File No. 333-32245
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HEARTLAND BANCSHARES, INC.
(Name of small business issuer as in its charter)
Indiana 6712 35-2017085
(State or other (Primary Standard (I.R.S.
jurisdiction of Industrial Employee
incorporation or Classification Identification
organization) Code Number) Number)
P.O. Box 469
Franklin, Indiana 46131
(317) 738-3915
(Address and telephone number of principal executive
offices and principal place of business or intended
principal place of business)
Steve Bechman, President
Heartland Bancshares, Inc.
P.O. Box 469
Franklin, Indiana 46131
(317) 738-3915
(Name, address, and telephone number of agent for service)
Copies to:
Mark B. Barnes, Esq. Timothy M. Harden, Esq.
Leagre Chandler & Millard Krieg DeVault Alexander
9100 Keystone Crossing, Suite 800 & Capehart
Indianapolis, IN 46240 2800 One Indiana Square
Telephone: (317) 843-1655 Indianapolis, IN 46204
Fax: (317) 846-7900 Telephone (317) 636-4341
Fax: (317) 636-1507
________________________________
Approximate date 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ____
==============================================================
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 SECTION 8(a) OF THE SECURITIES ACT OF 1933, MAY
DETERMINE.
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Information contained herein is subject to completion or
amendment. A registration statement relating to these
securities has been filed with the Securities and Exchange
Commission. These securities may not be sold nor may offers to
buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any
such State.
SUBJECT TO COMPLETION, DATED SEPTEMBER 4, 1997
PROSPECTUS
1,000,000 SHARES
HEARTLAND BANCSHARES, INC.
Common Stock
______________________
Heartland Bancshares, Inc., an Indiana corporation (the
"Company"), is offering for sale 1,000,000 shares of its Common
Stock (the "Common Stock"). The Company is a proposed bank holding
company organized to own all of the common stock of Heartland
Community Bank, an Indiana state chartered commercial bank (in
organization), to be headquartered in Franklin, Indiana (the
"Bank"). Neither the Company nor the Bank has ever conducted any
business operations other than matters related to their initial
organization and the raising of capital. See "Business." There has
been no public trading market for the Common Stock. Roney & Co.
L.L.C. (the "Underwriter" or "Roney & Co.") has advised the Company
that it anticipates making a market in the Common Stock following
completion of the offering, although there can be no assurance that
an active trading market will develop. See "Underwriting" for a
discussion of the factors considered in determining the initial
public offering price. The Company expects that the quotations for
the Common Stock will be reported on the NASD OTC Bulletin Board
under the symbol "HRTB." The directors and officers of the
Company are expected to purchase at least 74,500 of the shares of
Common Stock at the public offering price.
__________________
THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A
SIGNIFICANT AMOUNT OF RISK. SEE "RISK FACTORS" ON PAGES _______
FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE
COMPANY'S COMMON STOCK. THESE SECURITIES ARE NOT SAVINGS
ACCOUNTS OR SAVINGS DEPOSITS AND THEY ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
__________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION OR THE FEDERAL DEPOSIT INSURANCE CORPORATION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION OR THE FEDERAL DEPOSIT INSURANCE CORPORATION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE . <PAGE>
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=================================================================
Price to Underwriting Proceeds to
Public Discount(1)(2) Company (2)(3)
Per Share $10.00 $0.70 $9.30
Total(2) $10,000,000 $700,000 $9,300,000
=================================================================
(1) The Company has agreed to indemnify the Underwriter against
certain liabilities including liabilities under the Securities
Act of 1933. See "Underwriting".
(2) The Company has granted the Underwriter a 30-day option to
purchase up to 150,000 additional shares of its Common Stock
solely to cover over-allotments, if any. If the Underwriter
exercises such option in full, the Price to Public,
Underwriting Discounts, and Proceeds to the Company will be
approximately $11,500,000, $805,000 and $10,695,000,
respectively. See "Underwriting." The Underwriter has agreed
that reduced Underwriting Discounts of 4% will be incurred by
the Company for up to 200,000 shares sold by the Underwriter
to members of the Board of Directors or their immediate
families, and certain other persons. See "Underwriting." If
200,000 shares are so purchased, Underwriting Discounts will
be reduced by, and Proceeds to the Company will be increased
by, $60,000.
(3) Before deducting estimated offering expenses payable by the
Company of $160,000.
_________________
The shares of Common Stock are offered by the Underwriter
subject to prior sale, when, as and if delivered to and accepted by
the Underwriter, and subject to the right of the Underwriter to
withdraw, cancel or modify such offer and to reject orders in whole
or in part. It is expected that delivery of the shares of Common
Stock will be made in Detroit, Michigan, on or about September
____, 1997.
__________________
THE DATE OF THIS PROSPECTUS IS SEPTEMBER ___, 1997.
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[MAP OF HEARTLAND COMMUNITY BANK SERVICE AREA]
__________________
AVAILABLE INFORMATION
The Company is not currently a reporting company pursuant to
the Securities Exchange Act of 1934 (the "Exchange Act"), but will
be required to file reports pursuant to the Exchange Act following
the completion of the offering for at least its fiscal year ending
December 31, 1997. The Company, which will use a December 31
fiscal year, intends to furnish its shareholders with annual
reports containing audited financial statements and, for the first
three quarters of each fiscal year, quarterly reports containing
unaudited financial information.
Requests for such documents should be directed to Jeffery D.
Joyce, Chief Financial Officer of Heartland Bancshares, Inc., at
P.O. Box 469, Franklin, Indiana 46131.
__________________
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere
in this Prospectus. Unless the context clearly suggests otherwise,
references in this Prospectus to the Company include the Bank.
Except as otherwise indicated, all information in this Prospectus
assumes no exercise of the Underwriter's over-allotment option.
The Company
Heartland Bancshares, Inc. (the "Company") is an Indiana
corporation whose primary purpose will be to own and operate
Heartland Community Bank (the "Bank") as the Bank's sole
shareholder. The Bank is organizing as an Indiana state-chartered
commercial bank with depository accounts to be insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation (the
"FDIC"). The Bank's offices will be located in the Indiana cities
of Franklin and Greenwood in Johnson County, which is part of the
greater Indianapolis metropolitan area. The Bank's retail
strategy will be to offer, primarily in Johnson County, a wide
range of basic banking products and services that will be
reasonably priced and easily understood by the customer. The
Bank's commercial strategy will center on small to medium-sized
businesses. Completion of the offering will be conditioned on,
among other things, the Company and the Bank having received all
necessary regulatory approvals and satisfying certain conditions
contained therein. Management anticipates commencing business in
the fourth quarter of 1997.
REASON FOR STARTING HEARTLAND COMMUNITY BANK
The liberalization in recent years of Indiana's branch banking
laws, together with the expansion of interstate banking, has led to
substantial consolidation of the banking industry in Indiana and
especially in the metropolitan Indianapolis area in which the Bank
will be located. In many cases, when these consolidations
occurred, local boards of directors were dissolved and local
management was relocated or, in some cases, terminated.
In the opinion of the Company's management, this situation has
created a favorable opportunity for a new commercial bank with
local management and local directors. Management believes that
such a bank can be successful in attracting small to medium-sized
businesses and individuals as customers who wish to conduct
business with a locally owned and managed institution that
demonstrates an active interest in their business and personal
financial affairs. The Bank will seek to take advantage of this
opportunity by emphasizing in its marketing plan the Bank's local
management, and their strong ties and active commitment to the
community.
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MANAGEMENT
The Company has assembled a management team and a Board of
Directors that have strong business experience in the Bank's market
area and a shared vision and commitment to the future growth and
success of the Bank. The Bank intends to compete aggressively for
its banking business through a systematic program of direct calling
on both prospective customers and referral sources such as
attorneys, accountants and other business people, many of whom the
Bank's directors and officers have come to know during their
professional careers.
Steve Bechman, President and Chief Executive Officer of the
Company and the Bank, has over 21 years of banking experience in
the community, all with Citizens Bank of Central Indiana ("CBCI")
and its predecessors and affiliates. Prior to his resignation
earlier this year, Mr. Bechman was Regional President of CBCI,
which is a subsidiary of CNB Bancshares, Inc., of Evansville,
Indiana ("CNB"). CNB's stock is listed on the New York Stock
Exchange and at March 31, 1997, CNB had total assets of
approximately $4.2 billion. Mr. Bechman joined a predecessor of
CBCI in 1975 and he became Regional President of CBCI in 1993.
Jeffrey L. Goben, Executive Vice President and Chief Operating
Officer of the Company and the Bank, has over 24 years of banking
experience, the last 12 years being with CBCI and its predecessor.
Mr. Goben started his career in 1972 with the National Bank of
Greenwood, now a part of National City Bank. He joined a
predecessor of CBCI in July 1984 as Assistant Vice President and
Branch Manager. At various points in his career, Mr. Goben has
managed a wide variety of bank functions, including branch
administration, consumer banking, human resources, and marketing
and community development.
Keith Fox, with 14 years of banking experience in the Bank's
market area, most recently in commercial lending with CBCI, will be
the Bank's Vice President in charge of commercial lending
operations. John Morin, with 24 years of banking experience
primarily in the market area of the Bank, most recently was Vice
President in charge of consumer lending at CBCI. Mr. Morin will
head the Bank's consumer loan area. Jeffery D. Joyce, a certified
public accountant, has five years of experience with a major
regional accounting firm during which he focused primarily on
financial institutions. Mr. Joyce will be Vice President and Chief
Financial Officer of the Company and the Bank's Cashier and
Controller.
The Company has formed a Board of Directors comprised of
individuals with a broad background in business, agriculture, and
banking and a high level of community involvement. Current
directors include Gordon R. Dunn, former Chairman of the Board of
CBCI, and John Norton, previously a director of the former Franklin
Bank & Trust, Franklin, Indiana, which is now a part of KeyCorp.
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The Company anticipates that its directors and executive
officers, alone or with their associates, will purchase at least
74,500 shares in the offering. See "Principal Shareholders."
The management team represents a significant asset to the
Company and the Bank. These individuals have many years of personal
experience in the financial services industry, and many have worked
together successfully at CBCI. The Company believes that these
individuals and their relationships in the Bank's market area
should offer the Bank a substantial opportunity to attract new
relationships.
MARKET AREA
Johnson County was the second fastest growing county in the
State of Indiana from 1990 through 1996 based on estimates of the
Indiana Business Research Center. The Bank's main office will be
located on the main retail thoroughfare in Franklin, at 420 N.
Morton Street (U.S. Route 31), on property that has been purchased
by the Company and is being extensively renovated. The Bank
intends to open a branch office in newly-constructed leased space
in Greenwood, Indiana, 11 miles north of Franklin in Johnson County
and approximately 12 miles south of downtown Indianapolis, during
the fourth quarter of 1997. The Bank's primary service area
will be the northern two-thirds of Johnson County, which includes
the six Townships of Union, Needham, Franklin, White River,
Pleasant, and Clark. Management believes this community has an
expanding and diverse economic base, which includes a wide range of
small to medium-sized businesses engaged in manufacturing,
services, and retail. As of June, 1997, the unemployment rate for
Johnson County was 1.9%, compared with the statewide average of
approximately 3.1%, according to Ball State University's Bureau of
Business Research. There are approximately 3,200 businesses in
Johnson County.
The Bank's main office will also serve as the Company's
corporate headquarters. The Company's address will be 420 N. Morton
Street, Franklin, Indiana 46131 once the new facility is opened;
the Company's current mailing address is P.O. Box 469, Franklin,
Indiana 46131. The Company's telephone number is 317-738-3915.
THE OFFERING
Securities offered
by the Company................. 1,000,000 shares of Common
Stock. In addition, the
Company has granted the
Underwriter an option to
purchase up to an additional
150,000 shares to cover
over-allotments. See
"Description of Capital Stock."
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Common Stock to be outstanding
after the offering............... 1,000,000 shares (1,150,000
shares if the over-allotment
option is exercised in full).
Use of proceeds by the
Company.......................... Capitalization of the Bank,
retirement of mortgage debt
relating to the acquisition of
the Franklin main office, and
payment of organization and
preopening expenses. See "Use
of Proceeds."
Proposed NASD Over-the-Counter
("OTC") Bulletin Board
Symbol........................... HRTB
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk
and should be considered only by persons who can afford the loss of
their investment. The following constitute some of the potential
risks of an investment in the Common Stock and should be carefully
considered by prospective investors prior to purchasing shares of
Common Stock. The order of the following is not intended to be
indicative of the relative importance of any described risk nor is
the following intended to be inclusive of all risks of investment
in the Common Stock.
LACK OF OPERATING HISTORY; DEVELOPMENT STAGE COMPANY; NEGATIVE
NET WORTH; PREDOMINANT PORTION OF PRE-OFFERING ASSETS
INTANGIBLE
Neither the Company nor the Bank has any operating history.
The business of the Company and the Bank is subject to the risks
inherent in the establishment of a new business enterprise.
Because the Company is a development-stage company that is
only recently formed and the Bank and the Company are in the
process of obtaining the necessary regulatory approvals, subject to
the satisfaction of certain conditions, and the Bank has not
commenced banking operations as of the date of this prospectus,
prospective investors do not have access to all of the information
that, in assessing their proposed investment, is available to the
purchasers of securities of a financial institution with a history
of operations. Prior to this offering, the Company had a
shareholder's deficit (negative net worth) and the predominant
portion of the Company's assets were intangible.
SIGNIFICANT START-UP LOSSES EXPECTED
As a result of the substantial start-up expenditures that must
be incurred by a new bank and the time it will take to develop its
deposit base and loan portfolio, it is expected that the Bank, and<PAGE>
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thus the Company, will operate at a substantial loss during the
start-up of the Bank. Accordingly, neither the Company nor the
Bank is expected to be profitable in the first years of operation.
Cumulative losses during the first two years of operation are
expected to be at least $1,000,000, but there can be no assurance
that losses during these years will not exceed this amount. As a
result, it is anticipated that the book value of the Common Stock
will decrease accordingly. The preceding statements in this
paragraph (and others in this Prospectus) are forward-looking
statements that are based on assumptions rather than historical or
current facts and, therefore, are inherently uncertain and subject
to risk. There is no assurance that the Bank will ever operate
profitably. If the Company does not reach profitability and
recover its accumulated operating losses, the non-recoverable
portion of its investment in fixed assets and the expenses and
underwriting discounts incurred in connection with this offering,
investors will suffer a significant decline in the value of their
shares of Common Stock.
DELAY IN COMMENCING OPERATIONS
Although the Company and the Bank expect to receive all
regulatory approvals and commence business in their Franklin and
Greenwood facilities during the fourth quarter of 1997, there can
be no assurance as to when, if at all, these events will occur.
Any delay in commencing operations at either location will
increase pre-opening expenses and postpone realization by the Bank
of potential revenues. Absent the receipt of revenues and
commencement of profitable operations, the Company's accumulated
deficit will continue to increase (and book value per share
decrease) as operating expenses such as salaries and other
administrative expenses continue to be incurred.
GOVERNMENT REGULATION AND MONETARY POLICY
The Company has filed an application to organize and establish
the Bank with the Department of Financial Institutions of the State
of Indiana (the "Department"). The Company expects that the
Department will act upon this application at a meeting of the
members of the Department scheduled to be held on September 25,
1997. The Company expects that the Department's approval will be
conditioned upon the payment by the Company to the Bank of at least
$9 million of capital from the net proceeds of the offering and
satisfaction of other standard conditions. The Bank also expects
to receive approval for the insurance of its deposits by the FDIC
in September, 1997.
The Company's application to become a bank holding company for
the Bank was accepted for processing by a delegate of the Board of
Governors of the Federal Reserve System (the "Federal Reserve
Board") on August 12, 1997, and the Federal Reserve Board has
indicated that it expects to act upon the Company's becoming a bank
holding company for the Bank under the Bank Holding Company Act of
1956, as amended (the "BHCA") on or before September 11, 1997.R/
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The Company and the Bank will be subject to extensive state
and federal government supervision, regulation and examination.
