<PAGE>
As filed with the Securities and Exchange Commission on August 22, 1997
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
HIGH COUNTRY BANCORP, INC.
----------------------------------------------
(Name of Small Business Issuer in Its Charter)
Colorado 6035 Requested
--------------- ---------------------------- ----------------------
(State or other (Primary standard industrial (I.R.S. employer
jurisdiction of classification code number) identification number)
incorporation or
organization)
130 West 2nd Street, Salida, Colorado 81201
(719) 539-2516
- --------------------------------------------------------------------------------
(Address and telephone number of principal executive offices
and principal place of business)
Mr. Larry D. Smith, President
High Country Bancorp, Inc.
130 West 2nd Street
Salida, Colorado 81201
(719) 539-2516
- --------------------------------------------------------------------------------
(Name, address, and telephone number of agent for service)
Please send copies of all communications to:
Allan D. Housley, Esquire
Howard S. Parris, Esquire
Peter R. Lee, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed Proposed
Dollar Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to be Price Per Offering Registration
to be Registered Registered Unit Price (1) Fee
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share.......... $11,902,500 $10.00 $11,902,500 $3,606.46
- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
PROSPECTUS
High Country Bancorp, Inc.
(HOLDING COMPANY FOR
SALIDA BUILDING AND LOAN ASSOCIATION)
Up to 1,035,000 Shares of Common Stock
(Anticipated Maximum)
$10.00 Per Share
High Country Bancorp, Inc. (the "Company"), a Colorado corporation, is
offering up to 1,035,000 shares, subject to adjustment, of its common stock, par
value $.01 per share (the "Common Stock"), in connection with the conversion of
Salida Building and Loan Association (the "Association") from a federal mutual
savings and loan association to a federal stock savings and loan association
(the "Converted Association") and the issuance of the Converted Association's
capital stock to the Company pursuant to the Plan of Conversion (the "Plan") of
the Association. The conversion of the Association to the Converted Association,
the acquisition of control of the Converted Association by the Company and the
issuance and sale of the Common Stock are collectively referred to herein as the
"Conversion."
The shares of the Common Stock are being offered pursuant to
nontransferable subscription rights ("Subscription Rights") in a subscription
offering (the "Subscription Offering"). Subscription Rights are not
transferable, and persons who attempt to transfer their Subscription Rights may
lose the right to subscribe for stock in the Conversion and may be subject to
other sanctions and penalties imposed by the Office of Thrift Supervision
("OTS"). The Company may offer any shares of Common Stock not subscribed for in
the Subscription Offering in a community offering (the "Community Offering") to
certain members of the general public to whom the Company delivers a copy of
this Prospectus and a stock order form (the "Stock Order Form"), with preference
given to natural persons and trusts of natural persons who are permanent
residents of Chaffee, Lake, Fremont and Saguache Counties in Colorado (the
"Local Community"). The Association and the Company may, in their absolute
discretion, reject orders in the Community Offering in whole or in part. It is
anticipated that shares of the Common Stock not otherwise subscribed for in the
Subscription and Community Offerings may be offered at the discretion of the
Company
(continued on following page)
For information on how to subscribe, call the Stock Information
Center at (719) ____-_______.
PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER
THE DISCUSSION UNDER "RISK FACTORS" BEGINNING ON PAGE 1.
THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY STATE SECURITIES COMMISSION,
NOR HAS SUCH COMMISSION, OFFICE OR CORPORATION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE
SAVINGS ASSOCIATION INSURANCE FUND OR ANY
OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
=============================================================================================================================
Estimated Fees
and Expenses,
Including
Underwriting
Purchase Discounts and Estimated Net
Price (1) Commissions (2) Proceeds (3)
- ------------------------------------------------------- --------------------- ------------------------ ----------------------
<S> <C> <C> <C>
Per Share (4)......................................... $10.00 $.58 $9.42
- ------------------------------------------------------- --------------------- ------------------------ ----------------------
Total Minimum......................................... $7,650,000 $499,000 $7,151,000
- ------------------------------------------------------- --------------------- ------------------------ ----------------------
Total Midpoint........................................ $9,000,000 $520,000 $8,480,000
- ------------------------------------------------------- --------------------- ------------------------ ----------------------
Total Maximum......................................... $10,350,000 $541,000 $9,809,000
- ------------------------------------------------------- --------------------- ------------------------ ----------------------
Total Maximum, as adjusted (5)........................ $11,902,500 $565,000 $11,337,500
======================================================= ===================== ======================== ======================
(footnotes on following page)
</TABLE>
TRIDENT SECURITIES, INC.
The date of this Prospectus is ___________, 1997
<PAGE>
(continued from preceding page)
to certain members of the general public as part of a community offering on a
best efforts basis by a selling group of selected broker-dealers to be managed
by Trident Securities, Inc. (the "Syndicated Community Offering"). Neither
Trident Securities, Inc. nor any selected broker-dealers will have any
obligation to purchase any shares of the Common Stock. See "The Conversion --
Offering of Common Stock," " -- Subscription Offering," " -- Community
Offering," and " -- Syndicated Community Offering."
The total number of shares to be issued in the Conversion may be
significantly increased or decreased to reflect market and financial conditions
at the completion of the Conversion. The aggregate purchase price of all shares
of the Common Stock will be based on the estimated pro forma market value of the
Association, as converted, as determined by an independent appraisal. All shares
of the Common Stock will be sold for $10.00 per share (the "Purchase Price").
With the exception of the ESOP, which intends to purchase 8.0% of the total
number of shares of Common Stock issued in the Conversion, no Eligible Account
Holder, Supplemental Eligible Account Holder or Other Member, nor person
(together with associates of and persons acting in concert therewith) in the
Community Offering and Syndicated Community Offering may purchase more than
$250,000 of the shares of Common Stock issued in the Conversion. In addition, no
person (together with associates and persons acting in concert therewith) may
purchase in the aggregate more than $250,000 of the shares of Common Stock
issued in the Conversion. The maximum overall purchase limitation and the amount
permitted to be subscribed for may be increased or decreased under certain
circumstances in the sole discretion of the Company. The minimum purchase is 25
shares. See "The Conversion -- Limitations on Purchase of Shares."
The Subscription Offering will expire at 12:00 Noon, local time, on
___________, 1997, unless extended by the Company for up to an additional __
days. The Community Offering, if any, may commence without notice at any time
after the commencement of the Subscription Offering and may terminate at any
time without notice,
(continued on following page)
(footnotes from preceding table)
- ---------------
(1) The estimated aggregate value of the Common Stock is based on an
independent appraisal by Ferguson & Company ("Ferguson") as of August
8, 1997. See "The Conversion -- Stock Pricing and Number of Shares to
be Issued." Based on such appraisal, the Company has determined to
offer up to 1,035,000 shares, subject to adjustment, at a purchase
price of $10.00 per share (the "Purchase Price"). The final aggregate
value will be determined at the time of closing of the Conversion and
is subject to change due to changing market conditions and other
factors. If a change in the final valuation is required, an appropriate
adjustment will be made in the number of shares being offered within a
range of 765,000 shares at the minimum of the Estimated Valuation Range
(defined herein) to 1,035,000 shares at the maximum of the Estimated
Valuation Range and, with OTS approval, to 1,190,250 shares at
approximately 15% above the maximum of the Estimated Valuation Range.
(2) Includes estimated printing, postage, legal, accounting and
miscellaneous expenses which will be incurred in connection with the
Conversion. Also includes estimated fees, sales commissions and
reimbursable expenses to be paid to Trident Securities, Inc. ("Trident
Securities") in connection with the Subscription and Community
Offerings, estimated to be $152,000, $173,000, $194,000 and $218,000 at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range. The actual fees and expenses may vary from
the estimates. See "Pro Forma Data" for the assumptions underlying
these estimates. Trident Securities may be deemed to be an underwriter,
and certain amounts to be paid to Trident Securities may be deemed to
be underwriting compensation for purposes of the Securities Act of
1933, as amended. The Company and the Association have agreed to
indemnify Trident Securities against certain liabilities arising out of
its services as financial and sales advisor.
(3) Includes the ESOP's expected purchase of 8% of the shares sold in the
Conversion with funds borrowed from the Company. Does not reflect a
possible purchase by a management recognition plan of a number of
shares equal to up to 4% of the shares to be issued in the Conversion
with funds contributed by the Converted Association. See
"Capitalization" and "Pro Forma Data."
(4) Based on the midpoint of the Estimated Valuation Range. At the minimum,
maximum and 15% above the maximum of the Estimated Valuation Range, the
estimated fees and expenses, including underwriting discounts and
commissions, per share are expected to be $.65, $.52 and $.48,
respectively, and the estimated net proceeds per share are expected to
be $9.35, $9.48 and $9.52, respectively.
(5) Gives effect to an increase in the number of shares which could occur
without a resolicitation of subscribers or any right of cancellation
due to an increase in the Estimated Valuation Range of up to 15% above
the maximum of the Estimated Valuation Range to reflect changes in
market and financial conditions. See "The Conversion -- Stock Pricing
and Number of Shares to be Issued."
<PAGE>
(continued from preceding page)
but may not terminate later than ___________, 1997. An executed Stock Order
Form, once received by the Association, may not be modified, amended or
rescinded without the consent of the Association. Subscriptions paid by check,
cash or money order will be held in a separate account at the Association
established specifically for this purpose, and interest will be paid at the
Association's passbook rate from the date payment is received until the
Conversion is completed or terminated. In the case of payments to be made
through withdrawal from deposit accounts at the Association, all sums authorized
for withdrawal will continue to earn interest at the contract rate until the
date of the completion of the Conversion but, following completion of the
Conversion, funds withdrawn from deposit accounts and used to purchase Common
Stock will no longer be deposit accounts and will not be insured by the Federal
Deposit Insurance Corporation, the Bank Insurance Fund, the Savings Association
Insurance Fund or any other governmental agency. If the Conversion is not
completed within 45 days after the last day of the Subscription Offering (which
date will be no later than ________________, 199_) and the OTS consents to an
extension of time to complete the Conversion, subscribers must affirmatively
reconfirm their subscriptions prior to the expiration of the resolicitation
offering and may, in the alternative, modify or cancel their subscriptions. See
"The Conversion -- Subscription for Stock in Subscription and Community
Offerings."
The Association has retained Trident Securities, a broker-dealer
registered with the Securities and Exchange Commission ("SEC") and a member of
the National Association of Securities Dealers, Inc. ("NASD"), to provide
financial advisory and sales assistance in connection with the Subscription and
Community Offerings. Trident Securities has agreed to use its best efforts to
assist the Company and the Association with the sale of the Common Stock in the
Subscription Offering, the Community Offering and the Syndicated Community
Offering, if any.
<PAGE>
HIGH COUNTRY BANCORP, INC.
SALIDA BUILDING AND LOAN ASSOCIATION
Salida, Colorado
[INSERT MAP]
THE ASSOCIATION'S CONVERSION TO A STOCK ORGANIZATION IS CONTINGENT UPON APPROVAL
OF THE PLAN OF CONVERSION BY ITS MEMBERS, THE SALE OF AT LEAST THE MINIMUM
NUMBER OF SHARES OFFERED PURSUANT TO THE PLAN OF CONVERSION AND THE SATISFACTION
OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL.
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified
in its entirety by the more detailed information and the Financial Statements
and accompanying Notes appearing elsewhere in this Prospectus. This Prospectus
contains forward-looking statements which involve risks and uncertainties. The
Company's results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors" beginning on page 1 of
this Prospectus.
High Country Bancorp, Inc. The Company was incorporated under the laws
of the State of Colorado in August 1997 at
the direction of the Board of Directors of
the Association for the purpose of serving
as a holding company of the Converted
Association upon its conversion from mutual
to stock form. The Company has received
approval from the Office of Thrift
Supervision ("OTS") to acquire control of
the Converted Association subject to
satisfaction of certain conditions. Prior to
the Conversion, the Company has not engaged
and will not engage in any material
operations. Upon consummation of the
Conversion, the Company will have no
significant assets other than the
outstanding capital stock of the Converted
Association, a portion of the net proceeds
of the Conversion and a note receivable from
the ESOP. Following the Conversion, the
Company's principal business will be
overseeing and directing the business of the
Converted Association and investing the net
Conversion proceeds retained by it. The
Company will register with the OTS as a
savings and loan holding company.
Salida Building and Loan
Association The Association is a federal mutual savings
and loan association operating through
offices located in Salida, Colorado, Buena
Vista, Colorado and Leadville, Colorado and
serving Chaffee, Lake, Western Fremont and
Saguache Counties in Colorado (the
Association's "primary market area"). The
Association was chartered in 1886 as the
first state-chartered building and loan
association in Colorado. The Association
received federal insurance of deposit
accounts in 1937, became a member of the
Federal Home Loan Bank System in 1937, and
converted to a federally-chartered
association in 1993. At June 30, 1997, the
Association had total assets of $76.3
million, loans receivable (net) of $63.1
million, total deposits of $56.2 million and
retained earnings of $6.0 million. The
Association is subject to examination and
comprehensive regulation by the OTS, and the
Association's savings deposits are insured
up to applicable limits by the Savings
Association Insurance Fund ("SAIF"), which
is administered by the Federal Deposit
Insurance Corporation ("FDIC"). The
Association is a member of and owns capital
stock in the Federal Home Loan Bank ("FHLB")
of Topeka, which is one of 12 regional banks
in the FHLB System. The Association is
further subject to regulations of the
Federal Reserve Board governing reserves to
be maintained and certain other matters.
Regulations significantly affect the
operations of the Association. See
"Regulation -- Depository Institution
Regulation."
Historically, the Association has operated
as a traditional savings institution by
emphasizing the origination of loans secured
by one- to four-family (or "single-family")
residences. At June 30, 1997, $49.6 million,
or 78.57% of the Association's loan
portfolio, consisted of one- to four-family
residential mortgage loans, all of which
were originated on properties in its market
area. Substantially all of these loans have
terms of 15 to 25 years, and a majority are
fixed-rate loans. Since fiscal 1996, the
Association has significantly increased its
origination of consumer, commercial business
and commercial real estate loans, including
loans for the purchase and development of
raw land, all of which loans have been
(i)
<PAGE>
originated in its primary market area. Such
loans provide for higher interest rates and
have shorter terms than traditional one- to
four-family residential mortgage loans.
However, these types of loans also carry
significantly greater risks than residential
mortgage loans. While all of the
Association's non-residential real estate
loans are currently performing, potential
investors should be aware of the additional
risks associated with these types of
lending. For more information, see "Risk
Factors--Risks Posed by Certain Lending
Activities."
Financial and operating characteristics of
the Association include the following:
Community Orientation: The Association has
been committed to meeting the financial
needs of the communities in which it has
operated for over 110 years. The Board of
Directors believes that with its long-term
presence in the community, the Association
is well positioned to provide financial
services on a personalized and efficient
basis. The Association effectively services
its customers and provides quick responses
to customer needs and inquiries. Management
plans to continue to emphasize the community
orientation of the Association and believes
that this emphasis will represent a
continuing competitive advantage for the
Association.
Capital Strength: At June 30, 1997, the
Association had $6.0 million of retained
earnings, representing 7.81% of total
assets. At such date, the Association
exceeded all of its minimum regulatory
capital requirements, with tangible and core
capital of 7.80% of adjusted total assets
and risk-based capital of 13.73% of total
risk-weighted assets. See "Regulation --
Depository Institution Regulation -- Capital
Requirements." As a result of the
Conversion, assuming the Company retains 50%
of the net proceeds of the Conversion at the
midpoint of the Estimated Valuation Range,
at June 30, 1997, the Association would have
had pro forma stockholders' equity of
approximately $9.1 million, or 11.37% of pro
forma total assets, and the Company would
have had pro forma consolidated
stockholders' equity of $13.4 million, or
approximately 15.95%, of total pro forma
consolidated assets. See "Historical and Pro
Forma Regulatory Capital Compliance."
Asset Quality: At June 30, 1997, the
Association had $175,000 in nonperforming
assets representing .23% of total assets.
The Association's allowance for loan losses
at June 30, 1997 totaled $604,000 or .96% of
net loans.
The information set forth above should be
considered in the context of the detailed
information contained elsewhere herein. For
additional information, see "Risk Factors"
and "Business of the Association."
The Conversion The Board of Directors of the Association
adopted the Plan on May 15, 1997, pursuant
to which the Association will convert from a
federally chartered mutual savings and loan
association to a federally chartered stock
savings and loan association, (i.e., the
Converted Association), and will thereafter
operate as a wholly owned subsidiary of the
Company. See "The Conversion -- General."
Upon consummation of the Conversion, the
Converted Association will issue all of its
outstanding capital stock to the Company in
exchange for at least 50% of the net
proceeds from the sale of the Common Stock
in the Conversion.
The OTS has approved the Plan, subject to
member approval and satisfaction of certain
other conditions. The OTS has also approved
the Company's application
(ii)
<PAGE>
to acquire all of the capital stock of the
Converted Association and thereby become a
savings and loan holding company, as part of
the Conversion.
The Conversion is subject to certain
conditions, including the prior approval of
the Plan at a special meeting of members to
be held on _________, 1997 (the "Special
Meeting").
The portion of the net proceeds from the
sale of Common Stock in the Conversion to be
distributed to the Converted Association by
the Company will substantially increase the
Converted Association's capital position,
which will in turn increase the amount of
funds available for lending and investment
and provide greater resources to support
current operations by the Converted
Association. This capital will also provide
the Association with additional liquid
assets for investment in adjustable-rate
mortgage-backed securities, which
investments would improve the Association's
interest rate risk position and reduce the
effect of a significant increase in interest
rates. The holding company structure will
provide greater flexibility than the
Association alone would have for
diversification of business activities and
geographic expansion. Management believes
that this increased capital will enable the
Converted Association to compete more
effectively with other types of financial
services organizations. In addition, the
Conversion will enhance the future access of
the Company and the Converted Association to
the capital markets and will afford
depositors and others the opportunity to
become stockholders of the Company and
thereby participate in any future growth of
the Converted Association.
Stock Pricing and Number Federal regulations require that the
of Shares to be Issued aggregate purchase price of the Common Stock
to be issued in the Conversion be consistent
with an independent appraisal of the
estimated pro forma market value of the
Common Stock following the Conversion.
Ferguson, a firm experienced in valuing
savings institutions, has made an
independent appraisal of the estimated
aggregate pro forma market value of the
Common Stock to be issued in the Conversion.
Ferguson has determined that as of August 8,
1997, such estimated pro forma market value
was $9,000,000. See "The Conversion -- Stock
Pricing and Number of Shares to be Issued."
The resulting valuation range in Ferguson's
appraisal, which under OTS regulations
extends 15% below and above the estimated
value, is from $7,650,000 to $10,350,000
(the "Estimated Valuation Range"). The
Company, in consultation with its advisors,
has determined to offer the shares of Common
Stock in the Conversion at the Purchase
Price of $10.00 per share. Such appraisal is
not intended and must not be construed as a
recommendation of any kind as to the
advisability of purchasing such shares or as
any form of assurance that, after the
Conversion, such shares may be resold at or
above the Purchase Price. The appraisal
considered a number of factors and was based
upon estimates derived from those factors,
all of which are subject to change from time
to time. In preparing the valuation,
Ferguson relied upon and assumed the
accuracy and completeness of financial and
statistical information provided by the
Association and the Company. Ferguson did
not verify the financial statements provided
or independently value the assets of the
Association. The appraisal will be further
updated immediately prior to the completion
of the Conversion and could be increased to
up to $11,902,500 without a resolicitation
of subscribers based on market and financial
conditions at the completion of the
Conversion. Ferguson will receive fees and
reimbursement of out-of-pocket expenses
totaling not more
(iii)
<PAGE>
than $32,500 for its appraisal and for
assisting in the preparation of the
Company's business plan.
The total number of shares to be issued in
the Conversion may be increased or decreased
without a resolicitation of subscribers so
long as the aggregate purchase price is not
less than the minimum or more than 15% above
the maximum of the Estimated Valuation
Range. Based on the Purchase Price of $10.00
per share, the total number of shares which
may be issued without a resolicitation of
subscribers is from 765,000 to 1,035,000
(and up to 1,190,250 shares as adjusted).
For further information, see "The Conversion
-- Stock Pricing and Number of Shares to be
Issued."
The Subscription, Community The shares of Common Stock to be issued in
and Syndicated Community the Conversion are being offered at the
Offerings Purchase Price of $10.00 per share in the
Subscription Offering pursuant to non-
transferable Subscription Rights in the
following order of priority: (i) Eligible
Account Holders (the term "Eligible Account
Holders" shall hereinafter mean depositors
whose accounts in the Association totaled
$50.00 or more on December 31, 1995); (ii)
the ESOP (i.e., the Company's tax-qualified
stock benefit plan); (iii) Supplemental
Eligible Account Holders (i.e., depositors
whose accounts in the Association totaled
$50.00 or more on September 30, 1997, other
than Eligible Account Holders); and (iv)
Other Members (i.e., certain depositors and
borrower members of the Association as of
________, 1997, other than Eligible Account
Holders and Supplemental Eligible Account
Holders). Subscription Rights received in
any of the foregoing categories will be
subordinated to the Subscription Rights
received by those in a prior category, with
the exception that any shares of Common
Stock sold in excess of the maximum of the
Estimated Valuation Range may first be sold
to the ESOP.
The Company may offer any shares of Common
Stock not subscribed for in the Subscription
Offering at the same price in the Community
Offering to members of the general public to
whom the Company delivers a copy of this
Prospectus and the Stock Order Form. In the
Community Offering, preference will be given
to natural persons and trusts of natural
persons who are permanent residents of the
Local Community. Subscription Rights will
expire if not exercised by 12:00 Noon, local
time, on __________, 1997, unless extended
(the "Expiration Date"). The Company and the
Association reserve the absolute right to
accept or reject any orders in the Community
Offering, in whole or in part, either at the
time of receipt of an order or as soon as
practicable following the Expiration Date.
It is anticipated that shares of Common
Stock not otherwise subscribed for in the
Subscription Offering and Community
Offering, if any, may be offered at the
discretion of the Company to certain members
of the general public as part of a
Syndicated Community Offering on a best
efforts basis by a selling group of selected
broker-dealers to be managed by Trident
Securities. See "The Conversion --
Syndicated Community Offering." The
Subscription and Community Offerings and
Syndicated Community Offering are referred
to collectively herein as the "Offerings."
The Association and the Company have engaged
Trident Securities to consult with and
advise the Company and the Association with
respect to the Offerings, and Trident
Securities has agreed to solicit
subscriptions and purchase orders for shares
of Common Stock in the Offerings. Trident
Securities will receive sales
(iv)
<PAGE>
commissions with respect to shares sold in
the Subscription and Community Offerings and
Syndicated Community Offering, if necessary.
The Company and the Association have agreed
to indemnify Trident Securities against
certain liabilities, including certain
liabilities under the Securities Act of
1933, as amended (the "Securities Act"). See
"The Conversion -- Plan of Distribution and
Marketing Agent."
The Association has established a Stock
Information Center, which will be managed by
Trident Securities, to coordinate the
Offerings, including tabulation of orders
and answering questions about the Offerings
by telephone. All subscribers will be
instructed to mail payment to the Stock
Information Center or deliver payment
directly to any office of the Association.
Payment for shares of Common Stock may be
made by cash (if delivered in person), check
or money order or by authorization of
withdrawal from deposit accounts maintained
with the Association. If payment is made
through such deposit account authorization,
funds in the account to be used for such
payment will not be available for withdrawal
and will not be released until the
Conversion is completed or terminated or if
the subscriber fails to affirmatively
confirm his or her order in the event of a
resolicitation. See "The Conversion --
Subscriptions for Stock in Subscription and
Community Offerings."
The Plan provides that the Conversion must
be completed within 24 months after the date
of the approval of the Plan by the members
of the Association. The Plan has been
approved by the OTS and is subject to the
approval of the Association's members at the
Special Meeting to be held on _______, 1997.
Purchase Limitations With the exception of the ESOP, which
intends to purchase 8.0% of the total number
of shares of Common Stock issued in the
Conversion, no Eligible Account Holder,
Supplemental Eligible Account Holder or
Other Member nor person (together with
associations of and persons acting in
concert therewith) in the Community Offering
and Syndicated Community Offering may
purchase more than $250,000 of the shares of
Common Stock sold in the Conversion. In
addition, no person (together with
associates and persons acting in concert
therewith) may purchase in the aggregate
more than $250,000 of the shares of Common
Stock issued in the Conversion. The maximum
overall purchase limitation and the amount
permitted to be subscribed for may be
increased or decreased under certain
circumstances in the sole discretion of the
Company. The minimum purchase is 25 shares.
See "The Conversion -- Limitations on
Purchase of Shares." In the event of an over
subscription, shares will be allocated as
provided in the Plan. See "The Conversion --
Subscription Offering," " --Community
Offering" and "-- Syndicated Community
Offering." In the event of an increase in
the total number of shares up to the number
issuable at 15% above the maximum of the
Estimated Valuation Range, the additional
shares may be distributed and allocated
without the resolicitation of subscribers.
See "The Conversion -- Limitations on
Purchase of Shares."
The term "acting in concert" is defined in
the Plan of Conversion to mean: (i) knowing
participation in a joint activity or
interdependent conscious parallel action
towards a common goal whether or not
pursuant to an express agreement; or (ii) a
combination or pooling of voting or other
interests in the securities of an issuer for
a common purpose pursuant to any contract,
understanding, relationship, agreement or
other arrangement, whether written or
otherwise. The term
(v)
<PAGE>
"associate" of a person is defined in the
Plan of Conversion to mean: (i) any
corporation or organization (other than the
Association or a majority-owned subsidiary
of the Association) of which such person is
an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or
more of any class of equity securities; (ii)
any trust or other estate in which such
person has a substantial beneficial interest
or as to which such person serves as trustee
or in a similar fiduciary capacity
(excluding tax-qualified employee plans);
and (iii) any relative or spouse of such
person, or any relative of such spouse, who
either has the same home as such person or
who is a director or officer of the
Association or any of its parents or
subsidiaries. The Company and the
Association may presume that certain persons
are acting in concert based upon, among
other things, joint account relationships
and the fact that such persons have filed
joint Schedules 13D with the SEC with
respect to other companies.
Potential Benefits of Option Plan. The Board of Directors of the
Conversion to Management Company intends to implement the Option
Plan, contingent upon receipt of OTS non-
objection and stockholder approval at a
meeting held no earlier than six months
following completion of the Conversion, but
which may be held more than one year
following completion of the Conversion.
Assuming 900,000 shares are issued in the
Conversion (at the midpoint of the Estimated
Valuation Range) and receipt of the required
approvals, the Company currently plans to
grant options to purchase 22,500 shares of
the Common Stock to Larry D. Smith, Chief
Executive Officer, and ______ shares of the
Common Stock to all executive officers and
directors as a group (7 persons, including
the chief executive officer), respectively,
under the Option Plan in the year following
the Conversion. The exercise price of the
options, which would be granted at no cost
to the recipient thereof, would be the fair
market value of the Common Stock subject to
the option on the date the option is
granted. See "Management of the
Association --Certain Benefit Plans and
Agreements."
MRP. The Board of Directors of the Company
intends to implement the High Country
Bancorp, Inc. Management Recognition Plan
("MRP"), subject to receipt of OTS approval
and to stockholder approval at a meeting of
the Company's stockholders which may be held
within one year but no earlier than six
months following the Conversion or may be
held more than one year following completion
of the Conversion. Subject to such
approvals, the MRP will purchase an amount
of shares after the Conversion equal to up
to 4% of the shares issued in the Conversion
(36,000 shares at the midpoint of the
Estimated Valuation Range), for issuance to
executive officers and directors of the
Association and the Company. At the Purchase
Price in the Conversion of $10.00 per share,
the shares to be awarded by the MRP to the
directors and executive officers of the
Company would have a value of $360,000. No
shares will be awarded under the MRP prior
to receipt of regulatory and stockholder
approval. Awards under the MRP would be
granted at no cost to the recipients
thereof. See "Management of the Association
-- Certain Benefit Plans and Agreements."
Other Benefits. In addition to the Option
Plan and the MRP, the following benefits may
or will be realized as a result of the
Conversion, subject in certain cases to
approval of such plans by the OTS: (i) under
the Association's Long-Term, Incentive
Compensation Plan, each director will
receive, after terminating service on the
Board, an amount equal to their plan account
balance, plus earnings over the distribution
period; (ii) under the ESOP, employees of
the Association, including the executive
officers, will have shares of Common Stock
allocated to their
(vi)
<PAGE>
respective accounts in the ESOP; (iii) under
the Association's Incentive Compensation
Plan, annual cash bonuses based on the
Association's performance; and (iv) the
President and Vice President of the
Association have entered into employment
agreements with the Association, benefits
which are guaranteed by the Company. In
addition to the possible financial benefits
under the benefit plans, management could
benefit from certain statutory and
regulatory provisions, as well as certain
provisions in the Company's Articles of
Incorporation and Bylaws, that may tend to
promote the continuity of existing
management. See "Management of the
Association -- Director Compensation,"
"-- Executive Compensation" and " --Certain
Benefit Plans and Agreements," "Certain
Restrictions on Acquisitions of the Company
and the Association" and "Certain Anti-
takeover Provisions in the Certificate of
Incorporation and Bylaws."
Prospectus Delivery and To ensure that each subscriber receives a
Procedure for Purchasing Prospectus at least 48 hours prior to the
Shares Expiration Date in accordance with Rule
15c2-8 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), no
Prospectus will be mailed any later than
five days prior to the Expiration Date or
hand delivered any later than two days prior
to such date. Neither the Company, the
Association, nor any of their agents shall
be obligated to deliver a Prospectus and
Stock Order Form by any means other than the
U.S. Postal Service. Execution of a Stock
Order Form will confirm receipt or delivery
in accordance with Rule 15c2-8. Stock Order
Form will be distributed only with a
Prospectus. The executed Stock Order Form
must be accompanied by payment by check,
money order, bank draft or withdrawal
authorization to an existing account at the
Association. The Company is not obligated to
accept orders submitted on photocopied or
telecopied Stock Order Forms.
To ensure that Eligible Account Holders,
Supplemental Eligible Account Holders and
Other Members are properly identified as to
their stock purchase priorities, as well as
for purposes of allocating shares based on
subscribers' deposit balances in the event
of over subscription, such persons must list
all of their deposit accounts at the
Association as of such qualifying record
date on the Stock Order Form. Failure to
list all such deposit accounts may result in
the inability of the Company or the
Association to fill all or part of a
subscription order. Neither the Company, the
Association nor any of their agents shall be
responsible for any order on which all
deposit accounts of the subscriber have not
been fully and accurately disclosed. The
Company will not accept orders registered
"in care of," or instructed to be mailed to,
a third party.
Non-transferability of Applicable federal regulations provide that
Subscription Rights prior to the completion of the Conver-sion,
no person shall transfer or enter into any
agreement or understanding to transfer the
legal or beneficial ownership of the
Subscription Rights issued under the Plan or
the shares of Common Stock to be issued upon
their exercise. Persons violating such
prohibition may lose their right to
subscribe for stock in the Conversion and
may be subject to sanctions by the OTS. Each
person exercising Subscription Rights will
be required to certify that his or her
purchase of Common Stock is solely for the
purchaser's own account and that there is no
agreement or understanding regarding the
sale or transfer of such shares.
Use of Proceeds The amount of proceeds from the sale of the
Common Stock in the Conversion will depend
upon the total number of shares actually
sold, the number of shares of
(vii)
<PAGE>
Common Stock sold in the Subscription
Offering and the Community Offering and
Syndicated Community Offering, if any, and
the actual expenses of the Conversion. As a
result, the actual net proceeds from the
sale of the Common Stock cannot be
determined until the Conversion is
completed. Based on the sale of $9,000,000
of Common Stock at the midpoint of the
Estimated Valuation Range, the net proceeds
are estimated to be approximately
$8,480,000. It is anticipated, however, that
the net proceeds will be between
approximately $7,151,000 and $9,809,000 if
the aggregate purchase price is within the
Estimated Valuation Range and the net
proceeds will be approximately $11,337,500
if the aggregate purchase price is increased
to 15% above the maximum of the Estimated
Valuation Range. See "Pro Forma Data."
The Company has received OTS approval to
purchase all of the capital stock of the
Converted Association to be issued in the
Conversion in exchange for at least 50% of
the net proceeds. Assuming the sale of
900,000 shares of the Common Stock at the
midpoint, of the Estimated Valuation Range
and the purchase of 8% of such shares by the
ESOP, the Association would receive $4.2
million in cash, and the Company would
retain approximately $3.5 million in cash
and $720,000 in the form of a note
receivable from the ESOP. The ESOP note
receivable will be for a ten-year term and
carry an interest rate, which adjusts
annually, equal to the prime rate as
published in The Wall Street Journal plus
-----------------------
one percent.
The proceeds retained by the Company after
funding the ESOP initially will be invested
in short-term and intermediate-term
securities, including cash and cash
equivalents and U.S. government and agency
obligations. Also, such proceeds will be
available for a variety of corporate
purposes, including funding the MRP, if the
MRP is implemented, future acquisitions and
diversification of business, additional
capital contributions, dividends to
stockholders and future repurchases of the
Common Stock to the extent permitted by
applicable regulations. The Company
currently has no specific plans, intentions,
arrangements or understanding regarding any
acquisitions, dividends or repurchases.
The proceeds contributed to the Converted
Association will substantially increase the
capital of the Converted Association. The
Converted Association intends to use such
funds for general corporate purposes, such
as the origination of loans (including
consumer, commercial business and commercial
real estate loans) and investment in
securities (including adjustable-rate
mortgage-backed securities.) It is expected
that in the interim all or part of the
proceeds will be invested in short-term and
intermediate-term securities, including cash
and cash equivalents and U.S. government and
agency obligations.
Market for the The Company has never issued capital stock
Common Stock to the public and, consequently, there is no
existing market for the Common Stock.
Although the Company has received
conditional approval to trade its Common
Stock on the Nasdaq SmallCap Market under
the symbol "_____" there can be no assurance
that the Company will meet Nasdaq SmallCap
Market listing requirements, which currently
include a minimum of two market makers in
the Common Stock. Trident Securities has
indicated its intention to make a market in
the Common Stock, and the Association
anticipates that it will be able to secure
at least one additional market maker for the
Common Stock.
(viii)
<PAGE>
The Nasdaq has proposed substantial changes
to its listing requirements on the Nasdaq
SmallCap Market which would, among other
things, increase the minimum capitalization,
stockholder and market maker requirements.
If the proposed changes are approved by the
SEC, the Company's Common Stock may not
qualify for listing on the Nasdaq SmallCap
Market. In the event, the Company's Common
Stock would be traded on the
over-the-counter market through the OTC
"Electronic Bulletin Board." However,
purchasers of Common Stock should have a
long-term investment intent and recognize
that the absence of an active and liquid
trading market may make it difficult to sell
the Common Stock, and may have an adverse
effect on the price. The development of a
public trading market depends upon the
existence of willing buyers and sellers, the
presence of which is not within the control
of the Company, the Association or any
market maker. There can be no assurance that
an active and liquid market for the Common
Stock will develop in the foreseeable future
or, once developed, will continue. Even if a
market develops, there can be no assurance
that stockholders will be able to sell their
shares at or above the initial Purchase
Price after the completion of the Stock
Conversion. Purchasers of Common Stock
should consider the potentially illiquid and
long-term nature of their investment in the
shares being offered hereby. See "Risk
Factors -- Potentially Limited and Illiquid
Market for the Common Stock" and "Market for
the Common Stock."
Dividends The Board of Directors currently intends to
adopt a policy of paying regular quarterly
cash dividends on the Common Stock at an
initial annual rate of 3.0% of the $10.00
per share purchase price of the Common Stock
in the Conversion ($.30 per share), with the
first dividend being declared and paid no
earlier than for the quarter ending March
31, 1998. However, there can be no assurance
that dividends will be paid or, if paid
initially, will continue to be paid in the
future. In addition, subject to regulatory
approval, the Board of Directors may
determine to pay special cash dividends.
Special cash dividends, if paid, may be paid
in addition to, or in lieu of, regular cash
dividends. Like all possible dividend
payments, there can be no assurance that
special dividends will ever be paid. The
payment of regular or special dividends will
be subject to the requirements of applicable
law and the determination by the Board of
Directors of the Company that the net
income, capital and financial condition of
the Company and the Association, thrift
industry trends and general economic
conditions justify the payment of dividends.
See "Dividend Policy" and "Regulation --
Depository Institution Regulation --
Dividend Restrictions."
Risk Factors See "Risk Factors" for a discussion of
certain factors that should be considered by
prospective investors.
(ix)
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The following summary of selected consolidated financial information
and other data does not purport to be complete and is qualified in its entirety
by reference to the detailed information and Financial Statements and
accompanying Notes appearing elsewhere in this Prospectus.
Selected Financial Condition Data:
<TABLE>
<CAPTION>
At June 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total assets................................. $ 76,324 $ 63,185 $ 54,813 $ 49,204 $ 47,142
Cash......................................... 895 511 1,355 1,463 2,463
Interest bearing deposits.................... 2,381 1,577 513 639 1,882
Securities available for sale................ -- 989 1,385 1,454 2,169
Securities held to maturity................. 5,340 6,843 8,368 9,910 9,748
Loans receivable, net........................ 63,127 50,076 41,537 34,456 30,049
Savings deposits............................. 56,152 49,537 45,914 43,965 42,478
Retained earnings, substantially restricted.. 5,958 5,907 5,379 4,792 4,072
Number of:
Real estate loans outstanding............ 1,137 1,054 965 890 867
Savings accounts......................... 9,126 7,828 7,324 7,217 7,238
Full-service offices..................... 3 2 2 2 2
</TABLE>
Selected Operations Data:
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest income.............................. $ 5,764 $ 4,948 $ 3,911 $ 3,557 $ 3,858
Interest expense............................. 2,813 2,293 1,603 1,401 1,714
------- -------- ------- -------- --------
Net interest income ..................... 2,951 2,655 2,308 2,156 2,144
Provision for loan losses.................... 282 59 59 60 62
------- -------- ------- -------- --------
Net interest income after provision
for loan losses........................ 2,669 2,596 2,249 2,096 2,082
------- -------- ------- -------- --------
Noninterest income........................... 141 146 146 122 198
------- -------- ------- -------- --------
Subtotal................................. 2,810 2,742 2,395 2,218 2,280
------- -------- ------- -------- --------
Noninterest expense:
Compensation and benefits.................. 1,345 868 730 626 544
Other...................................... 1,410 948 771 661 725
------- -------- ------- -------- --------
Total noninterest expense.................. 2,755 1,816 1,501 1,287 1,269
------- -------- ------- -------- --------
Income before taxes...................... 55 926 894 931 1,011
Income tax expense........................... 11 407 327 347 367
------- -------- ------- -------- --------
Net income............................... $ 44 $ 519 $ 567 $ 584 $ 644
======= ======== ======= ======== ========
</TABLE>
(x)
<PAGE>
Operating Ratios
<TABLE>
<CAPTION>
At or for the
Year Ended June 30,
----------------------------------
1997 1996 1995
---- ---- ----
Performance Ratios:
<S> <C> <C> <C>
Return on assets (ratio of net earnings
to average total assets) .......................................... 0.06% 0.86% 1.17%
Return on equity (ratio of net earnings
to average equity) ................................................ 0.75% 9.15% 11.94%
Ratio of average interest-earning assets to
average interest-bearing liabilities .............................. 104.64% 106.15% 110.81%
Ratio of net interest income, after provision
for loan losses, to noninterest expense ........................... 96.88% 142.95% 149.83%
Net interest rate spread (difference between weighted average yield on
interest-earning assets and weighted
average cost of interest-bearing liabilities) .................... 4.19% 4.41% 4.48%
Net yield on average interest-earning assets ......................... 4.38% 4.65% 4.71%
Quality Ratios:
Non-performing loans to total loans
at end of period .................................................. 0.21% 0.14% 0.25%
Non-performing loans to total assets ................................. 0.18% 0.12% 0.19%
Non-performing assets to total assets
at end of period .................................................. 0.23% 0.12% 0.19%
Allowance for loan losses to non-performing
loans at end of period ............................................ 431% 563% 379%
Allowance for loan losses to total loans ............................. 0.93% 0.79% 0.93%
Capital Ratios:
Equity to total assets at end of period .............................. 7.81% 9.35% 9.81%
Average equity to average assets ..................................... 8.32% 9.42% 9.77%
</TABLE>
(xi)
<PAGE>
RISK FACTORS
Before investing in the shares of the Common Stock offered by this
Prospectus, prospective investors should carefully consider the matters
presented below.
Risks Posed by Certain Lending Activities
The Association's primary lending activity is the origination of
single-family residential mortgage loans. However, at June 30, 1997, $18.7
million, or 29% of the Association's gross loan portfolio at June 30, 1997
consisted of loans other than single-family mortgage loans. Such loans included
$1.6 million in loans secured by commercial real estate, $2.4 million in loans
for the development of raw land into single-family residential building lots,
$4.3 million in commercial business loans and $6.5 million in consumer loans,
$5.4 million of which are automobile loans. During recent years, the Association
has significantly increased its level of commercial real estate, land
development and commercial business lending, and consumer loans, all of which
have been made in the Association's Primary Market Area, in order to increase
interest income and make its loan portfolio more interest rate sensitive.
Although these loans generally provide for higher interest rates and shorter
terms than permanent single-family residential real estate loans, these loans
generally have a higher degree of credit and other risks. Nonresidential real
estate lending often involves larger loan balances to single borrowers or groups
of related borrowers as compared to residential real estate lending. The payment
experience on such loans typically is dependent on the successful operation of
the real estate project or marketing of the residential building lots. These
risks can be significantly affected by supply and demand conditions in the
market for office and retail space and the residential real estate market, and,
as such, may be subject to a greater extent to adverse conditions in the economy
generally. The Association may be exposed to risk of loss on land development or
construction loans if its initial estimate of the property's value at completion
of development or construction proves to be inaccurate. Commercial business
loans involve a greater degree of risk than other types of lending as payments
on such loans are often dependent on the successful operation of the business
involved which may be subject to a greater extent to adverse conditions in the
economy. At June 30, 1997, however, none of the Association's nonresidential
real estate, construction or land development, and commercial business loans
were in nonaccrual status (except for $3,000 in nonaccrual commercial business
loans). Consumer loans also entail greater risk than single-family residential
loans, particularly in the case of consumer loans which are unsecured or secured
by rapidly depreciable assets, such as automobiles. In such cases, any
repossessed collateral for a defaulted consumer loans may not provide an
adequate source of repayment of the outstanding loan balance as a result of the
greater likelihood of damage, loss or depreciation. At June 30, 1997, the
Association had $137,000 in consumer loans which were non-performing. Also, as a
result of the growth in the Association's loan portfolio in recent years, the
Association's loan portfolio at June 30, 1997 includes a significant portion of
relatively new loans. Although the Association currently has low levels of
nonperforming assets, due to the increased level of nonresidential loans and the
unseasoned nature of many of these loans, there can be no guarantee that the
level of nonperforming assets will not increase in the future, and that
corresponding losses from such activities may result therefrom.
Anticipated Low Return on Equity Following Conversion
As a result of the Conversion, the Association's equity will be
substantially increased. At June 30, 1997, the Association's ratio of total
equity to total assets was 7.81%, and, assuming the sale of 900,000 shares in
the Conversion (i.e., the midpoint of the Estimated Valuation Range), such ratio
is expected to increase to 15.95%. Absent an increase in consolidated net income
that corresponds to the increase in the consolidated equity of the Company and
the Association from the Conversion, the Company and the Association are
unlikely to maintain a return on average equity (i.e., net income divided by
average equity) at historical levels and, as a result, it is expected that the
Company's return on equity initially will be below industry norms. Additionally,
the increased costs resulting from the obligations associated with being a
public company, including increased professional costs and compensation-related
expenses, will have a negative effect on net income. Consequently, investors
should carefully evaluate and consider the effect of a subpar return on equity
on the market price of the Common Stock. Further, there can be no assurance that
the Company
1
<PAGE>
will be able to increase net income following the Conversion in amounts
commensurate with the increase in equity resulting from the Conversion.
Future of Thrift Industry
The U.S. Congress has taken up legislation, and certain Congressional
committees have passed proposed legislation, that may eliminate savings
associations as a separate industry. Legislation enacted in September 1996
provides that the SAIF, the current federal insurer of the Association's deposit
accounts, will be merged with the Bank Insurance Fund (the "BIF") which insures
the deposits of commercial banks on January 1, 1999 but only if there are no
thrift institutions left. The legislation directs the Department of the Treasury
to submit a report to the Congress by March 31, 1997 with its findings with
respect to the development of a common charter for banks and thrifts. This
report has been submitted, but no action has, as yet, been taken. The
Association cannot predict what the attributes of any such common charter would
be or whether any legislation will result from this study. It is possible,
however, that the common charter may not offer all the advantages which the
Association now enjoys such as unrestricted nationwide branching and the absence
of activities restrictions on savings and loan holding companies which do not
control more than one savings association. If the Association were to become
subject to the restrictions applicable to branching by banks headquartered in
Colorado, its branching would generally be restricted to Colorado. If the
Company were to become subject to the restrictions on bank holding companies,
its activities would be limited to activities that have been determined by the
Board of Governors of the Federal Reserve System to be so closely related to
banking as to be a proper incident thereto. If Congress fails to take action to
create a common charter for banks and thrift institutions or otherwise fails to
end the thrift industry's separate existence, the currently contemplated merger
of the deposit insurance funds would not take place and a shrinking thrift
industry would be required to support a separate deposit fund with certain fixed
costs with a shrinking assessment base.
