3 In authorizing leaves of absence, Employer shall treat all
employees who are similarly situated alike as much as possible.
3.03-4 If a person on leave fails to meet the conditions of the leave
or fails to return to work when required, the following shall apply:
(a) If the leave is not for military service and the failure is
because of death, disability under 8.02 or retirement, employment
shall be terminated and accrual of Service shall stop when the failure
occurs.
(b) If (a) does not apply, employment shall be terminated and accrual
of Service shall stop as of the date the leave began.
(c) No previous allocation of contributions or forfeitures shall be
changed.
(d) Any resulting forfeiture shall occur not earlier than the end of
the Plan Year in which the failure occurs.
3.04 Break in Service
3.04-1 A "Break in Service" shall be determined as follows:
(a) A Break in Service shall occur when an employee has five
consecutive Break- in-Service Years.
(b) Subject to (c), a "Break-in-Service Year" is a Service Year in
which an employee who has terminated employment has not more than 500
Hours of Service.
(c) Regardless of Hours of Service, an employee absent because of
maternity or paternity shall not, because of such absence, have a
Break-in-Service Year until the second Service Year ending after the
Service Year in which the absence begins, subject to (e) below.
(d) "Absence because of maternity or paternity" means an absence from
Service because of any of the following:
(1) Pregnancy.
(2) Birth of the employee's child or care following adoption or
placement for adoption.
(3) Adoption of the employee's child or care following adoption
or placement for adoption.
-8-
<PAGE>
(e) Paragraph (c) above shall not apply unless the employee furnishes
timely information satisfactory to the Committee to establish the
following:
(1) That the absence was due to maternity or paternity.
(2) The length of the absence.
3.04-2 Intermittent periods of Service shall be aggregated until there
is a Break in Service. If a Break in Service occurs and the employee has
later Service, Service before the Break shall be counted as follows:
(a) For vesting, pre-Break Service shall be counted if the tests in
(b) below are met and the employee has a Year of Service after the
Break.
(b) For eligibility for participation, pre-Break Service shall be
counted only if either of the following applies:
(1) The employee had a vested interest before the Break.
(2) The number of Years of Service before the Break is greater
than the number of consecutive Break-in-Service Years.
3.04-3 If an employee has a Break in Service, has later Service and
Service before the Break is counted, the employee shall participate
immediately on resumption of employment as a Qualified Employee. If Service
before the Break is not counted, the employee shall be treated as newly
hired and shall participate when eligible under 3.01. In that event, the
first day of Service after rehire shall start a new Employment Year.
3.04-4 If all or part of a participant's account is forfeited under
9.04 and the participant has a Break in Service, the forfeited amount shall
not be restored on rehire. If the participant resumes Service and Service
before the Break is counted for vesting, Service before and after the Break
shall be combined for vesting of future contributions.
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ARTICLE IV
Compensation; General Contribution Rules
4.01 Application of Provisions
The provisions of this Article shall apply to ESOP contributions under
Article V.
4.02 Compensation
4.02-1 "Compensation" means the following subject to the limits in
4.02-2:
(a) For deductibility under 4.03 and the annual addition limit under
4.04-2, compensation means taxable pay reportable on IRS Form W-2
under Internal Revenue Code section 3401(a), disregarding limitations
based on the nature or location of the employment.
(b) For determination of Highly Compensated Employees under 4.02-3,
compensation under (a) above shall be adjusted as follows:
(1) Amounts described in (c)(1) below shall be included.
(2) Amounts realized from the exercise of a non-qualified stock
option or from the lapse of restrictions on restricted property
shall be excluded.
(c) For the allocations of ESOP contributions under 5.01, compensation
means the amount under (a) above adjusted as follows:
(1) Elective contributions to any tax-qualified retirement plan
of one Employer and any amounts set aside by the participant from
otherwise taxable income under a welfare benefit plan qualified
under section 125 of the Internal Revenue Code shall be included.
(2) Any reimbursements or other expense allowances, fringe
benefits, moving expenses, severance or disability pay and other
deferred compensation and welfare benefits shall be excluded.
(3) Commissions in excess of $50,000 in any Plan Year shall be
excluded.
4.02-2 Compensation shall be limited as follows:
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(a) The limit of Compensation for any participant for a Plan Year or
Limitation Year shall be $160,000 or the dollar limitation then in
effect under section 401(a)(17) of the Internal Revenue Code and the
regulations thereunder for such Year.
(b) For Plan Years ending on or before December 31, 1996, compensation
of a Highly Compensated Employee as defined in section 4.02-3 who is a
5 percent owner or is one of the 10 highest paid employees shall be
aggregated with compensation from Employer to the spouse or a lineal
descendant under age 19 to determine the limit.
(c) If the limit is exceeded because of aggregation under (b) above,
pay counted for each aggregated employee shall be reduced pro rata to
stay within the limit.
(d) Compensation shall be based only upon amounts paid during the Plan
Year.
4.02-3 "Highly Compensated Employee" is defined in section 414(q) of
the Internal Revenue Code and related Treasury regulations. In determining
which employees are highly compensated employees, the following shall
apply:
(a) For Plan Years ending on or before December 31, 1996, a highly
compensated employee for a Plan Year is an employee who has performed
services for Employer during the Year or the prior Plan Year and is
one of the following:
(1) An owner of 5 percent or more of an Employer during either
Year.
(2) A person paid over $75,000 for either Year.
(3) A person paid over $50,000 for either Year who is among the
highest paid 20 percent of employees of Employer or either year,
aggregating employees of all statutory Affiliates under 2.01-2
and excluding employees to the extent provide by applicable
regulations.
(4) An officer of Employer paid over $45,000 for either Year, or
the highest paid officer if no officer is paid over $45,000 for a
Year. The number of officers counted in any Year under this
provision shall not exceed either 50 or the greater of 3 or 10
percent of the employees of Employer.
(5) A family member in either Year of a Highly Compensated
Employee who is a 5 percent owner or is one of the 10 highest
paid employees for the Year. For this purpose, family members
include the spouse, lineal
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ancestors, lineal descendants, and spouses of lineal descendants,
and spouses of lineal ancestors and descendants.
(b) For Plan Years beginning after December 31, 1996, "Highly
Compensated Employee" shall be defined as an employee who:
(1) was at any time a 5 percent owner of the Company, or
(2) for the preceding Plan Year, was paid over $80,000 (or such
greater amount authorized pursuant to Section 414(q) of the
Code), and, if elected by the Company, was in the top-paid group
of employees for such preceding Plan Year.
(c) The dollar amounts in (a) and (b) above shall be adjusted in
accordance with Treasury regulations for changes in cost of living.
(d) Former employees shall be taken into account in accordance with
applicable regulations.
(e) Pay for this purpose shall mean Compensation under 4.02-1(b).
4.03 Deductibility
4.03-1 Contributions are conditioned upon deductibility under section
404 of the Internal Revenue Code, except to the extent that deductible
contributions are not sufficient to pay principal and interest on an ESOP
loan. To the extent a deduction is disallowed, 13.08 shall apply.
4.03-2 If contributions would exceed the limit because of another
defined contribution plan, the amount recovered under 13.08 shall be
charged in the same order as reductions under 4.05-2.
4.04 Limit on Annual Additions
4.04-1 Benefits shall be limited in accordance with the following
rules as provided in Internal Revenue Code section 415 and related
regulations. The following provisions shall be applied in a manner
consistent with the Code and regulations, which are incorporated by this
reference.
4.04-2 No annual addition for any participant shall be more than the
lesser of the following:
(a) $30,000 plus any authorized cost-of-living adjustments.
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(b) 25 percent of the participant's Compensation, under 4.02-1(a), for
the Limitation Year.
4.04-3 "Annual addition" means for any Limitation Year the ESOP
contributions for the year, and any reallocated forfeitures, subject to the
following:
(a) Allocations to a participant's account of Leveraged Company Stock
shall be calculated with reference to Employer contributions used to
repay the loan.
(b) Contributions applied to pay interest on an ESOP Loan and
allocations of forfeitures of Leveraged Company Stock shall be
excluded if no more than one-third of all contributions for the year
under the ESOP are contributed for the benefit of highly compensated
employees.
(c) "Highly Compensated Employee" is defined in 4.02-3.
(d) "Leveraged Company Stock" is defined in 11.04.
4.04-4 In applying the limitations on annual additions the following
rules shall apply:
(a) All employers who are Affiliates under 2.01-2, with the
adjustments provided in Internal Revenue Code section 415(h), shall be
considered a single employer.
(b) The annual additions under all defined contribution plans shall be
combined.
(c) For purposes of 4.04-2(a) only, any contribution to a separate
account for post-retirement medical benefits under a funded welfare
benefit plan for a key employee shall be considered an annual addition
under a defined contribution plan.
4.04-5 If Employer maintains one or more other defined contribution
plans at any time, the annual additions under all such plans shall be
combined for purposed of applying the above limitations. For the purposes
of 4.04-2(a) only, any contribution to a separate account for
post-retirement medical benefits for a key employee under a funded welfare
benefit plan shall be considered such an annual addition.
4.04-6 If Employer maintains or has maintained one or more defined
benefit pension plans at any time, the following shall apply:
(a) The defined benefit fraction under all such plans combined with
the defined contribution fraction under this plan and all other
defined contribution plans currently or previously maintained by
Employer shall not exceed 1.0 for any individual.
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(b) The defined benefit fraction numerator shall be the participant's
projected annual normal retirement benefit. The denominator shall be
the maximum benefit under section 415(b)(1) of the Internal Revenue
Code, adjusted under (d).
(c) The defined contribution fraction numerator shall be the sum of
all annual additions for the participant since the plan's inception.
The denominator shall be the sum of the maximum annual additions under
section 415(c)(1) of the Internal Revenue Code for all years of the
participant's employment with Employer, adjusted under (d).
(d) The denominators under (b) and (c) shall be the smaller of the
maximum percentage limitation amount times 1.4 or the maximum dollar
limitation amount times 1.25.
4.05 Adjustments to Satisfy Limits
4.05-1 If an annual addition for a participant would exceed the limit
in 4.04, contributions and any forfeiture reallocations shall be reduced
pursuant to Treasury Regulation section 1.415-1(d) as necessary to
eliminate the excess as follows:
(a) The following amounts shall be reduced in the order stated:
(1) Forfeitures derived from ESOP contributions.
(2) ESOP contributions.
(b) If a participant's forfeiture allocations are reduced, the amount
shall be reallocated to other participants.
(c) Any forfeitures that cannot be reallocated under (b) because of
the annual addition limitation shall be placed in a suspense account
and allocated as soon as possible. No revaluation adjustment shall be
made in the suspense account for investment results. If the plan
terminates and there are unallocated forfeitures, they shall be
returned to Employer.
4.05-2 If an annual addition for a participant would exceed the limit
in 4.04 because of any other tax qualified retirement plan of an Employer,
the contributions, forfeiture reallocations and benefits under the plans
shall be reduced as necessary to meet the limit, in the following order:
(a) Benefits under any defined benefit pension plan.
(b) Annual additions under any defined contribution plan, other than
this plan.
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(c) Forfeitures allocated with ESOP contributions under this plan.
(d) ESOP contributions under this plan.
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ARTICLE V
ESOP Contributions, Allocations, Etc.
5.01 ESOP Contributions
5.01-1 Subject to 4.03 and 5.01-2, for each Plan Year each Employer
shall make contributions to the ESOP in such amounts, if any, as may be
fixed by the Company.
5.01-2 If the ESOP is funded with an ESOP Loan, the following shall
apply:
(a) The amount fixed by the Company under 5.01-1 shall be sufficient
to pay principal and interest currently due under any ESOP Loan.
(b) Each contribution shall be applied to repayment of the ESOP Loan,
to the extent directed by the Company, under the applicable Leveraged
ESOP Suspense Account procedures in accordance with 5.03.
5.01-3 ESOP contributions may be in cash or in Company stock, subject
to the following rules:
(a) Contributions to the extent necessary to pay principal and
interest on an ESOP Loan shall be in cash.
(b) "Company stock" means common stock of the Company or an Affiliate
of the Company that is readily tradable on an established securities
market or, if not readily tradable, common stock with the greatest
voting and dividend rights.
(c) Contributions in cash shall be applied as soon as reasonably
practicable to buy Company stock unless the Trustee determines that it
is not prudent to do so or the cash is applied to pay principal or
interest on an ESOP Loan.
5.01-4 ESOP contributions shall be combined with forfeitures with
respect to ESOP contributions and allocated as follows:
(a) Subject to 5.06, ESOP contributions shall be allocated to each
participant in the same ratio that the Compensation (as determined
under 4.02-1(c)) of such participant as a Qualified Employee bears to
the total Compensation (as determined under 4.02-1(c)) of all such
Participants for the Plan Year. For a new participant, the allocation
shall be based on such compensation for the part year after
participation starts.
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(b) A participant must have a Year of Service for the Plan Year under
3.02-3 and be employed as a Qualified Employee at the end of the Plan
Year unless (c) below applies.
(c) The Year of Service requirement in (b) and the Plan Year-end
requirement shall be waived for an otherwise eligible participant who
terminates employment during the year because of death, disability
under 8.02-2 or retirement.
5.01-5 This plan shall be a stock bonus plan with respect to ESOP
contributions.
5.01-6 No participant shall be required or permitted to make
contributions to the ESOP.
5.02 Time of Payment
Employer shall make payments to the Trustee to cover all ESOP contributions
as follows:
(a) Employer may pay such contributions in a lump sum or periodically
throughout and after the end of the year.
(b) All contributions for a Plan Year shall be paid within the regular
or extended time for filing Employer's federal income tax for the
year. Any amount paid after the end of the Plan Year or a tax year of
Employer shall be treated as paid on the last day of that Plan Year or
tax year if (i) the contribution is paid within the time specified in
this paragraph and (ii) the contribution is designated by Employer as
attributable to the Plan Year or tax.
5.03 Leveraged ESOP Suspense Accounts
5.03-1 The Committee shall maintain an unallocated Leveraged ESOP
Suspense Account for each ESOP Loan to purchase Leveraged Company Stock.
The following amounts shall be credited to the Leveraged ESOP Suspense
Account:
(a) Proceeds from the ESOP Loan.
(b) Leveraged Company Stock acquired with ESOP Loan proceeds.
(c) Amounts contributed by an Employer under the ESOP and designated
by the Employer for repayment of the ESOP Loan.
(d) Earnings received on assets held in the Leveraged ESOP Suspense
Account.
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5.03-2 A separate Leveraged ESOP Suspense Account shall be maintained
for each ESOP Loan.
5.04 Allocations from Leveraged ESOP Suspense Account
5.04-1 Subject to 5.04-5, the Committee shall determine in accordance
with applicable law and regulations the number of shares of Leveraged
Company Stock to be released from each Leveraged ESOP Suspense Account and
allocated to participants' accounts under either 5.04-2 or 5.04-3 as
follows:
(a) The number of shares released shall be based on ESOP contributions
designated for repayment of the ESOP Loan during the year.
(b) Allocations shall be made as of each Plan Year and each special
allocation date designated by the Committee during the Plan Year.
(c) Allocations shall be based on nonmonetary units corresponding with
the Trustee's cost for the stock being allocated.
(d) To the extent that earnings on Leveraged Company Stock need not be
retained in a suspense account to repay money borrowed, such earnings
shall be included in the allocations under (c).
5.04-2 Subject to 5.04-3, -4 and -5 and 5.06, the number of shares
released shall equal the number of shares held in the account multiplied by
the principal paid for the Plan Year on the loan to buy the stock and
divided by the outstanding principal at the start of the year.
5.04-3 Shares may be released under 5.04-2 only if the following
requirements are met:
(a) The ESOP Loan provides for payment each year of principal and
interest at a cumulative rate that is not less rapid at any time than
level annual payments of principal and interest over not more than 10
years.
(b) No payment is classified as interest except to the extent that it
would be treated as interest under standard loan amortization tables.
(c) The term of the loan, including renewals, extensions and
refinancings, does not exceed 10 years.
5.04-4 The alternative procedure described in this provision shall
apply if elected by the Committee or if the requirements of 5.04-3 are not
met. Subject to 5.04-5 and 5.05, under the alternative method, the number
of shares of leveraged Company stock to be released
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from a Leveraged ESOP Suspense Account shall be proportionate to the
principal and interest payments for the year on the ESOP Loan as follows:
(a) The proportion shall be the total principal and interest paid for
the Plan Year divided by the total principal and interest to be paid
on such borrowed funds as of the start of the Plan Year.
(b) If the interest under the loan is variable, future interest shall
be computed at the rate in effect on the regular valuation date.
5.04-5 If an ESOP Loan is repaid with the proceeds of another loan
(Replacement ESOP Loan), the following shall apply:
(a) The repayment shall not release shares for allocation to
participants.
(b) Shares released by the repayment shall be transferred to a
Leveraged ESOP Suspense Account for the Replacement ESOP Loan.
5.05 Treatment of Dividends
5.05-1 Subject to 5.05-2 and 5.05-4, dividends payable, if any, with
respect to Company Stock held by the Trust may be used, to the extent
permitted by law and the terms of such Company stock on which such
dividends are paid, for the purpose of repaying any ESOP Loan if such
dividends are paid with respect to Company Stock acquired with the proceeds
of such ESOP Loan. In the event that dividends paid with respect to
allocated Company Stock are used to repay an ESOP Loan, section
404(k)(2)(B) of the Internal Revenue Code shall apply.
5.05-2 Subject to 5.05-3, the Trustee shall, if directed to do so by
the Company, distribute cash dividends on allocated Company stock held by
the ESOP Trust as follows:
(a) Dividend distributions shall be paid in cash no later than 90 days
after the end of the Plan Year in which the dividends are received by
the ESOP Trust.
(b) The amount distributed shall be the amount otherwise allocable to
an individual's account for the dividend.
(c) Any Trust earnings on a dividend before distribution shall be
retained in the ESOP Trust and allocated to the ESOP account of the
participant or beneficiary affected.
(d) The Committee may allow participants to elect to have dividends
retained in their accounts rather than distributed currently in cash.
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5.05-3 Company direction under 5.05-2 must be in writing and may be
revoked at any time before the dividend is distributed.
5.05-4 Any dividends not used to repay an ESOP loan or distributed to
participants under 5.05-2 shall be retained in the Trust and allocated to
participants' accounts in the same manner as dividends distributed under
5.05-2.
5.06 Limitations on Allocations of Special Assets
5.06-1 Allocation of a special asset to restricted participants and
25-percent shareholders is subject to the limits set out below. For this
purpose, the following definitions apply:
(a) "Special asset" means any of the following:
(1) Company stock purchased in a qualifying sale.
(2) Any other asset attributable to Company stock in (1) or
allocable in place of Company stock in (1).
(b) "Qualifying sale" means any sale of Company stock to which
Internal Revenue Code section 1042 applies.
(c) "Restricted participant" means a person who sells Company stock to
the plan in a qualifying sale or the spouse, brother, sister, ancestor
or lineal descendant of such a person.
(d) "A 25-percent shareholder" means a person who, under applicable
regulations, owns directly or indirectly more than 25 percent of the
following:
(1) Any class of outstanding stock of the Company or any
corporation affiliated with the Company under section 409(1)(4)
of the Internal Revenue Code.
(2) The total value of any class of outstanding stock of the
Company or any affiliated corporation.
5.06-2 No special asset shall be allocated to a restricted participant
during the period that begins on the date Company stock is purchased in a
qualifying stock sale and ends on the later of the following:
(a) The tenth anniversary of the qualifying sale.
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(b) The date of the final allocation under 5.05 attributable to
payment of an ESOP Loan that financed the purchase of the Company
stock in the qualifying sale.
5.06-3 No special asset shall be allocated to a participant who is a
25-percent shareholder during the 12-month period ending on the date of a
qualifying sale or on the date on which the special asset is allocated. An
allocation of special assets to a participant who later becomes a
25-percent shareholder shall not be affected.
5.07 Limitation on Allocation to Highly Compensated Participants.
5.07-1 Notwithstanding the foregoing provisions of this ARTICLE if
more than one-third of ESOP Contributions for a Plan Year which are
deductible under section 404(a)(9) of the Internal Revenue Code would be
allocated, in the aggregate, to participants described in 4.02-3, then
allocations to such participants shall be reduced, pro rata, in an amount
sufficient to reduce the amounts allocated to such participants to an
amount not in excess of one-third of such deductible contributions with
respect to such Plan Year.
5.07-2 Any contributions which are prevented from being allocated due
to the restriction contained in 5.07-1 shall be allocated to other
participants as though the participants described in 4.02-3 did not
participate in the Plan.
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ARTICLE VI
Participants' Accounts
6.01 Participants' Accounts
6.01-1 The Committee shall keep such separate accounts for each
participant as may be necessary to administer the plan property.
6.01-2 The Committee shall furnish each participant annually a
statement showing contributions and forfeiture allocations, vesting and
account balances.
6.02 Valuations and Adjustments
6.02-1 As of each regular or special valuation date the Trustee shall
value the shares of Company stock and other assets at their fair market
values and report the values to the Committee.
6.02-2 Whenever the Committee finds it desirable to avoid a material
distorting in benefits or otherwise to administer the plan properly, it may
do either of the following:
(a) Call for a special valuation.
(b) Defer pending distributions until after the next regular valuation
date.
6.02-3 If Company stock is publicly traded, fair market value shall be
based on the market price for the stock unless otherwise required by law at
the time of the valuation. Company stock that is not publicly traded shall
be valued by a qualified, independent person or organization engaged by the
Committee.
6.03 Rollovers and Transfers
6.03-1 The Trustee shall not accept rollover contributions or
transfers from another tax-qualified retirement plan or Individual
Retirement Account (IRA) from any participant.
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ARTICLE VII
Retirement Benefits
7.01 Entitlement; Retirement Dates; Participation After Mandatory Benefit
Starting Date
7.01-1 A participant shall be entitled to benefits on retirement or on
reaching the mandatory benefit starting date under 7.04-2.
7.01-2 Retirement shall occur on termination of employment after
reaching one of the following dates:
(a) Normal retirement date, which shall be age 65.
(b) A deferred retirement date, which shall be any date after normal
retirement date.
7.01-3 Commencing benefits under 7.04-2 while still employed shall not
constitute retirement and shall not prevent continued participation in
contributions or forfeiture allocations. Contributions and forfeitures
allocated to the account of a participant after the distribution date under
7.04-2 shall be distributed as soon as practicable, and in any case not
later than the end of the calendar year after the calendar year that
includes the allocation date.
7.01-4 If a person entitled to receive benefits is rehired, the
benefit shall not be paid until later termination of employment except as
provided in 7.04-2. When the participant later terminates employment, the
amount of benefit shall be redetermined.
7.02 Amount and Form of Benefit
7.02-1 On retirement, the benefit shall be based on the participant's
entire account, which shall be 100 percent vested under 9.01-2, adjusted
through the last regular or special valuation on or before distribution or
segregation.
7.02-2 Benefits shall be paid as provided in 7.05-1.
7.02-3 If the participant's accounts are distributed before the final
allocation of contributions and forfeitures is made, a final payment shall
be made to the participant promptly after allocation.
7.02-4 If the participant dies before payment of the account, it shall
be paid as a death benefit under Article VIII.
7.03 Application for Benefits; Time of Payment
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7.03-1 A participant or beneficiary eligible for benefits must apply
in writing as follows:
(a) Application shall be made on a form prescribed by the Committee.
(b) Application shall be made after receipt of the explanation in
7.03-2(c) and within 90 days before benefits are to start.
7.03-2 Subject to 7.04, the participant shall specify the time of
payment of retirement benefits in the application and the following shall
apply:
(a) Subject to (b), the Committee shall direct the Trustee to pay
benefits as soon as reasonably possible after retirement whether or
not an application is filed.
(b) The Committee may delay payment of benefits for a reasonable
period necessary to process payment but in no event beyond 60 days
after the latest of the following:
(1) The end of the Plan Year of retirement.
(2) The date the amount is known.
(3) The date an application is received.
(c) The Committee shall, between 30 and 90 days before benefits are to
start, give the participant or other eligible recipient an explanation
of the following:
(1) The right to elect to have a direct rollover under 7.03-5.
(2) The applicability of mandatory withholding if a direct
rollover could be elected under 7.03-5 and is not.
(3) The applicable rules on rollover and taxation of the
distribution as required by section 402(f) of the Internal
Revenue Code.
(d) If a distribution of benefits is one to which sections 401(a)(11)
and 417 of the Internal Revenue Code do not apply, such distribution
may commence less than 30 days after the notice required under section
1.411(a)-11(c) of the Treasury Regulations is given, provided that:
(1) The Administrative Committee clearly informs the participant
that the participant has a right to a period of at least 30 days
after receiving the
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notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution
option), and
(2) the participant, after receiving the notice, affirmatively
elects a distribution.
7.03-3 Unless the participant consents to a later date, benefits under
the ESOP must be paid no later than the following:
(a) Leveraged Company Stock shall be distributed by the end of the
Plan Year in which the loan is repaid.
(b) All other distributions shall occur by the end of the Plan Year
that starts after the date of retirement or disability under 8.02.
7.03-4 If the date for payment has passed and the Committee has not
located the participant or beneficiary, the Committee shall distribute the
benefit into a custodial account in a financial institution in the name of
the participant or beneficiary. This shall constitute a lump sum
distribution to which regular tax reporting and withholding requirements
shall apply.
7.03-5 An eligible recipient of an eligible rollover distribution may
elect before a benefit is paid to have the benefit distributed by a direct
rollover into an eligible retirement plan and the following shall apply:
(a) The recipient shall furnish the Committee sufficient information
to identify the eligible retirement plan and the fund holds to whom
the transfer should be paid.
(b) "Eligible retirement plan" is defined in section 402(c)(8)(b) of
the Internal Revenue Code.
(c) "Eligible rollover distribution" is defined in section 402(c)(4)
of the Internal Revenue Code.
(d) "Eligible recipient" means the participant, the spouse of a
deceased participant and a spouse or former spouse who is an alternate
payee under a qualified domestic relations order.
7.04 Distribution Rules
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7.04-1 Benefits shall be paid in accordance with the following
overriding rules as provided in Treasury Regulation sections 1.401(a)(9)-1
and -2.