Existing state and federal banking laws will subject the Bank to
substantial limitations with respect to loans, purchase of
securities, payment of dividends and many other aspects of its
banking business. Recently enacted and proposed legislation may
adversely affect the banking industry or the operations of the Bank
and may result in increased competition in the financial services
industry. In June, 1997, broad financial reform legislation was
approved by the Banking Committee of the U.S. House of
Representatives. The proposed legislation includes provisions that
would permit, subject to certain restrictions, bank holding
companies to acquire manufacturing and other nonfinancial
companies, permit nonfinancial companies to acquire banks, and
require thrift institutions to convert to bank charters. The
Company cannot predict whether, or in what form, this legislation
may be enacted, and if enacted, what the effect would be on the
Company and the Bank. Federal economic and monetary policy, as
well as policy decisions of bank regulatory authorities, may affect
the Bank's ability to attract deposits, make loans and achieve
satisfactory interest spreads. See "Supervision and Regulation."
NO ASSURANCE OF DIVIDENDS
It is anticipated that no dividends will be paid on the
Company's Common Stock for the foreseeable future. The Company
will be largely dependent upon dividends paid by the Bank for funds
to pay dividends on its Common Stock, if and when such dividends
are declared. No assurance can be given that future earnings of
the Bank, and resulting dividends to the Company, will be
sufficient to permit the legal payment of dividends to Company
shareholders at any time in the future. See "Supervision and
Regulation." Even if the Company may legally declare dividends,
the amount and timing of such dividends will be at the discretion
of the Company's Board of Directors. The Board may in its sole
discretion decide not to declare dividends. These shares should
not be purchased by persons who need or desire dividend income from
this investment. For a more detailed discussion of other
limitations on the payment of cash dividends by the Company, see
"Dividend Policy."
COMPETITION
The Company and the Bank will face strong competition for
deposits, loans and other financial services from numerous Indiana
and out-of-state banks, thrifts, credit unions and other financial
institutions as well as other entities which provide financial
services, including consumer finance companies, securities
brokerage firms, mortgage brokers, equipment leasing companies,
insurance companies, mutual funds, and other lending sources and
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investment alternatives. Some of the financial institutions and
financial services organizations with which the Bank will compete
are not subject to the same degree of regulation as the Bank. Many
of the financial institutions aggressively compete for business in
the Bank's proposed market areas. Many of these competitors have
been in business for many years, have established customer bases,
have substantially higher lending limits than the Bank, are larger
and will be able to offer certain services that the Bank does not
expect to provide in the foreseeable future, including home
electronic banking services and international banking services. In
addition, most of these entities have greater capital resources
than the Bank, which, among other things, may allow them to price
their services at levels more favorable to the customer and to
provide larger credit facilities than could the Bank. See
"Business -- Market Area" and "Business -- Competition."
Additionally, recently passed federal legislation regarding
interstate branching and banking and legislation affecting the cost
of deposit insurance premiums may act to increase competition in
the future from larger out-of-state banks and thrift institutions.
See "Supervision and Regulation -- Recent Regulatory Developments."
DEPENDENCE ON MANAGEMENT
The Company and the Bank are, and for the foreseeable
future will be, dependent primarily upon the services of Steve
Bechman, the President of the Company and the Bank, and Jeffrey L.
Goben, Executive Vice President of the Company and the Bank. There
are no employment agreements with either Mr. Bechman or Mr. Goben
nor are any employment agreements with these individuals planned;
however, the Company has applied for "key man" life insurance
policies with respect to Mr. Bechman and Mr. Goben. If the
services of either of these individuals were to become unavailable
to the Company or the Bank for any reason, or if the Company or the
Bank were unable to hire highly qualified and experienced personnel
either to replace Mr. Bechman and Mr. Goben or any other proposed
employee, or to adequately staff the anticipated growth of the
Bank, the operating results of the Company and the Bank could be
adversely affected. See "Business -- Employees" and
"Management."
DISCRETION IN USE OF PROCEEDS
The offering is intended to raise funds primarily to provide
for the initial capitalization of the Bank. While management
currently has no such plans, if opportunities arise, some of the
proceeds of the offering may also be used by the Company or the
Bank to finance acquisitions of other financial institutions, or of
branches of other institutions, or to finance expansion into other
lines of business closely related to banking. Management will
retain discretion in employing most of the proceeds of the
offering. See "Use of Proceeds."
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LENDING RISKS AND LENDING LIMITS
The risk of nonpayment of loans is inherent in commercial
banking, and such nonpayment, if it occurs, would likely have a
material adverse effect on the Company's earnings and overall
financial condition as well as the value of the Common Stock.
Because the Bank does not have an operating history, none of the
Bank's customers will have an established credit history with the
Bank. Management will attempt to minimize the Bank's credit
exposure by carefully monitoring the concentration of its loans
within specific industries and through loan application and
approval procedures, but there can be no assurance that such
monitoring and procedures will reduce such lending risks. Credit
losses can cause insolvency and failure of a financial institution,
and in such event, its shareholders could lose their entire
investment.
The Bank's self-imposed lending limit initially will be
$1,000,000 per customer relationship. Accordingly, the size of the
loans which the Bank can offer to potential customers is less than
the size of loans which most of the Bank's competitors are able to
offer. This limit initially will affect the ability of the Bank to
seek relationships with the area's larger businesses. The Bank
expects to accommodate loan volumes in excess of its lending limit
through the sale of participations in such loans to other banks.
However, there can be no assurance that the Bank will be successful
in attracting or maintaining customers seeking larger loans or that
the Bank will be able to engage in participations of such loans on
terms favorable to the Bank.
IMPACT OF INTEREST RATES
The results of operations for financial institutions,
including the Bank, may be materially and adversely affected by
changes in prevailing economic conditions, including declines in
real estate market values, rapid changes in interest rates and the
monetary and fiscal policies of the federal government. See
"Supervision and Regulation -- General" and "-- Recent Regulatory
Developments." The Bank's profitability is in part a function of
the spread between the interest rates earned on investments and
loans and the interest rates paid on deposits and other
interest-bearing liabilities. In the early 1990s, many banking
organizations experienced historically high interest rate spreads.
More recently, interest rate spreads have generally narrowed due to
changing market conditions and competitive pricing pressure, and
there can be no assurance that such factors will not continue to
narrow interest rate spreads or that the higher interest rate
spreads will return. Like most banking institutions, the
Bank's net interest spread and margin will be affected by general
economic conditions and other factors that influence market
interest rates and the Bank's ability to respond to changes to such
rates. At any given time, the Bank's assets and liabilities will
be such that they are affected differently by a given change in
interest rates, principally due to the fact that the Bank does not<PAGE>
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plan to match the maturities of its loans precisely with its
deposits and other funding sources. As a result, an increase or
decrease in rates could have a material adverse effect on the
Bank's net income, capital and liquidity. While management intends
to take measures to mitigate interest rate risk, there can be no
assurance that such measures will be effective in minimizing the
exposure to interest rate risk. See "Supervision and Regulation."
IMPACT OF ECONOMIC CONDITIONS
Although economic conditions in the Bank's market area have
been generally favorable, there can be no assurance that such
conditions will continue to prevail. Substantially all the Bank's
loans are expected to be to businesses and individuals in Johnson
County, Indiana and any decline in the economy of this area could
have an adverse impact on the Bank. The Johnson County economy is,
however, widely diversified among various manufacturing, service
and retail businesses, with no single employer or group of
employers accounting for any substantial portion of the County's
total employment. See "Business -- Market Area."
NEED FOR TECHNOLOGICAL CHANGE
The banking industry is undergoing rapid technological changes
with frequent introductions of new technology-driven products and
services. In addition to better serving customers, the effective
use of technology increases efficiency and enables financial
institutions to reduce costs. The Company's future success will
depend in part on its ability to address the needs of its customers
by using technology to provide products and services that will
satisfy customer demands for convenience as well as to create
additional efficiencies in the Bank's operations. Many of the
Bank's competitors have substantially greater resources to invest
in technological improvements. Such technology may permit
competitors to perform certain functions at a lower cost than the
Bank. There can be no assurance that the Bank will be able to
effectively implement new technology-driven products and services
or be successful in marketing such products and services to its
customers. See "Business -- Business Strategy."
ANTI-TAKEOVER PROVISIONS
The Indiana Business Corporation Law and the Company's
Articles of Incorporation and Bylaws contain certain provisions
that may discourage, delay or prevent a change in control of the
Company. In addition, federal law requires the approval of the
Federal Reserve Board prior to acquisition of "control" of a bank
holding company. As a result, these provisions could adversely
affect the price of the Common Stock by, among other things,
preventing a shareholder of the Company's Common Stock from
realizing a premium which might be paid as a result of a change in
control of the Company. See "Description of Capital Stock -
Certain Anti-Takeover Provisions."
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BOARD'S AUTHORITY TO ISSUE PREFERRED STOCK
The Company's Articles of Incorporation authorize the Board of
Directors, without further shareholder approval or advance
notification, to issue one or more series of an authorized class of
2,000,000 preferred shares and to establish the relative rights,
designations, preferences and limitations or restrictions of each
series. Therefore, the Board of Directors may authorize and issue
a series of preferred shares with rights and preferences that are
superior to those of the common stock, and which could be used by
management to create voting impediments or to deter persons seeking
to effect a merger or otherwise gain control of the Company. See
"Description of Capital Stock -- Preferred Stock."
SHARES AVAILABLE FOR FUTURE SALE
Following this offering, all of the shares of the Company
will be freely salable without legal restriction by shareholders
who are not Directors, executive officers, or other "control
persons" of the Company. The Company's Directors and executive
officers, who are expected to purchase 74,500 shares in this
offering, have agreed with the Underwriter not to sell any of their
shares for 150 days from the date of this Prospectus, and
thereafter such individuals, for so long as they remain
"affiliates" of the Company (as that term is defined by Rule 144
under the Securities Act of 1933, as amended), will be subject to
the volume, manner of sale, and other restrictions of Rule 144 with
respect to any public sales of shares for their accounts unless
they rely upon another exemption from registration under that Act.
The sale, or availability for sale, of substantial amounts of the
Company's common stock by its Directors and executive officers in
the public market, under Rule 144 or otherwise, could, in the
future, have an adverse effect on the market price of the Company's
common stock. See "Shares Available for Future Sale" and
"Underwriting."</R?>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide for the indemnification of its
officers and directors, and thereby insulate its officers and
directors from liability for certain breaches of the duty of care.
It is possible that the indemnification obligations imposed under
these provisions could result in a charge against the Company's
earnings and thereby affect the market value of the Company's stock
and the availability of funds for payment of dividends to the
Company's shareholders. See "Description of Capital Stock --
Indemnification of Directors and Officers."
DETERMINATION OF OFFERING PRICE; LIMITED TRADING MARKET EXPECTED
The initial public offering price of $10.00 per share was
determined by the Company in consultation with the Underwriter.
This price is not based upon earnings or any history of operations
<PAGE>
<PAGE> 15
and should not be construed as indicative of the present or
anticipated future value of the Common Stock. Prior to the
offering, there has been no public trading market for the Common
Stock. The price at which these shares are being offered to the
public may be greater than the market price for the Common Stock
following the offering. The Underwriter has advised the Company
that, upon completion of the offering, it intends to use reasonable
efforts to initiate quotations of the Common Stock on the NASD OTC
Bulletin Board and to act as a market maker in the Common Stock,
subject to applicable laws and regulatory requirements, although
the Underwriter is not obligated to do so. Making a market in
securities involves maintaining bid and ask quotations and being
able, as principal, to effect transactions in reasonable quantities
at those quoted prices, subject to various securities laws and
other regulatory requirements. The development of a public trading
market depends, however, upon the existence of willing buyers and
sellers, the presence of which is not within the control of the
Company, the Bank or any market maker. Market makers on the NASD
OTC Bulletin Board are not required to maintain a continuous
two-sided market and are required to honor firm quotations for only
a limited number of shares, and are free to withdraw firm
quotations at any time. Even with a market maker, factors such as
the limited size of the offering, the lack of earnings history of
the Company and the absence of a reasonable expectation of
dividends within the near future mean that there can be no
assurance of an active and liquid market for the Common Stock
developing in the foreseeable future. Even if a market develops,
there can be no assurance that a market will continue, or that
shareholders will be able to sell their shares at or above the
price at which these shares are being offered to the public.
Purchasers of Common Stock should carefully consider the limited
liquidity of their investment in the shares being offered hereby.
REGULATORY RISK
The banking industry is heavily regulated. Many of these
regulations are intended to protect depositors, the public, and the
deposit insurance funds administered by the FDIC, not shareholders.
Applicable laws, regulations, interpretations and enforcement
policies have been subject to significant, and sometimes
retroactively applied, changes in recent years, and may be subject
to significant future changes. There can be no assurance that such
future changes will not adversely affect the business of the
Company. In addition, the burden imposed by federal and state
regulations may place banks in general, and the Company
specifically, at a competitive disadvantage compared to less
regulated competitors. See "Supervision and Regulation."
<PAGE>
<PAGE> 16
FORWARD-LOOKING STATEMENTS
Certain statements throughout this Prospectus regarding the
Company's financial position, business strategy and plans and
objectives of Company management for future operations, are
forward-looking statements rather than historical or current facts.
When used in this Prospectus, words such as "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions,
as they relate to the Company or its management, identify forward-
looking statements. Such forward-looking statements are based on
the beliefs of the Company's management as well as assumptions made
by and information currently available to the Company's management.
Such statements are inherently uncertain, and there can be no
assurance that the underlying assumptions will prove to be valid.
Actual results could differ materially from those contemplated by
the forward-looking statements as a result of certain factors, such
as those disclosed under "Risk Factors," including but not limited
to the Company's lack of operating history, competitive factors and
pricing pressures, changes in legal and regulatory requirements,
technological change, product development risks and general
economic conditions. Such statements reflect the current views of
the Company with respect to future events and are subject to these
and other risks, uncertainties and assumptions relating to the
operations, results of operations, growth strategy and liquidity of
the Company. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this
paragraph.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000
shares of Common Stock offered hereby are estimated to be at least
$9,140,000 ($10,690,000 if the Underwriter's over-allotment option
is exercised in full), after deduction of the underwriting
discounts and commissions and estimated offering expenses payable
by the Company. Under certain circumstances the underwriting
discount may be reduced by up to $60,000, which would
correspondingly increase net proceeds to the Company by a like
amount. See "Underwriting."
The principal uses of the net proceeds of the offering are (a)
to capitalize the Bank with the capital required by regulators for
its opening, (b) to retire the mortgage debt relating to the
acquisition of the Franklin main office, and (c) to retire the
principal and interest of indebtedness that is owed to certain
directors and executive officers of the Company for pre-offering
borrowings by the Company (the "Borrowings"). The Borrowings
(which at August 31, 1997 were in the aggregate amount of principal
and interest of approximately $163,000) have funded the payment of
approximately $56,000 of the purchase price and other costs
associated with the acquisition of the Bank's Franklin main office
<PAGE>
<PAGE> 17
site, $5,000 of the Bank's costs of acquiring equipment and other
fixed assets, $33,000 of the Company's professional and other fees
and expenses in connection with this offering, and $69,000 of other
organizational and pre-opening expenses of the Company and the
Bank, including professional and consulting fees and expenses and
salaries and benefit expense for certain of the executive officers
of the Bank (not including Mr Bechman or Mr. Goben). The Bank will
assume the portion of the Borrowings that represents amounts spent
by the Company to pay expenses or acquire assets properly allocable
to the Bank (which is estimated to be approximately $130,000 of
principal and interest at August 31, 1997), and will retire that
portion of the Company's indebtedness from the funds that it
receives from the Company as part of the initial capitalization.
The aggregate amount of the Borrowings to be repaid at closing of
this offering will be larger than the August 31, 1997 amount due to
accrual of additional interest and the Company's anticipated
additional Borrowings from certain of its directors and executive
officers during September. From and after the date of the Bank's
capitalization by the Company, all further expenses associated with
the organization and pre-opening activities of the Bank, and all
further payments representing the deferred or financed purchase
price of Bank assets previously acquired by the Company on behalf
of the Bank, will be paid directly by the Bank.