Potential Effects of Changes in Interest Rates and the Current Interest Rate
Environment
Effect on Net Interest Income. The operations of the Association are
substantially dependent on its net interest income, which is the difference
between the interest income earned on its interest-earning assets and the
interest expense paid on its interest-bearing liabilities. Like most savings
institutions, the Association's earnings are affected by changes in market
interest rates and other economic factors beyond its control. Substantially all
of the Association's residential mortgage loans have terms of 15 to 25 years,
while deposit accounts have significantly shorter terms to maturity. If an
institution's interest-earning assets (primarily loans) have longer effective
maturities than its interest-bearing liabilities (deposits), the yield on the
institution's interest-earning assets generally will adjust more slowly than the
cost of its interest-bearing liabilities and, as a result, the institution's net
interest income generally would be adversely affected by material and prolonged
increases in interest rates and positively affected by comparable declines in
interest rates. In addition, rising interest rates may negatively affect the
Association's earnings due to diminished loan demand. At June 30, 1997, the
Association's interest-bearing liabilities which were estimated to mature or
reprice within one year exceeded the Association's interest-earning assets with
the same characteristics by $34.7 million or 43.95%. This significant negative
gap position exposes the Association to severe and adverse effects in the event
of a prolonged and material increase in interest rates. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Asset and Liability Management" and "Business of the Association -- Lending
Activities" and " -- Deposit Activities and Other Sources of Funds."
Prepayment Risk. Changes in interest rates also can affect the average
life of loans and mortgage-backed securities. Lower interest rates in recent
periods have resulted in increased prepayments of loans and mortgage-backed
securities, as borrowers refinanced to reduce borrowing costs. Under these
circumstances, the Association is subject to reinvestment risk to the extent
that it is not able to reinvest such prepayments at rates which are comparable
to the rates on the maturing loans or securities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
2
<PAGE>
Limited and Illiquid Market for the Common Stock
Based on the midpoint of the Estimated Valuation Range, it is
anticipated that, following completion of the Conversion, the Company will have
approximately 900,000 shares of Common Stock issued and outstanding. Of such
amount, 72,000 of such shares will be held by the ESOP and an additional 145,000
shares will be held by directors and executive officers of the Association and
the Company, limiting the number of shares held by the general public. The
Company has never issued stock before and, due to the relatively small size of
the offering and the significant amount of stock expected to be held by
Management and the ESOP, it is highly unlikely that an active market for the
Common Stock will develop or, if developed, will be maintained, or that
quotations for the Common Stock will be available. The presence of a sufficient
number of buyers and sellers at any given time is a factor over which neither
the Company nor any market maker has control. The Company intends to list the
Common Stock on the Nasdaq SmallCap Market, subject to meeting the listing
requirements. If the Company does not meet these listing requirements, the
Company anticipates that the Common Stock will be traded on the over-the-counter
market through the OTC "Electronic Bulletin Board." Trident Securities (and one
other market maker, if a SmallCap listing is obtained) intends to make a market
in the Common Stock. Such efforts are expected to include solicitation of
potential buyers and sellers in order to match buy and sell orders. However,
Trident Securities will not be subject to any continuing obligation to continue
such efforts in the future.
The development of a liquid public market depends on the existence of
willing buyers and sellers, the presence of which is not within the control of
the Company, the Association or any market maker. Due to the size of the
Offering it is highly unlikely that a stockholder base sufficiently large to
create an active trading market will develop and be maintained. Investors in the
Common Stock could have difficulty disposing of their shares and should not view
the Common Stock as a short-term and liquid investment. The absence of an active
and liquid trading market for the Common Stock could affect the price and
liquidity of the Common Stock. See "Market for the Common Stock."
Articles of Incorporation, Bylaw and Statutory Provisions That Could Discourage
Hostile Acquisitions of Control
The Company's Articles of Incorporation and Bylaws contain certain
provisions that could discourage nonnegotiated takeover attempts that certain
stockholders might deem to be in their interests or through which stockholders
might otherwise receive a premium for their shares over the then current market
price and that may tend to perpetuate existing management. These provisions
include: the classification of the terms of the members of the Board of
Directors; supermajority voting provisions for the approval of certain business
combinations; elimination of cumulative voting by stockholders in the election
of directors; certain provisions relating to meetings of stockholders;
restrictions on the acquisition of the Company's equity securities; and
provisions allowing the Board of Directors to consider nonmonetary factors in
evaluating a business combination or a tender or exchange offer. The provisions
in the Company's Articles of Incorporation requiring a supermajority vote for
the approval of certain business combinations and containing restrictions on
acquisitions of the Company's equity securities provide that the supermajority
voting requirements or acquisition restrictions do not apply to business
combinations or acquisitions meeting specified Board of Directors approval
requirements. The Articles of Incorporation also authorizes the issuance of
1,000,000 shares of serial preferred stock as well as additional shares of
Common Stock up to a total of 4,000,000 outstanding shares of capital stock.
These shares could be issued without stockholder approval on terms or in
circumstances that could deter a future takeover attempt.
The Articles of Incorporation, Bylaw and statutory provisions, as well
as certain other provisions of state and federal law and certain provisions in
the Company's and the Association's employee benefit plans and employment
agreements and change in control severance agreements, may have the effect of
discouraging or preventing a future takeover attempt in which stockholders of
the Company otherwise might receive a substantial premium for their shares over
then current market prices. For a detailed discussion of those provisions, see
"Management of the Association -- Certain Benefit Plans and Agreements,"
"Description of Capital Stock," "Certain Restrictions on Acquisition of the
Company, the Converted Association and the Association" and "Certain
Anti-Takeover Provisions in the Articles of Incorporation and Bylaws."
3
<PAGE>
Possible Income Tax Consequences of Distribution of Subscription Rights
If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are deemed to have an
ascertainable value, the receipt of such rights would be taxable to recipients
who exercise the Subscription Rights in an amount equal to such value and the
Association could recognize a gain on such distribution. Whether Subscription
Rights are considered to have ascertainable value is an inherently factual
determination. The Association has received an opinion of Ferguson that such
rights have no value. The opinion of Ferguson is not binding on the IRS. See
"The Conversion -- Effect of Conversion to Stock Form on Depositors and
Borrowers of the Association -- Tax Effects."
Possible Dilutive Effect of MRP and Stock Options
It is expected that, following the consummation of the Conversion, the
Company will adopt the Option Plan and the MRP, both of which would be subject
to stockholder approval, and that such plans would be considered and voted upon
at a meeting of the Company's stockholders to be held within one year but not
less than six months after the Conversion. Under the MRP, employees and
directors could be awarded an aggregate amount of Common Stock equal to 4% of
the shares issued in the Conversion, and under the Option Plan, employees and
directors could be granted options to purchase an aggregate amount of Common
Stock equal to 10% of the shares issued in the Conversion at exercise prices
equal to the market price of the Common Stock on the date of grant. Under the
MRP, the shares issued to directors and employees could be newly issued shares
or shares purchased in the open market. In the event the shares issued under the
MRP and the Option Plan consist of newly issued shares of Common Stock, the
interests of existing stockholders would be diluted. If the shares to fund the
MRP and Option Plan are assumed to come from newly issued shares purchased
directly from the Company, and further assuming that all options granted under
the Option Plan are exercised, existing stockholders' ownership interests will
be diluted by 12.0%. At the midpoint of the Estimated Valuation Range, if all
shares under the MRP and the Option Plan were newly issued and the exercise
price for the option shares were equal to the Purchase Price per share in the
Conversion, the number of outstanding shares of Common Stock would increase from
900,000 to 1,026,000, the pro forma stockholders' equity per share of the
outstanding Common Stock at June 30, 1997 would have been $14.25, compared with
$14.84 without such plans, and the pro forma net income per share of the
outstanding Common Stock for the year ended June 30, 1997 would have been $.27,
compared with $.26 without such plans. See "Pro Forma Data" and "Management of
the Association -- Certain Benefit Plans and Agreements -- Management
Recognition Plan" and "-- Stock Option and Incentive Plan."
Potential Impact on Voting Control of Purchases by Management
The level of ownership or control of the Common Stock after the
Conversion by directors and officers of the Company is expected to be
sufficiently high such that, if each member of management were to act
consistently with each other, management as a whole would have significant
influence over the outcome of any stockholder vote requiring a majority vote and
in the election of directors, and would have veto power in matters requiring the
approval of 80% of the Company's outstanding Common Stock. Thus, such level of
ownership may tend to promote the continuity of existing management. Further,
under such circumstances, management might have the power to authorize actions
that could be viewed as contrary to the best interests of non-affiliated holders
of the Common Stock and might have veto power over actions that such holders may
deem to be in their best interests.
In particular, it is currently expected that directors and executive
officers will subscribe for approximately 145,000 shares, or 16.11% of the
Common Stock (assuming the sale of 900,000 shares at the midpoint of the
Estimated Valuation Range). Based upon the ESOP's purchase of 8.0% of the Common
Stock in the Conversion (72,000 shares at the midpoint of the Estimated
Valuation Range) and assuming the issuance to the MRP of newly issued shares of
Common Stock equal to 4.0% of the Common Stock issued in the Conversion (36,000
shares at the midpoint of the Estimated Valuation Range), management would
initially control 28.11% of the Common Stock outstanding (based upon the
midpoint of the Estimated Valuation Range). If all of the options currently
expected to be granted under the Option Plan (options for 90,000 shares at the
midpoint of the Estimated Valuation Range) were exercised, the percentage
4
<PAGE>
of shares controlled by such persons would be _____% of the total number of
shares of Common Stock outstanding (based upon the midpoint of the Estimated
Valuation Range). See "Pro Forma Data," "Proposed Management Purchases,"
"Management of the Association -- Certain Benefit Plans and Agreements," "The
Conversion --Regulatory Restrictions on Acquisition of the Common Stock,"
"Certain Restrictions on Acquisition of the Company and the Association" and
"Certain Anti-Takeover Provisions in the Articles of Incorporation and
Bylaws."
Potential Cost of ESOP and MRP
It is anticipated that the ESOP will purchase 8% of the Common Stock
sold in the Conversion with funds borrowed from the Company. The cost of
acquiring the ESOP shares will be $612,000, $720,000, $828,000 and $952,000 at
the minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively. In addition, following the Conversion, and
subject to regulatory and stockholder approval, the Company intends to implement
the MRP, under which employees and directors could be awarded (at no cost to
them) an aggregate amount of Common Stock equal to 4% of the shares issued in
the Conversion. Assuming the sale in the Conversion of the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range, and assuming
the shares of Common Stock to be awarded under the MRP have a cost equal to the
Purchase Price of $10.00 per share, the reduction to stockholders' equity of
funding the MRP would be $306,000, $360,000, $414,000 and $476,000,
respectively.
Accounting practices require an employer such as the Company to record
compensation expense in an amount equal to the fair value of shares committed to
be released from plans such as the ESOP. If shares of Common Stock appreciate in
price over time, compensation expense related to the ESOP may be materially
increased as a result, although the extent of such an increase in expense cannot
be accurately quantified at this time. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Impact of New Accounting
Standards."
HIGH COUNTRY BANCORP, INC.
High Country Bancorp, Inc. was incorporated under the laws of the
State of Colorado in August 1997 at the direction of the Board of Directors of
the Association for the purpose of serving as a savings and loan holding company
of the Converted Association upon the acquisition of all of the capital stock
issued by the Converted Association in the Conversion. The Company has received
approval from the OTS to acquire control of the Converted Association, subject
to satisfaction of certain conditions. Prior to the Conversion, the Company has
not engaged and will not engage in any material operations. Upon consummation of
the Conversion, the Company will have no significant assets other than the
outstanding capital stock of the Converted Association, up to 50% of the net
proceeds of the Conversion (after deducting amounts infused into the Association
and used to fund the ESOP) and a note receivable from the ESOP. Upon
consummation of the Conversion, the Company's principal business will be
overseeing the business of the Converted Association and investing the portion
of the net Conversion proceeds retained by it, and the Company will register
with the OTS as a savings and loan holding company.
As a holding company, the Company will have greater flexibility than
the Association to diversify its business activities through existing or newly
formed subsidiaries or through acquisition or merger with other financial
institutions, although the Company currently does not have any plans,
agreements, arrangements or understandings with respect to any such acquisitions
or mergers. After the Conversion, the Company will be classified as a unitary
savings and loan holding company and will be subject to regulation by the OTS.
The Company's executive offices are located at 130 W. 2nd Street,
Salida, Colorado 81201-0309, and its main telephone number is (719) 539-2516.
SALIDA BUILDING AND LOAN ASSOCIATION
The Association is a federal mutual savings and loan association
operating through offices located in Salida, Colorado, Buena Vista, Colorado and
Leadville, Colorado and serving Chaffee, Lake, Western Fremont and Saguache
5
<PAGE>
Counties in Colorado. The Association was chartered in 1886 as the first
state-chartered building and loan association in Colorado. The Association
received federal insurance of its deposit accounts and became a member of the
FHLB in 1937. The Association became a federally-chartered association on August
16, 1993 under its current name of Salida Building and Loan Association. At June
30, 1997, the Association had total assets of $76.3 million, loans receivable
(net) of $63.1 million, total deposits of $56.1 million and equity of $6.0
million.
Historically, the Association has operated as a traditional savings
institution by emphasizing the origination of loans secured by one- to
four-family residences. Since fiscal 1996, the Association has significantly
increased its origination of consumer, commercial business and commercial real
estate loans, including loans for the purchase and development of raw land, all
of which loans have been originated in its market area. For more information,
see "Risk Factors -- Risks Posed by Certain Lending Activities" and "Business of
the Association."
The Association is subject to examination and comprehensive regulation
by the OTS, and the Association's savings deposits are insured up to applicable
limits by the SAIF, which is administered by the FDIC. The Association is a
member of and owns capital stock in the FHLB of Topeka, which is one of 12
regional banks in the FHLB System. The Association is further subject to
regulations of the Federal Reserve Board governing reserves to be maintained and
certain other matters. Regulations significantly affect the operations of the
Association. See "Regulation -- Depository Institution Regulation."
The Association's executive offices are located at 130 W. 2nd Street,
Salida, Colorado 81201-0309, and its main telephone number is (719) 539-2516.
USE OF PROCEEDS
The amount of proceeds from the sale of the Common Stock in the
Conversion will depend upon the total number of shares actually sold in the
Subscription Offering and the Community Offering and the Syndicated Community
Offering, if any, and the actual expenses of the Conversion. As a result, the
actual net proceeds from the sale of the Common Stock cannot be determined until
the Conversion is completed. Based on the sale of $9,000,000 of Common Stock at
the midpoint of the Estimated Valuation Range, the net proceeds from the sale of
the Common Stock are estimated to be approximately $8,480,000. The Company has
received regulatory approval from the OTS to purchase all of the capital stock
of the Converted Association to be issued in the Conversion in exchange for at
least 50% of the net proceeds. Based on the foregoing assumption and the
purchase of 8% of the shares to be issued in the Conversion by the ESOP, the
Association would receive approximately $4,240,000 in cash, and the Company
would retain approximately $3,520,000 in cash and $720,000 in the form of a note
receivable from the ESOP. The ESOP note receivable will be for a ten-year term
and carry an interest rate, which adjusts annually, equal to the prime rate as
published in The Wall Street Journal plus one percent.
-----------------------
The proceeds retained by the Company, after funding the ESOP,
initially will be invested in short-term and intermediate-term securities
including cash and cash equivalents and U.S. government and agency obligations.
Such proceeds will be available for a variety of corporate purposes, including
funding the MRP, if implemented, future acquisitions and diversification of
business, additional capital contributions, dividends to stockholders and future
repurchases of the Common Stock to the extent permitted by applicable
regulations. The Company currently has no specific plans, intentions,
arrangements or understandings regarding acquisitions, capital contributions,
dividends or repurchases. Due to the limited nature of the Company's business
activities, the Company believes that the net proceeds retained after the
Conversion, earnings on such proceeds and payments on the ESOP note receivable
will be adequate to meet the Company's financial needs until dividends are paid
by the Converted Association. However, no assurance can be given that the
Company will not have a need for additional funds in the future. For additional
information, see "Regulation -- Depository Institution Regulation -- Dividend
Restrictions."
The proceeds contributed to the Converted Association will ultimately
become part of the Converted Association's general corporate funds to be used
for its business activities, such as the origination of loans (including
consumer, commercial business and commercial real estate loans) and investments
in securities (including adjustable-
6
<PAGE>
rate mortgage-backed securities). Initially it is expected that the proceeds
will be invested in short-term and intermediate-term securities including cash
and cash equivalents and U.S. government and agency obligations. The additional
capital will also provide the Association with additional liquidity to improve
the Association's interest rate risk position and moderate the effect of a
significant increase in interest rates.
Following the one-year anniversary of the completion of the Conversion
(or sooner if permitted by the OTS), and based upon then existing facts and
circumstances, the Company's Board of Directors may determine to repurchase
shares of Common Stock, subject to any applicable statutory and regulatory
requirements. Such facts and circumstances may include, but are not limited to:
(i) market and economic factors such as the price at which the stock is trading
in the market, the volume of trading, the attractiveness of other investment
alternatives in terms of the rate of return and risk involved in the investment,
the ability to increase the book value and/or earnings per share of the
remaining outstanding shares, and an improvement in the Company's return on
equity; (ii) the avoidance of dilution to stockholders by not having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Company and its stockholders. Any stock
repurchases will be subject to the determination of the Company's Board of
Directors that the Company and the Association will be capitalized in excess of
all applicable regulatory requirements after any such repurchases. The payment
of dividends or repurchasing of stock, however, would be prohibited if
stockholders' equity would be reduced below the amount required for the
liquidation account. See "Dividend Policy" and "The Conversion -- Certain
Restrictions on Purchase or Transfer of Shares After the Conversion."
Set forth below are the estimated investable net proceeds from the
Conversion, assuming the sale of the Common Stock at the minimum, midpoint,
maximum and maximum, as adjusted, of the Estimated Valuation Range and assuming
that the ESOP purchases 8% of the shares issued in the Conversion and the MRP
purchases 4% of the shares issued in the Conversion.
<TABLE>
<CAPTION>
Maximum, as
Minimum of Midpoint of Maximum of Adjusted, of
765,000 Shares 900,000 Shares 1,035,000 Shares 1,190,250 Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Gross offering proceeds................ $ 7,650,000 $ 9,000,000 $10,350,000 $ 11,902,500
Less estimated offering expenses....... 499,000 520,000 541,000 565,000
------------ ----------- ----------- ------------
Estimated net offering
proceeds........................... 7,151,000 8,480,000 9,809,000 11,337,100
Less: ESOP funded by the Company...... 612,000 720,000 828,000 952,000
MRP............................ 306,000 360,000 414,000 476,000
------------ ----------- ----------- ------------
Estimated investable net
proceeds........................... $ 6,233,000 $ 7,400,000 $ 8,567,000 $ 9,909,000
============ =========== =========== ============
</TABLE>
DIVIDEND POLICY
General
The payment of dividends on the Common Stock will be subject to
determination and declaration by the Board of Directors of the Company. The
Board of Directors currently intends to establish a policy of paying regular
semi-annual cash dividends on the Common Stock at an initial annual rate of 3.0%
of the $10.00 per share purchase price of the Common Stock in the Conversion
($0.30 per share), with the first dividend being declared and paid no earlier
than for the quarter ending March 31, 1998. In addition, from time to time, the
Board of Directors may determine to pay special cash dividends. Special cash
dividends, if paid, may be paid in addition to, or in lieu of, regular cash
dividends. The payment of dividends, however, will be subject to the
requirements of applicable law and the determination by the Board of Directors
of the Company that the net income, capital and financial condition of the
Company and the Association, thrift industry trends and general economic
conditions justify the payment of dividends, and there can be no assurance that
dividends will be paid or, if paid, will continue to be paid in the future.
7
<PAGE>
Since the Company initially will have no significant source of income
other than dividends from the Converted Association, principal and interest
payments on the note payable from the ESOP and earnings from investment of the
cash proceeds of the Conversion retained by the Company, the payment of
dividends by the Company will depend in large part upon the amount of the
proceeds from the Conversion retained by the Company and the Company's earnings
thereon and the receipt of dividends from the Converted Association, which is
subject to various tax and regulatory restrictions on the payment of dividends.
At June 30, 1997, assuming the Association was a stock association and that the
Conversion was completed at the midpoint of the Valuation Range, the amount that
would have been available to be paid by the Association to the Company in the
form of dividends under existing regulatory limitations and restrictions was
approximately $2.8 million (this does not consider the need for the Association
to maintain the liquidation account for Association members). Unlike the
Converted Association, the Company is not subject to regulatory restrictions on
the payment of dividends to stockholders. Under the Colorado General Corporation
Law, dividends may be paid either out of surplus or, if there is no surplus, out
of net profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. For additional information, see "Regulation -- Depository
Institution Regulation -- Capital Requirements," " -- Dividend Restrictions" and
"Taxation."
Tax Considerations
In addition to the foregoing, earnings of the Association or the
Converted Association appropriated for bad debt reserves and deducted for
federal income tax purposes cannot be used by the Converted Association to pay
cash dividends to the Company without the payment of federal income taxes by the
Association at the then current income tax rate on the amount deemed
distributed, which would include the amount of any federal income taxes
attributable to the distribution. See "Taxation -- Federal Income Taxation" and
Note 9 of the Notes to Financial Statements included elsewhere herein. The
Company does not contemplate any distribution by the Association that would
result in a recapture of the Association's bad debt reserve or create the
above-mentioned federal tax liabilities.
MARKET FOR THE COMMON STOCK
It is anticipated that following completion of the Conversion the
Company will have approximately 900,000 shares of Common Stock issued and
outstanding based on the midpoint of the Estimated Valuation Range. The Company
has never issued capital stock to the public and, consequently, there is no
existing market for the Common Stock. Although the Company has received
conditional approval to trade its Common Stock on the Nasdaq SmallCap Market
under the symbol "_____" there can be no assurance that the Company will meet
Nasdaq SmallCap Market listing requirements, which currently include a minimum
of two market makers in the Common Stock. Trident Securities has indicated its
intention to make a market in the Common Stock, and the Association anticipates
that it will be able to secure at least one additional market maker for the
Common Stock. The Nasdaq has proposed substantial changes to its listing
requirements on the Nasdaq SmallCap Market which would, among other things,
increase the minimum capitalization, stockholder and market maker requirements.
If the proposed changes are approved by the SEC, the Company's Common Stock may
not qualify for listing on the Nasdaq SmallCap Market. In the event, the
Company's Common Stock would be traded on the over-the-counter market through
the OTC "Electronize Bulletin Board." However, purchasers of Common Stock should
have a long-term investment intent and recognize that the absence of an active
and liquid trading market may make it difficult to sell the Common Stock, and
may have an adverse effect on the price.
8
<PAGE>
CAPITALIZATION
The following table sets forth information regarding the historical
capitalization, including deposits, of the Association at June 30, 1997 and the
pro forma consolidated capitalization of the Company giving effect to the sale
of the Common Stock at the minimum, midpoint, maximum and 15% above the maximum
of the Estimated Valuation Range based upon the assumptions set forth under "Use
of Proceeds" and below. For additional financial information regarding the
Association, see the Financial Statements and related Notes appearing elsewhere
herein. Depending on market and financial conditions, the total number of shares
to be issued in the Conversion may be significantly increased or decreased above
or below the midpoint of the Estimated Valuation Range. No resolicitation of
subscribers and other purchasers will be made unless the aggregate purchase
price of the Common Stock sold in the Conversion is below the minimum of the
Estimated Valuation Range or is above 15% above the maximum of the Estimated
Valuation Range. A change in the number of shares to be issued in the Conversion
may materially affect the Company's pro forma capitalization. See "Pro Forma
Data" and "The Conversion -- Stock Pricing and Number of Shares to be Issued."
<TABLE>
<CAPTION>
Capitalization Pro Forma Consolidated Capitalization of
of the the Company at June 30, 1997 Based on the Sale of
-----------------------------------------------------------------
Association at 765,000 Shares 900,000 Shares 1,035,000 Shares 1,190,250 Shares
June 30, at $10.00 at $10.00 at $10.00 at $10.00
1997 Per Share Per Share Per Share Per Share
------------ ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Deposits (1)....................................... $ 56,152 $ 56,152 $ 56,152 $ 56,152 $ 56,152
FHLB advances...................................... 13,520 13,520 13,520 13,520 13,520
--------- ---------- ---------- ---------- ----------
Total deposits and borrowed funds.............. $ 69,672 $ 69,672 $ 69,672 $ 69,672 $ 69,672
========= ========== ========== ========== ==========
Capital stock:
Preferred stock, par value $.01 per share:
authorized - 1,000,000 shares;
assumed outstanding - none................... $ -- $ -- $ -- $ -- $ --
Common Stock, par value $.01 per share
authorized - 3,000,000 shares;
shares to be outstanding - as shown (2)(3)... -- 8 9 10 12
Paid-in capital (2)(3)........................... -- 7,143 8,471 9,799 11,325
Less: Common Stock acquired by ESOP (4)......... -- (612) (720) (828) (952)
Common Stock acquired by MRP (3)....... -- (306) (360) (414) (476)
Retained earnings (5)........................... 5,958 5,958 5,958 5,958 5,958
--------- ---------- ---------- ---------- ----------
Total stockholders' equity (6)............... $ 5,958 $ 12,191 $ 13,358 $ 14,525 $ 15,867
========= ========== ========== ========== ==========
</TABLE>
(footnotes on following page)
9
<PAGE>
- -----------
(1) Does not reflect withdrawals from savings accounts for the purchase of
Common Stock in the Conversion; any withdrawals will reduce pro forma
capitalization by the amount of such withdrawals.
(2) Does not reflect additional shares of Common Stock that possibly could
be purchased by participants in the Option Plan, if implemented, under
which directors, executive officers and other employees could be
granted options to purchase an aggregate amount of Common Stock equal
to 10% of the shares issued in the Conversion (90,000 shares at the
midpoint of the Estimated Valuation Range) at exercise prices equal to
the market price of the Common Stock on the date of grant.
Implementation of the Option Plan will require regulatory and
stockholder approval. See "Management of the Association -- Certain
Benefit Plans and Agreements -- Stock Option and Incentive Plan" and
"Risk Factors -- Possible Dilutive Effect of MRP and Stock Options."
(3) Assumes a number of shares of Common Stock equal to 4% of the Common
Stock to be sold in the Conversion will be purchased by the MRP through
open market purchases. The dollar amount of the Common Stock to be
purchased by the MRP is based on the $10.00 per share Purchase Price in
the Conversion, represents unearned compensation and is reflected as a
reduction of capital. Such amount does not reflect possible increases
or decreases in the value of such stock relative to the Purchase Price
in the Conversion. As the Association accrues compensation expense to
reflect the vesting of such shares pursuant to the MRP, the charge
against capital will be reduced accordingly. Implementation of the MRP
will require regulatory and stockholder approval. If the shares to fund
the MRP are assumed to come from authorized but unissued shares
purchased by the MRP from the Company at the Purchase Price within the
year following the Conversion, at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, the number of
outstanding shares would be 795,600 shares, 936,000 shares, 1,076,400
shares and 1,237,860 shares, respectively, and total stockholders'
equity would be $15.71, $14.66, $13.88 and $13.20, respectively. If the
MRP acquires authorized but unissued shares from the Company,
stockholders' ownership in the Company would be diluted by
approximately 3.8%. See "Management of the Association -- Certain
Benefit Plans and Agreements -- Management Recognition Plan," "Pro
Forma Data" and "Risk Factors -- Possible Dilutive Effect of MRP and
Stock Options."
(4) Assumes 8% of the shares of Common Stock to be sold in the Conversion
are purchased by the ESOP, and that the funds used to purchase such
shares are borrowed from the Company out of net proceeds. Although
repayment of such debt will be secured solely by the shares purchased
by the ESOP, the Association or the Company expects to make
discretionary contributions to the ESOP in an amount at least equal to
the principal and interest payments on the ESOP debt. The approximate
amount expected to be borrowed by the ESOP is not reflected in this
table as borrowed funds but is reflected as a reduction of capital. As
the Association accrues compensation expense to reflect the allocation
of such shares pursuant to the ESOP, the charge against capital will be
reduced accordingly. See "Management of the Association -- Certain
Benefit Plans and Agreements -- Employee Stock Ownership Plan."
(5) The retained earnings of the Association are substantially restricted.
All capital distributions by the Association are subject to regulatory
restrictions tied to its regulatory capital level. In addition, after
the Conversion, the Association will be prohibited from paying any
dividend that would reduce its regulatory capital below the amount in
the liquidation account to be provided for the benefit of the
Association's Eligible Account Holders and Supplemental Eligible
Account Holders at the time of the Conversion and adjusted downward
thereafter. See "Regulation -- Depository Institution Regulation --
Dividend Restrictions" and "The Conversion -- Effect of Conversion to
Stock Form on Depositors and Borrowers of the Association --
Liquidation Account."
(6) Pro forma stockholders' equity information is not intended to represent
the fair market value of the Common Stock, the current value of the
Association's assets or liabilities or the amounts, if any, that would
be available for distribution to stockholders in the event of
liquidation. Such pro forma data may be materially affected by a change
in the number of shares to be sold in the Conversion and by other
factors. See "Pro Forma Data."
10
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The table below presents the Association's historical and pro forma capital
position relative to its various minimum statutory and regulatory capital
requirements at June 30, 1997 at the minimum, midpoint, maximum and maximum, as
adjusted, of the Estimated Valuation Range. For a discussion of the assumptions
underlying the pro forma capital calculations presented below, see "Use of
Proceeds," "Capitalization," "Pro Forma Data" and the financial statements and
related notes appearing elsewhere herein. For a detailed description of the
regulatory capital requirements applicable to the Association, see
"Regulation -- Regulation of the Association -- Regulatory Capital
Requirements."
<TABLE>
<CAPTION>
Pro Forma at June 30, 1997 (1)
Assuming Issuance of Shares of Common Stock at the:
------------------------------------------------------------------------
Minimum of Midpoint of
Historical at 765,000 Shares 900,000 Shares
June 30, 1997 at $ Per Share at $ Per Share
----------------- --------------------- ---------------------
Percent of Percent of Percent of
Amount Assets (2) Amount Assets (2) Amount Assets (2)
------ ---------- -------------------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital under generally accepted
accounting principles................. $ 5,958 7.81% $ 8,616 10.82% $ 9,118 11.37%
======= ====== ======== ===== ========= =====
Tangible capital........................ $ 5,955 7.80% $ 8,613 10.82% $ 9,115 11.37%
Tangible capital requirement............ 1,145 1.50 1,194 1.50 1,203 1.50
------- ------ -------- ------ --------- ------
Excess............................... $ 4,810 6.30% $ 7,419 9.32% $ 7,912 9.87%
======= ====== ======== ====== ========= ======
Core capital............................ $ 5,955 7.80% $ 8,613 10.82% $ 9,115 11.37%
Core capital requirement (3)............ 2,290 3.00 2,388 3.00 2,406 3.00
------- ------ -------- ------ --------- ------
Excess............................... $ 3,665 4.80% $ 6,225 7.82% $ 6,709 8.37%
======= ====== ======== ====== ========= ======
Risk-based capital...................... $ 6,552 13.73% $ 9,208 18.55% $ 9,710 19.41%
Risk-based capital requirement.......... 3,818 8.00 3,972 8.00 4,002 8.00
------- ------ -------- ------ --------- ------
Excess............................... $ 2,734 5.73% $ 5,236 10.55 % $ 5,708 11.41%
======= ====== ======== ====== ========= =====
<CAPTION>
Pro Forma at June 30, 1997 (1)
Assuming Issuance of Shares of Common Stock at the:
---------------------------------------------------
Maximum of Maximum, as Adjusted,
1,035,000 Shares of 1,190,250 Shares
at $ Per Share at $ Per Share
----------------------- ------------------------
Percent of Percent of
Amount Assets (2) Amount Assets (2)
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Capital under generally accepted
accounting principles................. $ 9,621 11.90% $10,199 12.51%
======== ===== ======= =====
Tangible capital........................ $ 9,618 11.90% $10,196 12.51%
Tangible capital requirement............ 1,212 1.50 1,223 1.50
-------- ------ ------- ------
Excess............................... $ 8,406 10.40% $ 8,973 9.51%
======== ===== ======= ======
Core capital............................ $ 9,618 11.90% $10,196 12.51%
Core capital requirement (3)............ 2,424 3.00 2,445 3.00
-------- ------ ------- ------
Excess............................... $ 7,194 8.90% $ 7,751 9.51%
======== ====== ======= ======
Risk-based capital...................... $ 10,213 20.26% $10,791 21.23%
Risk-based capital requirement.......... 4,032 8.00 4,067 8.00
-------- ------ ------- ------
Excess............................... $ 6,181 12.26% $ 6,724 13.23 %
======== ===== ======= ======
</TABLE>
- ------------------
(1) Assumes that the Company will purchase all of the capital stock of the
Association to be issued upon Conversion in exchange for 50% of the net
proceeds. Also assumes net proceeds distributed to the Association are
initially invested in assets with an average risk weight of 62%. Further
assumes that 8% of the Common Stock to be sold in the Conversion is acquired
by the ESOP, and that the funds used to acquire such shares are borrowed
from the Company. The amount of Common Stock to be purchased by the ESOP
represents unearned compensation and is reflected in this table as a
reduction of capital. Although repayment of such debt will be secured solely
by the Common Stock purchased by the ESOP, the Association or the Company
expects to make discretionary contributions to the ESOP in an amount at
least equal to the principal and interest payments on the ESOP debt. As the
Association makes contributions to the ESOP for simultaneous payment in an
equal amount on the ESOP debt, there will be a corresponding reduction in
the charge against capital. See "Management of the Association -- Certain
Benefit Plans and Agreements -- Employee Stock Ownership Plan." Also assumes
that the MRP will purchase in the open market Common Stock in an amount
equal to 4% of the Common Stock issued in the Conversion. The implementation
of the MRP is subject to regulatory and stockholder approvals. For purposes
of this table, the cost of the Common Stock to be purchased by the MRP is
assumed to be equal to the $10 price per share being offered in the
Conversion. Such price may increase or decrease between the date of
consummation of the Conversion and the date that, following receipt of
regulatory and stockholder approvals, the shares are actually purchased by
the MRP. The purchase of shares of Common Stock by the MRP following receipt
of such approvals may be from authorized but unissued shares of Common Stock
or in the open market. The amount of Common Stock to be purchased by the MRP
represents unearned compensation and is reflected in this table as a
reduction of capital. As the Association accrues compensation expense over
the five year period following such purchase in accordance with generally
accepted accounting principles to reflect the vesting of such shares of
Common Stock pursuant to the MRP, there will be a corresponding reduction in
the charge against capital. See "Management of the Association -- Certain
Benefit Plans and Agreements --Management Recognition Plan."
(2) Based on the Association's adjusted total assets for the purpose of the
tangible and core capital requirements and risk-weighted assets for the
purpose of the risk-based capital requirement. See "Regulation -- Depository
Institution Regulation -- Capital Requirements."
(3) Does not reflect potential increases in the Association's core capital
requirement to between 4% and 5% of adjusted total assets in the event the
OTS amends its capital requirements to conform to the more stringent
leverage ratio adopted by the Office of the Comptroller of the Currency for
national banks as described in "Regulation."
11
<PAGE>
PRO FORMA DATA
The following table sets forth the actual and, after giving effect to
the Conversion for the periods and at the dates indicated, pro forma
consolidated income, stockholders' equity and other data of the Association
prior to the Conversion and of the Company following the Conversion. Unaudited
pro forma consolidated income and related data have been calculated for the year
ended June 30, 1997 as if the Common Stock had been sold at the beginning of
such periods, and the estimated net proceeds had been invested at 5.65% at the
beginning of the period. The foregoing yield approximates the yield on the
One-Year U.S. Treasury bill at June 30, 1997. (While OTS regulations provide for
the use of a yield representing the arithmetic average of the average yield on
the Association's interest-earning assets and the average cost of deposits, the
Association believes that the use of the One-year Treasury bill rate is more
relevant in the current interest rate environment). The pro forma after-tax
yield for the Company and the Association is assumed to be 3.50% for the year
ended June 30, 1997, based on the effective tax rate of 38%. Unaudited pro forma
consolidated stockholders' equity and related data have been calculated as if
the Common Stock had been sold and was outstanding at the end of the periods,
without any adjustment of historical or pro forma equity to reflect assumed
earnings on estimated net proceeds. Per share amounts have been computed as if
the Common Stock had been outstanding at the beginning of the period or at the
dates shown, but without any adjustment of historical or pro forma stockholders'
equity to reflect the earnings on estimated net proceeds. The pro forma data set
forth below do not reflect withdrawals from deposit accounts to purchase shares,
accruals expected to be made by the Association with regard to employee benefit
plans to be adopted in connection with the Conversion or increases in capital
and, in the case of newly issued shares, outstanding Common Stock upon the
exercise of options by participants in the Option Plan, under which an aggregate
amount of Common Stock equal to 10% of the shares issued in the Conversion
(90,000 shares at the midpoint of the Estimated Valuation Range) are expected to
be reserved for issuance to directors, executive officers and employees upon the
exercise of stock options at exercise prices equal to the market price of the
Common Stock on the date of grant. See "Management of the Association -- Certain
Benefit Plans and Agreements."
The estimated net proceeds to the Company, as set forth in the
following tables, assume the sale of the Common Stock at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range. The actual
net proceeds from the sale of the Common Stock cannot be determined until the
Conversion is completed. However, net proceeds set forth on the following tables
are estimated based upon the following assumptions: (i) 100% of the shares of
Common Stock will be sold in the Subscription and Community Offerings as
follows: (a) 8% will be sold to the ESOP and 145,000 shares will be sold to
directors and officers of the Association and their associates, for which
commissions will not be paid; and (b) the remaining shares will be sold to
others in the Subscription and Community Offerings; and (ii) other Conversion
expenses, not including sales commissions, will be approximately $392,000. The
foregoing assumptions regarding estimated purchases in the Subscription and
Community Offerings are based on reasonable market assumptions, market
conditions, consultations between the Association and Trident Securities and
planned purchases by the ESOP. Actual expenses may vary from those estimated.
The stockholders' equity and related data presented herein are not
intended to represent the fair market value of the Common Stock, the current
value of assets or liabilities, or the amounts, if any, that would be available
for distribution to stockholders in the event of liquidation. For additional
information regarding the liquidation account, see "The Conversion -- Effect of
Conversion to Stock Form on Depositors and Borrowers of the Association --
Liquidation Account." The pro forma income and related data derived from the
assumptions set forth above should not be considered indicative of the actual
results of operations of the Converted Association and the Company for any
period. Such pro forma data may be materially affected by a change in the number
of shares to be issued in the Conversion and other factors. See "The Conversion
- -- Stock Pricing and Number of Shares to be Issued."
12
<PAGE>
<TABLE>
<CAPTION>
At or for the Year Ended June 30, 1997
----------------------------------------------------------
765,000 900,000 1,035,000 1,190,250
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(Dollars in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Gross offering proceeds................................ $ 7,650 $ 9,000 $ 10,350 $ 11,903
Less estimated offering expenses....................... (499) (520) (541) (565)
---------- --------- ---------- ----------
Estimated net offering proceeds..................... 7,151 8,480 9,809 11,337
Less Common Stock acquired by ESOP.................. (612) (720) (828) (952)
Less Common Stock acquired by MRP................... (306) (360) (414) (476)
---------- --------- ---------- ----------
Estimated investable net proceeds................... $ 6,233 $ 7,400 $ 8,567 $ 9,909
========== ========= ========== ==========
Net income
Historical net income............................... $ 44 $ 44 $ 44 $ 44
Pro forma adjustments:
Net income from proceeds.......................... 218 259 300 347
ESOP (1).......................................... (38) (45) (51) (59)
MRP (2)........................................... (38) (45) (51) (59)
---------- --------- ---------- ----------
Pro Forma Net Income................................ $ 186 $ 214 $ 241 $ 273
========== ========= ========== ==========
Net Income Per share
Historical.......................................... $ 0.06 $ 0.05 $ 0.05 $ 0.04
Pro forma adjustments:
Net income from proceeds.......................... 0.31 0.31 0.31 0.31
ESOP (1).......................................... (0.05) (0.05) (0.05) (0.05)
MRP (2)........................................... (0.05) (0.05) (0.05) (0.05)
---------- --------- ---------- ----------
Pro Forma -- Net Income
Per Share..................................... $ 0.26 $ 0.26 $ 0.25 $ 0.25
========== ========= ========== ==========
Number of shares used in calculating earnings
per share (1)(2)..................................... 709,920 835,200 960,480 1,104,552
========== ========= ========== ==========
Stockholders' equity (book value) (3)
Historical........................................... $ 5,958 $ 5,958 $ 5,958 $ 5,958
Estimated net proceeds............................... 7,151 8,480 9,809 11,337
Less Common Stock acquired by:
ESOP (1)........................................... (612) (720) (828) (952)
MRP (2)............................................ (306) (360) (414) (476)
---------- --------- ---------- ----------
Pro Forma........................................ $ 12,191 $ 13,358 $ 14,525 $ 15,867
========== ========= ========== ==========
Per Share
Historical........................................... $ 7.79 $ 6.62 $ 5.76 $ 5.01
Estimated net proceeds................................. 9.35 9.42 9.48 9.52
Less Common Stock acquired by:
ESOP (1)............................................. (0.80) (0.80) (0.80) (0.80)
MRP (2) ............................................. (0.40) (0.40) (0.40) (0.40)
---------- --------- ---------- ----------
Pro Forma.......................................... $ 15.94 $ 14.84 $ 14.03 $ 13.33
========== ========= ========== ==========
Number of shares used in calculating
equity per share..................................... 765,000 900,000 1,035,000 1,190,250
========== ========= ========== ==========
Pro forma price to book value.......................... 62.8% 67.4% 71.3% 75.0%
========== ========= ========== ==========
Pro forma price to earnings (P/E ratio)................ 38.5 38.5 40.0 40.0
========== ========= ========== ==========
</TABLE>
(Footnotes on succeeding page)
13
<PAGE>
- -----------
(1) Assumes 8% of the shares to be sold in the Conversion are purchased by
the ESOP under all circumstances, and that the funds used to purchase
such shares are borrowed from the Company. The approximate amount
expected to be borrowed by the ESOP is reflected as a reduction of
capital. Although repayment of such debt will be secured solely by the
shares purchased by the ESOP, the Association expects to make
discretionary contributions to the ESOP in an amount at least equal to
the principal and interest payments on the ESOP debt. Pro forma net
income has been adjusted to give effect to such contributions, based
upon a fully amortizing debt with a ten-year term. Because the Company
will be providing the ESOP loan, only principal payments on the ESOP
loan are reflected as employee compensation and benefits expense. For
purposes of this table the Purchase Price of $10.00 was utilized to
calculate the ESOP expense. The Association intends to record
compensation expense related to the ESOP in accordance with American
Institute of Certified Public Accountants ("AICPA") Statement of
Position ("SOP") No. 93-6. As a result, to the extent the value of the
Common Stock appreciates over time, compensation expense related to the
ESOP will increase. SOP 93-6 also changes the earnings per share
computations for leveraged ESOPs to include as outstanding only shares
that have been committed to be released to participants. For purposes
of the preceding table, it was assumed that 10% of the ESOP shares
purchased in the Conversion were committed to be released at the
beginning of the fiscal year. If it is assumed that 100% of the ESOP
shares were committed to be released at the beginning of the fiscal
year, the application of SOP 93-6 would result in net income per share
of $.82, $.73, $.66 and $.60, respectively, based on the sale of shares
at the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range. See "Management of the Association --
Certain Benefit Plans and Agreements -- Employee Stock Ownership Plan."
(2) Assumes a number of shares of Common Stock equal to 4% of the Common
Stock to be sold in the Conversion will be purchased by the MRP in the
open market in the year following the Conversion. The dollar amount of
the Common Stock to be purchased by the MRP is based on the Purchase
Price in the Conversion and represents unearned compensation and is
reflected as a reduction of capital. Such amount does not reflect
possible increases or decreases in the value of such stock relative to
the Purchase Price in the Conversion. As the Association accrues
compensation expense to reflect the vesting of such shares pursuant to
the MRP, the charge against capital will be reduced accordingly. MRP
adjustment is based on amortization of the MRP over five years.
Implementation of the MRP would require stockholder approval at a
meeting of the Company's stockholders to be held within one year but no
earlier than six months after the Conversion. For purposes of this
table, it is assumed that the MRP will be adopted by the Association's
Board of Directors and approved by the Company's stockholders, and that
the MRP will purchase the shares of Common Stock in the open market
within the year following the Conversion. If the shares to be purchased
by the MRP are assumed to be newly issued shares purchased from the
Company by the MRP at the Purchase Price, at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range, the
offering price as a percentage of pro forma stockholders' equity per
share would be 63.6%, 68.2%, 72.0% and 75.8%, respectively, and pro
forma net income per share would have been $.27, $.26, $.26 and $.25,
respectively. As a result of the MRP, stockholders' interests will be
diluted by approximately 3.8%. See "Management of the Association --
Certain Benefit Plans and Agreements -- Management Recognition Plan"
and "Risk Factors -- Dilutive Effect of MRP and Stock Options."
(3) Consolidated stockholders' equity represents the excess of the carrying
value of the assets of the Company over its liabilities. The amounts
shown do not reflect the federal income tax consequences of the
potential restoration to income of the bad debt reserves for income tax
purposes, which would be required in the event of liquidation. The
amounts shown also do not reflect the amounts required to be
distributed in the event of liquidation to eligible depositors from the
liquidation account which will be established upon the consummation of
the Conversion. Pro forma stockholders' equity information is not
intended to represent the fair market value of the Common Stock, the
current value of the Association's assets or liabilities or the
amounts, if any, that would be available for distribution to
stockholders in the event of liquidation. Such pro forma data may be
materially affected by a change in the number of shares to be sold in
the Conversion and by other factors.