7.04-2 Payment to a participant shall be made not later than the later
to occur of the April 1 of the calendar year following the calendar year
(i) in which the participant reaches 70 1/2, or (ii) the calendar year in
which the Participant terminates employment. Clause (ii) shall not apply in
the case of a 5% of owner of an Employer (as defined in Section 416(i) of
the Code).
7.05 Distribution and Transfer of Company Stock
7.05-1 Distributions under the ESOP shall be paid as follows:
(a) Amounts in a participant's ESOP account that have been invested
pursuant to an election to diversify under 11.02-3 shall be paid in
cash.
(b) All amounts remaining in the participant's ESOP account shall be
paid in whole shares of Company stock and cash for fractional shares.
Company Stock distributed under the ESOP shall be transferable only in
conformance with applicable state and federal securities laws.
7.06 Right to Sell Distributed Shares
7.06-1 This section shall apply to Company stock that meets both of
the following criteria as defined by applicable regulations:
(a) It is not subject to a trading limitation.
(b) It is not publicly traded.
Company stock is publicly traded if it is listed on a national securities
exchange or quoted on a system sponsored by a national securities
association.
7.06-2 If non-Leveraged Company Stock subject to this section is
distributed from the trust, the holder may require the Company to buy the
stock, subject to 7.06-5, as follows:
(a) The stock must be held by a participant, former participant,
beneficiary of a participant, or a person who received the stock by
gift from or by reason of the death of such a participant or
beneficiary, or by the trustee or custodian of an individual
retirement account of any of the above persons.
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(b) The holder may elect within 60 days after it is distributed to
sell any of the stock to the Company.
(c) If the holder does not sell all the stock under (b), the Company
must notify the holder of the value of the stock as of the end of the
Plan Year in which the 60 day period ends. The holder may then elect
within 60 days after receipt of the notice to sell any of the
remaining stock to the Company.
(d) A sale under (b) or (c) shall be carried out under 7.06-4.
7.06-3 If Leveraged Company Stock subject to this section is
distributed from the trust, the holder may require the Company to buy any
of the stock, subject to 7.06-5, as follows:
(a) The stock must be held by a participant, former participant,
beneficiary of a participant, or a person who received the stock by
gift from or by reason of the death of such a participant or
beneficiary.
(b) An election to sell must be made by the holder within 15 months
after the stock is distributed excluding any period after distribution
during which the Company is not permitted by applicable federal or
state law to make such a purchase.
(c) Company stock that is publicly traded but ceases to be publicly
traded within 15 months shall remain subject to the election described
in 7.06-3(b) for the remainder of the 15 month period. The Company
must so notify the holder according to applicable regulations.
7.06-4 The price and terms of payment for a purchase under 7.06-2 and
7.06-3 shall be as follows:
(a) The purchase price shall be the fair market value as of the last
valuation date or the date of exercise as required by applicable
regulations. The fair market value shall be determined under 6.02-3.
(b) The Company may elect before any payment is due to pay in a lump
sum or installments, subject to the following:
(1) Installment payments may only be made on repurchase of
Company stock distributed by lump sum payment.
(2) Installment payments must be at least as fast as
substantially equal periodic payments, not less frequently than
annually, over a period not longer than five years.
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(3) Any amount payable in installments shall bear interest a
reasonable rate determined by the Company from the date of the
election to sell.
(4) Any amount payable in installments shall be secured by
Company stock or other assets with a value equal to at least 125%
of the outstanding balance.
(c) The lump sum or initial installment shall be paid within 30 days
after the election.
7.06-5 The Company may grant the Trustee an option to assume the
rights and obligations of the Company under 7.06-2 through 7.06-4 if the
Trustee has sufficient available assets to do so. The Company may grant
such option any time before the closing of the sale by delivering to the
Trustee a notice authorizing the Trustee to make the purchase. In that
event, the Trustee may elect to buy the stock and determine the method of
payment under 7.06-4, including interest rate under 7.06-4(b)(3).
7.06-6 Except as provided under this section and 11.05, Leveraged
Company Stock shall not be subject to a put, call, or other option, or
buy--sell or similar arrangement.
7.06-7 The right to sell under this section and the restriction in
7.06-6 shall continue even if the ESOP ceases to be a qualified employee
stock ownership plan.
7.07 Right of First Refusal
7.07-1 Shares of the Company Stock purchased with the proceeds of a
Loan and distributed by the Trustee may be subject to a "right of first
refusal." Such a "right" shall provide that prior to any subsequent
transfer, the shares must first be offered in writing to the Company at a
price equal to the greater of (i) the then fair market value of such shares
of Company Stock or (ii) the purchase price offered by a buyer, other than
the Company or Trustee, making a good faith (as determined by the
Committee) offer to purchase such shares of Company Stock.
7.07-2 The Trust or the Company, as the case may be, may accept the
offer as to part or all of the Company Stock at any time during a period
not exceeding 14 days after receipt of such offer by the Trust, on terms
and conditions no less favorable to the shareholder than those offered by
the independent third party buyer. Any installment purchase shall be made
pursuant to a note secured by the shares purchased and shall bear a
reasonable rate of interest as determined by the Committee. If the offer is
not accepted by the Trust, or the Company, or both, then the proposed
transfer may be completed within a reasonable prior following the end of
the 14 day period, but only upon terms and conditions of the third party
buyer's prior offer.
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7.07-3 Shares of Company Stock which are publicly traded with the
meaning of Code Section 409(h)(1)(B) at the time such right may otherwise
be exercised shall not be subject to this "right of first refusal."
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ARTICLE VIII
Benefits on Death or Disability
8.01 Benefits on Death
8.01-1 A deceased participant's vested account, adjusted to the last
regular or special valuation date before payment and including any final
allocation for the year of death, shall be paid as a death benefit to the
beneficiary in a lump sum in the form provided under 7.05- 1. If death
occurs before employment terminates, the participant's account shall be
fully vested.
8.01-2 The beneficiary shall make application under 8.03-1.
Distributions from the ESOP must begin no later than the end of the Plan
Year that starts after the date of death. If the Committee has not located
the beneficiary within the time for payment, 7.03-4 shall apply.
8.02 Benefits on Disability
8.02-1 A participant whose employment ends because of disability shall
be fully vested and entitled to receive benefits. Subject to 8.02-3,
benefits shall be paid by lump sum at a time fixed under 9.03.
8.02-2 A disabled participant is one who as a result of illness or
injury suffers from a condition of mind or body that permanently prevents
continued employment by Employer. The Committee shall determine the
existence of disability and may have the participant examined by and rely
on advice from a medical examiner satisfactory to the Committee in making
the determination.
8.02-3 If the participant notifies the Committee in writing that
benefits after disability would reduce any other disability benefit, the
Committee shall defer payment until the other benefit stops, subject to
7.04-2.
8.03 Designation of Beneficiary
8.03-1 Each participant shall file a designation of beneficiaries with
the Committee as follows:
(a) The designation shall name a specific beneficiary or
beneficiaries, which may include a trust. The beneficiaries may be
changed from time to time in accordance with these provisions.
(b) A designation by a married participant of a beneficiary other than
the surviving spouse shall not be effective unless either of the
following applies:
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(1) The spouse executes a consent in writing that acknowledges
the effect of the designation and is witnessed by a plan
representative or notary public.
(2) The consent cannot be obtained because the spouse cannot be
located or because of other circumstances provided by applicable
regulations.
(c) A determination in good faith by the Committee that (b) has been
complied with shall be final and binding if the Committee has
exercised proper fiduciary care in making the determination.
(d) The designated beneficiary or other recipient described below
shall receive any residual benefit after death of a participant.
8.03-2 If the participant's marital status changes after the
participant has designated a beneficiary, the following shall apply,
subject to any applicable qualified domestic relations order under 13.06-2:
(a) If the participant is married at death but was unmarried when the
designation was made, the designation shall be void unless the spouse
is the beneficiary or the spouse consents to the designation in the
manner prescribed above.
(b) If the participant is unmarried at death but was married when the
designation was made, the benefit shall be paid as though the former
spouse had predeceased the participant.
(c) If the participant was married when the designation was made and
is married to a different spouse at death, the designation shall be
void unless the new spouse consents to it in the manner prescribed
above.
8.03-3 If a beneficiary dies after the death of a participant but
before full distribution to the beneficiary, any benefit to which the
beneficiary was entitled shall be paid to the estate of the deceased
beneficiary.
8.03-4 The following shall apply to any part of a benefit as to which
no valid designation of beneficiary is in effect at death:
(a) Subject to (b) and (c) below, the benefit shall be paid in the
following order of priority:
(1) To the participant's surviving spouse.
(2) To the participant's surviving children in equal shares.
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(3) To the participant's estate.
(b) If a beneficiary designated under (a) above or under 8.03-1
disclaims a benefit, the benefit shall be paid as though that
beneficiary had predeceased the participant.
(c) If a surviving spouse entitled to a benefit consents after the
participant's death to the participant's designation of another
beneficiary, the other beneficiary shall be a validly designated
beneficiary as to such benefit.
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ARTICLE IX
Benefits After Termination of Employment
9.01 Vesting
9.01-1 Amounts attributable to ESOP contributions shall be vested as
follows based on Years of Service under 3.02 completed after age 18:
Years of Service
after age 18 Percent Vested
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
9.01-2 A participant who, while employed by Employer, dies, becomes
disabled under 8.02-2 or becomes eligible for retirement shall be fully
vested.
9.02 Distributable Amount
9.02-1 Absent rehire and restoration under 9.05, a participant whose
employment terminates for any reason, other than retirement, disability
under 8.02 or death, shall receive only the vested interest under 9.01.
9.02-2 The amount to be forfeited shall be determined under 9.04-2(a).
The amount of the vested benefit shall be based on the last regular or
special valuation on or before payment or segregation under 9.03.
9.03 Payment of benefits
9.03-1 Subject to 7.04-2, the participant shall specify the time of
payment of benefits after termination of employment in the application
under 7.03, and the following shall apply:
(a) Subject to (b) below, the Committee shall direct the Trustee to
pay benefits as soon as reasonably possible, whether or not an
application has been filed, if either of the following applies:
(1) The distributable amount has never been over $3,500.
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(2) The participant has reached normal retirement date.
(b) Subject to (e), the committee may delay payment for a reasonable
period necessary to process payment but in no event beyond 60 days
after the latest of the following:
(1) The end of the Plan Year of retirement.
(2) The date the amount is known.
(3) The date an application is received.
(c) The Committee shall, between 30 and 90 days before benefits are to
start, give the participant the explanation described in 7.03-2(c)
and, unless (a) above applies, an explanation of the right to defer
payment until normal retirement date.
(d) If a person entitled to receive benefits is rehired, the benefit
shall not be paid until later termination of employment, except as
provided in 7.04-2. When the participant later terminates, the amount
of the benefit shall be redetermined.
(e) Unless the participant consents to a later date, benefits under
the ESOP shall be paid no later than the following:
(1) Leveraged Company Stock shall be distributed by the end of
the Plan Year in which the loan is repaid.
(2) All other distributions shall occur by the close of the fifth
Plan Year after the Plan Year of termination of employment.
(3) In the case of a participant with a distributable amount
which has a value in excess of seven hundred ten thousand dollars
($710,000) (as adjusted pursuant to section 409(o)(2) of the
Internal Revenue Code) on the Valuation Date coincident with or
immediately preceding the date distributions are scheduled to
commence, all other distributions shall occur by the close of the
fifth Plan Year plus one additional year (but not more than five
additional years) for each one hundred forty thousand dollars
($140,000) (as adjusted pursuant to section 409(o)(2) of the
Internal Revenue Code) or fraction thereof by which the value of
such distributable amount exceeds seven hundred ten thousand
dollars ($710,000) (as adjusted pursuant to section 409(o)(2) of
the Internal Revenue Code).
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9.03-2 If the date for payment has passed and the Committee has not
located the participant or beneficiary, the Committee shall distribute the
benefit under the procedure described in 7.03-4.
9.04 Forfeiture of Unvested Amounts
9.04-1 The unvested portion of a participant's account(s) shall be
forfeited at the earlier of the following:
(a) The first Plan Year-end at which all of the following are true:
(1) The participant has no vested interest or the participant's
vested interest has been distributed fully.
(2) The participant is not then an employee.
(b) The end of the Plan Year in which the fifth Break-in-Service Year
ends.
9.04-2 Leveraged Company Stock in a participant's account(s) shall be
forfeited only after all other forfeitable assets in the participant's
account(s) have been forfeited.
9.04-3 Forfeitures shall be accounted for as follows:
(a) The amount forfeited shall be based on the balance in the account
as of the end of the Plan Year in which forfeiture occurs.
(b) Forfeitures shall first be applied to restore prior forfeitures
under 9.05.
(c) Any forfeitures remaining after application under (b) shall be
pooled and reallocated under 5.01-4 among all remaining participants,
regardless of their Employer.
9.04-4 A zero vested balance of a participant shall be treated as
though distributed immediately when employment terminates.
9.05 Restoration of Forfeited Amounts
9.05-1 If a participant is rehired before a Break in Service but after
a forfeiture under 9.04-1(a) because of an imputed or actual full
distribution, the forfeited amount, unadjusted for interim gains or losses,
shall be subject to restoration under 9.05-2. If the rehire occurs after a
Break in Service, no restoration shall occur.
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9.05-2 An amount subject to restoration under 9.05-1 shall be credited
to the participant's ESOP account, as of the first Plan-Year-end after
rehire and application under 9.05- 4. Amounts restored shall be derived
first from forfeitures for the Plan Year of restoration, and then from
additional Employer contributions.
9.05-3 A rehired participant under 9.05-1 may repay the full amount
previously distributed from a partially vested account as follows:
(a) Repayment shall be made in a single lump sum. Partial repayments
shall not be allowed.
(b) Repayment may only be made while the participant remains employed,
and may not be made later than five years after rehire.
(c) Repaid amounts shall be fully vested and shall be accounted for in
such manner as the Committee may decide.
(d) Repayment cannot be made in whole or in part by rollover from
another plan or IRA.
9.05-4 In order to receive a restoration under 9.05-1 and 9.05-2, a
participant must apply for restoration within the time allowed for
repayment under 9.05-3. Repayment shall not be required.
9.06 Vesting After Rehire
9.06-1 A participant who is fully vested on termination of employment
shall remain fully vested after rehire.
9.06-2 The following rules shall apply in determining future vested
balances for ESOP contributions after rehire of a participant who is not
fully vested:
(a) If the rehire occurs before a distribution is made from the
account or if the participant repays a distribution under 9.05-3 after
rehire, the following shall apply:
(1) Subject to (2), the participant's future vested balance shall
be determined by applying the vesting schedule to the entire
account.
(2) In no event shall the vested amount under (1) be less than
the amount repaid under 9.05-3, adjusted for investment results
after the date of repayment.
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(b) If the rehire occurs after a distribution is made from the account
and before the participant has five-year Break in Service and no
repayment is made under 10.05-3, the participant's future vested
balance shall be determined by taking the following steps:
(1) Multiplying the participant's vesting percentage times the
sum of the current account balance and the amount previously
distributed.
(2) Subtracting the amount previously distributed.
(c) If the rehire occurs after the participant has a Break in Service,
the following shall apply:
(1) Any unforfeited and undistributed residue of the
participant's partially vested account shall remain fully vested
and be carried as a separate account until the participant's
future contributions are fully vested.
(2) The forfeited balance shall not be restored.
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ARTICLE X
Plan Administration
10.01 Administrative Committee
10.01-1 The plan shall be administered by an Administrative Committee
of one or more persons appointed by the chief executive officer of the
Company, who may delegate that function. The Committee shall have a Chair
chosen from among its members and a secretary who need not be a member.
Minute shall be kept of all proceedings of the Committee. The Committee may
act at a meeting by a majority vote of a quorum present or without a
meeting by action recorded in a memorandum signed by a majority of all
members. A majority of members shall constitute a quorum.
10.01-2 Any member of the Committee may resign on 15 days' notice to
the chief executive officer. The Company or delegate may remove any
Committee member without having to show cause. All vacancies on the
Committee shall be filled as soon as reasonably practicable. Until a new
appointment is made, the remaining members of the Committee shall have
authority to act although less than a quorum.
10.01-3 The Committee shall keep records of all relevant data about
the rights of all persons under the plan. The Committee shall determine
eligibility to participate and the time, manner, amount and recipient of
payment of benefits and the Service of any employee and shall instruct the
Trustee on distributions. Any person have an interest under the plan may
consult the Committee at any reasonable time.
10.01-4 The Committee shall interpret the plan and the related trusts,
shall decide any questions about the rights of participants and their
beneficiaries and in general shall administer the plan and trusts. Any
decisions by the Committee shall be final and bind all parties. The
Committee shall have absolute discretion to carry out its responsibilities.
10.01-5 The Committee shall be the plan administrator under federal
laws and regulations applicable to plan administration and shall comply
with such laws and regulations. The Chair of the Committee shall be an
agent for service of process on the plan at the Company's address.
10.01-6 The Committee may delegate all or part of its administrative
duties to one or more agents and may retain advisors to assist it. The
Committee may consult with and rely upon the advice of counsel who may be
counsel for an Employer. The Committee shall appoint any independent public
accountant required for the plan.
10.01-7 Each Employer shall furnish the Committee any information
reasonably requested by it for plan administration.
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10.02 Company and Employer Functions
10.02-1 The power to appoint or remove any Committee member may be
exercised only by the chief executive officer under 10.01. The Company and
the Employers have no administrative authority or function and are not plan
fiduciaries.
10.02-2 Except as provided in 10.03-3, all Company or Employer
functions or responsibilities shall be exercised by the chief executive
officer of the Company, who may delegate all or any part of those
functions.
10.02-3 The power to fix ESOP contributions and amend or terminate the
plan or related trusts may be exercised only by the Board of Directors of
the Company, except as provided in 10.03-4.
10.02-4 The chief executive officer of the Company or a delegate may
amend the plan to make technical, administrative or editorial changes on
advice of counsel to comply with applicable law or to simplify or clarify
the plan.
10.02-5 The Board of Directors of the Company or an Employer shall
have no administrative or investment authority or function. Membership on
the Board shall not, by itself, cause a person to be considered a plan
fiduciary.
10.03 Claims Procedure
10.03-1 Any person claiming a benefit or requesting information, an
interpretation or a ruling under the plan shall present the request in
writing to the Committee Chair, who shall respond in writing as soon as
practicable.
10.03-2 If the claim or request is denied, the written notice of
denial shall state the following:
(a) The reasons for denial, with specific reference to the plan
provisions on which the denial is based.
(b) A description of any additional material or information required
for review of the claim and an explanation of why it is necessary.
(c) An explanation of the plan's claim review procedure.
10.03-3 The initial notice of denial shall normally be given within 90
days after receipt of the claim. If special circumstances require an
extension of time, the claimant shall be so notified and the time limit
shall be 180 days.
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10.03-4 Any person whose claim or request is denied or who has not
received a response within 30 days may request review by notice in writing
to the Committee chair. The original decision shall be reviewed by the
Committee who may, but shall not be required to, grant the claimant a
hearing. On review, whether or not there is a hearing, the claimant may
have representation, examine pertinent documents and submit issues and
comments in writing.
10.03-5 The decision on review shall normally be made within 60 days.
If an extension is required for a hearing or other special circumstances,
the claimant shall be so notified and the time limit shall be 120 days. The
decision shall be in writing and shall state the reasons and the relevant
plan provisions. All decisions on review shall be final and binding on all
parties concerned.
10.04 Expenses
10.04-1 Members of the Committees shall not be compensated for
services. The Committee shall be reimbursed for all expenses.
10.04-2 The Company may elect to pay any administrative fees or
expenses and may allocate the cost among the Employers. Otherwise the
expenses and fees shall be paid from the Plan assets. Expenses related to a
particular account or an investment fund may be charged directly to that
account or fund.
10.05 Indemnity and Bonding
10.05-1 The Company shall indemnify and defend any plan fiduciary who
is an officer, director or employee of Employer from any claim or liability
that arises from any action or inaction in connection with the plan subject
to the following rules:
(a) Coverage shall be limited to actions taken in good faith that the
fiduciary reasonably believed were not opposed to the best interest of
the plan.
(b) Negligence by the fiduciary shall be covered to the fullest extent
permitted by law.
(c) Coverage shall be reduced to the extent of any insurance coverage.
10.06-2 Plan fiduciaries shall be bonded to the extent required by
applicable law for the protection of plan assets.
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ARTICLE XI
Investment of Trust Funds
11.01 Trust Funds
11.01-1 Benefits under the ESOP shall be funded through the Riverview
Savings Bank Employee Stock Ownership Trust (the "ESOP Trust") established
by agreement between the Company and one or more Trustees who are referred
to herein as the "Trustee." The ESOP Trust shall be a separate trust for
assets contributed and held under the ESOP.
11.01-2 Contributions shall be paid to the Trustee who shall pool them
for investment. The Trustee shall have no regard for the separate interests
of individual participants and shall rely on the Committee in paying
benefits. The Trustee shall accept the sums paid and need not determine the
required amount of contributions or collect any contribution not
voluntarily paid.
11.02 ESOP Trust
11.02-1 Except as provided in 11.02-2, all assets attributable to ESOP
contributions or ESOP Loans shall be held in the ESOP Trust. The interest
of any lender under an ESOP Loan shall relate only to assets of the ESOP
Trust.
11.02-2 All assets of the ESOP Trust shall be invested primarily in
Company stock unless the Trustee determines that it is not prudent to do so
or 11.02-3 applies.
11.02-3 Participants may elect to diversify amounts allocated to their
ESOP accounts as follows:
(a) A diversification election shall be allowed in each of the six
Plan Years starting with the year in which the participant first
qualifies under (b).
(b) The diversification election shall only be available to a
participant who is age 55 or older with 10 or more years of
participation in the ESOP.
(c) During the first five years under (a), a participant may elect to
have up to 25 percent of the total of the amounts attributable to ESOP
contributions invested in investment funds under (e). During the sixth
year as provided under (a), the applicable percentage shall be 50
percent.
(d) Elections under (c) must be made no later than 90 days after the
end of the applicable Plan Year, and shall be carried out within 180
days after the end of the applicable Plan Year. Diversification
elections, once made become irrevocable following 90 days after the
applicable Plan Year.
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(e) Investment alternatives under (c) shall be specified by the
Committee and must include at least three options not inconsistent
with any applicable regulations under section 401(a)(28) of the
Internal Revenue Code.
11.03 Voting Company Stock
11.03-1 Participants shall be permitted in accordance with applicable
federal regulations to direct the manner of exercise of voting rights on
shares of Company stock including fractional shares allocated to any of
their accounts, as follows:
(a) Participants may direct the voting of shares on any matter on
which shareholders are entitled to vote. The Trustee shall follow the
Participant's directions unless the Trustee determines that it would
be inconsistent with its fiduciary duties to do so.
(b) The Company shall make available to the Committee to provide to
the Trustees and plan participants all notices and information
provided to its shareholders in connection with the exercise of their
voting rights.
(c) The Committee shall solicit directions from participants to vote
the shares of Company stock allocated to participants accounts in the
same manner as proxies are solicited generally from shareholders of
Company Stock.
(d) If a participant fails to give directions, such voting rights may
be exercised in the same manner as voting rights with respect to
unallocated shares as provided in 11.03-2.
(e) Except as required for trust administration or by law, individual
participant voting instructions shall be held by the Trustee in
confidence.
11.03-2 The Trustee shall vote all unallocated Company Stock held in
the Trust only as directed by the Committee, in the Committee's sole
discretion, after the Committee determines such action to be in the best
interests of participants and beneficiaries.
11.04 ESOP Loans
11.04-1 At the direction of the Committee, the Trustee may borrow
money (an "ESOP Loan") to buy Company stock ("Leveraged Company Stock"), or
to repay a prior ESOP Loan to buy such stock as follows:
(a) The ESOP Loan must be on terms permitted under and be subject to
the conditions of applicable law and regulations.
(b) The interest rate may not exceed a reasonable rate at t time the
loan is made.
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(c) On default, the value of trust assets transferred in satisfaction
for the loan shall not exceed the amount of the default. If the lender
is a disqualified person, the loan must provide that assets
transferred on default of the loan will not exceed the amount by which
the plan has failed to meet the payment schedule of the loan.
(d) The loan must be without recourse against the plan. The only trust
assets that may be used as security for the ESOP Loan are the
following:
(1) The Leveraged Company Stock purchased with ESOP Loan
proceeds.
(2) The Leveraged Company Stock purchased with the proceeds of a
prior ESOP Loan repaid with the proceeds of the current ESOP
Loan.
(e) The lender may not have a right to any assets held under the plan
other than the following:
(1) Collateral given for the loan under (d).
(2) ESOP contributions made in cash to repay the ESOP Loan.
(3) Earnings on the assets in (1) and (2) above.
(f) ESOP contributions (other than Company Stock) and income from such
contributions and from Leveraged Company Stock may be used to repay
the ESOP Loan, as directed by the Company. Unused amounts may be
carried over to a future year. No other amounts may be used to pay on
an ESOP Loan.
(g) The ESOP Loan must be primarily for the benefit of participants
and beneficiaries.
11.04-2 All assets acquired with the proceeds of an ESOP Loan shall be
held in a suspense account under 5.03 and allocated under 5.04.
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ARTICLE XII
Amendment; Termination; Merger
12.01 Amendment
12.01-1 The Company may amend this plan at any time by written
instrument as follows:
(a) No amendment shall revest any of the plan assets in any Employer
or otherwise modify the plan so that it would not be for the exclusive
benefit of eligible employees except as required or permitted by
applicable law and regulations.
(b) No amendment shall reduce any participant's accrued benefit, or
the vested percentage of that accrued benefit, as of the date the
amendment is adopted or is effective, whichever is later.
(c) No amendment shall increase the Years of Service required for
vesting without allowing each participant with at least three Years of
Service on the date the amendment is adopted a 60-day period to elect
in writing to the Committee to have the prior vesting schedule
continue to apply to future benefits under the plan. The 60-day
election period shall begin on the latest of the following:
(1) The date the amendment is adopted.
(2) The date the amendment is effective.