The Company expects to apply the net proceeds of this offering
in the following approximate amounts:
Purchase of stock of Bank $9,000,000 98.5%
Retirement of Borrowings
allocable to Company's
pre-opening expenditures 60,000 .7%
Payment of Company organizational
and pre-opening expenditures 35,000 .4%
Working capital 45,000 .5%
_________ ____
TOTAL $9,140,000 100%
========= ====
<PAGE>
<PAGE> 18
The Company expects that the Bank will apply the $9,000,000
proceeds of its sale of stock to the Company in the following
approximate amounts:
Pre-payment of mortgage on
Franklin headquarters $ 484,000 7.2%
Retirement of Borrowings
allocable to Bank's pre-opening
expenditures 190,000 2.1%
Working capital 8,162,000 90.7%
_________ ____
TOTAL $9,000,000 100%
========= ====
The Company and the Bank retain discretion as to the use of
working capital, although at present there are no plans to use
working capital for purposes other than general corporate purposes,
including, in the case of the Bank, the funding of the Bank's loans
and the acquisition of investment securities for the Bank's
investment portfolio. Although these funds would be available to
finance possible acquisitions of other financial institutions or
branches or expansion into other lines of business closely related
to banking, the Company has no present plans to do so. The Company
has not determined how to apply the proceeds of any sale of stock
upon any exercise of the underwriter's over-allotment
option, but presently anticipates retaining those amounts as
working capital of the Company and not contributing those amounts
to the capital of the Bank.
<PAGE>
<PAGE> 19
DIVIDEND POLICY
The Company initially expects that Company and Bank earnings,
if any, will be retained to finance the growth of the Company and
the Bank and that no cash dividends will be paid for the
foreseeable future. If the Company achieves profitability and
recovers its operating deficit, the Company may consider payment of
dividends. However, the declaration of dividends will be at the
discretion of the Board of Directors and there is no assurance that
dividends will be declared at any time. If and when dividends are
declared, the Company will be dependent largely upon dividends paid
by the Bank for funds to pay dividends on the Common Stock.
The ability of the Company and the Bank to pay dividends is
affected by various regulatory requirements and policies, such as
the requirement to maintain adequate capital above regulatory
guidelines. See "Supervision and Regulation." Such requirements
and policies may limit the Company's ability to obtain dividends
from the Bank for its cash needs, including funds for acquisitions,
payment of dividends by the Company and the payment of operating
expenses.
CAPITALIZATION
The following table sets forth the capitalization of the
Company as it is projected to be immediately after the sale of the
1,000,000 shares of Common Stock offered hereby and the application
of the estimated net proceeds. See "Use of Proceeds."
Preferred Stock, no par value,
2,000,000 shares authorized;
no shares issued and outstanding --
Common Stock, no par value,
10,000,000 shares authorized;
1,000,000 shares issued and
outstanding $1,000,000
Additional paid-in capital 8,140,000
Retained earnings (deficit) (50,000)
_________
Total shareholders' equity $9,090,000
=========
<PAGE>
<PAGE> 20
BUSINESS
BACKGROUND
The liberalization in recent years of Indiana's branch banking
laws, together with the expansion of interstate banking, has led to
substantial consolidation of the banking industry in Indiana and
especially the metropolitan Indianapolis area in which the Bank
will be located. In many cases, when these consolidations
occurred, local boards of directors were dissolved and local
management was relocated or, in some cases, terminated.
In the opinion of the Company's management, this situation has
created a favorable opportunity for a new bank with local
management and directors. Management of the Company believes that
such a bank can attract those customers who wish to conduct
business with a locally managed institution that demonstrates an
active interest in their business and personal financial affairs.
The Company believes that a locally managed institution will, in
many cases, be able to deliver more timely responses to customer
requests, provide customized financial products and services, and
offer the personal attention of the Bank's senior banking officers.
The Company is incorporated as an Indiana general corporation
and will hold all of the Bank's issued and outstanding stock and
will engage in the business of a bank holding company under the
federal Bank Holding Company Act of 1956, as amended ("BHCA"). The
Company expects that the Department will act upon the Company's
application to establish the Bank at a meeting of the members of
the Department scheduled to be held on September 25, 1997. The
Company expects that the Department's approval will be conditioned
upon the payment by the Company to the Bank of at least $9 million
of the net proceeds of this offering and satisfaction of other
standard conditions. The Bank's application for FDIC deposit
insurance was filed on June 17, 1997, and the FDIC's approval,
which is expected in late September 1997, will be subject to
certain conditions, including conditions related to capital
adequacy. The Company's application to become a bank holding
company for the Bank was accepted by a delegate of the Federal
Reserve Board as of August 12, 1997, and the Federal Reserve Board
has indicated that it expects to act upon the Company's becoming a
bank holding company for the Bank under the BHCA on or before
September 11, 1997. The Bank expects to receive the Department and
FDIC approvals and to have all regulatory conditions to the opening
of the Bank satisfied in the fourth quarter of 1997. There can be
no assurance, however, as to the timing of such approvals or that
the Bank and the Company will obtain such approvals. The Bank
intends to commence business as soon as reasonably practicable upon
receipt of all regulatory approvals, the satisfaction of regulatory
conditions, and the completion of its Franklin facility. See "Risk
Factors -- Delay in Commencing Operations" and "Risk Factors --
Government Regulation and Monetary Policy."
<PAGE>
<PAGE> 21
Following completion of the offering and before commencement
of operations, the Bank intends to complete the furnishing of its
facilities, certain training of its staff and the purchase, lease
and installation of equipment necessary to transact a banking
business. Correspondent banking relationships and other
arrangements for services will be completed as necessary. The Bank
currently projects that the Bank will be prepared (subject to
regulatory approvals) to open at its Franklin facility and to open
its Greenwood branch facility during the fourth quarter of 1997.
The Company will own all of the issued and outstanding stock
of the Bank. Prior to the completion of the offering, the Company
will have only one share of Common Stock outstanding with such
share being held by Director Gordon R. Dunn. The Company's
principal office will be located at 420 N. Morton Street, Franklin,
Indiana 46131, and its telephone number is (317) 738-3915.
BUSINESS STRATEGY AND PLAN OF OPERATION
The Bank intends to provide a wide range of business and
consumer financial services to small to medium-sized business
customers and individuals. The foundation of this strategy will be
to emphasize local management and its commitment to the community.
Steve Bechman, President and Chief Executive Officer of the
Company, has over 21 years of banking experience in the community.
From 1993 to his resignation earlier this year, he was Regional
President for CBCI in Greenwood, Indiana. Jeffrey L. Goben,
Executive Vice President and Chief Operating Officer of the
Company, has over 24 years experience in the community. During his
career he has managed branch administration, consumer banking,
human resources, and marketing and community development functions.
Mr. Bechman and Mr. Goben have worked together for the last 13
years in the same banking organization. K. Keith Fox and John L.
Morin, Vice President -- Commercial Lending and Vice President --
Consumer Lending, respectively, also have many years of experience
in the Bank's primary market area. The Company's Vice President
and Chief Financial Officer, Jeffery D. Joyce, C.P.A., has five
years of public accounting experience primarily focused on
financial institutions with a major regional accounting firm.
Messrs. Bechman, Goben, Fox and Morin, who prior to their
resignations worked together at CBCI, are assembling a high-quality
staff of local employees. The staff will be committed to providing
outstanding customer service and banking products that are
reasonably priced and easily understood by the customer. The Bank
intends to compete aggressively for its banking business through a
systematic program of direct calling on both customers and referral
sources such as attorneys, accountants and other business people,
many of whom the management have come to know during their
professional careers.
<PAGE>
<PAGE> 22
BUSINESS FINANCIAL SERVICES. The Bank intends to offer
products and services consistent with its goal of attracting small
to medium-sized business customers as well as a variety of
individuals. Commercial loans will be offered on both a secured
and unsecured basis and will be available for working capital
purposes, the purchase of equipment and machinery, financing of
accounts receivable and inventory and for the purchase of real
estate, primarily owner occupied real estate. As part of its
banking business, the Bank may make loans to all types of borrowers
secured by first and junior mortgages on various types of real
estate, including without limitation, single-family residential,
multi-family residential, mixed use, commercial, developed, and
undeveloped. In making such loans, the Bank will be subject to
written policies, reviewed and approved at least annually by the
Bank's board of directors, pursuant to federal law and regulations.
Such policies address loan portfolio diversification and prudent
underwriting standards, loan administration procedures, and
documentation, approval and reporting requirements. In addition,
Federal regulations impose supervisory loan-to-value ratios
applicable to each type of loan secured by real estate.
The Bank will generally look to a borrower's business
operations as the principal source of repayment and will also seek,
when appropriate, security interests in the inventory, accounts
receivable or other personal property of the borrower, and personal
guaranties. Although the Bank intends to be aggressive in seeking
new loan growth, it intends to stress high quality in its loans.
To promote such standards, the Board of Directors of the Bank
intends to establish strict lending policies, including specified
lending authorities, loan review policies and lending committees.
In establishing such policies, the Board of Directors will be
required to conform to applicable bank regulatory requirements.
See "Supervision and Regulation." Mr. Bechman will be the Bank's
senior lender and Mr. Fox, most recently a commercial lending
officer of CBCI, where he was employed 8 years, will be the Bank's
Vice President of Commercial Lending.
The Bank will actively pursue business checking accounts by
offering competitive rates, computerized banking, and other
convenient services to many of its business customers. In some
cases the Bank will require its business borrowers to maintain
minimum balances. Management of the Bank also intends to establish
relationship with one or more correspondent banks and other
independent financial institutions to provide other services
required by its customers, including loan participations where the
requested loan amount exceeds the Bank's legal lending limit.
<PAGE>
<PAGE> 23
CONSUMER FINANCIAL SERVICES. The Bank's retail banking
strategy will initially focus on providing basic banking products
that are reasonably priced and easily understood by the customer.
The Bank will be capable of offering sophisticated electronic
banking services in the future, if there is sufficient customer
demand, through third-party service providers, which will allow the
Bank to be at the forefront of technology while minimizing the
costs of delivery. Many of the Bank's competitors, however,
have substantially greater resources to invest in technological
improvements, and substantially greater assets over which to spread
the cost of technology which may permit them to more effectively
implement new technology-driven products at a lower cost than can
the Bank.
The Bank will offer a full range of short to intermediate term
personal loans to individuals for various purposes, including
purchases of automobiles, mobile homes, boats and other
recreational vehicles, home improvements, education and personal
investments. The Bank anticipates that it will retain
substantially all of such loans. The Bank intends initially to
offer only adjustable rate mortgages. It does not anticipate
offering long-term fixed rate mortgage products, except through an
arrangement with outside providers. The Bank expects that any
fixed rate residential mortgage loans it generates will be sold to
third party investors, though with respect to some of such loans,
the Bank may continue to service the loans for a fee.
The Bank intends to offer other consumer lending services,
including credit cards and other personal loan products on both a
secured and unsecured basis. Mr. Morin, formerly Vice President of
Retail Banking at CBCI, has more than 24 years of banking
experience and will be the Bank's Vice President of Consumer
Lending.
DEPOSITS AND RETAIL BANKING. The Bank plans to offer its
retail customers a variety of deposit accounts. The Bank plans on
taking advantage of increasing population and rising income levels
in the growing areas of its primary market areas, including
Franklin, Needham, Clark, Pleasant, White River, and Union
Townships. Bank personnel will be trained to offer a variety of
deposit options. These options are expected to include demand
deposit accounts, regular savings accounts, NOW accounts, money
market demand accounts and certificates of deposit. The Bank's
deposit funding strategy will be to seek deposits aggressively
through competitive pricing.
<PAGE>
<PAGE> 24
MARKET RESPONSIVENESS. The management team will monitor the
performance of each part of the Bank's business strategy. The
strategy may change based on market conditions and acceptance of
the strategy and as the executive officers evaluate new
opportunities. The Bank expects to respond to changes in the
marketplace by focusing attention and resources on those areas that
show the greatest potential for growth. While the Bank expects to
concentrate on the business strategy as described above, market
forces may dictate alterations that cannot be predicted at this
time.
INVESTMENTS
The principal investment of the Company is expected to be its
purchase of all of the common stock of the Bank. See "Use of
Proceeds". Funds retained by the Company (including the net
proceeds obtained by the Company upon any exercise by the
Underwriter of its over - allotment option) may be invested at the
discretion of the Company in any lawful investment. Current laws
and regulations that limit the types of investments by bank holding
companies (see "Supervision and Regulation -- The Company --
Investments and Activities") are proposed to be made much less
restrictive by broad financial reform legislation approved by the
Banking Committee of the House of Representatives in June 1997 (see
"Supervision and Regulation -- Regulatory Developments").
The Bank may invest in a wide variety of securities and may
participate in the federal funds market with other depository
institutions. Subject to certain exceptions, the Bank is
prohibited by law from investing in equity securities. The Bank
has established an investment policy, under which the President of
the Bank (or, in the President's absence, the Bank's Controller)
will have daily authority to make trades in accordance with the
policy. The investment policy will be reviewed by the Bank's Board
of Directors annually.
MARKET AREA
Johnson County was the second fastest growing county in the
State of Indiana from 1990 through 1996 based on estimates of the
Indiana Business Research Center. The Bank's main office will be
located on the main retail thoroughfare in Franklin, at 420 N.
Morton Street (U.S. Route 31), on property that has been purchased
by the Company and is being extensively renovated. The Bank
intends to open a branch office in newly-constructed leased space
in Greenwood, Indiana, 11 miles north of Franklin in Johnson County
and approximately 12 miles south of downtown Indianapolis, during
the fourth quarter of 1997. The Bank's primary service area will
be the northern two-thirds of Johnson County, which includes the
six Townships of Union, Needham, Franklin, White River, Pleasant,
<PAGE>
<PAGE> 25
and Clark. As of June, 1997, the unemployment rate for Johnson
County was 1.9%, compared with the statewide average of
approximately 3.1%, according to Ball State University's Bureau of
Business Research. Median household income for Johnson County
residents in 1990 was $35,035, which was 22% higher than the
statewide average of $28,797.
Management believes this community has an expanding and
diverse economic base, which includes a wide range of small to
medium-sized businesses engaged in manufacturing, services, and
retail. There are approximately 3,200 businesses in Johnson
County. In 1990, Johnson County's ten largest private employers
accounted for only 6.39% of the total employment of this county,
highlighting the diversity and importance of small businesses.
COMPETITION
There are many thrifts, credit unions and bank offices located
within the Bank's primary and secondary market areas. Most are
branches of larger financial institutions which, in management's
view, are managed with a philosophy of strong centralization. The
Bank will face competition from the thrifts, credit unions and
other banks as well as finance companies, insurance companies,
mortgage companies, securities brokerage firms, equipment leasing
companies, mutual funds, money market funds and other providers of
financial services. Most of the Bank's competitors have been in
business a number of years, have established customer bases, are
larger and have higher lending limits than the Bank. The Bank will
compete for loans principally through its ability to communicate
effectively with its customers and to understand and meet their
needs. Management believes that its personal service philosophy
will enhance its ability to compete favorably in attracting
individuals and small businesses. The Bank will actively solicit
retail customers and will compete for deposits by offering
customers personal attention, professional service, computerized
banking and competitive interest rates.
BANK PREMISES
In July 1997, the Company purchased a 5,700 square foot
building at 420 N. Morton Street (U.S. Route 31), which is on the
main retail thoroughfare in Franklin, Indiana. The building on the
site, which will be used as the Bank's main office and the
Company's headquarters, is being extensively renovated. Total cost
of land, building, improvements and renovations is estimated to be
approximately $1,075,000. Acquisition and construction debt
associated with this facility will be assumed by the Bank upon its
organization and retired with the proceeds of the Bank's sale of
its stock to the Company.
<PAGE>
<PAGE> 26
The Company intends to lease a branch facility to be
constructed in Greenwood, Indiana, on State Road 135, one-half mile
north of Smith Valley Road. This branch will include approximately
3,800 square feet of space. The site has access to both State Road
135 and Smith Valley Road, which are principal thoroughfares in
Greenwood. Although the Bank intends to open the Greenwood branch
during the fourth quarter of 1997, there is no assurance that
necessary construction can be completed in time to open the
Greenwood branch at the same time as the Franklin office.
DATA PROCESSING
The Bank is negotiating with a data processing service
provider. The Bank expects that a contract will be executed during
September, 1997, for these services.