(4) It is expected that following the consummation of the Conversion the
Company will adopt the Option Plan, which would be subject to
stockholder approval, and that such plan would be considered and voted
upon at a meeting of the Company's stockholders to be held within one
year but no earlier than six months after the Conversion. Upon adoption
of the Option Plan, employees and directors could be granted options to
purchase an aggregate amount of Common Stock equal to 10% of the shares
issued in the Conversion at exercise prices equal to the market price
of the Common Stock on the date of grant. In the event the shares
issued under the Option Plan consist of newly issued shares of Common
Stock and all options available for award under the Option Plan were
awarded, the interests of existing stockholders would be diluted. At
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, if all shares under the Option Plan were
newly issued and the exercise price for the option shares were equal to
the Purchase Price in the Conversion, net income per share would be
$.27, $.27, $.26 and $.26, respectively, and the stockholders' equity
per share would be $15.40, $14.40, $13.67 and $13.03, respectively.
14
<PAGE>
PROPOSED MANAGEMENT PURCHASES
The following table sets forth information regarding the approximate
number of shares of the Common Stock intended to be purchased by each of the
directors and executive officers of the Association and by all directors and
executive officers as a group, including their associates. For purposes of the
following table, it has been assumed that 900,000 shares of the Common Stock
will be sold at $10.00 per share, the midpoint of the Estimated Valuation Range
(see "-- Stock Pricing and Number of Shares to be Issued") and that sufficient
shares will be available to satisfy subscriptions in all categories.
<TABLE>
<CAPTION>
Percent Aggregate Purchase
Total of Price of
Name and Position Shares Total Proposed Purchases
----------------- ------ ----- ------------------
<S> <C> <C> <C>
Robert B. Mitchell, Chairman of the Board 20,000 2.22% $ 200,000
Larry D. Smith, President and Director 25,000 2.78 250,000
Scott G. Erchul, Vice President and Director 12,500 1.39 125,000
Timothy G. Glenn, Director 25,000 2.78 250,000
Phillip W. Harsh, Director 25,000 2.78 250,000
Richard A. Young, Director 25,000 2.78 250,000
Frank L. DeLay, Chief Financial Officer 12,500 1.39 125,000
------ ---- ---------
All directors and executive officers, as a
group (7 persons) and their associates 145,000 16.11 1,450,000
ESOP (1) 72,000 8.00 720,000
MRP (2) 36,000 4.00 360,000
------- ----- ----------
Total (3) 253,000 28.11% $2,530,000
======= ===== ==========
</TABLE>
(Differences due to rounding)
- ----------
(1) Consists of shares that could be allocated to participants in the ESOP,
under which executive officers and other employees would be allocated in
the aggregate 8% of the Common Stock issued in the Conversion. See
"Management of the Association -- Certain Benefit Plans and Agreements --
Employee Stock Ownership Plan."
(2) Consists of shares that are expected to be awarded to participants in
the MRP, if implemented, under which directors, executive officers and
other employees would be awarded an aggregate number of shares equal to
4% of the Common Stock sold in the Conversion (36,000 shares at the
midpoint of the Estimated Valuation Range). The dollar amount of the
Common Stock to be purchased by the MRP is based on the Purchase Price in
the Conversion and does not reflect possible increases or decreases in
the value of such stock relative to the Purchase Price per share in the
Conversion. Implementation of the MRP would require stockholder approval.
See "Management of the Association -- Certain Benefit Plans and
Agreements -- Management Recognition Plan." Such shares could be newly
issued shares or shares purchased in the open market following
implementation of the MRP, in the sole discretion of the Company's Board
of Directors. The percentage shown assumes the shares are purchased in
the open market. If all shares acquired by the MRP are newly issued
shares, the percentage of the outstanding Common Stock owned by the MRP
would be 3.8%. Any sale of newly issued shares to the MRP would be
dilutive to existing stockholders. See "Risk Factors --Possible Dilutive
Effect of MRP and Stock Options."
(3) Does not include shares that might be purchased by participants in an
Option Plan, intended to be implemented, under which directors, executive
officers and other employees would be granted options to purchase an
aggregate amount of Common Stock equal to 10% of the shares issued in the
Conversion (90,000 shares at the midpoint of the Estimated Valuation
Range) at exercise prices equal to the market price of the Common Stock
on the date of grant. Shares issued pursuant to the exercise of options
could be from treasury stock or newly issued shares. Implementation of
the Option Plan would require stockholder approval. See "Management of
the Association -- Certain Benefit Plans and Agreements -- Stock Option
and Incentive Plan."
15
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
STATEMENTS OF INCOME
The following Statements of Income of Salida Building & Loan
Association for each of the years in the two-year period ended June 30, 1997
have been audited by Grimsley, White & Company, independent certified public
accountants, whose report thereon appears elsewhere herein. The Statements of
Income should be read in conjunction with the Financial Statements and related
notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Interest Income
Interest on loans........................................................ $5,249,291 $4,326,277
Interest on securities available-for-sale................................ 18,171 73,845
Interest on securities held-to-maturity.................................. 412,386 506,463
Interest on other interest-bearing assets................................ 84,302 40,960
---------- -----------
Total interest income............................................. 5,764,150 4,947,545
---------- -----------
Interest Expense
Deposits................................................................. 2,179,408 1,966,757
Federal Home Loan Bank advances.......................................... 633,923 325,843
---------- -----------
Total interest expense............................................ 2,813,331 2,292,600
---------- -----------
Net interest income.......................................................... 2,950,819 2,654,945
Provision for losses on loans................................................ 282,000 59,450
---------- -----------
Net interest income after provision for loan losses....................... 2,668,819 2,595,495
---------- -----------
Noninterest Income
Service charges on deposits............................................... 123,955 118,798
Other..................................................................... 17,980 27,421
---------- -----------
Total noninterest income........................................... 141,935 146,219
---------- -----------
Noninterest Expense
Compensation and benefits................................................. 1,345,030 868,903
Occupancy and equipment................................................... 482,360 355,699
Insurance and professional fees........................................... 169,937 205,298
Other..................................................................... 405,163 293,559
SAIF special assessment................................................... 296,578 --
Loss on sale of loans..................................................... 56,185 92,535
---------- -----------
Total noninterest expense............................................ 2,755,253 1,815,994
---------- -----------
Income before income taxes................................................... 55,501 925,720
Income tax expense........................................................... 11,085 407,018
---------- -----------
Net income................................................................... $ 44,416 $ 518,702
========== ===========
</TABLE>
See Notes to Financial Statements
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company has only recently been formed and, accordingly, has no results
of operations at this time. As a result, this discussion relates to the
financial condition and results of operations of the Association. The principal
business of the Association consists of accepting deposits from the general
public and investing these funds primarily in loans and in investment securities
and mortgage-backed securities. The Association's loan portfolio consists
primarily of loans secured by residential real estate located in its market
area, with terms of 15 to 25 years, as well as commercial real estate,
commercial business, land development and consumer loans. See "Business of the
Association."
The Association's net income is dependent primarily on its net interest
income, which is the difference between interest income earned on its loan,
investment securities and mortgage-backed securities portfolio and interest paid
on interest-bearing liabilities. Net interest income is determined by (i) the
difference between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities. The
Association's interest rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit
flows. To a lesser extent, the Association's net income also is affected by the
level of noninterest expenses such as compensation and employee benefits and
FDIC insurance premiums.
The operations of the Association are significantly affected by prevailing
economic conditions, competition and the monetary, fiscal and regulatory
policies of governmental agencies. Lending activities are influenced by the
demand for and supply of housing, competition among lenders, the level of
interest rates and the availability of funds. Deposit flows and costs of funds
are influenced by prevailing market rates of interest, primarily on competing
investments, account maturities and the levels of personal income and savings in
the Association's market area.
Asset/Liability Management
The Association seeks to reduce its exposure to changes in interest
rates by originating shorter term consumer and commercial business loans with
maturities of no more than 10 years and by investing in adjustable-rate
mortgage-backed securities. The matching of the Association's assets and
liabilities may be analyzed by examining the extent to which its assets and
liabilities are interest rate sensitive and by monitoring the expected effects
of interest rate changes on the Association's net interest income.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If the
Association's assets mature or reprice more quickly or to a greater extent than
its liabilities, the Association's net portfolio value and net interest income
would tend to increase during periods of rising interest rates but decrease
during periods of falling interest rates. If the Association's assets mature or
reprice more slowly or to a lesser extent than its liabilities, the
Association's net portfolio value and net interest income would tend to decrease
during periods of rising interest rates but increase during periods of falling
interest rates. As a result of the interest rate risk inherent in the historical
savings institution business of originating long-term loans funded by short-term
deposits, the Association has pursued certain strategies designed to decrease
the vulnerability of its earnings to material and prolonged changes in interest
rates.
17
<PAGE>
Interest Rate Sensitivity Analysis
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific period if it
will mature or reprice within that period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities, and is considered negative when the amount
of interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets.
Generally, during a period of rising interest rates, a negative gap would
be expected to adversely affect net interest income while a positive gap would
be expected to result in an increase in net interest income, while conversely
during a period of declining interest rates, a negative gap would be expected to
result in an increase in net interest income and a positive gap would be
expected to adversely affect net interest income. As noted above, the
Association is attempting to improve its significant negative gap by emphasizing
the origination of shorter-term consumer and commercial business loans, and by
investing a portion of the net proceeds of the Conversion in adjustable-rate
mortgage-backed securities.
Net Portfolio Value. In recent years, the Association has measured its
interest rate sensitivity by computing the "gap" between the assets and
liabilities which were expected to mature or reprice within certain periods,
based on assumptions regarding loan prepayment and deposit decay rates formerly
provided by the OTS. However, the OTS now requires the computation of amounts by
which the net present value of an institution's cash flows from assets,
liabilities and off balance sheet items (the institution's net portfolio value,
or "NPV") would change in the event of a range of assumed changes in market
interest rates. These computations estimate the effect on an institution's NPV
from instantaneous and permanent 1% to 4% increases and decreases in market
interest rates. In the Association's interest rate sensitive policy, the Board
of Directors has established a maximum decrease in net interest income and
maximum decreases in NPV given these instantaneous changes in interest rates.
The following table sets forth the interest rate sensitivity of the
Association's net portfolio value as of June 30, 1997 in the event of 1%, 2%, 3%
and 4% instantaneous and permanent increases and decreases in market interest
rates, respectively. These changes are set forth below as basis points, where
100 basis points equals one percentage point.
<TABLE>
<CAPTION>
Net Portfolio Value NPV as % of Portfolio Value of Assets
Change ------------------------------------ -------------------------------------
in Rates $ Amount $ Change % Change NPV Ratio Basis Point Change
-------- -------- -------- -------- --------- ------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
+ 400 bp
+ 300 bp
+ 200 bp
+ 100 bp
0 bp [Table to be completed in amendment]
- 100 bp
- 200 bp
- 300 bp
- 400 bp
</TABLE>
18
<PAGE>
The following table sets forth the interest rate risk capital component
for the Association at June 30, 1997 given a hypothetical 200 basis point rate
change in market interest rates. See "Regulation -- Depository Institution
Regulation -- Capital Requirements."
<TABLE>
<CAPTION>
June 30, 1997
-------------
<S> <C>
Pre-shock NPV Ratio: NPV as % of Portfolio Value of Assets....... %
Exposure Measure: Post-Shock NPV Ratio........................... %
Sensitivity Measure: Change in NPV Ratio......................... bp
Interest Rate Risk Capital Component ($000)...................... (1)
</TABLE>
- ----------
(1) Although this calculation is not applicable to the Association, the
Association has a negative interest rate sensitivity gap which would
adversely affect net interest income during a period of rising interest
rates. The Association believes its high level of liquid assets would,
however, allow the Association to address this negative impact.
Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates and loan prepayments, and should not be relied upon as indicative
of actual results. Further, the computations do not contemplate any actions the
Association may undertake in response to changes in interest rates.
Certain shortcomings are inherent in the method of analysis presented
in both the computation of NPV and in the analysis presented in prior tables
setting forth the maturing and repricing of interest-earning assets and
interest-bearing liabilities. For example, although certain assets and
liabilities may have similar maturities or periods to repricing, they may react
in differing degrees to changes in market interest rates. The interest rates on
certain of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other assets and liabilities may lag
behind changes in market rates. Based on the above, net interest income should
decline with instantaneous increases in interest rates while net interest income
should increase with instantaneous declines in interest rates. Further, in the
event of a change in interest rates, prepayment and early withdrawal levels
would likely deviate significantly from those assumed in the tables.
The Association originates fixed-rate and variable-rate real estate
loans and holds most loans in portfolio until maturity, except as may be
appropriate for asset/liability management purposes. Because the Association's
interest-bearing liabilities which mature or reprice within short periods
substantially exceed its earning assets with similar characteristics, material
and prolonged increases in interest rates generally would adversely affect net
interest income, while material and prolonged decreases in interest rates
generally, but to a lesser extent because of their historically low levels,
would have the opposite effect.
Average Balance, Interest and Average Yields and Rates
The following table sets forth certain information relating to the
Association's average interest-earning assets and interest-bearing liabilities
and reflects the average yield on assets and average cost of liabilities for the
periods and at the date indicated. Such yields and costs are derived by dividing
income or expense by the average monthly balance of assets or liabilities,
respectively, for the periods presented. Management does not believe that the
use of month-end balances instead of daily balances has caused any material
difference in the information presented.
The table also presents information for the periods and at the date
indicated with respect to the difference between the average yield earned on
interest-earning assets and average rate paid on interest-bearing liabilities,
or "interest rate spread," which savings institutions have traditionally used as
an indicator of profitability. Another indicator of an institution's net
interest income is its "net yield on interest-earning assets," which is its net
interest income divided by the average balance of interest-earning assets. Net
interest income is affected by the interest rate spread and by the relative
amounts of interest-earning assets and interest-bearing liabilities. When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.
19
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------------
At June 30, 1997 1996
1997 ----------------------------- -------------------------------
------------------ Average Average
Yield/ Average Yield/ Average Yield/
Balance Cost Balance Interest Cost Balance Interest Cost
------- ----- ------- -------- ------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits................ $ 2,381 3.53% $ 1,398 $ 84 6.01% $ 543 $ 41 7.55%
Investments.............................. 6,328 6.81 7,234 431 5.96 9,081 581 6.40
Loans.................................... 63,129 8.31 58,752 5,249 8.93 47,442 4,326 9.12
---------- ---------- ---------- --------- ----------
Total interest-earning assets ............. 71,836 8.02 67,384 5,764 8.55 57,066 4,948 8.67
---------- ----------
Non-interest-earning assets................ 4,488 3,845 3,120
---------- ---------- ---------
Total assets............................... $ 76,324 $ 71,229 $ 60,186
========== ========== =========
Interest-bearing liabilities:
Savings deposits......................... $ 56,152 3.88 $ 53,890 2,179 4.04 $ 48,451 $ 1,967 4.06
FHLB advances............................ 13,520 4.69 10,508 634 6.03 5,308 326 6.14
---------- ---------- ---------- --------- ----------
Total interest-bearing liabilities......... 69,672 4.04 64,398 2,813 4.37 53,759 2,293 4.27
---------- ----------
Non-interest bearing liabilities........... 694 908 760
---------- ---------- ---------
Total liabilities.......................... 70,366 65,306 54,519
Equity..................................... 5,958 5,923 5,667
---------- ---------- ---------
Total liabilities and equity............... $ 76,324 $ 71,229 $ 60,186
========== ========== =========
Net interest income........................ $ 2,951 $ 2,655
========== ==========
Net interest rate spread (1)............... 3.98% 4,19% 4.41%
==== ==== ====
Net interest\dividend earning assets....... $ 2,986 3,307
========== =========
Net interest margin (2).................... 4.38% 4.65%
==== ====
Average interest-earning assets to
average interest-bearing liabilities..... 104.64% 106.15%
========= =========
</TABLE>
- --------------------
(1) Net interest rate spread represents the difference between the average yield
on interest-earning assets and the average rate on interest-bearing
liabilities.
(2) Net interest margin represents net interest income divided by average
interest-earning assets.
20
<PAGE>
Rate/Volume Analysis
The following table sets forth certain information regarding changes in
interest income and interest expense of the Association for the periods
indicated. For each category of interest-earning asset and interest-bearing
liability, information is provided on changes attributable to: (i) changes in
volume (changes in volume multiplied by old rate); (ii) changes in rate (changes
in rate multiplied by old volume); and (iii) changes in rate/volume (changes in
rate multiplied by changes in volume).
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
--------------------------------------- ---------------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
--------------------------------------- ---------------------------------------
Rate/ Rate/
Volume Rate Volume Total Volume Rate Volume Total
------ ---- ------ ----- ------ ---- ------ -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits ................ $ 66 $ (8) $ (13) $ 45 $ (8) $ -- $ -- $ (8)
Investments .............................. (118) (40) 8 (150) (82) 81 (12) (13)
Loans .................................... 1,033 (90) (21) 922 837 176 45 1,058
------- ------- ------- ------- ------- ------- ------- -------
Total interest-earning assets .......... 981 (138) (26) 817 747 257 33 1,037
------- ------- ------- ------- ------- ------- ------- -------
Interest-bearing liabilities:
Deposits ................................. 221 (9) (1) 211 125 282 23 430
FHLB advances ............................ 321 (6) (5) 310 273 (3) (11) 259
------- ------- ------- ------- ------- ------- ------- -------
Total interest-bearing liabilities .... 542 (15) (6) 521 398 279 12 689
------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) in net interest
income ................................. $ 439 $ (123) $ (20) $ 296 $ 349 $ (22) $ 21 $ 348
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
21
<PAGE>
Comparison of Financial Condition at June 30, 1997 and June 30, 1996
The Association's total assets increased by $13.1 million from $63.2
million at June 30, 1996 to $76.3 million at June 30, 1997, with $13.0 million
of the increase reported in loans receivable. The Association's market area is
experiencing favorable population growth, resulting in increasing loan demand.
The allowance for loan losses totaled $604,000 and $411,000 at June 30,
1997. and 1996. The loans charged off, net of recoveries, during the years ended
June 30, 1997 and 1996 amounted to $89,000 and $53,000. At June 30, 1997, the
ratio of the allowance for loan losses to net loans was .96%. as compared to
.82% at June 30, 1996. The increase in the ratio is attributed to loan growth,
and additional allowances established due to the increase in consumer,
commercial real estate, commercial business and land development loans.
At June 30, 1997 the Association's investment portfolio consisted of
mortgage-backed securities and Federal Home Loan Bank stock. The mortgage-backed
securities were reported as securities held-to-maturity, carried at amortized
cost of $5.3 million, with an estimated fair value of $5.4 million. The Federal
Home Loan Bank stock is carried at cost which is assumed to be equal to its
market value, based on the fact the stock is only redeemable at par from the
FHLB or another member institution. During the year ended June 30, 1997, the
FHLB declared a stock dividend of $42,000.
The Association completed construction of two new buildings located at
the Association's two branch sites. The cost of the buildings and related
equipment was approximately $1.3 million.
At June 30, 1997 deposits had increased to $56.2 million, from $49.5
million at June 30, 1996 or a net increase of 13.5%. Part of the increase is
attributed to the new branch building in Buena Vista, Colorado, and increased
activity in the Association's market area.
Certificates of deposit at June 30, 1997 and 1996 included
approximately $8.7 million and $9.2 million of deposits with balances of
$100,000 or more. Such time deposits may be risky because their continued
presence in the Association is dependent partially upon the rates paid by the
Association rather than any customer relationship and, therefore, may be
withdrawn upon maturity if another institution offers higher interest rates. The
Association may be required to resort to other funding sources such as borrowing
or sales of its securities if the Association believes that increasing its rates
to maintain such deposits would adversely affect its operating results. At this
time, the Association does not believe that it will need to significantly
increase its deposit rates to maintain such certificates of deposit, and
therefore, does not anticipate resorting to alternative funding sources.
Advances from the FHLB went from $7.2 million as of June 30, 1996 to
$13.5 million as of June 30, 1997. The increase was used to fund the growth in
loans originated during the year.
Accounts payable and other liabilities increased by approximately
$230,000 for the year ended June 30, 1997, due to the implementation of certain
benefit plans.
Comparison of Operating Results for the Year Ended June 30, 1997 to the Year
Ended June 30, 1996
Net Income. The Association's net income for the year ended June 30,
1997 was $44,000 compared to $519,000 for the year ended June 30, 1996. The
decrease for 1997 is attributed to the special SAIF assessment of $297,000, the
adoption of certain benefit plans resulting in a one-time charge of $237,000,
and an increase in the provision for losses on loans of approximately $223,000,
which was offset by an increase in net interest income of approximately
$296,000.
Interest Income. Interest income increased by $817,000 from $5.0
million to $5.8 million or by 16.5%, during fiscal 1997. This change resulted in
part from an overall increase of average interest-earning assets by $10.3
million from $57.1 million to $67.4 million or by 18.1% from fiscal 1996 to
fiscal 1997. The Association experienced a decrease in the average yield on the
interest-earning assets from 8.67% for fiscal 1996 to 8.55% for fiscal 1997.
22
<PAGE>
Although loans were made at lower rates during fiscal 1997, it provided the
Association with a competitive product that lead to growth in residential and
other lending and earned a comparatively higher yield than short-term
investments.
Interest Expense. Interest expense increased $521,000 or 22.7% to $2.8
million for the year ended June 30 1997 from $2.3 million for the year ended
June 30, 1996. For the year ended June 30, 1997, the average cost of deposits
was 4.04%., compared to 4.06% for the year ended June 30, 1996. The interest
expense for FHLB advances increased from $326,000 for the year ended June 30,
1996, to $634,000 for the year ended June 30, 1997. The increase is attributable
to increased borrowings of $6.4 million.
Provision for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and the general economy. Such evaluation
considers numerous factors including, general economic conditions, loan
portfolio composition, prior loss experience, the estimated fair value of the
underlying collateral and other factors that warrant recognition in providing
for an adequate loan loss allowance.
The provision for loan losses increased approximately $223,000 or 378%
to $282,000 for the year ended June 30, 1997 from $59,000 for the year ended
June 30, 1996. The increase in the provision for loan losses was the result of
the increase in the Association's loan portfolio, including significant
increases in: one- to four-family loans of $8.4 million; land development loans
of $900,000; consumer loans (primarily auto loans) of $1.7 million; and
commercial business loans of $2.0 million. Consumer, commercial business, and
land development loans are generally considered to involve a higher degree of
credit risk than one- to four-family residential mortgage loans. See "Risk
Factors -- Risks Posed by Certain Lending Activities" and "Business of the
Association."
Noninterest Expense. Noninterest expense increased by $939,000 or 51.7%
to $2.76 million for the year ended June 30, 1997 from $1.82 million for the
year ended June 30, 1996. Compensation and benefits expenses increased by
$476,000 or 54.8% to $1.34 million at June 30, 1997 from $869,000 at June 30,
1996. The increase in compensation and benefits expenses at June 30, 1997 was
primarily the result of newly implemented benefit plans. Occupancy and equipment
expense increased by $126,000 or 35.3%, to $482,000 at June 30, 1997 from
$356,000 at June 30, 1996. The increase in occupancy and equipment expense was
the result of the new branch office facilities in Leadville and Buena Vista.
Pursuant to the Economic Growth and Paperwork Reduction Act of 1996 (the "Act"),
the FDIC imposed a special assessment on SAIF members to capitalize the SAIF at
the designated reserve level of 1.25% as of October 31, 1996. Based on the
Association's deposits as of March 31, 1995, the date for measuring the amount
of the special assessment pursuant to the Act, the Association's special
assessment was $297,000. The assessment rate for the SAIF special assessment was
65.7 basis points, compared to 23 basis points for the regular assessment for
the six months ended September 30, 1996, and 6.48 basis points for the regular
assessment for the last two quarters of fiscal 1997.
Income Taxes. The Association's effective tax rate for the years ended June
30, 1997 and 1996 was 20% and 44%, respectively. The change was due to rates
used for the higher income level and State credits that were available.
Liquidity and Capital Resources
Following the completion of the Conversion, the Company initially will
have no business other than that of the Converted Association and investing the
net proceeds retained by it. Management believes that the net proceeds to be
retained by the Company, earnings on such proceeds and principal and interest
payments on the ESOP loan, together with dividends that may be paid from the
Converted Association to the Company following the conversion, will provide
sufficient funds for its initial operations and liquidity needs; however, no
assurance can be given that the Company will not have a need for additional
funds in the future. The Converted Association will be subject to certain
regulatory limitations with respect to the payment of dividends to the Company.
See "Dividend Policy " and "Regulation Depository Institution Regulation -
Dividend Restrictions." The Company intends to lend a portion of the net
proceeds retained from the Conversion to the ESOP to permit its purchase of
Common Stock in the Conversion. See "Use of Proceeds."
23
<PAGE>
At June 30, 1997, the Association exceeded all regulatory minimum
capital requirements. For a detailed discussion of the OTS regulatory capital
requirements, and for a tabular presentation of the Association's compliance
with such requirements, see "Regulation - Depository Institution Regulation -
Capital Requirements," and Note 11 of Notes to Financial Statements.
The Association's primary sources of funds consists of deposits,
repayment of loans and mortgage-backed securities, maturities of investments and
interest-bearing deposits, and funds provided from operations. While scheduled
repayments of loans and mortgage-backed securities and maturities of investment
securities are predicable sources of funds, deposit flows and loan prepayments
are greatly influenced by the general level of interest rates, economic
conditions and competition. The Association uses its liquidity resources
principally to fund existing and future loan commitments, to fund maturing
certificates of deposit and demand deposit withdrawals, to invest in other
interest-earning assets, to maintain liquidity, and to meet operating expenses.
Management believes that loan repayments and other sources of funds will be
adequate to meet the Association's liquidity needs for the immediate future.
The Association is required to maintain minimum levels of liquid assets
as defined by OTS regulations. This requirement, which may be varied at the
direction of the OTS depending upon economic conditions and deposit flows, is
based upon a percentage of deposits and short-term borrowings. The required
minimum ratio is currently 5%. The Association has historically maintained a
level of liquid assets in excess of regulatory requirements. The Association's
liquidity ratios at June 30, 1997 and 1996 were 5.51% and 6.90%, respectively.
The Association's liquidity ratios at June 30, 1997 and 1996 were reflective of
the demand for new loans.
A major portion of the Association's liquidity consists of cash and
cash equivalents, which include investments in highly liquid, short-term
deposits. The level of these assets is dependent on the Association's operating,
investing, lending and financing activities during any given period. At June 30,
1997, cash and cash equivalents totaled $3.3 million.
The primary investing activities of the Association include origination
of loans and purchase of investment securities. During the year ended June 30,
1997 loan originations totaled $36.4 million. These originations were funded in
part by loan and mortgage-backed prepayments, deposit growth, and by advances
from the FHLB.
Liquidity management is both a daily and long-term function of business
management. If the Association requires funds beyond its ability to generate
them internally, the Association borrows funds from the FHLB. At June 30, 1997,
the Association had outstanding advances from the FHLB of $13.5 million.
At June 30, 1997, the Association had $740,000 in outstanding
commitments to originate loans. The Association anticipates that it will have
sufficient funds available to meet its current loan origination commitments.
Certificates of deposit which are scheduled to mature in one year or less
totaled $25.3 million at June 30, 1997. Based on historical experience,
management believes that a significant portion of such deposits will remain with
the Association.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and results of operations in terms
of historical dollars without considering changes in the relative purchasing
power of money over time because of inflation. Unlike most industrial companies,
virtually all of the assets and liabilities of the Association are monetary in
nature. As a result, interest rates have a more significant impact on the
Association's performance than the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the extent as
the price of goods and services.
Impact of New Accounting Standards
Accounting for ESOP. The Accounting Standards Division of the American
Institute of Certified Public Accountants approved Statement of Position ("SOP")
93-6, "Employers' Accounting for Employee Stock Ownership
24
<PAGE>
Plans," which is effective for fiscal years beginning after December 15, 1993.
SOP 93-6 changed, among other things, the measure of compensation recorded by
employers from the cost of ESOP shares to the fair value of ESOP shares. To the
extent that the fair value of the common stock held by the ESOP that are
committed to be released directly to compensate employees, differs from the cost
of such shares, compensation expenses and a related charge or credit to
additional paid-in capital will be reported in the Association's financial
statements. The adoption of the ESOP by the Association and the application of
SOP 93-6 is likely to result in fluctuations in compensation expense as a result
of changes in the fair value of the common stock. However, any such compensation
expense fluctuations will result in an offsetting adjustment to paid-in capital,
and therefore, total capital will not be affected.
Disclosure of Derivative Financial Instruments. In October, 1994, the
Financial Accounting Standards Board ("FASB) issued SFAS No. 119 "Disclosure
about Derivative Financial Instruments and Fair Value of Financial Instruments."
This statement addresses the disclosure of derivative financial instruments
including the face amount, nature and terms. For derivatives held for trading,
disclosure of objectives, strategies, policies on reporting and income
recognition method is required. This statement is effective for financial
statements for fiscal years ending after December 15, 1995. Currently the
Association does not own any derivative financial instruments and therefore SFAS
No. 119 does not have any impact on the financial statements.
Accounting for Stock-Based Compensation. In October, 1995, the
Financial Accounting Standards Board issued SFAS No. 123, "Accounting for
Stock-Based Compensation to Employees." This statement encourages entities to
adopt the fair value based method of accounting for employee stock options or
other stock compensation plans. However, it allows an entity to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Under the fair value based method, compensation cost is measured at
the grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. Under the intrinsic value
based method, compensation cost is the excess of the quoted market price of the
stock at the grant date over the amount an employee must pay to acquire the
stock. Most fixed stock option plans - the most common type of stock
compensation plan - have no intrinsic value at grant date and under Opinion No.
25 no compensation cost is recognized for them.
Compensation cost is recognized for other types of stock based
compensation plans under Opinion No. 25, including plans with variable, usually
performance-based features. This Statement requires that an employer's financial
statements include certain disclosures about stock-based employee compensation
arrangements regardless of the method used to account for them. This Statement
is effective for transactions entered into in fiscal years that begin after
December 15, 1995. The Association will adopt the Statement on the date the
Association converts from a federal mutual to a federal stock savings and loan
association. The Association has not determined which method it will use to
account for the options at this time and has not estimated the effect of
adoption on the Association's financial statements.
Earnings Per Share. In March 1997, the Financial Accounting Standards
Board ("FASB") issued Statement No. 128. The Statement establishes standards for
computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. This Statement simplifies
the standards for computing earnings per share and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentations of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. This statement
supersedes Opinion 15 and AICPA Accounting Interpretation 1-102 of Opinion 15.
This statement is effective for financial statements issued for periods ending
after December 15, 1997. Management believes that the impact of adopting SFAS
No. 128 will not be material to the financial statements.
25
<PAGE>
Disclosure of Information about Capital Structure. In February 1997,
the Financial Accounting Standards Board issued Statement No. 129. The Statement
incorporates the disclosure requirements of APB Opinion No. 15, Earnings Per
Share and makes them applicable to all public and nonpublic entities that have
issued securities addressed by the Statement. APB Opinion No. 15 requires
disclosure of descriptive information about securities that is not necessarily
related to the computation of earnings per share.
This statement continues the previous requirements to disclose certain
information about an entity's capital structure found in APB Opinions No. 10,
Omnibus Opinion - 1966, and No. 15, Earnings Per Share, and FASB Statement No.
47, Disclosure of Long-Term Obligations, for entities that were subject to the
requirements of those standards. This Statement eliminates the exemption of
nonpublic entities from certain disclosure requirements of Opinion No. 15 as
provided by FASB Statement No. 21, Suspension of the Reporting of Earnings per
Share and Segment Information by Nonpublic Enterprises. It supersedes specific
disclosure requirements of Opinions 10 and 15 and Statement 47 and consolidates
them in this statement for ease of retrieval and for greater visibility to
nonpublic entities. The Statement is effective for financial statements for
periods ending after December 15, 1997. SFAS No. 129 will be adopted by the
Association after December 15, 1997, the impact of adopting the Statement will
not be material to the financial statements.
Reporting Comprehensive Income. In June 1997, the Financial Accounting
Standards board issued Statement No. 130. The Statement establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains, and losses) in a full set of general-purpose financial
statements. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income to
be reported in a financial statement that is displayed with the same prominence
as other financial statements. This Statement does not require a specific format
for that financial statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that financial
statement.
This Statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.
This Statement is effective for fiscal years beginning after December
15, 1997. FASB Statement No. 130 will be adopted by the Association after
December 15, 1997, the impact of adopting the Statement will not be material to
the financial statements.
Disclosures about Segments of an Enterprise and Related Information. In
June 1997 the Financial Accounting Standards board issued Statement No. 131. The
Statement establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. This Statement supersedes FASB Statement
No. 14, Financial reporting for segments of Business Enterprise, but retains the
requirement to report information about major customers. It amends FASB
Statement No. 94, Consolidation of all Majority-owned Subsidiaries, to remove
the special disclosure requirements for previously unconsolidated subsidiaries.
The Statement requires that a public business enterprise report
financial and descriptive information about its reportable operating segments.
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the
basis that is used internally for evaluating segment performance and deciding
how to allocate resources to segments.
The Statement requires that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and expense items,
and segment assets. It requires reconciliations of total segment revenues, total
segment profit or loss, total segment assets and other amounts disclosed for
segments to corresponding amounts in the enterprise's general-purpose financial
statements. It requires that all public business enterprises report information
about the revenues derived from the enterprise's products or services (or groups
of similar products and services), about the
26
<PAGE>
countries in which the enterprise earns revenues and holds assets, and about
major customers regardless of whether that information is used in making
operating decisions.
The Statement also requires that a public business enterprise report
descriptive information about the way that the operating segments were
determined, the products and services provided by the operating segments,
differences between the measurements used in reporting segment information and
those used in the enterprise's general-purpose financial statements, and changes
in the measurement of segment amounts from period to period.
This Statement is effective for fiscal years beginning after December
15, 1997. FASB Statement No. 131 will be adopted by the Association after
December 15, 1997, the impact of adopting the Statement will not be material to
the financial statements.
BUSINESS OF THE COMPANY
The Company was organized at the direction of the Board of Directors of
the Association in August 1997 for the purpose of becoming a holding company to
own all of the outstanding capital stock of the Association. Upon completion of
the Conversion, the Association will become a wholly owned subsidiary of the
Company. For additional information, see "High Country Bancorp, Inc."
The Company currently is not an operating company. Following the
Conversion, the Company will be engaged primarily in the business of directing,
planning and coordinating the business activities of the Association. In the
future, the Company may become an operating company or acquire or organize other
operating subsidiaries, including other financial institutions, though there are
no current plans in this regard. Initially, the Company will not maintain
offices separate from those of the Association or employ any persons other than
its officers (all of whom are officers of the Association) who will not be
separately compensated for such service.
BUSINESS OF THE ASSOCIATION
General
Historically, the Association's principal business has consisted of
attracting deposits from the general public and investing these funds in loans
secured by first mortgages on owner-occupied, one- to four-family residences in
the Association's market area. Since 1996, the Association has significantly
increased its origination of consumer, commercial business and commercial real
estate loans, including loans for the purchase and development of raw land, all
of which loans have been originated in its market area. These types of loans
carry significantly greater risks than one- to four-family residential real
estate loans. While all of these loans are currently performing, potential
investors should be aware of the additional risks inherent in these types of
loans. For more information, see "Risk Factors--Risks Posed by Certain Lending
Activities."
The Association derives its income principally from interest earned on
loans, as well as interest earned on mortgage-backed securities and other
investments. The Association's principal expenses are interest expense on
deposits and borrowings and noninterest expenses such as compensation and
employee benefits, deposit insurance and other miscellaneous expenses. Funds for
these activities are provided principally by deposits, repayments of outstanding
loans and mortgage-backed securities and operating revenues.
Market Area
The Association's market area for gathering deposits and making loans
is Chaffee, Lake, Western Fremont and Saguache Counties in Colorado, which is
located in central Colorado.
Tourism related businesses are the base of the market area's economy. The
primary employers in the market area are the tourism industry and the
government. As of 1990, the market area had a population of approximately
23,000. Major employers in the area include the Colorado Department of
Corrections, the Heart of the Rockies Medical Center, Asarco mines, local school
districts and governments and Wal Mart. In addition, the area is a frequent
destination for retirees, self-employed individuals and telecommuters who wish
to take advantage of the recreation and
27
<PAGE>
beauty that the Rocky Mountains offer. Major towns (population) in the market
area include Salida (4,737), Buena Vista (1,752) and Leadville (2,659).
Lending Activities
General. The Association's loan portfolio, net, totaled $63.1 million
at June 30, 1997, representing 82.71% of total assets at that date.
Substantially all loans are originated in the market area. At June 30, 1997,
$49.6 million, or 78.57% of the Association's gross loan portfolio consisted of
one- to four-family, residential mortgage loans. Other loans secured by real
estate include commercial real estate loans which amounted to $1.6 million or
2.60% of the gross loan portfolio and land development loans, which amounted to
$2.4 million or 3.79% of the gross loan portfolio at June 30, 1997. The
Association also originates consumer loans, most of which are automobile loans,
and commercial business loans. At June 30, 1997, consumer loans totaled $6.5
million, or 10.26% of the gross loan portfolio, and commercial business loans
totaled $4.3 million or 6.79% of the gross loan portfolio.
Analysis of Loan Portfolio
Set forth below is selected data relating to the composition of the
Association's loan portfolio by type of loan at the dates indicated. At June 30,
1997, the Association had no concentrations of loans exceeding 10% of total
loans other than as disclosed below.
<TABLE>
<CAPTION>
At June 30,
--------------------------------------------------------
1997 1996
----------------------------- ------------------------
Amount % Amount %
------ ----- ------ -----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage Loans:
One- to four-family..................................... $ 46,510 73.68% $ 38,704 77.29%
Commercial.............................................. 1,644 2.60 1,381 2.76
Construction............................................ 3,092 4.90 2,544 5.08
Land development........................................ 2,390 3.79 1,500 3.00
---------- ------- --------- -------
Total mortgage loans................................. 53,636 84.97 44,129 88.12
---------- ------- --------- -------
Consumer loans............................................ 6,476 10.26 4,770 9.53
Loans on savings accounts................................. 765 1.21 824 1.65
Commercial loans.......................................... 4,287 6.79 2,285 4.56
Other loans............................................... 98 0.16 92 0.18
---------- ------- --------- -------
Total loans............................................... 65,262 103.38 52,100 104.04
---------- ------- --------- -------
Less:
Undisbursed loans in process............................ 1,123 1.78 1,247 2.49
Deferred fees and discounts............................ 408 0.65 366 0.73
Allowance for losses.................................... 604 0.96 411 0.82
---------- ------- --------- -------
Loan portfolio, net....................................... $ 63,127 100.00% $ 50,076 100.00%
========== ======= ========= =======
</TABLE>
28
<PAGE>
Loan Maturity Schedule
The following table sets forth certain information at June 30, 1997
regarding the dollar amount of loans maturing in the Association's portfolio
based on their contractual terms to maturity. Demand loans, loans having no
stated schedule of repayments and no stated maturity, and overdrafts are
reported as due in one year or less.
<TABLE>
<CAPTION>
Three Three to One to Three to Five to Over
Months Twelve Months Three Years Five Years Ten Years Ten Years Total
------ ------------- ----------- ---------- --------- --------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans ................... $ 4,934 $ 8,340 $ 1,322 $ 2,222 $ 6,929 $28,783 $52,530
Commercial loans ................. 1,436 1,543 600 1,127 250 -- 4,956
Consumer loans ................... 232 941 2,022 3,214 244 -- 6,653
------- ------- ------- ------- ------- ------- -------
Total ....................... $ 6,602 $10,824 $ 3,944 $ 6,563 $ 7,423 $28,783 $64,139
======= ======= ======= ======= ======= ======= =======
</TABLE>
The next table sets forth at June 30, 1997, the dollar amount of all loans
which have predetermined interest rates and have floating or adjustable interest
rates.
<TABLE>
<CAPTION>
Predetermined Floating or
Rate Adjustable Rates
----------- ----------------
(In thousands)
<S> <C> <C>
Mortgage loans
One- to four-family .................... $ 42,986 $ 5,510
Non-residential ........................ 3,278 756
Commercial ................................. 4,956 --
Consumer ................................... 6,653 --
--------- ---------
Total .............................. $ 57,873 $ 6,266
========= =========
</TABLE>
29
<PAGE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of loans is substantially less than
their contractual terms because of prepayments. In addition, due-on-sale clauses
on loans generally give the Association the right to declare a loan immediately
due and payable in the event, among other things, that the borrower sells the
real property subject to the mortgage and the loan is not repaid. The average
life of mortgage loans tends to increase when current mortgage loan market rates
are substantially higher than rates on existing mortgage loans and, conversely,
decrease when current mortgage loan market rates are substantially lower than
rates on existing mortgage loans.
One-to Four-Family Real Estate Loans. The Association's primary
lending activity consists of the origination of loans secured by owner-occupied,
one- to four-family residential properties located in its primary market area.
At June 30, 1997, $49.6 million, or 78.57%, of the Association's loan portfolio
consisted of loans secured by one- to four-family residential properties, of
which $5.5 million or 11.09% carried adjustable interest rates. The Association
estimates that the average size of the residential mortgages that it currently
originates is $85,000.
The Association originates both fixed-rate mortgage loans and
adjustable-rate mortgage loans ("ARMs"). Due to customer preferences for
fixed-rate loans, the Association has had difficulty originating a large volume
of ARMs in recent years. Most fixed-rate mortgage loans are originated for terms
of 15 or 25 years. ARMs are originated for terms of up to 25 years. The
Association's ARMs have interest rates that adjust every one year, with a
maximum adjustment of two percentage points for any adjustment period and up to
six percentage points over the life of the loan. These loans are indexed to the
rate on one-year U.S. Treasury securities, adjusted to a constant maturity. The
current margin is two and one-half percentage points. Historically, all loans
originated by the Association have been retained in the Association's loan
portfolio. However, in June 1997 and June, 1996, the Association sold two large
blocks of fixed-rate loans of $3.9 million and $5.8 million, respectively, in
order to manage interest rate risk. In future years, the Association may
increase its origination and sale of mortgage loans, while retaining the
servicing of such loans to generate fee income.
The Association's lending policies generally limit the maximum
loan-to-value ratio on residential mortgage loans to a maximum of 80% of the
lesser of the appraised value of the underlying property or its purchase price.
For those few loans where the loan-to-value ratio exceeds 80%, the Association
requires private mortgage insurance. Originated loans in the Association's
portfolio include due-on-sale clauses which provide the Association with the
contractual right to deem the loan immediately due and payable in the event that
the borrower transfers ownership of the property without the Association's
consent.
The retention of ARMs in portfolio helps reduce the Association's
exposure to increases in interest rates. There are, however, unquantifiable
credit risks resulting from potential increased costs to the borrower as a
result of upward repricing of ARMs. It is possible that during periods of rising
interest rates, the risk of default on ARMs may increase due to the upward
adjustment of interest costs to the borrower. The Association does not originate
ARM loans which provide for negative amortization. Although ARMs allow the
Association to increase the sensitivity of its asset base to changes in interest
rates, the extent of this interest sensitivity is limited by the periodic and
lifetime interest rate ceilings contained in ARM contracts. In addition, since
ARM interest rates can be adjusted no more frequently than annually, the yield
on the Association's ARM portfolio does not adjust as rapidly as market interest
rates. Accordingly, there can be no assurance that yields on the Association's
ARMs will adjust sufficiently to compensate for increases in its cost of funds.
The Association also originates second mortgage loans primarily for its
existing one-to four-family first mortgage customers. At June 30, 1997, $4.6
million or 7.22% of the Association's loan portfolio consisted of second
mortgage loans and home equity lines of credit. Second mortgage loans are
generally underwritten on a fixed-rate basis with terms of up to 15 years and
are fully amortizing over the term of the loan. Second mortgages are generally
subject to an 80% combined loan-to-value limitation, including all other
outstanding mortgages or liens.
Construction Loans. The Association offers construction financing to
qualified borrowers for construction primarily of single-family residential
properties and to qualified developers for construction of small residential
developments. The Association provides financing to one builder for the
construction of no more than four homes at
30
<PAGE>
a time. Construction loans are generally limited to a maximum loan-to-value
ratio of 75% of the appraised value of the property on an "as-completed" basis.
The Association attempts to structure its residential construction loans so that
they convert to a permanent loan, although this is not necessarily the case.
Loans to finance the construction of residential property on a speculative basis
are offered on a fixed-rate basis only, with the rate indexed to the prime rate
plus a negotiated increment. The Association limits the origination of
construction loans to borrowers and developers with whom the Association has had
substantial prior experience due to the significant time and other requirements
associated with originating and monitoring construction loans.
Loan proceeds are disbursed during the construction phase (a maximum of
12 months) according to a draw schedule based on the stage of completion.
Construction loans are underwritten on the basis of the estimated value of the
property as completed and loan-to-value ratios must conform to the requirements
for the permanent loan. At June 30, 1997, $4.0 million, or 6.14% of the
Association's gross loan portfolio consisted of construction loans to fund the
construction of one- to four-family properties. The Association had an
additional $200,000, or .31% of the Association's gross loan portfolio, in loans
to finance the construction of commercial properties at June 30, 1997.
Approximately 95% of all construction loans originated by the Association
convert into permanent loans upon completion of the construction phase.
Construction financing generally is considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of construction cost proves to be
inaccurate, the Association may be required to advance funds beyond the amount
originally committed to permit completion of the development. If the estimate of
the value proves to be inaccurate, the Association may be confronted, at or
prior to the maturity of the loan, with a project having a value which is
insufficient to assure full repayment. The ability of a developer to sell
developed lots or completed dwelling units will depend on, among other things,
demand, pricing, availability of comparable properties and economic conditions.