(3) The date the participant is provided written notice of the
amendment.
12.02 Termination
12.02-1 The Company may terminate this plan or discontinue
contributions at any time. In the event of any total or partial termination
or discontinuance, the accounts of all affected participants shall be fully
vested and nonforfeitable. The Company may request a ruling from the
Internal Revenue Service on the effect of termination on the qualification
of the plan.
12.02-2 If the Plan is terminated, or contributions permanent
discontinued, the Company, at its discretion, may (at that time or at any
later time) direct the Trustee to distribute the amounts in a participant's
Accounts in accordance with the distribution provisions of the Plan. If the
Company does not direct such distribution, each Participant's Account shall
be maintained until distributed in accordance with the provisions of the
Plan (determined without regard to this section) as though the Plan had not
been terminated or contributions discontinued.
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12.03 Treatment of Employers
12.03-1 All employees of all Employers, including the Company, shall
be treated as though employed by one Employer for purposes of determining
total or partial termination. For this purpose the plan shall be treated as
one plan and not as a collection of separate plans of the Employers. If
some or all of the employees of an Employer terminate employment, this
shall be viewed in the context of the whole plan to determine whether there
has been a partial termination and whether accelerated vesting is required.
12.03-2 An Employer may be excluded from the plan with respect to its
employees at any time by the Company. Such exclusion shall not
automatically constitute a termination or partial termination of the plan.
Employees of the excluded Affiliate shall be treated as having terminated
employment if the affiliate ceases to maintain its affiliated status.
Unless the Committee determines or the Internal Revenue Service rules that
the exclusion constitutes a partial termination of the plan, the rights of
the employees of the excluded Affiliate shall not become fully vested and
nonforfeitable as a result of the exclusion. If the excluded Affiliate
retain its affiliated status with the Company, its employees shall continue
to accrue Service for purpose of vesting, but shall not be eligible to
participate in contributions and forfeitures with respect to pay after the
effective date of the exclusion.
12.04 Merger
If this plan is merged or consolidated with or the assets or liabilities
are transferred to any other plan or trust, the benefit that each participant
would receive if the plan terminated just afterwards shall be at least as much
as if it terminated just before.
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ARTICLE XIII
Miscellaneous Provisions
13.01 Information Furnished
13.01-1 The Trustee may accept as correct and rely on any information
furnished by an Employer or the Committee. The Trustee and the Committee
may not demand an audit, investigation or disclosure of the records of
Employer.
13.02 Applicable Law
This Plan shall be construed according to the laws of Washington except as
preempted by federal law.
13.03 Plan Binding on All Parties
This plan shall be binding upon the heirs, personal representatives,
successors and assigns of all present and future parties.
13.04 Not a Contract of Employment
The plan shall not be a contract of employment between an Employer and any
employee, and no employee may object to amendment or termination of the plan.
The Plan shall not prevent any Employer from discharging any employee at any
time.
13.05 Notices
Except as otherwise required or permitted under this plan or applicable
law, any notice or direction under this plan shall be in writing and shall be
effective when actually delivered or transmitted electronically or when
deposited postpaid as first-class mail. Mail shall be directed to the address
stated in this plan or in a statement of adoption or to such other address as a
party may specify by notice to the other parties. Notice to the Committee shall
be sent to the Company's address.
13.06 Benefits not Assignable; Qualified Domestic Relations Orders
13.06-1 This plan is for the personal protection of the participants.
No vested or unvested interest of any participant or beneficiary may be
assigned, alienated, seized by legal process, transferred or subjected to
the claims or creditors in any way, except as provided in 13.06-2.
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13.06-2 Benefits shall be paid in accordance with a qualified domestic
relations order (QDRO) under section 414(p) of the Internal Revenue Code
pursuant to procedures established by the Committee.
13.07 Nondiscrimination
The Company, each Employer, and the Committee shall to the fullest extent
possible treat all person who may be similarly situated alike under this Plan.
13.08 Nonreversion of Assets
13.08-1 Subject to 1.02-2 and the following paragraphs, no part of the
contributions or the principal or income of this plan shall be paid to or
revested in an Employer or be used other than for the exclusive benefit of
the participants and their beneficiaries.
13.08-2 A contribution may be returned to an Employer to the extent
that either of the following applies:
(a) The contribution was made by mistake of fact.
(b) A deduction for the contribution under 4.03-1 other than an ESOP
contribution excepted under 4.03-1, is disallowed.
13.08-3 Return of contributions under 13.08-2 shall be subject to the
following:
(a) Any return must occur within one year of the mistaken payment or
disallowance of the deduction.
(b) The returnable amount shall be reduced by a pro rata share of any
investment losses attributable to the contribution and by any amounts
that cannot be charged under (c) below.
(c) The amounts returned shall be charged to participants' accounts in
the same proportion as the accounts were credited with the
contribution. No participant's account shall be charged more than it
was previously credited.
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ARTICLE XIV
Top-Heavy Rules
14.01 General. This ARTICLE shall only be applicable if the Plan becomes a
Top- Heavy Plan under section 416 of the Internal Revenue Code. If the Plan does
not become a Top- Heavy Plan, then none of the provisions of this ARTICLE shall
be operative. The provisions of this ARTICLE shall be interpreted and applied in
a manner consistent with the requirements of section 416 of the Internal Revenue
Code and the regulations thereunder.
14.02 Minimum Contribution.
14.02-1 For each Plan Year that the Plan is a Top- Heavy Plan, the
Company shall make a Company Contribution to be allocated directly to the
Account of each Non-Key Employee as set forth in this section.
14.02-2 The amount of the Employer Contribution (and forfeitures)
required to be contributed and allocated for a Plan Year by this section is
three percent (3%) of the Top- Heavy Compensation for that Plan Year of
each Non-Key Employee who is both a Participant and an Employee on the last
day of the Plan Year for which the Employer Contribution is made, with
adjustments as provided herein. If the Employer Contribution allocated to
the Accounts of each Key Employee for a Plan Year is less than three
percent (3%) of his or her Top-Heavy Compensation, then the Employer
Contribution required by the preceding sentence shall be reduced for that
Plan Year to the same percentage of Top-Heavy Compensation that was
allocated to the Account of the Key Employee whose Account received the
greatest allocation of Employer Contributions for that Plan Year, when
computed as a percentage of Top-Heavy Compensation.
14.02-3 The contribution required by this section shall be reduced for
a Plan Year to the extent of any Employer Contributions made and allocated
under this Plan or any other contributions from the Employer made and
allocated under any other Aggregated Plans.
14.03 Definitions. The following terms shall have the meanings specified
herein and shall be interpreted in a manner consistent with Section 416 of the
Internal Revenue Code.
(1) Aggregated Plans.
(i) The Plan, any plan that is part of a "required aggregation group"
and any plan that is part of a "permissive aggregation group" that the
Company treats as an Aggregated Plan.
(ii) The "required aggregation group" consists of each plan of the
Company in which a Key Employee participates (in the Plan Year
containing the Determination Date or any of the four (4) preceding
Plan Years) and each other plan of the
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Company which enables any plan of the Company in which a Key Employee
participates to meet the requirements of section 401(a)(4) or section
410(b) of the Code.
(iii) The "permissive aggregation group" consists of any plan not
included in the "required aggregation group" if the Aggregated Plan
described in subparagraph (i) above would continue to meet the
requirements of section 401(a)(4) and 410 of the Internal Revenue Code
with such additional plan being taken into account.
(2) Determination Date. The last day of the preceding Plan Year, or, in the
case of the first Plan Year of any plan, the last day of such Plan Year.
The computations made on the Determination Date shall utilize information
from the immediately preceding Valuation Date.
(3) Key Employee.
(i) An Employee (or former Employee) who, at any time during the Plan
Year containing the Determination Date or any of the four (4)
preceding Plan Years, is:
(A) An officer of an Employer with annual Top-Heavy Compensation
for the Plan Year greater than one hundred fifty percent (150%)
of the amount in effect under section 415(c)(1)(A) of the
Internal Revenue Code for the calendar year in which that Plan
Year ends;
(B) one of the ten (10) Employees owning (or considered as owning
under section 318 of the Internal Revenue Code) the largest
interest in an Employer, who has more than one-half of one
percent (.5%) interest in an Employer, and who has annual
Top-Heavy Compensation for the Plan Year at least equal to the
maximum dollar limitation under section 415(c)(1)(A) of the
Internal Revenue Code for the calendar year in which that Plan
Year ends;
(C) a five percent (5%) or greater shareholder in an Employer; or
(D) a one percent (1%) shareholder in an Employer with annual
Top- Heavy Compensation from the Employer of more than one
hundred fifty thousand dollars ($150,000).
(ii) For purposes of paragraphs (3)(i)(C) and (3)(i)(D), the rules of
section 414(b), (c) and (m) of the Internal Revenue Code shall not
apply. Beneficiaries of an Employee shall acquire the character of
such Employee and inherited benefits will retain the character of the
benefits of the Employee who performed services.
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(4) Non-Key Employee. Any Employee who is not a Key Employee.
(5) Super Top-Heavy Plan. A Top-Heavy Plan in which the sum of the present
value of the cumulative accrued benefits and accounts for Key Employees
exceeds ninety percent (90%) of the comparable sum determined for all
Employees. The foregoing determination shall be made in the same manner as
the determination of a Top-Heavy Plan under this section.
(6) Top-Heavy Compensation. The term Top-Heavy Compensation shall have the
same meaning as the term Compensation has under 4.02-1(a).
(7) Top-Heavy Plan. The Plan is a Top-Heavy Plan for a Plan Year if, as of
the Determination Date for that Plan Year, the sum of (i) the present value
of the cumulative accrued benefits for Key Employees under all Defined
Benefit Plans that are Aggregated Plans and (ii) the aggregate of the
accounts of Key Employees under all Defined Contribution Plans that are
Aggregated Plans exceeds sixty percent (60%) of the comparable sum
determined for all Employees.
(8) Years of Top-Heavy Service. The number of years of service with an
Employer that must be counted under section 411(a) of the Internal Revenue
Code, disregarding all service that may be disregarded under section
411(a)(4) of the Internal Revenue Code.
14.04 Special Rules.
14.04-1 For purposes of determining the present value of the
cumulative accrued benefit for any Participant or the amount of the Account
of any Participant, such present value or amount shall be increased by the
aggregate distributions made with respect to such Participant under the
Plan during the Plan Year that includes the Determination Date and the four
(4) preceding Plan Years (if such amounts would otherwise have been
omitted).
14.04-2 In the case of unrelated rollovers and transfers, (i) the plan
making the distribution or transfer is to count the distribution as a
distribution under section 416(g)(3) of the Internal Revenue Code, and (ii)
the plan accepting the rollover or transfer is not to consider the rollover
or transfer as part of the accrued benefit if such rollover or transfer was
accepted after December 31, 1983, but is to consider it as part of the
accrued benefit if such rollover or transfer was accepted before January 1,
1984. For this purpose, rollovers and transfers are to be considered
unrelated if they are both initiated by the Employee and made from a plan
maintained by one employer to a plan maintained by another employer.
In the case of related rollovers and transfers, the plan making the
distribution or transfer is not to count the distribution or transfer under
section 416(g)(3) of the Code, and the plan accepting the rollover or
transfer counts the rollover or
-50-
<PAGE>
transfer in the present value of the accrued benefits. For this purpose,
rollovers and transfers are to be considered related if they are not
unrelated this 14.05-2.
14.04-3 If any individual is a Non-Key Employee with respect to any
plan for any Plan Year, but such individual was a Key Employee with respect
to such plan for any prior Plan Year, any accrued benefit for such Employee
(and the Account of such Employee) shall not be taken into account.
14.04-4 Beneficiaries of Key Employees and former Key Employees are
considered to be Key Employees and Beneficiaries of Non-Key Employees and
former Non-Key Employees are considered to be Non-Key Employees.
14.04-5 For Plan Years beginning before 1985, contributions
attributable to a salary reduction or similar arrangement shall not be
taken into account.
14.05 Adjustment of Limitations.
14.05-1 If this Article is applicable, then the contribution and
benefit limitations in 4.04-6 shall be reduced as provided under section
416(h) of the Internal Revenue Code.
14.05-2 shall be applicable for any Plan Year in which either:
(a) the Plan is a Super Top-Heavy Plan; or
(b) the Plan both is a Top-Heavy Plan (but not a Super Top-Heavy Plan)
and provides Employer Contributions (and forfeitures) to the Account
of any Non-Key Employee in an amount less than four percent (4%) of
such Participant's Top- Heavy Compensation, as determined in
accordance with this Article.
-51-
<PAGE>
IN WITNESS WHEREOF, Riverview Savings Bank has caused this Plan to be
executed by its duly authorized officer this 31st day of March, 1997.
Attest: RIVERVIEW SAVINGS BANK
/s/ Phyllis Kreibich By: /s/ Patrick Sheaffer
- -------------------- ------------------------
Secretary President
-52-
EXHIBIT 10.4
Proposed Form of Employee Severance Compensation Plan
<PAGE>
FORM OF THE
RIVERVIEW SAVINGS BANK, FSB
EMPLOYEE SEVERANCE COMPENSATION PLAN
PLAN PURPOSE
The purpose of this Riverview Savings Bank, FSB Employee Severance
Compensation Plan is to assure the services of Employees of the Savings Bank in
the event of a Change in Control. The benefits contemplated by the Plan
recognize the value to the Savings Bank of the services and contributions of the
Employees of the Savings Bank and the effect upon the Savings Bank resulting
from the uncertainties of continued employment, reduced employee benefits,
management changes and relocations that may arise in the event of a Change in
Control. The Board of Directors believes that the Plan will also aid the Savings
Bank in attracting and retaining the highly qualified individuals who are
essential to its success and that the Plan's assurance of fair treatment of the
Savings Bank's Employees will reduce the distractions and other adverse effects
on Employees' performance in the event of a Change in Control.
ARTICLE I
ESTABLISHMENT OF PLAN
1.1 Establishment of Plan
As of the Effective Date of the Plan as defined herein, the Savings Bank
hereby establishes an employee severance compensation plan to be known as the
Riverview Savings Bank, FSB Employee Severance Compensation Plan." The purposes
of the Plan are as set forth above.
1.2 Application of Plan
The benefits provided by this Plan shall be available to all Employees of
the Savings Bank, who, at or after the Effective Date, meet the eligibility
requirements of Article III, except for those officers of the Savings Bank who
have entered into, or who enter into in the future, and continue to be subject
to, an employment or change in control agreement with the Employer.
1.3 Contractual Right to Benefits
This plan establishes and vests in each Participant a contractual right to
the benefits to which each Participant is entitled hereunder in the event of a
Change in Control, enforceable by the Participant against the Employer, the
Savings Bank, or both. The Plan does not provide, and should not be construed as
providing, benefits of any kind to any Employee, except in the event of a Change
in Control and, in the event of a Change in Control, only upon the involuntary
or voluntary termination of an Employee in the manner contemplated herein.
<PAGE>
ARTICLE II
DEFINITIONS AND CONSTRUCTION
2.1 Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below.
"Annual Compensation" of a Participant means and includes all wages,
salary, bonus, and cash compensation, if any, paid (including accrued amounts)
by an Employer as consideration for the Participant's service during the twelve
(12) month period ending on the last day of the month preceding the date of a
Participant's termination pursuant to Section 4.2, which is or would be
includable in the gross income of the Participant receiving the same for federal
income tax purposes.
"Board" means the Board of Directors of the Savings Bank.
"Change in Control" shall mean an event deemed to occur if and when (a)
there occurs a change in control of the Savings Bank or the Company within the
meaning of the Home Owners Loan Act of 1933 and 12 C.F.R. Part 574, (b) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the beneficial owner, directly or indirectly, of securities of the
Company or the Savings Bank representing twenty-five percent (25%) or more of
the combined voting power of the Company's or the Savings Bank's then
outstanding securities, (c) the membership of the board of directors of the
Company or the Savings Bank changes as the result of a contested election, such
that individuals who were directors at the beginning of any twenty-four (24)
month period (whether commencing before or after the date of adoption of this
Plan) do not constitute a majority of the Board at the end of such period, or
(d) shareholders of the Company or the Savings Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the Company's
or the Savings Bank's assets, or a plan of partial or complete liquidation. If
any of the events enumerated in clauses (a) - (d) occur, the Board shall
determine the effective date of the change in control resulting therefrom, for
purposes of the Plan.
"Company" means Riverview Bancorp, Inc., a Washington corporation, the
holding company of the Savings Bank.
"Disability" means the permanent and total inability by reason of mental or
physical infirmity, or both, of an employee to perform the work customarily
assigned to him. Additionally, a medical doctor selected or approved by the
Board of Directors must advise the Board that it is either not possible to
determine if or when such Disability will terminate or that it appears probable
that such Disability will be permanent during the remainder of said employees
lifetime.
"Effective Date" means the date the Plan is approved by the Board of
Directors of the Savings Bank, or such other date as the Board shall designate
in its resolution approving the Plan.
2
<PAGE>
"Employee" means any employee of the Savings Bank or another Employer who
has completed at least one year of service with the Savings Bank; provided,
however, that any Employee who is covered or hereinafter becomes covered
by an employment agreement or change in control agreement with an
Employer shall not be considered to be an Employee for purposes of this Plan.
"Employer" means (i) the Savings Bank or (ii) a subsidiary of the Savings
Bank or a parent company of the Savings Bank which has adopted the plan pursuant
to Article VI hereof.
"Expiration Date" means a date ten (10) years from the Effective Date
unless earlier terminated pursuant to Section 8.2 or extended pursuant to
Section 8.1.
"Just Cause" shall means termination because of Participant's personal
dishonesty, incompetence, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule or regulation (other than traffic violations or other
similar offenses) or any final cease-and desist order.
"Payment" means the payment of severance compensation as provided in
Article IV hereof.
"Participant" means an Employee who meets the eligibility requirements of
Article III.
"Plan" means this Riverview Savings Bank, FSB Employee Severance
Compensation Plan.
"Savings Bank" means Riverview Savings Bank, FSB or any successor as
provided for in Article VII hereof.
2.2 Applicable Law
The laws of the State of Washington shall be controlling law in all matters
relating to the Plan to the extent not preempted by Federal law.
2.3 Severability
If a provision of this Plan shall be held illegal or invalid, the
illegality or invalidity shall not affect the remaining parts of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
3
<PAGE>
ARTICLE III
ELIGIBILITY
3.1 Participation
The term "Participant" shall include all Employees of an Employer who have
completed at least one (1) year of service with the Employer at the time of any
termination pursuant to Section 4.2 herein. Notwithstanding the foregoing,
persons who have entered into and continue to be covered by an individual
employment contract or change in control agreement with an Employer shall not be
entitled to participate in this Plan.
3.2 Duration of Participation
A Participant shall cease to be a Participant in the Plan when the
Participant ceases to be an Employee of an Employer, unless such Participant is
entitled to a Payment as provided in the Plan. A Participant entitled to receipt
of a Payment shall remain a Participant in this Plan until the full amount of
such Payment has been paid to the Participant.
ARTICLE IV
PAYMENTS
4.1 Right to Payment
A Participant shall be entitled to receive from his or her Employer a
Payment in the amount provided in Section 4.3 if a Change in Control occurs and
if, within one (1) year thereafter, the Participant's employment by an Employer
shall terminate for any reason specified in Section 4.2. A Participant shall not
be entitled to a Payment if termination occurs by reason of death, voluntary
retirement, voluntary termination other than for the reasons specified in
Section 4.2, Disability or for Just Cause.
4.2 Reasons for Termination
Following a Change in Control, a Participant shall be entitled to a Payment
in accordance with Section 4.3 if employment by an Employer is terminated,
voluntary or involuntary, for any one or more of the following reasons:
(a) The Employer reduces the Participant's base salary or rate of
compensation as in effect immediately prior to the Change in Control, or as
the same may have been increased thereafter.
(b) The Employer materially changes Participant's function, duties or
responsibilities which would cause the Participant's position to be one of
lesser responsibility, importance or scope with the Employer than
immediately prior to the Change in Control.
4
<PAGE>
(c) The Employer requires the Participant to change the location of
the Participant's job or office, so that such Participant will be based
at a location more than thirty-five (35) miles from the location of
the Participant's job or office immediately prior to the Change in
Control provided that such new location is not closer to Participant's
home.
(d) The Employer materially reduces the benefits and perquisites
available to the Participant immediately prior to the Change in Control;
provided, however, that a material reduction in benefits and perquisites
generally provided to all Employees of the Savings Bank on a
nondiscriminatory basis shall not trigger a Payment pursuant to this Plan.
(e) A successor to the Employer fails or refuses to assume the
Employer's obligations under this Plan, as required by Article VII.
(f) The Employer, or any successor to the Employer, breaches any other
provisions of this Plan.
(g) The Employer terminates the employment of a Participant at or
after a Change in Control other than for Just Cause.
4.3 Amount of Payment
(a) Each Participant (other than a Participant entitled to a benefit
under any other provision of the Plan) with at least three (3) years of
service with the Employer entitled to a Payment under this Plan shall
receive from the Employer a lump sum cash payment equal to one twenty-sixth
(1/26) of Annual Compensation for each year of service up to a maximum of
100% of Annual Compensation.
(b) Each Participant (other than a Participant entitled to a benefit
under any other provision of this Plan) with less than three (3) years of
service shall receive from the Employer a lump sum cash payment equal to
one twenty-sixth (1/26) of Annual Compensation.
(c) The Participant shall not be required to mitigate damages on the
amount of the Payment by seeking other employment or otherwise, nor shall
the amount of such Payment be reduced by any compensation earned by the
Participant as a result of employment after termination of employment
hereunder.
4.4 Time of Payment
The Payment to which a Participant is entitled shall be paid to the
Participant by the Employer or the successor to the Employer, in cash and in
full, not later than thirty (30) business days after the termination of the
Participant's employment. If any Participant should die after termination of the
employment but before all amounts have been paid, such unpaid amounts shall
5
<PAGE>
be paid to the Participant's named beneficiary, if living, otherwise to the
personal representative of behalf of or for the benefit of the Participant's
estate.
4.5 Suspension of Payment
Notwithstanding the foregoing, no payments or portions thereof shall be
made under this Plan, if such payment or portion would result in the Savings
Bank failing to meet its minimum regulatory capital requirements as required by
12 C.F.R. ss.567.2. Any payments or portions thereof not paid shall be suspended
until such time as their payment would not result in a failure to meet the
Savings Bank's minimum regulatory capital requirements. Any portion of benefit
payments which have not been suspended will be paid on an equitable basis, pro
rata based upon amounts due each Participant, among all eligible Participants.
ARTICLE V
OTHER RIGHTS AND BENEFITS NOT AFFECTED
5.1 Other Benefits
Neither the provisions of this Plan nor the Payment provided for hereunder
shall reduce any amounts otherwise payable, or in any way diminish the
Participant's rights as an Employee of an Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock option, stock bonus,
stock ownership or any employment agreement or other plan or arrangement.
5.2 Employment Status
This Plan does not constitute a contract of employment or impose on the
Participant's Employer any obligation to retain the Participant, to maintain the
status of the Participant's employment, or to change the Employer's policies
regarding termination of employment.
ARTICLE VI
PARTICIPATING EMPLOYERS
6.1 Upon approval by the Board of Directors of the Savings Bank, this Plan
may be adopted by any subsidiary of the Savings Bank or by the Company. Upon
such adoption, the subsidiary or the Company shall become an Employer hereunder
and the provisions of the Plan shall be fully applicable to the Employees of
that subsidiary or the Company. The term "subsidiary" means any corporation in
which the Savings Bank, directly or indirectly, holds a majority of the voting
power of its outstanding shares of capital stock.
ARTICLE VII
SUCCESSOR TO THE SAVINGS BANK
7.1 The Savings Bank shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business
6
<PAGE>
or assets of the Savings Bank, expressly and unconditionally to assume and
agree to perform the Savings Bank's obligations under this plan, in the
same manner and to the same extent that the Savings Bank would be required
to perform if no such succession or assignment had taken place.
ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION
8.1 Duration
If a Change in Control has not occurred, this Plan shall expire as of the
Expiration Date, unless sooner terminated as provided in Section 8.2, or unless
extended for an additional period or periods by resolution adopted by the Board
of Directors of the Savings Bank.
Notwithstanding the foregoing, if a Change in Control occurs this Plan
shall continue in full force and effect, and shall not terminate or expire until
such date as all Participants who become entitled to Payments hereunder shall
have received such Payments in full.
8.2 Amendment and Termination
The Plan may be terminated or amended in any respect by resolution adopted
by a majority of the Board of Directors of the Savings Bank, unless a Change in
Control has previously occurred. If a Change in Control occurs, the Plan no
longer shall be subject to amendment, change, substitution, deletion, revocation
or termination in any respect whatsoever.
8.3 Form of Amendment
The form of any proper amendment or termination of the Plan shall be a
written instrument signed by a duly authorized officer or officers of the
Savings Bank, certifying that the amendment or termination has been approved by
the Board of Directors. A proper termination of the Plan automatically shall
effect a termination of all Participants' rights and benefits hereunder.
8.4 No Attachment
(a) Except as required by law, no right to receive payments under this Plan
shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation, or to execution, attachment,
levy, or similar process or assignment by operation of law, and any attempt,
voluntary or involuntary, to affect such action shall be null, void, and of no
effect.
(b) This Plan shall be binding upon, and inure to the benefit of, each
Employee, the Employer and their respective successors and assigns.
7
<PAGE>
ARTICLE IX
LEGAL FEES AND EXPENSES
9.1 All reasonable legal fees and other expenses paid or incurred by a
party hereto pursuant to any dispute or question of interpretation relating to
this Plan shall be paid or reimbursed by the prevailing party in any legal
judgment, arbitration or settlement.
ARTICLE X
REQUIRED PROVISIONS
10.1 The Savings Bank may terminate the Employee's employment at any time,
but any termination by the Savings Bank, other than Termination for Cause, shall
not prejudice Employee's right to compensation or other benefits under this
Agreement if the Employee is otherwise entitled to a benefit. Employee shall not
have the right to receive compensation or other benefits for any period after
termination for Just Cause as defined in Section 2.1 hereinabove.