EMPLOYEES
Upon commencement of operations, the Bank expects to employ
approximately 18 full-time employees, including its executive
officers, teller staff and other support positions. Management
will encourage all employees to share management's goal of
high-quality customer service.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company as of the date
hereof, and the contemplated directors and executive officers of
the Bank upon completion of its organization, are as follows:
<TABLE>
<CAPTION>
POSITION WITH DIRECTOR TERM POSITION(S)
NAME AND AGE THE COMPANY EXPIRES WITH THE BANK
<S> <C> <C> <C>
Steve Bechman, 46 President, Chief 1999 President, Chief
Executive Officer, Executive Officer,
and Director and Director
Jeffrey L. Goben, 45 Executive Vice 2000 Executive Vice
President, Chief President, Chief
Operating Officer, Operating Officer,
Secretary, and and Director
Director
K. Keith Fox, 37 Vice President -- Vice President,
Commercial Lending
John Morin, 47 Vice President -- Vice President,
Consumer Lending
<PAGE>
<PAGE> 27
Jeffery D. Joyce, 27 Vice President -- Cashier and
and Chief Controller
Financial Officer
Sharon Acton, 50 Director 2000 Director
Gordon R. Dunn, 76 Chairman of the 1999 Chairman of the
Board; Director Board; Director
J. Michael Jarvis, 54 Director 1998 Director
John Norton, 49 Director 2000 Director
Robert Richardson, 36 Director 1998 Director
Patrick A. Sherman, 49 Director 1998 Director
James C. Stewart, 46 Director 1999 Director
</TABLE>
Under Federal law and regulations and subject to certain
exceptions, the addition or replacement of any director, or the
employment, dismissal or reassignment of a senior executive
officer, of the Bank occurring within two years of the chartering
of the Bank, its acquisition by the Company, or any change in
control of the Bank or the Company (or at any time that the Bank is
not in compliance with applicable minimum capital requirements or
is otherwise in a troubled condition) is subject to prior notice to
and disapproval by the FDIC.
The Company's Bylaws provide that the number of directors, as
determined from time to time by the Board of Directors, shall be no
fewer than six and no more than fifteen. The Board of Directors
has presently fixed the number of directors at nine. The
Articles of Incorporation further provide that the directors shall
be divided into three classes, with each class serving a staggered
3-year term and with the number of directors in each class being as
nearly equal as possible. The initial terms of the three classes
of directors have been established at one year, two years and three
years, respectively. The subsequent terms of each class of director
will be for three years.
It is anticipated that the entire Board of Directors of the
Bank will be elected annually by its shareholder, the Company.
Officers of the Company and the Bank will be appointed annually by
their respective Boards of Directors and perform such duties as are
prescribed in the Bylaws or by the Board of Directors.
None of the executive officers or staff is subject to any
agreements with former employers that restrict their right to fully
perform their duties with the Company or the Bank.
<PAGE>
<PAGE> 28
EXPERIENCE OF DIRECTORS AND OFFICERS
The experience and backgrounds of the directors and officers,
and their proposed positions with the Company, are summarized
below.
Steve Bechman (President, Chief Executive Officer, Director) has
been in banking in the community for over 21 years, all with
Citizens Bank of Central Indiana and its predecessors and
affiliates. He began his career at Bargersville State Bank,
Greenwood, Indiana ("BSB") and worked his way through the branch
system, commercial lending and several management positions. For
a two year period starting around July 1988 he was President of
BSB's affiliate, Bloomington Bank & Trust, Bloomington, Indiana
("BB&T"). In May 1992 BSB and BB&T were acquired by CNB
Bancshares, Inc., which merged BSB and BB&T to form Citizens Bank
of Central Indiana ("CBCI"). Mr. Bechman from 1993 until his
resignation in 1997 was CBCI's Regional President in charge of 13
locations in the Johnson County area. Mr. Bechman is a member of
the Board of Directors of the Indiana Bankers Association. Mr.
Bechman also serves on numerous boards of community organizations,
and is past president of the United Way of Johnson County,
President of the Johnson County Health Foundation, and incoming
President of the Franklin Chamber of Commerce.
Jeffrey L. Goben (Executive Vice President, Chief Operating
Officer, Secretary, Director) has been in banking in Johnson County
for the past 25 years. Mr. Goben started his career in 1972 with
National Bank of Greenwood, Greenwood, Indiana (now part of
National City Bank), and joined CBCI's predecessor Bargersville
State Bank in July 1984 as Assistant Vice President and branch
manager. When he left CBCI in May 1997, Mr. Goben was a Senior
Vice President in charge of marketing and community development.
Mr. Goben is also experienced in branch administration, human
resources and consumer lending. Mr. Goben is active in the
community, serving as Vice President and President-elect of the
Greenwood Chamber of Commerce, President of the Greenwood Senior
Citizens Center Board, and Past President of the Greenwood Sertoma
Club.
K. Keith Fox (Vice President of Commercial Lending) has been in
banking in the Johnson County community since May 1982. For most
of the last 9 years he was employed by CBCI. His bank experience
includes branch operations and commercial lending. Mr. Fox is an
active member of the Johnson County Builders Association and in
August 1997 completed his degree at the Graduate School of Banking
in Madison, Wisconsin.
<PAGE>
<PAGE> 29
John Morin (Vice President of Consumer Lending) began his banking
career at the National Bank of Greenwood, Johnson County, and has
24 years of banking experience, with 12 years at CBCI and 12 years
at the National Bank of Greenwood (now part of National City Bank).
During his career he has been a branch manager, commercial loan
officer and most recently Vice President in charge of retail
lending.
Jeffery D. Joyce (Vice President and Chief Financial Officer) is a
Certified Public Accountant who was employed with the Indianapolis
office of the public accounting firm of Crowe, Chizek and Company
LLP from September 1992 to May 1997. Most of his experience with
the firm was in the area of financial institution auditing and
consulting. Mr. Joyce is a Deacon of the Calvary Baptist Church in
Greenwood, Indiana, as well as Vice Chairman of the financial
committee. He is also active in United Way of Central Indiana and
Big Brothers of Johnson County.
Sharon Acton (Director) is employed by Cinergy/PSI, an electric
utility, as manager of the Franklin/Greenwood District providing
customer services to over 25,000 customers in the district. She is
active in numerous community organizations including the Franklin
Rotary and the Johnson County Historical Society. She also holds
office and serves on the Boards of Directors of the Franklin
Chamber of Commerce, United Way of Johnson County, Leadership
Johnson County and Johnson County Health Foundation. She is a life
time resident of Johnson County.
Gordon Dunn (Chairman of the Board; Director) is a retired
purchasing agent for the L.S. Ayres department stores. He was
employed there for 43 years. Mr. Dunn also formerly served as
Chairman of the Board of CBCI, and served as a Director of CBCI and
its predecessors for 22 years. He presently serves on the Boards
of the Franklin United Methodist Retirement Community and the Grace
United Methodist Church. He has also been active in the annual
campaign for the United Way of Johnson County.
J. Michael Jarvis (Director) is President and part owner of Power
Investments, Inc., an engine remanufacturer that is a division of
Delco Remy International, Inc. Mr. Jarvis is also President of
Production Engine Rebuild Association, which encompasses the United
States, Canada, England and all of South America. Mr. Jarvis is a
past president of the Franklin Chamber of Commerce and a current
member of the Franklin Rotary Club.
John Norton (Director) is owner and president of Norton Farms,
Inc., a grain farming operation located in Franklin, Indiana. He
is a lifelong resident of the Franklin area. Mr. Norton formerly
served as a Director on the Board of Ameritrust Indiana Corporation
(formerly Franklin Bank & Trust) for nine years. He is on the
Board of the Johnson County Historical Society, past director of
Leadership Johnson County and a member of the Board of Zoning
Appeals for Johnson County.
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<PAGE> 30
Robert Richardson (Director) since 1990 has been the majority owner
and president of MegaSys, Inc., a third party logistics company
located in Greenwood, Indiana. He serves on the Board of Directors
for Reach for Youth social services agency. Mr. Richardson is also
a member of American Society for Transportation and the Greenwood
Sertoma Club.
Patrick A. Sherman (Director) is President and part owner of
Sherman & Armbruster P.C., a public accounting firm located in
Greenwood, Indiana. Mr. Sherman has been a Certified Public
Accountant with this firm for 22 years. He is past president of
the Board of Aviation Commission for the City of Greenwood and
Board of Trustees of Valle Vista Hospital. He has also been the
Chairman of the finance committee for Our Lady of Greenwood
Catholic Church and past board member of the Greenwood Chamber of
Commerce.
James C. Stewart (Director) is currently under contract as a
consultant to Bauer Built Corp. to manage Jim Stewart Truck Tire
Company, a firm he owned for 24 years until October 1996. Mr.
Stewart's community involvement includes service as past director
of the Indianapolis Business Boosters organization, member of the
Indianapolis Athletic Club and Knights of Columbus. He is also a
member of the Indiana Motor Truck Association.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
In the first year of operation, a cash retainer of $300 per
month is expected to be paid to non-employee directors of the
Company for their services, regardless of attendance at meetings.
In addition, non-employee directors will receive awards under the
1997 Stock Option Plan for Nonemployee Directors. See "1997 Stock
Option Plan for Nonemployee Directors."
The Company will commence paying salaries to Mr. Bechman
(initial rate of $115,000 per year) and to all five of its
executive officers as a group (aggregate initial rates of
approximately $400,000) upon completion of this offering. In
addition, the Company has paid aggregate salary to three of its
five executive officers (not including Mr. Bechman or Mr. Goben,
who have served without salary) for their services during the
organizational period through the date of this Prospectus in the
aggregate estimated amount of $5,750. The Bank's initial salary
levels for its executive officers are based on individual years of
experience and the compensation of officers in comparable positions
at competitive financial institutions. Executive officers'
compensation in subsequent years will be determined by the
Compensation Committee, a committee of the Bank's Board of
Directors comprised of a majority of outside (non-employee)
<PAGE>
<PAGE> 31
directors. Officers of the Bank may also participate in any
benefit plan adopted for broad participation by Bank employees,
such as a planned 401(k) plan. Neither the Company nor the Bank
has an employment agreement with any officer.
1997 STOCK OPTION PLAN
The Board of Directors has adopted, and the sole shareholder
of the Company has approved, the 1997 Stock Option Plan (the
"Plan)". The Plan's adoption is intended to enable the key
employees of the Company or any subsidiary (and non-employee
consultants) to participate in any growth and profitability of the
Company and encourage their continuation of service to the Company
or a subsidiary to the benefit of the Company and its shareholders.
Pursuant to the Plan, stock options may be granted which qualify
under the Internal Revenue Code as incentive stock options or as
stock options that do not qualify as incentive stock options. The
Board is of the judgment that the interests of the Company and its
shareholders will be advanced by implementation of this Plan. The
option price will not be less than fair market value of the shares
of shares of Common Stock at the time the option is granted, but in
any event not less than $10 per share during the 12 months
following the date of this Prospectus. The maximum number of
shares of Common Stock which may be issued under Plan during its
ten-year term will not exceed 75,000 shares (subject to anti-
dilution adjustments). The shares will be authorized but unissued
shares (including shares reacquired by the Company). In the event
of a change in control (as defined in the Plan), each option then
outstanding will become exercisable in full immediately prior to
such change in control.
The Stock Option Committee of the Board of Directors of the
Company has granted options under the Plan to the following
officers:
Number of Shares
Name of Officer Covered by Options
Steve Bechman 20,000
Jeffrey L. Goben 15,000
Keith Fox 5,000
John Morin 5,000
Jeffery D. Joyce 5,000
The options, which are intended to be incentive options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, were granted as of the date immediately preceding the date
of this Prospectus. The exercise price for each option is $10 per
share. Each option is immediately exercisable with respect to 20
percent of the shares covered by the option and will vest with
<PAGE>
<PAGE> 32
respect to an additional 20 percent of the shares on each of the
following four anniversaries of the date of this Prospectus,
assuming continued employment of the optionee. The options will
expire on July 24, 2007.
1997 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
In order to increase the proprietary interest of nonemployee
directors of the Company and to enhance the Company's ability to
retain and attract experienced and knowledgeable directors, the
Board of Directors has adopted and the sole shareholder of the
Company has approved the 1997 Stock Option Plan for Nonemployee
Directors (the "Nonemployee Director Plan"). Pursuant to the
Nonemployee Director Plan, as of the close of business on the date
preceding the date of this Prospectus, the Company has granted to
each director of the Company who is not an employee of the Company
or any affiliate ("Nonemployee Director") an option to purchase
4,000 shares of Common Stock of the Company at the public offering
price of $10 per share. Nonemployee Directors who are first
appointed or elected after the date of this Prospectus, will
receive an option for a lesser number of shares, the number of
which will depend on which annual meeting is the first annual
meeting occurring concurrently with, or after he or she becomes a
Nonemployee Director. The total number of shares of the Company's
Common Stock which may be issued under the Nonemployee Director
Plan will not exceed 40,000 shares (subject to anti-dilution
adjustments). The shares will be authorized but unissued shares
(including shares reacquired by the Company). Options granted
under the Nonemployee Director Plan are immediately exercisable for
1,000 shares of Common Stock. On the date of each successive
annual meeting of the Company, each option will become exercisable
(assuming continued service on the Board of Directors) for an
additional 1,000 shares of Common Stock, until it is exercisable in
full. In the event of a "change in control" of the Company, as
defined in the Nonemployee Director Plan, each option then
outstanding shall become immediately exercisable in full,
immediately prior to such change in control. The option exercise
price for future options granted under the Nonemployee Director
Plan will be the fair market value per share on the date the option
is granted to the Nonemployee Director. The unexercised portion of
each option automatically expires, and is no longer exercisable, on
the earliest to occur of the following: (i) ten years after the
option is granted, (ii) three months after the person who was
granted the option ceases to be a Nonemployee Director, other than
due to permanent disability, death, or for cause, (iii) one year
following the death or permanent disability of the Nonemployee
Director, and (iv) termination of the Nonemployee Director's
service as such, for cause.
<PAGE>
<PAGE> 33
RELATED PARTY TRANSACTIONS
LOANS FROM ORGANIZERS AND REDEMPTION OF ORGANIZATIONAL STOCK
Over the past several months, the organizers of the Bank have
loaned funds (which at August 31, 1997 were in the aggregate amount
of principal plus accrued interest) of approximately $163,000 to
the Company to cover organizational expenses of the Company and the
Bank and other costs. Interest is payable on the loans at the
national prime rate. All of these loans will be repaid by the
Company and the Bank (with interest) from the net proceeds of the
offering. See "Use of Proceeds." The organizers include the
members of the Board of Directors and executive officers. In
addition, the Company will redeem the single share of Common Stock
currently owned by its Chairman of the Board, Gordon R. Dunn, upon
its organization for Mr. Dunn's $10 cost upon closing of this
offering.
BANKING TRANSACTIONS
It is anticipated that the directors and officers of the
Company and the Bank and the companies with which they are
associated will have banking and other transactions with the
Company and the Bank in the ordinary course of business. It is the
Bank's policy that any loans and commitments to lend to such
affiliated persons or entities included in such transactions will
be made in accordance with all applicable laws and regulations and
on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with unaffiliated parties of similar creditworthiness,
and will not involve more than normal risk or present other
unfavorable features to the Company and the Bank. Applicable law
and Bank policy generally require that transactions between the
Company or the Bank, and any officer, director, principal
shareholder, or other affiliate of the Company or the Bank will be
on terms no less favorable to the Company or the Bank than could be
obtained on an arm's-length basis from unaffiliated independent
third parties.
INDEMNIFICATION
The Bylaws of the Company provide for the indemnification of
directors and officers of the Company, including reasonable legal
fees, incurred by such directors and officers while acting for or
on behalf of the Company or the Bank as a director or officer,
subject to certain limitations. See "Description of Capital Stock
- -- Indemnification of Directors and Officers." The scope of such
indemnification otherwise permitted by Indiana law may be limited
in certain circumstances by Federal law and regulations. See
"Supervision and Regulation -- Recent Regulatory Developments."
The Company may purchase directors' and officers' liability
insurance for directors and officers of the Company and the Bank.
<PAGE>
<PAGE> 34
PRINCIPAL SHAREHOLDERS
The Company has only one share of Common Stock outstanding
with such share being held by Mr. Dunn; that share will be
redeemed by the Company at its cost upon closing of this offering.
The following table sets forth certain information with respect to
the anticipated beneficial ownership of the Company's Common Stock
after the sale of shares offered hereby, by each of the current
directors and executive officers of the Company and by all such
directors and executive officers of the Company as a group. No
person is expected to beneficially own more than five percent of
the outstanding Common Stock following the offering. Pursuant to
the Underwriting Agreement, the Company will direct the underwriter
to offer to sell the number of shares listed below. All share
numbers are provided based upon such directions from the Company
and non-binding expressions of interest supplied by the persons
listed below. Depending upon their individual circumstances at the
time, each of such persons may purchase a greater or fewer number
of shares than indicated in the following table and in fact may
purchase no shares.