The Association has sought to minimize this risk by limiting construction
lending to qualified borrowers in the Association's market area, limiting the
aggregate amount of outstanding construction loans and imposing a stricter
loan-to-value ratio requirement than required for one- to four-family mortgage
loans.
Land Development Loans. The Association originates land loans to local
developers for the purpose of developing the land (i.e., roads, sewer and water)
for sale, and loans secured by raw land, such as cattle ranching acreage. Such
loans are secured by a lien on the property, are generally limited to 70% of the
developed value of the secured property and are typically made for a period of
one-year, renewable based on negotiations with the Association. Most land
development loans are expected to be fully paid off five years after the
original date of the loan. The Association generally requires semi-annual
interest payments during the term of the land loan. The amount of funds
available under the Association's land loans usually include an amount from
which the borrower can pay the stated interest due thereon until completion of
the loan term. The principal of the loan is reduced as lots are developed, sold
and released. All of the Association's land loans are secured by property
located in its primary market area. In addition, the Association obtains
personal guarantees from its borrowers and originates such loans to developers
with whom it has established relationships. At June 30, 1997, the Association
had $2.4 million of land development loans, which constituted 3.79% of the gross
loan portfolio at such date. This total includes three loans of $545,000,
$417,0000 and $413,000, respectively, which are three of the Association's four
largest loans (the motel loan described below is the fourth). The Association
originated $1.8 million and $1.6 million in land development loans during fiscal
1997 and fiscal 1996, respectively. Land development loans generally involve a
higher degree of risk than residential mortgage lending in that there are large
loan balances to single borrowers, and the initial estimate of the property
value at completion may be inaccurate due to market variations and the
difficulty in selling lots for home building. The success of such land
development projects is sensitive to changes in supply and demand conditions in
the local housing market, as well as regional and economic conditions generally.
Although the Association has attempted to reduce these risks, as noted above,
potential investors should be aware of these factors in making their investment
decision. See "Risk Factors -- Risks Posed by Certain Lending Activities."
31
<PAGE>
Commercial Real Estate Loans. At June 30, 1997, loans secured by
commercial real estate properties totaled $1.6 million, and represented 2.60% of
the Association's loan portfolio. Commercial real estate loans are secured by
motels, small office buildings and retail stores and other non-residential
property. Some of the Association's commercial real estate loans are made to
local businesses connected to the tourism and recreational rafting industries,
which predominate in the Association's primary market area. At June 30, 1997,
the Association's largest outstanding commercial real estate loan was a $427,000
loan secured by a motel in Salida, Colorado. Substantially all of the
Association's commercial real estate loans are secured by property located
within the Association's market area and were current and performing at June 30,
1997.
Commercial real estate loans generally have terms of up to 10 years and
are underwritten on either a fixed or adjustable-rate basis. Commercial real
estate loans have a maximum 20-year amortizing, although the term of the loan
may be a fixed ten-year balloon loan. Adjustable-rate commercial and
multi-family mortgages are indexed to the prime rate and adjust on an annual
basis. Loan-to-value ratios may not exceed 70% of the appraised value of the
underlying property. It is the Association's policy to obtain personal
guarantees from all principals obtaining commercial real estate loans. In
assessing the value of such guarantees, the Association reviews the individuals'
personal financial statements, credit reports, tax returns and other financial
information.
Commercial real estate lending entails significant additional risks
compared to residential property lending. These loans typically involve large
loan balances to single borrowers or groups of related borrowers. The payment
experience on such loans typically is dependent on the successful operation of
the real estate project or business. These risks can be significantly affected
by business conditions and by supply and demand conditions in the market for
office and retail space, and, as such, may be subject to a greater extent to
adverse conditions in the economy generally. To minimize these risks, the
Association generally limits this type of lending to its market area and to
borrowers with which it has substantial experience or who are otherwise well
known to management.
With certain limited exceptions, the maximum amount that the
Association may lend to any borrower (including certain related entities of the
borrower) at any one time may not exceed 15% of the unimpaired capital and
surplus of the institution, plus an additional 10% of unimpaired capital and
surplus for loans fully secured by readily marketable collateral. At June 30,
1997, the maximum amount that the Association could have loaned to any one
borrower without prior OTS approval was $983,000. At June 30, 1997, the largest
aggregate amount of loans that the Association had outstanding to any one
borrower and their related interests was $930,000 and consisted of ten loans
including two loans of $300,000 and $350,000, both secured by cattle ranching
properties. The largest single commercial loan outstanding was a $427,000 loan
secured by a motel discussed above.
Commercial Business Loans. At June 30, 1997, the Association had $4.3
million in commercial business loans which represented 6.79% of the
Association's gross loan portfolio. The Association is permitted to invest up to
20% of its assets in commercial loans. The Association's commercial business
lending activities are directed towards small businesses located in its market
area, including those connected to the tourism industry, such as recreational
vehicle ("RV") dealers, rafting companies and other tourist-related businesses.
Generally, the Association's commercial business loans are secured by assets
such as inventory, equipment or other assets and are guaranteed by the
principals of the business. From time to time, the Association has engaged in
dealer floor-plan lending with a limited number of dealerships with which the
Association has had substantial experience. Commercial business loans usually
carry a fixed rate and generally are underwritten for a maximum of five years.
The Association underwrites its commercial business loans on the basis
of the borrower's cash flow and ability to service the debt from earnings rather
than on the basis of the underlying collateral value, and seeks to structure
such loans to have more than one source of repayment. The borrower is required
to provide the Association with sufficient information to allow the Association
to make its lending determination. In most instances, this information consists
of at least three years of financial statements, a statement of projected cash
flows, current financial information on any guarantor and any additional
information on the collateral. For information regarding the risks associated
with commercial lending, see "Risk Factors -- Risks Associated with Certain
Lending Activities."
32
<PAGE>
Consumer Loans. The Association's consumer loans, which totaled $7.3
million or 11.25% of the gross loan portfolio at June 30, 1997, includes
primarily loans secured by deposit accounts, automobile loans and other personal
loans, which represented 1.21%, 8.62%, and 1.80% of its total loan portfolio,
respectively, at June 30, 1997. The Association also makes RV and boat loans,
tractor loans and home improvement loans pursuant to its consumer lending
authority. The Association has recently emphasized consumer lending because of
the higher yields and shorter-terms of such loans.
The Association makes deposit account loans up to 95% of the
depositor's account balance. The interest rate is normally 2.0% above the rate
paid on the account and the account must be pledged as collateral to secure the
loan. Savings account loans are secured by demand notes and interest is due on a
quarterly basis. The Association's automobile loans are generally underwritten
in amount up to the purchase price of the automobile or the trading-in value as
published by the National Automobile Dealers Association. The terms of such
loans generally do not exceed 60 months and vary depending on the age of the
vehicle securing the loan. The Association requires the borrower to insure the
automobile under a policy listing the Association as loss payee. The Association
also makes unsecured personal loans of up to $10,000. The terms of such loans do
not exceed 12 months.
Since fiscal 1995, the Association has increased its consumer lending
by hiring a consumer loan officer. The Association intends to continue to
emphasize the origination of consumer loans, especially automobile loans.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciable assets such as automobiles, RVs, boats and tractors. In such
cases, any repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation. The remaining deficiency
often does not warrant further substantial collection efforts against the
borrower. In addition, consumer loan collections are dependent on the borrower's
continuing financial stability, and thus are more likely to be adversely
affected by job loss, divorce, illness or personal bankruptcy. Furthermore, the
application of various federal and state laws, including federal and state
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans. Such loans may also give rise to claims and defenses by a consumer
loan borrower against an assignee of such loans such as the Association, and a
borrower may be able to assert against such assignee claims and defenses which
it has against the seller of the underlying collateral.
Loan Solicitation and Processing. The Association's mortgage loans have
generally been originated by its loan officers, branch managers and senior
management officials. Loan originations are obtained from a number of sources,
including existing and past customers, members of the local community and
established builders and realtors within the Association's market area. Upon
receipt of a loan application from a prospective borrower, the Association
reviews the information provided and makes an initial determination as to
whether certain basic underwriting standards regarding the type of property,
debt-to-income ratios and other credit concerns are satisfied. A credit report
and employment and other verifications are obtained to verify certain specific
information relating to the loan applicant's employment, income and credit
standing. For real estate loans, an appraisal of the property intended to secure
the loan is undertaken by an independent appraiser approved by the Association.
It is the Association's policy to obtain appropriate insurance protection on all
real estate first mortgage loans and to obtain a lawyer's opinion of title which
insures that the property is free of prior encumbrances. The borrower must also
obtain paid flood insurance when the property is located in a flood plain as
designated by the Federal Government. It is the Association's policy to record a
lien on the real estate securing the loan. Borrowers generally are required to
advance funds for certain items such as real estate taxes, flood insurance and
private mortgage insurance, when applicable.
Secured loans in amounts of up to $200,000 may be approved by two
members of the Association's loan committee. All loans in excess of $200,000
must be approved by the Board of Directors. Branch Managers may approve consumer
loans of up to $10,000, or up to $20,000 with the approval of the consumer loan
officer. Consumer loans of $20,000 to $100,000 may be approved by two members of
the loan committee, while consumer loans over $100,000 must be approved by the
full Board of Directors. Commercial loans of up to $100,000 may be approved by
two members of the loan committee, while such loans over $100,000 to $200,000
are approved by two loan committee members and one outside Director and loans of
$200,000 or over go to the full Board.
33
<PAGE>
Loan applicants are promptly notified in writing of the Association's
decision. If the loan is approved, the notification will provide that the
Association's commitment will generally terminate within 30 days of the
approval. It has been the Association's experience that substantially all
approved loans are funded.
Loan Originations, Purchases and Sales. Most loans originated by the
Association are intended to be held in the Association's portfolio until
maturity. The Association is a qualified seller/servicer for the Federal Home
Loan Mortgage Corporation ("FHLMC"). The Association uses FHLMC documentation
for its residential mortgages, and most of the loans in its portfolio would
generally qualify for sale to FHLMC under standard programs. The Association,
however, has selectively sold blocks of loans when appropriate for
asset/liability management purposes. In June 1997 and June 1996, the Association
sold $3.9 million and $5.8 million, respectively, in fixed-rate loans to FHLMC
for this reason.
The following table sets forth certain information with respect to the
Association's loan origination activity for the periods indicated. The
Association has not purchased any loans in the periods presented.
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------
1997 1996
---------- ----------
(In thousands)
<S> <C> <C>
Net loans, beginning of period................................. $ 50,076 $ 41,537
Origination by type:
- -------------------
Mortgage loans:
One- to four-family......................................... $ 19,174 $ 18,973
Commercial.................................................. 981 1,898
Land development............................................ 1,813 1,641
Consumer loans................................................. 9,179 6,323
Loans on savings accounts...................................... 604 694
Commercial loans............................................... 4,669 2,906
--------- ---------
Total loans originated.................................... 36,420 32,435
--------- ---------
Loans sold..................................................... 3,968 5,777
--------- ---------
Repayments..................................................... 19,636 18,092
--------- ---------
Decrease (increase) in other items, net........................ 235 (27)
--------- ---------
Net increase (decrease) in loans receivable, net.......... 13,051 8,539
--------- ---------
Net loans, end of period....................................... $ 63,127 $ 50,076
========= =========
</TABLE>
Nonperforming Loans and Other Problem Assets. It is management's policy to
continually monitor its loan portfolio to anticipate and address potential and
actual delinquencies. When a borrower fails to make a payment on a loan, the
Association takes immediate steps to have the delinquency cured and the loan
restored to current status. Loans which are delinquent 15 days incur a late fee
of 5.0% of principal and interest due. As a matter of policy, the Association
will contact the borrower after the loan has been delinquent 30 days. If payment
is not promptly received, the borrower is contacted again, and efforts are made
to formulate an affirmative plan to cure the delinquency. Generally, after any
loan is delinquent 90 days or more, formal legal proceedings are commenced to
collect amounts owed. Loans are placed on nonaccrual status if the loan becomes
past due more than 90 days unless such loans are well-secured and in the process
of collection. Loans are charged off when management concludes that they are
uncollectible. See Note 1 of Notes to Financial Statements.
34
<PAGE>
Real estate acquired by the Association as a result of foreclosure is
classified as real estate acquired through foreclosure until such time as it is
sold. When such property is acquired, it is initially recorded at estimated fair
value and subsequently at the lower of book value or fair value, less estimated
costs to sell. Costs relating to holding such real estate are charged against
income in the current period, while costs relating to improving such real estate
are capitalized until a saleable condition is reached. Any required write-down
of the loan to its fair value less estimated selling costs upon foreclosure is
charged against the allowance for loan losses. See Note 1 of Notes to Financial
Statements.
The following table sets forth information with respect to the
Association's nonperforming assets at the dates indicated. Further, no loans
were recorded as restructured loans within the meaning of SFAS No. 15 at the
dates indicated.
<TABLE>
<CAPTION>
At June 30,
---------------------------
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
Loans accounted for on a non-accrual basis: (1)
Real estate:
One-to four-family......................................... $ -- $ --
Commercial................................................. -- --
Land development........................................... -- --
Consumer....................................................... 137 73
Commercial..................................................... 3 --
Other.......................................................... -- --
-------- --------
Total.................................................. 140 73
-------- --------
Accruing loans delinquent 90 days or more:
Real estate:
One-to four-family......................................... $ -- $ --
Commercial................................................. -- --
Land development........................................... -- --
Consumer..................................................... -- --
Commercial..................................................... -- --
Other.......................................................... -- --
-------- --------
Total.................................................. -- --
-------- --------
Total nonperforming loans.......................... 140 73
-------- --------
Repossed assets................................................ 35 --
-------- --------
Total non-performing assets.................................... $ 175 $ 73
======== ========
Total non-performing loans as a
percentage of total net loans................................ 0.22% 0.15%
======== ========
Total non-performing assets as a
percentage of total assets................................... 0.23% 0.12%
======== ========
</TABLE>
At June 30, 1997, the Association had $140,000 in loans outstanding that
were classified as non-accrual, of which $137,000 were consumer loans, including
$77,000 in automobile loans. At that date, the Association had no loans
outstanding that were not classified as non-accrual, 90 days past due or
restructured, but as to which known information about possible credit problems
of borrowers caused management to have serious concerns as to the ability of the
borrowers to comply with present loan repayment terms and may result in
disclosure as non-accrual, 90 days past due or restructured.
35
<PAGE>
Federal regulations require savings institutions to classify their
assets on the basis of quality on a regular basis. An asset meeting one of the
classification definitions set forth below may be classified and still be a
performing loan. An asset is classified as substandard if it is determined to be
inadequately protected by the current retained earnings and paying capacity of
the obligor or of the collateral pledged, if any. An asset is classified as
doubtful if full collection is highly questionable or improbable. An asset is
classified as loss if it is considered uncollectible, even if a partial recovery
could be expected in the future. The regulations also provide for a special
mention designation, described as assets which do not currently expose a savings
institution to a sufficient degree of risk to warrant classification but do
possess credit deficiencies or potential weaknesses deserving management's close
attention. Such assets designated as special mention may include nonperforming
loans consistent with the above definition. Assets classified as substandard or
doubtful require a savings institution to establish general allowances for loan
losses. If an asset or portion thereof is classified loss, a savings institution
must either establish a specific allowance for loss in the amount of the portion
of the asset classified loss, or charge off such amount. Federal examiners may
disagree with a savings institution's classifications. If a savings institution
does not agree with an examiner's classification of an asset, it may appeal this
determination to the OTS Regional Director. The Association regularly reviews
its assets to determine whether any assets require classification or re-
classification. At June 30, 1997, the Association had $514,000 in assets
classified as special mention, $420,000 in assets classified as substandard, $0
in assets classified as doubtful and no assets classified as loss. The special
mention classification is primarily used by management as a "watch list" to
monitor loans that exhibit any potential deviation in performance from the
contractual terms of the loan.
Allowance for Loan Losses. In originating loans, the Association
recognizes that credit losses will be experienced and that the risk of loss will
vary with, among other things, the type of loan being made, the creditworthiness
of the borrower over the term of the loan, general economic conditions and, in
the case of a secured loan, the quality of the security for the loan. It is
management's policy to maintain an adequate allowance for loan losses based on,
among other things, the Association's and the industry's historical loan loss
experience, evaluation of economic conditions, regular reviews of delinquencies
and loan portfolio quality and evolving standards imposed by federal bank
examiners. The Association increases its allowance for loan losses by charging
provisions for loan losses against the Association's income. During fiscal 1997,
the Association increased its allowance for loan losses by $282,000 to $604,000
at June 30, 1997. The Association took this action due to the significant
increase in commercial real estate, commercial business, consumer and land
development loans originated by the Association during fiscal 1997, and due to
the additional risks inherent in these types of lending. For more information
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Management will continue to actively monitor the Association's asset
quality and allowance for loan losses. Management will charge off loans and
properties acquired in settlement of loans against the allowances for losses on
such loans and such properties when appropriate and will provide specific loss
allowances when necessary. Although management believes it uses the best
information available to make determinations with respect to the allowances for
losses and believes such allowances are adequate, future adjustments may be
necessary if economic conditions differ substantially from the economic
conditions in the assumptions used in making the initial determinations.
The Association's methodology for establishing the allowance for loan
losses takes into consideration probable losses that have been identified in
connection with specific assets as well as losses that have not been identified
but can be expected to occur. Management conducts regular reviews of the
Association's assets and evaluates the need to establish allowances on the basis
of this review. Allowances are established by the Board of Directors on a
quarterly basis based on an assessment of risk in the Association's assets
taking into consideration the composition and quality of the portfolio,
delinquency trends, current charge-off and loss experience, loan concentrations,
the state of the real estate market, regulatory reviews conducted in the
regulatory examination process and economic conditions generally. Specific
reserves will be provided for individual assets, or portions of assets, when
ultimate collection is considered improbable by management based on the current
payment status of the assets and the fair value of the security. At the date of
foreclosure or other repossession, the Association would transfer the property
to real estate acquired in settlement of loans initially at the lower of cost or
estimated fair value and subsequently at the lower of book value or fair value
less estimated selling costs. Any portion of the outstanding loan balance in
excess of fair value less estimated selling costs would be charged off against
the allowance for loan losses. If, upon ultimate disposition of the property,
net sales proceeds exceed the net carrying value of the property, a gain on sale
of real estate would be recorded.
36
<PAGE>
Banking regulatory agencies, including the OTS, have adopted a policy
statement regarding maintenance of an adequate allowance for loan and lease
losses and an effective loan review system. This policy includes an arithmetic
formula for determining the reasonableness of an institution's allowance for
loan loss estimate compared to the average loss experience of the industry as a
whole. Examiners will review an institution's allowance for loan losses and
compare it against the sum of: (i) 50% of the portfolio that is classified
doubtful; (ii) 15% of the portfolio that is classified as substandard; and (iii)
for the portions of the portfolio that have not been classified (including those
loans designated as special mention), estimated credit losses over the upcoming
12 months given the facts and circumstances as of the evaluation date. This
amount is considered neither a "floor" nor a "safe harbor" of the level of
allowance for loan losses an institution should maintain, but examiners will
view a shortfall relative to the amount as an indication that they should review
management's policy on allocating these allowances to determine whether it is
reasonable based on all relevant factors.
The following table sets forth an analysis of the Association's
allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------
1997 1996
-------- --------
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period................................. $ 411 $ 405
-------- ---------
Charge-offs:
One- to four-family.......................................... (32) (26)
Multi-family................................................. -- --
Non-residential.............................................. -- --
Construction................................................. -- --
Consumer..................................................... (64) (27)
Commercial................................................... -- --
Other........................................................ -- --
-------- ---------
(96) (53)
-------- ---------
Recoveries..................................................... 7 --
-------- ---------
Net recoveries (charge-offs)................................... (89) (53)
-------- ---------
Additions charged to operations................................ 282 59
-------- ---------
Balance at end of period....................................... $ 604 $ 411
======== =========
Allowance for loan losses to total
non-performing loans at end of period........................ 431.00% 563.00%
======== =========
Allowance for loan losses to net loans
at end of period............................................. 0.96% 0.82%
======== =========
</TABLE>
37
<PAGE>
The following table allocates the allowance for loan losses by loan
category at the dates indicated. The allocation of the allowance to each
category is not necessarily indicative of future losses and does not restrict
the use of the allowance to absorb losses in any category.
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------
1997 1996
----------------------- -----------------------
Percent Percent
of Loans of Loans
in Category in Category
to Total to Total
Amount Loans Amount Loans
------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
Residential..................................... $ 143 30.82% $ 184 80.72%
Commercial...................................... 40 8.62 26 4.02
Land............................................ 120 25.86 -- --
Consumer loans..................................... 161 34.70 137 15.26
------- ------ ------- ------
$ 464 100.00% $ 411 100.00%
======= ====== ======= ======
</TABLE>
Loan Delinquencies at June 30, 1997
<TABLE>
<CAPTION>
June 30,
----------------------------------------------------
1997 1996
----------------------- -----------------------
Percent Percent
of Gross of Gross
Amount Loans Amount Loans
------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage loans..................................... $ -- --% $ -- --%
Non-residential................................. -- -- -- --
Consumer........................................... 137 0.21 73 0.14
Commercial loans................................... 3 -- -- --
Other loans........................................ -- -- -- --
------- ------ ------- -----
Total allowance for loan losses................ $ 140 0.21% $ 73 0.14%
======= ====== ======= =====
</TABLE>
Investment Activities
General. The Association is permitted under federal law to make certain
investments, including investments in securities issued by various federal
agencies and state and municipal governments, deposits at the FHLB of Topeka,
certificates of deposit in federally insured institutions, certain bankers'
acceptances and federal funds. It may also invest, subject to certain
limitations, in commercial paper rated in one of the two highest investment
rating categories of a nationally recognized credit rating agency, and certain
other types of corporate debt securities and mutual funds. Federal regulations
require the Association to maintain an investment in FHLB stock and a minimum
amount of liquid assets which may be invested in cash and specified securities.
From time to time, the OTS adjusts the percentage of liquid assets which savings
banks are required to maintain. See "Regulation -- Depository Institution
Regulation -- Liquidity Requirements."
The Association makes investments in order to maintain the levels of
liquid assets required by regulatory authorities and manage cash flow, diversify
its assets, obtain yield, for asset/liability management purposes and to satisfy
certain requirements for favorable tax treatment. The investment activities of
the Association consist primarily of investments in mortgage-backed securities
and other investment securities, consisting primarily of interest-bearing
deposits and securities issued by the U.S. Treasury. Typical investments include
federally sponsored agency mortgage pass-through and federally sponsored agency
and mortgage-related securities. Investment and aggregate investment limitations
and credit quality parameters of each class of investment are prescribed in the
Association's investment
38
<PAGE>
policy. The Association performs analyses on mortgage-related securities prior
to purchase and on an ongoing basis to determine the impact on earnings and
market value under various interest rate and prepayment conditions. Under the
Association's current investment policy, securities purchases must be approved
by the Association's Investment Committee. The Board of Directors reviews all
securities transactions on a monthly basis.
Pursuant to SFAS No. 115, the Association has classified securities
with an amortized cost of $1.0 million and an approximate market value of
$990,000 at June 30, 1996 as available for sale. The Association had no
securities classified as "available for sale" at June 30, 1997. Management of
the Association presently does not intend to sell such securities and, based on
the Association's current liquidity level and the Association's access to
borrowings through the FHLB of Topeka, management currently does not anticipate
that the Association will be placed in a position of having to sell securities
with material unrealized losses.
Securities designated as "held to maturity" are those assets which the
Association has the ability and intent to hold to maturity. Upon acquisition,
securities are classified as to the Association's intent, and a sale would only
be effected due to deteriorating investment quality. The held to maturity
investment portfolio is not used for speculative purposes and is carried at
amortized cost. In the event the Association sells securities from this
portfolio for other than credit quality reasons, all securities within the
investment portfolio with matching characteristics may be reclassified as assets
available for sale. Securities designated as "available for sale" are those
assets which the Association may not hold to maturity and thus are carried at
market value with unrealized gains or losses, net of tax effect, recognized in
retained earnings.
Mortgage-Backed and Related Securities. Mortgage-backed securities
represent a participation interest in a pool of single-family or multi-family
mortgages, the principal and interest payments on which are passed from the
mortgage originators through intermediaries that pool and repackage the
participation interest in the form of securities to investors such as the
Association. Such intermediaries include quasi-governmental agencies such as
FHLMC, FNMA and GNMA which guarantee the payment of principal and interest to
investors, and from all of whom the Association has purchased mortgage-backed
securities. Mortgage-backed securities generally increase the quality of the
Association's assets by virtue of the guarantees that back them, are more liquid
than individual mortgage loans and may be used to collaterize borrowings or
other obligations of the Association.
Mortgage-related securities typically are issued with stated principal
amounts and the securities are backed by pools of mortgages that have loans with
interest rates that are within a range and have similar maturities. The
underlying pool of mortgages can be composed of either fixed-rate or
adjustable-rate mortgage loans. Mortgage-backed securities generally are
referred to as mortgage participation certificates or pass-through certificates.
As a result, the interest rate risk characteristics of the underlying pool of
mortgages, i.e., fixed-rate or adjustable-rate, as well as prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed pass-through
security is equal to the life of the underlying mortgages.
The actual maturity of a mortgage-backed security varies, depending on
when the mortgagors prepay or repay the underlying mortgages. Prepayments of the
underlying mortgages may shorten the life of the investment, thereby adversely
affecting its yield to maturity and the related market value of the
mortgage-backed security. The yield is based upon the interest income and the
amortization of the premium or accretion of the discount related to the
mortgage-backed security. Premiums and discounts on mortgage-backed securities
are amortized or accredited over the estimated term of the securities using a
level yield method. The prepayment assumptions used to determine the
amortization period for premiums and discounts can significantly affect the
yield of the mortgage-backed security, and these assumptions are reviewed
periodically to reflect the actual prepayment. The actual prepayments of the
underlying mortgages depend on many factors, including the type of mortgage, the
coupon rate, the age of the mortgages, the geographical location of the
underlying real estate collateralizing the mortgages and general levels of
market interest rates. The difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates is an important
determinant in the rate of prepayments. During periods of falling mortgage
interest rates, prepayments generally increase, and, conversely, during periods
of rising mortgage interest rates, prepayments generally decrease. If the coupon
rate of the underlying mortgage significantly exceeds the prevailing market
interest rates offered for
39
<PAGE>
mortgage loans, refinancing generally increases and accelerates the prepayment
of the underlying mortgages. Prepayment experience is more difficult to estimate
for adjustable-rate mortgage-backed securities.
The Association's mortgage-backed securities portfolio consists solely
of $5.3 million in mortgage-backed securities of which $300,000 had fixed
interest rates and $5.0 million had adjustable interest rates at June 30, 1997.
The Association makes such investments in order to manage cash flow, mitigate
interest rate risk, diversify assets, obtain yield, to satisfy certain
requirements for favorable tax treatment and to satisfy the qualified thrift
lender test. See "Regulation -- Depository Institution Regulation -- Qualified
Thrift Lender Test."
The following table sets forth the carrying value of the Association's
investment securities at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
---------------------------------
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
U.S. Treasury securities.................................................... $ -- $ 989
Interest-bearing deposits................................................... 2,381 1,577
Mortgage-backed securities.................................................. 5,340 6,843
Federal Home Loan Bank stock................................................ 988 564
-------- --------
Total................................................................. $ 8,709 $ 9,973
======== ========
</TABLE>
The following table sets forth information in the scheduled maturities,
amortized cost, market values and average yields for the Association's
investment portfolio at June 30, 1997.
<TABLE>
<CAPTION>
One Year or Less One to Five Years Five to Ten Years
----------------------- ---------------------- -----------------------
Weighted Weighted Weighted
Book Average Book Average Book Average
Value Yield Value Yield Value Yield
----- ------- ----- ------- ----- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits.............. $ 2,381 5.50% $ -- --% $ -- --%
Mortgage-backed securities............. 460 6.77 1,340 6.77 3,540 6.77
Federal Home Loan Bank stock........... -- -- -- -- 988 6.68
-------- ------- -------
Total investment securities............ $ 2,841 5.71 $ 1,340 6.77 $ 4,528 6.76
======== ======= =======
<CAPTION>
Total Investment Portfolio
--------------------------
Weighted
Book Average
Value Yield
----- -------
(Dollars in thousands)
<S> <C> <C>
Interest-bearing deposits.............. $2,381 5.56%
Mortgage-backed securities............. 5,340 6.77
Federal Home Loan Bank stock........... 988 6.68
------
Total investment securities............ $8,709 6.41
======
</TABLE>
The Association is required to maintain average daily balances of
liquid assets (cash, deposits maintained pursuant to Federal Reserve Board
requirements, time and savings deposits in certain institutions, obligations of
state and political subdivisions thereof, shares in mutual funds with certain
restricted investment policies, highly rated corporate debt, and mortgage loans
and mortgage-backed securities with less than one year to maturity or subject to
repurchase within one year) equal to a monthly average of not less than a
specified percentage (currently 5%) of its net withdrawable savings deposits
plus short-term borrowings. Monetary penalties may be imposed for failure to
meet liquidity requirements. The average liquidity ratio of the Association for
the month ending June 30, 1997 was 5.51%. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Deposit Activity and Other Sources of Funds
General. Deposits are the primary source of the Association's funds for
lending, investment activities and general operational purposes. In addition to
deposits, the Association derives funds from loan principal and interest
repayments, maturities of investment securities and mortgage-backed securities
and interest payments thereon. Although loan repayments are a relatively stable
source of funds, deposit inflows and outflows are significantly influenced by
40
<PAGE>
general interest rates and money market conditions. Borrowings may be used on a
short-term basis to compensate for reductions in the availability of funds, or
on a longer term basis for general operational purposes. The Association has
access to borrow from the FHLB of Topeka, and the Converted Association will
continue to have access to FHLB of Topeka advances.
Deposits. The Association attracts deposits principally from within its
market area by offering competitive rates on its deposit instruments, including
money market accounts, passbook savings accounts, Individual Retirement
Accounts, and certificates of deposit which range in maturity from three months
to eight years. Deposit terms vary according to the minimum balance required,
the length of time the funds must remain on deposit and the interest rate.
Maturities, terms, service fees and withdrawal penalties for its deposit
accounts are established by the Association on a periodic basis. The Association
reviews its deposit mix and pricing on a weekly basis. In determining the
characteristics of its deposit accounts, the Association considers the rates
offered by competing institutions, lending and liquidity requirements, growth
goals and federal regulations. The Association does not accept brokered
deposits, but does accept jumbo deposits from its regular customers.
The Association attempts to compete for deposits with other
institutions in its market area by offering competitively priced deposit
instruments that are tailored to the needs of its customers. Additionally, the
Association seeks to meet customers' needs by providing convenient customer
service to the community, efficient staff and convenient hours of service.
Substantially all of the Association's depositors are Colorado residents who
reside in the Association's market area.
Savings deposits in the Association at June 30, 1997 were represented
by the various types of savings programs described below.
<TABLE>
<CAPTION>
Interest Minimum Minimum Percentage of
Rate(1) Term Category Amount Balances Total Savings
- ------- ------- -------- ------ -------- -------------
<C> <C> <S> <C> <C> <C>
Savings and Transactions Accounts
---------------------------------
1.67 % None NOW accounts $ 0 $ 8,225 14.65%
2.97 None Passbook accounts 10 10,691 19.04
0.00 None Demand 0 2,361 4.20
2.93 None Money market accounts 0 3,347 5.96
---------- -------
24,624 43.85
---------- -------
Certificates of Deposit
-----------------------
3.70 3 months Fixed-Term, Fixed-Rate 2,500 187 0.33
5.16 6 months Fixed-Term, Fixed-Rate 1,000 4,039 7.19
5.19 9 months Fixed-Term, Fixed-Rate 10,000 1,586 2.82
5.45 10 months Fixed-Term, Fixed-Rate 10,000 3,963 7.06
5.78 12 months Fixed-Term, Fixed-Rate 500 7,958 14.17
5.53 15 months Fixed-Term, Fixed-Rate 10,000 2,893 5.15
5.38 18 months Fixed-Term, Fixed-Rate 500 4,590 8.17
6.37 24 months Fixed-Term, Fixed-Rate 500 536 1.07
5.64 30 months Fixed-Term, Fixed-Rate 500 2,295 4.09
6.40 36 months Fixed-Term, Fixed-Rate 500 306 0.54
5.88 48 months Fixed-Term, Fixed-Rate 500 2,458 4.38
7.20 Other varies 717 1.28
---------- --------
Total certificates of deposit 31,528 56.15
---------- -------
Total savings deposits $ 56,152 100.00%
========== ======
</TABLE>
- -----------------
(1) Indicates weighted average interest rate at June 30, 1997.
41
<PAGE>
The following table sets forth the change in dollar amount of deposits in
the various types of accounts offered by the Association between the dates
indicated.
<TABLE>
<CAPTION>
Balance at Balance at
June 30, % of Increase June 30, % of
1997 Deposits (Decrease) 1996 Deposits
---------- -------- ---------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
NOW accounts........................... $ 10,586 18.85% $ 2,836 $ 7,750 15.64%
Money market deposit................... 14,038 25.00 875 13,163 26.57
Certificates of deposit................ 22,860 40.71 3,423 19,437 39.24
Jumbo certificates..................... 8,668 15.44 (519) 9,187 18.55
-------- ------- --------- --------- -------
$ 56,152 100.00% $ 6,615 $ 49,537 100.00%
======== ====== ========= ========= ======
</TABLE>
The following table sets forth the time deposits in the Association
classified by rates at the dates indicated.
<TABLE>
<CAPTION>
At June 30,
--------------------------
1997 1996
------ ------
(In thousands)
<S> <C> <C>
3.00 - 4.00%............................... $ 187 $ 906
4.01 - 5.00%............................... 3,156 5,948
5.01 - 6.00%............................... 22,629 17,788
6.01 - 7.00%............................... 4,946 3,111
Over 7.00%................................. 610 871
---------- ----------
$ 31,528 $ 28,624
========== ==========
</TABLE>
The following table sets forth the amount and maturities of time deposits
at June 30, 1997.
<TABLE>
<CAPTION>
3.00- 4.01- 5.01- Over Percent
4.00% 5.00% 7.00% 7.00% Total of Total
----- ----- ----- ----- ----- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Certificate maturing in:
One year....................... $ 187 $ 2,996 $ 18,468 $ 3,659 $ 25,310 80.28%
One to two years............... -- 161 3,123 1,042 4,326 13.72
Two to three years............. -- -- 768 300 1,068 3.39
Over three years............... -- -- 604 220 824 2.61
------ -------- -------- -------- -------- -------
Total............... $ 187 $ 3,157 $ 22,963 $ 5,221 $ 31,528 100.00%
====== ======== ======== ======== ======== ======
Percent of total......... 0.59% 10.01% 72.83% 16.56% 100.00%
====== ======== ======== ======== ========
</TABLE>
The following table indicates the amount of the Association's certificates
of deposit of $100,000 or more by time remaining until maturity as of June 30,
1997.
<TABLE>
<CAPTION>
Certificates
Maturity Period of Deposits
--------------- -----------
(In thousands)
<S> <C>
Three months or less....................... $ 2,562
Over three through six months.............. 2,411
Over six through 12 months................. 2,347
Over 12 months............................. 1,348
-------
Total.... ............................... $ 8,668
=======
</TABLE>
42
<PAGE>
The following table sets forth the savings activities of the Association
for the periods indicated.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------
1997 1996
------ ------
(Dollars in thousands)
<S> <C> <C>
Opening balance ...................................... $ 49,537 $ 45,914
Net increase (decrease) before interest credited ..... 4,797 2,026
Interest credited .................................... 1,818 1,597
-------- --------
Ending balance ................................... $ 56,152 $ 49,537
======== ========
Net increase (decrease) .............................. $ 6,615 $ 3,623
======== ========
Percent increase (decrease) .......................... 13.35% 7.89%
======== ========
</TABLE>
In the unlikely event the Association is liquidated after the Conversion,
depositors will be entitled to full payment of their deposit accounts prior to
any payment being made to the sole stockholder of the Converted Association or
the Association, which is the Company.
Borrowings. Savings deposits historically have been the primary source of
funds for the Association's lending, investments and general operating
activities. The Association is authorized, however, to use advances from the
FHLB of Topeka to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. The FHLB of Topeka functions as a central reserve bank
providing credit for savings institutions and certain other member financial
institutions. As a member of the FHLB System, the Association is required to own
stock in the FHLB of Topeka and is authorized to apply for advances. Advances
are pursuant to several different programs, each of which has its own interest
rate and range of maturities. The Association has a Blanket Agreement for
advances with the FHLB under which the Association may borrow up to 25% of
assets (approximately $19 million), subject to normal collateral and
underwriting requirements. Advances from the FHLB of Topeka are secured by
mortgage-backed securities, investments and residential first mortgage loans.
At June 30, 1997, the Association had an approved line of credit for $10.0
million with the FHLB, of which the Association had drawn on $1.0 million at
that date. In addition, as of June 30, 1997, the Association had $12.5 million
in FHLB advances outstanding of which $8.5 million was at interest rates which
range from $5.81% to 8.12% and mature within one year; $3.0 million were at
interest rates which range from 5.81% to 6.72% and mature in 1999; $500,000 were
at an interest rate of 6.79% and mature in 2000; and $520,000 were at an
interest rate of 6.80% and mature in 2001.
Subsidiary Activities
As a federally chartered savings bank, the Association is permitted to
invest an amount equal to 2% of its assets in subsidiaries, with an additional
investment of 1% of assets where such investment serves primarily community,
inner-city and community development purposes. Under such limitations, as of
June 30, 1997, the Association was authorized to invest up to approximately $2.3
million in the stock of or loans to subsidiaries, including the additional 1%
investment for community inner-city and community development purposes.
Institutions meeting their applicable minimum regulatory capital requirements
may invest up to 50% of their regulatory capital in conforming first mortgage
loans to subsidiaries in which they own 10% or more of the capital stock. The
Association does not have any subsidiaries.
43
<PAGE>
Competition
The Association faces strong competition both in originating real estate
and consumer loans and in attracting deposits. The Association competes for real
estate and other loans principally on the basis of interest rates, the types of
loans it originates, the deposit products it offers and the quality of services
it provides to borrowers. The Association also competes by offering products
which are tailored to the local community. Its competition in originating real
estate loans comes primarily from other commercial banks and mortgage bankers
making loans secured by real estate located in the Association's market area.
Commercial banks, credit unions and finance companies provide vigorous
competition in consumer lending. Competition may increase as a result of the
continuing reduction of restrictions on the interstate operations of financial
institutions.
The Association attracts its deposits through its offices primarily from
the local communities of the offices. Consequently, competition for deposits is
principally from other savings institutions, commercial banks and brokers in the
local communities as well as from the corporate credit unions sponsored by the
large private employers in the Association's market area. The Association
competes for deposits and loans by offering what it believes to be a variety of
deposit accounts at competitive rates, convenient business hours, a commitment
to outstanding customer service and a well-trained staff. The Association
believes it has developed strong relationships with local realtors and the
community in general.
Management considers its market area for gathering deposits to be Chaffee,
Lake, Western Fremont and Saguache counties in Colorado. The Association
estimates that it competes with six banks, and two credit unions for deposits
and loans. Based on data provided by a private marketing firm, the Association
estimates that as of June 1996, the latest date for which information was
available, it had 21.76% of deposits held by all financial institutions in its
market area.
Offices and Other Material Properties
The following table sets forth information regarding the Association's
offices at June 30, 1997.
<TABLE>
<CAPTION>
Book Value at
Year Owned or June 30, Approximate
Opened Leased 1997 (1) Square Footage
------ ------ ------------- --------------
<S> <C> <C> <C> <C>
Main Office
130 West 2nd
Salida, Colorado 1886 (2) Owned $763 10,750
Branch Offices
600 Harrison (3)
Leadville, Colorado 1978 Owned 805 3,800
713 East Main (3)
Buena Vista, Colorado 1996 Owned 480 2,400
</TABLE>
- ---------
(1) Cost less accumulated depreciation and amortization.
(2) The current location and building in Salida, Colorado was occupied in 1974.
(3) The Association constructed new building facilities at each of these
locations in 1996.
The book value of the Association's investment in premises and equipment
totaled approximately $2.5 million at June 30, 1997. See Note 6 of Notes to
Financial Statements.
44
<PAGE>
Employees
As of June 30, 1997, the Association had 36 full-time and one part-time
employees, none of whom were represented by a collective bargaining agreement.
Management considers the Association's relationships with its employees to be
good.
Legal Proceedings
From time to time, the Association is a party to various legal proceedings
incident to its business. At June 30, 1997, there were no legal proceedings to
which the Company or the Association was a party, or to which any of their
property was subject, which were expected by management to result in a material
loss to the Company or the Association. There are no pending regulatory
proceedings to which the Company, the Association or its subsidiaries is a party
or to which any of their properties is subject which are currently expected to
result in a material loss.
REGULATION
General
As a federally chartered savings association, the Association is subject to
extensive regulation by the OTS. The lending activities and other investments of
the Association must comply with such regulatory requirements, and the OTS
periodically examines the Association for compliance with various regulatory
requirements. The FDIC also has the authority to conduct special examinations.
The Association must file reports with the OTS describing its activities and
financial condition and is also subject to certain reserve requirements
promulgated by the Federal Reserve Board. This supervision and regulation is
intended primarily for the protection of depositors. Certain of these regulatory
requirements are referred to below or appear elsewhere herein.
Regulation of the Association
Regulatory Capital Requirements. Under OTS capital standards, savings
associations must maintain "tangible" capital equal to 1.5% of adjusted total
assets, "core" capital equal to 3.0% of adjusted total assets and a combination
of core and "supplementary" capital equal to 8.0% of "risk-weighted" assets. In
addition, the OTS has recently adopted regulations which impose certain
restrictions on savings associations that have a total risk-based capital ratio
that is less than 8.0%, a ratio of Tier 1 capital to risk-weighted assets of
less than 4.0% or a ratio of Tier 1 capital to adjusted total assets of less
than 4.0% (or 3.0% if the institution is rated Composite 1 under the OTS
examination rating system). See " -- Prompt Corrective Regulatory Action." For
purposes of this regulation, Tier 1 capital has the same definition as core
capital, which is defined as common stockholders' equity (including retained
earnings), noncumulative perpetual preferred stock and related surplus, minority
interests in the equity accounts of fully consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits and "qualifying supervisory
goodwill." Core capital is generally reduced by the amount of the savings
association's intangible assets for which no market exists. Limited exceptions
to the deduction of intangible assets are provided for purchased mortgage
servicing rights and qualifying supervisory goodwill. Tangible capital is given
the same definition as core capital but does not include an exception for
qualifying supervisory goodwill and is reduced by the amount of all the savings
association's intangible assets with only a limited exception for purchased
mortgage servicing rights and purchased credit card relationship. Both core and
tangible capital are further reduced by an amount equal to a savings
association's debt and equity investments in subsidiaries engaged in activities
not permissible to national banks, other than subsidiaries engaged in activities
undertaken as agent for customers, or in mortgage banking activities and
subsidiary depository institutions or their holding companies. At June 30, 1997,
the Association had no such investments.
Adjusted total assets are a savings association's total assets as
determined under GAAP, adjusted for certain goodwill amounts and increased by a
pro rated portion of the assets of subsidiaries in which the savings association
holds a minority interest, and which are not engaged in activities for which the
capital rules require deduction of its debt
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and equity investments. Adjusted total assets are reduced by the amount of
assets that have been deducted from capital, the portion of the savings
association's investments in subsidiaries that must be netted against capital
under the capital rules and, for purposes of the core capital requirement,
qualifying supervisory goodwill.
In determining compliance with the risk-based capital requirement, a
savings association is allowed to use both core capital and supplementary
capital provided the amount of supplementary capital used does not exceed the
savings association's core capital. Supplementary capital is defined to include
certain preferred stock issues, nonwithdrawable accounts and pledged deposits
that do not qualify as core capital, certain approved subordinated debt, certain
other capital instruments and a portion of the savings association's general
loss allowances. Total core and supplementary capital are reduced by the amount
of capital instruments held by other depository institutions pursuant to
reciprocal arrangements, the savings association's high loan-to-value ratio land
loans and non-residential construction loans and equity investments other than
those deducted from core and tangible capital. At June 30, 1997, the Association
had no high ratio land or nonresidential construction loans and had no equity
investments for which OTS regulations require a deduction from total capital.
The risk-based capital requirement is measured against risk-weighted
assets, which equal the sum of each asset, and the credit-equivalent amount of
each off-balance sheet item after being multiplied by an assigned risk weight.
Under the OTS risk-weighting system, one-to four-family first mortgages that
are not more than 90 days past due with loan-to-value ratios under 80% are
assigned a risk weight of 50%. Consumer and residential construction loans are
assigned a risk weight of 100%. Mortgage-backed securities issued, or fully
guaranteed as to principal and interest by the FHLMC, are assigned a 20% risk
weight. Cash and U.S. Government securities backed by the full faith and credit
of the U.S. Government are given a 0% risk weight.
The table below presents the Association's capital position relative to its
various regulatory capital requirements at June 30, 1997.