10.2 If the Employee is suspended and/or temporarily prohibited from
participating in the conduct of the Savings Bank's affairs by a notice served
under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
ss.1818(e)(3) or (g)(1), the Savings Bank's obligations under this Plan to such
Employee shall be suspended as of the date of service, unless stated by
appropriate proceedings. If the charges in the notice are dismissed, the Savings
Bank may in its discretion (i) pay the Employee all or part of the compensation
withheld while their contract obligations were suspended and (ii) reinstate (in
whole or in part) any of the obligation which were suspended.
10.3 If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Savings Bank's affairs by an order issued
under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
ss.1818(e)(4) or (g)(1), all obligations of the Savings Bank under this Plan to
the Employee shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
10.4 If the Savings Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. ss.1818(x)(1), all obligations of the
Savings Bank under this Plan shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
10.5 All obligations of the Savings Bank under this contract shall be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of the institution, (i) by the Director of
the OTS (or his designee) or (ii) the Federal Deposit Insurance Corporation
("FDIC") at the time FDIC enters into an agreement to provide assistance to or
on behalf of the Savings Bank under the authority contained in Section 13(c) of
the Federal Deposits Insurance Act, 12 U.S.C. ss.1823(c); or (ii) by the
Director of the OTS (or his designee) at the time the Director (or his designee)
approves a supervisory merger to resolve problems
8
<PAGE>
related to the operations of the Savings Bank or when the Savings Bank is
determined by the Director to be in an unsafe or unsound condition.
Any rights of the parties that have already vested, however, shall not
be affected by such action.
10.6 Any payments made to an Employee pursuant to this Plan or otherwise
shall be conditioned upon compliance under 12 U.S.C. ss.1828(k) and any
regulations promulgated thereunder.
9
<PAGE>
Having been adopted by its Board of Directors on ___________, 1997, this
Plan is executed by duly authorized officer of the Savings Bank this ______ day
of __________________, 1997.
Attest
_________________________ _________________________________
Secretary
EXHIBIT 21
Subsidiaries of Riverview Bancorp, Inc.
<PAGE>
Exhibit 21
Subsidiaries of the Registrant
Parent
- ------
Riverview Bancorp, Inc.
Percentage Jurisdiction or
Subsidiaries (a) of Ownership State of Incorporation
- ---------------- ------------ ----------------------
Riverview Savings Bank, FSB (1) 100% United States
Riverview Services, Inc. (2) 100% Washington
- -------------
(1) Upon consummation of the Conversion and Reorganization, Riverview Savings
Bank, FSB will become a wholly-owned subsidiary of the Registrant.
(2) This corporation is a wholly owned subsidiary of Riverrview Savings Bank,
FSB.
EXHIBIT 23.1
Consent of Deloitte & Touche LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Boards of Directors
Riverview Bancorp, Inc.
Riverview Savings Bank, FBS
Camas, Washington
We consent to the use in this Registration Statement of Riverview Bancorp, Inc.
on Form S-1 of our report dated May 27, 1997 appearing in the Prospectus, which
is part of this Registration Statement, relating to the consolidated financial
statements of Riverview Savings Bank, FSB and Subsidiary, which appear in such
Registration Statement. We also consent to the reference to us under the heading
"Experts" contained in the Prospectus, which is a part of such Registration
Statement.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Portland, Oregon
June 27, 1997
EXHIBIT 23.2
Consent of Breyer & Aguggia as to its Federal Tax Opinion
<PAGE>
June 27, 1997
Board of Directors
Riverview Bancorp, Inc.
700 N.E. Fourth Avenue
Camas, Washington 98607
RE: Riverview Bancorp, Inc.
Registration Statement on Form S-1
To the Board of Directors:
We hereby consent to the filing of the form of our federal tax opinion as
an exhibit to the Registration Statement and to the reference to us in the
Prospectus included therein under the headings "THE CONVERSION AND
REORGANIZATION -- Effects of Conversion and Reorganization on Depositors and
Borrowers of the Savings Bank" and "LEGAL AND TAX OPINIONS."
Sincerely,
/s/ Breyer & Aguggia
--------------------
BREYER & AGUGGIA
Washington, D.C.
EXHIBIT 23.3
Consent of RP Financial, LC.
June 20, 1997
Boards of Directors
Riverview, M.H.C
Riverview Savings Bank, FSB
700 NE 4th Avenue
Camas, Washington 98607
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of Riverview Mutual Holding Company, the mutual holding company for
Riverview Savings Bank, FSB, Camas, Washington, and any amendments thereto, in
the Form S-1 Registration Statement and any amendments thereto and in the Form
H(e)1-s for Riverview Bancorp, Inc. We also hereby consent to the inclusion of,
summary of and references to our Appraisal Report and our statement concerning
subscription rights in such filings including the Prospectus of Riverview
Bancorp, Inc.
Sincerely,
RP FINANCIAL, LC.
James P. Hennessey
Senior Vice President
<PAGE>
[LETTERHEAD] RP Financial, LC
June 20, 1997
Boards of Directors
Riverview, M.H.C
Riverview Savings Bank, FSB
700 NE 4th Avenue
Camas, Washington 98607
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of Riverview Mutual Holding Company, the mutual holding company for
Riverview Savings Bank, FSB, Camas, Washington, and any amendments thereto, in
the Form S-1 Registration Statement and any amendments thereto and in the Form
H(e)1-s for Riverview Bancorp, Inc. We also hereby consent to the inclusion of,
summary of and references to our Appraisal Report and our statement concerning
subscription rights in such filings including the Prospectus of Riverview
Bancorp, Inc.
Sincerely,
RP FINANCIAL, LC.
/s/James P. Hennessey
-------------------------
James P. Hennessey
Senior Vice President
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone (703 528-1700
Arlington, Va 22209 Fax. No:(703)528-1788
EXHIBIT 99.2
Solicitation and Marketing Materials
<PAGE>
[LETTERHEAD] Charles Webb & Company
A Division of
KEEFE, BRUYETTE & WOODS, INC.
August xx, 1997
To Members and Friends of Riverview,
M.H.C. and Stockholders of
Riverview Savings, FSB
Charles Webb & Company, a member of the National Association of Securities
Dealers, Inc. ("NASD"), is assisting Riverview, M.H.C. (the "MHC") in its
conversion from a mutual holding company to a stock holding company and the
concurrent offering of shares of common stock by Riverview Bancorp, Inc. (the
"Holding Company"), the newly-formed corporation that will serve as holding
company for Riverview Savings Bank, FSB ("Riverview Savings") following the
conversion.
At the request of the Holding Company, we are enclosing materials explaining the
conversion and your options, including an opportunity to invest in shares of the
Holding Company's common stock being offered to members of the MHC, Riverview
Saving's Employee Stock Ownership Plan, stockholders of Riverview Savings and
the community through September xx, 1997. Please read the enclosed offering
materials carefully. The Holding Company has asked us to forward these documents
to you in view of certain requirements of the securities laws in your state.
If you have any questions, please visit our Stock Information Center at 700 N.E.
Fourth Avenue, Camas, Washington or feel free to call the Stock Information
Center at (360) xxx-xxxx.
Very truly yours,
Charles Webb & Company
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY STOCK.
THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
August xx, 1997
Dear Member:
We are pleased to announce that Riverview, M.H.C. is converting from a mutual
holding company to a stock holding company and Riverview Savings Bank, FSB
("Riverview Savings") is simultaneously reorganizing as a wholly-owned
subsidiary of a newly-formed corporation (the "Conversion and Reorganization").
In conjunction with the Conversion and Reorganization, Riverview Bancorp, Inc.
("Riverview Bancorp"), the newly-formed corporation that will serve as holding
company for Riverview Savings, is offering shares of common stock in a
subscription offering and direct community offering.
Unfortunately, Riverview Bancorp is unable to either offer or sell its common
stock to you because the small number of eligible subscribers in your
jurisdiction makes registration or qualification of the common stock under the
securities laws of your jurisdiction impractical, for reasons of cost or
otherwise. Accordingly, this letter should not be considered an offer to sell or
a solicitation of an offer to buy the common stock of Riverview Bancorp.
However, you have the right to vote on the Plan of Conversion and Agreement and
Plan of Reorganization at the Special Meeting of Members to be held on September
xx, 1997. Therefore, enclosed is a proxy card, a Proxy Statement (which includes
the Notice of the Special Meeting), a Prospectus (which is provided solely as an
accompaniment to the Proxy Statement) and a return envelope for your proxy card.
I invite you to attend the Special Meeting on September xx, 1997. However,
whether or not you are able to attend, please complete the enclosed proxy card
and return it in the enclosed envelope.
Sincerely,
Patrick Sheaffer
Chairman, President and Chief Executive Officer
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY.
<PAGE>
August xx, 1997
Dear Member:
We are pleased to announce that Riverview, M.H.C. is converting from a mutual
holding company to a stock holding company and Riverview Savings Bank, FSB
("Riverview Savings") is simultaneously reorganizing as a wholly-owned
subsidiary of a newly-formed holding company (the "Conversion and
Reorganization"). In conjunction with the Conversion and Reorganization,
Riverview Bancorp, Inc., the newly-formed corporation that will serve as holding
company for Riverview Savings, is offering shares of common stock in a
subscription offering and direct community offering to certain of our depositors
and borrowers, to Riverview Saving's Employee Stock Ownership Plan and some
members of the general public pursuant to a Plan of Conversion and
Reorganization.
To accomplish the Conversion and Reorganization, we need your participation in
an important vote. Enclosed is a proxy statement describing the Plan of
Conversion and Reorganization and your voting and subscription rights. The Plan
of Conversion and Reorganization has been approved by the Office of Thrift
Supervision and now must be approved by you. YOUR VOTE IS VERY IMPORTANT.
Enclosed, as part of the proxy material, is your proxy card located behind the
window of your mailing envelope. This proxy card should be signed and returned
to us prior to the Special Meeting of Members to be held on September xx, 1997.
Please take a moment to sign the enclosed proxy card and return it to us in the
postage-paid envelope provided. FAILURE TO VOTE HAS THE SAME EFFECT AS VOTING
AGAINST THE CONVERSION AND REORGANIZATION.
The Boards of Directors of Riverview, M.H.C. and Riverview Savings believe that
the Conversion and Reorganization is in the best interests of Riverview, M.H.C.
and its members and Riverview Savings and its stockholders. Please remember:
o Your deposit accounts at Riverview Savings will continue to be insured
up to the maximum legal limit by the Federal Deposit Insurance
Corporation ("FDIC").
o There will be no change in the balance, interest rate, or maturity of
any deposit or loan accounts because of the Conversion and
Reorganization.
o Members have a right, but no obligation, to buy stock before it is
offered to the public.
o Like all stock, stock issued in this offering will not be insured by
the FDIC.
Enclosed are materials describing the stock offering. We urge you to read these
materials carefully before submitting your Stock Order and Certification Form.
If you are interested in purchasing the common stock of Riverview Bancorp, Inc.,
you must submit your Stock Order and Certification Form and payment prior to
x:xx p.m., Pacific Time on September xx, 1997.
If you have additional questions regarding the stock offering, please call us at
(360) xxx-xxxx, Monday through Thursday 9:00 a.m. to 5:00 p.m. and Friday 9:00
a.m. to 5:30 p.m., or stop by the Stock Information Center located at 700 N.E.
Fourth Avenue, in Camas, Washington.
Sincerely,
Patrick Sheaffer
Chairman, President and Chief Executive Officer
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY STOCK.
THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
August xx, 1997
Dear Friend:
We are pleased to announce that Riverview, M.H.C. is converting from a mutual
holding company to a stock holding company and Riverview Savings Bank, FSB
("Riverview Savings") is simultaneously reorganizing as a wholly-owned
subsidiary of a newly formed holding company (the "Conversion and
Reorganization"). In conjunction with the Conversion and Reorganization,
Riverview Bancorp, Inc. ("Riverview Bancorp"), the newly-formed corporation that
will serve as holding company for Riverview Savings, is offering shares of
common stock in a subscription offering and direct community offering. The sale
of stock in connection with the Conversion and Reorganization will enable
Riverview Savings to raise additional capital to support and enhance its current
operations.
Because we believe you may be interested in learning more about the merits of
Riverview Bancorp's stock as an investment, we are sending you the following
materials which describe the stock offering. Please read these materials
carefully before you submit a Stock Order and Certification Form.
o PROSPECTUS: This document provides detailed information about the
operations of Riverview Bancorp, Riverview Savings and the proposed
stock offering.
o QUESTIONS AND ANSWERS: Key questions and answers about the stock
offering are found in this pamphlet.
o STOCK ORDER AND CERTIFICATION FORM: This form is used to purchase
stock by returning it with your payment in the enclosed business reply
envelope. The deadline for ordering stock is x:xx p.m., Pacific Time,
September xx, 1997.
As a friend of Riverview, M.H.C., you will have the opportunity to buy stock
directly from Riverview Bancorp without commission or fee. If you have
additional questions regarding the Conversion and Reorganization and stock
offering, please call us at (360) xxx-xxxx, Monday through Thursday 9:00 a.m. to
5:00 p.m. and Friday 9:00 a.m. to 5:30 p.m., or stop by the Stock Information
Center at 700 N.E. Fourth Avenue, Camas, Washington.
We are pleased to offer you this opportunity to become a charter shareholder of
Riverview Bancorp, Inc.
Sincerely,
Patrick Sheaffer
Chairman, President and Chief Executive Officer
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY STOCK.
THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
August xx, 1997
Dear Prospective Investor:
We are pleased to announce that Riverview, M.H.C. is converting from a mutual
holding company to a stock holding company and Riverview Savings Bank, FSB
("Riverview Savings") is simultaneously reorganizing as a wholly-owned
subsidiary of a newly-formed holding company (the "Conversion and
Reorganization"). In conjunction with the Conversion and Reorganization,
Riverview Bancorp, Inc. ("Riverview Bancorp") the newly-formed corporation that
will serve as holding company for Riverview Savings, is offering shares of
common stock in a subscription offering and direct community offering. The sale
of stock in connection with the Conversion and Reorganization will enable
Riverview Savings to raise additional capital to support and enhance its current
operations.
We have enclosed the following materials which will help you learn more about
the stock offering of Riverview Bancorp. Please read and review the materials
carefully before you submit a Stock Order and Certification Form.
o PROSPECTUS: This document provides detailed information about the
operations of Riverview Bancorp, Riverview Savings and the proposed
stock offering.
o QUESTIONS AND ANSWERS: Key questions and answers about the stock
offering are found in this pamphlet.
o STOCK ORDER AND CERTIFICATION FORM: This form is used to purchase
stock by returning it with your payment in the enclosed business reply
envelope. The deadline for ordering stock is x:xx p.m., Pacific Time,
September xx, 1997.
We invite our loyal customers and local community members to become charter
shareholders of Riverview Bancorp. Through this offering you have the
opportunity to buy stock directly from Riverview Bancorp, without commission or
fee. The board of directors and management of Riverview Savings and Riverview,
M.H.C. fully support the stock offering.
If you have additional questions regarding the Conversion and Reorganization and
stock offering, please call us at (360) xxx-xxxx, Monday through Thursday 9:00
a.m. to 5:00 p.m. and Friday 9:00 a.m. to 5:30 p.m., or stop by the Stock
Information Center located at 700 N.E. Fourth Avenue, Camas, Washington.
Sincerely,
Patrick Sheaffer
Chairman, President and Chief Executive Officer
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY STOCK.
THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
(Dear stockholder Dark blue sky)
August xx, 1997
Dear Shareholder:
We are pleased to announce that Riverview, M.H.C. is converting from a mutual
holding company to a stock holding company and Riverview Savings Bank, FSB
("Riverview Savings") is simultaneously reorganizing as a wholly-owned
subsidiary of a newly-formed corporation (the "Conversion and Reorganization").
In conjunction with the Conversion and Reorganization, Riverview Bancorp, Inc.
("Riverview Bancorp"), the newly-formed corporation that will serve as holding
company for Riverview Savings, is offering shares of common stock in a
subscription offering and direct community offering.
Unfortunately, Riverview Bancorp is unable to either offer or sell its common
stock to you because the small number of eligible subscribers in your
jurisdiction makes registration or qualification of the common stock under the
securities laws of your jurisdiction impractical, for reasons of cost or
otherwise. Accordingly, this letter should not be considered an offer to sell or
a solicitation of an offer to buy the common stock of Riverview Bancorp.
However, you have the right to vote on the Plan of Conversion and Agreement and
Plan of Reorganization at the Special Meeting of Members to be held on September
xx, 1997. Therefore, enclosed is a proxy card, a Proxy Statement (which includes
the Notice of the Special Meeting), a Prospectus (which is provided solely as an
accompaniment to the Proxy Statement) and a return envelope for your proxy card.
I invite you to attend the Special Meeting on September xx, 1997. However,
whether or not you are able to attend, please complete the enclosed proxy card
and return it in the enclosed envelope.
Sincerely,
Patrick Sheaffer
Chairman, President and Chief Executive Officer
<PAGE>
(Stockholder Letter REGISTERED HOLDERS- Riverview Savings letterhead)
Dear Stockholder:
We are pleased to inform you that the Boards of Directors of Riverview Savings,
FSB ("Riverview Savings") of Camas, Washington, Riverview, M.H.C. (the "MHC")
and Riverview Financial Corporation (the "Company") have adopted a Plan of
Conversion and Reorganization (the "Plan of Conversion") whereby the MHC and
Riverview Savings will be reorganized into a stock holding company (the
"Conversion and Reorganization"). Riverview Savings has organized the Company to
become the holding company for all of Riverview Savings' stock. Pursuant to the
Plan of Conversion, the existing shareholders of Riverview Savings (other than
the MHC) will be issued shares of the Company's Common Stock in exchange for
their shares of Riverview Savings common stock (the "Exchange"). The Exchange
will result in those shareholders owning in the aggregate the same percent of
the Company as they owned of the Riverview Savings. In addition to the shares of
Company stock to be issued in the Exchange, the Company is also offering up to
2,760,000 shares of common stock (subject to increase up to 3,174,000 shares in
certain circumstances) to the MHC's members, Riverview Savings' stockholders and
members of the public. Consummation of the Plan of Conversion and Reorganization
is subject to (i) the approval of the members of the MHC, (ii) the approval of
the stockholders of the Riverview Savings and (iii) various regulatory
approvals.
We are asking stockholders of the Riverview Savings as of August xx, 1997, the
voting record date, to vote FOR the Plan of Conversion. If you and/or members of
your family hold stock in different names, you may receive more than one proxy
mailing. Please vote all proxy cards received and return them today in the
enclosed postage-paid envelope. Should you choose to attend the meeting and wish
to vote in person, you may do so by executing your previously submitted proxy.
Your vote FOR the Plan of Conversion will not obligate you to buy any additional
stock in the Conversion and Reorganization. A Proxy Statement relating to the
Conversion and Reorganization is enclosed.
We have enclosed the following materials which will help you learn more about
investing in Riverview Bancorp's common stock. Please read and review the
materials carefully before making an investment decision.
o PROSPECTUS: This document provides detailed information about the
operations of Riverview Bancorp, Riverview Savings and the proposed
stock offering.
o QUESTIONS AND ANSWERS BROCHURE: Key questions and answers about the
stock offering are found in this pamphlet.
o STOCK ORDER AND CERTIFICATION FORM: This form is used to purchase
stock by signing and returning it with your payment in the enclosed
business reply envelope. The deadline for ordering stock is x:xx p.m.,
Pacific Time, on September xx, 1997.
We are invite our loyal customers, existing stockholders, and local community
members to become stockholders of Riverview Bancorp. Through this offering you
have the opportunity to buy additional stock directly from Riverview Bancorp
without commission or fee.
Should you have additional questions regarding the Conversion and Reorganization
and stock offering, please call the Stock Information Center at (360) xxx-xxxx,
Monday through Thursday 9:00 a.m. to 5:00 p.m. and Friday 9:00 a.m. to 5:30
p.m., Pacific Time, or stop by the Stock Information Center at 700 N.E. Fourth
Avenue in Camas.
Sincerely,
Riverview Savings, FSB
By: Patrick Sheaffer
Chairman, President and Chief Executive Officer
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY STOCK.
THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
(Stockholder Letter STREET HOLDERS- Riverview Savings letterhead)
Dear Stockholder:
We are pleased to inform you that the Boards of Directors of Riverview Savings,
FSB ("Riverview Savings") of Camas, Washington, Riverview, M.H.C. (the "MHC")
and Riverview Financial Corporation (the "Company") have adopted a Plan of
Conversion and Reorganization (the "Plan of Conversion") whereby the MHC and
Riverview Savings will be reorganized into a stock holding company (the
"Conversion and Reorganization"). Riverview Savings has organized the Company to
become the holding company for all of Riverview Savings' stock. Pursuant to the
Plan of Conversion, the existing shareholders of Riverview Savings (other than
the MHC) will be issued shares of the Company's Common Stock in exchange for
their shares of Riverview Savings common stock (the "Exchange"). The Exchange
will result in those shareholders owning in the aggregate the same percent of
the Company as they owned of the Riverview Savings. In addition to the shares of
Company stock to be issued in the Exchange, the Company is also offering up to
2,760,000 shares of common stock (subject to increase up to 3,174,000 shares in
certain circumstances) to the MHC's members, Riverview Savings' stockholders and
members of the public. Consummation of the Plan of Conversion and Reorganization
is subject to (i) the approval of the members of the MHC, (ii) the approval of
the stockholders of the Riverview Savings and (iii) various regulatory
approvals.
We are asking stockholders of the Riverview Savings as of August xx, 1997, the
voting record date, to vote FOR the Plan of Conversion. If you and/or members of
your family hold stock in different names, you may receive more than one proxy
mailing. Please vote all proxy cards received and return them today in the
enclosed postage-paid envelope. Should you choose to attend the meeting and wish
to vote in person, you may do so by executing your previously submitted proxy.
Your vote FOR the Plan of Conversion will not obligate you to buy any additional
stock in the Conversion and Reorganization. A Proxy Statement relating to the
Conversion and Reorganization is enclosed.
We have enclosed the following materials which will help you learn more about
investing in Riverview Bancorp's common stock. Please read and review the
materials carefully before making an investment decision.
o PROSPECTUS: This document provides detailed information about the
operations of Riverview Bancorp, Riverview Savings and the proposed
stock offering.
o QUESTIONS AND ANSWERS BROCHURE: Key questions and answers about the
stock offering are found in this pamphlet.
o STOCK ORDER AND CERTIFICATION FORM: This form is used to purchase
stock by signing and returning it with your payment in the enclosed
business reply envelope. The deadline for ordering stock is x:xx p.m.,
Pacific Time, on September xx, 1997. You may obtain a Stock Order and
Certification Form from your broker or by contacting the Stock
Information Center.
We are invite our loyal customers, existing stockholders, and local community
members to become stockholders of Riverview Bancorp. Through this offering you
have the opportunity to buy additional stock directly from Riverview Bancorp
without commission or fee.
Should you have additional questions regarding the Conversion and Reorganization
and stock offering, please call the Stock Information Center at (360) xxx-xxxx,
Monday through Thursday 9:00 a.m. to 5:00 p.m. and Friday 9:00 a.m. to 5:30
p.m., Pacific Time, or stop by the Stock Information Center at 700 N.E. Fourth
Avenue in Camas.
Sincerely,
Riverview Savings, FSB
By: Patrick Sheaffer
Chairman, President and Chief Executive Officer
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY STOCK.
THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
(Stockholder Letter Street holders - 2nd mailing-Riverview Savings Letterhead)
August xx, 1997
Dear Stockholder:
Under separate cover on this date, we forwarded to you information regarding the
Plan of Conversion and Reorganization of Riverview Savings Bank, FSB ("Riverview
Savings") and Riverview, M.H.C. (the "MHC") and the concurrent offering of
common stock by Riverview Bancorp, Inc. ("Riverview Bancorp").
As a result of certain requirements, we could not forward a Stock Order and
Certification Form with the other packet of materials. They are enclosed herein,
along with a Prospectus.
The deadline for ordering Riverview Bancorp's common stock is at x:xx p.m.,
Pacific Time, on September xx, 1997.
Should you have additional questions regarding the Conversion and Reorganization
and stock offering, please call the Stock Information Center at (360) xxx-xxxx,
Monday through Thursday from 9:00 a.m. to 5:00 p.m., and Friday from 9:00 a.m.
to 5:30 p.m., Pacific Time, or stop by the Stock Information Center at 700 N.E.
Fourth Avenue in Camas.
Sincerely,
Riverview Savings Bank, FSB
By: Patrick Sheaffer
Chairman, President and Chief Executive Officer
THE SHARES OF COMMON STOCK BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL
AGENCY. THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY STOCK.
THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
FACTS ABOUT CONVERSION AND
REORGANIZATION
The Boards of Directors of Riverview Savings Bank, FSB ("Riverview Savings" or
the "Savings Bank") and Riverview, M.H.C. (the "MHC") unanimously adopted a Plan
of Conversion and Agreement and Plan of Reorganization (the "Plan") to convert
the MHC from a mutual holding company to a stock holding company and
simultaneously reorganize Riverview Savings as a wholly-owned subsidiary of a
newly-formed corporation ("Conversion and Reorganization").
This brochure answers some of the most frequently asked questions about the Plan
and about your opportunity to invest in Riverview Bancorp, Inc., (the "Holding
Company" or "Riverview Bancorp"), the newly formed corporation that will serve
as the holding company for Riverview Savings following the Conversion and
Reorganization.
Investment in the stock of the Holding Company involves certain risks. For a
discussion of these risks, other factors, and a complete description of the
offerings investors are urged to read the accompanying Prospectus, especially
the discussion under the heading "Risk Factors".
WHY IS THE MHC CONVERTING TO THE STOCK HOLDING COMPANY STRUCTURE?
- --------------------------------------------------------------------------------
The stock holding company structure is a more common form of ownership than the
mutual holding company structure and offers the ability to diversify the MHC's
and the Savings Bank's business activities. The Conversion and Reorganization
will increase both the capital base of the Savings Bank and the number of
outstanding shares, which will increase the likelihood of the development of an
active and liquid market for the common stock of the Holding Company.