<TABLE>
<CAPTION>
Number of shares Percentage of
beneficially owned outstanding shares
Name after offering(1) after offering(4)
<S> <C> <C>
Sharon K. Acton 500(3) 0.05%
Steve Bechman 25,000(2) 2.50%
Gordon R. Dunn 6,000(3) 0.60%
K. Keith Fox 2,500(2) 0.25%
Jeffrey L. Goben 20,000(2) 2.00%
J. Michael Jarvis 2,000(3) 0.20%
Jeffery D. Joyce 1,000(2) 0.10%
John Morin 2,500(2) 0.25%
John Norton 4,000(3) 0.40%
Robert L. Richardson 4,000(3) 0.40%
Patrick A. Sherman 2,000(3) 0.20%
<PAGE>
<PAGE> 35
James C. Stewart 5,000(3) 0.50%
Directors and executive 74,500(2)(3) 7.45%
officers as a group
(12 persons)
______________________
</TABLE>
(1) Some or all of the Common Stock listed may be held jointly
with, or for the benefit of, spouses and children of, or
various trusts established by, the person indicated.
(2) Does not include an additional 10,000 shares that such persons
have the right to acquire, in the aggregate, within 60 days of
the date of this Prospectus pursuant to the Company's 1997
Employee Stock Option Plan (Mr. Bechman: 4,000 shares; Mr.
Goben: 3,000 shares; Mr. Fox: 1,000 shares; Mr. Morin: 1,000
shares; and Mr. Joyce: 1,000 shares). Such persons also hold
options under such plan to purchase an additional 40,000
shares (which will first become exercisable subject to
continued service in future years) as follows:
Mr. Bechman 16,000
Mr. Goben 12,000
Mr. Fox 4,000
Mr. Morin 4,000
Mr. Joyce 4,000
(3) Does not include 1,000 shares that such person has the right
to acquire within 60 days after the date of the Prospectus
pursuant to the Company's 1997 Stock Option Plan for
Nonemployee Directors. Such person also holds options under
such plan to purchase an additional 3,000 shares, which
options will first become exercisable (subject to continued
service) in future years.
(4) The percentages shown are based on the 1,000,000 shares
offered hereby and assume no exercise of the Underwriter's
over-allotment option.
<PAGE>
<PAGE> 36
SUPERVISION AND REGULATION
GENERAL
Financial institutions and their holding companies are
extensively regulated under federal and state law. Consequently,
the growth and earnings performance of the Company and the Bank can
be affected not only by management decisions and general economic
conditions, but also by the statutes administered by, and the
regulations and policies of, various governmental regulatory
authorities. Those authorities include, but are not limited to,
the Federal Reserve Board, the FDIC, the Department, the Securities
and Exchange Commission (the "SEC"), the Internal Revenue Service
and state taxing authorities. The effect of such statutes,
regulations and policies can be significant, and cannot be
predicted with a high degree of certainty.
Federal and state laws and regulations generally applicable to
financial institutions and their holding companies regulate, among
other things, the scope of business, investments, reserves against
deposits, capital levels relative to operations, lending activities
and practices, the nature and amount of collateral for loans, the
establishment of branches, mergers, consolidations and dividends.
The system of supervision and regulation applicable to the Company
and the Bank establishes a comprehensive framework for their
respective operations and is intended primarily for the protection
of the FDIC's deposit insurance funds, the depositors of the Bank
and the public, rather than shareholders of the Bank or the
Company.
Federal law and regulations, including provisions added by the
Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") and regulations promulgated thereunder, establish
supervisory standards applicable to the operation, management and
lending activities of the Bank, including internal controls, loan
documentation, credit underwriting, interest rate exposure, asset
growth, compensation and loan-to-value ratios for loans secured by
real property. The Bank intends to comply with these requirements,
and in some cases may apply more restrictive standards.
The following references to statutes and regulations are
intended to summarize material effects of certain government
regulation on the business of the Company and the Bank. Any change
in government regulation may have a material adverse effect on the
Company, the Bank and their operations.
THE COMPANY
GENERAL. The Company's application to serve as the holding
company for the Bank was accepted for processing by the Federal
Reserve Bank of Chicago pursuant to regulations promulgated under
the Bank Holding Company Act of 1956, as amended ("BHCA"). The
<PAGE>
<PAGE> 37
Federal Reserve Board has indicated that this application will be
acted upon on or before September 11, 1997. When the Company
becomes the sole shareholder of the Bank, the Company will be a
bank holding company and, as such, will be subject to the
supervision of and regulation by, the Federal Reserve Board under
the BHCA. Under the BHCA, the Company will be subject to periodic
examination by the Federal Reserve Board and will be required to
file periodic reports of its operations and such additional
information as the Federal Reserve Board may require. The Company
also will be required to file periodic reports with, and otherwise
comply with the rules and regulations of, the SEC under the federal
securities laws.
In accordance with Federal Reserve Board policy, the Company
will be expected to act as a source of financial strength to the
Bank and to commit resources to support the Bank in circumstances
where the Company might not do so absent such policy. In addition,
in certain circumstances an Indiana state bank having impaired
capital may be required by the Department of Financial Institutions
either to restore the bank's capital by a special assessment upon
its shareholders or to initiate the liquidation of the bank.
INVESTMENTS AND ACTIVITIES. Under the BHCA, bank holding
companies are prohibited, with certain limited exceptions, from
engaging in, or acquiring, directly or indirectly, control of
voting securities or assets of a company engaged in, any activity
other than banking or managing or controlling banks or an activity
that the Federal Reserve Board determines to be so closely related
to banking or managing or controlling banks as to be a proper
incident thereto. Under current Federal Reserve Board regulations,
such permissible non-bank activities include such things as
mortgage banking, equipment leasing, securities brokerage and
consumer and commercial finance company operations. Any such
acquisition will require, except in certain cases, prior written
notice to the Federal Reserve Board.
In evaluating a written notice of such an acquisition, the
Federal Reserve Board will consider various factors, including
among others the financial and managerial resources of the
notifying bank holding company and its subsidiaries, and the
relative public benefits and adverse effects which may be expected
to result from the performance of the activity by an affiliate of
such company. The Federal Reserve Board may apply different
standards to activities proposed to be commenced de novo and
activities commenced by acquisition, in whole or in part, of a
going concern. The required notice period may be extended by the
Federal Reserve Board under certain circumstances, including a
notice for acquisition of a company engaged in activities not
previously approved by regulation of the Federal Reserve Board. If
such a proposed acquisition is not disapproved or subjected to
conditions by the Federal Reserve Board within the applicable
notice period, it is deemed approved by the Federal Reserve Board.
<PAGE>
<PAGE> 38
In general, any direct or indirect acquisition by the Company
of any voting shares of any bank which would result in the
Company's direct or indirect ownership or control of more than 5%
of any class of voting shares of such bank, and any merger or
consolidation of the Company with another bank holding company,
will require the prior written approval of the Federal Reserve
Board under the BHCA. In acting on such applications, the Federal
Reserve Board must consider various statutory factors, including
among others, the effect of the proposed transaction on competition
in the relevant geographic and product markets, each party's
financial condition and managerial resources and record of
performance under the Community Reinvestment Act. Since September
29, 1995, the BHCA has permitted the Federal Reserve Board under
specified circumstances to approve the acquisition, by a bank
holding company located in one state, of a bank or bank holding
company located in another state, without regard to any prohibition
contained in state law. See "Recent Regulatory Developments."
The merger or consolidation of an existing bank subsidiary of
the Company with another bank, or the acquisition by such a
subsidiary of assets of another bank, or the assumption of
liability by such a subsidiary to pay any deposits in another bank,
will require the prior written approval of the responsible Federal
depository institution regulatory agency under the Bank Merger Act,
based upon a consideration of statutory factors similar to those
outlined above with respect to the BHCA. In addition, in certain
such cases an application to, and the prior approval of, the
Federal Reserve Board under the BHCA and/or the Department of
Financial Institutions of the State of Indiana, may be required.
CAPITAL REQUIREMENTS. The Federal Reserve Board uses capital
adequacy guidelines in its examination and regulation of bank
holding companies. If capital falls below minimum guidelines, a
bank holding company may, among other things, be denied approval to
acquire or establish additional banks or non-bank businesses.
The Federal Reserve Board's capital guidelines establish the
following minimum regulatory capital requirements for bank holding
companies: (i) a leverage capital requirement expressed as a
percentage of total assets, (ii) a risk-based requirement expressed
as a percentage of total risk-weighted assets, and (iii) a Tier 1
leverage requirement expressed as a percentage of total assets.
The leverage capital requirement consists of a minimum ratio of
total capital to total assets of 6%, with an expressed expectation
that banking organizations generally should operate above such
minimum level. The risk-based requirement consists of a minimum
ratio of total capital to total risk-weighted assets of 8%, of
which at least one-half must be Tier 1 capital (which consists
principally of shareholders' equity). The Tier 1 leverage
requirement consists of a minimum ratio of Tier 1 capital to total
assets of 3% for the most highly rated companies, with minimum
requirements of 4% to 5% for all others.
<PAGE>
<PAGE> 39
The risk-based and leverage standards presently used by the
Federal Reserve Board are minimum requirements, and higher capital
levels will be required if warranted by the particular
circumstances or risk profiles of individual banking organizations.
Further, any banking organization experiencing or anticipating
significant growth would be expected to maintain capital ratios,
including tangible capital positions (i.e., Tier 1 capital less all
intangible assets), well above the minimum levels.
The Federal Reserve Board's regulations provide that the
foregoing capital requirements will generally be applied on a
bank-only (rather than a consolidated) basis in the case of a bank
holding company with less than $150 million in total consolidated
assets unless: (i) the bank holding company is engaged directly or
indirectly in any nonbank activity involving significant leverage
or (ii) the holding company has outstanding significant debt held
by the general public. Nonetheless, on a pro forma basis, assuming
the issuance and sale by the Company of the 1,000,000 shares of
Common Stock offered hereby at $10.00 per share, the Company's
leverage capital ratio, risk-based capital ratio and Tier 1
leverage ratio, in each case as calculated on a consolidated basis
under the Federal Reserve Board's capital guidelines, would exceed
the minimum requirements.
The Company has committed to the Federal Reserve Bank of
Chicago that it will not, without the prior written consent of the
Federal Reserve Board, incur debt outside the ordinary course of
business until five years has elapsed from the date that the
Company has acquired the Bank.
DIVIDENDS. The Company is a corporation separate and distinct
from the Bank. Most of the Company's revenues will be received by
it in the form of dividends or interest paid by the Bank. The Bank
is subject to statutory restrictions on its ability to pay
dividends. See "The Bank -- Dividends." The Federal Reserve Board
has issued a policy statement on the payment of cash dividends by
bank holding companies. In the policy statement, the Federal
Reserve Board expressed its view that a bank holding company
experiencing earnings weaknesses should not pay cash dividends
exceeding its net income or which could only be funded in ways that
weakened the bank holding company's financial health, such as by
borrowing. Additionally, the Federal Reserve Board possesses
enforcement powers over bank holding companies and their non-bank
subsidiaries to prevent or remedy actions that represent unsafe or
unsound practices or violations of applicable statutes and
regulations. Among these powers is the ability to proscribe the
payment of dividends by banks and bank holding companies. Similar
enforcement powers over the Bank are possessed by the FDIC. The
"prompt corrective action" provisions of FDICIA impose further
restrictions on the payment of dividends by insured banks which
fail to meet specified capital levels and, in some cases, their
parent bank holding companies.
<PAGE>
<PAGE> 40
In addition to the restrictions on dividends imposed by the
Federal Reserve Board, the laws of the State of Indiana impose
certain restrictions on the declaration and payment of dividends by
Indiana corporations such as the Company. See "Description of
Capital Stock -- Common Stock -- Dividend Rights."
THE BANK
GENERAL. Upon completion of its organization, the Bank will
be an Indiana state-charted commercial bank, and its deposit
accounts will be insured up to applicable limits by the FDIC under
the Bank Insurance Fund (the "BIF"). As an FDIC-insured,
Indiana-chartered bank, the Bank will be subject to the
examination, supervision, reporting and enforcement requirements of
the Department of Financial Institutions, as the chartering
authority for Indiana banks, and the FDIC, as administrator of the
BIF. These agencies and federal and state law extensively regulate
various aspects of the banking business including, among other
things, permissible types and amounts of loans, investments and
other activities, capital adequacy, branching, interest rates on
loans and on deposits, the maintenance of non-interest bearing
reserves on deposit accounts and the safety and soundness of
banking practices.
DEPOSIT INSURANCE. As an FDIC-insured institution, the Bank
will be required to pay deposit insurance premium assessments to
the FDIC. Pursuant to FDICIA, the FDIC adopted a risk-based
assessment system under which all insured depository institutions
are assigned one of nine categories (consisting of one of three
capital subcategories and one of three supervisory subcategories)
and assessed insurance premiums based upon their level of capital
and supervisory evaluation. Institutions classified as
well-capitalized (as defined by the FDIC) and considered healthy
pay the lowest premium while institutions that are less than
adequately capitalized (as defined by the FDIC) and considered of
substantial supervisory concern pay the highest premium. Risk
classification of all insured institutions is made by the FDIC for
each semi-annual assessment period.
FDICIA required the FDIC to establish assessment rates at
levels which would restore the BIF to a mandated reserve ratio of
1.25% of insured deposits over a period not to exceed 15 years. In
November 1995, the FDIC determined that the BIF had reached the
required ratio. Accordingly, the FDIC has established the schedule
of BIF insurance assessments for the first semi-annual assessment
period of 1997, ranging from 0% of deposits for institutions in the
highest category to .27% of deposits for institutions in the lowest
category.
<PAGE>
<PAGE> 41
The FDIC may terminate the deposit insurance of any insured
depository institution if the FDIC determines, after a hearing,
that the institution or its directors have engaged or are engaging
in unsafe or unsound practices, or have violated any applicable
law, regulation, rule, order or any condition imposed in writing
by, or written agreement with, the FDIC, or if the institution is
in an unsafe or unsound condition to continue operations. The FDIC
may also suspend deposit insurance temporarily during the hearing
process for a permanent termination of insurance if the institution
has no tangible capital.
CAPITAL REQUIREMENTS. The FDIC has established the following
minimum capital standards for state-chartered, FDIC-insured
non-member banks, such as the Bank: (i) a leverage requirement
consisting of a minimum ratio of Tier 1 capital to total assets of
3% for the most highly-rated banks and a minimum ratio of Tier I
capital to total assets of 4% to 5% for all others, and (ii) a
risk-based capital requirement consisting of a minimum ratio of
total capital to total risk-weighted assets of 8%, of which at
least one-half of that total capital amount must consist of Tier 1
capital. Tier 1 capital consists principally of shareholders'
equity.
The capital requirements described above are minimum
requirements. Higher capital levels will be required if warranted
by the particular circumstances or risk profiles of individual
institutions. As a condition to the regulatory approvals of the
Bank's formation, the Bank will be required to have an initial
capitalization sufficient to provide a ratio of Tier 1 capital to
total estimated assets of at least 8% at the end of the third year
of operation.
PROMPT CORRECTIVE ACTION. FDICIA establishes a system of
prompt corrective action to resolve the problems of
undercapitalized institutions. Under this system, federal
depository institution regulators are required to take certain
mandatory supervisory actions, and may take certain discretionary
supervisory actions against undercapitalized institutions, the
severity of which depends upon the institution's degree of
capitalization. In addition, subject to a narrow exception, FDICIA
generally requires the federal depository institution regulators to
appoint a receiver or conservator for an institution that is
critically undercapitalized.
As mandated by FDICIA, the federal banking regulators have
specified by regulation the relevant capital measures at which an
insured depository institution is deem well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. Pursuant to the FDIC's regulations
implementing the prompt corrective action provisions of FDICIA, a
bank will be deemed to be: (i) well capitalized if the bank has a
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total risk-based capital ratio of 10% or greater, Tier 1 risk-based
capital ratio of 6% or greater and leverage ratio of 5% or greater;
(ii) adequately capitalized if the bank has a total risk-based
capital ratio of 8% or greater, Tier 1 risk-based capital ratio of
4% or greater and leverage ratio of 4% or greater (3% for the most
highly rated banks); (iii) undercapitalized if the bank has a total
risk-based capital ratio of less than 8%, Tier 1 risk-based capital
ratio of less than 4% or leverage ratio of less than 4% (less than
3% for the most highly rated banks); (iv) significantly
undercapitalized if the bank has a total risk-based capital ratio
of less than 6%, Tier 1 risk-based capital ratio of less than 3% or
leverage ratio of less than 3%; and (v) critically undercapitalized
if the bank has a ratio of tangible equity to total assets of 2% or
less.