<TABLE>
<CAPTION>
Percent of
Amount Assets(1)
------ ---------
(Dollars in thousands)
<S> <C> <C>
Tangible capital............................ $ 5,955 7.80%
Tangible capital requirement................ 1,145 1.50
--------- ------
Excess (deficit)......................... $ 4,810 6.30%
========= ======
Core capital................................ $ 5,955 7.80%
Core capital requirement.................... 2,290 3.00
--------- ------
Excess (deficit)......................... $ 3,665 4.80%
========= ======
Risk-based capital.......................... $ 6,552 13.73%
Risk-based capital requirement.............. 3,818 8.00
--------- ------
Excess (deficit)......................... $ 2,734 5.73%
========= ======
</TABLE>
- ------------------
(1) Based on adjusted total assets for purposes of the tangible capital and
core capital requirements and risk-weighted assets for purpose of the risk-based
capital requirement.
The OTS requires savings institutions with more than a "normal" level of
interest rate risk to maintain additional total capital. A savings institution's
interest rate risk is measured in terms of the sensitivity of its "net portfolio
value" to changes in interest rates. Net portfolio value is defined, generally,
as the present value of expected cash inflows from existing assets and off-
balance sheet contracts less the present value of expected cash outflows from
existing liabilities. A savings institution will be considered to have a
"normal" level of interest rate risk exposure if the
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decline in its net portfolio value, after an immediate 200 basis point increase
or decrease in market interest rates (whichever results in the greater decline),
is less than two percent of the current estimated economic value of its assets.
A savings institution with a greater than normal interest rate risk is required
to deduct from total capital, for purposes of calculating its risk-based capital
requirement, an amount (the "interest rate risk component") equal to one-half
the difference between the institution's measured interest rate risk and the
normal level of interest rate risk, multiplied by the economic value of its
total assets.
The OTS calculates the sensitivity of a savings institution's net portfolio
value based on data submitted by the institution in a schedule to its quarterly
Thrift Financial Report, and using the interest rate risk measurement model
adopted by the OTS. The amount of the interest rate risk component, if any, to
be deducted from a savings institution's total capital is based on the
institution's Thrift Financial Report filed two quarters earlier. Savings
institutions with less than $300 million in assets and a risk-based capital
ratio above 12% are generally exempt from filing the interest rate risk schedule
with their Thrift Financial Reports. However, the OTS will require any exempt
savings institution that it determines may have a high level of interest rate
risk exposure to file such schedule on a quarterly basis. The OTS has not yet
implemented these requirements.
In addition to requiring generally applicable capital standards for savings
institutions, the OTS is authorized to establish the minimum level of capital
for a savings institution at such amount or at such ratio of capital-to-assets
as the OTS determines to be necessary or appropriate for such institution in
light of the particular circumstances of the institution. The OTS may treat the
failure of any savings institution to maintain capital at or above such level as
an unsafe or unsound practice, and may issue a directive requiring any savings
institution which fails to maintain capital at or above the minimum level
required by the OTS to submit and adhere to a plan for increasing capital. Such
an order may be enforced in the same manner as an order issued by the FDIC.
Prompt Corrective Regulatory Action. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), the federal banking regulators
are required to take prompt corrective action if an insured depository
institution fails to satisfy certain minimum capital requirements. All
institutions, regardless of their capital levels, are restricted from making any
capital distribution or paying any management fees if the institution would
thereafter fail to satisfy the minimum levels for any of its capital
requirements. An institution that fails to meet the minimum level for any
relevant capital measure (an "undercapitalized institution") may be: (i) subject
to increased monitoring by the appropriate federal banking regulator; (ii)
required to submit an acceptable capital restoration plan within 45 days; (iii)
subject to asset growth limits; and (iv) required to obtain prior regulatory
approval for acquisitions, branching and new lines of businesses. A
"significantly undercapitalized" institution, as well as any undercapitalized
institution that does not submit an acceptable capital restoration plan, may be
subject to regulatory demands for recapitalization, broader application of
restrictions on transactions with affiliates, limitations on interest rates paid
on deposits, asset growth and other activities, possible replacement of
directors and officers, and restrictions on capital distributions by any bank
holding company controlling the institution. Any company controlling the
institution could also be required to divest the institution, or the institution
could be required to divest subsidiaries. The senior executive officers of a
significantly undercapitalized institution may not receive bonuses or increases
in compensation without prior approval and the institution is prohibited from
making payments of principal or interest on its subordinated debt. In their
discretion, the federal banking regulators may also impose the foregoing
sanctions on an undercapitalized institution if the regulators determine that
such actions are necessary to carry out the purposes of the prompt corrective
action provisions. If an institution's ratio of tangible capital to total assets
falls below a "critical capital level," the institution will be subject to
conservatorship or receivership within 90 days, unless periodic determinations
are made that forbearance from such action would better protect the deposit
insurance fund. Unless appropriate findings and certifications are made by the
appropriate federal bank regulatory agencies, a critically undercapitalized
institution must be placed in receivership if it remains critically
undercapitalized on average during the calendar quarter, beginning 270 days
after the date it became critically undercapitalized.
Under implementing regulations, the federal banking regulators, including
the OTS, generally measure a depository institution's capital adequacy on the
basis of the institution's total risk-based capital ratio (the ratio of its
total
47
<PAGE>
capital to risk-weighted assets), Tier 1 risk-based capital ratio (the ratio of
its core capital to risk-weighted assets) and leverage ratio (the ratio of its
core capital to adjusted total assets). Under the regulations, a savings
institution that is not subject to an order or written directive to meet or
maintain a specific capital level will be deemed "well capitalized" if it also
has: (i) a total risk-based capital ratio of 10% or greater; (ii) a Tier 1 risk-
based capital ratio of 6.0% or greater; and (iii) a leverage ratio of 5.0% or
greater. An "adequately capitalized" savings institution is a savings
institution that does not meet the definition of well capitalized and has: (i) a
total risk-based capital ratio of 8.0% or greater; (ii) a Tier 1 capital risk-
based ratio of 4.0% or greater; and (iii) a leverage ratio of 4.0% or greater
(or 3.0% or greater if the savings institution has a composite 1 CAMEL rating).
An "undercapitalized institution" is a savings institution that has (i) a total
risk-based capital ratio less than 8.0%; or (ii) a Tier 1 risk-based capital
ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0% (or 3.0% if
the institution has a composite 1 CAMEL rating). A "significantly
undercapitalized" institution is defined as a savings institution that has: (i)
a total risk-based capital ratio of less than 6.0%; or (ii) a Tier 1 risk-based
capital ratio of less than 3.0%; or (iii) a leverage ratio of less than 3.0%. A
"critically undercapitalized" savings institution is defined as a savings
institution that has a ratio of "tangible equity" to total assets of less than
2.0%. Tangible equity is defined as core capital plus cumulative perpetual
preferred stock (and related surplus) less all intangibles other than qualifying
supervisory goodwill and certain purchased mortgage servicing rights. The OTS
may reclassify a well capitalized savings institution as adequately capitalized
and may require an adequately capitalized or undercapitalized institution to
comply with the supervisory actions applicable to institutions in the next lower
capital category (but may not reclassify a significantly undercapitalized
institution as critically under-capitalized) if the OTS determines, after notice
and an opportunity for a hearing, that the savings institution is in an unsafe
or unsound condition or that the institution has received and not corrected a
less-than-satisfactory rating for any CAMEL rating category. At June 30, 1997
the Association was classified as "well capitalized" under OTS Regulations, and
Management of the Association believes that the Converted Association will,
immediately after the Conversion, also be classified as "well capitalized."
Qualified Thrift Lender Test. A savings institution that does not meet the
Qualified Thrift Lender test ("QTL Test") must either convert to a bank charter
or comply with the following restrictions on its operations: (i) the institution
may not engage in any new activity or make any new investment, directly or
indirectly, unless such activity or investment is permissible for a national
bank; (ii) the branching powers of the institution shall be restricted to those
of a national bank; (iii) the institution shall not be eligible to obtain any
advances from its FHLB; and (iv) payment of dividends by the institution shall
be subject to the rules regarding payment of dividends by a national bank. Upon
the expiration of three years from the date the institution ceases to be a QTL,
it must cease any activity, and not retain any investment not permissible for a
national bank and immediately repay any outstanding FHLB advances (subject to
safety and soundness considerations).
To qualify as a QTL, a savings institution must either qualify as a
"domestic building and loan association" under the Internal Revenue Code or
maintain at least 65% of its "portfolio" assets in Qualified Thrift Investments.
Portfolio assets are defined as total assets less intangibles, property used by
a savings institution in its business and liquidity investments in an amount not
exceeding 20% of assets. Qualified Thrift Investments consist of: (i) loans,
equity positions, or securities related to domestic, residential real estate or
manufactured housing, and educational, small business and credit card loans;
(ii) 50% of the dollar amount of residential mortgage loans subject to sale
under certain conditions but do not include any intangible assets. Subject to a
20% of portfolio assets limit, however, savings institutions are able to treat
as Qualified Thrift Investments 200% of their investments in loans to finance
"starter homes" and loans for construction, development or improvement of
housing and community service facilities or for financing small businesses in
"credit-needy" areas.
A savings institution must maintain its status as a QTL on a monthly basis
in nine out of every 12 months. A savings institution that fails to maintain
Qualified Thrift Lender status will be permitted to requalify once, and if it
fails the QTL Test a second time, it will become immediately subject to all
penalties as if all time limits on such penalties had expired. Failure to
qualify as a QTL results in a number of sanctions, including the imposition of
certain operating
48
<PAGE>
restrictions imposed on national banks and a restriction on obtaining additional
advances from the FHLB System. Upon failure to qualify as a QTL for two years, a
savings association must convert to a commercial bank. At June 30, 1997,
approximately 96.54% of the Association's assets were invested in Qualified
Thrift Investments.
Dividend Limitations. Under OTS regulations, the Association is not
permitted to pay dividends on its capital stock if its regulatory capital would
thereby be reduced below the amount then required for the liquidation account
established for the benefit of certain depositors of the Association at the time
of its conversion to stock form. In addition, savings institution subsidiaries
of savings and loan holding companies are required to give the OTS 30 days'
prior notice of any proposed declaration of dividends to the holding company.
Federal regulations impose limitations on the payment of dividends and
other capital distributions (including stock repurchases and cash mergers) by
the Association. Under these regulations, a savings institution that,
immediately prior to, and on a pro forma basis after giving effect to a proposed
capital distribution, has total capital (as defined by OTS regulation) that is
equal to or greater than the amount of its fully phased-in capital requirements
(a "Tier 1 Association"), is generally permitted without OTS approval, after
notice, to make capital distributions during a calendar year in the amount equal
to the greater of (i) 75% of net income for the previous four quarters or (ii)
up to 100% of its net income to date during the calendar year plus an amount
that would reduce by one-half the amount by which its capital-to-assets ratio
exceeded its fully phased-in capital requirement to assets ratio at the
beginning of the calendar year. A savings institution with total capital in
excess of current minimum capital requirements but not in excess of the fully
phased-in requirements (a "Tier 2 Association") is permitted, after notice, to
make capital distributions without OTS approval of up to 75% of its net income
for the previous four quarters, less dividends already paid for such period. A
savings institution that fails to meet current minimum capital requirements (a
"Tier 3 Association") is prohibited from making any capital distributions
without the prior approval of the OTS. Tier 1 Associations that have been
notified by the OTS that they are in need of more than normal supervision will
be treated as either a Tier 2 or Tier 3 Association. Unless the OTS determines
that the Association is an institution requiring more than normal supervision,
the Association is authorized to pay dividends, in accordance with the
provisions of the OTS regulations discussed above, as a Tier 1 Association.
Under the OTS' prompt corrective action regulations, the Association is
also prohibited from making any capital distributions if, after making the
distribution, the Association would have: (i) a total risk-based capital ratio
of less than 8.0%; (ii) a Tier 1 risk-based capital ratio of less than 4.0%; or
(iii) a leverage ratio of less than 4.0%. However, the OTS, after consultation
with the FDIC, may permit an otherwise prohibited stock repurchase if it is made
in connection with the issuance of additional shares in an equivalent amount,
and the repurchase will reduce the institution's financial obligations or
otherwise improve the institution's financial condition.
In addition to the foregoing, earnings of the Association appropriated to
bad debt reserves and deducted for Federal income tax purposes are not available
for payment of cash dividends or other distributions to stockholders without
payment of taxes at the then current tax rate by the Association on the amount
of earnings removed from the reserves for such distributions. See "Taxation."
Safety and Soundness Standards. Under FDICIA, as amended by the Riegle
Community Development and Regulatory Improvement Act of 1994 (the "CDRI Act"),
each Federal banking agency is required to establish safety and soundness
standards for institutions under its authority. On July 10, 1995, the Federal
banking agencies, including the OTS, released Interagency Guidelines
Establishing Standards for Safety and Soundness and published a final rule
establishing deadlines for submission and review of safety and soundness
compliance plans. The final rule and the guidelines went into effect on August
9, 1995. The guidelines require savings institutions to maintain internal
controls, information systems and audit systems that are appropriate for the
size, nature and scope of the institution's business. The guidelines also
establish certain basic standards for loan documentation, credit underwriting,
interest rate risk exposure, and asset growth. The guidelines further provide
that savings institutions should maintain safeguards to prevent the payment of
compensation, fees and benefits that are excessive or that could lead to
material financial loss,
49
<PAGE>
and should take into account factors such as comparable compensation practices
at comparable institutions. If the OTS determines that a savings institution is
not in compliance with the safety and soundness guidelines, it may require the
institution to submit an acceptable plan to achieve compliance with the
guidelines. A savings institution must submit an acceptable compliance plan to
the OTS within 30 days of receipt of a request for such a plan. Failure to
submit or implement a compliance plan may subject the institution to regulatory
sanctions. Management believes that the Association already meets substantially
all the standards adopted in the interagency guidelines, and therefore does not
believe that implementation of these regulatory standards will materially affect
the Association's operations.
Additionally, under FDICIA, as amended by the CDRI Act, the Federal banking
agencies are required to establish standards relating to the asset quality and
earnings that the agencies determine to be appropriate. On July 10, 1995, the
federal banking agencies, including the OTS, issued proposed guidelines relating
to asset quality and earnings. Under the proposed guidelines, a savings
institution should maintain systems, commensurate with its size and the nature
and scope of its operations, to identify problem assets and prevent
deterioration in those assets, as well as to evaluate and monitor earnings and
ensure that earnings are sufficient to maintain adequate capital and reserves.
Management believes that the asset quality and earnings standards, in the form
proposed by the banking agencies, would not have a material effect on the
Association's operations.
Deposit Insurance. The Association is required to pay assessments, based on
a percentage of its insured deposits, to the FDIC for insurance of its deposits
by the FDIC through the SAIF. Under the Federal Deposit Insurance Act, the FDIC
is required to set semi-annual assessments for SAIF-insured institutions at a
level necessary to maintain the designated reserve ratio of the SAIF at 1.25% of
estimated insured deposits, or at a higher percentage of estimated insured
deposits that the FDIC determines to be justified for that year by circumstances
indicating a significant risk of substantial future losses to the SAIF.
Under the FDIC's risk-based deposit insurance assessment system, the
assessment rate for an insured depository institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is determined
by the institution's capital level and supervisory evaluations. Based on the
data reported to regulators for the date closest to the last day of the seventh
month preceding the semi-annual assessment period, institutions are assigned to
one of three capital groups -- well capitalized, adequately capitalized or
undercapitalized -- using the same percentage criteria as under the prompt
corrective action regulations. See " -- Prompt Corrective Regulatory Action."
Within each capital group, institutions are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority, and such other information as the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance fund. Subgroup A consists of financially sound institutions with only
a few minor weaknesses. Subgroup B consists of institutions that demonstrate
weaknesses which, if not corrected, could result in significant deterioration of
the institution and increased risk of loss to the deposit insurance fund.
Subgroup C consists of institutions that pose a substantial probability of loss
to the deposit insurance fund unless effective corrective action is taken.
For the past several semi-annual periods, institutions with SAIF-assessable
deposits, like the Association, have been required to pay higher deposit
insurance premiums than institutions with deposits insured by the BIF. In order
to recapitalize the SAIF and address the premium disparity, the recently-enacted
Deposit Insurance Funds Act of 1996 authorized the FDIC to impose a one-time
special assessment on institutions with SAIF-assessable deposits, based on the
amount determined by the FDIC to be necessary to increase the reserve levels of
the SAIF to the designated reserve ratio of 1.25% of insured deposits.
Institutions were assessed at the rate of 65.7 basis points based on the amount
of their SAIF-assessable deposits as of March 31, 1995. As a result of the
special assessment the Association incurred a pre-tax expense of $297,000,
during the fiscal year ended June 30, 1997.
The FDIC has proposed a rule that would lower the regular semi-annual SAIF
assessment rates by establishing a base assessment rate schedule ranging from 4
to 31 basis points effective October 1, 1996. The rule widens the range between
the lowest and highest assessment rates among healthy and troubled institutions
with the intent of creating an incentive for savings institutions to control
risk-taking behavior. The rule also prevents the FDIC from collecting more funds
than needed to maintain the SAIF's capitalization at 1.25% of insured deposits.
Until December 31, 1999, however, SAIF-insured institutions will be required to
pay assessments to the FDIC at the rate of 6.44 basis points to
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help fund interest payments on certain bonds issued by the Financing Corporation
("FICO"), an agency of the federal government established to finance takeovers
of insolvent thrifts. During this period, BIF members will be assessed for these
obligations at the rate of 1.3 basis points. After December 31, 1999, both BIF
and SAIF members will be assessed at the same rate for FICO payments.
SAIF members are generally prohibited from converting to BIF, also
administered by the FDIC, or merging with or transferring assets to a BIF member
before the date on which the SAIF first meets or exceeds the designated reserve
ratio of 1.25% of insured deposits. However, the FDIC may approve such a
transaction in the case of a SAIF member in default or if the transaction
involves an insubstantial portion of the deposits of each participant. In
addition, mergers, transfers of assets and assumptions of liabilities may be
approved by the appropriate bank regulator so long as deposit insurance premiums
continue to be paid to the SAIF for deposits attributable to the SAIF members,
plus an adjustment for the annual rate of growth of deposits in the surviving
bank without regard to subsequent acquisitions. Each depository institution
participating in a SAIF-to-BIF conversion transaction is required to pay an exit
fee to SAIF equal to 0.90% of the deposits transferred and an entrance fee to
BIF based on the current reserve ratio of the BIF. A savings institution is not
prohibited from adopting a commercial bank or savings bank charter if the
resulting bank remains a SAIF member.
Transactions with Affiliates. Transactions between savings institutions and
any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act.
An affiliate of a savings institution is any company or entity which controls,
is controlled by or is under common control with the savings institution. In a
holding company context, the parent holding company of a savings institution
(such as the Company) and any companies which are controlled by such parent
holding company are affiliates of the savings institution. Generally, Sections
23A and 23B (i) limit the extent to which the savings institution or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such institution's capital stock and surplus, and contain
an aggregate limit on all such transactions with all affiliates to an amount
equal to 20% of such capital stock and surplus, and (ii) require that all such
transactions be on terms substantially the same, or at least as favorable, to
the institution or subsidiary as those provided to a non-affiliate. The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of a guarantee and other similar types of transactions. In addition to the
restrictions imposed by Sections 23A and 23B, no savings institution may (i)
loan or otherwise extend credit to an affiliate (except for any affiliate which
engages only in activities which are permissible for savings and loan holding
companies), or (ii) purchase or invest in any stocks, bonds, debentures, notes
or similar obligations of any affiliate (except for affiliates which are
subsidiaries of the savings institution). Section 106 of the Bank Holding
Company Act ("BHCA"), which also applies to the Association, prohibits the
Association from extending credit to or offering any other services, or fixing
or varying the consideration for such extension of credit or service, on the
condition that the customer obtain some additional service from the institution
or certain of its affiliates or not obtain services of a competitor of the
institution, subject to certain exceptions.
Loans to Directors, Executive Officers and Principal Stockholders. Savings
institutions are also subject to the restrictions contained in Section 22(h) of
the Federal Reserve Act on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to an executive officer and to a
greater than 10% stockholder of a savings institution, and certain affiliated
entities of either, may not exceed, together with all other outstanding loans to
such person and affiliated entities, the institution's loan to one borrower
limit (generally equal to 15% of the institution's unimpaired capital and
surplus and an additional 10% of such capital and surplus for loans fully
secured by certain readily marketable collateral). Section 22(h) also prohibits
loans, above amounts prescribed by the appropriate federal banking agency, to
directors, executive officers and greater than 10% stockholders of a savings
institution, and their respective affiliates, unless such loan is approved in
advance by a majority of the board of directors of the institution with any
"interested" director not participating in the voting. The Federal Reserve Board
has prescribed the loan amount (which includes all other outstanding loans to
such person), as to which such prior board of director approval is required, as
being the greater of $25,000 or 5% of capital and surplus (up to $500,000).
Further, the Federal Reserve Board, pursuant to Section 22(h), requires that
loans to directors, executive officers and principal stockholders be made on
terms substantially the same as offered in comparable transactions to other
persons. Section 22(h) also generally prohibits a depository institution from
paying the overdrafts of any of its executive officers or directors. Section
22(g) of the Federal Reserve Act requires that loans to executive officers of
depository institutions not be made on terms more favorable than those afforded
to other borrowers, requires approval for such extensions of credit by the board
of
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<PAGE>
directors of the institution, and imposes reporting requirements for and
additional restrictions on the type, amount and terms of credits to such
officers. In addition, Section 106 of the BHCA prohibits extensions of credit to
executive officers, directors, and greater than 10% stockholders of a depository
institution by any other institution which has a correspondent banking
relationship with the institution, unless such extension of credit is on
substantially the same terms as those prevailing at the time for comparable
transactions with other persons and does not involve more than the normal risk
of repayment or present other unfavorable features.
Liquidity Requirements. The Association is required to maintain average
daily balances of liquid assets (cash, certain time deposits, bankers'
acceptances, highly rated corporate debt and commercial paper, securities of
certain mutual funds, and specified United States government, state or federal
agency obligations) equal to the monthly average of not less than a specified
percentage (currently 5%) of its net withdrawable savings deposits plus short-
term borrowings. The Association is also required to maintain average daily
balances of short-term liquid assets at a specified percentage (currently 1%) of
the total of its net withdrawable savings accounts and borrowings payable in one
year or less. Monetary penalties may be imposed for failure to meet liquidity
requirements. The average regulatory liquidity ratio of the Association for the
month of June 1997 was 5.51%.
Federal Home Loan Bank System. The Association is a member of the FHLB,
which consists of 12 Federal Home Loan Banks subject to supervision and
regulation by the Federal Housing Finance Board ("FHFB"). The FHLBs provide a
central credit facility primarily for member institutions. As a member of the
FHLB of Topeka, the Association is required to acquire and hold shares of
capital stock in the FHLB of Topeka in an amount at least equal to 1% of the
aggregate unpaid principal of its home mortgage loans, home purchase contracts
and similar obligations at the beginning of each year, or 1/20 of its advances
from the FHLB of Topeka, whichever is greater. The Association was in compliance
with this requirement with investment in FHLB of Topeka stock at June 30, 1997,
of $988,500. The FHLB of Topeka is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes advances to
members in accordance with policies and procedures established by the FHFB and
the Board of Directors of the FHLB of Topeka. As of June 30, 1997, the
Association had $13.5 million in advances and other borrowings from the FHLB of
Topeka. See "Business of the Association -- Deposit Activities and Other Sources
of Funds -- Borrowings."
Federal Reserve System. Pursuant to regulations of the Federal Reserve
Board, a thrift institution must maintain average daily reserves equal to 3% on
the first $49.3 million of transaction accounts, plus 10% on the remainder. This
percentage is subject to adjustment by the Federal Reserve Board. Because
required reserves must be maintained in the form of vault cash or in a non-
interest bearing account at a Federal Reserve Bank, the effect of the reserve
requirement is to reduce the amount of the institution's interest-earning
assets. As of June 30, 1997, the Association met its reserve requirements.
Regulation of the Company
General. Following the Conversion, the Company will be a savings and loan
holding company within the meaning of the Home Owners' Loan Act, as amended
("HOLA"). As such, the Company will be registered with the OTS and subject to
OTS regulations, examinations, supervision and reporting requirements. As a
subsidiary of a savings and loan holding company, the Association will be
subject to certain restrictions in its dealings with the Company and affiliates
thereof. The Company also will be required to file certain reports with, and
otherwise comply with the rules and regulations of the SEC under the federal
securities laws.
Activities Restrictions. The Board of Directors of the Company presently
intends to operate the Company as a unitary savings and loan holding company.
There are generally no restrictions on the activities of a unitary savings and
loan holding company. However, if the Director of OTS determines that there is
reasonable cause to believe that the continuation by a savings and loan holding
company of an activity constitutes a serious risk to the financial safety,
soundness, or stability of its subsidiary savings association, the Director of
OTS may impose such restrictions as deemed necessary to address such risk,
including limiting: (i) payment of dividends by the savings institution, (ii)
transactions between the savings institution and its affiliates; and (iii) any
activities of the savings institution that might create a serious risk that the
liabilities of the holding company and its affiliates may be imposing on the
savings institution.
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<PAGE>
Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding companies, if the savings institution subsidiary of
such a holding company fails to meet the QTL Test, then such unitary holding
company shall also presently become subject to the activities restrictions
applicable to multiple holding companies and unless the savings association
requalifies as a QTL within one year thereafter, register as, and become subject
to, the restrictions applicable to a bank holding company. See " -- Regulation
of the Association -- Qualified Thrift Lender Test."
If the Company were to acquire control of another savings association,
other than through merger or other business combination with the Association,
the Company would thereupon become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve emergency
thrift acquisitions and where each subsidiary savings institution meets the QTL
Test, the activities of the Company and any of its subsidiaries (other than the
Association or other subsidiary savings institutions) would thereafter be
subject to further restrictions. Among other things, no multiple savings and
loan holding company, or subsidiary thereof which is not a savings institution,
may commence or continue for a limited period of time after becoming a multiple
savings and loan holding company or subsidiary thereof, any business activity,
upon prior notice to, and no objection by the OTS, other than: (i) furnishing or
performing management services for a subsidiary savings institution; (ii)
conducting an insurance agency or escrow business; (iii) holding, managing, or
liquidating assets owned by or acquired from a subsidiary savings institution;
(iv) holding or managing properties used or occupied by a subsidiary savings
institution; (v) acting as trustee under deeds of trust; (vi) those activities
previously directly authorized by regulation as of March 5, 1987 to be engaged
in by multiple holding companies; or (vii) those activities authorized by the
Federal Reserve Board as permissible for savings and loan holding companies,
unless the Director of OTS by regulation prohibits or limits such activities for
savings and loan holding companies. Those activities described in (vii) above
must also be approved by the Director of OTS prior to being engaged in by a
multiple holding company.
Restrictions on Acquisitions. The HOLA generally prohibits savings and loan
holding companies from acquiring, without prior approval of the Director of OTS,
(i) control of any other savings institution or savings and loan holding company
or substantially all the assets thereof, or (ii) more than 5% of the voting
shares of a savings institution or holding company thereof which is not a
subsidiary. Except with the prior approval of the Director of OTS, no director
or officer of a savings and loan holding company or person owning or controlling
by proxy or otherwise more than 25% of such company's stock, may also acquire
control of any savings institution, other than a subsidiary savings institution,
or of any other savings and loan holding company.
The Director of OTS may only approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
institutions in more than one state if: (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home or
branch office in the state of the institution to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
institution pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act; or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by state-chartered institutions or savings and loan holding companies
located in the state where the acquiring entity is located (or by a holding
company that controls such state-chartered savings institutions).
The OTS regulations permit federal associations to branch in any state or
states of the United States and its territories. Except in supervisory cases, or
when interstate branching is otherwise permitted by state law or other statutory
provision, a federal association may not establish an out-of-state branch unless
(i) the federal association qualifies as a QTL or as a "domestic building and
loan association" under ss.7701(a)(19) of the Code and the total assets
attributable to all branches of the association in the state would qualify such
branches taken as a whole as a QTL or for treatment as a domestic building and
loan association and (ii) such branch would not result in (a) formation of a
prohibited multi-state multiple savings and loan holding company or (b) a
violation of certain statutory restrictions on branching by savings association
subsidiaries of banking holding companies. Federal associations generally may
not establish new branches unless the association meets or exceeds minimum
regulatory capital requirements. The OTS will also consider the association's
record of compliance with the Community Reinvestment Act of 1977 in connection
with any branch application.
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<PAGE>
Under the BHCA, bank holding companies are specifically authorized to
acquire control of any savings association. Pursuant to rules promulgated by the
Federal Reserve Board, owning, controlling or operating a savings institution is
a permissible activity for savings and loan holding companies, if the savings
institution engages only in deposit-taking activities and lending and other
activities that are permissible for bank holding companies. A bank holding
company that controls a savings institution may merge or consolidate the assets
and liabilities of the savings institution with, or transfer assets and
liabilities to, any subsidiary bank which is a member of the BIF with the
approval of the appropriate federal banking agency and the Federal Reserve
Board. The resulting bank will be required to continue to pay assessments to the
SAIF at the rates prescribed for SAIF members on the deposits attributable to
the merged savings institution plus an annual growth increment. In addition, the
transaction must comply with the restrictions on interstate acquisitions of
commercial banks under the BHCA.
Federal Securities Law. The Company has filed with the SEC a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
for the registration of the Common Stock to be issued in the Conversion. Upon
completion of the Conversion, the Common Stock will be registered with the SEC
under the Exchange Act and, under OTS regulations, generally may not be
deregistered for at least three years thereafter. The Company will be subject to
the information, proxy solicitation, insider trading restrictions and other
requirements of the Exchange Act.
The registration under the Securities Act of the Common Stock does not
cover the resale of such shares. Shares of the Common Stock purchased by persons
who are not affiliates of the Company may be resold without registration. Shares
purchased by an affiliate of the Company will be subject to the resale
restrictions of Rule 144 under the Securities Act. If the Company meets the
current public information requirements of Rule 144 under the Securities Act,
each affiliate of the Company who complies with the other conditions of Rule 144
(including those that require the affiliate's sale to be aggregated with those
of certain other persons) would be able to sell in the public market, without
registration, a number of shares not to exceed, in any three-month period, the
greater of (i) 1% of the outstanding shares of the Company or (ii) the average
weekly volume of trading in such shares during the preceding four calendar
weeks. Provision may be made in the future by the Company to permit affiliates
to have their shares registered for sale under the Securities Act under certain
circumstances. There are currently no demand registration rights outstanding.
However, in the event the Company at some future time determines to issue
additional shares from its authorized but unissued shares, the Company might
offer registration rights to certain of its affiliates who want to sell their
shares.
TAXATION
General
The Association files a consolidated federal income tax return based on the
fiscal year. After the Conversion, it is expected that the Company and the
Association, together with the Association's subsidiary, will file a
consolidated federal income tax return based on a fiscal year ending June 30.
Consolidated returns have the effect of deferring gain or loss on intercompany
transactions and allowing companies included within the consolidated return to
offset income against losses under certain circumstances.
Federal Income Taxation
The Company and the Association will file a consolidated federal income tax
return.
Thrift institutions are subject to the provisions of the Code in the same
general manner as other corporations. Prior to recent legislation, institutions
such as the Association which met certain definitional tests and other
conditions prescribed by the Code benefitted from certain favorable provisions
regarding their deductions from taxable income for annual additions to their bad
debt reserve. For purposes of the bad debt reserve deduction, loans were
separated into "qualifying real property loans," which generally are loans
secured by interests in certain real property, and nonqualifying loans, which
are all other loans. The bad debt reserve deduction with respect to
nonqualifying loans was based on actual loss experience, however, the amount of
the bad debt reserve deduction with respect to qualifying real property loans
could be based upon actual loss experience (the "experience method") or a
percentage of taxable income determined without regard to such deduction (the
"percentage of taxable income method"). Legislation recently signed
54
<PAGE>
by the President repealed the percentage of taxable income method of calculating
the bad debt reserve. The Association historically has elected to use the
percentage method.
Earnings appropriated to an institution's bad debt reserve and claimed
as a tax deduction were not available for the payment of cash dividends or for
distribution to shareholders (including distributions made on dissolution or
liquidation), unless such amount was included in taxable income, along with the
amount deemed necessary to pay the resulting federal income tax.
Beginning with the first taxable year beginning after December 31,
1995, savings institutions, such as the Association, will be treated the same as
commercial banks. Institutions with $500 million or more in assets will only be
able to take a tax deduction when a loan is actually charged off. Institutions
with less than $500 million in assets will still be permitted to make deductible
bad debt additions to reserves, but only using the experience method.
In 1996 the Association's federal corporate income tax returns for 1995
were audited with no significant correction. The Association's tax returns have
not been otherwise audited in the last five years.
Under provisions of the Revenue Reconciliation Act of 1993 ("RRA"),
enacted on August 10, 1993, the maximum federal corporate income tax rate was
increased from 34% to 35% for taxable income over $10.0 million, with a 3%
surtax imposed on taxable income over $15.0 million. Also under provisions of
RRA, a separate depreciation calculation requirement has been eliminated in the
determination of adjusted current earnings for purposes of determining
alternative minimum taxable income, rules relating to payment of estimated
corporate income taxes were revised, and certain acquired intangible assets such
as goodwill and customer-based intangibles were allowed a 15-year amortization
period. Beginning with tax years ending on or after January 1, 1993, RRA also
provides that securities dealers must use mark-to-market accounting and
generally reflect changes in value during the year or upon sale as taxable gains
or losses. The IRS has indicated that financial institutions which originate and
sell loans will be subject to the rule.
State Income Taxation
The State of Colorado imposes no income or franchise taxes on savings
institutions. The State of Colorado taxes the Association's federal taxable
income, adjusted for interest income received directly from federal agencies, at
a 5% rate.
MANAGEMENT OF THE COMPANY
The Board of Directors of the Company consists of the same individuals
who serve as directors of the Association. Their biographical information is set
forth under "Management of the Association." The Board of Directors of the
Company is divided into three classes. Directors of the Company will serve for
three year terms or until their successors are elected and qualified, with
approximately one-third of the directors being elected at each annual meeting of
stockholders, beginning with the first annual meeting of stockholders following
the Conversion.
The following individuals hold the offices in the Company set forth
below opposite their names.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
Larry D. Smith President
Scott G. Erchul Vice President
Frank L. DeLay Chief Financial Officer
</TABLE>
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors of the Company.
55
<PAGE>
Since the formation of the Company, none of the executive officers,
directors or other personnel have received remuneration from the Company.
Information concerning the principal occupations, employment and compensation of
the directors and officers of the Company during the past five years is set
forth under "Management of the Association." Executive officers and directors of
the Company will be compensated as described below under "Management of the
Association."
MANAGEMENT OF THE ASSOCIATION
Directors
Because the Association is a mutual savings and loan association, its
members have elected its Board of Directors. Upon completion of the Conversion,
each director of the Association immediately prior to the Conversion will
continue to serve as directors of the Converted Association. The term of each
director is three years, and approximately one-third of the members of the Board
of Directors are elected each year. The Conversion will not affect the classes
or terms of the existing directors. Because the Company will own all the issued
and outstanding capital stock of the Converted Association following the
Conversion, the Board of Directors of the Company will elect the directors of
the Converted Association. Following the Conversion, Mr. Mitchell, who currently
serves as Chairman of the Board of Directors of the Association, will become
Chairman of the Board of Directors of the Converted Association. Mr. Smith, who
currently serves as President of the Association, will become President and
Chief Executive Officer of the Converted Association. They each will serve in
these same capacities for the Company.
The following table sets forth certain information with respect to the
individuals who serve currently as members of the Association's Board of
Directors. There are no arrangements or understandings between the Association
and any director pursuant to which such person has been elected a director of
the Association, and no director is related to any other director or executive
officer by blood, marriage or adoption.
<TABLE>
<CAPTION>
Age at
June 30,
Name 1997 Director Since Term to Expire
- ---- ------- -------------- --------------
<S> <C> <C> <C>
Richard A. Young 43 1992 1998
Philip W. Harsh 52 1995 1998
Larry D. Smith 39 1987 1999
Robert B. Mitchell 71 1972 2000
Timothy R. Glenn 39 1991 2000
Scott G. Erchul 35 1997 2000
</TABLE>
Presented below is certain information concerning the directors of the
Association. Unless otherwise stated, all directors have held the positions
indicated for at least the past five years.
Richard A. Young has served as a Director of the Association since 1992
and will serve as Secretary and Treasurer of the Company and the Converted
Association. He is a Certified Public Accountant and a partner in the accounting
firm of Swartz & Young P.C. He is a high school football coach, treasurer and
board member of the local Pop Warner Football League and youth leader for a LDS
church scouting troop.
Philip W. Harsh has been an owner and agent of the Fredrickson Brown
Insurance Agency since 1990 and a Director of the Association since 1995. He is
a member of the Salida Chamber of Commerce and the Chamber of Commerce Business
Development Group. Also, he has served as President of the ruling group for the
Salida Public Golf Course and is active in the Independent Insurance Agents of
America's Insurance Youth Golf Classic.
Larry D. Smith has been President of the Association since 1991 and a
Director of the Association since 1987. He will serve as the President and Chief
Executive Officer of the Company and the Converted Association. From 1978 to
1991, he served as Controller of the Association. He is active in the Salida
school system and youth sports by serving
56
<PAGE>
as a coach for various sports teams and by serving on the High School Building
Accountability and Business Advisory Committees. He is also involved with
several organizations which promote the academic and athletic development of the
youth of Salida.
Robert B. Mitchell has served as a Director of the Association since
1972. He is retired after 20 years as the Post Master of Salida, Colorado.
Timothy R. Glenn has served as a Director of the Association since
1991. He is the Funeral Director and Owner of the Lewis & Glenn Funeral Home and
the Coroner for Chaffee County, Colorado. His civic activities include the
Salida Rotary Club, Elks Lodge, 4-H Club and the St. Joseph Catholic Church. He
has also served as President and a member of the Board of Directors of the
Colorado Association of Cemeteries.
Scott G. Erchul has been a member of the Board of Directors of the
Association since 1997. He has served as Vice President of the Association since
1991 and will serve as Vice President of the Company and the Converted
Association. His past and current community involvement include the Rotary Club,
Academic Booster Club committee member and youth sports coach for football,
baseball and soccer.
Executive Officers Who Are Not Directors
Frank L. DeLay has served as the Chief Financial Officer of the
Association since 1992 and he will serve in a similar capacity for the Company.
He is a member and current President of the Kiwanis Club. Also, he is a member
of the Board of Directors of the Heart of the Rockies Chamber of Commerce.
Committees of the Board of Directors
The Board of Directors of the Association meets monthly and may have
additional special meetings, as required. During the year ended June 30, 1997,
the Board met 28 times. No director attended fewer than 75% in the aggregate of
the total number of Board meetings held during the year ended June 30, 1997 and
the total number of meetings held by committees on which he served during such
fiscal year.
The Board of Directors' Audit Committee consists of Directors Mitchell
and Young. The Audit Committee, met two times during the year ended June 30,
1997 to examine and approve the audit report prepared by the independent
auditors of the Association to review and recommend the independent auditors to
be engaged by the Association, to review the internal audit function and
internal accounting controls, and to review and approve conflict of interest and
audit policies. Following the Conversion, it is expected that the Audit
Committee will be comprised of two non-employee directors.
The Association's full Board of Directors serves as the Nominating
Committee, and is responsible for considering potential nominees to the Board of
Directors. During the year ended June 30, 1997, the Board of Directors met one
time as a nominating committee. Following the Conversion, it is expected that
the Company's full Board of Directors will act as a nominating committee for
selecting the management nominees for election as directors of the Company in
accordance with the Company's Bylaws.
The Board of Directors' Compensation Committee consists of the full
Board of Directors. The Compensation Committee evaluates the compensation and
benefits of the directors, officers and employees, recommends changes, and
monitors and evaluates employee performance. All compensation decisions are made
by the full Board of Directors. The Board of Directors met four times as the
Compensation Committee during the fiscal year ended June 30, 1997.
57
<PAGE>
Executive Compensation
The following table sets forth the cash and noncash compensation for
the last fiscal year awarded to or earned by the Chief Executive Officer. No
executive officer of the Company earned salary and bonus in fiscal year 1997
exceeding $100,000 for services rendered in all capacities to the Association.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------
Other Annual All Other
Name Year Salary Bonus Compensation(1) Compensation
- ---- --- ------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Larry D. Smith 1997 $70,142 $ 7,500 $7,000 (2) $ --
President
</TABLE>
- ---------------
(1) Executive officers of the Association receive indirect compensation in
the form of certain perquisites and other personal benefits. The amount
of such benefits received by the named executive officers in fiscal
1997 did not exceed 10% of each of the executive officer's respective
salary and bonus.
(2) Compensation for serving on the Board of Directors.
Director Compensation
Effective May 1997, the Association's directors receive fees of $1,000
per month. It is expected that Directors will receive no additional fees for
serving on the Board of Directors of the Company as well as the Board of
Directors of the Converted Association. Prior to May 1997, directors received
fees of $500 per month. No fees are paid for serving on committees of the Board
of Directors. During fiscal year 1997, the Association's directors' fees paid
totaled $65,500.
Certain Benefit Plans and Agreements
In connection with the Conversion, the Company's and the Association's
Boards of Directors have approved certain stock incentive plans, employment
agreements, change-in-control severance agreements, and incentive compensation
plans.
Basis for Awards of Benefits and Compensation. The Company's and the
Association's Boards of Directors have evaluated and approved the terms of the
employment agreements and other benefits described below. In its review of the
benefits and compensation of the executive officers and the terms of the
employment agreements, the Boards of Directors considered a number of factors,
including the experience, tenure and ability of the executive officers, their
performance for the Association during their tenure and the various legal and
regulatory requirements regarding the levels of compensation which may be paid
to employees of savings associations.
Stock Option Plan. The Board of Directors of the Company intends to
implement the Option Plan more than six months after completion of the
Conversion. The purpose of the Option Plan is to provide additional incentive to
directors and employees by facilitating their acquisition of Common Stock. The
Option Plan will have a term of ten years, after which no awards may be made.
A number of shares equal to 10% of the shares of Conversion Stock sold
to the public in the Offering would be reserved for future issuance by the
Company -- in the form of newly issued shares, or treasury shares, or shares
held in a grantor trust -- upon exercise of stock options ("Options") or stock
appreciation rights ("SARs"). Options and SARs are collectively referred to
herein as "Awards." The exercise price of shares subject to outstanding Awards
will be equitably adjusted upon a stock split, recapitalization, or similar
event (including a return of capital). If Awards should expire, become
unexercisable, or be forfeited for any reason without having been exercised or
having become vested in full, the shares of Common Stock subject to such Awards
would be available for the grant of additional Awards under the Option Plan.
58
<PAGE>
It is expected that the Option Plan will be administered by a committee
(the "Option Committee") of at least two directors who are designated by the
Board of Directors and are "non-employee directors" within the meaning of the
federal securities laws. Directors Mitchell, Glenn, Harsh, and Young are
currently expected to serve as the Option Committee. Directors and employees
will be eligible to receive Awards, and the Option Committee will select the
recipients of Awards, the number of shares to be subject to such Awards, and the
terms and conditions of such Awards (subject to the terms of the Option Plan).
The Options to be awarded to employees pursuant to the Option Plan may or may
not qualify as incentive stock options ("ISOs") that afford favorable tax
treatment to recipients upon compliance with certain restrictions pursuant to
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
that do not result in tax deductions to the Company unless optionees fail to
comply with Section 422 of the Code.
Subject to the regulatory requirements explained below under the
heading "OTS Rules Applicable to the Option Plan and MRP" each Option will have
an exercise price not less than 50% of the market value of the underlying shares
on the date of the grant, will become exercisable upon terms determined by the
Option Committee, and will become immediately exercisable upon a change in
control (within the meaning of the Employment Agreements) or an optionee's
termination of employment due to retirement, death, or disability. Nevertheless,
each Option will expire no later than ten years from the date it is granted, and
will expire earlier, unless otherwise determined by the Option Committee, upon
(i) an employee's termination of employment for "just cause" (as defined in the
Option Plan), (ii) the date two years after termination of such service due to
the employee's death, (iii) the date one year after an employee terminates
service due to disability, or (iv) the date one year after an employee
terminates service for a reason other than just cause, death, or disability.
Otherwise unexpired Options granted to non-employee directors will automatically
expire one year after termination of service on the Board of Directors (two
years in the event of death).
An SAR may be granted in tandem with all or any part of any Option or
without any relationship to any Option. Whether or not an SAR is granted in
tandem with an Option, exercise of the SAR will entitle the optionee to receive,
as the Option Committee prescribes in the grant, all or a percentage of the
excess of the then fair market value of the shares of Common Stock subject to
the SAR at the time of its exercise over the aggregate exercise price of the
shares subject to the SAR when granted. Payment to the optionee may be made in
cash or shares of Common Stock, as determined by the Option Committee.
The Company will receive no monetary consideration for the granting of
Awards under the Option Plan, and will receive no monetary consideration other
than the Option exercise price for each share issued to optionees upon the
exercise of Options. The Option Committee will have the discretion to impose
transfer restrictions, such as a right of first refusal, on the Common Stock
subject to Awards. Optionees will be permitted to transfer Awards to family
members or trusts under specified circumstances, but awards may not otherwise be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution. Upon an
optionee's exercise of an Option, the Company may, if provided by the Option
Committee in the underlying Option agreement, pay to the optionee a cash amount
up to but not exceeding the amount of dividends, if any, declared on the
underlying shares between the date of grant and the date of exercise of the
Option.
It is expected that upon the implementation of the Option Plan, Mr.
Smith will receive an Award with respect to 25% of the shares of Conversion
Stock reserved under the Option Plan, and each director at that time who is not
then an employee will receive an Award with respect to 5% of such shares. No
SARs are expected to be granted when the Option Plan becomes effective. At any
time following consummation of the Conversion, the Bank or the Company may
contribute sufficient funds to a grantor trust to purchase, and such trust may
purchase, a number of shares of Common Stock equal to 10% of the shares sold to
the public in the Offering. Such shares would be held by the trust for issuance
to Option holders upon the exercise of Options in the event the Option Plan is
implemented. Whether such shares are purchased, and the timing of such
purchases, will depend on market and other conditions and the alternative uses
of capital available to the Company.