WILL THE PLAN AFFECT ANY OF MY DEPOSIT ACCOUNTS OR LOANS?
No. The Plan will not effect the balance or terms of any savings account or
loan, and your deposits will continue to be federally insured by the Federal
Deposit Insurance Corporation ("FDIC") to the maximum legal limit. Your savings
account is not being converted to stock.
WHO IS ELIGIBLE TO PURCHASE STOCK IN THE SUBSCRIPTION OFFERING AND DIRECT
COMMUNITY OFFERING?
- --------------------------------------------------------------------------------
Depositors of Riverview Savings as of certain dates, the Savings Bank's Employee
Stock Ownership Plan, Riverview Savings' public stockholders, certain borrowers
and members of the general public.
HOW MANY SHARES OF STOCK ARE BEING OFFERED AND AT WHAT PRICE?
Riverview Bancorp is offering up to 1,976,571 shares of common stock ("Exchange
Shares"). The outstanding shares of common stock of the Savings Bank will be
exchanged for exchange shares according to the Exchange Ratio described in the
next section. Riverview Bancorp, Inc. is also offering up to 2,760,000 shares of
common stock ("Conversion Shares"), subject to adjustment as described in the
Prospectus, at a price of $10.00 per share through the Prospectus.
I AM AN EXISTING STOCKHOLDER. HOW WILL MY STOCK BE TREATED?
- --------------------------------------------------------------------------------
The Plan ensures that existing shareholders of the Savings Bank will own the
same aggregate percentage of the Holding Company's common stock as they own of
the Savings Bank. Depending upon where the offering closes in the Estimated
Valuation Range, an exchange ratio ranging from approximately 1.4488 to 1.9601
Exchange Shares will be applied to each share of Savings Bank common stock.
HOW MANY CONVERSION SHARES MAY I BUY?
- --------------------------------------------------------------------------------
The minimum order is 25 shares. In each of the Subscription Offering, the Direct
Community Offering or any Syndicated Offering, the maximum purchase for any
person including associates is xx,xxx shares, including any Exchange Shares to
which such person may be entitled as a shareholder of the Savings Bank.
DO MEMBERS HAVE TO BUY CONVERSION SHARES?
- --------------------------------------------------------------------------------
No. However, if a member of the MHC is also a stockholder of the Savings Bank,
his or her shares of Savings Bank stock will be converted automatically to
Exchange Shares.
HOW DO I ORDER CONVERSION SHARES?
- --------------------------------------------------------------------------------
You must complete the enclosed Stock Order Form and Certification Form.
Instructions for completing your Stock Order Form and Certification Form are
contained in this packet. Your order must be received by x:xx p.m., Pacific
Time, on September xx, 1997.
HOW MAY I PAY FOR MY CONVERSION SHARES?
- --------------------------------------------------------------------------------
First, you may pay by check, cash or money order. Interest will be paid by
Riverview Savings on these funds at the current passbook rate from the day the
funds are received until the completion or termination of the Plan. Second, you
may authorize us to withdraw funds from your Riverview Savings account or
certificate of deposit for the amount of funds you specify for payment. You will
not have access to these funds from the day we receive your order until
completion or termination of the Plan. Riverview Savings will waive any early
withdrawal penalties on certificate accounts used to purchase stock.
<PAGE>
CAN I PURCHASE SHARES USING FUNDS IN MY RIVERVIEW SAVINGS IRA ACCOUNT?
- --------------------------------------------------------------------------------
Federal regulations do not permit the purchase of Conversion Shares from your
existing IRA account at the Savings Bank. Please call our Stock Information
Center for additional
information.
WILL THE STOCK BE INSURED?
- --------------------------------------------------------------------------------
No. Like any other common stock, the Holding Company's common stock will not be
insured.
WILL DIVIDENDS BE PAID ON THE STOCK?
- --------------------------------------------------------------------------------
The Board of Directors of the Holding Company intends to pay cash dividends on
the common stock at an initial quarterly rate equal to $0.xx per share divided
by the final exchange ratio, commencing with the first full quarter following
consummation of the conversion and reorganization. However no assurances can be
given that such dividends will be paid, or if paid, will continue.
HOW WILL THE STOCK BE TRADED?
- --------------------------------------------------------------------------------
The Company's common stock has been approved for listing on the Nasdaq National
Market System under the symbol "RVSB". However, no assurance can be given that
an active and liquid market will develop.
MUST I PAY A COMMISSION?
- --------------------------------------------------------------------------------
No. You will not be charged a commission or fee on the purchase of shares in the
Conversion and Reorganization.
SHOULD I VOTE?
- --------------------------------------------------------------------------------
Yes. Your "YES" vote is very important!
PLEASE VOTE, SIGN AND RETURN ALL
PROXY CARDS!
WHY DID I GET SEVERAL PROXY CARDS?
- --------------------------------------------------------------------------------
If you have more than one account, you could receive more than one proxy card,
depending on the ownership structure of your accounts. If you own shares of
common stock of the Savings Bank in more than one account, you could receive
more than on proxy card for the Savings Bank's Meeting of Stockholders.
HOW MANY VOTES DO I HAVE?
- --------------------------------------------------------------------------------
Your proxy card(s) show(s) the number of votes you have. Every member of the MHC
entitled to vote may cast one vote for each $100, or fraction thereof, on
deposit at the Savings Bank as of the voting record date. Additionally, certain
borrowers of the Savings Bank entitled to vote may cast one vote for each loan
with the Savings Bank. Each stockholder of the Savings Bank is entitled to cast
one vote for each share held as of the voting record date.
MAY I VOTE IN PERSON AT THE SPECIAL MEETING OF MEMBERS AND/OR THE MEETING OF
STOCKHODLERS?
- --------------------------------------------------------------------------------
Yes, but we would still like you to sign and mail your proxy today. If you
decide to revoke your proxy you may do so by giving notice at the appropriate
meeting.
FOR ADDITIONAL INFORMATION YOU MAY CALL OUR STOCK INFORMATION CENTER BETWEEN
9:00 A.M. AND 5:00 P.M. MONDAY THROUGH THURSDAY OR FRIDAY BETWEEN 9:00 A.M. AND
5:30 P.M., PACIFIC TIME.
================================================================================
STOCK INFORMATION CENTER
(360) xxx-xxxx
================================================================================
Riverview Bancorp, Inc.
700 N.E. Fourth Avenue
Camas, Washington 98067
STOCK OFFERING
QUESTIONS
AND
ANSWERS
- --------------------------------------------------------------------------------
Riverview Bancorp, Inc.
THE STOCK OFFERED IN THE CONVERSION IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED OR GUARANTEED. THIS IS NOT AN OFFER TO SELL OR A SOLICIATION
OF AN OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS
ACCOMPANIED BY A STOCK ORDER FORM AND CERTIFICATION FORM.
<PAGE>
================================================================================
PROXY GRAM
We recently forwarded to you a proxy statement and letter advising that
Riverview, M.H.C. had received conditional approval to convert from a mutual
holding company to a stock holding company.
Your vote on our Plan of Conversion and Agreement and Plan of Reorganization has
not yet been received. Failure to Vote has the Same Effect as Voting Against the
Plan of Conversion and Agreement and Plan of Reorganization.
Your vote is important to us. Therefore, we are requesting that you sign the
enclosed proxy card and return it promptly in the enclosed postage-paid
envelope.
Voting for the Plan of Conversion and Agreement and Plan of Reorganization does
not obligate you to purchase stock or affect the terms or insurance on your
accounts.
The Boards of Directors of Riverview, M.H.C. unanimously recommend that you vote
"FOR" the Plan of Conversion and Agreement and Plan of Reorganization.
RIVERVIEW, M.H.C.
Camas, Washington
Patrick Sheaffer
Chairman, President and Chief Executive Officer
- --------------------------------------------------------------------------------
If you mailed the proxy, please accept our thanks and disregard this request.
For further information call (360) xxx-xxxx.
The shares of common stock being offered are not savings accounts or deposits
and are not insured by the Federal Deposit Insurance Corporation, the Bank
Insurance Fund or any other governmental agency. This is not an offer to sell or
a solicitation of an offer to buy stock. The offer is made only by the
Prospectus.
================================================================================
<PAGE>
Proxy Card
- -------------------------------------------------------------------------------
Riverview Bancorp, Inc.
Proposed Holding Company for Riverview Savings Bank, FSB
Stock Information Center
700 N.E. Fourth Street
Camas, Washington
(360) xxx-xxxx
Stock Order Form
- --------------------------------------------------------------------------------
Deadline The Subscription Offering ends at x:xx p.m., Pacific Time, on September
xx, 1997. Your original Stock Order and Certification Form, properly executed
and with the correct payment, must be received at the address on the top of this
form by this deadline, or it will be considered void.
- --------------------------------------------------------------------------------
(1) Number of Shares Price Per Share (2) Total Amount Due
x $10.00 = $
- -------------------- --------------------
The minimum number of shares that may be subscribed for is 25. The maximum
individual subscription, when combined with exchange shares, is xx,xxx shares in
the Subscription Offering and Direct Community Offering.
- --------------------------------------------------------------------------------
Method of Payment
(3)[ ] Enclosed is a check, bank draft or money order payable to Riverview
Bancorp, Inc. for $_________________ (or cash if presented in person).
(4)[ ] I authorize Riverview Savings to make withdrawals from my Riverview
Savings certificate or savings account (s) shown below, and understand
that the amounts will not otherwise be available for withdrawal:
Account Number (s) Amount (s)
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Withdrawal
-------------------------
(5)[ ] Check here if you are a director, officer or employee of Riverview
Savings or a member of such person's immediate family.
- --------------------------------------------------------------------------------
(6)[ ] Associate - Acting in Concert
Check here, and complete the reverse side of this form, if you or any
associates (as defined on the reverse side of this form) or persons
acting in concert with you have submitted other orders for shares in the
Subscription Offering and/or Direct Community Offering.
- --------------------------------------------------------------------------------
(7) Purchaser Information (additional space on back of form)
a.[ ] Eligible Account Holder - Check here if you were a depositor with $50.00
or more on deposit with Riverview Savings as of December 31, 1995. Enter
information below for all deposit accounts that you had at Riverview
Savings on December 31, 1995.
b.[ ] Supplemental Eligible Account Holder - Check here if you were a
depositor with $50.00 or more on deposit with Riverview Savings as of
XXXX 3x, 1997, but are not an Eligible Account Holder. Enter information
below for all deposit accounts that you had at Riverview Savings on XXXX
3x, 1997.
c.[ ] Other Member - Check here if you were a depositor of Riverview Savings
as of August xx, 1997, and borrowers of Riverview Savings with loans
outstanding as of October 22, 1993 which continue to be outstanding as
of August xx, 1997 but are not an Eligible Account Holder or a
Supplemental Eligible Account Holder. Enter information below for all
deposit accounts that you had at Riverview Savings on August xx, 1997.
d.[ ] Local Community - Check here if you are a permanent resident of Clark,
Cowlitz, Klickitat or Skamania counties, Washington.gs
e.[ ] Shareholder - Check here if you are a shareholder of Riverview Savings
as of August xx, 1997.
Account Title (Names on Accounts) Account Number
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(8)[ ] Stock Registration
<TABLE>
<S> <C> <C>
[ ] Individual [ ] Uniform Transfer to Minors [ ] Partnership
[ ] Joint Tenants [ ] Uniform Gift to Minors [ ] Individual Retirement Account
[ ] Tenants in Common [ ] Corporation [ ] Fiduciary/Trust (Under Agreement Dated _________________)
</TABLE>
- --------------------------------------------------------------------------------
Name Social Security or Tax I.D.
- --------------------------------------------------------------------------------
Name Social Security or Tax I.D.
- --------------------------------------------------------------------------------
Street Addressr Daytime Telephone
- --------------------------------------------------------------------------------
City State Zip Code Evening Telephone
- --------------------------------------------------------------------------------
[ ]NASD Affiliation (This section only applies to those individuals who meet the
delineated criteria)
Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of the
immediate family of any such person to whose support such person contributes,
directly or indirectly, or the holder of an account in which an NASD member or
person associated with an NASD member has a beneficial interest. To comply with
conditions under which an exemption from the NASD's Interpretation With Respect
to Free-Riding and Withholding is available, you agree, if you have checked the
NASD affiliation box: (1) not to sell, transfer or hypothecate the stock for a
period of three months following the issuance and (2) to report this
subscription in writing to the applicable NASD member within one day of the
payment therefor.
- --------------------------------------------------------------------------------
Acknowledgment By signing below, I acknowledge receipt of the Prospectus dated
August xx, 1997 and understand I may not change or revoke my order once it is
received by Riverview Bancorp, Inc. I also certify that this stock order is for
my account and there is no agreement or understanding regarding any further sale
or transfer of these shares. Federal regulations prohibit any persons from
transferring, or entering into any agreement directly or indirectly to transfer,
the legal or beneficial ownership of conversion subscription rights or the
underlying securities to the account of another person. Riverview Savings Bank,
FSB will pursue any and all legal and equitable remedies in the event it becomes
aware of the transfer of subscription rights and will not honor orders known by
it to involve such transfer. Under penalties of perjury, I further certify that:
(1) the social security number or taxpayer identification number given above is
correct; and (2) I am not subject to backup withholding. You must cross out this
item, (2) above, if you have been notified by the Internal Revenue Service that
you are subject to backup withholding because of under- reporting interest or
dividends on your tax return. By signing below, I also acknowledge that I have
not waived any rights under the Securities Act of 1933 and the Securities
Exchange Act of 1934.
Signature THIS FORM MUST BE SIGNED AND DATED TWICE: Here and on the
Certification Form on the reverse side. THIS ORDER IS NOT VALID IF THE STOCK
ORDER FORM AND CERTIFICATION FORM ARE NOT BOTH SIGNED. YOUR ORDER WILL BE FILLED
IN ACCORDANCE WITH THE PROVISIONS OF THE PROSPECTUS. When purchasing as a
custodian, corporate officer, etc., include your full title. An additional
signature is required only if payment is by withdrawal from an account that
requires more than one signature to withdraw funds.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
- --------------------------------------------------------------------------------
Signature Title (if applicable) Date
- --------------------------------------------------------------------------------
Signature Title (if applicable) Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR OFFICE Date Rec'd ___/___/___ Order # ________
USE Check # ___________ Category ________
Batch# _______ Amount $ ___________ Deposit _________
<PAGE>
Proxy Card
- -------------------------------------------------------------------------------
Riverview Bancorp, Inc.
Proposed Holding Company for Riverview Savings Bank, FSB
- --------------------------------------------------------------------------------
Item (6) continued; Associate - Acting in Concert
Associates listed on Number of
other stock orders shares ordered
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Item (7) continued; Purchaser Informations
Account Title (Names on Accounts) Account Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Definition of Associate
The term "associate" of a person is defined to mean (i) any corporation or other
organization (other than Riverview Bancorp, Inc. ("Holding Company"), Riverview
Savings Bank , FSB ("Riverview Savings"), or a majority owned subsidiary of
Riverview Savings) of which such person is a director, officer or partner or is
directly or indirectly the beneficial owner of 10% or more of any class of
equity securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, provided, however, that such term shall not
include any tax-qualified employee stock benefit plan of the Holding Company or
Riverview Savings in which such person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity; and (iii) any relative
or spouse of such person, or any relative of such person, who either has the
same home as such person or who is a director or officer of the Holding Company
or Riverview Savings or any of their subsidiaries.
- --------------------------------------------------------------------------------
CERTIFICATION FORM
(This Certification Must Be Signed In Addition to the Stock Order Form On
Reverse Side)
I ACKNOWLEDGE THAT THE SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE, OF
RIVERVIEW BANCORP, INC. IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT FEDERALLY
INSURED, AND IS NOT GUARANTEED BY RIVERVIEW SAVINGS BANK, FSB OR BY THE FEDERAL
GOVERNMENT.
If anyone asserts that the shares of common stock are federally insured or
guaranteed, or are as safe as an insured deposit, I should call the Office of
Thrift Supervision Western Regional Acting Director, Charles A. Deardorf, at
(415) 616-1500.
I further certify that, before purchasing the shares of common stock of
Riverview Bancorp, Inc., I received a copy of the Prospectus dated, August xx,
1997 which discloses the nature of the shares of common stock being offered
thereby and describes the following risks involved in an investment in the
common stock under the heading "Risk Factors" beginning on page 1 of the
Prospectus:
1. Certain Lending Risks
2. Interest Rate Risk
3. Competition
4. Return on Equity After Conversion and Reorganization
5. Expenses Associated with ESOP and MRP
6. Anti-takeover Considerations
7. Possible Dilutive Effect of Benefit Programs
8. Absence of Prior Market for the Common Stock
9. Possible Increase in Estimated Price Range and Number of Shares Issued
10. Recent Legislation and the Future of the Thrift Industry
11. Possible Adverse Income Tax Consequences of the Distribution of
Subscription Rights
- --------------------------------------------------------------------------------
Signature Date Signature Date
- --------------------------------------------------------------------------------
(Note: If stock is to be held jointly, both parties must sign)
<PAGE>
Riverview Bancorp, Inc.
Stock Ownership Guide and Stock Order Form Instructions
Stock Order Form Instructions
- --------------------------------------------------------------------------------
Item 1 and 2 - Fill in the number of shares that you wish to purchase and the
total payment due. The amount due is determined by multiplying the number of
shares ordered bye subscription price of $10.00 per share. The minimum purchase
is 25 shares. The maximum individual subscription, when combined with exchange
shares, is xx,xxx shares in the Subscription and Direct Community Offerings.
Riverview Bancorp, Inc. reserves the right to reject the subscription of any
order received in the Direct Community Offering, if any, in whole or in part.
Item 3 - Payment for shares may be made in cash (only if delivered by you in
person), by check, bank draft or money order payable to Riverview Bancorp, Inc.
DO NOT MAIL CASH. Your funds will earn interest at Riverview Saving's current
passbook rate of x.xx%.
Item 4 - To pay by withdrawal from a savings account or certificate at Riverview
Savings, insert the account number(s) and the amount(s) you wish to withdraw
from each account. If more than one signature is required to withdraw, each must
sign in the signature box on the front of this form. To withdraw from an account
with checking privileges, please write a check. No early withdrawal penalty will
be charged on funds used to purchase stock. A hold will be placed on the
account(s) for the amount(s) you show. Payments will remain in account(s) until
the stock offering closes. If a partial withdrawal reduces the balance of a
certificate account to less than the applicable minimum, the remaining balance
will thereafter earn interest at the passbook rate.
Item 5 - Please check this box to indicate whether you are a director, officer
or employee of Riverview Savings Bank, FSB or a member of such person's
immediate family
Item 6 - Please check this box if you or any associate (as defined on the
reverse side of the Stock Order Form) or person acting in concert with you has
submitted another order for shares and complete the reverse side of the Stock
Order Form.
Item 7 - Please check the appropriate box if you were:
a) depositor with $50.00 or more on deposit at Riverview Savings as of
December 31, 1995. Enter information below for all deposit accounts
that you had at Riverview Savings on December 31, 1995.
b) A depositor with $50.00 or more on deposit at Riverview Savings as of
XXXX 3x, 1997, but are not an Eligible Account Holder. Enter
information below for all deposit accounts that you had at Riverview
Savings on XXXX 3x, 1997.
c) A depositor of Riverview Savings as of August xx, 1997 or a borrower
of Riverview Savings with loans outstanding as of October 22, 1993
which continue to be outstanding as of August xx, 1997, but are not an
Eligible Account Holder or a Supplemental Eligible Account Holder.
Enter information below for all deposit accounts that you had at
Riverview Savings on August xx, 1997.
d) A permanent resident of Clark, Cowlitz, Klickitat or Skamania
Counties, Washington.
e) Shareholder of Riverview Savings as of August xx, 1997.
Item 8 - The stock transfer industry has developed a uniform system of
shareholder registrations that we will use in the issuance of Riverview Bancorp,
Inc. common stock. Please complete this section as fully and accurately as
possible, and be certain to supply your social security or Tax I.D. number(s)
and your daytime and evening phone numbers. We will need to call you if we can
not execute you order as given. If you have any questions regarding the
registration of your stock, please consult your legal advisor. Subscription
rights are not transferable. If you are a qualified member, to protect your
priority over other purchasers as described in the Prospectus, you must take
ownership in at least one of the account holder's names.
Stock Ownership Guide
- --------------------------------------------------------------------------------
Individual - The Stock is to be registered in an individual's name only, You man
not list beneficiaries for this ownership
Joint Tenants - Joint tenants with rights of survivorship identifies two or more
owners. When stock is held by joint tenants with rights of survivorship,
ownership automatically passes to the surviving joint tenant(s) upon the death
of any joint tenant. You may not list beneficiaries for this ownership.
Tenants in Common - Tenants in common may also identify two or more owners. When
stock is to be held by tenants in common, upon the death of one co-tenant,
ownership of the stock will be held by the surviving co-tenant(s) and by the
heirs of the deceased co-tenant. All parties must agree to the transfer or sale
of shares held by tenants in common. You may not list beneficiaries for this
ownership.
Uniform Gift to Minors - For residents of many states, stock may by held in the
name of a custodian for the benefit of a minor under the Uniform Gift to Minors
Act. For residents in other states, stock may be held in a similar type of
ownership under the Uniform Transfer to Minors Act of the individual state. For
either ownership, the minor is the actual owner of the stock with the adult
custodian being responsible for the investment until the child reaches legal
age. Only one custodian and one minor may be designated.
Instructions: On the first name line, print the first name, middle initial and
last name of the custodian, with the abbreviation "CUST" after the name. Print
the first name, middle initial and last name of the minor on the second name
line. Use the minor's social security number.
Corporation/Partnership - Corporation/Partnerships may purchase stock. Please
provide the Corporation/Partnership's legal name and Tax I.D. To have depositor
rights, the Corporation/Partnership must have an account in the legal name.
Please contact the Stock Information Center to verify depositor rights and
purchase limitations.
Individual Retirement Account - Individual Retirement Account ("IRA") holders
may make stock purchases from their deposits through a prearranged
"trustee-to-trustee" transfer. Stock may only be held in a self-directed IRA.
Riverview Savings does not offer a self-directed IRA.
Please contact the Stock Information Center if you have any questions about your
IRA account.
Fiduciary/Trust - Generally, fiduciary relationships (such as Trusts, Estates,
Guardianships, etc.) are established under a form of trust agreement or pursuant
to a court order. Without legal document establishing a fiduciary relationship,
your stock may not be registered in a fiduciary capacity.
Instructions: On the first name line, print the first name, middle initial and
last name of the fiduciary if the fiduciary is an individual. If the fiduciary
is a corporation, list the corporate title on the first name line. Following the
name, print the fiduciary title such as trustee, executor, personal
representative, etc. On the second name line, print the name of the maker ,
donor or testator or the name of the beneficiary. Following the name, indicate
the type of legal document establishing the fiduciary relationship (agreement,
court order, etc.). In the blank after "Under Agreement Dated", fill in the date
of the document governing the relationship. The date of the document need not be
provided for a trust created by a will.
EXHIBIT 99.3
Agreement with RP Financial, LC.
<PAGE>
[LETTERHEAD] RP Financial, LC.
April 7, 1997
Mr. Patrick Sheaffer
Chairman, President and Chief Executive Officer
Riverview Savings Bank, FSB
700 NE 4th Avenue
Camas, Washington 98607
Dear Mr. Sheaffer:
This letter sets forth the agreement between Riverview Savings Bank, FSB,
Camas, Washington ("Riverview" or the "Bank") and RP Financial, LC. ("RP
Financial") for certain conversion appraisal services pertaining to the
mutual-to-stock conversion of Riverview, M.H.C. (the "MHC"), a federal mutual
holding company and the majority shareholder of Riverview, and the Plan of
Reorganization between the MHC and Riverview. The specific services to be
rendered by RP Financial are described below. These services will be rendered by
a team of two senior consultants on staff.
Description of Conversion Appraisal Services
RP Financial will prepare a written detailed valuation report which will be
fully consistent with applicable regulatory guidelines and standard valuation
practices. The valuation report will conclude with an estimate of the pro forma
market value of the shares of stock to be offered and sold in the conversion. RP
Financial understands that as part of the conversion, the shares of Riverview
which are held by public shareholders (i.e. stockholders other than the MHC)
will be exchanged for newly issued shares of common stock of a newly organized
stock holding company ("SHC") and that shares offered in the conversion will be
SHC shares. The valuation report will incorporate such key transaction
parameters as the financial strength and operations of Riverview, the proposed
treatment in the conversion of the publicly-traded shares of Riverview
(including the proposed exchange), and the financial strength and operations of
the MHC unconsolidated. The estimate of pro forma market value will be a
preliminary value, subject to confirmation by RP Financial at the closing of the
offering.
Prior to preparing the valuation report, RP Financial will conduct a
financial due diligence, including on-site interviews of senior management and
reviews of financial and other documents and records, to gain insight into the
operations, financial condition, profitability, risks and external factors which
impact the Bank. The valuation will include an in-depth analysis of the Bank's
financial condition and operating results, as well as assess the Bank's interest
rate risk, credit risk and liquidity risk. The valuation report will describe
the Bank's business strategies and market area and prospects for the future. A
peer group analysis relative to publicly-traded savings institutions will be
conducted for the purpose of determining appropriate valuation adjustments
relative to the group. The valuation report will conclude with a midpoint pro
forma valuation for the shares to be offered in the conversion, as well as a
range of value around the midpoint value. The valuation report may be
periodically updated throughout the conversion process and there will be at
least one updated valuation prepared at the time of the closing of the stock
offering.
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone (703 528-1700
Arlington, Va 22209 Fax. No:(703)528-1788
<PAGE>
RP Financial, LC.
Mr. Patrick Sheaffer
April 7, 1997
Page 2
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to Riverview at the above address in conjunction with the
filing of the regulatory application. Subsequent updates will be filed promptly
as certain events occur which would warrant the preparation and filing of such
valuation updates. Further, RP Financial agrees to perform such other services
as are necessary or required in connection with the regulatory review of the
appraisal and respond to the regulatory comments, if any, regarding the
valuation appraisal and subsequent updates.