Subject to certain exceptions, these capital ratios are
generally determined on the basis of Call Reports submitted by each
depository institution and the reports of examination by each
institution's appropriate federal depository institution regulatory
agency.
Depending upon the capital category to which an institution is
assigned, the regulators' corrective powers include: requiring the
submission of a capital restoration plan (which must include a
holding company guarantee of performance); placing limits on asset
growth and restrictions on activities; requiring the institution to
issue additional capital stock (including additional voting stock)
or to be acquired; restricting transactions with affiliates;
restricting the interest rate the institution may pay on deposits;
ordering a new election of directors of the institution; requiring
that senior executive officers or directors be dismissed;
prohibiting the institution from accepting deposits from
correspondent banks requiring the holding company to divest certain
subsidiaries including the institution; requiring the institution
to divest certain subsidiaries; prohibiting the payment of
principal or interest on subordinated debt; and ultimately,
appointing a receiver or conservator for the institution.
In general, a depository institution may be reclassified to a
lower category than is indicated by its capital position if the
appropriate federal depository institution regulatory agency
determines the institution to be otherwise in an unsafe or unsound
condition or to be engaged in an unsafe or unsound practice. This
could include a failure by the institution, following receipt of a
less-than-satisfactory rating on its most recent examination
report, to correct the deficiency.
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DIVIDENDS. As a state-chartered commercial bank organized
under Indiana law, the Bank may declare and pay dividends to the
proposed sole shareholder (the Company) of so much undivided
profits as its Board of Directors deems expedient, subject to prior
approval of the Department if the proposed dividend (when added to
all prior dividends declared during the current calendar year)
would exceed current year "net profits" and retained "net profits"
for the previous two calendar years.
FDICIA generally prohibits a depository institution from
making any capital distribution (including payment of a dividend)
or paying any management fee to its holding company if the
depository institution would thereafter be undercapitalized. The
FDIC may prevent an insured bank from paying dividends if the bank
is in default of payment of any assessment due to the FDIC. In
addition, payment of dividends by a bank may be prevented by the
applicable federal regulatory authority if such payment is
determined, by reason of the financial condition of such bank, to
be an unsafe and unsound banking practice.
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INSIDER TRANSACTIONS. The Bank is subject to certain
restrictions imposed by the Federal Reserve Act ("FRA") on any
extensions of credit to the Company or its subsidiaries, on
investments in the stock or other securities of the Company or its
subsidiaries, and the acceptance of the stock or other securities
of the Company or its subsidiaries as collateral for loans. These
restrictions limit the aggregate amount of transactions with any
individual affiliate to 10% of the Bank's capital and surplus,
limit the aggregate amount of transactions with all affiliates to
20% of the Bank's capital and surplus, require that loans and
certain other extensions of credit be secured by collateral in
certain specified amounts and types, generally prohibit the
purchase of low quality assets from affiliates and generally
require that certain transactions with affiliates, including loans
and asset purchases, be on terms and under circumstances, including
credit standards, that are substantially the same or at least as
favorable to the Bank as those prevailing at the time for
comparable transactions with nonaffiliated individuals or entities.
Also, the FRA prescribes certain limitations and reporting
requirements on extensions of credit by the Bank to its directors
and executive officers, to directors and executive officers of the
Company and its subsidiaries, to principal shareholders of the
Company and its subsidiaries, to principal shareholders of the
Company and to "related interests" of such directors, officers and
principal shareholders. Among other things, the FRA, and the
regulations thereunder, require such loans to be made on
substantially the same terms as those offered to unaffiliated
individuals, place limits on the amount of loans the Bank may
extend to such individuals and require certain approval procedures
to be followed. In addition, such legislation and regulations may
affect the terms upon which any person becoming a director or
officer of the Company or one of its subsidiaries or a principal
shareholder of the Company may obtain credit from banks with which
the Bank maintains a correspondent relationship.
SAFETY AND SOUNDNESS STANDARDS. On July 10, 1995, the FDIC,
the Office of Thrift Supervision, the Federal Reserve Board and the
Office of the Comptroller of the Currency published final
guidelines implementing the FDICIA requirement that the federal
banking agencies establish operational and managerial standards to
promote the safety and soundness of federally insured depository
institutions. The guidelines, which took effect on August 9, 1995,
establish standards for internal controls, information systems,
internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth and compensation, fees and
benefits, and specifically prohibit, as an unsafe and unsound
practice, excessive compensation that could lead to a material loss
to an institution. The federal banking agencies also adopted asset
quality and earnings standards that were added to the safety and
soundness guidelines effective October 1, 1996. If an institution
fails to comply with any of the standards set forth in the
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guidelines, the institution's primary federal regulator may require
the institution to submit a plan for achieving and maintaining
compliance. Failure to submit an acceptable compliance plan, or
failure to adhere to a compliance plan that has been accepted by
the appropriate regulator, would constitute grounds for further
enforcement action.
STATE BANK ACTIVITIES. Under FDICIA, as implemented by final
regulations adopted by the FDIC, FDIC-insured state banks are
prohibited, subject to certain exceptions, from directly or
indirectly acquiring or retaining any equity investments of a type,
or in an amount, that are not permissible for a national bank.
FDICIA, as implemented by FDIC regulations, also prohibits
FDIC-insured state banks and their subsidiaries, subject to certain
exceptions, from engaging as principal in any activity that is not
permitted for a national bank or its subsidiary, respectively,
unless the bank meets, and continues to meet, its minimum
regulatory capital requirements and the FDIC determines the
activity would not pose a significant risk to the deposit insurance
fund of which the bank is a member. Impermissible investments and
activities must be divested or discontinued within certain time
frames set by the FDIC in accordance with FDICIA. These
restrictions are not currently expected to have a material impact
on the operations of the Bank.
CONSUMER BANKING. The Bank's business will include making a
variety of types of loans to individuals. In making these loans,
the Bank will be subject to state usury and regulatory laws and to
various federal statutes, such as the Equal Credit Opportunity Act,
Fair Credit Reporting Act, Truth in Lending Act, Real Estate
Settlement Procedures Act and Home Mortgage Disclosure Act, and the
regulations promulgated thereunder, which prohibit discrimination,
specify disclosures to be made to borrowers regarding credit and
settlement costs and regulate the mortgage loan servicing
activities of the Bank, including the maintenance and operation of
escrow accounts and the transfer of mortgage loan servicing. The
Riegle Act imposed new escrow requirements on depository and
non-depository mortgage lenders and servicers under the National
Flood Insurance Program. See "Recent Regulatory Developments." In
receiving deposits, the Bank will be subject to extensive
regulation under state and federal law and regulations, including
the Truth in Savings Act, the Expedited Funds Availability Act, the
Bank Secrecy Act, the Electronic Funds Transfer Act and the Federal
Deposit Insurance Act. Violation of these laws could result in the
imposition of significant damages and fines upon the Bank, its
directors and officers.
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REGULATORY DEVELOPMENTS
The Deposit Insurance Funds Act of 1996 (the "DIFA"), which
was part of the omnibus appropriations bill for fiscal year 1997,
addresses the problem of the undercapitalized Savings Association
Insurance Fund (the "SAIF"). As required under the DIFA, the FDIC
imposed a one-time special assessment on savings associations to
bring the SAIF up to a mandated reserve ratio of 1.25% of insured
deposits.
In addition, beginning on January 1, 1997, banks and thrifts
are required to share in the payment of the Financing Corporation
(the "FICO") bonds. The FICO bonds were issued pursuant to the
Competitive Equality Banking Act of 1987 to recapitalize the
Federal Savings and Loan Insurance Corporation. Prior to the
enactment of the DIFA, savings associations alone paid assessments
on the FICO bonds.
In 1994, the Congress enacted two major pieces of banking
legislation, the Riegle Community Direction Act (the "Riegle Act")
and the Riegle-Neal Interstate Banking and Branching Efficiency Act
(the "Riegle-Neal Act"). The Riegle Act addressed such varied
issues as the promotion of economic revitalization of defined urban
and rural "qualified distressed communities" through special
purpose "Community Development Financial Institutions," the
expansion of consumer protection with respect to certain loans
secured by a consumer's home and reverse mortgages and reductions
in compliance burdens regarding Currency Transaction Reports, in
addition to reform of the National Flood Insurance Program, the
promotion of a secondary market for small business loans and leases
and mandating specific changes to reduce regulatory impositions on
depository institutions and holding companies.
The Riegle-Neal Act substantially changed the geographic
constraints applicable to the banking industry. Effective
September 29, 1995, the Riegle-Neal Act allows bank holding
companies to acquire banks located in any state in the United
States without regard to geographic restrictions or reciprocity
requirements imposed by state law, but subject to certain
conditions, including limitations on the aggregate amount of
deposits that may be held by the acquiring holding company and all
of its insured depository institution affiliates. Effective June
1, 1997 (or earlier if expressly authorized by applicable state
law), the Riegle-Neal Act allows banks to establish interstate
branch networks through acquisitions of other banks, subject to
certain conditions, including certain limitations on the aggregate
amount of deposits that may be held by the surviving bank and all
of its insured depository institution affiliates. The
establishment of de novo interstate branches or the acquisition of
individual branches of a bank in another state (rather than the
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acquisition of an out-of-state bank in its entirety) is allowed by
the Riegle-Neal Act only if specifically authorized by state law.
The legislation allowed individual states to "opt-out" of certain
provisions of the Riegle-Neal Act by enacting appropriate
legislation prior to June 1, 1997.
Effective March 14, 1996, Indiana "opted in" to the interstate
branching provisions of the Riegle-Neal Act. The Indiana
legislation authorizes, subject to certain approval and other
requirements, Indiana-chartered banks to establish branches in
states other than Indiana and out-of-state banks to establish
branches in Indiana. Indiana and out-of-state banks are authorized
to establish branches either by acquisition or de novo.
FDIC regulations, which became effective April 1, 1996, impose
certain limitations (and in certain cases, prohibitions) on (i)
"golden parachute" severance payments by troubled depository
institutions, their subsidiaries and affiliated holding companies
to institution-affiliated parties (primarily directors, officers,
employees or principal shareholders of the institution), and (ii)
indemnification payments by a depository institution, their
subsidiaries and affiliated holding companies, regardless of
financial condition, to institution-affiliated parties. The FDIC
regulations impose limitations on indemnification payments which
could restrict, in certain circumstances, payments by the Company
or the Bank to their respective directors or officers otherwise
permitted under Indiana state law. See "Description of Capital
Stock -- Indemnification of Directors and Officers."
In June, 1997, broad financial reform legislation was approved
by the Banking Committee of the U.S. House of Representatives. The
proposed legislation includes provisions that would permit, subject
to certain restrictions, bank holding companies to acquire
manufacturing and other nonfinancial companies, permit nonfinancial
companies to acquire banks, and require thrift institutions to
convert to bank charters. The Company cannot predict whether, or
in what form, this legislation may be enacted, and if enacted, what
the effect would be on the Company and the Bank.
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DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 10,000,000
shares of Common Stock, no par value, of which only one share was
issued and outstanding as of the date of this Prospectus and
2,000,000 shares of Preferred Stock, no par value, of which no
shares are issued and outstanding. At the conclusion of the
offering, 1,000,000 shares of Common Stock will be issued and
outstanding, assuming no exercise by the Underwriter of its over-
allotment option. The Board of Directors has the power to
determine the relative rights of and restrictions on any series of
Preferred Stock that it may authorize in the future and may provide
terms upon which preferred stock may be converted into shares of
any other class of stock, and may issue and sell such Preferred
Stock without prior shareholder approval. The Company has reserved
115,000 shares of Common Stock that may be issued under the
Company's stock option plans. The remaining authorized but
unissued shares of Common Stock may be issued upon authorization by
the Board of Directors without prior shareholder approval.
COMMON STOCK
VOTING RIGHTS. Each share of the Company's Common Stock
entitles the holder thereof to one vote on all matters on which the
holders of shares of the Company's Common Stock are entitled to
vote. Except for (a) supermajority votes required to approve
certain business combinations and certain other matters (see
"Description of Capital Stock -- Certain Provisions of Indiana Law
and the Company's Articles of Incorporation and Bylaws"), and (b)
certain corporate actions that must be approved by a majority of
the outstanding votes of the relevant voting group under the
Indiana Business Corporation Law (the "IBCL"), the affirmative vote
of the holders of the majority of the votes cast at a meeting at
which a quorum is present is sufficient to approve matters
submitted for shareholder approval, except that directors are
elected by a plurality of the votes cast. Shareholders do not have
cumulative voting rights for the election of directors. Directors
may be removed, with or without cause, only by the vote of 80% of
the shares entitled to vote at an election of directors.
DIVIDEND RIGHTS. Subject to any preferential dividend rights
of a series of shares of preferred stock, the holders of Common
Stock are entitled to receive dividends as and when declared by the
Board of Directors from funds legally available for their payment.
Although the Company does not currently anticipate paying dividends
in the foreseeable future, holders of shares of Common Stock would
be entitled to share ratably in dividends, if any, that may be
declared on the Common Stock by the Board of Directors.
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LIQUIDATION RIGHTS. Upon any liquidation, dissolution, or
winding up of the affairs of the Company, the holders of Common
Stock are entitled to share ratably in the assets legally available
for distribution to the holders of Common Stock after satisfaction
in full of any liquidation preference to which holders of Preferred
Stock, if any, may then be entitled.
OTHER MATTERS. The holders of shares of the Common Stock have
no preemptive or redemption rights or any preferred right to
purchase or subscribe for any authorized but unissued capital stock
or any securities of the Company convertible into Common Stock.
The outstanding shares are, and the shares offered hereby will be
when issued, fully paid and nonassessable. The shares of Common
Stock are not redeemable at the option of the Company or holders
thereof.
Heartland Bancshares, Inc., serves as the registrar and
transfer agent for its own Common Stock.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the Board of
Directors, without further shareholder approval, to establish the
relative rights, designations, preferences, and limitations or
restrictions on the shares of Preferred Stock prior to the issuance
thereof, including, without limitation, dividend rights, conversion
rights, voting rights, liquidation preferences, redemption rights,
division into series, sinking fund provisions, and similar matters.
Thus, the Board of Directors may authorize and issue a series of
Preferred Stock with rights and preferences that are superior to
those of the Common Stock, the issuance of which could adversely
affect the voting power of the holders of Common Stock.
The availability of Preferred Stock with unspecified voting
rights and possibly other rights, such as a required approval of
mergers or other extraordinary corporate transactions, could be
used by management to create voting impediments or to deter persons
seeking to effect a merger or otherwise to gain control of the
Company. Preferred Stock may also be issued at sometime in the
future in connection with acquisitions by the Company of additional
companies or businesses. The Company has no present plans to issue
any series of Preferred Stock.
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INDIANA LAW
Under the IBCL, several provisions could affect the
acquisition of the shares of or control over the Company. The IBCL
contains a Control Share Acquisition Chapter that may have the
effect of discouraging or making more difficult a hostile takeover
of an Indiana corporation. This provision also may have the effect
of discouraging premium bids for outstanding shares. The Control
Share Acquisition Chapter provides that, unless otherwise provided
in a corporation's articles of incorporation or by-laws, shares
acquired in certain acquisitions of the corporation's stock (which
take the acquiror over the successive thresholds of 20%, 33% and
50% of the corporation's stock) will be accorded voting rights only
if a majority of the disinterested shareholders approves a
resolution granting the potential acquiror the ability to vote such
shares. An Indiana corporation is subject to the Control Share
Acquisition Chapter if it has 100 or more shareholders and its
principal place of business is in Indiana. An Indiana corporation
otherwise subject to the Control Share Acquisition Chapter may
elect not to be governed by the statute by so providing in its
articles of incorporation or by-laws. The Company has not made
such an election and, therefore, the Company will be subject to the
statute when and if it has 100 or more shareholders.