Management Recognition Plan. The Board of Directors of the Company
intends to implement the MRP more than six months after completion of the
Conversion. The purpose of the MRP is to enable the Company and the Bank to
retain personnel of experience and ability in key positions of responsibility.
59
<PAGE>
A number of shares equal to 4% of the shares of Conversion Stock sold
in the Offering would be reserved for future issuance under the MRP. The same
non-employee directors who are appointed to the Option Committee are expected to
act, by majority, as the committee (the "MRP Committee") responsible for
selecting the directors and employees who will receive MRP awards, as well as
making general decisions associated with the MRP's operation. The directors
serving as the MRP Committee are also expected to serve as trustee of the trust
associated with the MRP (the "MRP Trust"). In that capacity, they will have the
responsibility to hold and invest all funds contributed to the MRP Trust. Shares
held in the MRP Trust will be voted by the MRP trustees in the same proportion
as the shares held by the Company's employee stock ownership plan, and will be
distributed as each award vests. The compensation expense for the Company for
MRP awards will equal the fair market value of the Common Stock on the date of
the grant pro rated over the years during which vesting occurs. The Company's
Board of Directors can terminate the MRP at any time, and, if it does so, any
shares not subject to outstanding awards will revert to the Company.
The shares awarded pursuant to the MRP will be in the form of awards
which may be transferred to family members or trusts under specified
circumstances, but may not otherwise be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent and distribution. Subject to the regulatory requirements explained below
under the heading "OTS Rules Applicable to the Option Plan and MRP" each MRP
award will vest in accordance with conditions determined by the MRP Committee,
with an acceleration of vesting to 100% upon a participant's death, disability,
or retirement or a "change in control" within the meaning of the Employment
Agreement. Dividends on unvested shares will be held in the MRP Trust for
payment as vesting occurs. Participants in the MRP may elect to defer all or a
percentage of their MRP awards that would have otherwise been transferred to the
participants upon vesting of said awards. If, however, a participant terminates
employment before becoming fully vested in an MRP award, he or she forfeits all
rights to the allocated shares under restriction.
It is expected that upon the implementation of the MRP, Mr. Smith will
receive an award with respect to 25% of the shares reserved for MRP awards, and
each director who is not an employee but is a director on the effective date
shall receive an award with respect to 5% of such shares. At any time following
consummation of the Conversion the Bank or the Company will contribute
sufficient funds to the MRP Trust so that the trust can purchase a number of
shares of Common Stock equal to 4% of those sold in the Offering. Whether those
shares will be purchased in the open market or newly issued by the Company, and
the timing of such purchases, will depend on market and other conditions and the
alternative uses of capital available to the Company.
OTS Rules Applicable to the Option Plan and MRP. Current OTS
regulations require that, if the Option Plan or MRP is implemented within one
year following completion of the Conversion, (i) no employee will receive awards
covering more than 25% of the shares subject to the plan, (ii) non-employee
directors will not receive awards exceeding 30% in the aggregate, and 5%
individually, of such shares, (iii) awards will vest over a period of at least
five years and vesting will not accelerate upon an individual's retirement or a
corporate change in control, (iv) the exercise price for Options will at least
equal the fair market value of the underlying shares on its grant date, and
(v) the plan will not be implemented before, or in the absence of, its receipt
of stockholder approval, and no awards will be made prior to the receipt of such
approval.
401(k) Plan. The Association maintains a defined contribution plan,
which is designed to qualify under Sections 401(a) and 401(k) of the Code (the
"401(k) Plan"). An employee is eligible to participate in the 401(k) Plan on or
after attaining age 18 and completion of one year of service. The 401(k) Plan
permits a participant to make before-tax contributions through regular salary
reductions of up to 15% of salary payable. The 401(k) Plan is intended to comply
with all the rights and protection afforded employees pursuant to the Employee
Retirement Income Security Act of 1974, as amended.
Participants are at all times fully vested in their elective salary
deferrals under the 401(k) Plan. Employer matching and discretionary
contributions to the 401(k) Plan vest based on years of service, with
participants becoming 20% vested after 3 years of service, 40% after 4 years of
service, 60% after 5 years of service, 80% after 6 years of service, and 100%
after 7 years of service. Benefits are paid following a participant's
termination of employment.
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Participants will be permitted to direct, on a one-time basis, that all
or part of their 401(k) Plan account balances be invested in Common Stock.
Voting rights for such stock, to be held in trust for participants, are expected
to be exercisable by participants.
Employee Stock Ownership Plan. In connection with the Conversion, the
Company's Board of Directors intends to adopt an employee stock ownership plan
("ESOP"), effective as of July 1, 1997. Employees of the Company and its
subsidiaries who have attained age 18 and completed one year of service will be
eligible to participate in the ESOP. The Company will submit an application to
the IRS for a letter of determination as to the tax-qualified status of the
ESOP. Although no assurances can be given, the Company expects the ESOP to
receive a favorable letter of determination from the IRS.
The ESOP is to be funded by contributions made by the Company or the
Association in cash or shares of Common Stock. The ESOP intends to borrow funds
from the Company in an amount sufficient to purchase 8% of the Common Stock
issued in the Conversion. This loan will be secured by the shares of Common
Stock purchased and earnings thereon. Shares purchased with such loan proceeds
will be held in a suspense account for allocation among participants as the loan
is repaid. The Company expects to contribute sufficient funds to the ESOP to
repay such loan over a ten-year period, plus such other amounts as the Company's
Board of Directors may determine in its discretion.
Upon the occurrence of a "change in control" (as defined in the ESOP),
the outstanding balance of any outstanding securities acquisition loans under
the ESOP will be discharged through a transfer or sale of shares held as
collateral under such loan, with any remaining shares allocated to participant
accounts pro rata based on their account balances. Participants terminating
employment on or after the change in control will be entitled to receive a cash
payment from the Company equal to the amount, if any, plus earnings thereon,
which would have been allocated to the participant's account immediately
following the change in control but was precluded from allocation based on
allocation limits applicable under federal tax laws.
Contributions to the ESOP and shares released from the suspense account
will be allocated among participants on the basis of their annual wages subject
to federal income tax withholding, plus any amounts withheld under a plan
qualified under Sections 125 or 401(k) of the Code and sponsored by the Company
or the Association. Participants must be employed at least 500 hours in a plan
year in order to receive an allocation. Each participant's interest under the
ESOP becomes vested at the rate of 20% for each of the participant's years of
service with the company or the Association, and thereby becomes 100% vested
upon a participant's completion of five years of service. For vesting purposes,
a year of service means any plan year in which an employee completes at least
1,000 hours of service (whether before or after the ESOP's July 1, 1997
effective date). Vesting accelerates to 100% upon a participant's attainment of
age 65, death or disability. Forfeitures will be reallocated to participants on
the same basis as other contributions. Benefits are payable upon a participant's
retirement, death, disability or separation from service and will be paid in a
lump sum in whole shares of Common Stock (with cash paid in lieu of fractional
shares). Benefits paid to a participant in Common Stock that is not publicly
traded on an established securities market will be subject both to a right of
first refusal by the Company and to a put option by the participant. Dividends
paid on allocated shares are expected to be paid to participants or used to
repay the ESOP loan, and dividends on unallocated shares are expected to be used
to repay the ESOP loan.
It is expected that the Company will administer the ESOP and that
Directors Mitchell, Glenn, Harsh, and Young will be appointed as trustees of the
ESOP (the "ESOP Trustees"). The ESOP Trustees must vote all allocated shares
held in the ESOP in accordance with the instructions of the participants.
Unallocated shares and allocated shares for which no timely direction is
received are expected to be voted by the ESOP Trustees in the same proportion as
the participant-directed voting of allocated shares.
Long-Term Incentive Plan. The Association's Board of Directors has
adopted the Salida Building and Loan Association Long-Term Incentive Plan (the
"LTIP") effective June 10, 1997 (the "Effective Date"), for its directors who
are members of the Association's Board of Directors (the "Board") at some time
on or after the plan's effective date.
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On the Effective Date, a bookkeeping account was established by the
Association in the name of each participant, and each participant who was a
non-employee director on the Effective Date had his account credited with an
amount equal to the product of (i) $2,846, and (ii) his full years of service as
a director prior to the Effective Date. On each June 30 following the Effective
Date, each participant who is a non-employee director on such date shall have
his or her account credited with an amount equal to the product of $2,846 and
the safe performance factor. The safe performance factor is determined based on
the Association's actual performance as compared to budgeted goals for return on
average assets, non-performing assets, and CAMEL rating, provided that the safe
performance factor may not exceed 1.2. Also on the Effective Date, the LTIP
accounts of Messrs. Smith and Erchul (the "Employee Directors"), were credited
with amounts equal to $11,076 and $5,342, respectively, (the "Annual Credits")
for each full year of their service with the Association prior to such date. On
the June 30 occurring during each of the years following 1997 until termination
of employment, each Employee Director's account will be credited with an
additional amount equal to the Annual Credit times the safe performance factor.
Amounts credited to participants' accounts will be fully vested at all times.
Until distributed in accordance with the terms of the LTIP, each participant's
account will be credited with a rate of return on any amounts previously
credited. Prior to the Conversion, this rate of return equals the highest rate
of interest paid by the Association on certificates of deposit having a term of
one year. After the Conversion that rate of return will equal the
dividend-adjusted rate of return on the Company's common stock.
In the event of an Employee Director's disability or death, his account
will be credited with an amount equal to the difference (if any) between (i) 50%
of the present value of all benefits which would have been credited to his
account if he had otherwise remained employed by the Association to age 65, and
(ii) the benefits which are actually credited to his account at the time of his
termination. If his employment terminates in connection with or following a
change in control, his account will be credited with an amount equal to the
difference (if any) between (i) 100% of the present value of all benefits which
would have been credited to his account if he had otherwise remained employed by
the Association to age 65, and (ii) the benefits which are actually credited to
his account at the time of his termination, subject to applicable "golden
parachute" limitations under (S)280G of the Internal Revenue Code. "Change in
control" is defined the same as under the Employment Agreement described below.
Participants' accounts under the LTIP will be paid, in cash, in ten
substantially equal annual installments, beginning during the first quarter of
the calendar year which next follows the calendar year in which the participant
ceases to be a director. Notwithstanding the foregoing, a participant may elect
to receive LTIP benefits in a lump sum or over a period shorter than ten years.
In the event of a participants' death, the balance of his LTIP account will be
paid in a lump sum (unless the participant elects a distribution period up to
ten years) to his designated beneficiary, or if none, his estate.
Any benefits accrued under the LTIP will be paid from the Association's
general assets. The Association has established a trust in order to hold assets
with which to pay benefits. Trust assets will be subject to the claims of the
Association's general creditors. In the event a participant prevails over the
Association in a legal dispute as to the terms or interpretation of the LTIP, he
or she will be reimbursed for his or her legal and other expenses.
Incentive Compensation Plan. The Association's Board of Directors
adopted the Incentive Compensation Plan, effective July 1, 1997. The Incentive
Compensation Plan is administered by a committee (the "Incentive Compensation
Committee") which is expected to consist of the Association's non-employee
directors. Under the plan, employees will receive annual cash bonus awards from
a bonus pool determined under a performance-based formula. The bonus pool will
equal the multiple of (i) 30% of net income in excess of 80% of targeted net
income, times (ii) the NPA factor, times (iii) the CAMEL factor. The NPA factor
will equal 1.0 as long as the ratio of the Association's non-performing assets
and real-estate-owned to its total loans and real-estate-owned ("NPA Ratio") is
less than or equal to 1%, and will be reduced ratably to 0 for NPA Ratios
equaling or exceeding 2%. The CAMEL Factor will equal 1.2 for a CAMEL rating of
1, 1.0 for a CAMEL rating of 2, and 0 for CAMEL ratings of 3 or higher. In
determining performance for a fiscal year, the Incentive Compensation Committee
will have the discretion to take into account or disregard extraordinary
financial events. Mr. Smith is expected to receive approximately 25% of the
annual bonus pool, with the remaining 75% divided among the Association's other
employees, based on a schedule approved by the Incentive Compensation Committee.
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The Incentive Compensation Plan has an indefinite term, and the
Association has the right at any time to terminate or amend the Incentive
Compensation Plan for any reason; provided, that no amendment or termination
may, without the consent of the participant or, if applicable, the participant's
beneficiary, adversely affect such participant's or beneficiary's rights with
respect to benefits accrued as of the date of such amendment or termination.
Employment Agreements. The Company and the Association has entered into
employment agreements (the "Employment Agreements") under which Larry D. Smith
would serve as President and Scott G. Erchul will serve as Vice President of the
Association and the Company (the "Employees"). In such capacities, the Employees
are responsible for overseeing all operations of the Association and the
Company, and for implementing the policies adopted by the Boards of Directors.
Such Boards believe that the Employment Agreements assure fair treatment of the
Employees in their career with the Company and the Association by assuring them
of some financial security.
The Employment Agreements will become effective upon their execution
and will provide for a term of three years, with an annual base salary equal to
each Employee's existing base salary rate in effect on the effective date. On
each anniversary date of the commencement of the Employment Agreements, the term
of each Employee's employment may be extended for an additional one-year period
beyond the then effective expiration date, upon a determination by the Board of
Directors that the performance of the Employee has met the required performance
standards and that such Employment Agreements should be extended. The Employment
Agreements provide each Employee with a salary review by the Board of Directors
not less often than annually, as well as with inclusion in any discretionary
bonus plans, retirement and medical plans, customary fringe benefits, vacation
and sick leave. An Employment Agreement shall terminate upon the Employee's
death, may terminate upon the Employee's disability and are terminable by the
Association for "just cause" (as defined in the Employment Agreements). In the
event of termination for just cause, no severance benefits are available. If the
Company or the Association terminates an Employee without just cause, the
Employee will be entitled to a continuation of his salary and benefits from the
date of termination through the remaining term of the Employment Agreements plus
an additional 12 month's salary and, at the Employee's election, either
continued participation in benefit plans which the Employee would have been
eligible to participate in through the Employment Agreements' expiration date or
the cash equivalent thereof. If the Employment Agreements are terminated due to
the Employee's "disability" (as defined in the Employment Agreements), the
Employee will be entitled to a continuation of his salary and benefits through
the date of such termination, including any period prior to the establishment of
the Employee's disability. In the event of an Employee's death during the term
of his Employment Agreement, his estate will be entitled to receive his salary
through the last day of the calendar month in which the Employee's death
occurred. An Employee is able to voluntarily terminate his Employment Agreement
by providing 90 days' written notice to the Boards of Directors of the
Association and the Company, in which case the Employee is entitled to receive
only his compensation, vested rights, and benefits up to the date of
termination. If an Employee's employment terminates for a reason other than just
cause, the Employee will, until he first becomes eligible for Medicare, be
entitled to purchase from the Association, at a rate not greater than that
applicable under COBRA, family medical insurance through any group health plan
maintained by the Association.
In the event of (i) the Employee's involuntary termination of
employment other than for "just cause" during the period beginning six months
before a change in control and ending on the later of the first anniversary of
the change in control or the expiration date of the Employment Agreements (the
"Protected Period"), (ii) the Employee's voluntary termination within 90 days of
the occurrence of certain specified events occurring during the Protected Period
which have not been consented to by the Employee, or (iii) the Employee's
voluntary termination of employment for any reason within the 30-day period
beginning on the date of the change in control, the Employee will be paid within
10 days of such termination (or the date of the change in control, whichever is
later) an amount equal to the difference between (i) 2.99 times his "base
amount," as defined in Section 280G(b)(3) of the Internal Revenue Code, and (ii)
the sum of any other parachute payments, as defined under Section 280G(b)(2) of
the Internal Revenue Code, that the Employee receives on account of the change
in control.
"Change in Control" means any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 25% of the voting
stock of the Association or the Holding Company thereof, (ii) the acquisition of
the ability to control the election of a majority of the Association's or the
Company's Directors, (iii) the acquisition of a controlling influence over the
management or policies of the Association or of the Company by any person or by
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persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), or (iv) during any period of two consecutive
years, individuals (the "Continuing Directors") who at the beginning of such
period constitute the Board of Directors of the Association or of the Company
(the "Existing Board") cease for any reason to constitute at least two-thirds
thereof, provided that any individual whose election or nomination for election
as a member of the Existing Board was approved by a vote of at least two-thirds
of the Continuing Directors then in office shall be considered a Continuing
Director. Notwithstanding the foregoing, the Company's ownership of the
Association shall not of itself constitute a Change in Control for purposes of
the Agreement. For purposes of this paragraph only, the term "person" refers to
an individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. Notwithstanding the foregoing, a
"Change in Control" shall not be deemed to occur solely by reason of a
transaction in which the Association converts to the stock form of organization,
or creates an independent holding company in connection therewith. The decision
of the Board as to whether a Change in Control has occurred shall be conclusive
and binding.
Each Employment Agreement with the Association provides that within 10
business days of a change in control, the Association shall fund, or cause to be
funded, a trust in the amount of 2.99 times the Employee's base amount, that
will be used to pay the Employee amounts owed to him. The payments that would be
made to Messrs. Smith and Erchul assuming their termination of employment under
the foregoing circumstances at June 30, 1997 would have been approximately
$197,000 and $127,000, respectively. These provisions may have an anti-takeover
effect by making it more expensive for a potential acquiror to obtain control of
the Company. For more information, see "Certain Anti-Takeover Provisions in the
Articles of Incorporation and Bylaws -- Additional Anti-Takeover Provisions."
In the event that the Employee prevails over the Company and the Association, or
obtains a written settlement, in a legal dispute as to the Employment Agreement,
he will be reimbursed for his legal and other expenses.
Change-in-Control Protective Agreements. The Company and the
Association intend to enter into change-in-control severance agreements (the
"Severance Agreements") with Frank L. DeLay, and Linda C. Rush (collectively,
the "Employees"), effective upon the closing of the Conversion.
The Severance Agreements will have a term beginning on the date of
completion of the Conversion and ending on the earlier of (a) three years after
the date of completion of the Conversion, and (b) the date on which one of these
individuals terminates employment with the Company and the Association, provided
that the Employee's rights under the Severance Agreement will continue, provided
the Agreement is in effect upon a Change in Control through the later of (i) the
first annual anniversary of the Change in Control, or (ii) the expiration of the
term of the Severance Agreement. On each annual anniversary date from the date
of commencement of the Severance Agreements, the term of the Severance
Agreements may be extended for additional one-year periods beyond the then
effective expiration date, upon a determination by the Board of Directors that
the performance of these individuals has met the required performance standards
and that such Severance Agreements should be extended.
Under the Severance Agreements, in the event of an Employee's
involuntary termination of employment in connection with, or within one year
after, any change in control of the Association or the Company, other than for
"just cause," the Employee will be paid within 10 days of such termination an
amount equal to his or her annual salary then in effect provided that no amount
shall be paid in excess of the difference between (i) 2.99 times his or her
"base amount" as defined in Section 280G(b)(3) of the Internal Revenue Code, and
(ii) the sum of any other parachute payments, as defined under Section
280G(b)(2) of the Internal Revenue Code, that he or she receives on account of
the change in control. "Change in Control" has the same meaning under the
Severance Agreements that it has under the Employment Agreements (see above).
Each Severance Agreement also provides for a similar lump sum payment to be made
in the event of an Employee's voluntary termination of employment within one
year following a change in control, upon the occurrence, or within 90 days
thereafter, of certain specified events following the change in control, which
have not been consented to in writing by one of them.
The Severance Agreements with the Association provides that within 10
business days of a change in control, the Association shall fund, or cause to be
funded, a trust in the amount of 2.99 times the base amount that will be used to
pay amounts owed to him or her upon termination other than for just cause within
one year of the change in control. The amount to be paid to an employee from
this trust upon his or her termination is determined according to the
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procedures outlined in the Severance Agreements with the Association, and any
money not paid to the employee is returned to the Association.
The aggregate payments that would be made to Employees DeLay and Rush,
assuming termination of employment under the foregoing circumstances at June 30,
1997, would have been approximately $________ and $________, respectively. These
provisions may have an anti-takeover effect by making it more expensive for a
potential acquiror to obtain control of the Company. For more information, see
"Certain Anti-Takeover Provisions in the Charter and Bylaws -- Additional
Anti-Takeover Provisions." In the event that one of these individuals prevails
over the Company and the Association in a legal dispute as to the Severance
Agreement, he or she will be reimbursed for his or her legal and other expenses.
Transactions with Management
The Association offers loans to its directors and officers. These loans
currently are made in the ordinary course of business with the same collateral,
interest rates and underwriting criteria as those of comparable transactions
prevailing at the time and to not involve more than the normal risk of
collectibility or present other unfavorable features. Under current law, the
Association's loans to directors and executive officers are required to be made
on substantially the same terms, including interest rates, as those prevailing
for comparable transactions and must not involve more than the normal risk of
repayment or present other unfavorable features. Furthermore, all loans to such
persons must be approved in advance by a disinterested majority of the Board of
Directors. At June 30, 1997, the Association had $689,000 in loans outstanding
to directors and executive officers, which is 5.61% of pro forma stockholders
equity at the midpoint of the Estimated Valuation Range. None of these loans had
favorable terms.
THE CONVERSION
The OTS has approved the Plan, subject to the Plan's approval by the
members of the Association entitled to vote on the matter and subject to the
satisfaction of certain other conditions imposed by the OTS in its approval.
Approval by the OTS, however, does not constitute a recommendation or
endorsement of the Plan.
General
On May 15, 1997, the Board of Directors of the Association unanimously
adopted, subject to approval by the OTS and the members of the Association, the
Plan, pursuant to which the Association would convert from a federal mutual
savings and loan association to a federal capital stock savings and loan
association as a wholly owned subsidiary of the Company. The OTS has approved
the Plan, subject to its approval by the members of the Association at the
Special Meeting called for that purpose to be held on _________, 1997.
The Conversion will be accomplished through the amendment of the
Association's existing Federal Mutual Charter and Bylaws to read in the form of
a Federal Stock Charter and Bylaws to authorize the issuance of capital stock by
the Converted Association, the issuance of all the Converted Association's
capital stock to be outstanding upon consummation of the Conversion to the
Company and the offer and sale of the Common Stock of the Company. Upon issuance
of the Converted Association's shares of capital stock to the Company, the
Converted Association will be a wholly owned subsidiary of the Company.
The Company has received approval from the OTS to become the holding
company of the Converted Association subject to the satisfaction of certain
conditions and to acquire all of the common stock of the Converted Association
to be issued in the Conversion in exchange for at least 50% of the net proceeds
from the sale of Common Stock in the Conversion. The Conversion will be effected
only upon completion of the sale of all of the shares of Common Stock to be
issued by the Company pursuant to the Plan.
The aggregate purchase price of the Common Stock to be issued in the
Conversion will be within the Estimated Valuation Range of between $7,650,000
and $10,350,000, which may be increased to $11,902,500, based upon an
independent appraisal of the estimated pro forma market value of the Common
Stock prepared by Ferguson. All shares
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of the Common Stock to be issued and sold in the Conversion will be sold at the
same price. The independent appraisal will be updated, if necessary, and the
final price of the shares of the Common Stock will be determined at the
completion of the Subscription and Community Offerings. Ferguson is experienced
in the valuation and appraisal of financial institutions. For additional
information, see " -- Stock Pricing and Number of Shares to be Issued."
The following is a brief summary of material aspects of the Conversion.
The summary is qualified in its entirety by reference to the provisions of the
Plan. A copy of the Plan is available for inspection at the office of the
Association and at the office of the OTS. The Plan is also filed as an exhibit
to the Registration Statement of which this Prospectus is a part, copies of
which may be obtained from the SEC. See "Additional Information."
Offering of Common Stock
Under the Plan, the Company is offering shares of the Common Stock
first to the Association's Eligible Account Holders, second to the ESOP, third
to Supplemental Eligible Account Holders and fourth to its Other Members who are
not Eligible Account Holders or Supplemental Eligible Account Holders in the
Subscription Offering. Subscription Rights received in any of the foregoing
categories will be subordinated to the Subscription Rights received by those in
a prior category, with the exception that any shares of Common Stock sold in
excess of the maximum of the Estimated Valuation Range may first be sold to the
ESOP. To the extent shares remain available for purchase after the Subscription
Offering, the Company may offer any such remaining shares to the general public
in the Community Offering. In the Community Offering, preference will be given
to natural persons and trusts of natural persons who are permanent residents of
the Local Community. The term "resident" as used in relation to the preference
afforded natural persons in the Local Community means any natural person who
occupies a dwelling within the Local Community, has an intention to remain
within the Local Community for a period of time (manifested by establishing a
physical, ongoing, nontransitory presence within the Local Community) and
continues to reside in the Local Community at the time of the Subscription and
Community Offerings. The Association may utilize deposit or loan records or such
other evidence provided to it to make the determination whether a person is
residing in the Local Community. To the extent the person is a corporation or
other business entity, the principal place of business or headquarters shall be
within the Local Community. To the extent the person is a personal benefit plan,
the circumstance of the beneficiary shall apply with respect to this definition.
In the case of all other benefit plans, circumstances of the trustee shall be
examined for purposes of this definition. In all cases, however, such
determination shall be in the sole discretion of the Association. The occurrence
of the Community Offering is subject to the availability of shares of the Common
Stock for purchase after satisfaction of all subscriptions in the Subscription
Offering. Additionally, all purchases in the Community Offering are subject to
the maximum and minimum purchase limitations set forth in the Plan and the right
of the Company to reject any such orders, in whole or in part.
As part of the Community Offering, the Plan provides that, if feasible,
all shares of Common Stock not purchased in the Subscription and Community
Offerings, if any, may be offered for sale to the general public in a Syndicated
Community Offering through selected dealers to be formed and managed by Trident
Securities. See " -- Syndicated Community Offering."
If the Community Offering and Syndicated Community Offering are
determined not to be feasible, the Association will immediately consult with the
OTS to determine the most viable alternative available to effect the completion
of the Conversion. Should no viable alternative exist, the Association may
terminate the Conversion with the concurrence of OTS. The Plan provides that the
Conversion must be completed within 24 months after the date of the approval of
the Plan by the members of the Association. In the event that the Conversion is
not effected, the Association will remain a federal mutual savings and loan
association, all subscription funds will be promptly returned to subscribers
with interest earned thereon and all withdrawal authorizations will be
cancelled. The completion of the Conversion is subject to market conditions and
other factors beyond the Association's control. No assurance can be given as to
the length of time after approval of the Plan at the Special Meeting that will
be required to complete the sale of the Common Stock to be offered in the
Conversion. If delays are experienced, significant changes may occur in the
estimated pro forma market value of the Company and the Converted Association
upon consummation of the Conversion, together with corresponding changes in the
offering price and the net proceeds realized by the Association from the sale of
the Common Stock. The Association would also incur substantial additional
printing, legal and
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accounting expenses in completing the Conversion. In the event the Conversion is
terminated, the Association would be required to charge all Conversion-related
expenses against current income.
Business Purposes
The Association's Board of Directors has formed the Company to serve
upon consummation of the Conversion as a holding company with the Converted
Association as its subsidiary. The portion of the net proceeds from the sale of
the Common Stock in the Conversion to be distributed to the Converted
Association by the Company will substantially increase the Converted
Association's capital position which will in turn increase the amount of funds
available for lending and investment, provide a "cushion" to compensate for the
Association's negative interest rate risk position, and provide greater
resources to support both current operations and future expansion by the
Association, although there are no current agreements or understandings for such
expansion. The holding company structure will provide greater flexibility than
the Association alone would have for diversification of business activities and
geographic expansion. Management believes that this increased capital and
operating flexibility will enable the Association to compete more effectively
with other types of financial services organizations. In addition, the
Conversion will also enhance the future access of the Company and the
Association to the capital markets.
The potential impact of Conversion upon the Association's capital base
is significant. The Association had retained earnings in accordance with
generally accepted accounting principles of $6.0 million, or 7.81% of assets, at
June 30, 1997. Assuming approximately $8.5 million (based on the sale of 900,000
shares of Common Stock at the midpoint of the Estimated Valuation Range) of net
proceeds are realized from the sale of the Common Stock (see "Pro Forma Data"),
and after deducting amounts necessary to fund the ESOP and MRP, the Company's
consolidated stockholders' equity would have been approximately $13.4 million as
of June 30, 1997. The Company's ratio of tangible capital to total assets would
increase to 15.95% after the Conversion. See "Historical and Pro Forma
Regulatory Capital Compliance." The investment of the net proceeds from the sale
of the Common Stock will provide the Converted Association with additional
income to further increase its capital position. The additional capital may also
assist the Converted Association in offering new programs and expanded services
to its customers.
After completion of the Conversion, the unissued Common Stock and
preferred stock authorized by the Company's Articles of Incorporation will
permit the Company, subject to market conditions, to raise additional equity
capital through further sales of securities and to issue securities in
connection with possible acquisitions. At the present time, the Company has no
plans with respect to additional offerings of securities, other than the
issuance of additional shares under the MRP or Option Plan, if implemented.
Following completion of Conversion, the Company also will be able to use
stock-related incentive programs to attract and retain executive and other
personnel for itself and its subsidiaries. See "Management of the Association--
Certain Benefit Plans and Agreements."
Effect of Conversion to Stock Form on Depositors and Borrowers of the
Association
General. Each depositor in a mutual savings institution such as the
Association has both a deposit account and a pro rata interest in the retained
earnings of that institution based upon the balance in his or her deposit
account. However, this interest is tied to the depositor's account and has no
tangible market value separate from such deposit account. Any other depositor
who opens a deposit account obtains a pro rata interest in the retained earnings
of the institution without any additional payment beyond the amount of the
deposit. A depositor who reduces or closes his or her account receives a portion
or all of the balance in the account but nothing for his or her ownership
interest, which is lost to the extent that the balance in the account is
reduced.
Consequently, depositors normally do not have a way to realize the
value of their ownership, which has realizable value only in the unlikely event
that the mutual institution is liquidated. In such event, the depositors of
record at that time, as owners, would share pro rata if any residual retained
earnings remained, after other claims are paid.
Upon consummation of the Conversion, permanent nonwithdrawable capital
stock will be created to represent the ownership of the institution. The stock
is separate and apart from deposit accounts and is not and cannot be insured
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by the FDIC. Transferable certificates will be issued to evidence ownership of
the stock, which will enable the stock to be sold or traded, if a purchaser is
available, with no effect on any account held in the Association. Under the
Plan, all of the capital stock of the Converted Association will be acquired by
the Company in exchange for a portion of the net proceeds from the sale of the
Common Stock in the Conversion. The Common Stock will represent an ownership
interest in the Company and will be issued upon consummation of the Conversion
to persons who elect to participate in the Conversion by purchasing the shares
being offered.
Continuity. During the Conversion process, the normal business of the
Association of accepting deposits and making loans will continue without
interruption. The Converted Association will continue to be subject to
regulation by the OTS and the FDIC, and FDIC insurance of accounts will continue
without interruption. After the Conversion, the Converted Association will
continue to provide services for depositors and borrowers under current policies
and by its present management and staff.
The Board of Directors serving the Association at the time of the
Conversion will serve as the Board of Directors of the Converted Association
after the Conversion. Following the Conversion, the Board of Directors of the
Company will consist of the individuals serving on the Board of Directors of the
Association. All officers of the Association at the time of the Conversion will
retain their positions with the Converted Association after the Conversion.
Voting Rights. Upon the completion of the Conversion, depositor and
borrower members as such will have no voting rights in the Converted Association
or the Company and, therefore, will not be able to elect directors of the
Converted Association or the Company or to control their affairs. Currently
these rights are accorded to depositors of the Association. Subsequent to the
Conversion, voting rights will be vested exclusively in the stockholders of the
Company which, in turn, will own all of the stock of the Converted Association.
Each holder of Common Stock shall be entitled to vote on any matter to be
considered by the stockholders of the Company, subject to the provisions of the
Company's Articles of Incorporation.
After the Conversion, holders of Savings Accounts in and obligors on
loans of the Converted Association will not have voting rights in the
Association. Exclusive voting rights with respect to the Company shall be vested
in the holders of the Common Stock, holders of Savings Accounts in and obligors
on loans of the Converted Association and the Association will not have any
voting rights in the Company except and to the extent that such persons become
stockholders of the Company, and the Company will have exclusive voting rights
with respect to the Converted Association's capital stock.
Deposit Accounts and Loans. The Association's deposit accounts, the
balances of individual accounts and existing federal deposit insurance coverage
will not be affected by the Conversion. Furthermore, the Conversion will not
affect the loan accounts, the balances of these accounts and the obligations of
the borrowers under their individual contractual arrangements with the
Association.
Tax Effects. The Association has received an opinion from its special
counsel, Housley Kantarian & Bronstein, P.C., Washington, D.C., as to the
material federal income tax consequences of the Conversion to the Association,
and as to the generally applicable material federal income tax consequences of
the Conversion to the Association's account holders and to persons who purchase
Common Stock in the Conversion. The opinion provides that the Conversion will
constitute a reorganization for federal income tax purposes under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended ("Code"). Among
other things, the opinion also provides that: (i) no gain or loss will be
recognized by the Association in its mutual or stock form by reason of the
Conversion; (ii) no gain or loss will be recognized by its account holders upon
the issuance to them of accounts in the Converted Association in stock form
immediately after the Conversion, in the same dollar amounts and on the same
terms and conditions as their accounts at the Association immediately prior to
the Conversion; (iii) the tax basis of each account holder's interest in the
liquidation account will be equal to the value, if any, of that interest;
(iv) the tax basis of the Common Stock purchased in the Conversion will be equal
to the amount paid therefor increased, in the case of Common Stock acquired
pursuant to the exercise of Subscription Rights, by the fair market value, if
any, of the Subscription Rights exercised; (v) the holding period for the Common
Stock purchased in the Conversion will commence upon the exercise of such
holder's Subscription Rights and otherwise on the day following the date of such
purchase; and (vi) gain or loss will be recognized to account holders
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upon the receipt of liquidation rights or the receipt or exercise of
Subscription Rights in the Conversion, to the extent such liquidation rights and
Subscription Rights are deemed to have value, as discussed below.
The opinion of Housley Kantarian & Bronstein, P.C., is based in part
upon, and subject to the continuing validity in all material respects through
the date of the Conversion of, various representations of the Association and
upon certain assumptions and qualifications, including that the Conversion is
consummated in the manner and according to the terms provided in the Plan. Such
opinion is also based upon the Code, regulations now in effect or proposed
thereunder, current administrative rulings and practice and judicial authority,
all of which are subject to change and such change may be made with retroactive
effect. Unlike private letter rulings received from the Internal Revenue Service
("IRS"), an opinion is not binding upon the IRS and there can be no assurance
that the IRS will not take a position contrary to the positions reflected in
such opinion, or that such opinion will be upheld by the courts if challenged by
the IRS.
Housley Kantarian & Bronstein, P.C. has advised the Association that an
interest in a liquidation account has been treated by the IRS, in a series of
private letter rulings which do not constitute formal precedent, as having
nominal, if any, fair market value and therefore it is likely that the interests
in the liquidation account established by the Association as part of the
Conversion will similarly be treated as having nominal, if any, fair market
value. Accordingly, it is likely that such depositors of the Association who
receive an interest in such liquidation account established by the Association
pursuant to the Conversion will not recognize any gain or loss upon such
receipt.
Housley Kantarian & Bronstein, P.C. has further advised the Association
that the federal income tax treatment of the receipt of Subscription Rights
pursuant to the Conversion is uncertain, and recent private letter rulings
issued by the IRS have been in conflict. For instance, the IRS adopted the
position in one private ruling that Subscription Rights will be deemed to have
been received to the extent of the minimum pro rata distribution of such rights,
together with the rights actually exercised in excess of such pro rata
distribution, and with gain recognized to the extent of the combined fair market
value of the pro rata distribution of Subscription Rights plus the Subscription
Rights actually exercised. Persons who do not exercise their Subscription Rights
under this analysis would recognize gain upon receipt of rights equal to the
fair market value of such rights, regardless of exercise, and would recognize a
corresponding loss upon the expiration of unexercised rights that may be
available to offset the previously recognized gain. Under another IRS private
ruling, Subscription Rights were deemed to have been received only to the extent
actually exercised. This private ruling required that gain be recognized only if
the holder of such rights exercised such rights, and that no loss be recognized
if such rights were allowed to expire unexercised. There is no authority that
clearly resolves this conflict among these private rulings, which may not be
relied upon for precedential effect. However, based upon express provisions of
the Code and in the absence of contrary authoritative guidance, Housley
Kantarian & Bronstein, P.C. has provided in its opinion that gain will be
recognized upon the receipt rather than the exercise of Subscription Rights.
Further, also based upon a published IRS ruling and consistent with recognition
of gain upon receipt rather than exercise of the Subscription Rights, Housley
Kantarian & Bronstein, P.C. has provided in its opinion that the subsequent
exercise of the Subscription Rights will not give rise to gain or loss.
Regardless of the position eventually adopted by the IRS, the tax consequences
of the receipt of the Subscription Rights will depend, in part, upon their
valuation for federal income tax purposes.
If the Subscription Rights are deemed to have a fair market value, the
receipt of such rights will be taxable to Eligible Account Holders, Supplemental
Eligible Account Holders and other eligible members who exercise their
Subscription Rights, even though such persons would not have received any cash
from which to pay taxes on such taxable income. The Association could also
recognize a gain on the distribution of such Subscription Rights in an amount
equal to their aggregate value. In the opinion of Ferguson & Company, whose
opinion is not binding upon the IRS, the Subscription Rights do not have any
value, based on the fact that such rights are acquired by the recipients without
cost, are non-transferable and of short duration and afford the recipients the
right only to purchase shares of the Common Stock at a price equal to its
estimated fair market value, which will be the same price as the price paid by
purchasers in the Community Offering for unsubscribed shares of Common Stock.
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members are encouraged to consult with their own tax advisors as to the tax
consequences in the event that the Subscription Rights are deemed to have a fair
market value. Because the fair market value, if any, of the Subscription Rights
issued in the Conversion depends primarily upon the existence of
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certain facts rather than the resolution of legal issues, Housley Kantarian &
Bronstein, P.C., has neither adopted the opinion of Ferguson & Company, as its
own nor incorporated such opinion of Ferguson & Company in its opinion issued in
connection with Conversion.
The Association has also received the opinion of Grimsley, White &
Company that no gain or loss will be recognized as a result of the Conversion
for purposes of Colorado income tax laws.
THE FEDERAL AND STATE INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT
PURPORT TO CONSIDER ALL ASPECTS OF FEDERAL AND STATE INCOME TAXATION WHICH MAY
BE RELEVANT TO EACH ELIGIBLE ACCOUNT HOLDER, SUPPLEMENTAL ACCOUNT HOLDER AND
OTHER MEMBER ENTITLED TO SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE, SUCH
AS TRUSTS, INDIVIDUAL RETIREMENT ACCOUNTS, OTHER EMPLOYEE BENEFIT PLANS,
INSURANCE COMPANIES AND ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL ELIGIBLE ACCOUNT
HOLDERS AND OTHER MEMBERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH ELIGIBLE ACCOUNT
HOLDER, SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER AND OTHER MEMBER IS URGED TO
CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR AS TO THE EFFECT OF SUCH
FEDERAL AND STATE INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND
CIRCUMSTANCES, INCLUDING THE RECEIPT AND EXERCISE OF SUBSCRIPTION RIGHTS, AND
ALSO AS TO ANY OTHER TAX CONSEQUENCES ARISING OUT OF THE CONVERSION.
Liquidation Account. In the unlikely event of a complete liquidation of
the Association in its present mutual form, each holder of a deposit account in
the Association would receive his pro rata share of any assets of the
Association remaining after payment of claims of all creditors (including the
claims of all depositors to the withdrawal value of their accounts). His pro
rata share of such remaining assets would be the same proportion of such assets
as the value of his deposit account was to the total of the value of all deposit
accounts in the Association at the time of liquidation.
After the Conversion, each deposit account holder on a complete
liquidation would have a claim of the same general priority as the claims of all
other general creditors of the Association. Therefore, except as described
below, a claim of such account holder would be solely in the amount of the
balance in the related deposit account plus accrued interest, and the account
holder would not have any interest in the value of the Association above that
amount.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the net worth of the Association as of the date of its latest statement of
financial condition contained in the final Prospectus. Each Eligible Account
Holder (a qualifying depositor of the Association on December 31, 1995) and each
Supplemental Eligible Account Holder (a person with a qualifying deposit in the
Association on September 30, 1997) would be entitled, on a complete liquidation
of the Converted Association after completion of the Conversion, to an interest
in the liquidation account. Each Eligible Account Holder would have an initial
interest in such liquidation account for each deposit account held in the
Association on December 31, 1995 and each Supplemental Eligible Account Holder
would have an initial interest in such liquidation account for each qualifying
deposit held in the Association on September 30, 1997. The interest as to each
qualifying deposit account would be in the same proportion of the total
liquidation account as the balance of such qualifying deposit account was to the
balance in all deposit accounts of Eligible Account Holders and Supplemental
Eligible Account Holders on such respective date. However, if the amount in the
qualifying deposit account on any annual closing date (September 30) of the
Association subsequent to the relevant eligibility date is less than the amount
in such account on the relevant eligibility date, or any subsequent closing
date, then the Eligible Account Holder's or Supplemental Eligible Account
Holder's interest in the liquidation account would be reduced from time to time
by an amount proportionate to any such reductions, and such interest would cease
to exist if he or she ceases to maintain an account at the Converted Association
that has the same Social Security number as appeared on his or her account(s) at
the relevant eligibility date. The interest in the liquidation account would
never be increased, notwithstanding any increase in the related deposit account
after the Conversion.
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Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders were satisfied would
be distributed to the entity or persons holding the Converted Association's
capital stock at that time.
A merger, consolidation, sale of bulk assets or similar combination or
transaction with an FDIC-insured institution in which the Converted Association
is not the surviving insured institution would not be considered to be a
"liquidation" under which distribution of the liquidation account could be made.
In such a transaction, the liquidation account would be assumed by the surviving
institution.
The creation and maintenance of the liquidation account will not
restrict the use or application of any of the capital accounts of the Converted
Association, except that the Converted Association may not declare or pay a cash
dividend on, or repurchase any of, its capital stock if the effect of such
dividend or repurchase would be to cause its retained earnings to be reduced
below the aggregate amount then required for the liquidation account.
Subscription Offering
Nontransferable Subscription Rights to subscribe for shares of the
Common Stock have been issued to all persons entitled to subscribe for stock in
the Subscription Offering at no cost to such persons. The amount of the Common
Stock which these parties may subscribe for will be determined, in part, by the
total stock to be issued, and the availability of stock for purchase under the
categories set forth in the Plan.
Preference categories have been established for the allocation of the
Common Stock to the extent that shares are available. These categories are as
follows:
Subscription Category No. 1 is reserved for the Association's
Eligible Account Holders, (i.e., qualifying depositors of the
Association on December 31, 1995) who will each receive nontransferable
Subscription Rights to subscribe for Common Stock in the Subscription
Offering. Pursuant to the Plan, an Eligible Account Holder may purchase
Common Stock in the Conversion in an amount equal to the greater of
(i) $250,000 of the Common Stock, (ii) one-tenth of one percent of the
total offering of shares of Common Stock, or (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the
total number of shares of Common Stock to be issued by a fraction of
which the numerator is the amount of the Qualifying Deposit of the
Eligible Account Holder and the denominator is the total amount of
Qualifying Deposits of all Eligible Account Holders in the Converted
Association in each case on the Eligibility Record Date (i.e.,
December 31, 1995). The Plan further provides that no person (together
with associates and persons acting in concert therewith) may purchase
in the aggregate more than $250,000 of the aggregate value of shares of
Common Stock offered in the Conversion. See "-- Limitations on
Purchases of Shares." If the exercise of Subscription Rights in this
category results in an oversubscription, shares shall be allocated
among subscribing Eligible Account Holders so as to permit each such
Eligible Account Holder, to the extent possible, to purchase a number
of shares sufficient to make his total allocation equal 100 shares or
the amount subscribed for, whichever is less. Any shares not so
allocated shall be allocated among the subscribing Eligible Account
Holders on an equitable basis related to the amounts of their
respective qualifying deposits, as compared to the total qualifying
deposits of all subscribing Eligible Account Holders. To ensure a
proper allocation of Common Stock, each Eligible Account Holder must
list on his Stock Order Form all accounts in which he has an ownership
interest as of December 31, 1995. Failure to list all such qualifying
deposit accounts may result in the inability of the Company or the
Association to fill all or part of a subscription order. Neither the
Company, the Association nor any of their agents shall be responsible
for orders on which all qualifying deposit accounts have not been fully
and accurately disclosed. A qualifying deposit is the amount (required
to be at least $50.00) contained in a deposit account in the
Association on December 31, 1995. Subscription Rights received by
directors and officers of the Association in this category based on
their increased deposits in the Association in the one-year period
preceding December 31, 1995 are subordinated to the Subscription Rights
of other Eligible Account Holders.
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Subscription Category No. 2 is reserved for the Association's
tax-qualified employee stock benefit plans, i.e., the ESOP, which shall
receive nontransferable Subscription Rights to purchase in the
aggregate up to 10% of the shares issued in the Conversion and which is
expected to purchase 8% of the Common Stock offered in the Conversion.
Any shares of Common Stock sold in excess of the maximum of the
Estimated Valuation Range may be first sold to the ESOP.