Fee Structure and Payment Schedule
Riverview agrees to pay RP Financial a fixed fee of $25,000 for these
services, plus reimbursable expenses. Payment of these fees shall be made
according to the following schedule:
o $5,000 upon execution of the letter of agreement engaging RP
Financial's services as outlined herein;
o $17,500 upon delivery of the completed original appraisal report; and
o $2,500 upon completion of the conversion to cover all subsequent
valuation updates that may be required.
The Bank will reimburse RP Financial for out-of-pocket expenses incurred in
the preparation of the appraisal report. Such out-of-pocket expenses, which are
not expected to exceed $5,000 inclusive of expenses for the business plan and
appraisal, will include travel, telephone, facsimile, copying, shipping,
computer and data. RP Financial will make all attempts to keep out-of-pocket
expenses to a minimum.
In the event Riverview or the MHC shall, for any reason, discontinue the
proposed conversion prior to delivery of the completed documents set forth above
and payment of the respective progress payment fees, Riverview agrees to
compensate RP Financial according to RP Financial's standard billing rates for
consulting services based on accumulated and verifiable time expenses, not to
exceed the respective fee caps noted above, after giving full credit to the
initial retainer fee. RP Financial's standard billing rates range from $75 per
hour for research associates to $250 per hour for managing consultants.
If during the course of the proposed transaction, unforeseen events occur
so as to materially change the nature or the work content of the services
described in this contract, the terms of said contract shall be subject to
renegotiation by Riverview and RP Financial. Such unforeseen events shall
include, but not be limited to, major changes in the conversion regulations,
appraisal guidelines or processing procedures as they relate to conversion
appraisals, major changes in management or procedures, operating policies or
philosophies, and excessive delays or suspension of processing of conversion
applications by the regulators such that completion of the conversion
transaction requires the preparation by RP Financial of a new appraisal.
Representations and Warranties
Riverview and RP Financial agree to the following:
1. The Bank agrees to make available or to supply to RP Financial such
information with respect to its business and financial condition as RP Financial
may reasonably request in order to provide the aforesaid valuation. Such
information heretofore or hereafter supplied or made available to RP Financial
shall include:
<PAGE>
RP Financial, LC.
Mr. Patrick Sheaffer
April 7, 1997
Page 3
annual financial statements, periodic regulatory filings and material
agreements, debt instruments, off balance sheet assets or liabilities,
commitments and contingencies, unrealized gains or losses and corporate books
and records. All information provided by the Bank to RP Financial shall remain
strictly confidential (unless such information is otherwise made available to
the public), and if conversion is not consummated or the services of RP
Financial are terminated hereunder, RP Financial shall upon request promptly
return to the Bank the original and any copies of such information.
2. The Bank hereby represents and warrants to RP Financial that any
information provided to RP Financial does not and will not, to the best of the
Bank's knowledge, at the times it is provided to RP Financial, contain any
untrue statement of a material fact or fail to state a material fact necessary
to make the statements therein not false or misleading in light of the
circumstances under which they were made.
3. (a) The Bank agrees that it will indemnify and hold harmless RP
Financial, any affiliates of RP Financial, the respective directors, officers,
agents and employees of RP Financial or their successors and assigns who act for
or on behalf of RP Financial in connection with the services called for under
this agreement (hereinafter referred to as "RP Financial"), from and against any
and all losses, claims, damages and liabilities (including, but not limited to,
all losses and expenses in connection with claims under the federal securities
laws) attributable to (i) any untrue statement or alleged untrue statement of a
material fact contained in the financial statements or other information
furnished or otherwise provided by Riverview to RP Financial, either orally or
in writing, (ii) the omission or alleged omission of a material fact from the
financial statements or other information furnished or otherwise made available
by Riverview to RP Financial or (iii) any action or omission to act by
Riverview, or Riverview's respective officers, directors, employees or agents
which action or omission is willful or negligent. Riverview will be under no
obligation to indemnify RP Financial hereunder if a court determines that RP
Financial was negligent or acted in bad faith with respect to any actions or
omissions of RP Financial related to a matter for which indemnification is
sought hereunder. Any time devoted by employees of RP Financial to situations
for which indemnification is provided hereunder, shall be an indemnifiable cost
payable by Riverview at the normal hourly professional rate chargeable by such
employee.
(b) RP Financial shall give written notice to the Bank of such claim or
facts within thirty days of the assertion of any claim or discovery of material
facts upon which the RP Financial intends to base a claim for indemnification
hereunder. In the event the Bank elects, within seven days of the receipt of the
original notice thereof, to contest such claim by written notice to RP
Financial, RP Financial will be entitled to be paid any amounts payable by the
Bank hereunder, together with interest on such costs from the date incurred at
the rate of fifteen percent (15%) per annum within five days after the final
determination of such contest either by written acknowledgement of the Bank or a
final judgment of a court of competent jurisdiction. If the Bank does not so
elect, RP Financial shall be paid promptly and in any event within thirty days
after receipt by the Bank of the notice of the claim.
(c) The Bank shall pay for or reimburse the reasonable expenses, including
attorneys' fees, incurred by RP Financial in advance of the final disposition of
any proceeding within thirty days of the receipt of such request if RP Financial
furnishes the Bank: (1) a written statement of RP Financial's good faith belief
that it is entitled to indemnification hereunder; and (2) a written undertaking
to repay the advance if it ultimately is determined in a final adjudication of
such proceeding that it or he is not entitled to such indemnification.
(d) In the event the Bank does not pay any indemnified loss or make advance
reimbursements of expenses in accordance with the terms of this agreement, RP
Financial shall have all remedies available at law or in equity to enforce such
obligation.
It is understood that, in connection with RP Financial's above-mentioned
engagement, RP Financial may also be engaged to act for the Bank in one or more
additional capacities, and that the terms of the original
<PAGE>
RP Financial, LC.
Mr. Patrick Sheaffer
April 7, 1997
Page 5
engagement may be embodied in one or more separate agreements. The provisions of
Paragraph 3 herein shall apply to the original engagement, any such additional
engagement, any modification of the original engagement or such additional
engagement and shall remain in full force and effect following the completion or
termination of RP Financial's engagement(s). This agreement constitutes the
entire understanding of the Bank and RP Financial concerning the subject matter
addressed herein, and such contract shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia. This agreement may not
be modified, supplemented or amended except by written agreement executed by
both parties.
Riverview and RP Financial are not affiliated, and neither Riverview nor RP
Financial has an economic interest in, or is held in common with, the other and
has not derived a significant portion of its gross revenues, receipts or net
income for any period from transactions with the other.
The MHC and RP Financial are not affiliated, and neither the MHC nor RP
Financial has an economic interest in, or is held in common with, the other and
has not derived a significant portion of its gross revenues, receipts or net
income for any period from transactions with the other.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as indicated
below and returning to RP Financial a signed copy of this letter, together with
the initial retainer fee of $5,000.
Sincerely,
/s/William E. Pommerening
-------------------------
William E. Pommerening
Chief Executive Officer
and Managing Director
Agreed To and Accepted By: Mr. Patrick Sheaffer /s/Mr. Patrick Sheaffer
------------------------------
Chairman, President and Chief Executive Officer
For: Riverview Savings Bank, FSB
Camas, Washington
Date Executed: April 24, 1997
-----------------
EXHIBIT 99.5
Proxy Statement for Special Meeting of
Members of Riverview, M.H.C.
<PAGE>
RIVERVIEW, M.H.C.
700 N.E. Fourth Avenue
P.O. Box 1068
Camas, Washington 98607
(360) 834-2231
NOTICE OF SPECIAL MEETING OF MEMBERS
To be Held on September ___, 1997
Notice is hereby given that a special meeting ("Special Meeting") of
members of Riverview, M.H.C. ("MHC") will be held at the main office of
Riverview Savings Bank, FSB ("Savings Bank") at 700 N.E. Fourth Avenue, Camas,
Washington, on __________, September ____, 1997, at ___:___ __.m., Pacific Time.
Business to be taken up at the Special Meeting shall be:
(1) To approve a Plan of Conversion from Mutual Holding Company to Stock
Holding Company and Agreement and Plan of Reorganization ("Plan of
Conversion") between the MHC and Riverview Savings Bank, FSB ("Savings
Bank"), pursuant to which the Savings Bank organized Riverview
Bancorp, Inc. ("Holding Company") and, upon consummation of the
following transactions, the Savings Bank will become a wholly owned
subsidiary of the Holding Company: (i) the MHC, which currently owns
____% of the outstanding shares of common stock of the Savings Bank,
will convert from mutual holding company to a federal interim stock
savings bank ("Interim A") and simultaneously merge with and into the
Savings Bank, with the Savings Bank as the surviving entity; (ii) the
Savings Bank will merge with and into an interim stock savings bank
("Interim B") to be formed as a wholly owned subsidiary of the Holding
Company, with the Savings Bank being the surviving entity; (iii) the
outstanding shares of common stock of the Savings Bank (other than
those held by the MHC which will be canceled) ("Public Savings Bank
Shares") will be exchanged for shares of common stock of the Holding
Company ("Exchange Shares") pursuant to a ratio that will result in
the holders of such shares owning in the aggregate the same percentage
of the outstanding shares of common stock of the Holding Company as
they currently own in the Savings Bank, before giving effect to such
stockholders purchasing additional shares of common stock of the
Holding Company ("Conversion Shares") in a concurrent stock offering
by the Holding Company ("Conversion Offerings") or by the Savings
Bank's employee stock ownership plan thereafter or receiving cash in
lieu of fractional Exchange Shares; and (iv) the offer and sale of
Conversion Shares by the Holding Company in the Conversion Offerings
(collectively, "Conversion and Reorganization"), all undertaken
pursuant to the laws of the United States and the rules and
regulations of the Office of Thrift Supervision; and
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: As of the date of mailing of this Notice, the Board of Directors is
not aware of any other matters that may come before the Special Meeting.
<PAGE>
The members entitled to vote at the Special Meeting shall be those members
of the MHC at the close of business on _______ __, 1997, and who continue as
members until the Special Meeting, and should the Special Meeting be, from time
to time, adjourned to a later time, until the final adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
PHYLLIS KREIBICH
SECRETARY
Camas, Washington
August ___, 1997
PLEASE SIGN AND RETURN PROMPTLY EACH PROXY CARD YOU RECEIVE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. THIS WILL ASSURE NECESSARY REPRESENTATION AT THE SPECIAL
MEETING, BUT WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU SO DESIRE. THE
PROXY IS SOLICITED ONLY FOR THIS SPECIAL MEETING (AND ANY ADJOURNMENTS THEREOF)
AND WILL NOT BE USED FOR ANY OTHER MEETING. YOU MAY REVOKE YOUR WRITTEN PROXY BY
WRITTEN INSTRUMENT DELIVERED TO PHYLLIS KREIBICH, SECRETARY, RIVERVIEW, M.H.C.,
AT THE ABOVE ADDRESS AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING.
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RIVERVIEW, M.H.C.
700 N.E. FOURTH AVENUE
CAMAS, WASHINGTON 98607
(360) 834-2231
PROXY STATEMENT
September __, 1997
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF DIRECTORS OF
RIVERVIEW, M.H.C. FOR USE AT A SPECIAL MEETING OF MEMBERS TO BE HELD ON
_________, SEPTEMBER __, 1997, AND ANY ADJOURNMENT OF THAT MEETING, FOR THE
PURPOSES SET FORTH IN THE FOREGOING NOTICE OF SPECIAL MEETING. YOUR BOARD OF
DIRECTORS AND MANAGEMENT URGE YOU TO VOTE FOR THE PLAN OF CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A special meeting of members ("Special Meeting") of Riverview, M.H.C.
("MHC") will be held at the Savings Bank's main office at 700 N.E. Fourth
Avenue, Camas, Washington, on _________, September __, 1997, at __:00 _.m.,
Pacific Time, for the purpose of considering and voting upon a Plan of
Conversion and Agreement and Plan of Reorganization ("Plan of Conversion"),
which, if approved by a majority of the total votes of the members eligible to
be cast, will permit the Savings Bank to become a subsidiary of the Holding
Company, a newly organized Washington corporation formed by the Savings Bank.
The reorganization of the Savings Bank and the acquisition of control of the
Savings Bank by the Holding Company are collectively referred to herein as the
"Conversion and Reorganization."
Pursuant to the MHC's Federal Mutual Holding Company Charter, depositors of
the Savings Bank, and borrowers of the Savings Bank with a loan outstanding as
of October 22, 1993 and for as long as such loan remains outstanding, are
members of the MHC. Members entitled to vote on the Plan of Conversion are
members of the MHC as of _________, 1997 ("Voting Record Date") who continue as
members until the Special Meeting, and should the Special Meeting be, from time
to time, adjourned to a later time, until the final adjournment thereof. The
Conversion and Reorganization requires the approval of not less than a majority
of the total votes eligible to be cast at the Special Meeting.
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) Interim A
will then merge with and into the Savings Bank. As a result of the merger of
Interim A with and into the Savings Bank, the Savings Bank will become a wholly
owned subsidiary of the Holding Company and the shares of Savings Bank Common
Stock held by persons other than the MHC ("Public Savings Bank Shares") will be
converted into shares of common stock of the Holding Company ("Exchange Shares")
pursuant to a ratio ("Exchange Ratio"), which will result in the holders of such
shares owning in the aggregate approximately the same percentage of the Common
Stock to be outstanding upon the completion of the Conversion and Reorganization
as the percentage of Savings Bank Common Stock owned by them in the aggregate
immediately prior to consummation of the Conversion and Reorganization, but
before giving effect to (a) the payment of cash in lieu of issuing fractional
Exchange Shares and (b) any Conversion Shares (defined below) purchased by the
Savings Bank's stockholders in the Conversion Offerings (defined below) or the
ESOP thereafter.
As part of the Plan of Conversion, nontransferable rights to subscribe
("Subscription Rights") for up to 2,760,000 shares of common stock ("Conversion
Shares") have been granted, in order of priority, to (i) depositors with $50.00
or more on deposit at the Savings Bank as of December 31, 1995 ("Eligible
Account Holders"), (ii) the
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ESOP, a tax-qualified employee benefit plan, (iii) depositors with $50.00 or
more on deposit at the Savings Bank as of June 30, 1997 ("Supplemental Eligible
Account Holders"), and (iv) depositors of the Savings Bank (other than Eligible
Account Holders and Supplemental Eligible Account Holders) as of ________ __,
1997 ("Voting Record Date"), and borrowers of the Savings Bank with loans
outstanding as of October 22, 1993 which continue to be outstanding as of the
Voting Record Date ("Other Members"), subject to the priorities and purchase
limitations set forth in the Plan of Conversion ("Subscription Offering").
Concurrently, but subject to the prior rights of Subscription Rights holders,
the Holding Company is offering the Conversion Shares for sale to members of the
general public through a direct community offering ("Direct Community Offering")
with preference given first to Public Stockholders (who are not Eligible Account
Holders, Supplemental Eligible Account Holders or Other Members) and then to
natural persons and trusts of natural persons who are permanent residents of
Clark, Calix, Klickitat and Skamania Counties of Washington ("Local Community").
It is anticipated that any Conversion Shares not subscribed for in the
Subscription Offering or purchased in the Direct Community Offering will be
offered to eligible members of the general public on a best efforts basis by a
selling group of broker-dealers managed by Pacific Crest in a syndicated
community offering ("Syndicated Community Offering"). The Subscription Offering,
Direct Community Offering and the Syndicated Community Offering are referred to
collectively as the "Conversion Offerings." The Holding Company, Savings Bank
and MHC are collectively referred to herein as the "Primary Parties." The
Primary parties reserve the right, in their absolute discretion, to accept or
reject, in whole or in part, any or all orders in the Direct Community Offering
or Syndicated Community Offering either at the time of receipt of an order or as
soon as practicable following the termination of the Conversion Offerings. If an
order is rejected in part, the purchaser does not have the right to cancel the
remainder of the order.
RIVERVIEW, M.H.C.
The MHC is the federally-chartered mutual holding company for the Savings
Bank. The MHC was formed in October 1993 as a result of the reorganization of
the Savings Bank into a federally chartered mutual holding company ("MHC
Reorganization"). The members of the MHC consist of depositors of the Savings
Bank and those current borrowers of the Savings Bank who had loans outstanding
as of the consummation date of the MHC Reorganization (October 22, 1993).
Currently, the MHC's sole business activity is holding the _______ shares of
Savings Bank Common Stock, which represents ___% of the outstanding shares as of
the date of this Prospectus. The MHC's main office is located at 700 N.E. Fourth
Avenue, Camas, Washington 98607, and its telephone number is (360) 834-2231. As
part of the Conversion and Reorganization, the MHC will convert to a
federally-chartered interim stock savings bank and simultaneously merge with and
into the Savings Bank, with the Savings Bank as the surviving entity.
RIVERVIEW SAVINGS BANK, FSB
The Savings Bank is a federally-chartered savings bank, founded in 1923 and
headquartered in Camas, Washington. The Savings Bank's deposits are insured by
the FDIC up to applicable legal limits under the SAIF. The Savings Bank has been
a member of the Federal Home Loan Bank ("FHLB") system since 1937. The Savings
Bank is regulated by the OTS and the FDIC. At March 31, 1997, the Savings Bank
had total assets of $224.4 million, total deposit accounts of $169.4 million,
and total shareholders' equity of $25.0 million, on a consolidated basis.
On October 22, 1993, when the MHC Reorganization was consummated, the
Savings Bank completed its initial stock offering by issuing 1,725,000 shares of
Savings Bank Common Stock, of which 690,000 shares were purchased by the Public
Stockholders and 1,007,400 shares were issued to the MHC. Stock dividends issued
and stock options exercised subsequent to the initial public offering have
increased the total shares issued and outstanding to _______ as of the date of
this Prospectus, of which ________ shares are held by the Public Stockholders
and _______ shares are held by the MHC.
The Savings Bank is a community oriented financial institution offering
traditional financial services to the residents of its primary market area. The
Savings Bank considers Clark, Cowlitz, Klickitat and Skamania Counties
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of the State of Washington as its primary market area. The Savings Bank is
engaged primarily in the business of attracting deposits from the general public
and using such funds to originate fixed-rate mortgage loans and adjustable rate
mortgage ("ARM") loans secured by one- to- four family residential real estate
located in its primary market area. The Savings Bank is also an active
originator of residential construction loans and consumer loans. At March 31,
1997, one- to- four family mortgage loans were $94.5 million, or 62.3% of total
net loans receivable and loans held for sale (collectively, "total net loans
receivable"), residential construction loans were $32.5 million, or 21.4% of
total net loans receivable, and consumer loans were $14.3 million, or 9.4% of
total net loans receivable. To a lesser extent, the Savings Bank originates land
loans ($7.9 million or 5.2% of total net loans receivable at March 31, 1997) and
commercial real estate loans ($9.0 million or 5.9% of total net loans receivable
at March 31, 1997). Substantially all of the Savings Bank's real estate loans
are secured by real estate located in its primary market area. Construction,
consumer, land and commercial real estate loans generally involve a greater risk
of loss than one- to- four family mortgage loans. See "RISK FACTORS -- Certain
Lending Risks" in the Prospectus.
In addition to originating one- to- four family loans for its portfolio,
the Savings Bank is an active mortgage broker for several third party mortgage
lenders. In recent periods, such mortgage brokerage activities have reduced the
volume of fixed-rate one- to- four family loans that are originated and sold by
the Savings Bank. See "-- Loan Originations, Sales and Purchases" and "--
Mortgage Brokerage" in the Prospectus.
The Savings Bank also invests in short- to- intermediate term U.S. Treasury
securities and U.S. Government agency obligations, and mortgage-backed
securities issued by U.S. Government agencies. At March 31, 1997, the Savings
Bank's investment and mortgage-backed securities portfolio had a carrying value
of $53.7 million. See "BUSINESS OF THE SAVINGS BANK -- Investment Securities" in
the Prospectus.
Deposits have been the primary source of funds for the Savings Bank's
investment and lending activities. The Savings Bank plans to continue to fund
its operations primarily with deposits, although advances from the FHLB-Seattle
have been used as a supplemental source of funds. The Savings Bank has also used
FHLB advances to purchase investment securities, with the goal of recognizing
income on the difference between the interest rate earned on the investment
securities and the interest rate paid on the FHLB advances. See "BUSINESS OF THE
SAVINGS BANK -- Deposits and Other Sources of Funds" in the Prospectus.
The Savings Bank conducts its operations from its main office and eight
branch offices located in Southwest Washington State. See "BUSINESS OF THE
SAVINGS BANK -- Properties" in the Prospectus. The Savings Bank's main office is
located at 700 N.E. Fourth Avenue, Camas, Washington, and its telephone number
is (360) 834-2231.
RIVERVIEW BANCORP, INC.
The Holding Company was organized on __________, 1997 under Washington law
at the direction of the Savings Bank to acquire the Savings Bank as a
wholly-owned subsidiary upon consummation of the Conversion and Reorganization.
The Holding Company has only engaged in organizational activities to date. The
Holding Company has received conditional OTS approval to become a savings and
loan holding company through the acquisition of 100% of the capital stock of the
Savings Bank. Immediately following the Conversion, the only significant assets
of the Holding Company will be the outstanding capital stock of the Savings
Bank, 50% of the net investable proceeds of the Conversion Offerings (see table
under "PRO FORMA DATA" in the Prospectus) as permitted by the OTS to be retained
by it) and a note receivable from the ESOP evidencing a loan to enable the ESOP
to purchase 8% of the Conversion Shares issued in the Conversion and
Reorganization. Funds retained by the Holding Company will be used for general
business activities. See "USE OF PROCEEDS" in the Prospectus. Upon consummation
of the Conversion and Reorganization, the Holding Company will be classified as
a unitary savings and loan holding company subject to OTS regulation. See
"REGULATION -- Savings and Loan Holding Company Regulations" in the Prospectus.
The main office of the Holding Company is located at 700 N.E. Fourth Avenue,
Camas, Washington 98607 and its telephone number is (360) 834-2231.
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VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
The MHC's Board of Directors has fixed the close of business on ________,
1997 as the record date for the determination of members entitled to notice of
and to vote at the Special Meeting. All holders of savings or other authorized
accounts of the Savings Bank, and borrowers of the Savings Bank with loans
outstanding as of October 22, 1993 and for as long as such loans remain
outstanding, are members of the Savings Bank under its current charter. All
members of record as of the close of business on the Voting Record Date who
continue to be members on the date of the Special Meeting or any adjournment
thereof will be entitled to vote at the Special Meeting or such adjournment.
Each eligible depositor member will be entitled at the Special Meeting to
cast one vote for each $100, or fraction thereof, of the aggregate withdrawal
value of all of the depositor's savings accounts in the Savings Bank as of the
Voting Record Date. Borrowers with loans outstanding as of ________, 1997 which
continue to be outstanding as of the Voting Record Date will be entitled to cast
one vote for the period of time such borrowings remain in existence. No member
is entitled to cast more than 1,000 votes. Any number of members present and
voting, represented in person or by proxy, at the Special Meeting will
constitute a quorum.
Approval of the Plan of Conversion will require the affirmative vote of a
majority of the total outstanding votes of the MHC's members eligible to be cast
at the Special Meeting. As of the Voting Record Date for the Special Meeting,
there were approximately _________ votes eligible to be cast, of which _________
votes may be cast by depositor members and _____ votes may be cast by borrower
members.
PROXIES
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. Enclosed is a proxy which may be used by any eligible member
to vote on the Plan of Conversion. All properly executed proxies received by
management will be voted in accordance with the instructions indicated thereon
by the members giving such proxies. If no instructions are given, such proxies
will be voted in favor of the Plan of Conversion. If any other matters are
properly presented at the Special Meeting and may properly be voted on, all
proxies will be voted on such matters in accordance with the best judgment of
the proxy holders named therein. If the enclosed proxy is returned, it may be
revoked at any time before it is voted by written notice to the Secretary of the
Savings Bank, by submitting a later dated proxy, or by attending and voting in
person at the Special Meeting. The proxies being solicited are only for use at
the Special Meeting and at any and all adjournments thereof and will not be used
for any other meeting. Management is not aware of any other business to be
presented at the Special Meeting.
The trustees for individual retirement accounts at the Savings Bank, will
vote in favor of the Plan of Conversion, unless the beneficial owner executes
and returns the enclosed proxy for the Special Meeting or attends the Special
Meeting and votes in person.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or regular employees of the MHC,
in person, by telephone or through other forms of communication. Such persons
will be reimbursed by the MHC for their reasonable out-of-pocket expenses
incurred in connection with such solicitation. If necessary, the Special Meeting
may be adjourned to an alternative date.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends that you vote "FOR" the Plan
of Conversion. Voting in favor of the Plan of Conversion will not obligate any
voter to purchase any Conversion Stock.
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THE CONVERSION AND REORGANIZATION
The OTS has approved the Plan of Conversion subject to its approval by the
members of the Savings Bank and the stockholders of the Savings Bank entitled to
vote thereon and to the satisfaction of certain other conditions imposed by the
OTS in its approval. OTS approval does not constitute a recommendation or
endorsement of the Plan of Conversion.
General
On May 21, 1997, the Boards of Directors of the MHC and the Savings Bank,
and on ________, 1997, the Holding Company's Board of Directors, unanimously
adopted the Plan of Conversion, pursuant to which the MHC will convert from a
mutual holding company to a stock holding company and the Savings Bank
simultaneously reorganize as a wholly-owned subsidiary of the Holding Company, a
newly formed Washington corporation. The following discussion of the Plan of
Conversion is qualified in its entirety by reference to the Plan of Conversion,
which is attached as Exhibit A to this Proxy Statement. The Plan of Conversion
is also filed as an exhibit to the Registration Statement. See "ADDITIONAL
INFORMATION."
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank (i.e. Interim A) and simultaneously merge with and into the
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) Interim A
will then merge with and into the Savings Bank. As a result of the merger of
Interim A with and into the Savings Bank, the Savings Bank will become a wholly
owned subsidiary of the Holding Company and the Public Savings Bank Shares will
be converted into the Exchange Shares pursuant to the Exchange Ratio, which will
result in the holders of such shares owning in the aggregate approximately the
same percentage of the Common Stock to be outstanding upon the completion of the
Conversion and Reorganization (i.e., the Conversion Shares and the Exchange
Shares) as the percentage of Savings Bank Common Stock owned by them in the
aggregate immediately prior to consummation of the Conversion and
Reorganization, but before giving effect to (a) the payment of cash in lieu of
issuing fractional Exchange Shares and (b) any shares of Conversion Stock
purchased by the Savings Bank's stockholders in the Conversion Offerings or the
ESOP thereafter.