In addition to the Control Share Acquisition Chapter, the IBCL
contains a Business Combination Chapter. The Business Combinations
Chapter provides that, unless a company elects not to be governed
by that chapter, certain Indiana corporations and a 10% or greater
shareholder may not engage in certain business combinations,
including mergers, sales of assets, recapitalizations, and reverse
stock splits for five years following the date on which the
shareholder obtained a 10% or greater ownership interest, unless
the acquisition has been approved in advance of that date by the
Board of Directors. In addition, if prior approval is not
obtained, the Company and such shareholder may not consummate a
business combination unless a majority of disinterested
shareholders approve the transaction or all shareholders receive a
price per share determined in accordance with the Business
Combinations Chapter. The Articles of Incorporation of the Company
provide that the Business Combinations Chapter shall not apply to
the Company. The Company could subsequently elect to be covered by
the Business Combination Chapter, however, but such an election
would remain ineffective for 18 months and would not apply to a
combination with a shareholder who acquired a 10% or greater
ownership position prior to the effective date of the election.
The Company's Restated Articles of Incorporation contain provisions
governing approval of certain business combinations. See
"Description of Capital Stock -- Articles of Incorporation and
Bylaws."
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The IBCL specifically authorizes directors, in considering the
best interests of a corporation, to consider the effects of any
action on shareholders, employees, suppliers, and customers of the
corporation, the communities in which offices or other facilities
of the corporation are located, and any other factors the directors
consider pertinent. Under the IBCL, directors are not required to
approve a proposed business combination or other corporation action
if the directors determine in good faith, after considering and
weighing as they deem appropriate the effects of such action on the
corporation's constituents, that such approval is not in the best
interest of the corporation. The IBCL specifies that, in making
these determinations, directors are not required to consider the
effects of a proposed corporate action on any particular corporate
constituent group or interest (including the amounts that might be
paid to shareholders) as a dominant or controlling factor. The
IBCL explicitly provides that the different or higher degree of
scrutiny imposed in Delaware and certain other jurisdictions upon
director actions taken in response to potential changes in control
are inconsistent with the proper application of the applicable
provisions of the IBCL.
In taking or declining to take any action or in making any
recommendation to a corporation's shareholders with respect to any
matter, directors are authorized under the IBCL to consider both
the short-term and long-term interests of the corporation as well
as interests of other constituencies and other relevant factors.
Any determination made with respect to the foregoing by a majority
of disinterested directors shall conclusively be presumed to be
valid unless it can be demonstrated that such determination was not
made in good faith.
Because of the foregoing provisions of the IBCL, the Board
will have flexibility in responding to unsolicited proposals to
acquire the Company, and, accordingly, it may be more difficult for
an acquiror to gain control of the Company in a transaction not
approved by the Board.
The IBCL also imposes restrictions in connection with
shareholder derivative proceedings. The IBCL provides that if a
shareholder of the corporation files a derivative complaint, the
corporation's board of directors may establish a committee of
disinterested directors or other disinterested persons to
investigate the complaint. The IBCL authorizes a stay of any court
proceedings on the complaint until the investigation of such
committee is completed. If the committee determines that pursuit
of the claim through the derivative proceeding would not be in the
best interests of the corporation, then the committee can terminate
the derivative proceeding. The conclusion of the committee is
determinative unless the shareholder who filed the complaint can
demonstrate that the committee was not disinterested or did not act
in good faith.
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ARTICLES OF INCORPORATION AND BYLAWS
REMOVAL OF DIRECTORS. The Articles of Incorporation provide
that a director may be removed from office with or without cause
prior to the expiration of his or her term only upon the
affirmative vote of the holders of at least 80% of the outstanding
shares of stock of the Company entitled to vote for the election of
directors at any meeting called for that purpose. The Articles do
not provide for the removal of a director by the remaining
directors.
CERTAIN BUSINESS COMBINATIONS. The Articles of Incorporation
of the Company include a provision imposing certain supermajority
vote and minimum price requirements on any "Business Combination"
with a "Related Person" unless the combination has been approved by
the vote of two-thirds of certain members of the Board of Directors
of the Company who are not associated with the Related Person.
This provision defines "Business Combination" very broadly to
include, subject to certain conditions, (i) any merger or
consolidation of the Company or any of its subsidiaries into or
with a Related Person, its affiliates or associates; (ii) any sale,
exchange, lease, transfer or other disposition by the Company or
any of its subsidiaries of all or any substantial part of its or
their assets or businesses to or with a Related Person, its
affiliates or associates; (iii) the purchase, exchange, lease or
acquisition by the Company or any of its subsidiaries of all or any
substantial part of the assets or business of a Related Person, its
affiliates or associates; (iv) any reclassification of securities,
recapitalization or other transaction that has the effect of
increasing the proportionate amount of the Company's Common Stock
(or other voting capital security) beneficially owned by a Related
Person; (v) any partial or complete liquidation, spinoff or splitup
of the Company or any of its subsidiaries; and (vi) the acquisition
by a Related Person of beneficial ownership upon issuance of Common
Stock (or other voting capital shares) of the Company or any of its
subsidiaries or any securities convertible into, or any rights,
warrants or options to acquire, any such shares.
"Related Person" also is defined broadly to mean (i) any
person (which includes any individual, corporation or entity other
than the Company or its subsidiaries) who beneficially owns ten
percent or more of the Company Common Stock (or other voting
capital security) (a "Ten Percent Shareholder"); (ii) any person
who within the preceding two-year period has been a Ten Percent
Shareholder and who directly or indirectly controls, is controlled
by, or is under common control with the Company; or (iii) any
person who has received, other than pursuant to or in a series of
transactions involving a public offering within the meaning of the
1933 Act, the Company Common Stock (or other voting capital
security) that has been owned by a Related Person within the
preceding two-year period.
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In the absence of approval by the Company Directors who are
not associated with the Related Person or, in the alternative, the
agreement by the Related Person to pay all other shareholders a
certain minimum price for their shares, a Business Combination with
a Related Person would require the approval of 80% of the
outstanding voting stock plus the approval of a majority of the
outstanding shares that are not controlled by the Related Person.
In general terms, the restrictions apply to mergers or
consolidations of the Company of any subsidiary with any Related
Person, transfers or encumbrances of all or substantially all of
the assets of the Company to a Related Person, the adoption of any
plan of liquidation proposed by a Related Person or any transaction
which would have the effect, directly or indirectly, of increasing
the proportionate share of any class of equity securities of the
Company of any shareholder (including affiliates and associates)
who is the beneficial owner of more than 10% of the voting power of
the then outstanding shares entitled to vote generally in the
election of Directors of the Company. Absent the provision
regulating Business Combinations, mergers, consolidations, and
sales of all or substantially all assets would require only the
approval of a majority of the Board of Directors and (subject to
the rights of any Preferred Stock issued in the future) the
affirmative vote of a majority of the total number of outstanding
shares of the Company entitled to vote on the matter.
The percentage of the shares required to approve a Business
Combination by a Related Person may be reduced from 80% to two-
thirds if certain price and other requirements are met. The
shareholder voting requirements do not apply, however, if the
directors of the Company other than directors who are Related
Persons or Affiliates of Related Persons vote by a two-thirds vote
to approve the Business Combination.
This provision may tend to discourage or render it more
difficult for a person to acquire control of the Company, even if
such a transaction might generally be favorable to the interests of
shareholders. This provision may also tend to perpetuate present
management in that if a certain number of Directors do not approve
a proposed Business Combination it may be more difficult to obtain
the 80% shareholder approval requirement. In addition, this
provision may give Directors and minority shareholders veto power
over a Business Combination which a majority of the shareholders
may believe is desirable.
AMENDMENT, CHANGE, OR REPEAL OF CERTAIN ARTICLES. The
Articles provide that any amendment, change, or repeal of the
provisions of the Articles of Incorporation relating to Business
Combinations, the removal of Directors, or amendment of the
Articles must receive the approval of (a) at least 80% of the
outstanding voting power, and (b) in the case of an amendment,
change, or repeal of any of the above-stated provisions proposed by
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or on behalf of a Related Person, the approval by a majority of the
shares not controlled by the Related Person. However, in the event
that an amendment, change, or repeal of those provisions is
approved by two-thirds of the Board of Directors, and, if the
amendment is proposed by or on behalf of a Related Person, by the
favorable vote of two-thirds of certain Directors who are not
associated with the Related Person, the affirmative vote of a
majority of the outstanding voting power would be sufficient to
approve any such amendment, change, or repeal.
CLASSIFIED BOARD. The Articles of Incorporation permit the
Bylaws to provide for the staggering of the terms of the members of
the Board of Directors to the full extent permitted by the IBCL.
The Bylaws provide for the Board of Directors to be divided into
three equal (or as nearly equal as possible) classes with only one
class of Directors being elected at any annual meeting. As a
result, approximately one-third of the Board of Directors is
elected each year. In addition, the Bylaws provide that any
vacancy shall be filled by a majority vote of the remaining
Directors. Any Director elected to fill such vacancy shall hold
office for the expired term of the class of which he is a member.
These provisions effectively prevent the shareholders of the
Company from changing a majority of the Directors at any single
election of Directors.
REDEMPTION OF SHARES ACQUIRED IN CONTROL SHARE ACQUISITIONS.
The Bylaws of the Company empower the Company to redeem shares that
are acquired in excess of the percentage-of-ownership thresholds
specified by the Control Share Acquisition Chapter of the IBCL in
the event that the disclosure statement required by the Control
Share Acquisition Chapter is not delivered or the acquired shares
are not accorded full voting rights by the shareholders. For
information concerning the Control Share Acquisition Chapter, see
"Description of Capital Stock - Indiana Law." The redemption price
is specified to be the fair market value per share of the shares to
be redeemed immediately prior to the first public announcement of
the intent or plan of the acquiring person to make a control share
acquisition.
DISCLOSURE PROCEDURE. The Bylaws provide, in accordance with
the IBCL, that the President may, in his or her discretion from
time to time, require a record shareholder to disclose to the
Company whether or not such shareholder holds shares of record for
the account of another person or persons who is or are the
beneficial owner(s) of such shares and, if so, the name(s) of such
beneficial owner(s). This disclosure procedure provides that if
the shareholder shall, without legal justification, fail to
disclose the information requested within ten (10) days of being
requested to do so, then the Company may, in the discretion of its
President, (a) prohibit the voting of any or all shares held by
such record shareholder at the next meeting of the shareholders;
<PAGE>
<PAGE> 55
(b) for so long as the failure to disclose continues, withhold
dividends with respect to such record shareholder's shares; (c)
acquire any or all of the shareholder's shares at a price
determined by market prices or market quotations of the shares (or
at a price determined by the Board of Directors in good faith to
represent the fair market value of such shares in the event that
there is no market for the shares) by mailing to such shareholder
a notice of acquisition; or (d) deny voting rights, withhold
dividends, and acquire shares, or exercise such rights in any
combination.
NOMINATION PROCEDURE. The Bylaws of the Company limit
eligibility for election to the Board of Directors at any meeting
of shareholders at which one or more Directors are to be elected to
(a) those persons named in (or replacements thereof named in
accordance with) the proxy or information statement prepared on
behalf of the Board of Directors of the Company and distributed to
shareholders in accordance with the proxy rules of the Securities
and Exchange Commission (the "SEC Proxy Rules") and (b) other
persons nominated from the floor of such shareholders meeting by a
shareholder, but only if (i) the names of the particular person or
persons who are proposed to be nominated are disclosed to the
Secretary of the Company by the nominating shareholder not later
than ten (10) business days prior to the shareholder meeting at
which such nomination is to be made and (ii) any "solicitation" of
"proxies" by such shareholder (or other persons) on behalf of such
other nominee(s) has been conducted in accordance with the SEC
Proxy Rules, if applicable.
SHARES ELIGIBLE FOR FUTURE SALE
The Company presently has one share of Common Stock
outstanding. That share is held by a member of the Board of
Directors and it will be redeemed at its original cost after
completion of the offering. Upon completion of the offering, the
Company expects to have 1,000,000 shares of its Common Stock
outstanding (plus any shares issued and sold upon exercise by the
Underwriter of the over-allotment option). The 1,000,000 shares of
the Company's Common Stock sold in the offering (plus any
additional shares sold upon the Underwriter's exercise of its
over-allotment option) have been registered with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933 (the
"Securities Act") and may generally be resold without registration
under the Securities Act unless they were acquired by directors,
executive officers or other affiliates of the Company
(collectively, "Affiliates"). Affiliates of the Company may
generally only sell shares of the Common Stock pursuant to Rule 144
under the Securities Act without registration.
<PAGE>
<PAGE> 56
In general, under Rule 144 as currently in effect, an
affiliate (as defined in Rule 144) of the Company may sell shares
of Common Stock within any three-month period in an amount limited
to the greater of 1% of the outstanding shares of the Company's
Common Stock or the average weekly trading volume in the Company's
Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain manner-of-sale
provisions, holding periods for restricted shares, notice
requirements and the availability of current public information
about the Company.
The Company and the directors and officers of the Company and
the Bank (who are expected to hold an aggregate of approximately
74,500 shares after the offering), have agreed, or will agree, that
they will not issue, offer for sale, sell, transfer, grant options
to purchase or otherwise dispose of any shares of Common Stock
without the prior written consent of the Underwriter for a period
of 150 days from the date of this Prospectus, except that (i) they
may sell shares to the Company in payment of part or all of the
purchase price of shares purchased under the Stock Option Plan, and
(ii) the directors and officers may give Common Stock owned by them
to others who have agreed in writing to be bound by
the same agreement.
Prior to the offering, there has been no public trading market
for the Common Stock, and no predictions can be made as to the
effect, if any, that sales of shares or the availability of shares
for sale will have on the prevailing market price of the Common
Stock after completion of the offering. Nevertheless, sales of
substantial amounts of Common Stock in the public market could have
an adverse effect on prevailing market prices.
UNDERWRITING
The Underwriter has agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the
Company 1,000,000 shares of the Company's Common Stock. The
Underwriting Agreement provides that the obligations of the
Underwriter thereunder are subject to certain conditions and
provides for the Company's payment of certain expenses incurred in
connection with the review of the underwriting arrangements for the
offering by the National Association of Securities Dealers, Inc.
(the "NASD"). The Underwriter is obligated to purchase all
1,000,000 of the shares of Common Stock offered hereby, excluding
shares covered by the over-allotment option granted to the
Underwriter, if any are purchased.
<PAGE>
<PAGE> 57
If the Underwriting Agreement is terminated, except in certain
limited cases, the Underwriting Agreement provides that the Company
will reimburse the Underwriter for all accountable out-of-pocket
expenses, including Underwriter's counsel's fees and any Blue Sky
costs, incurred by it in connection with the proposed purchase and
sale of the Common Stock, up to $30,000 (in addition to $10,000
already advanced by the Company to cover expenses). Such expenses
and advances will be credited by the Underwriter against the
underwriting discount otherwise payable to the Underwriter upon any
purchase by it of Common Shares.
The Company and the Underwriter have agreed that the
Underwriter will purchase the 1,000,000 shares of Common Stock
offered hereunder at a price to the public of $10.00 per share less
underwriting discounts and commissions of $0.70 per share.
However, underwriting discounts or commissions will be incurred by
the Company in the amount of $0.40 per share with respect to
the first 200,000 shares sold to members of the Board of Directors
of the Company, their immediate families or certain other
designated individuals. The Underwriter proposes to offer the
Common Stock to selected dealers who are members of the NASD, at a
price of $10 per share less a concession not in excess of $_______
per share. The Underwriter may allow, and such dealers may
re-allow, concessions not in excess of $______ per share to certain
other brokers and dealers.
The Underwriter has informed the Company that the Underwriter
does not intend to make sales to any accounts over which it
exercises discretionary authority.
The Company has granted the Underwriter an option, exercisable
within 30 days after the date of this offering, to purchase up to
an additional 150,000 shares of Common Stock from the Company to
cover over-allotments, if any, at the same price per share as is to
be paid by the Underwriter for the other shares offered hereby.
If the over-allotment option is exercised in full, the Underwriter
has agreed to credit $25,000 of its accountable expenses in
connection with the offering that are otherwise reimburseable to
the Underwriter by the Company against the aggregate discount on
the over-allotment shares. The Underwriter may purchase such
shares only to cover over-allotments, if any, in connection with
the offering.
The Underwriting Agreement contains indemnity provisions
between the Underwriter and the Company and the controlling persons
thereof against certain liabilities, including liabilities arising
under the Securities Act. The Company is generally obligated to
indemnify the Underwriter and its controlling persons in connection
with losses or claims arising out of any untrue statement of a
material fact contained in this Prospectus or in related documents
filed with the Commission or with any state securities
administrator, or any omission of certain material facts from such
documents.