Subscription Category No. 3 is reserved for the Association's
Supplemental Eligible Account Holders, i.e., qualifying depositors of
the Association on the last day of the calendar quarter preceding OTS
approval of the Plan (September 30, 1997) who will each receive
nontransferable Subscription Rights to subscribe for Common Stock in
the Subscription Offering. Pursuant to the Plan, a Supplemental
Eligible Account Holder may purchase Common Stock in the Conversion in
an amount equal to the greater of (i) $250,000 of the Common Stock,
(ii) one-tenth of one percent of the total offering of shares of Common
Stock, or (iii) 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares of Common
Stock to be issued by a fraction of which the numerator is the amount
of the Qualifying Deposit of the Supplemental Eligible Account Holder
and the denominator is the total amount of Qualifying Deposits of all
Supplemental Eligible Account Holders in the Converted Association in
each case on the Supplemental Eligibility Record Date (i.e.,
September 30, 1997). The Plan further provides that no person (together
with associates and persons acting in concert therewith) may purchase
in the aggregate more than $250,000 of the aggregate value of shares of
Common Stock offered in the Conversion. See " -- Limitations on
Purchases of Shares." If the exercise of Subscription Rights in this
category results in an oversubscription, shares shall be allocated
among subscribing Supplemental Eligible Account Holders, so as to
permit each such Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his total
allocation equal 100 shares or the amount subscribed for, whichever is
less, and any shares not so allocated shall be allocated among the
subscribing Supplemental Eligible Account Holders on an equitable basis
related to the amounts of their respective qualifying deposits, as
compared to the total qualifying deposits of all subscribing
Supplemental Eligible Account Holders. To ensure a proper allocation of
Common Stock, each Supplemental Eligible Account Holder must list on
his Stock Order Form all accounts in which he has an ownership interest
as of September 30, 1997. Failure to list all such deposit accounts may
result in the inability of the Company or the Association to fill all
or part of a subscription order. Neither the Company, the Association
nor any of their agents shall be responsible for orders on which all
qualifying deposit accounts have not been fully and accurately
disclosed. A qualifying deposit is the amount (required to be at least
$50.00) contained in a deposit account in the Association on September
30, 1997. Subscription Rights received by directors and officers of the
Association in this category based on their increased deposits in the
Association in the one-year period preceding September 30, 1997 are
subordinated to the Subscription Rights of other Supplemental Eligible
Account Holders. Subscriptions in this Category No. 3 will be filled
only to the extent that there are sufficient shares of Common Stock
remaining after satisfaction of subscriptions by Category Nos. 1 and 2.
Subscription Category No. 4 is reserved for Other Members,
i.e., certain depositors and borrowers who are members of the
Association as of the Voting Record Date entitled to vote at the
Special Meeting but who are not otherwise Eligible Account Holders or
Supplemental Eligible Account Holders. To the extent then available
following subscriptions by Eligible Account Holders, tax-qualified
employee stock benefit plans and Supplemental Eligible Account Holders,
Other Members will receive, without payment therefor, nontransferable
Subscription Rights to subscribe for Common Stock in the Subscription
Offering up to $250,000 of the Common Stock. See "-- Limitations on
Purchases of Shares." In the event that Other Members subscribe for a
number of shares which, when added to the shares subscribed for by
Eligible Account Holders, tax-qualified employee stock benefit plans
and Supplemental Eligible Account Holders, is in excess of the total
number of shares offered in the Conversion, the subscriptions of such
Other Members will be allocated pro rata among subscribing Other
Members on an equitable basis as determined by the Board of Directors.
The Company will make reasonable efforts to comply with the securities
laws of all states in the United States in which persons entitled to subscribe
for the Common Stock pursuant to the Plan reside. However, no person will be
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offered or allowed to purchase any Common Stock under the Plan if he resides in
a foreign country or in a state of the United States with respect to which any
or all of the following apply: (i) a small number of persons otherwise eligible
to subscribe for shares under the Plan reside in such state or foreign country;
(ii) the granting of Subscription Rights or the offer or sale of shares of
Common Stock to such persons would require the Company or the Association or
their employees or agents to register, under the securities laws of such state,
as a broker, dealer, salesman or agent or to register or otherwise qualify its
securities for sale in such state or foreign country; and (iii) such
registration or qualification would be impracticable for reasons of cost or
otherwise. No payments will be made in lieu of the granting of Subscription
Rights to any such person.
Community Offering
To the extent shares remain available for purchase after the
Subscription Offering, the Company may offer any such remaining shares of the
Common Stock to members of the general public to whom the Company delivers a
copy of this Prospectus and a Stock Order Form in the Community Offering. The
occurrence of the Community Offering is subject to the availability of shares of
Common Stock for purchase after satisfaction of all orders received in the
Subscription Offering. The Community Offering, if any, may commence without
notice at any time after the commencement of the Subscription Offering and may
terminate at any time without notice, but may not terminate later than
____________, 1997. The right of any person to purchase shares in the Community
Offering, if any, is subject to the absolute right of the Company and the
Association to accept or reject such purchases in whole or in part. The Company
presently intends to terminate the Community Offering, if any, as soon as it has
received orders for sufficient shares available for purchase in the Conversion.
If all of the Common Stock offered in the Subscription Offering is
subscribed for, there will be no Community Offering. In the event an
insufficient number of shares are available to fill orders in the Community
Offering, the available shares will be allocated by the Company in its
discretion and a preference shall be given to natural persons and trusts of
natural persons who are permanent residents of the Local Community. If the
Community Offering extends beyond 45 days following the expiration of the
Subscription Offering, subscribers will have the right to increase, decrease or
rescind subscriptions for stock previously submitted. Purchasers in the
Community Offering, together with their associates and groups acting in concert,
are each eligible to purchase up to $250,000 of the Common Stock issued in the
Conversion.
Except as noted below, cash and checks received in the Community
Offering will be placed in segregated savings accounts (each insured by the FDIC
up to the applicable $100,000 limit) established specifically for this purpose.
Interest will be paid on orders made by check, in cash or by money order at the
Association's passbook rate from the date the payment is received by the Company
until the consummation of the Conversion. In the event that the Conversion is
not consummated for any reason, all funds submitted pursuant to the Community
Offering will be promptly refunded with interest as described above.
Syndicated Community Offering
As part of the Community Offering, all shares of Common Stock not
purchased in the Subscription and Community Offerings, if any, may be offered
for sale to the general public in a Syndicated Community Offering through
selected dealers to be formed and managed by Trident Securities. The Syndicated
Community Offering, if any, will be conducted to achieve the widest distribution
of Common Stock subject to the Company and the Association having the right to
reject orders in whole or in part in their sole discretion in the Syndicated
Community Offering. Neither Trident Securities nor any registered broker-dealer
shall have any obligation to take or purchase any shares of the Common Stock in
the Syndicated Community Offering. Common Stock sold in the Syndicated Community
Offering will be sold at the same price as in the Subscription and Community
Offerings.
Individual purchasers in the Syndicated Community Offering may purchase
up to $250,000 of the Common Stock in the Conversion when aggregated with any
associate or group of persons acting in concert. The Association shall be
responsible for the payment of selling commissions to other NASD firms and
licensed brokers participating in the Syndicated Community Offering. Other firms
may participate under selected dealers agreements, and Trident
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Securities and such selected dealers may receive fees which are not expected to
exceed 4.5% of the amount of the stock sold by the selected dealers in the
Syndicated Community Offering. In addition, Trident would receive a fee of 1.0%
for managing the Syndicated Community Offering.
During the Syndicated Community Offering, selected dealers may only
solicit indications of interest from their customers to place orders with the
Company as of a certain date ("Order Date") for the purchase of shares of common
Stock. When and if Trident Securities and the Company believe that enough
indications and orders have been received in the Offerings to consummate the
Conversion, Trident Securities will request, as of the Order Date, selected
dealers to submit orders to purchase shares for which they have received
indications of interest from their customers. Selected dealers will send
confirmations of the orders to such customers on the next business day after the
Order Date. Selected dealers may debit the accounts of their customers on a date
which will be three business days from the Order Date ("Settlement Date").
Customers who authorize selected dealers to debit their brokerage accounts are
required to have the funds for payment in their account on but not before the
Settlement Date. On the Settlement Date, selected dealers will remit funds to
the account that the Company established for each selected dealer. After payment
has been received by the Company from selected dealers, funds will earn interest
at the Association's passbook savings rate until the consummation of the
Conversion. In the event the Conversion is not consummated as described above,
funds with interest will be returned promptly to the selected dealers, who, in
turn, will promptly credit its customers' brokerage account.
The Syndicated Community Offering, if any, will terminate no more than
45 days following the completion of the Subscription Offering, unless extended
by the Company with the approval of the OTS. The Syndicated Community Offering
may run concurrently with the Subscription and Community Offerings or subsequent
to such offerings.
Subscriptions for Stock in Subscription and Community Offerings
Expiration Date. The Subscription Offering will expire at 12:00 Noon,
local time, on ________, 1997 unless extended by the Board of Directors of the
Association for up to an additional ___ days, to no later than ________, 1997.
Such date and time are referred to herein as the "Expiration Date." Subscription
rights not exercised prior to the Expiration Date will be void. The Community
Offering, if any, may terminate at any time without notice, but may not
terminate later than _________, 1998.
Orders will not be executed by the Company until at least the minimum
number of shares of Common Stock offered hereby have been subscribed for or
sold. If all shares of Common Stock have not been subscribed for or sold within
45 days of the end of the Subscription Offering (unless such period is extended
with consent of the OTS), all funds delivered to the Company pursuant to the
Subscription Offering will be promptly returned to the subscribers with interest
and all charges to savings accounts will be rescinded.
Use of Stock Order Forms and Certification Forms. Rights to subscribe
may only be exercised by completion of Stock Order Forms and certification
forms. Any person receiving a Stock Order Form who desires to subscribe for
shares of stock must do so prior to the Expiration Date by delivering (by mail
or in person) to the office of the Association a properly executed and completed
Stock Order Form and certification form, together with full payment for all
shares for which the subscription is made. All checks or money orders must be
made payable to "High Country Bancorp, Inc." The Stock Order Form and
certification form must be received by the Expiration Date. All subscription
rights under the Plan will expire on the Expiration Date, whether or not the
Company has been able to locate each person entitled to such subscription
rights. Once tendered, subscription orders cannot be revoked.
Each subscription right may be exercised only by the person to whom it
is issued and only for his or her own account. The subscription rights granted
under the Plan are nontransferable; persons who attempt to transfer their
subscription rights may lose the right to subscribe for stock in the Conversion
and may be subject to other sanctions and penalties imposed by the OTS. Each
person subscribing for shares is required to represent to the Company that he or
she is purchasing such shares for his or her own account and that he or she has
no agreement or understanding with any other person for the sale or transfer of
such shares.
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In the event Stock Order Forms (i) are not delivered and are returned
to the Company by the United States Postal Service or the Company is unable to
locate the addressee, or (ii) are not returned or are received after the
Expiration Date, or (iii) are defectively completed or executed, or (iv) are not
accompanied by the full required payment for the shares subscribed for
(including instances where a savings account or certificate balance from which
withdrawal is authorized is insufficient to fund the amount of such required
payment), the subscription rights of the person to whom such rights have been
granted will lapse as though such person failed to return the completed Stock
Order Form within the time period specified. However, the Company or the
Association may, but will not be required to, waive any irregularity on any
Stock Order Form or require the submission of corrected Stock Order Forms or the
remittance of full payment for subscribed shares by such date as the Company or
the Association may specify. The interpretation by the Company and the
Association of the terms and conditions of the Plan and of the Stock Order Form
will be final.
Payment for Shares. Payment for all subscribed shares of Common Stock
will be required to accompany all completed Stock Order Forms for subscriptions
to be valid. Payment for subscribed shares may be made (i) in cash, if delivered
in person, (ii) by check or money order, or (iii) by authorization of withdrawal
from deposit accounts maintained with the Association. Appropriate means by
which such withdrawals may be authorized are provided in the Stock Order Form.
Once such a withdrawal has been authorized, none of the designated withdrawal
amount may be used by a subscriber for any purpose other than to purchase stock
for which subscription has been made while the Plan remains in effect. In the
case of payments authorized to be made through withdrawal from deposit accounts,
all sums authorized for withdrawal will continue to earn interest at the
contract rate until the date of consummation of the sale. In the case of
payments made in cash or by check or money order such funds will be placed in a
segregated savings account established for each subscriber specifically for this
purpose (each insured by the FDIC up to the applicable $100,000 limit) and
interest will be paid at the Association's passbook rate from the date payment
is received until the Conversion is completed or terminated. Interest penalties
for early withdrawal applicable to certificate accounts will not apply to
withdrawals authorized for the purchase of shares; however, if a partial
withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate evidencing the remaining
balance will earn interest at the Association's passbook rate subsequent to the
withdrawal. An executed Stock Order Form, once received by the Company, may not
be modified, amended or rescinded without the consent of the Company, unless the
Conversion is not completed within 45 days of the termination of the
Subscription Offering. If an extension of the period of time to complete the
Conversion is approved by the OTS, subscribers will be resolicited and must
affirmatively reconfirm their orders prior to the expiration of the
resolicitation offering, or their subscription funds will be promptly refunded.
Subscribers may, through such extension, also modify or cancel their
subscriptions. Interest will be paid on such funds at the Association's passbook
rate during the 45-day period and any approved extension period. Wired funds
will not be accepted for the payment for shares of Common Stock.
Owners of self-directed IRAs or other self-directed tax-qualified
retirement plans, may use the assets of such IRAs or plans to purchase shares of
Common Stock in the Subscription and Community Offerings, provided that such
IRAs or plans are not maintained at the Association. Persons with IRAs or plans
maintained at the Association must have their accounts transferred to an
unaffiliated institution or broker to purchase shares of Common Stock in the
Subscription and Community Offerings. Depositors interested in using funds in an
Association IRA or plan to purchase Common Stock should contact the
Association's Stock Information Center at (719) __________ as soon as possible
but in no event later than seven days prior to closing of the offering period,
so that the necessary forms may be forwarded for execution and returned at least
one week prior to the Expiration Date of the Subscription Offering.
The ESOP will not be required to pay for the shares subscribed for at
the time it subscribes, but may pay for such shares upon consummation of the
Subscription and Community Offerings, if all shares are sold, or upon
consummation of any subsequent offering, if shares remain to be sold in such an
offering.
Shares Purchased. Certificates representing shares of the Common Stock
will be delivered to subscribers as soon as practicable after closing of the
Conversion. Purchasers may not be able to sell the shares of Common Stock which
they purchased until certificates for the Common Stock are available and
delivered to them, even though trading of the Common Stock may have commenced.
Shares sold prior to the receipt of a stock certificate are the responsibility
of the purchaser.
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Plan of Distribution and Marketing Agent
Officers of the Association are available at the Association's office
to provide offering materials to prospective investors, to answer their
questions (but only to the extent such information is derived from this
Prospectus) and to receive completed Stock Order Forms and certification forms
from prospective investors interested in subscribing for shares of the Common
Stock. None of the Association's directors, officers or employees will receive
any commissions or other compensation for their efforts in connection with sales
of shares of the Common Stock. Although information regarding the stock offering
is available at the Association's office, an investment in the Common Stock is
not a deposit, and the Common Stock is not federally insured.
The directors, officers and employees of the Association who will be
involved in selling stock are expected to be exempt from the requirement to
register with the SEC as broker-dealers within the meaning of Rule 3a4-1 under
the Exchange Act. Such persons will qualify under the safe harbor provisions of
that rule on the basis of paragraphs (a)(4)(ii) and/or (iii), i.e., management
of the Association expects that such persons either (x) will perform substantial
duties for the Company in its business, will not otherwise be broker-dealers and
are not expected to participate in another offering in the next twelve months or
(y) will limit their activities to preparing written communications, responding
to customer inquiries and/or performing ministerial/clerical functions.
The Association and the Company have engaged Trident Securities as
financial advisor to provide sales assistance in connection with the
Subscription and Community Offerings of the Common Stock. The services of
Trident Securities will include, but are not limited to, (i) training and
educating the Association's employees who will be performing certain ministerial
functions in the Subscription and Community Offerings regarding the mechanics
and regulatory requirements of the stock sales process and the solicitation of
proxies from members, (ii) providing employees to manage the Stock Information
Center, assisting Association customers and interested stock purchasers and
keeping records of orders for shares of Common Stock, and (iii) supervising the
Association's sales efforts, including preparation of marketing materials. For
all its services rendered in the Conversion, Trident Securities will receive a
commission equal to 1.70% of the aggregate dollar amount of Common Stock sold to
residents of Colorado, and 1.20% of the aggregate dollar amount of Common Stock
sold to non-residents of Colorado, excluding any shares of stock sold to the
Association's directors, executive officers, and the ESOP. Additionally,
commissions will be excluded on shares sold to "associates" (as defined in the
Plan) of the Association's directors and executive officers. In the event Common
Stock is sold by other NASD member firms under selected dealer's agreements, the
aggregate commissions to be received by Trident Securities and selected dealers
shall not exceed a fee to be set by the Association to reflect market
requirements at the time of the stock allocation in a Syndicated Community
Offering. Trident Securities will also be reimbursed for its reasonable
out-of-pocket expenses in an amount not to exceed $10,000 and its legal fees in
an amount not to exceed $25,000. The Company and the Association have agreed to
indemnify Trident Securities for reasonable costs and expenses in connection
with certain claims or liabilities, including certain liabilities under the
Securities Act.
Stock Pricing and Number of Shares to be Issued
Ferguson, which is experienced in the evaluation and appraisal of
savings institutions involved in the conversion process, has been retained by
the Association to prepare an appraisal of the estimated pro forma market value
of the Common Stock to be sold pursuant to the Conversion. Prior to the
Conversion, the Association did not have any business relationship with
Ferguson. Ferguson will receive a fixed fee of $27,500 for its appraisal and
other services, and reimbursement for related expenses up to $5,000. The
Association has agreed to indemnify Ferguson under certain circumstances against
any losses, damages, expenses or liability arising out of the Association's
engagement of Ferguson for the appraisal.
Ferguson has determined as of August 5, 1997 that the estimated pro
forma market value of the stock to be issued by the Company in the Conversion
was $9,000,000. In determining the reasonableness and adequacy of the appraisal
submitted by Ferguson, the Boards of Directors of the Association and the
Company reviewed with Ferguson the methodology and the appropriateness of
assumptions used by Ferguson in preparing the appraisal. The Company, in
consultation with Trident Securities, has determined to offer the shares in the
Conversion at the Purchase Price of
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$10.00 per share. The price per share was determined based on a number of
factors, including the market price per share of the stock of other financial
institutions. Regulations administered by the OTS require, however, that the
appraiser establish a range of value for the stock of approximately 15% on
either side of the estimated value to allow for fluctuations in the aggregate
value of the stock due to changes in the market and other factors from the time
of commencement of the Subscription Offering until completion of the Community
Offering. Accordingly, Ferguson has established a range of value of from
$7,650,000 to $10,350,000 for the Conversion. Ferguson will either confirm the
continuing validity of its appraisal or provide an updated appraisal immediately
prior to the completion of the Conversion.
Should it be determined at the close of the offering that the aggregate
pro forma market value of the Common Stock is higher or lower than $9,000,000,
but is nonetheless within the Estimated Valuation Range or within 15% of the
maximum of such range, the Company will make an appropriate adjustment by
raising or lowering by no more than 15% the total number of shares being offered
(within a range from 765,000 shares to 1,035,000 shares). Unless permitted by
the Company or otherwise required by the OTS, no resolicitation of subscribers
and other purchasers will be made because of any such change in the number of
shares to be issued unless the aggregate purchase price of the Common Stock sold
in the Conversion is below the minimum of the Estimated Valuation Range or is
more than $11,902,500 (i.e., 15% above the maximum of the Estimated Valuation
Range). If the aggregate purchase price falls outside the range of from
$7,650,000 to $11,902,500, subscribers and other purchasers will be resolicited
and given the opportunity to continue their orders, in which case they will need
to affirmatively reconfirm their subscriptions prior to the expiration of the
resolicitation, or their subscription funds will be promptly refunded with
interest at the Association's passbook rate. Subscribers will also be given the
opportunity to increase, decrease or rescind their orders. Any change in the
Estimated Valuation Range must be approved by the OTS. The establishment of any
new price range may be effected without a resolicitation of votes from the
Association's members to approve the Conversion.
The appraisal is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing the Common
Stock. In preparing the valuation, Ferguson has relied upon and assumed the
accuracy and completeness of financial and statistical information provided by
the Association and the Company. Ferguson did not independently verify the
financial statements and other information provided by the Association and the
Company, nor did Ferguson value independently the assets and liabilities of the
Association and the Company. The valuation considers the Association and the
Company only as a going concern and should not be considered as an indication of
the liquidation value of the Association and the Company. Moreover, because such
valuation is necessarily based upon estimates and projections of a number of
matters, all of which are subject to change from time to time, no assurance can
be given that persons purchasing the Common Stock will thereafter be able to
sell such shares at prices equal to or above the price or prices paid for it.
Copies of the appraisal report of Ferguson setting forth the method and
assumptions for such appraisal are on file and available for inspection at the
offices set forth in "Additional Information" and at the office of the
Association. Further, any subsequent updated appraisal also will be filed with
the SEC and will be available for inspection.
Limitations on Purchase of Shares
Purchases of shares of Common Stock are subject to limitations as set
forth in the Plan. All shares are offered to persons subscribing in the
Subscription Offering, and shares are only offered to persons in the Community
Offering and Syndicated Community Offering, if any, to the extent available
after filling subscriptions in the Subscription Offering.
Within the Subscription Offering, the maximum purchases by subscribers
are limited under the Plan. Eligible Account Holders may only subscribe up to an
amount equal to the greater (i) $250,000 of the Common Stock, (ii) one-tenth of
one percent of the total offering of shares of Common Stock, or (iii) 15 times
the product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Common Stock to be issued by a fraction of which the
numerator is the amount of the Qualifying Deposit of the Eligible Account Holder
and the denominator is the total amount of Qualifying Deposits of all Eligible
Account Holders in the Converted Association in each case on the Eligibility
Record Date (i.e., December 31, 1995). Supplemental Eligible Account Holders may
only subscribe
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up to an amount equal to the greater of (i) $250,000 of the Common Stock,
(ii) one-tenth of one percent of the total offering of shares of Common Stock,
or (iii) 15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of shares of Common Stock to be issued by a
fraction of which the numerator is the amount of the Qualifying Deposit of the
Supplemental Eligible Account Holder and the denominator is the total amount of
Qualifying Deposits of all Supplemental Eligible Account Holders in the
Converted Association in each case on the Supplemental Eligibility Record Date
(i.e., September 30, 1997). The Plan further provides that no person (together
with associates and persons acting in concert therewith) may purchase in the
aggregate more than $250,000 of the aggregate value of shares of Common Stock
offered in the Conversion.
The Plan provides for certain additional limitations to be placed upon
the purchase of shares by eligible subscribers and others in the Conversion.
Each subscriber must subscribe for a minimum of 25 shares. The ESOP may purchase
up to an aggregate of 10% of the shares of the Common Stock to be issued in the
Conversion and is expected to purchase 8% of such shares. No person, including
associates (as defined below) of and persons acting in concert (as defined
below) with such person (other than the ESOP), may purchase in the Subscription
or Community Offerings more than $250,000 of the Common Stock. Shares purchased
by the ESOP and attributable to a participant thereunder shall not be aggregated
with shares purchased by such participant or any other purchaser of Common Stock
in the Conversion. Officers and directors and their associates may not purchase,
in the aggregate, more than 35% of the shares to be issued in the Conversion.
For purposes of the Plan, the directors of the Company and the Association are
not deemed to be associates or a group acting in concert solely by reason of
their Board membership.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the
Association's members, purchase limitations may be increased or decreased at the
sole discretion of the Company and the Association at any time. If such amount
is increased, subscribers for the maximum amount will be given the opportunity
to increase their subscriptions up to the then applicable limit, subject to the
rights and preferences of any person who has priority Subscription Rights. In
the event that the purchase limitation is decreased after commencement of the
Subscription and Community Offerings, the orders of any person who subscribed
for the maximum number of shares of Common Stock shall be decreased by the
minimum amount necessary so that such person shall be in compliance with the
then maximum number of shares permitted to be subscribed for by such person.
The term "acting in concert" is defined in the Plan to mean (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal, whether or not pursuant to an express agreement, or
(ii) a combination or pooling of voting or other interests in the securities of
an issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. The
Company and the Association may presume that certain persons are acting in
concert based upon, among other things, joint account relationships and the fact
that such persons have filed joint Schedules 13D with the SEC with respect to
other companies. The term "associate" of a person is defined in the Plan to
mean: (i) any corporation or organization (other than the Association, the
Company, or a majority-owned subsidiary of the Association or the Company) of
which such person is an officer or partner or is directly or indirectly the
beneficial owner of 10% or more of any equity securities; (ii) any trust or
other estate in which such person has a substantial beneficial interest or as to
which such person serves as a trustee or in a similar fiduciary capacity,
provided, however, such term shall not include any employee stock benefit plan
of the Association in which such person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity; and (iii) any relative
or spouse of such person, or any relative of such spouse, who either has the
same home as such person or who is a director of the Association or the Company
or any of their subsidiaries. Directors are not treated as associates solely
because of their Board membership.
Each person purchasing Common Stock in the Conversion shall be deemed
to confirm that such purchase does not conflict with the purchase limitations
under the Plan or otherwise imposed by law, rule or regulation. In the event
that such purchase limitations are violated by any person (including any
associate or group of persons affiliated or otherwise acting in concert with
such person), the Company shall have the right to purchase from such person at
the aggregate purchase price all shares acquired by such person in excess of
such purchase limitations or, if such excess shares have been sold by such
person, to receive the difference between the aggregate purchase price paid for
such excess shares and the price at which such excess shares were sold by such
person. This right of the Company to
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purchase such excess shares shall be assignable by the Company. In addition,
persons who violate the purchase limitations may be subject to sanctions and
penalties imposed by the OTS.
Stock purchased pursuant to the Conversion will be freely transferable,
except for shares purchased by directors and officers of the Association and
the Company. See "-- Limitations on Resales by Management."
In addition, under guidelines of the NASD, members of the NASD and
their associates are subject to certain restrictions on the transfer of
securities purchased in accordance with Subscription Rights and to certain
reporting requirements upon purchase of such securities.
Depending upon market conditions, the Boards of Directors of the
Company and the Association, with the approval of the OTS, may increase or
decrease any of the above purchase limitations. In the event of such an increase
or decrease, no further approval of members of the Association would be
required. OTS regulations authorize a plan of conversion to provide a minimum
purchase limitation of a percentage as low as 1% and a maximum purchase
limitation of a percentage not to exceed 10%, provided that orders for shares
exceeding 5% of the shares being offered in the Conversion shall not exceed in
the aggregate 10% of the shares being offered in the Conversion.
Regulatory Restrictions on Acquisition of the Common Stock
Current federal regulations prohibit any person from making an offer,
announcing an intent to make an offer, entering into any other arrangement to
purchase Common Stock or acquiring Common Stock or Subscription Rights in the
Company from another person prior to completion of the Conversion. Further, no
person may make an offer or announcement of an offer to purchase shares or
actually acquire shares in the Company for a period of three years from the date
of the completion of the Conversion, if, upon the completion of such offer or
acquisition, that person would become the beneficial owner of more than 10% of
the Company's outstanding stock, without the prior written approval of the OTS.
The OTS has defined the word "person" to include any individual, group acting in
concert, corporation, partnership, association, joint stock company, trust,
unincorporated organization or similar company, a syndicate or any group formed
for the purpose of acquiring, holding or disposing of securities of an insured
institution. However, offers made exclusively to the Company or underwriters or
members of a selling group acting on behalf of the Company for resale to the
general public are excepted. The regulations also provide civil penalties for
willful violation or assistance of any such violation of the regulation by any
person connected with the management of the Company following the Conversion.
Moreover, when any person, directly or indirectly, acquires beneficial ownership
of more than 10% of the Company's capital stock following the Conversion within
such three-year period without the prior approval of the OTS, the Company's
Common Stock beneficially owned by such person in excess of 10% shall not be
counted as shares entitled to vote and shall not be voted by any person or
counted as voting shares in connection with any matter submitted to the
stockholders for a vote. The Articles of Incorporation of the Company include
a similar 10% beneficial ownership limitation. See "Certain Anti-Takeover
Provisions in the Articles of Incorporation and Bylaws."
In addition to the foregoing restrictions, any person or group of
persons acting in concert who propose to acquire 10% or more of the Company's
outstanding shares will be presumed under OTS regulations, to be acquiring
control of the Company and will be required to submit prior notice to the OTS
under the Change in Control Act.
Restrictions on Repurchase of Stock
Subject to the exceptions described herein, for a period of three years
following the Conversion, the Company may not repurchase any of its stock from
any person, except (i) repurchases on a pro rata basis pursuant to an offer,
approved by the OTS, made to all stockholders, and (ii) repurchases of
qualifying shares of a director. However, upon 10 days' written notification to
the OTS Regional Director for the Converted Association and the Chief Counsel of
the Business Transactions Division of the OTS, if the Regional Director and
Chief Counsel do not object, the Company may make open market repurchases of its
outstanding Common Stock, provided that: (i) no repurchases may occur in the
first year following the Conversion without OTS approval; (ii) in the second and
third years after the Conversion, repurchases must be part of an open-market
program that does not allow for the repurchase of more than 5% of the Company's
outstanding Common Stock during a 12-month (a waiver may be obtained from the
OTS which would allow
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for additional purchases); (iii) the repurchases would not cause the Converted
Association to become "undercapitalized" (as defined for regulatory purposes);
(iv) the repurchases would not materially adversely affect the Converted
Association's financial condition; and (v) there is a valid business purpose for
the repurchases. The Company may not repurchase any of its stock if the effect
thereof would cause the Converted Association's regulatory capital to be reduced
below the amount required for the liquidation account. Regulatory dividend
limitations may provide further restrictions on stock repurchases.
Limitations on Resales by Management
Shares of the Common Stock purchased by directors or officers of the
Company and the Association in the Conversion will be subject to the restriction
that such shares may not be sold for a period of one year following completion
of the Conversion, except in the event of the death of the original purchaser or
in any exchange of such shares in connection with a merger or acquisition of the
Company approved by the OTS. Accordingly, shares of the Common Stock issued by
the Company to directors and officers shall bear a legend giving appropriate
notice of the restriction imposed upon it and, in addition, the Company will
give appropriate instructions to the transfer agent for the Common Stock with
respect to the applicable restriction for transfer of any restricted stock. Any
shares issued to directors and officers as a stock dividend, stock split or
otherwise with respect to restricted stock shall be subject to the same
restrictions. Shares acquired otherwise than in the Conversion, such as under
the Company's Option Plan, would not be subject to such restrictions. To the
extent directors and officers are deemed affiliates of the Company, all shares
of the Common Stock acquired by such directors and officers will be subject to
certain resale restrictions and may be resold pursuant to Rule 144 under the
Securities Act. See "Regulation -- Regulation of the Company Following the
Conversion -- Federal Securities Law."
Interpretation and Amendment of the Plan
To the extent permitted by law, all interpretations of the Plan by the
Association will be final. The Plan provides that the Association's Board of
Directors shall have the sole discretion to interpret and apply the provisions
of the Plan to particular facts and circumstances and to make all determinations
necessary or desirable to implement such provisions, including but not limited
to matters with respect to giving preference in the Community Offering to
natural persons and trusts of natural persons who are permanent residents of the
Local Community, and any and all interpretations, applications and
determinations made by the Board of Directors in good faith and on the basis of
such information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Association and its members and
subscribers in the Subscription and Community Offerings, subject to the
authority of the OTS.
The Plan provides that, if deemed necessary or desirable by the Board
of Directors, the Plan may be substantively amended by a two-thirds vote of the
Board of Directors at any time prior to submission of the Plan and proxy
materials to the Association's members. After submission of the Plan and proxy
materials to the members, the Plan may be amended by a two-thirds vote of the
Board of Directors at any time prior to the Special Meeting and at any time
following the Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors may generally modify or terminate the Plan
upon the order of the regulatory authorities without resoliciting proxies or
otherwise obtaining approval of the amended Plan by members at another Special
Meeting. However, any modification of the Plan that results in a material change
in the terms of the Conversion would require such a resolicitation of proxies
and another meeting of members.
The Plan further provides that in the event that mandatory new
regulations pertaining to conversions are adopted by the OTS or any successor
agency prior to completion of the Conversion, the Plan will be amended to
conform to such regulations without a resolicitation of proxies or another
Special Meeting. In the event that such new conversion regulations contain
optional provisions, the Plan may be amended to utilize such optional provisions
at the discretion of the Board of Directors without a resolicitation of proxies
or another Special Meeting. By adoption of the Plan, the Association's members
will be deemed to have authorized amendment of the Plan under the circumstances
described above.
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Conditions and Termination
Completion of the Conversion requires the approval of the Plan by the
affirmative vote of not less than a majority of the total outstanding votes of
the members of the Association and the sale of all shares of the Common Stock
within 24 months following approval of the Plan by the members. If these
conditions are not satisfied, the Plan will be terminated, and the Association
will continue its business in the mutual form of organization. The Plan may be
terminated by the Board of Directors at any time prior to the Special Meeting
and, with the approval of the OTS, by the Board of Directors at any time
thereafter.
CERTAIN RESTRICTIONS ON ACQUISITION OF THE COMPANY AND THE ASSOCIATION
Conversion Regulations
OTS regulations prohibit a person from making an offer, announcing an
intent to make an offer or other arrangement to purchase stock, or acquiring
stock or subscription rights in the Association or the Company from another
person prior to completion of the Conversion. Further, no person may make such
an offer or announcement of an offer to purchase shares or actually acquire
shares in the Association or the Company for a period of three years from the
date of the completion of the Conversion if, upon the completion of such offer
or acquisition, that person would become the beneficial owner of more than 10%
of the stock of the Association or the Company without the prior written
approval of the Director of the OTS. For purposes of the regulations, "person"
is defined to include any individual, group acting in concert, corporation,
partnership, association, joint stock company, trust, unincorporated
organization or similar company, a syndicate or any other group formed for the
purpose of acquiring, holding or disposing of securities of the Association or
the Company. Offers made exclusively to the Association or the Company, however,
or underwriters or members of a selling group acting on the Association's or
Company's behalf for resale to the general public, are excepted.
Change in Association Control Act and Savings and Loan Holding Company
Provisions of Home Owners' Loan Act
Federal laws and regulations contain a number of provisions which
affect the acquisition of insured institutions such as the Association,
including a savings and loan holding company such as the Company. The Change in
Bank Control Act provides that no person, acting directly or indirectly or
through or in concert with one or more persons, may acquire control of a savings
association unless the OTS has been given 60 days' prior written notice and the
OTS does not issue a notice disapproving the proposed acquisition. In addition,
certain provisions of the Home Owners Loan Act provide that no company may
acquire control of a thrift without the prior approval of the OTS. Any company
that acquires such control becomes a "savings and loan holding company" subject
to registration, examination and regulation by the OTS.
Pursuant to applicable regulations, control of a savings association is
conclusively deemed to have been acquired by, among other things, the
acquisition of more than 25% of any class of voting stock of a savings
association or the ability to control the election of a majority of the
directors of an institution. Moreover, control is presumed to have been
acquired, subject to rebuttal, upon the acquisition of more than 10% of any
class of voting stock, or more than 25% of any class of stock, of a savings
association, where one or more enumerated "control factors" are also present in
the acquisition. The OTS may prohibit an acquisition of control if it finds,
among other things, that (i) the acquisition would result in a monopoly or
substantially lessen competition, (ii) the financial condition of the acquiring
person might jeopardize the financial stability of the savings association, or
(iii) the competence, experience, or integrity of the acquiring person indicates
that it would not be in the interest of the depositors or the public to permit
the acquisition of control by such person. The foregoing restrictions do not
apply to the acquisition of the Company's capital stock by one or more
tax-qualified employee stock benefit plans, provided that the plan or plans do
not have beneficial ownership in the aggregate of more than 25% of any class of
equity security.
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CERTAIN ANTI-TAKEOVER PROVISIONS
IN THE ARTICLES OF INCORPORATION AND BYLAWS
While the Boards of Directors of the Association and the Company are
not aware of any effort that might be made to obtain control of the Company
after Conversion, the Board of Directors, as discussed below, believes that it
is appropriate to include certain provisions as part of the Company's Articles
of Incorporation to protect the interests of the Company and its stockholders
from hostile takeovers which the Board of Directors might conclude are not in
the best interests of the Association, the Company or the Company's
stockholders. These provisions may have the effect of discouraging a future
takeover attempt which is not approved by the Board of Directors but which
individual stockholders may deem to be in their best interests or in which
stockholders may receive a substantial premium for their shares over then
current market prices. As a result, stockholders who might desire to participate
in such a transaction may not have an opportunity to do so. Such provisions will
also render the removal of the current Board of Directors or management of the
Company more difficult.
The following discussion is a general summary of the material
provisions of the Articles of Incorporation and Bylaws of the Company which may
be deemed to have such an "anti-takeover" effect. The description of these
provisions is necessarily general and reference should be made in each case to
the Articles of Incorporation and Bylaws of the Company. For information
regarding how to obtain a copy of these documents without charge, see
"Additional Information."
Board of Directors
Certain provisions of the Company's Articles of Incorporation and
Bylaws will impede changes in control of the Board of Directors of the Company.
The Articles of Incorporation provides that the Board of Directors is to be
divided into three classes, as nearly equal in number as possible, which shall
be elected for staggered three-year terms.
The Company's Articles of Incorporation provides that a director may be
removed only for cause by the affirmative vote of the holders of at least 80% of
the outstanding shares entitled to vote and that the size of the Board of
Directors may be changed only by a vote of two-thirds of the directors then in
office. The Articles of Incorporation further provides that any vacancy
occurring in the Board of Directors, including a vacancy created by an increase
in the number of directors, shall be filled for the remainder of the unexpired
term by a two-thirds vote of the directors then in office.
Stockholder Vote Required to Approve Business Combinations with Principal
Stockholders
The Company's Articles of Incorporation requires the approval of the
holders of (i) at least 80% of the Company's outstanding shares of voting stock,
and (ii) at least a majority of the Company's outstanding shares of voting
stock, not including shares held by a "Related Person," to approve certain
"Business Combinations" as defined therein, and related transactions. The
increased voting requirements in the Company's Articles of Incorporation apply
in connection with business combinations involving a "Related Person," except in
cases where the proposed transaction has been approved in advance by two-thirds
of those members of the Company's Board of Directors who are unaffiliated with
the Related Person and who were directors prior to the time when the Related
Person became a Related Person (the "Continuing Directors"). The term "Related
Person" is defined to include any individual, corporation, partnership or other
entity which owns beneficially or controls, directly or indirectly, 10% or more
of the outstanding shares of voting stock of the Company. A "Business
Combination" is defined to include (i) any merger or consolidation of the
Company with or into any Related Person; (ii) any sale, lease exchange,
mortgage, transfer, or other disposition of all or a substantial part of the
assets of the Company or of a subsidiary to any Related Person (the term
"substantial part" is defined to include more than 25% of the Company's total
assets); (iii) any merger or consolidation of a Related Person with or into the
Company or a subsidiary of the Company; (iv) any sale, lease, exchange, transfer
or other disposition of all or any substantial part of the assets of a Related
Person to the Company or a subsidiary of the Company; (v) the issuance of any
securities of the Company or a subsidiary of the Company to a Related Person;
(vi) the acquisition by the Company of any securities of the Related Person;
(vii) any reclassification of the Common Stock, or any
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<PAGE>
recapitalization involving the Common Stock; and (viii) any agreement, contract
or other arrangement providing for any of the above transactions.
Limitations on Call of Meetings of Stockholders
The Company's Articles of Incorporation provides that special meetings
of stockholders may only be called by the Company's Board of Directors or an
appropriate committee appointed by the Board of Directors. Stockholders are not
authorized to call a special meeting, and stockholder action may be taken only
at a special or annual meeting of stockholders and not by written consent.
Absence of Cumulative Voting
The Company's Articles of Incorporation provides that there shall not
be cumulative voting by stockholders for the election of the Company's
directors. The absence of cumulative voting rights effectively means that the
holders of a majority of the shares voted at a meeting of stockholders may, if
they so choose, elect all directors of the Company to be selected at that
meeting, thus precluding minority stockholder representation on the Company's
Board of Directors.
Restrictions on Acquisitions of Securities
The Articles of Incorporation provides that for a period of five years
from the effective date of the Conversion, no person may acquire directly or
indirectly acquire the beneficial ownership of more than 10% of any class of
equity security of the Company, unless such offer or acquisition shall have been
approved in advance by a two-thirds vote of the Company's Continuing Directors.
This provision does not apply to any employee stock benefit plan of the Company.
In addition, during such five-year period, no shares beneficially owned in
violation of the foregoing percentage limitation, as determined by the Company's
Board of Directors, shall be entitled to vote in connection with any matter
submitted to stockholders for a vote. Additionally, the Articles of
Incorporation provides for further restrictions on voting rights of shares owned
in excess of 10% of any class of equity security of the Company beyond five
years after the Conversion of the Association. Specifically, the Articles of
Incorporation provides that if, at any time after five years from the
Association's conversion to stock form, any person acquires the beneficial
ownership of more than 10% of any class of equity security of the Company, then,
with respect to each vote in excess of 10%, such person shall be entitled to
cast only one-hundredth of one vote. An exception from the restriction is
provided if the acquisition of more than 10% of the securities received the
prior approval by a two-thirds vote of the Company's Continuing Directors. Under
the Company's Articles of Incorporation, the restriction on voting shares
beneficially owned in violation of the foregoing limitations is imposed
automatically. In order to prevent the imposition of such restrictions, the
Board of Directors must take affirmative action approving in advance a
particular offer to acquire or acquisition. Unless the Board took such
affirmative action, the provision would operate to restrict the voting by
beneficial owners of more than 10% of the Company's Common Stock in a proxy
contest.
Board Consideration of Certain Nonmonetary Factors in the Event of an Offer by
Another Party
The Articles of Incorporation of the Company permits the Board of
Directors, in evaluating a Business Combination or a tender or exchange offer,
to consider, in addition to the adequacy of the amount to be paid in connection
with any such transaction, certain specified factors and any other factors the
Board deems relevant, including (i) the social and economic effects of the
transaction on the Company and its subsidiaries, employees, depositors, loan and
other customers, creditors and other elements of the communities in which the
Company and its subsidiaries operate or are located; (ii) the business and
financial condition and earnings prospects of the acquiring party or parties;
and (iii) the competence, experience and integrity of the acquiring party or
parties and its or their management. By having the standards in the Articles of
Incorporation of the Company, the Board of Directors may be in a stronger
position to oppose any proposed business combination, tender or exchange offer
if the Board concludes that the transaction would not be in the best interest of
the Company, even if the price offered is significantly greater than the then
market price of any equity security of the Company.
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<PAGE>
Authorization of Preferred Stock
The Company's Articles of Incorporation authorizes the issuance of up
to 1,000,000 shares of preferred stock, which conceivably would represent an
additional class of stock required to approve any proposed acquisition. The
Company is authorized to issue preferred stock from time to time in one or more
series subject to applicable provisions of law, and the Board of Directors is
authorized to fix the designations, powers, preferences and relative
participating, optional and other special rights of such shares, including
voting rights (which could be multiple or as a separate class) and conversion
rights. Issuance of the preferred stock could adversely affect the relative
voting rights of holders of the Common Stock. In the event of a proposed merger,
tender offer or other attempt to gain control of the Company that the Board of
Directors does not approve, it might be possible for the Board of Directors to
authorize the issuance of a series of preferred stock with rights and
preferences that would impede the completion of such a transaction. An effect of
the possible issuance of preferred stock, therefore, may be to deter a future
takeover attempt. The Board of Directors has no present plans or understandings
for the issuance of any preferred stock and does not intend to issue any
preferred stock except on terms which the Board of Directors deems to be in the
best interests of the Company and its stockholders. This preferred stock, none
of which has been issued by the Company, together with authorized but unissued
shares of Common Stock (the Articles of Incorporation authorizes the issuance of
up to 3,000,000 shares of Common Stock), also could represent additional capital
required to be purchased by the acquiror.
Procedures for Stockholder Nominations
The Company's Articles of Incorporation provides that any stockholder
desiring to make a nomination for the election of directors or a proposal for
new business at a meeting of stockholders must submit written notice to the
Secretary of the Company not less than 30 or more than 60 days in advance of the
meeting. "New business" within the meaning of this provision will be interpreted
by the Company to exclude shareholder proposals which have been included in the
Company's proxy solicitation materials pursuant to Rule 14a-8 under the Exchange
Act.
Amendment of Bylaws
The Company's Articles of Incorporation provides that the Company's
Bylaws may be amended either by a two-thirds vote of the Company's Board of
Directors or by the affirmative vote of the holders of not less than 80% of the
outstanding shares of the Company's stock entitled to vote generally in the
election of directors, after giving effect to any limits on voting rights.
Absent this provision, Colorado law provides that a corporation's bylaws may be
amended by the holders of a majority of a corporation's outstanding capital
stock. The Company's Bylaws contain numerous provisions concerning the Company's
governance, such as fixing the number of directors and determining the number of
directors constituting a quorum. By reducing the ability of a potential
corporate raider to make changes in the Company's Bylaws and to reduce the
authority of the Board of Directors or impede its ability to manage the Company,
this provision could have the effect of discouraging a tender offer or other
takeover attempt where the ability to make fundamental changes through bylaw
amendments is an important element of the takeover strategy of the acquiror.