As part of the Conversion and Reorganization, the Holding Company is
offering Conversion Shares in the Subscription Offering to holders of
Subscription Rights in the following order of priority: (i) Eligible Account
Holders (depositors of the Savings Bank with $50.00 or more on deposit as of
December 31, 1995); (ii) the ESOP; (iii) Supplemental Eligible Account Holders
(depositors of the Savings Bank with $50.00 or more on deposit as of ________,
1997); and (iv) Other Members (depositors of the Savings Bank as of _______,
1997 and borrowers of the Savings Bank with loans outstanding as of October 22,
1993, which continue to be outstanding as of ________, 1997).
Concurrently with the Subscription Offering, any Conversion Shares not
subscribed for in the Subscription Offering may be offered for sale in the
Direct Community Offering to members of the general public, with priority being
given first to Public Stockholders (who are not Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members) and then to natural
persons and trusts of natural persons residing in the Local Community.
Conversion Shares not sold in the Subscription and Direct Community Offerings
may be offered in the Syndicated Community Offering. Regulations require that
the Direct Community and Syndicated Community Offerings be completed within 45
days after completion of the fully extended Subscription Offering unless
extended by the Savings Bank or the Holding Company with the approval of the
regulatory authorities. If the Syndicated Community Offering is determined not
to be feasible, the Board of Directors of the Savings Bank will consult with the
regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed Conversion Shares. The Plan of Conversion provides that
the Conversion and Reorganization must be completed within 24 months after the
date of the approval of the Plan of Conversion by the members of the MHC.
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No sales of Common Stock may be completed, either in the Subscription
Offering, Direct Community Offering or Syndicated Community Offerings unless the
Plan of Conversion is approved by the members of the MHC and the stockholders of
the Savings Bank.
The completion of the Conversion Offerings, however, is subject to market
conditions and other factors beyond the Savings Bank's control. No assurance can
be given as to the length of time after approval of the Plan of Conversion at
the Special Members Meeting and the Stockholders Meeting that will be required
to complete the Direct Community or Syndicated Community Offerings or other sale
of the Conversion Shares. If delays are experienced, significant changes may
occur in the estimated pro forma market value of the MHC and the Savings Bank,
as converted, together with corresponding changes in the net proceeds realized
by the Holding Company from the sale of the Conversion Shares. If the Conversion
and Reorganization is terminated, the Savings Bank would be required to charge
all Conversion and Reorganization expenses against current income.
Orders for Conversion Shares will not be filled until at least 2,040,000
Conversion Shares have been subscribed for or sold and the OTS approves the
final valuation and the Conversion and Reorganization closes. If the Conversion
and Reorganization is not completed within 45 days after the last day of the
fully extended Subscription Offering and the OTS consents to an extension of
time to complete the Conversion and Reorganization, subscribers will be given
the right to increase, decrease or rescind their subscriptions. Unless an
affirmative indication is received from subscribers that they wish to continue
to subscribe for shares, the funds will be returned promptly, together with
accrued interest at the Savings Bank's passbook rate from the date payment is
received until the funds are returned to the subscriber. If such period is not
extended, or, in any event, if the Conversion and Reorganization is not
completed, all withdrawal authorizations will be terminated and all funds held
will be promptly returned together with accrued interest at the Savings Bank's
passbook rate from the date payment is received until the Conversion and
Reorganization is terminated.
Purposes of Conversion and Reorganization
The MHC, as a federally chartered mutual holding company, does not have
stockholders and has no authority to issue capital stock. As a result of the
Conversion and Reorganization, the Holding Company will be structured in the
form used by holding companies of commercial banks, most business entities and a
growing number of savings institutions. The holding company form of organization
will provide the Holding Company with the ability to diversify the Holding
Company's and the Savings Bank's business activities through acquisition of or
mergers with both stock savings institutions and commercial banks, as well as
other companies. Although there are no current arrangements, understandings or
agreements regarding any such opportunities, the Holding Company will be in a
position after the Conversion and Reorganization, subject to regulatory
limitations and the Holding Company's financial position, to take advantage of
any such opportunities that may arise.
In their decision to pursue the Conversion and Reorganization, the Board of
Directors of the MHC and the Savings Bank considered various regulatory
uncertainties associated with the mutual holding company structure including the
ability to waive dividends in the future as well as the general uncertainty
regarding a possible elimination of the federal savings association charter. See
"RISK FACTORS -- Recent Legislation and the Future of the Thrift Industry" in
the Prospectus.
The Conversion and Reorganization will be important to the future growth
and performance of the holding company organization by providing a larger
capital base to support the operations of the Savings Bank and Holding Company
and by enhancing their future access to capital markets, their ability to
diversify into other financial services related activities, and their ability to
provide services to the public. Although the Savings Bank currently has the
ability to raise additional capital through the sale of additional shares of
Savings Bank Common Stock, that ability is limited by the mutual holding company
structure which, among other things, requires that the MHC hold a majority of
the outstanding shares of Savings Bank Common Stock.
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The Conversion and Reorganization also will result in an increase in the
number of shares of Common Stock to be outstanding as compared to the number of
outstanding shares of Public Savings Bank Shares which will increase the
likelihood of the development of an active and liquid trading market for the
Common Stock. See "MARKET FOR COMMON STOCK" in the Prospectus. In addition, the
Conversion and Reorganization permit to the Holding Company to engage in stock
repurchases without adverse federal income tax consequences, unlike the Savings
Bank. Currently, the Holding Company has no plans or intentions to engage in any
stock repurchases.
An additional benefit of the Conversion and Reorganization will be an
increase in the accumulated earnings and profits of the Savings Bank for federal
income tax purposes. When the Savings Bank (as a mutual institution) transferred
substantially all of its assets and liabilities to its stock savings bank
successor in the MHC Reorganization, its accumulated earnings and profits tax
attribute was not able to be transferred to the Savings Bank because no tax-free
reorganization was involved. Accordingly, this tax attribute was retained by the
Savings Bank when it converted its charter to that of the MHC, even though the
underlying retained earnings were transferred to the Savings Bank. The
Conversion and Reorganization has been structured to re-unite the accumulated
earnings and profits tax attribute retained by the MHC in the MHC Reorganization
with the retained earnings of the Savings Bank by merging the MHC with and into
the Savings Bank in a tax-free reorganization. This transaction will increase
the Savings Bank's ability to pay dividends to the Holding Company in the
future. See "DIVIDEND POLICY" in the Prospectus.
If the Savings Bank had undertaken a standard conversion involving the
formation of a stock holding company in 1993, applicable OTS regulations would
have required a greater amount of common stock to be sold than the amount of net
proceeds raised in the MHC Reorganization. Management believed that it was
advisable to profitably invest the $6.5 million of net proceeds raised in the
MHC Reorganization prior to raising the larger amount of capital that would have
been raised in a standard conversion. A standard conversion in 1993 also would
have immediately eliminated all aspects of the mutual form of organization.
In light of the foregoing, the Boards of Directors of the Primary Parties
believe that the Conversion and Reorganization is in the best interests of the
MHC and the Savings Bank, their respective members and stockholders, and the
communities served by the Savings Bank.
Effects of Conversion and Reorganization on Depositors and Borrowers of the
Savings Bank
General. Prior to the Conversion and Reorganization, each depositor in the
Savings Bank has both a deposit account in the institution and a pro rata
ownership interest in the net worth of the MHC based upon the balance in his or
her account, which interest may only be realized in the event of a liquidation
of the MHC. However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account. A depositor
who reduces or closes his account receives a portion or all of the balance in
the account but nothing for his ownership interest in the net worth of the MHC,
which is lost to the extent that the balance in the account is reduced.
Consequently, the depositors of the Savings Bank normally have no way to
realize the value of their ownership interest in the MHC, which has realizable
value only in the unlikely event that the MHC is liquidated. In such event, the
depositors of record at that time, as owners, would share pro rata in any
residual surplus and reserves of the MHC after other claims are paid.
Upon consummation of the Conversion and Reorganization, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
net worth of the Holding Company. The Common Stock is separate and apart from
deposit accounts and cannot be and is not insured by the FDIC or any other
governmental agency. Certificates are issued to evidence ownership of the
permanent stock. The stock certificates are transferable, and therefore the
stock may be sold or traded if a purchaser is available with no effect on any
deposit and/or loan account(s) the seller may hold in the Savings Bank.
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Continuity. The Conversion and Reorganization will not interrupt the
Savings Bank's normal business of accepting deposits and making loans. The
Savings Bank will continue to be subject to regulation by the OTS and the FDIC.
After the Conversion and Reorganization, the Savings Bank will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.
The directors and officers of the Savings Bank at the time of the
Conversion and Reorganization will continue to serve as directors and officers
of the Savings Bank after the Conversion and Reorganization. The directors and
officers of the Holding Company consist of individuals currently serving as
directors and officers of the MHC and the Savings Bank, and they generally will
retain their positions in the Holding Company after the Conversion and
Reorganization.
Effect on Public Savings Bank Shares. Under the Plan of Conversion, upon
consummation of the Conversion and Reorganization, the Public Savings Bank
Shares shall be converted into Exchange Shares based upon the Exchange Ratio
without any further action on the part of the holder thereof. Upon surrender of
the Public Savings Bank Shares, Common Stock will be issued in exchange for such
shares.
Upon consummation of the Conversion and Reorganization, the Public
Stockholders will become stockholders of the Holding Company. For a description
of certain changes in the rights of stockholders as a result of the Conversion
and Reorganization, see "COMPARISON OF STOCKHOLDERS" RIGHTS" in the Prospectus.
Voting Rights. Presently, depositors and borrowers of the Savings Bank are
members of, and have voting rights in, the MHC as to all matters requiring
membership action. Upon completion of the Conversion and Reorganization, the MHC
will cease to exist and all voting rights in the Savings Bank will be vested in
the Holding Company as the sole stockholder of the Savings Bank. Exclusive
voting rights with respect to the Holding Company will be vested in the holders
of Common Stock. Depositors and borrowers of the Savings Bank will not have
voting rights in the Holding Company after the Conversion and Reorganization,
except to the extent that they become stockholders of the Holding Company.
Savings Accounts and Loans. The Savings Bank's savings accounts, account
balances and existing FDIC insurance coverage of savings accounts will not be
affected by the Conversion and Reorganization. Furthermore, the Conversion and
Reorganization will not affect the loan accounts, loan balances or obligations
of borrowers under their individual contractual arrangements with the Savings
Bank.
Tax Effects. The Savings Bank has received an opinion from Breyer &
Aguggia, Washington, D.C., that the Conversion and Reorganization will
constitute a nontaxable reorganization under Section 368(a)(1)(A) of the Code.
Among other things, the opinion provides that: (i) the conversion of the MHC
from a mutual holding company to a federally-chartered interim stock savings
bank (i.e., Interim A) and its simultaneous merger with and into the Savings
Bank, with the Savings Bank as the surviving entity will qualify as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code, (ii) no
gain or loss will be recognized by the Savings Bank upon the receipt of the
assets of the MHC in such merger, (iii) the merger of Interim B with and into
the Savings Bank, with the Savings Bank as the surviving entity, will qualify as
a reorganization within the meaning of Section 368(a)(1)(A) of the Code, (iv) no
gain or loss will be recognized by Interim B upon the transfer of its assets to
the Savings Bank, (v) no gain or loss will be recognized by the Savings Bank
upon the receipt of the assets of Interim B, (vi) no gain or loss will be
recognized by the Holding Company upon the receipt of Savings Bank Common Stock
solely in exchange for Common Stock, (vii) no gain or loss will be recognized by
the Public Stockholders upon the receipt of Exchange Shares in exchange for
their Public Savings Bank Shares, (viii) the basis of the Exchange Shares to be
received by the Public Stockholders will be the same as the basis of the Public
Savings Bank Shares surrendered in exchange therefor, before giving effect to
any payment of cash in lieu of fractional Exchange Shares, (ix) the holding
period of the Exchange Shares to be received by the Public Stockholders will
include the holding period of the Public Savings Bank Shares, provided that the
Public Savings Bank Shares were held as a capital asset on the date of the
exchange, (x) no gain or loss will be recognized by the Holding Company upon the
sale of shares of Conversion Shares in the Conversion Offerings, (xi) the
Eligible Account Holders, Supplemental Eligible Account
8
<PAGE>
Holders and Other Members will recognize gain, if any, upon the issuance to them
of withdrawable savings accountsin the Savings Bank following the Conversion and
Reorganization, interests in the liquidation account and nontransferable
subscription rights to purchase Conversion Stock, but only to the extent of the
value, if any, of the subscription rights, and (xii) the tax basis to the
holders of Conversion Shares purchased in the Conversion Offerings will be the
amount paid therefor, and the holding period for the Conversion Shares will
begin on the date of consummation of the Conversion Offerings, if purchased
through the exercise of Subscription Rights, and on the day after the date of
purchase, if purchased in the Community Offering or the Syndicated Community
Offering. Unlike a private letter ruling issued by the IRS, an opinion of
counsel is not binding on the IRS and the IRS could disagree with the
conclusions reached therein. In the event of such disagreement, no assurance can
be given that the conclusions reached in an opinion of counsel would be
sustained by a court if contested by the IRS.
Based upon past rulings issued by the IRS, the opinion provides that the
receipt of Subscription Rights by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members under the Plan of Conversion will be
taxable to the extent, if any, that the Subscription Rights are deemed to have a
fair market value. RP Financial, a financial consulting firm retained by the
Savings Bank, whose findings are not binding on the IRS, has issued a letter
indicating that the Subscription Rights do not have any value, based on the fact
that such rights are acquired by the recipients without cost, are
nontransferable and of short duration and afford the recipients the right only
to purchase shares of the Common Stock at a price equal to its estimated fair
market value, which will be the same price paid by purchasers in the Direct
Community Offering for unsubscribed shares of Common Stock. If the Subscription
Rights are deemed to have a fair market value, the receipt of such rights may
only be taxable to those Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members who exercise their Subscription Rights. The Savings
Bank could also recognize a gain on the distribution of such Subscription
Rights. Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members are encouraged to consult with their own tax advisors as to the
tax consequences in the event the Subscription Rights are deemed to have a fair
market value.
The Savings Bank has also received an opinion from Knapp, O'Dell & Lewis,
Camas, Washington, that, assuming the Conversion and Reorganization does not
result in any federal income tax liability to the Savings Bank, its account
holders, or the Holding Company, implementation of the Plan of Conversion will
not result in any Washington tax liability to such entities or persons.
The opinions of Breyer & Aguggia and Knapp, O'Dell & Lewis and the letter
from RP Financial are filed as exhibits to the Registration Statement. See
"ADDITIONAL INFORMATION."
PROSPECTIVE INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE CONVERSION AND REORGANIZATION PARTICULAR
TO THEM.
Liquidation Account. In the unlikely event of a complete liquidation of the
MHC, each depositor of the Savings Bank would receive his or her pro rata share
of any assets of the MHC remaining after payment of claims of all creditors.
Each depositor's pro rata share of such remaining assets would be in the same
proportion as the value of his or her deposit account was to the total value of
all deposit accounts in the Savings Bank at the time of liquidation. After the
Conversion and Reorganization, each depositor, in the event of a complete
liquidation of the Savings Bank, would have a claim as a creditor of the same
general priority as the claims of all other general creditors of the Savings
Bank. However, except as described below, his or her claim would be solely in
the amount of the balance in his or her deposit account plus accrued interest.
Each stockholder would not have an interest in the value or assets of the
Savings Bank or the Holding Company above that amount.
The Plan of Conversion provides for the establishment, upon the completion
of the Conversion and Reorganization, of a special "liquidation account" for the
benefit of Eligible Account Holders and Supplemental Eligible Account Holders in
an amount equal to the amount of any dividends waived by the MHC plus the
greater of (1) the Savings Bank's retained earnings of $9.8 million at March 31,
1993, the date of the latest statement of
9
<PAGE>
financial condition contained in the final offering circular utilized in the MHC
Reorganization, or (2) ______% of the Savings Bank's total stockholders' equity
as reflected in its latest statement of financial condition contained in the
final Prospectus utilized in the Conversion Offerings. As of the date of this
Prospectus, the initial balance of the liquidation account would be $25.0
million. Each Eligible Account Holder and Supplemental Eligible Account Holder,
if he or she were to continue to maintain his deposit account at the Savings
Bank, would be entitled, upon a complete liquidation of the Savings Bank after
the Conversion and Reorganization to an interest in the liquidation account
prior to any payment to the Holding Company as the sole stockholder of the
Savings Bank. Each Eligible Account Holder and Supplemental Eligible Account
Holder would have an initial interest in such liquidation account for each
deposit account, including passbook accounts, transaction accounts such as
checking accounts, money market deposit accounts and certificates of deposit,
held in the Savings Bank at the close of business on December 31, 1995 or June
30, 1997, as the case may be. Each Eligible Account Holder and Supplemental
Eligible Account Holder will have a pro rata interest in the total liquidation
account for each of his or her deposit accounts based on the proportion that the
balance of each such deposit account on the December 31, 1995 Eligibility Record
Date or the June 30, 1997 Supplemental Eligibility Record Date, as the case may
be, bore to the balance of all deposit accounts in the Savings Bank on such
date.
If, however, on any March 31 annual closing date of the Savings Bank,
commencing March 31, 1997, the amount in any deposit account is less than the
amount in such deposit account on December 31, 1995 or June 30, 1997, as the
case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed. In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Holding Company as the sole stockholder of the Savings Bank.
REVIEW OF OTS ACTION
Any person aggrieved by a final action of the OTS which approves, with or
without conditions, or disapproves a plan of conversion pursuant to this part
may obtain review of such action by filing in the court of appeals of the United
States for the circuit in which the principal office or residence of such person
is located, or in the United States Court of Appeals for the District of
Columbia, a written petition praying that the final action of the OTS be
modified, terminated or set aside. Such petition must be filed within 30 days
after the publication of notice of such final action in the Federal Register, or
30 days after the mailing by the applicant of the notice to members as provided
for in 12 C.F.R. ss.563b.6(c), whichever is later. The further procedure for
review is as follows: A copy of the petition is forthwith transmitted to the OTS
by the clerk of the court and thereupon the OTS files in the court the record in
the proceeding, as provided in Section 2112 of Title 28 of the United States
Code. Upon the filing of the petition, the court has jurisdiction, which upon
the filing of the record is exclusive, to affirm, modify, terminate, or set
aside in whole or in part, the final action of the OTS. Review of such
proceedings is as provided in Chapter 7 of Title 5 of the United States Code.
The judgment and decree of the court is final, except that they are subject to
review by the United States Supreme Court upon certiorari as provided in Section
1254 of Title 28 of the United States Code.
ADDITIONAL INFORMATION
The Holding Company has filed with the SEC a Registration Statement on Form
S-1 (File No. 333-_____) under the Securities Act of 1933, as amended, with
respect to the Common Stock offered in the Conversion and Reorganization. The
accompanying Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Such information may be inspected at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Room
1100, Chicago, Illinois 60661; and 75 Park Place, New York, New York 10007.
Copies may be obtained at prescribed rates from the Public
10
<PAGE>
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Registration Statement also is available through the SEC's World Wide Web
site on the Internet (http://www.sec.gov).
The Savings Bank has filed with the OTS an Application for Approval of
Conversion. The accompanying Prospectus omits certain information contained in
such Application. The Application, including exhibits and certain other
information that are a part thereof, may be inspected, without charge, at the
offices of the OTS, 1700 G Street, N.W., Washington, D.C. 20552 and at the
office of the Regional Director of the OTS at the OTS West Regional Office,
Pacific Telesis Tower, 1 Montgomery Street, Suite 400, San Francisco, California
94104.
Copies of the Holding Company's Articles of Incorporation and Bylaws may be
obtained by written request to the Savings Bank.
All persons eligible to vote at the Special Meeting should review both this
Proxy Statement and the accompanying Prospectus carefully. However, no person is
obligated to purchase any Common Stock. For additional information, you may call
the Stock Information Center at (360) ___-____.
BY ORDER OF THE BOARD OF DIRECTORS
PHYLLIS KREIBICH
SECRETARY
Camas, Washington
August __, 1997
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT AND THE PROSPECTUS AND, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO FILL IN, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO ASSURE THAT YOUR VOTES
WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING IN PERSON IF YOU ATTEND
THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY BY WRITTEN INSTRUMENT DELIVERED
TO THE SECRETARY OF THE SAVINGS BANK AT ANY TIME PRIOR TO OR AT THE SPECIAL
MEETING OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS IN THOSE
JURISDICTIONS IN WHICH IT IS LAWFUL TO MAKE SUCH OFFER.
11
<PAGE>
EXHIBIT 99.6
Proxy Statement for Annual Meeting of
Stockholders of Riverview Savings Bank, FSB
<PAGE>
___________, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Riverview Savings Bank, FSB, which will be held at the main office of the
Savings Bank, 700 N.E. Fourth Avenue, Camas, Washington, on _________, September
__, 1997, at __:00 _.m., Pacific Daylight Time.
The attached Notice of Annual Meeting of Stockholders and Proxy Statement
describe the formal business to be transacted at the meeting. In addition to the
routine matters of electing directors and ratifying the appointment of
independent auditors, you will be asked to approve a Plan of Conversion From
Mutual Holding Company to Stock Holding Company and Agreement and Plan of
Reorganization ("Plan of Conversion"). The Plan of Conversion provides for the
conversion of Riverview, M.H.C. from a mutual holding company to a stock holding
company, to be known as Riverview Bancorp, Inc. ("Holding Company"), and the
reorganization of the Savings Bank as a wholly-owned subsidiary of the Holding
Company.
During the meeting, we will also report on the operations of the Savings
Bank. Directors and Officers of the Savings Bank, as well as a representative of
Deloitte & Touche LLP, the Savings Bank's independent auditors, will be present
to respond to appropriate questions from stockholders.
Detailed information regarding the Savings Bank's activities and operating
performance during the fiscal year ended March 31, 1997, is contained in the
Holding Company's Prospectus dated August ___, 1997, which also is enclosed. The
Prospectus is provided in lieu of the Savings Bank's Annual Report to
Stockholders.
Your vote is important, regardless of the number of shares you own. THE
BOARD OF DIRECTORS URGES YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS
SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. This
will not prevent you from voting in person at the Annual Meeting, but will
assure that your vote is counted if you are unable to attend.
Sincerely,
Patrick Sheaffer
President, Chief Executive Officer
and Chairman of the Board
<PAGE>
RIVERVIEW SAVINGS BANK, FSB
700 N.E. FOURTH AVENUE
P.O. BOX 1068
CAMAS, WASHINGTON 98607
(360) 834-2231
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER __, 1997
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Meeting")
of Riverview Savings Bank, FSB ("Savings Bank") will be held at the Savings
Bank's main office, 700 N.E. Fourth Avenue, Camas, Washington, on _________,
September __, 1997, at __:00 _.m., Pacific Daylight Time.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. To approve a Plan of Conversion from Mutual Holding Company to Stock
Holding Company and Agreement and Plan of Reorganization ("Plan of
Conversion") providing for the conversion of Riverview, M.H.C.
("MHC"), the mutual holding company of the Savings Bank, to a stock
holding company, with the concurrent issuance and sale of all of the
Savings Bank's outstanding common stock to Riverview Bancorp, Inc.,
("Holding Company"), a Washington corporation, and the issuance and
sale of the Holding Company's common stock to the public; and the
other transactions provided for in the Plan of Conversion;
2. The election of three directors of the Savings Bank;
3. The approval of the appointment of Deloitte & Touche LLP as
independent auditors for the Savings Bank for the fiscal year ending
March 31, 1998; and
4. Such other matters as may properly come before the Meeting or any
adjournments thereof.
NOTE: The Board of Directors is not aware of any other business to come
before the Meeting.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above, or on any date or dates to which, by
original or later adjournment, the Meeting may be adjourned. Pursuant to the
Savings Bank's Bylaws, the Board of Directors has fixed the close of business on
_________, 1997, as the record date for the determination of the stockholders
entitled to notice of and to vote at the Meeting and any adjournments thereof.
You are requested to complete and sign the enclosed form of Proxy, which is
solicited by the Board of Directors, and to mail it promptly in the enclosed
envelope. The Proxy will not be used if you attend the Meeting and vote in
person.
BY ORDER OF THE BOARD OF DIRECTORS
PHYLLIS KREIBICH, SECRETARY
Camas, Washington
August __, 1997
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE SAVINGS BANK THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PROXY STATEMENT
OF
RIVERVIEW SAVINGS BANK, FSB
700 N.E. FOURTH AVENUE
P.O. BOX 1068
CAMAS, WASHINGTON 98607
(360) 834-2231
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER , 1997
- --------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Riverview Savings Bank, FSB ("Savings
Bank") to be used at the Annual Meeting of Stockholders (as may be adjourned or
postponed, the "Meeting") of the Savings Bank. The Meeting will be held at the
Savings Bank's main office, 700 N.E. Fourth Avenue, Camas, Washington, on
_________, September __, 1997, at __:00 _.m., Pacific Daylight Time. The
accompanying Notice of Annual Meeting of Stockholders and this Proxy Statement
are being first mailed to stockholders on or about August __, 1997.
- --------------------------------------------------------------------------------
REVOCATION OF PROXIES
- --------------------------------------------------------------------------------
Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting. Proxies may be revoked by written notice delivered in person or
mailed to the Secretary of the Savings Bank at the above address, or the filing
of a later proxy prior to a vote being taken on a particular proposal at the
Meeting. A proxy will not be voted if a stockholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors of the Savings Bank
will be voted in accordance with the directions given therein. Where no
instructions are indicated, executed proxies will be voted for the nominees for
directors set forth below and in favor of the other proposals set forth herein.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND SECURITIES OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
Stockholders of record as of the close of business on __________, 1997
("Voting Record Date"), are entitled to one vote for each share of common stock
of the Savings Bank ("Savings Bank Common Stock") then held. As of the Voting
Record Date, _________ shares of Savings Bank Common Stock were issued and
outstanding, __________ of which were owned by the MHC, the Savings Bank's
mutual holding company. All share data included herein has been adjusted to
reflect all stock dividends paid by the Savings Bank.