<PAGE>
<PAGE> 58
There has been no public trading market for the Common Stock.
The price at which the shares are being offered to the public was
determined by negotiations between the Company and the Underwriter.
This price is not based upon earnings or any history of operations
and should not be construed as indicative of the present or
anticipated future value of the Common Stock. Several factors were
considered in determining the initial offering price of the Common
Stock, among them the size of the offering, the desire that the
security being offered be attractive to individuals and the
Underwriter's experience in dealing with initial public offerings
for financial institutions.
LEGAL PROCEEDINGS
Neither the Bank nor the Company is a party to any pending
legal proceedings or aware of any threatened legal proceedings
where the Company or the Bank may be exposed to any material loss.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed
upon for the Company by Leagre Chandler & Millard, Indianapolis,
Indiana. Krieg DeVault Alexander & Capehart, Indianapolis,
Indiana, is acting as counsel for the Underwriter in connection
with certain legal matters relating to the shares of Common Stock
offered hereby.
EXPERTS
The financial statements of the Company included in this
Prospectus have been audited by Crowe, Chizek and Company, LLP,
independent public accountants, as indicated in their report with
respect thereto. Such financial statements and their report have
been included herein in reliance upon the authority of said firm as
experts in accounting and auditing.
<PAGE>
<PAGE> 59
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange
Commission ("SEC") a Form SB-2 Registration Statement under the
Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth
in the Registration Statement, certain portions of which have been
omitted as permitted by the Rules and Regulations of the SEC. For
further information pertaining to the shares of Common Stock
offered hereby and to the Company, reference is made to the
Registration Statement, including the Exhibits filed as a part
thereof, copies of which can be inspected at and copied at the
Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Room 1400, 75 Park Place, New York New
York 10007. Copies of such materials can also be obtained at
prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. The
information is also available on the World Wide Web site maintained
by the SEC. The address of the site is http://www.sec.gov.
<PAGE>
F-1
HEARTLAND BANCSHARES, INC.
Franklin, Indiana
FINANCIAL STATEMENTS
June 30, 1997
CONTENTS
REPORT OF INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . . . . . F-2
FINANCIAL STATEMENTS
BALANCE SHEET . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
STATEMENT OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . F-4
STATEMENT OF CHANGES IN SHAREHOLDER'S DEFICIT . . . . . . . . . . . F-5
STATEMENT OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . . . F-6
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . F-7
<PAGE>
<PAGE> F-2
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Heartland Bancshares, Inc.
Franklin, Indiana
We have audited the accompanying balance sheet of Heartland
Bancshares, Inc. (a company in the development stage) as of
June 30, 1997 and the related statements of operations, changes
in shareholder's deficit and cash flows for the period from
May 27, 1997 (date of inception) to June 30, 1997. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform our audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Heartland Bancshares, Inc. (a company in the development
stage) as of June 30, 1997, and the results of its operations and
its cash flows for the period from May 27, 1997 (date of
inception) to June 30, 1997 in conformity with generally accepted
accounting principles.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Indianapolis, Indiana
July 25, 1997, except for
Note 2 as to which the
date is August 31, 1997.
<PAGE>
<PAGE> F-3
HEARTLAND BANCSHARES, INC.
(A Cmopany in the Development Stage)
BALANCE SHEET
June 30, 1997
ASSETS
Cash $ 10,214
Premises and equipment 13,210
Organization costs 46,171
Deferred offering costs 29,500
______
$ 99,095
======
LIABILITIES AND SHAREHOLDER'S DEFICIT
Liabilities
Accounts payable $ 81,684
Related party notes payable (Note 2) 25,490
Total liabilities 107,174
Shareholder's deficit
Common stock - no par value; 10,000 shares
authorized; one share issued and
outstanding 10
Deficit accumulated during the development
stage (8,089)
_____
Total shareholder's deficit (8,079)
$ 99,095
======
<PAGE>
<PAGE> F-4
HEARTLAND BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF OPERATIONS
For the period from May 27, 1997 (date of inception)
to June 30, 1997
Operating expenses
Interest expense $ 385
Salaries and employee benefits 6,391
Other 1,313
_____
Total operating expenses 8,089
Loss before income taxes (8,089)
Provision for income taxes (Note 3) -
_____
Net loss $ (8,089)
=====<PAGE>
<PAGE> F-5
HEARTLAND BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF CHANGES IN SHAREHOLDER'S DEFICIT
For the period from May 27, 1997 (date of inception)
to June 30, 1997
<TABLE>
Deficit
Accumulated
During the
Common Development
Stock Stage Total
<S> <C> <C> <C>
Balance at inception (May 27, 1997) $ - $ - $ -
Issuance of common stock 10 - 10
Net loss - (8,089) (8,089)
______ _____ _____
Balance at June 30, 1997 $ 10 $(8,089) $(8,079)
====== ===== =====
/TABLE
<PAGE>
<PAGE> F-6
HEARTLAND BANCSHARES, INC.
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS
For the period from May 27, 1997 (date of inception)
to June 30, 1997
Cash flows from operating activities
Net loss $ (8,089)
Adjustments to reconcile net loss to
net cash from operating activities
Increase in accounts payable 81,684
______
Net cash from operating activities 73,595
Cash flows from investing activities
Purchase of fixed assets (13,210)
Organizational costs (46,171)
______
Net cash from investing activities (59,381)
Cash flows from financing activities
Proceeds from related party notes payable 25,490
Deferred offering costs (29,500)
Sale of common stock 10
______
Net cash from financing activities (4,000)
______
Net increase in cash 10,214
Cash at beginning of period -
_______
Cash at end of period $ 10,214
======
<PAGE>
<PAGE> F-7
HEARTLAND BANCSHARES, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Heartland Bancshares, Inc. (the "Company") was
incorporated on May 27, 1997 to form a new bank, Heartland
Community Bank (the "Bank") to be located in Franklin, Indiana.
The Company intends to raise a minimum of $9,000,000 in equity
capital through the sale of 1,000,000 shares of the Company's
common stock at $10 per share, net of underwriting discounts and
offering costs. Proceeds from the offering will be used to
capitalize the Bank and provide working capital.
Nature of Business: The Bank intends to generate commercial,
mortgage and installment loans and receive deposits from
customers located in Johnson and contiguous counties in Indiana.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statement disclosures provided.
These estimates and assumptions may change in the future and
future results could differ.
Organization Costs: Organization costs represent incorporation
and legal costs and other costs relating to the establishment of
the Company. These costs will be amortized over a 60-month
period after the commencement of operations.
Deferred Offering Costs: Deferred offering costs include legal,
consulting and accounting costs incurred in connection with the
registration of the Company's common stock. Those costs will be
charged against the stock proceeds or, if the offering is not
successful, charged to expense at that time.
Office Equipment: Office equipment is stated at cost less
accumulated depreciation. Depreciation is computed using the
straight line method based on the estimated useful lives of the
assets. Maintenance and repairs are expensed and major
improvements are capitalized.
NOTE 2 - NOTES PAYABLE TO RELATED PARTIES
Demand notes payable, including accrued interest, in the amount
of $25,490 are outstanding to certain directors and officers of
the Company and bear interest at prime rate variable (which was
8.5% at June 30, 1997). As of August 31 the balance of demand
<PAGE>
<PAGE> F-8
notes payable, including accrued interest, was $163,082. The
Company intends to repay the loans from the proceeds of the
common stock offering. The notes are due no later than
December 31, 1997.
NOTE 3 - INCOME TAXES
At June 30, 1997, the Company had a loss of $8,089. At the
conclusion of its tax year, the Company may have an operating
loss carryforward which could be utilized over a 15 year period.
No deferred tax asset is recorded, as a valuation allowance
reduces the gross deferred tax asset of $2,750 to zero.
NOTE 4 - STOCK OPTIONS AND AUTHORIZED SHARES
On July 25, 1997, the Company's Board of Directors adopted two
stock option plans: an employee plan and a non-employee director
plan. Under the terms of the plans, options for up to 115,000
shares of the Company's common stock may be granted to key
management employees and directors of the Company and its
subsidiaries. The exercise price of the options will be
determined at the time of grant by an administrative committee to
be appointed by the Board of Directors and in any event, will not
be less than fair market value of the shares of Common Stock at
the time the option is granted.
Regarding the employee plan, options are immediately exercisable
with respect to 20 percent of the shares covered by the option
and will vest with respect to an additional 20 percent of the
shares on each of the following four anniversaries of the date of
grant, assuming continued employment of the optionee. The
options will expire after 10 years.
Regarding the Nonemployee Director Plan, options granted are
immediately exercisable for 1,000 shares of Common Stock per
nonemployee director. On the date of each successive annual
meeting of the Company, options will become exercisable (assuming
continued service on the Board of Directors) for an additional
1,000 shares of Common Stock per nonemployee director, until all
options are exercisable in full. In the event of a "change in
control" of the Company, as defined in the Nonemployee Director
Plan, options then outstanding shall become immediately
exercisable in full, immediately prior to such change in control.
The unexercised portion of each option automatically expires, and
is no longer exercisable, on the earliest to occur of the
following: (i) ten years after the option is granted, (ii) three
months after the person who was granted the option ceases to be a
Nonemployee Director, other than due to permanent disability,
death, or for cause, (iii) one year following the death or
permanent disability of the Nonemployee Director, and (iv)
termination of the Nonemployee Director's service as such, for
cause.
<PAGE>
<PAGE> F-9
Also on July 25, 1997, the Board of Directors amended the
articles of incorporation to increase authorized shares of common
stock to 10,000,000 and to authorize 2,000,000 shares of no par
preferred stock.
Franklin, Indiana
FINANCIAL STATEMENTS
June 30, 1997
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE 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 ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information.................. 4
Prospectus Summary..................... 5
Risk Factors........................... 8
Use of Proceeds........................ 16
Dividend Policy........................ 19
Capitalization......................... 19
Business............................... 20
Management............................. 26
Related Party Transactions............. 33
Principal Shareholders................. 34
Supervision and Regulation............. 36
Description of Capital Stock........... 48
Shares Eligible for Future Sale........ 55
Underwriting........................... 56
Legal Proceedings...................... 58
Legal Matters.......................... 58
Experts................................ 58
Additional Information................. 59
Index to Financial Statements.......... F-1
------------------------
UNTIL DECEMBER ___, 1997 (90 DAYS AFTER THE EFFECTIVE DATE
OF THE OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE
COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
1,000,000 SHARES
[HEARTLAND BANCSHARES, INC. LOGO]
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
(LOGO)
, 1997
- - -------------------------------------------------------
- - -------------------------------------------------------<PAGE>
<PAGE> II-1
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Indiana Business Corporation Law and Article IV of
the Company's Restated Bylaws, the Company's officers and
directors are entitled to indemnification against all liability
and expense with respect to any civil or criminal claim, action,
suit or proceeding in which they are wholly successful. If they
are not wholly successful and even if they are adjudged liable or
guilty, they are entitled to indemnification if it is determined,
with respect to a civil action, by disinterested directors, a
special legal counsel, or a majority vote of the shares of the
Company's voting stock held by disinterested shareholders, that
they acted in good faith in what they reasonably believed to be
the best interests of the Company. With respect to any criminal
action, it must also be determined that they had no reasonable
cause to believe their conduct unlawful.
Under the Indiana Business Corporation Law, a director of
the Company cannot be held liable for actions that do not
constitute wilful misconduct or recklessness. In addition, the
Articles of Incorporation of the Company provide that directors
of the Company shall be immune from personal liability for any
action taken as a director, or any failure to take any action, to
the fullest extent permitted by the applicable provisions of the
Indiana Business Corporation Law from time to time in effect and
by general principles of corporate law. In addition, a director
of the Company against whom a shareholders' derivative suit has
been filed cannot be held liable if a committee of disinterested
directors of the Company, after a good faith investigation,
determines either that the shareholder has no right or remedy or
that pursuit of that right or remedy will not serve the best
interests of the Company.
At present, there are no claims, actions, suits or
proceedings pending where indemnification would be required under
the above, and the Company does not know of any threatened
claims, actions, suits or proceedings which may result in a
request for such indemnification.
<PAGE>
<PAGE> II-2
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in
connection with the sale and distribution of the Common Stock
being registered, other than underwriting discounts and
commissions. All amounts shown are estimates, except the SEC
registration fee and the NASD filing fee, and assume sale of
1,000,000 shares in the offering.
SEC registration fee. . . . . . . $ 3,485
NASD filing fee. . . . . . . . . . . 1,650
Printing and mailing expenses. . . . 16,500
Fees and expenses of counsel . . . . 60,000
Accounting and related expenses. . . 15,000
Blue Sky fees and expenses
(including counsel fees). . . . . . 15,000
Underwriter's Expenses*. . . . . . . 25,000
Miscellaneous. . . . . . . . . . . . 23,365
_______
Total . . . . . . . . . . . . . . $160,000
=======
*If the over-allotment option is exercised by the Underwriter in
full, the Underwriter will waive reimbursement of these expenses.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The registrant has borrowed approximately funds from its
organizers to pay organizational and related expenses as
disclosed in the Prospectus. To the extent that such
transactions would be deemed to involve the offer or sale of a
security, the registrant would claim exemption including, without
limitation, the exemption provided by Section 4(2) of the
Securities Act of 1933, for such transactions. In addition, the
registrant, sold one share of its Common Stock to a Director for
$10. The registrant also claims an exemption for such sale
pursuant to Section 4(2).
<PAGE>
<PAGE> II-3
ITEM 27.EXHIBITS.
Exhibit No. Description
1 *Form of Underwriting Agreement
3.1 *Amended and Restated Articles of Incorporation of
Heartland Bancshares, Inc.
3.2 *Amended and Restated Bylaws of Heartland Bancshares,
Inc.
5 *Opinion of Leagre Chandler & Millard
10.1 *1997 Stock Option Plan
10.2 *1997 Stock Option Plan for Nonemployee Directors
23.1 *Consent of Leagre Chandler & Millard (included in
opinion filed as Exhibit 5)
23.3 **Consent of Crowe, Chizek and Company, LLP
24 *Power of Attorney (included on page II-4)
27 **Financial Data Schedule (EDGAR filing only)
__________________
* Filed with the original Registration Statement.
**Filed herewith.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) The registrant will provide to 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.
(2) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
<PAGE>
<PAGE> II-4
(3) The registrant will:
(i) For determining any liability under the Securities
Act, treat the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
registrant under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the
time the SEC declared it effective; and
(ii) For determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of the
securities at that time as the initial bona fide offering of
those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements of filing on Form
SB-2 and authorized this Amendment No. 1 to this registration
statement to be signed on its behalf by the undersigned, in the
City of Franklin, State of Indiana, on September 4, 1997.
HEARTLAND BANCSHARES, INC.
By /s/ Steve Bechman
Steve Bechman, President
In accordance with the requirements of the Securities Act of
1933, this Amendment No. 1 to this Registration Statement was
signed by the following persons in the capacities indicated on
September 4, 1997.
Signatures Title
/s/ Steve Bechman President (chief executive
Steve Bechman officer) and Director
/s/ Jeffrey L. Goben Director
Jeffrey L. Goben
Chief Financial Officer
/s/ Jeffery D. Joyce (principal financial and
Jeffery D. Joyce accounting officer)
<PAGE>
____________________________ Director
Sharon K. Acton
*
____________________________ Director
Gordon R. Dunn
____________________________ Director
J. Michael Jarvis
*
____________________________ Director
John Norton
____________________________ Director
Robert L. Richardson
____________________________ Director
Patrick A. Sherman
*
____________________________ Director
James C. Stewart
*By /s/ Steve Bechman
Steve Bechman, Attorney-in-fact
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Heartland Bancshares, Inc.
We consent to the inclusion in Registration Statement Form SB-2
and Prospectus of Heartland Bancshares, Inc., relating to the
issuance of securities for the initial public offering, of our
Independent Auditor's Report, dated July 25, 1997 (except for
Note 2 as to which the date is August 31, 1997), on the
financial statements of Heartland Bancshares, Inc. for the
period from May 27, 1997 (date of inception) to June 30, 1997,
and we consent to the use of our name and the statements with
respect to us appearing under the heading "Experts" in the
Prospectus.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
September 3, 1997
Indianapolis, Indiana