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Meeting. Since the MHC owns more than 50% of the
outstanding shares of Common Stock, the votes cast by the MHC will constitute
the presence of a quorum and will determine the outcome of the Proposal II
(Election of Directors) and Proposal III (Approval of Appointment of Independent
Auditors) set forth herein. Proposal I (Approval of Plan of Conversion From
Mutual Holding Company to Stock Holding Company and Agreement and Plan of
Reorganization) must be approved by the holders of at least two-thirds of the
outstanding shares of Savings Bank Common Stock and by the holders of at least a
majority of the outstanding shares of Savings Bank Common Stock present in
person or by proxy at the Meeting (other than those held by the MHC).
1
<PAGE>
The nominees for directors who receive a plurality of the votes cast by the
holders of the outstanding Common Stock entitled to vote at the Meeting will be
elected. Votes may be cast for or withheld from each nominee. Votes that are
withheld will have no effect on the outcome of the election because directors
will be elected by a plurality of votes cast. An affirmative majority of the
votes cast is required to ratify the appointment of independent auditors.
Abstentions and "broker non-votes" (i.e., shares held by brokers or
nominees as to which instructions have not been received and the broker or
nominee does not have discretionary voting power) will be treated as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. The vote of a stockholder who abstains will, however, have the same
effect as a vote "against" a proposal. "Broker non-votes" will have no effect on
whether or not a proposal passes.
Persons and groups beneficially owning in excess of 5% of the Common Stock
are required to file with the Office of Thrift Supervision ("OTS"), and provide
a copy to the Savings Bank, certain reports disclosing such ownership pursuant
to the Securities Exchange Act of 1934, as amended ("Exchange Act"). Based upon
such reports, the following table sets forth, as of the Voting Record Date,
certain information as to those persons who were beneficial owners of more than
5% of the outstanding shares of Common Stock and as to the shares of Common
Stock beneficially owned by the Savings Bank's named executive officers and by
all officers and directors of the Savings Bank as a group. See "PROPOSAL II --
ELECTION OF DIRECTORS" for information concerning the beneficial ownership of
shares of Common Stock by each of the Savings Bank's directors.
Amount and Nature Percent of
of Beneficial Common Stock
Beneficial Owner Ownership(a) Outstanding
- ---------------- ------------ -----------
Riverview, M.H.C 1,407,891 58.27%
700 N.E. Fourth Avenue
Camas, Washington 98607
Named executive officers(b):
Patrick Sheaffer 74,223(c) 3.05
Ron Wysaske 51,004(d) 2.10
Michael C. Yount 25,976(e) 1.07
All Officers and
Directors as a
Group (10 persons) 264,768(e) 10.64
- ----------
(a) Unless otherwise indicated, all shares are owned directly by the officers
and directors or by the officers and directors indirectly through a trust,
corporation or association, or by the officers and directors or their
spouses as custodians or trustees for the shares of minor children. The
officers and directors effectively exercise voting and investment power
over such shares.
(b) Under applicable regulations the term "named executive officers" is defined
to include the chief executive officer, regardless of compensation level,
and the four most highly compensated executive officers other than the
chief executive officer whose total annual salary and bonus for the last
completed fiscal year exceeded $100,000. Messrs. Sheaffer, Wysaske and
Yount were the Savings Bank's only named executive officers during the
fiscal year ended March 31, 1997.
(c) Includes 20,733 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days of
from the Voting Record Date.
(d) Includes 16,297 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
the Voting Record Date.
2
<PAGE>
(e) Includes 12,536 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
the Voting Record Date.
(f) Includes 72,046 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
the Voting Record Date.
- --------------------------------------------------------------------------------
PROPOSAL I -- APPROVAL OF PLAN OF CONVERSION FROM MUTUAL HOLDING COMPANY
TO STOCK HOLDING COMPANY AND AGREEMENT AND PLAN OF REORGANIZATION
- --------------------------------------------------------------------------------
On May 21, 1997, the Boards of Directors of the MHC and the Savings Bank,
and on ________, 1997, the Holding Company's Board of Directors, unanimously
adopted the Plan of Conversion, pursuant to which the MHC will convert from a
mutual holding company to a stock holding company and the Savings Bank
simultaneously reorganize as a wholly-owned subsidiary of the Holding Company, a
newly formed Washington corporation. The following discussion is qualified in
its entirety by reference to the Plan of Conversion, which is attached as an
exhibit to this Proxy Statement, and the information set forth under
"INCORPORATION BY REFERENCE" BELOW.
Pursuant to the Plan of Conversion, (i) the MHC will convert from a
federally-chartered mutual holding company to a federally-chartered interim
stock savings bank ("Interim A") and simultaneously merge with and into the
Savings Bank, pursuant to which the MHC will cease to exist and the shares of
Savings Bank Common Stock held by the MHC will be canceled, and (ii) Interim A
will then merge with and into the Savings Bank. As a result of the merger of
Interim A with and into the Savings Bank, the Savings Bank will become a wholly
owned subsidiary of the Holding Company and the shares of Savings Bank Common
Stock held by persons other than the MHC ("Public Savings Bank Shares") will be
converted into shares of common stock of the Holding Company ("Exchange Shares:)
pursuant to a ratio ("Exchange Ratio"), which will result in the holders of such
shares owning in the aggregate approximately the same percentage of the Common
Stock to be outstanding upon the completion of the Conversion and Reorganization
as the percentage of Savings Bank Common Stock owned by them in the aggregate
immediately prior to consummation of the Conversion and Reorganization, but
before giving effect to (a) the payment of cash in lieu of issuing fractional
Exchange Shares and (b) any shares of Conversion Stock (defined below) purchased
by the Savings Bank's stockholders in the Conversion Offerings (defined below)
or the ESOP thereafter.
As part of the Conversion and Reorganization, the Holding Company is
offering Conversion Shares in the Subscription Offering to holders of
Subscription Rights in the following order of priority: (i) Eligible Account
Holders (depositors of the Savings Bank with $50.00 or more on deposit as of
December 31, 1995); (ii) the ESOP; (iii) Supplemental Eligible Account Holders
(depositors of the Savings Bank with $50.00 or more on deposit as of ________,
1997); and (iv) Other Members (depositors of the Savings Bank as of _______,
1997 and borrowers of the Savings Bank with loans outstanding as of October 22,
1993, which continue to be outstanding as of ________, 1997).
Concurrently with the Subscription Offering, any Conversion Shares not
subscribed for in the Subscription Offering may be offered for sale in the
Direct Community Offering to members of the general public, with priority being
given first to Public Stockholders (who are not Eligible Account Holders,
Supplemental Eligible Account Holders or Other Members) and then to natural
persons and trusts of natural persons residing in the Local Community.
Conversion Shares not sold in the Subscription and Direct Community Offerings
may be offered in the Syndicated Community Offering. The Subscription Offering,
Direct Community Offering and Syndicated Community Offering are collectively
referred to herein as the "Conversion Offerings." Regulations require that the
Direct Community and Syndicated Community Offerings be completed within 45 days
after completion of the fully extended Subscription Offering unless extended by
the Savings Bank or the Holding Company with the approval of the regulatory
authorities. If the Syndicated Community Offering is determined not to be
feasible, the Board of Directors of the Savings Bank will consult with the
regulatory authorities to determine an appropriate alternative method for
selling the unsubscribed Conversion Shares. The Plan of Conversion provides that
the Conversion and
3
<PAGE>
Reorganization must be completed within 24 months after the date of the approval
of the Plan of Conversion by the members of the MHC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF PLAN OF
CONVERSION.
- --------------------------------------------------------------------------------
INCORPORATION BY REFERENCE
- --------------------------------------------------------------------------------
Each person receiving this Proxy Statement is also receiving the
accompanying Prospectus of Riverview Bancorp, Inc. dated August ___, 1997.
Although such Prospectus is incorporated herein by reference, this Proxy
Statement does not constitute an offer to buy or a solicitation of an offer to
by the common stock of the Holding Company.
The Savings Bank urges each recipient of this Prospectus to read carefully
the sections of the Prospectus that describe (i) the Conversion and
Reorganization (see "THE CONVERSION AND REORGANIZATION") and the (ii) business
of the Holding Company and the Savings Bank (see "BUSINESS OF THE HOLDING
COMPANY" AND "BUSINESS OF THE SAVINGS BANK"), (iii) reasons for the Conversion
and reorganization and management's belief that the Conversion and
Reorganization is in the best interests of the Savings Bank and its
stockholders, (iv) employment agreements, severance agreements, severance plans
and stock benefit plans that the Savings Bank and/or the Holding Company intend
to implement in connection with the Conversion and Reorganization (see
"MANAGEMENT OF THE SAVINGS BANK"), (v) the common stock of the Holding Company
(see "DESCRIPTION OF CAPITAL STOCK OF THE HOLDING COMPANY"), (vi) the historical
capitalization of the Savings Bank and the pro forma capitalization of the
Holding Company (see "CAPITALIZATION"), (vii) the historical and pro forma
capital compliance of the Savings Bank (see "HISTORICAL AND PRO FORMA CAPITAL
COMPLIANCE"), (viii) pro forma financial information with respect to the
Conversion and reorganization (see "PRO FORMA DATA"), (ix) the Holding Company
and the Savings Bank's respective intended use of proceeds of the Conversion
Offerings (see "USE OF PROCEEDS"), (x) the Holding Company's proposed dividend
policy (See "DIVIDEND POLICY"), (xi) restrictions on the acquisition of the
Holding Company, including anti-takeover provisions in the Holding Company's
Articles of Incorporation and Bylaws (see "RESTRICTIONS ON THE ACQUISITION OF
THE HOLDING COMPANY"), (xii) a comparison of the rights of the holders of
Savings Bank Common Stock and rights of the holders of the Holding Company's
common stock, and (xiii) the consolidated financial statements of the Savings
Bank appearing in the Prospectus.
- --------------------------------------------------------------------------------
PROPOSAL II -- ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
The Savings Bank's Board of Directors consists of seven members. The
Savings Bank's Bylaws provide that directors are elected for terms of three
years, one-third of whom are elected annually. The Nominating Committee has
nominated for election as directors Roger Malfait, Gary R. Douglass and Patrick
Sheaffer, for the terms set forth in the table on the following page. The
nominees are current members of the Board of Directors of the Savings Bank.
Stockholders are not permitted to cumulate their votes for the election of
directors.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend or the Board of Directors may amend the Bylaws and
reduce the size of the Board. At this time, the Board knows of no reason why any
nominee might be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES NAMED
BELOW FOR DIRECTORS OF THE SAVINGS BANK.
4
<PAGE>
The following table sets forth certain information as to each nominee and
director continuing in office.
<TABLE>
<CAPTION>
Shares of
Year Common Stock
First Beneficially
Appointed or Year Owned at the Percent
Principal Occupation Elected Term Voting Record of
Name Age(1) for Past Five Years Director Expires Date(2) Class
---- ------ ------------------- -------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
BOARD NOMINEES
Roger Malfait(3) 67 Semi-retired real estate developer 1973 2000(4) 19,761(5) 0.82%
and cattle rancher
Gary R. Douglass 55 Certified Public Accountant with 1994 2000(4) 7,906(6) 0.33
Douglass & Paulson, P.C.
Patrick Sheaffer 57 President, Chief Executive Officer and Chairman of 1979 2000(4) 74,223(7) 3.05
the Board of the Savings Bank; director of Epitope
Biotech Company, a Nasdaq-listed company.
DIRECTORS CONTINUING IN OFFICE
Dale E. Scarbrough 69 Retired Chief Financial Officer for the 1972 1998 19,761(8) 0.82
City of Camas, Washington
Ronald Wysaske 45 Executive Vice President and Chief Financial Officer 1985 1998 51,004(9) 2.10
of the Savings Bank
Paul L. Runyan 62 Owner and operator of Runyan's Jewelry Stores, 1979 1999 41,004(10) 1.70
Camas and White Salmon, Washington
Robert K. Leick(11) 61 Sole practitioner attorney at law; former 1972 1999 5,810(12) 0.24
Prosecuting Attorney with Skamania County,
Stevenson, Washington, until retirement
in 1994
(footnotes on following page)
</TABLE>
5
<PAGE>
- ----------
(1) At March 31, 1997.
(2) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of
Common Stock if he has shared voting and/or investment power with respect
to such security. Includes shares owned by spouses other immediate family
members in trust, shares held in retirement accounts or funds for the
benefit of the named individuals, and other forms of ownership, over which
shares the named persons possess voting and investment power.
(3) Immediate past Vice-Chairman of the Board.
(4) Assuming re-election at the Meeting.
(5) Includes 3,857 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days of
the Voting Record Date.
(6) Includes 918 shares of Savings Bank Common Stock which may be received upon
the exercise of stock options that are exercisable within 60 days from the
Voting Record Date.
(7) Includes 20,733 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days of
the Voting Record Date.
(8) Includes 3,857 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
the Voting Record Date.
(9) Includes 16,297 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
the Voting Record Date.
(10) Includes 1,602 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days of
the Voting Record Date.
(11) Vice-Chairman of the Board.
(12) Includes 3,857 shares of Savings Bank Common Stock which may be received
upon the exercise of stock options that are exercisable within 60 days from
the Voting Record Date.
- --------------------------------------------------------------------------------
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
The business of the Savings Bank is conducted through meetings and
activities of its Board of Directors and its committees. During the fiscal year
ended March 31, 1997, the Board of Directors held 13 regular meetings. No
director attended fewer than 75% of the total meetings of the Board of Directors
of the Savings Bank and committees on which such director served.
The Savings Bank has standing Executive, Audit, Nominating and
Personnel/Compensation Committees, among others.
The Executive Committee of the Board of Directors, which consists of
Directors Malfait, Leick and Sheaffer (Chairman), meets as necessary in between
meetings of the full Board of Directors. The Executive Committee met 12 times
during the fiscal year ended March 31, 1997.
The Audit Committee of the Savings Bank consists of Directors Scarbrough
(Chairman), Douglass and Runyan. It is responsible for developing and monitoring
the Savings Bank's audit program. The Committee meets with the Savings Bank's
independent auditors to discuss the results of the annual audit and any related
matters. The members of the committee also receive and review all the reports
and findings and other information presented to them by the Savings Bank's
officers regarding financial reporting policies and practices. The Audit
Committee met once during the fiscal year ended March 31, 1997.
The Nominating Committee consists of Directors Malfait (Chairman), Douglass
and Scarbrough. This Committee submits nominations for the annual election of
directors. The Nominating Committee met once during the fiscal year ended March
31, 1997.
6
<PAGE>
The Personnel/Compensation Committee consists of Director Runyan
(Chairman), Douglass and Leick. This Committee determines annual grade and
salary levels for employees and establishes personnel policies. The
Personnel/Compensation Committee met two times during the fiscal year ended
March 31, 1997.
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
Summary Compensation Table
The following information is provided for the named executive officers.
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------------------------------
Name and Other Annual All Other
Position Year Salary Bonus Compensation(1) Compensation(2)
- -------- ---- ------ ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Patrick Sheaffer 1997 $128,902 $56,720 $-- $19,364
President and Chief 1996 124,246 27,772 -- 20,875
Executive Officer 1995 111,896 59,178 -- 18,220
Ron Wysaske 1997 91,615 36,677 16,446
Executive Vice 1996 88,818 23,328 -- 15,560
President 1995 86,028 49,816 -- 16,393
Michael C. Yount 1997 81,528 27,384 -- 13,934
Senior Vice 1996 77,259 19,332 -- 13,333
President 1995 75,712 42,108 -- 14,111
</TABLE>
- ----------
(1) The aggregate amount of perquisites and other personal benefits was less
than 10% of the annual salary and bonus reported.
(2) Consists of contributions to profit sharing plan and ESOP. Such
contributions for 1997 amount to: Mr. Sheaffer, $4,500 and $14,864,
respectively; Mr. Wysaske, $3,833 and $12,613, respectively; and Mr. Yount,
$3,251 and $10,683, respectively.
Employment and Severance Agreements
The MHC and the Savings Bank (collectively, the "Employers") have entered
into three-year employment agreements ("Employment Agreements" or "Agreements")
with Messrs. Sheaffer and Wysaske. Under the Agreements, the current base
salaries for Messrs. Sheaffer and Wysaske are $124,246 and $88,818,
respectively, which will be paid by the Savings Bank and may be increased at the
discretion of the Board of Directors or an authorized committee of the Board of
Directors of the Savings Bank. Messrs. Sheaffer's and Wysaske's salaries may not
be decreased during the term of the Employment Agreement without their prior
written consent. On the anniversary of the commencement date of the Agreements,
the term of the Agreements may be extended by the Board of Directors for an
additional year unless a termination notice is given by Messrs. Sheaffer and
Wysaske. The Agreements are terminable by the Employers for just cause at any
time or in certain events specified by OTS regulations.
The Agreements provide for severance payments if employment is terminated
following a change in control. These payments, which will be made promptly after
any change in control, will be equal to 2.99 times the average annual
compensation paid to Messrs. Sheaffer and Wysaske during the five years
immediately preceding the change in control. Under the Agreements, a "change in
control" is deemed to occur if, at anytime during the term of the Agreement, any
person or persons acting in concert obtain beneficial ownership of 20% or more
of the Savings
7
<PAGE>
Bank's Common Stock, or a merger, acquisition or other business combination
involving the Savings Bank or the MHC has occurred.
The Employers have also entered into a severance agreement with Mr. Yount
providing for payments in the event of this termination following a change in
control. The payments and the definition of "change in control" under Mr.
Yount's agreement are similar to the related provisions of the Agreements.
The aggregate severance payments that would have been payable under the
terms of the Agreement to Messrs. Sheaffer, Wysaske and Yount had a change in
control occurred in 1997 would have been $_______, $_______ and $_______,
respectively, based on their respective current base salaries under the
Agreements.
Option Grants
No options were granted under the Savings Bank's 1993 Option Plan ("1993
Stock Option Plan") to the named executive officers during the fiscal year ended
March 31, 1997.
Option Exercise/Value Table
The following information is presented for the named executive officers in
connection with the 1993 Stock Option Plan.
<TABLE>
<CAPTION>
====================================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
- ------------------------------------------------------------------------------------------------------------------------------------
Number Value of
of Number of Unexercised
Shares Unexercised In-the-Money
Acquired Dollar Options at Options at
on Value Fiscal Year End Fiscal Year End
Name Exercise Realized (Exercisable) (Exercisable)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Patrick Sheaffer -- $-- 20,733 $224,746
Ronald Wysaske -- -- 16,297 176,659
Michael C. Yount -- -- 12,536 135,890
====================================================================================================================================
</TABLE>
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION
- --------------------------------------------------------------------------------
Directors receive an annual retainer of $4,600 (except for the current and
immediate past Vice-Chairman of the Board who each receive an annual retainer of
$5,000) and a monthly fee of $320 provided that they attend all meetings held
during the month. Directors also receive $200 for each committee meeting
attended, except no fees are paid for service on the Executive Committee.
Director and committee fees totalled $104,000 for the year ended March 31, 1997.
Directors may elect to defer their monthly fees until retirement with no
income tax payable by the director until retirement benefits are received. This
alternative is available through a non-qualified deferred compensation plan
adopted by the Savings Bank in December 1986, and subsequently amended. If the
participant's employment is terminated on or after the date he attains age 65 or
five years of participation in the Plan ("Normal Retirement Date"), the Savings
Bank shall pay the participant or his designated beneficiaries in annual or
monthly installments
8
<PAGE>
over a period of 120 months, an amount equal to the balance in the participant's
account immediately before the date on which benefits commence, plus interest on
the unpaid balance. Participants may also choose two optional forms of benefit
payments: (i) a lump-sum payment within five years of the Normal Retirement Date
or (ii) an annuity over the life of the participant, or a joint survivor annuity
over the lives of the participant and the participant's spouse. Benefits are
also payable upon disability, early retirement, termination of service or death.
The Savings Bank pays annual interest on assets under the plans based on a
formula relating to gross revenues, which amounted to 7.9% for the year ended
March 31, 1997. The estimated liability under the plan is accrued as earned by
the participant. At March 31, 1997, the Savings Bank's aggregate liability under
the plans was $663,000.
- --------------------------------------------------------------------------------
PROPOSAL III -- APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
Deloitte & Touche LLP was the Savings Bank's independent auditors for the
fiscal year ended March 31, 1997. The Board of Directors has appointed Deloitte
& Touche LLP as independent auditors for the fiscal year ending March 31, 1998,
subject to approval by the Savings Bank's stockholders. A representative of
Deloitte & Touche LLP is expected to be present at the Meeting to respond to
stockholders' questions and will have the opportunity to make a statement if he
so desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS OF THE
SAVINGS BANK FOR THE FISCAL YEAR ENDING MARCH 31, 1998.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH THE SAVINGS BANK
- --------------------------------------------------------------------------------
Federal regulations require that all loans or extensions of credit to
executive officers and directors must generally be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons (unless the loan or
extension of credit is made under a benefit program generally available to all
other employees and does not give preference to any insider over any other
employee) and must not involve more than the normal risk of repayment or present
other unfavorable features. The Savings Bank's policy is not to make any new
loans or extensions of credit to the Savings Bank's executive officers and
directors at different rates or terms than those offered to the general public.
In addition, loans made to a director or executive officer in an amount that,
when aggregated with the amount of all other loans to such person and his
related interests, are in excess of the greater of $25,000 or 5% of the Savings
Bank's capital and surplus (up to a maximum of $500,000) must be approved in
advance by a majority of the disinterested members of the Board of Directors.
The aggregate amount of loans by the Savings Bank to its executive officers and
directors was $1.0 million at March 31, 1997.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors of the Savings Bank is not aware of any business to
come before the Meeting other than those matters described above in this Proxy
Statement. However, if any other matters should properly come before the
Meeting, it is intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the judgment of the person or persons voting
the proxies.
The cost of solicitation of proxies will be borne by the Savings Bank. In
addition to solicitations by mail, directors, officers and regular employees of
the Savings Bank may solicit proxies personally or by telegraph or telephone
without additional compensation.
9
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Prospectus of Riverview Bancorp, Inc. dated August ___, 1997, which
includes consolidated financial statements of the Savings Bank, has been mailed
to all stockholders of record as of the close of business on the Voting Record
Date. Any stockholder who has not received a copy of such Prospectus may obtain
a copy by writing to the Secretary of the Savings Bank. The Prospectus is
incorporated herein in its entirety.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
Upon consummation of the Conversion and Reorganization, the stockholders of
the Savings bank will become stockholders of the Holding Company. In order to be
eligible for inclusion in the Holding Company's proxy materials for its Annual
Meeting of Stockholders next year, any stockholder proposal to take action at
such meeting must be received at the Holding Company's main office at 700 N.E.
Fourth Avenue, Camas, Washington, no later than ___________, 1998. Any such
proposals shall be subject to the requirements of the proxy solicitation rules
adopted under the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
PHYLLIS KREIBICH
SECRETARY
Camas, Washington
August __, 1997
- --------------------------------------------------------------------------------
A COPY OF THE FORM 10-KSB AS FILED WITH THE OFFICE OF THRIFT SUPERVISION WILL BE
FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN
REQUEST TO PHYLLIS KREIBICH, SECRETARY, RIVERVIEW SAVINGS BANK, FSB, 700 N.E.
FOURTH AVENUE, P.O. BOX 1068, CAMAS, WASHINGTON 98607.
- --------------------------------------------------------------------------------
10
<PAGE>
REVOCABLE PROXY
RIVERVIEW SAVINGS BANK, FSB
ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
SEPTEMBER , 1997
- --------------------------------------------------------------------------------
The undersigned hereby appoints the full Board of Directors with full
powers of substitution, as attorneys and proxies for the undersigned, to vote
all shares of common stock of Riverview Savings Bank, FSB which the undersigned
is entitled to vote at the Annual Meeting of Stockholders, to be held at the
Savings Bank's main office at 700 N.E. Fourth Avenue, Camas, Washington, on
_________, September ___, 1997, at ______ ___.m., Pacific Daylight Time, and at
any and all adjournments thereof, as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. To approve a Plan of Conversion from Mutual Holding [ ] [ ] [ ]
Company to Stock Holding Company and Agreement and
Plan of Reorganization providing for the conversion of
Riverview, M.H.C., the mutual holding company of
Riverview Savings bank, FSB ("Savings Bank"), to a
stock holding company, with the concurrent issuance and
sale of all of the Savings Bank's outstanding common
stock to Riverview Bancorp, Inc. ("Holding Company"),
a Washington corporation, and the issuance and sale of
the Holding Company's common stock to the public; and
the other transactions provided for in the Plan of
Conversion;
VOTE
FOR WITHHELD
2. The election as directors of all nominees [ ] [ ]
listed below (except as marked to the
contrary below).
Roger Malfait
Gary R. Douglass
Patrick Sheaffer
INSTRUCTION: To withhold your vote
for any individual nominee, write
that nominee's name on the line below.
--------------------------------------
FOR AGAINST ABSTAIN
3. The approval of the appointment of Deloitte [ ] [ ] [ ]
& Touche LLP as independent auditors for the
Savings Bank for the fiscal year ending
March 31, 1998.
4. Such other matters as may properly come before the Meeting or any adjournments thereof.
The Board of Directors recommends a vote "FOR" the above proposals.
</TABLE>
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY
IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO
OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting
or at any adjournment thereof and after notification to the Secretary of the
Savings Bank at the Meeting of the stockholder's decision to terminate this
proxy, then the power of said attorneys and proxies shall be deemed terminated
and of no further force and effect.
The undersigned acknowledges receipt from the Savings Bank, prior to the
execution of this proxy, of the Notice of Annual Meeting of Stockholders, a
proxy statement for the Annual Meeting of Stockholders, and a Prospectus of
Riverview Bancorp, Inc. dated August ___, 1997.
Dated: _____________, 1997
_______________________________ ______________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
_______________________________ ______________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