Amendment of Articles of Incorporation
The Company's Articles of Incorporation provides that specified
provisions contained in the Articles of Incorporation may not be repealed or
amended except upon the affirmative vote of not less than 80% of the outstanding
shares of the Company's stock entitled to vote generally in the election of
directors, after giving effect to any limits on voting rights. This requirement
exceeds the majority vote of the outstanding stock that would otherwise be
required by Colorado law for the repeal or amendment of an Articles of
Incorporation provision. The specific provisions are those (i) governing the
calling of special meetings, the absence of cumulative voting rights and the
requirement that stockholder action be taken only at annual or special meetings,
(ii) requiring written notice to the Company of nominations for the election of
directors and new business proposals, (iii) governing the number of the
Company's Board of Directors, the filling of vacancies on the Board of Directors
and classification of the Board of Directors, (iv) providing the mechanism for
removing directors, (v) limiting the acquisition of more than 10% of the capital
stock of the Company or the Association (except, with the prior approval of the
Continuing Directors of the Company), (vi) governing the requirement for the
approval of certain Business Combinations involving a "Related Person," (vii)
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<PAGE>
regarding the consideration of certain nonmonetary factors in the event of an
offer by another party, (viii) providing for the indemnification of directors,
officers, employees and agents of the Company, (ix) pertaining to the
elimination of the liability of the directors to the Company and its
stockholders for monetary damages, with certain exceptions, for breach of
fiduciary duty, and (x) governing the required stockholder vote for amending the
Articles of Incorporation or Bylaws of the Company. This provision is intended
to prevent the holders of less than 80% of the outstanding stock of the Company
from circumventing any of the foregoing provisions by amending the Articles of
Incorporation to delete or modify one of such provisions. This provision would
enable the holders of more than 20% of the Company's voting stock to prevent
amendments to the Company's Articles of Incorporation or Bylaws, even if such
amendments were favored by the holders of a majority of the voting stock.
Benefit Plans
In addition to the provisions of the Company's Articles of
Incorporation and Bylaws described above, certain benefit plans of the Company
and the Association adopted in connection with the Conversion contain provisions
which also may discourage hostile takeover attempts which the Boards of
Directors of the Company and the Association might conclude are not in the best
interests of the Company, the Association or the Company's stockholders. For a
description of the benefit plans and the provisions of such plans relating to
changes in control of the Company or the Association, see "Management of the
Association -- Certain Benefit Plans and Agreements."
The Purpose of and Anti-Takeover Effect of the Company's Articles of
Incorporation and Bylaws
The Boards of Directors of the Company and the Association believe that
the provisions described above reduce the Company's vulnerability to takeover
attempts and certain other transactions which have not been negotiated with and
approved by its Board of Directors. These provisions will also assist the
Company and the Association in the orderly deployment of the net proceeds of the
Conversion into productive assets during the initial period after the
Conversion. The Boards of Directors of the Company and the Association believe
these provisions are in the best interests of the Association and of the Company
and its stockholders. In the judgment of the Boards of Directors of the Company
and the Association, the Company's Board is in the best position to consider all
relevant factors and to negotiate for what is in the best interests of the
stockholders and the Company's other constituents. Accordingly, the Boards of
Directors of the Company and the Association believe that it is in the best
interests of the Company and its stockholders to encourage potential acquirors
to negotiate directly with the Company's Board of Directors and that these
provisions will encourage such negotiations and discourage nonnegotiated
takeover attempts. It is also the view of the Board of Directors that these
provisions should not discourage persons from proposing a merger or other
transaction at prices reflective of the true value of the Company and which is
in the best interests of all stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts which have
not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value for the Company
and stockholders, with due consideration given to matters such as the management
and business of the acquiring corporation and maximum strategic development of
the Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause great expense. Although a tender offer or
other takeover attempt may be made at a price substantially above then current
market prices, such offers are sometimes made for less than all the outstanding
shares of a target company. As a result, stockholders may be presented with the
alternative of partially liquidating their investment at a time that may be
disadvantageous, or retaining their investment in an enterprise which is under
different management and whose objectives may not be similar to those of the
remaining stockholders.
Despite the belief of the Association and the Company as to the
benefits to stockholders of these provisions of the Company's Articles of
Incorporation and Bylaws, these provisions may also have the effect of
discouraging a future takeover attempt which would not be approved by the
Company's Board, but pursuant to which the stockholders
85
<PAGE>
may receive a substantial premium for their shares over then current market
prices. As a result, stockholders who might desire to participate in such a
transaction may not have any opportunity to do so. Such provisions will also
render the removal of the Company's Board of Directors and management more
difficult and may tend to stabilize the Company's stock price, thus limiting
gains which might otherwise be reflected in price increases due to a potential
merger or acquisition. The Board of Directors, however, has concluded that the
potential benefits of these provisions outweigh the possible disadvantages.
Pursuant to applicable regulations, at any annual or special meeting of its
stockholders after the Conversion, the Company may adopt additional Articles of
Incorporation provisions regarding the acquisition of its equity securities that
would be permitted to a Colorado corporation.
DESCRIPTION OF CAPITAL STOCK
General
The Company is authorized to issue 3,000,000 shares of Common Stock,
par value $0.01 per share, and 1,000,000 shares of serial preferred stock, par
value $0.01 per share. The Company currently expects to issue between 765,000
and 1,035,000 shares, subject to adjustment, of the Common Stock and no shares
of serial preferred stock in the Conversion. The Company has reserved for future
issuance under the Option Plan an amount of authorized but unissued shares of
Common Stock equal to 10% of the shares to be issued in the Conversion. The
capital stock of the Company will represent nonwithdrawable capital, will not be
an account of an insurable type, and will not be insured by the FDIC or any
other federal or state governmental agency.
Common Stock
Voting Rights. Each share of the Common Stock will have the same
relative rights and will be identical in all respects with every other share of
the Common Stock. The holders of the Common Stock will possess exclusive voting
rights in the Company, except to the extent that shares of serial preferred
stock issued in the future may have voting rights, if any. Each holder of shares
of the Common Stock will be entitled to one vote for each share held of record
on all matters submitted to a vote of holders of shares of the Common Stock. For
information regarding a possible reduction in voting rights, see "Certain
Anti-Takeover Provisions in the Articles of Incorporation and Bylaws --
Restrictions on Acquisitions of Securities."
Dividends. The Company may, from time to time, declare dividends to the
holders of the Common Stock, who will be entitled to share equally in any such
dividends. For information as to cash dividends, see "Dividend Policy,"
"Regulation -- Dividend Restrictions," and "Taxation."
Liquidation. In the event of any liquidation, dissolution or winding up
of the Converted Association, the Company, as holder of all of the Association's
capital stock, would be entitled to receive all assets of the Converted
Association after payment of all debts and liabilities of the Converted
Association and after distribution of the balance in the liquidation account to
Eligible Account Holders and Supplemental Eligible Account Holders. In the event
of a liquidation, dissolution or winding up of the Company, each holder of
shares of the Common Stock would be entitled to receive, after payment of all
debts and liabilities of the Company, a pro rata portion of all assets of the
Company available for distribution to holders of the Common Stock. If any serial
preferred stock is issued, the holders thereof may have a priority in
liquidation or dissolution over the holders of the Common Stock.
Restrictions on Acquisition of the Common Stock. For information
regarding limitations on acquisition of shares of the Common Stock, see "Certain
Restrictions on Acquisition of the Company, the Converted Association and the
Association," "Certain Anti-Takeover Provisions in the Articles of Incorporation
and Bylaws" and "The Conversion -- Regulatory Restrictions on Acquisition of the
Common Stock."
Other Characteristics. Holders of the Common Stock will not have
preemptive rights with respect to any additional shares of the Common Stock
which may be issued. The Common Stock is not subject to call for redemption, and
the outstanding shares of the Common Stock, when issued and upon receipt by the
Company of the full purchase price therefor, will be fully paid and
nonassessable.
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Serial Preferred Stock
None of the 1,000,000 authorized shares of serial preferred stock of
the Company will be issued in the Conversion. After the Conversion is completed,
the Board of Directors of the Company will be authorized to issue serial
preferred stock and to fix and state voting powers, designations, preferences or
other special rights of such shares and the qualifications, limitations and
restrictions thereof. The serial preferred stock may rank prior to the Common
Stock as to dividend rights or liquidation preferences, or both, and may have
full or limited voting rights. The Board of Directors has no present intention
to issue any of the serial preferred stock. Should the Board of Directors of the
Company subsequently issue serial preferred stock, no holder of any such stock
shall have any preemptive right to subscribe for or purchase any stock or any
other securities of the Company other than such, if any, as the Board of
Directors, in its sole discretion, may determine and at such price or prices and
upon such other terms as the Board of Directors, in its sole discretion, may
fix.
REGISTRATION REQUIREMENTS
The Company will register its Common Stock with the SEC pursuant to the
Exchange Act upon the completion of the Conversion and will not deregister said
shares for a period of at least three years following the completion of the
Conversion. Upon such registration, the proxy and tender offer rules, insider
trading reporting and restrictions, annual and periodic reporting and other
requirements of the Exchange Act will be applicable. The Company intends to have
a June 30 fiscal year end.
LEGAL OPINIONS
The legality of the Common Stock will be passed upon for the Company by
Housley Kantarian & Bronstein, P.C., Washington, D.C., which has consented to
the references herein to its opinion. Certain legal matters will be passed upon
for Trident Securities by Malizia, Spidi, Sloane & Fisch, P.C., Washington,
D.C.
TAX OPINIONS
The federal income tax consequences of the Conversion will be passed
upon by Housley Kantarian & Bronstein, P.C., Washington, D.C., which has
consented to the references herein to its opinion. The Colorado income tax
consequences of the Conversion will be opined upon by Grimsley, White & Company,
which has consented to the references herein to its opinion.
EXPERTS
The financial statements of Salida Building and Loan Association at
June 30, 1997 and 1996 and for the two years then ended have been included
herein and elsewhere in the registration statement and the Association's
application for conversion in reliance upon the report of Grimsley, White &
Company, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
Ferguson has consented to the publication herein of the summary of its
letter to the Association setting forth its opinion as to the estimated pro
forma aggregate market value of the Common Stock to be issued in the Conversion
and the value of Subscription Rights to purchase the Common Stock and to the use
of its name and statements with respect to it appearing herein.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement with
respect to the Common Stock offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
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<PAGE>
Copies may be obtained at prescribed rates from the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also
maintains an internet address ("Web site") that contains reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the SEC. The address for this Web
site is "http://www.sec.gov."
The Association has filed with the OTS an Application for Conversion.
This document omits certain information contained in such application. The
Application for Conversion can be inspected, without charge, at the offices of
the OTS, 1700 G Street, N.W., Washington, D.C. 20552, and at the office of the
OTS Regional Director, Midwest Regional Office, at 122 West John Carpenter
Freeway, Irving, Texas 75039.
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INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report F-1
Statements of Financial Condition as of June 30, 1997 and 1996 F-2
Statements of Income for the Years Ended June 30, 1997 and 1996 16
Statements of Equity for the Years Ended June 30, 1997 and 1996 F-3
Statement of Cash Flows for the Years Ended June 30, 1997 and 1996 F-4
Notes to Financial Statements F-5
Schedules - All schedules are omitted because the required information is not
applicable or is presented in the financial statements or accompanying notes.
All financial statements of High Country Bancorp, Inc. have been omitted
because High Country Bancorp, Inc. has not yet issued any stock, has no assets
and no liabilities and has not conducted any business other than of an
organizational nature.
89
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[Letterhead of Grimsley, White & Company Appears Here]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Salida Building and Loan Association
Salida, Colorado
We have audited the accompanying statements of financial condition of Salida
Building and Loan Association as of June 30, 1997 and 1996, and the related
statements of income, equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Association's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits 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 Salida Building and Loan
Association as of June 30, 1997 and 1996 and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ GRIMSLEY, WHITE & COMPANY
------------------------------
GRIMSLEY, WHITE & COMPANY
July 31, 1997
F-1
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS
1997 1996
----------- -----------
<S> <C> <C>
Cash and amounts due from banks $ 894,995 $ 511,119
Interest-bearing deposits at other institutions 2,381,315 1,576,878
Securities available-for-sale - 989,085
Securities held-to-maturity 5,339,762 6,843,218
Loans receivable, net 63,126,864 50,075,541
Federal Home Loan Bank stock 988,500 563,500
Accrued interest receivable 595,007 438,580
Property and equipment, net 2,507,398 2,060,920
Mortgage servicing rights 35,352 -
Prepaid expenses and other assets 454,909 126,229
----------- -----------
Total Assets $76,324,102 $63,185,070
=========== ===========
LIABILITIES AND EQUITY
Liabilities
Deposits $56,152,178 $49,537,369
Advances by borrowers for taxes and insurance 127,175 134,075
Accounts payable and other liabilities 491,929 214,638
Advances from Federal Home Loan Bank 13,520,000 7,150,000
Deferred income taxes 74,600 242,000
----------- -----------
Total Liabilities 70,365,882 57,278,082
----------- -----------
Commitments
Equity
Retained earnings, substantially restricted 5,958,220 5,913,804
Net unrealized depreciation on securities available-for-sale,
net of tax of $4,900 (1996) - (6,816)
----------- -----------
Total Equity 5,958,220 5,906,988
----------- -----------
Total Liabilities and Equity $76,324,102 $63,185,070
=========== ===========
</TABLE>
See Notes To Financial Statements
F-2
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
STATEMENTS OF EQUITY
JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
LOSS ON
SECURITIES
RETAINED AVAILABLE
EARNINGS FOR-SALE TOTAL
---------- ----------- ----------
<S> <C> <C> <C>
BALANCES JULY 1, 1995 $5,395,102 $ (16,217) $5,378,885
Net income for the year 518,702 518,702
Change in net urealized loss on securities available -
for - sale 9,401 9,401
---------- ----------- ----------
BALANCES JUNE 30, 1996 5,913,804 (6,816) 5,906,988
Net income for the year 44,416 44,416
Change in net unrealized loss on securities available -
for - sale 6,816 6,816
---------- ----------- ----------
BALANCES JUNE 30, 1997 $5,958,220 $ - $5,958,220
========== =========== ==========
</TABLE>
See Notes To Financial Statements
F-3
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
STATEMENT OF CASH FLOWS
JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Operating Activities
Net income $ 44,416 $ 518,702
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 158,415 96,936
Net amortization of premiums and discounts on investments10,349 10,349 36,413
Net loss on sale of loans 56,185 92,535
Amortization of loan fees (109,739) (180,534)
FHLB stock dividends (42,200) (21,400)
Provision for losses on loans 282,000 59,450
Net loss on assets disposition 4,226 10,889
Deferred income taxes (162,500) 70,100
Net change in miscellaneous assets (460,107) (99,725)
Net change in miscellaneous liabilities 277,291 45,437
------------ -----------
Net cash provided by operating activities 58,336 628,803
------------ -----------
Investing Activities
Net change in loans receivable (17,192,492) (14,213,259)
Proceeds from sale of loans 3,878,889 5,702,942
Proceeds from sale of securities available-for-sale 1,000,000 -
Principal repayments of mortgage-backed securities held-to-maturity 1,482,590 1,487,979
Purchase of Federal Home Loan Bank stock (382,800) (130,900)
Purchase of property and equipment (609,119) (988,042)
Sale of assets - 8,200
------------ -----------
Net cash used by investing activities (11,822,932) (8,133,080)
------------ -----------
Financing Activities
Net increase in deposit accounts 6,614,809 3,623,530
Net increase (decrease) in mortgage escrow funds (6,900) (49,824)
Conversion costs incurred (25,000) -
Proceeds from borrowings 6,370,000 4,150,000
------------ -----------
Net cash provided by financing activities 12,952,909 7,723,706
------------ -----------
Net increase in cash and cash equivalents 1,188,313 219,429
Cash and cash equivalents, beginning of year 2,087,997 1,868,568
------------ -----------
Cash and cash equivalents, end of year $ 3,276,310 $ 2,087,997
============ ===========
Supplemental disclosure of cash flow information
Interest paid on deposits and borrowings $ 2,813,211 $ 2,289,500
Income taxes paid $ 208,624 $ 355,320
</TABLE>
See Notes To Financial Statements
F-4
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -1 OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Salida Building and Loan Association (the Association) is a federally
chartered mutual association with its main office in Salida, Colorado
and with branch offices in Leadville and Buena Vista, Colorado. The
Association provides a variety of financial services to the area it
serves. Its primary deposit products are interest-bearing checking
accounts and certificates of deposit, and its primary lending products
are real estate mortgages, consumer and commercial loans.
A summary of significant accounting policies follows:
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Securities Held to Maturity
Bonds and notes for which the Association has the positive intent and
ability to hold to maturity are reported at cost, adjusted for premiums
and discounts that are recognized in interest income using the interest
method over the period to maturity.
Securities Available for Sale
Available-for-sale securities consist of bonds and notes not classified
as trading securities nor as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as a net amount in a separate component of
shareholders' equity until realized.
Gains and losses on the sale of available-for-sale securities are
determined using the specific-identification method.
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than
temporary would result in write-downs of the individual securities to
their fair value. Should the Association incur write-downs they will be
included in earnings as realized losses.
Premiums and discounts are recognized in interest income using the
interest method over the period to maturity.
F-5
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -1 OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Federal Home Loan Bank Stock
The stock is an equity interest in the Federal Home Loan Bank of
Topeka. The Association, as a member of the FHLB, is required to
maintain an investment in capital stock of the FHLB. The stock is
carried at cost, as its cost is assumed to equal its market value. FHLB
stock can only be sold at par value to the FHLB or to another member
institution. The FHLB declares cash and stock dividends. The stock
dividends are recognized as income due to the fact they are redeemable
at par value ($100 per share) from the FHLBs or another member
institution.
Loans
Loans are stated at unpaid principal balances, less the allowance for
loan losses, net of deferred loan fees and loans in process.
Loan origination and commitment fees, as well as certain direct
origination costs, are deferred and amortized as a yield adjustment
over the lives of the related loans using the interest method.
Amortization of deferred loan fees is discontinued when a loan is
placed on nonaccrual status.
Loans are placed on nonaccrual status when principal and interest is
delinquent for 90 days or more. Uncollectible interest on these loans
is charged off, or an allowance is established, based on management's
periodic evaluation, by a charge to interest income equal to all
interest previously accrued. Income is subsequently recognized only to
the extent that cash payments are received.
Effective July 1995, the Association adopted Statement of Financial
Accounting Standards No. 114, Accounting by Creditors for Impairment of
a Loan, as amended by Statement No. 118, Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures. These
Statements prescribe recognition criteria for loan impairment,
generally related to commercial loans, and multifamily real estate
loans, and measurement methods for certain impaired loans and all loans
whose terms are modified in trouble debt restructuring subsequent to
the adoption of these statements. A loan is considered impaired when it
is probable that the borrower will not repay the loan according to the
original contractual terms of the loan agreement.
Management has determined that first mortgage loans on one-to-four
family properties, home equity, second mortgage loans, and all consumer
loans are large groups of smaller-balance homogenous loans that are
collectively evaluated. Accordingly, such loans are outside the scope
of Statement Nos. 114 and 118.
F-6
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -1 OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loans (continued)
Management considers an insignificant delay, which is determined as 90
days by the Association, will not cause a loan to be classified as
impaired. A loan is not impaired during a period of delay in payment if
the Association expects to collect all amounts due including interest
accrued at the contractual interest rate for the period of delay. All
loans identified as impaired are evaluated independently by
management.
Under this Standard, the Association estimates credit losses on
impaired loans based on the present value of expected cash flows or the
fair value of the underlying collateral if the loan repayment is
expected to come from the sale or operation of such collateral.
Statement No. 118 amends Statement No. 114 to permit a creditor to use
existing methods for recognizing interest income on impaired loans
eliminating the income recognition provisions of Statement No. 114.
Prior to adoption of this Standard the credit losses related to these
loans were estimated based on undiscounted cash flows or the fair value
of the underlying collateral. The adoption of the statements did not
have a material effect on the Association's financial condition or
results of operations.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb potential losses inherent
in the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan portfolio,
including the nature of the portfolio, credit concentrations, specific
impaired loans, and economic conditions. The allowance is increased by
a provision for loan losses, which is charged to expense, and reduced
by charge-offs, net of recoveries. Such provisions are based on
management's estimate of net realizable value or fair value of the
collateral, as applicable. These estimates are susceptible to economic
changes that could result in a material adjustment to results of
operations in the near term. Recovery of the carrying value of such
loans is dependent to a great extent on economic, operation, and other
conditions that may be beyond the Association's control.
Loan Servicing
The cost of mortgage servicing rights is amortized in proportion to,
and over the period of, estimated net servicing revenues. Impairment of
mortgage servicing rights is assessed based on the fair value of those
rights. Fair values are estimated using discounted cash flows based on
a current market interest rate.
F-7
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -1 OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is calculated using primarily the straight-
line method over the estimated useful lives of the related assets.
Estimated useful lives of furniture, fixtures, and equipment range from
two to ten years; buildings and improvements range from five to forty
years.
Income Taxes
Income taxes are provided in accordance with SFAS No. 109, Accounting
for Income Taxes (See Note 9). Under the provisions of SFAS No. 109,
deferred tax assets and liabilities are recorded based on the
differences between the financial statement and tax bases of assets and
liabilities and the tax rates which will be in effect when these
differences are expected to reverse. If appropriate, deferred tax
assets are reduced by a valuation allowance which reflects expectations
of the extent to which such assets will be realized.
Financial Instruments
Off-balance sheet instruments. In the ordinary course of business the
Association has entered into off-balance sheet financial instruments
consisting of commitments to extend credit, and standby letters of
credit. Such financial instruments are recorded in the financial
statements when they are funded.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Association in
estimating fair values of financial instruments as disclosed herein:
Cash and short-term instruments. The carrying amounts of cash and
short-term instruments approximate fair values.
Available-for-sale and held-to-maturity securities. Fair values for
securities, excluding restricted equity securities, are based on quoted
market prices. The carrying values of restricted equity securities
approximate fair values.
Loans receivable. For variable-rate loans that reprice frequently and
have no significant change in credit risk, fair values are based on
carrying-values. Fair values for mortgage loans, consumer loans,
commercial real estate and commercial loans are estimated using
discounted cash flow analysis, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using discounted
cash flow analysis or underlying collateral values, where applicable.
F-8
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -1 OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Deposit Liabilities. The fair values disclosed for demand deposits are,
by definition, equal to the amount payable on demand at the reporting
date. The carrying amounts of variable-rate, fixed-term money-market
accounts and certificates of deposit (CDs) approximate their fair
values at the reporting date. Fair values for fixed-rate CDs are
estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Advances from Federal Home Loan Bank. The fair values are based on the
borrowing rates and remaining maturities.
Cash Equivalents
For the purpose of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks, and interest-bearing
deposits at other institutions. The Association considers all highly
liquid debt instruments with original maturities of three months or
less to be cash equivalents.
Reclassifications
Certain amounts in 1996 have been reclassified to conform with the 1997
presentation.
NOTE -2 SECURITIES
Securities are classified in three categories and accounted for as
follows: debt securities that the Association has the positive intent
and ability to hold to maturity are classified as held-to-maturity and
are measured at amortized cost; debt and equity securities bought and
held principally for the purpose of selling in the near term are
classified as trading securities and are measured at fair value, with
unrealized gains and losses included in earnings; debt and equity
securities not classified as either held-to-maturity or trading
securities are deemed available-for-sale and are measured at fair-
value, with unrealized gains and losses, net of applicable taxes,
reported in a separate component of equity.
Held-to-Maturity Securities
The amortized cost and estimated fair value of held-to-maturity
securities at June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1997 Cost Gains Losses Value
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Mortgage-backed securities
GNMA certificates $1,708,760 $22,801 $ 0 $1,731,561
FHLMC certificates 1,305,265 32,939 (12,170) 1,326,034
FNMA certificates 2,325,737 33,659 (4,855) 2,354,541
---------- ---------- ---------- ----------
$5,339,762 $ 89,399 $ (17,025) $5,412,136
========== ========== ========== ==========
</TABLE>
F-9
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
====================================
NOTES TO FINANCIAL STATEMENTS
NOTE -2 SECURITIES (Continued)
Held-to-Maturity Securities (Continued)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1996 Cost Gains Losses Value
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Mortgage-backed securities
GNMA certificates $2,011,893 $ 1,127 $(14,602) $1,998,418
FHLMC certificates 1,775,407 31,314 (21,160) 1,785,561
FNMA certificates 3,055,918 49,396 (9,415) 3,095,899
---------- ---------- ---------- ----------
$6,843,218 $ 81,837 $ (45,177) $6,879,878
========== ========== ========== ==========
</TABLE>
Available-for-Sale Securities
The amortized cost and estimated fair value of available-for-sale
securities at June 30, 1996, were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1996 Cost Gains Losses Value
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Government and Federal
Agency Obligations:
U.S. Agencies $ 999,501 $ 0 $ (10,416) $ 989,085
========== ========== ========== ==========
</TABLE>
The amortized cost and fair value of debt securities at June 30, 1997,
by contractual maturity, are shown below. The Association's debt
securities held-to-maturity are mortgage-backed securities whose
expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
Held-to-Maturity Debt Securities Cost Value
-------------------------------- ---------- ----------
<S> <C> <C>
Due after one year through five years $ 260,817 $ 258,729
Due after ten years 5,078,945 5,153,407
---------- ----------
Total Held-to-Maturity Securities $5,339,762 $5,412,136
========== ==========
</TABLE>
Proceeds from the maturity or sale of securities available-for-sale
during the years ended June 30 were $1,000,000 (1997) and $0 (1996)
with no gains or losses realized.
At June 30, investments with a carrying value of $1,744,847 (1997) and
$609,524 (1996) were pledged as collateral for deposits of public
funds.
F-10
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -3 LOANS RECEIVABLE
Loans receivable at June 30, are summarized as follows
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Loans secured by real estate:
Residential real estate $46,509,985 $38,011,308
Commercial real estate 1,643,468 2,095,187
Construction 3,092,469 2,544,200
Land 2,390,040 1,500,311
----------- -----------
Total Loans Secured by Real Estate 53,635,962 44,151,006
Consumer loans, net of discounts 6,476,354 3,926,450
Loans collateralized by savings accounts 764,450 849,183
Commercial loans 4,287,400 3,080,228
Other loans 98,427 92,093
----------- -----------
Total Loans 65,262,593 52,098,960
Less:
Undisbursed portion of loans in process 1,123,281 1,246,388
Deferred loan origination fees 408,043 365,906
Allowance for loan losses 604,405 411,125
----------- -----------
Loans Receivable, Net $63,126,864 $50,075,541
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
The changes in the allowance for loan losses were as follows:
1997 1996
----------- -----------
<S> <C> <C>
Balance, beginning of year $ 411,125 $ 404,595
Provision for losses 282,000 60,000
Recoveries 7,450 16
Losses incurred (96,170) (53,486)
----------- -----------
Balance, end of year $ 604,405 $ 411,125
=========== ===========
</TABLE>
At June 30, the Association had adjustable interest rate loans of
approximately $6,266,000 (1997) and $6,145,000 (1996). The adjustable
rate loans have interest rate adjustment limitations and are generally
indexed to the 1-year U.S. Treasury Note rate. Future market factors
may affect the correlation of the interest rate adjustment with the
rates the Association pays on the short-term deposits that have been
primarily utilized to fund these loans.
Loans for which interest accruals had been discontinued at June 30 were
approximately $140,000 (1997) and $73,000 (1996). If interest on these
loans had been accrued, such interest would have increased income by
immaterial amounts.
Loans receivable at June 30 include loans to officers and directors of
approximately $839,000 (1997) and $761,000 (1996).
F-11
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -4 LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
statements of financial condition. The unpaid principal balances of
these loans at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Mortgage loan portfolios serviced for:
FHLMC $9,353,814 $6,260,125
Other investors 27,868 206,224
---------- ----------
$9,381,682 $6,466,349
========== ==========
</TABLE>
In connection with these loans serviced for others at June 30, the
Association held borrowers' escrow balances of $23,837 (1997) and
$19,939 (1996).
NOTE -5 ACCRUED INTEREST RECEIVABLE
Interest receivable at June 30, relates to the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Loans $ 556,692 $ 379,647
Mortgage-backed securities 38,315 49,783
Other investments 0 9,150
---------- ----------
$ 595,007 $ 438,580
========== ==========
</TABLE>
NOTE -6 PROPERTY AND EQUIPMENT
Property and equipment and the related accumulated depreciation at
June 30, are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Land and improvements $ 316,035 $ 255,847
Buildings and improvements 2,043,519 940,032
Furniture, fixtures and equipment 783,742 628,012
Construction-in-progress 0 745,847
---------- ----------
3,143,296 2,569,738
Less accumulated depreciation (635,898) (508,818)
---------- ----------
$2,507,398 $2,060,920
========== ==========
</TABLE>
Depreciation expense for the years ended June 30, totaled $158,415
(1997) and $96,936 (1996).
F-12
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -7 DEPOSIT ACCOUNTS
Deposit accounts at June 30 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- ------------------------
Weighted Weighted
Average Average
Amount Rate Amount Rate
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
NOW accounts, including
non-interest bearing
deposits of $2,361,034
(1997) and $2,275,661
(1996) $10,586,504 1.30% $ 7,749,722 1.35%
Money market and
savings accounts 14,037,595 2.96% 13,163,710 2.91%
Certificate accounts 31,528,079 5.58% 28,623,937 5.43%
----------- ------------
$56,152,178 $ 49,537,369
=========== ============
</TABLE>
At June 30, 1997, scheduled maturities of the above certificate
accounts are summarized as follows:
<TABLE>
<CAPTION>
Year ending June 30,
--------------------------------------------------------------
2002 and
1998 1999 2000 2001 thereafter
----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
3.01-4.00 $ 187,271
4.01-5.00 2,995,455 $ 161,026
5.01-6.00 18,467,799 3,123,389 $ 618,764 $ 418,900
6.01-7.00 3,659,417 951,879 149,238 52,694 $ 132,400
7.01-8.00 90,000 300,000 5,211 214,636
----------- ----------- ---------- ----------- ----------
$25,309,942 $ 4,326,294 $1,068,002 $ 476,805 $ 347,036
=========== =========== ========== =========== ==========
</TABLE>
The aggregate amount of certificates of deposits with a minimum
denomination of $100,000 at June 30, was $8,668,062 (1997) and
$9,186,927 (1996).
Deposits in excess of $100,000 are not insured by the Savings
Association Insurance Fund (SAIF).
Interest expense on deposits for the years ended June 30 is summarized
as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
NOW and money market deposit accounts $ 224,126 $ 196,031
Passbook savings and certificate accounts 1,955,282 1,770,726
---------- ----------
$2,179,408 $1,966,757
========== ==========
</TABLE>
F-13
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE -8 ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank (FHLB) at June 30 are
summarized as follows:
<TABLE>
<CAPTION>
Interest
Rate 1997 1996
---------- ----------- -----------
<S> <C> <C> <C>
Maturing within one year 5.81-8.12% $ 9,500,000 $2,000,000
Maturing in 1999 5.81-6.72% 3,000,000 500,000
Maturing in 2000 6.79% 500,000 4,000,000
Maturing in 2001 6.80% 520,000 650,000
----------- ----------
$13,520,000 $7,150,000
=========== ==========
</TABLE>
Pursuant to collateral agreements with the FHLB, advances are secured
by a blanket pledge agreement with the FHLB which includes real estate
loans and other non-pledged securities.
At June 30, 1996, the Association had an approved line of credit of
$6,000,000 with the FHLB which expired May 5, 1997. At June 30, 1997,
the Association has an approved line of credit for $10,000,000 with the
FHLB. No amount was drawn on the line of credit at June 30, 1996. As of
June 30, 1997, the Association had drawn $1,000,000 on the line of
credit.
NOTE -9 INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1996
---------- --------
<S> <C> <C>
Current $ 182,085 $336,918
Deferred (171,000) 70,100
--------- --------
$ 11,085 $407,018
========= ========
</TABLE>
The effective tax rate on income before the provisions for income taxes
differs from the federal statutory income tax rate for the following
reasons:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Provision for income taxes at statutory rate $ 18,900 $314,700
Excess tax provision for bad debts over
book provisions 0 49,800
State income taxes, net of federal income
tax benefit 7,200 16,200
Other, net (15,015) 26,318
-------- --------
$ 11,085 $407,018
======== ========
</TABLE>
F-14
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -9 INCOME TAXES (Continued)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The net deferred tax liabilities as of June 30, are as
follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Difference between tax basis and
carrying basis of FHLB stock $ 127,100 $ 111,900
Tax depreciation in excess of
financial statement amounts 76,700 75,400
Difference between tax basis and
carrying basis of investments 0 4,900
Difference between tax basis and carrying
basis of long term incentive plan (87,700) 0
Loan loss reserve (41,500) 49,800
--------- ---------
$ 74,600 $ 242,000
========= =========
</TABLE>
The deferred tax expense (benefit) results from timing differences in
the recognition of income and expense for tax and financial purposes.
The sources and tax effects of these temporary timing differences are
as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
FHLB stock dividends $ 15,500 $ 15,400
Accumulated depreciation 1,400 13,100
Allowance for loan losses - net (91,300) 49,800
Long-term incentive plan (87,700) 0
Other (8,900) (8,200)
--------- ---------
$(171,000) $ 70,100
========= =========
</TABLE>
The Association is permitted under the Internal Revenue Code to deduct
an annual addition to reserve for bad debts in determining taxable
income, subject to certain limitations. This deduction differs from the
bad debt provision used for financial accounting purposes. Bad debt
deductions for income tax purposes are included in taxable income of
later years only if the bad debt reserve is used subsequently for
purposes other than to absorb bad debt losses. Because the Association
does not intend to use the reserve for purposes other than to absorb
losses, no deferred income taxes have been provided. Retained earnings
at June 30, 1997, includes approximately $1,169,000, representing such
bad debt deductions for which no income taxes have been provided.
NOTE -10 CONTINGENCIES
In the normal course of business, the Association is involved in
various legal actions arising in the ordinary course of business. In
the opinion of management, after consultation with legal counsel, the
ultimate disposition of these matters is not expected to have a
material adverse effect on the financial position of the Association.
F-15
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -11 REGULATORY CAPITAL REQUIREMENTS
The Association is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain actions by regulators that,
if undertaken, could have a direct material effect on the Association's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Association must
meet specific guidelines that involve quantitative measures of the
Association's assets, liabilities, and certain off-balance sheet items
as calculated under regulatory accounting practices. The Association's
capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and
other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Association to maintain minimum amounts and ratios
as outlined below. Management believes, as of June 30, 1997. The
Association meet all capital adequacy requirements to which it is
subject.
As of November 14, 1995, the most recent notification from Office of
Thrift Supervision categorized the Association as well capitalized
under the regulatory framework for prompt corrective action. To be well
capitalized the Association must maintain minimum total risk-based,
Tier I risk-based, and Tier I leverage ratios. There are no conditions
or events since that notification that management believes have changed
the institution's category.
The following is a reconciliation of capital computed under generally
accepted accounting principles (GAAP) to regulatory capital. OTS
regulations specify minimum capital requirements for the Association.
The following reconciliation also compares the capital requirements as
computed to the minimum capital requirements for the Association, as of
June 30.
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Equity Per GAAP $5,958,220 $5,913,804
Less Servicing Rights Plus Valuations (3,535) 2,000
---------- ----------
Equity Per GAAP- Tier I Capital 5,954,685 5,915,804
Valuation Allowance 604,405 411,125
---------- ----------
Regulatory Capital $6,559,090 $6,326,929
========== ==========
</TABLE>
F-16
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -11 REGULATORY CAPITAL REQUIREMENTS (Continued)
<TABLE>
<CAPTION>
Minimum Required To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
Amount Ratio Amount Ratio Amount Ratio
----------- ------- ----------- ---------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
1997
----
Total Capital
(to Risk
Weighted
Assets) $6,559,090 13.76% $3,814,320 8.00% $4,767,900 10.00%
Tier I Capital
(to Risk
Weighted
Assets) 5,954,685 12.49 1,430,370 3.00 2,860,740 6.00
Tier I Capital
(to Average
Assets) 5,954,685 8.25 1,082,820 1.50 3,609,400 5.00
Tangible Capital
(to Tangible
Assets) 5,954,685 8.25 1,082,820 1.50 N/A
1996
----
Total Capital
(to Risk
Weighted
Assets) $6,326,929 16.99% $2,979,360 8.00% $3,724,200 10.00%
Tier I Capital
(to Risk
Weighted
Assets) 5,915,804 15.88 1,117,260 3.00 2,234,520 6.00
Tier I Capital
(to Average
Assets) 5,915,804 9.69 919,170 1.50 3,053,900 5.00
Tangible Capital
(to Tangible
Assets) 5,915,804 9.69 919,170 1.50 N/A
</TABLE>
F-17
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -11 REGULATORY CAPITAL REQUIREMENTS (Continued)
The Association's management believes that, under the current
regulations, the Association will continue to meet its minimum capital
requirements in the coming year. However, events beyond the control of
the Association, such as increased interest rates or a downturn in the
economy in the Association's operating area, could adversely affect
future earnings and, consequently, the ability of the Association to
meet its future minimum capital requirements.
NOTE -12 BENEFIT PLANS
The Association has a defined contribution plan (the Plan) for
employees who have completed one year of service. The Association
matches covered employee's contributions up to 5% of their
compensation. In addition, the Association's Board of Directors may
elect to contribute an additional amount based upon the Association's
profit. Contributions to the Plan were $54,100 (1997) and $49,800
(1996).
The Association adopted a Long-Term Incentive Plan in June, 1997
covering the directors and key employees of the Association. On June 30
of each year following 1997 the participants will have a contribution
made to their account providing the participant continues to be an
employee or director of the Association. Prior to distribution under
the terms of the Plan, each participant's account shall be credited
with a rate of return, on any amounts previously credited, equal to the
highest rate of interest paid by the Association on one-year
certificates of deposit, or after conversion the rate of return will
equal the dividend-adjusted rate of return on the common stock.
Amounts credited to Participant's Accounts on the effective date and
thereafter shall be fully vested. Account balances shall be paid, in
cash, in ten equal annual installments beginning during the first
quarter of the calendar year which next follows the calendar year in
which the participant ceases to be a director or employee for any
reason, with subsequent payments being made by the last day of the
first quarter of each subsequent calendar year until the participant
has received the entire amount of his account. Notwithstanding the
foregoing a participant may elect to have his account paid in lump sum
distribution or in annual payments over a period less than ten years.
Any benefits accrued under the plan will be paid from the Association's
general assets. The Association has established a trust in order to
hold assets with which to pay benefits. Trust assets will be subject to
the claims of the Association's general creditors. The Association
recognized an expense of $237,031 in the year ended June 30, 1997,
which represented the funding of the plan for past services.
F-18
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -13 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
CREDIT RISK
The Association is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs
of its customers. At June 30, 1997, the Association has commitments to
fund mortgage loans of $740,300, unfunded lines of credit of $978,900,
and letters of credit of $270,400. The Association makes contractual
commitments to extend credit, which are legally binding agreements to
lend money to customers at prevailing interest rates for specified
periods of time. The credit risk involved in issuing these commitments
is essentially the same as that involved in extending loan facilities
to customers.
As such, the Association's exposure to credit loss, in the event of
non-performance by the counterparty to the financial instrument, is
represented by the contractual amount of those instruments. However,
the Association applies the same credit standards used in the lending
process when extending these commitments, and periodically reassesses
the customers' credit worthiness. Additional risks associated with
these commitments arise when they are drawn upon, such as the demands
on liquidity that the Association could experience if a significant
portion were drawn down at once. This is considered unlikely, however,
as commitments may expire without having been drawn upon.
The Association originates loans primarily in Chaffee and Lake
Counties, Colorado. Although the Association has a diversified loan
portfolio, a substantial portion of its borrower's ability to repay
their loans is dependent upon economic conditions in the Association's
market area.
NOTE -14 FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Association's financial instruments,
as of June 30, 1997, are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
----------- ----------
<S> <C> <C>
Financial Assets:
Cash and amounts due from banks $ 894,995 $ 894,995
Interest bearing deposits 2,381,315 2,381,315
Securities held-to-maturity 5,339,762 5,412,136
FHLB stock 988,500 988,500
Loans receivable - net 63,126,864
Financial liabilities:
Deposits 56,152,178
Advances from FHLB 13,520,000
</TABLE>
F-19
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -15 OTHER NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Advertising $ 74,292 $ 46,544
Stationery Supplies 90,893 60,202
Postage 66,675 48,737
Telephone 17,990 12,775
Dues and Subscriptions 22,102 21,477
Other 133,211 103,824
-------- --------
$405,163 $293,559
======== ========
</TABLE>
NOTE -16 PLAN OF CONVERSION
On May 15, 1997, the Board of Directors of Salida Building and Loan
Association adopted a Plan of Conversion whereby the Association would
convert from a mutual savings institution to a stock savings and loan
pursuant to the Rules and Regulations of the OTS. The Plan includes, as
part of the conversion, the concurrent formation of a holding company.
The Plan provides that non-transferable subscription rights to purchase
holding company conversion stock will be offered first to eligible
account holders of record as of the eligibility record date, then to
the Association's tax qualified employee plan, then to other
supplemental eligible account holders of record as of the supplemental
eligibility record date, then to other members, and then to directors,
officers and employees. Concurrently with, at any time during, or
promptly after the subscription offering, and on a lowest priority
basis, an opportunity to subscribe may also be offered to the general
public in a direct community offering. The price of the holding company
conversion stock will be based upon an independent appraisal of the
Association and will reflect its estimated pro forma market value, as
converted. It is the desire of the Board of Directors of the
Association to attract new capital to the Association in order to
increase its capital, support future savings growth and increase the
amount of funds available for residential and other mortgage lending.
The converted Association is also expected to benefit from its
management and other personnel having a stock ownership in its
business, since stock ownership is viewed as an effective performance
incentive an a means of attracting, retaining and compensating
management and other personnel. No change will be made in the Board of
Directors or management as a result of the conversion. Upon consumption
of the conversion, the Association will issue all of its outstanding
capital stock to the holding company in exchange for at least 50% of
the net proceeds from the sale of the common stock.
The cost of issuing the common stock will be deferred and deducted from
the sale proceeds. If the offering is unsuccessful for any reason, the
deferred costs will be charged to operations. At June 30, 1997, the
Association had incurred $25,000 of such costs.
F-20
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -16 PLAN OF CONVERSION (Continued)
For the purpose of granting eligible members of the Association a
priority in the event of future liquidation, the Association will, at
the time of conversion, establish a liquidation account equal to its
regulatory capital as of the date of the latest balance sheet used in
the final conversion offering circular. In the event (and only in such
event) of future liquidation of the converted Association, an eligible
savings account holder who continues to maintain a savings account
shall be entitled to receive a distribution from the liquidation
account, in the proportionate amount of then-current adjusted balance
of the savings deposits then held, before any distributions may be made
with respect to capital stock.
Present regulations provide that the Association may not declare or pay
a cash dividend on or repurchase any of its capital stock if the result
thereof would be to reduce the regulatory capital of the Association
below the amount required for the liquidation account or the regulatory
capital requirement. Further, any dividend declared or paid on or
repurchase of, the Association's capital stock shall be in compliance
with the rules and regulations of the Office of Thrift Supervision, or
other applicable regulations.
NOTE -17 IMPACT OF NEW ACCOUNTING STANDARDS
Accounting for ESOP. The Accounting Standards Division of the American
Institute of Certified Public Accountants approved Statement of
Position ("SOP") 93-6, "Employers' Accounting for Employee Stock
Ownership Plans," which is effective for fiscal years beginning after
December 15, 1993. SOP 93-6 changed, among other things, the measure of
compensation recorded by employers from the cost of ESOP shares to the
fair value of ESOP shares. To the extent that the fair value of the
common stock held by the ESOP that are committed to be released
directly to compensate employees, differs from the cost of such shares,
compensation expenses and a related charge or credit to additional
paid-in capital will be reported in the Association's financial
statements. The adoption of the ESOP by the Association and the
application of SOP 93-6 is likely to result in fluctuations in
compensation expense as a result of changes in the fair value of the
common stock. However, any such compensation expense fluctuations will
result in an offsetting adjustment to paid-in capital, and therefore,
total capital will not be affected.
Disclosure of Derivative Financial Instruments. In October, 1994, the
Financial Accounting Standards Board ("FASB) issued SFAS No. 119
"Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments." This statement addresses the disclosure of
derivative financial instruments including the face amount, nature and
terms.
F-21
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -17 IMPACT OF NEW ACCOUNTING STANDARDS (Continued)
For derivatives held for trading, disclosure of objectives, strategies,
policies on reporting and income recognition method is required. This
statement is effective for financial statements for fiscal years ending
after December 15, 1995. Currently the Association does not own any
derivative financial instruments and therefore SFAS No. 119 does not
have any impact on the financial statements.
Impairment of Long-Lived Assets. In March 1995, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets to be Disposed of." This
statement establishes accounting standards for the impairment of long-
lived assets and certain identifiable intangibles, and goodwill related
to those assets to held and used and for long-lived assets and certain
identifiable intangibles to be disposed of.
This Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicated that the carrying
amount of an asset may not be recoverable. In performing the review for
recoverability, the entity should estimate the future cash flows
expected to result from the use of the asset and eventual disposition.
If the sum of the expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Otherwise, and impairment loss is not
recognized. Measurement of an impairment loss for long-lived assets and
identifiable intangibles that an entity expects to hold and use should
be based on the fair value of the assets. The Association adopted this
statement in July, 1996 and it did not have an affect on the financial
statements.
Accounting for Stock-Based Compensation. In October, 1995, the
Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock-Based Compensation to Employees." This statement encourages
entities to adopt the fair value based method of accounting for
employee stock options or other stock compensation plans. However, it
allows an entity to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Under the fair
value based method, compensation cost is measured at the grant date
based on the value of the award and is recognized over the service
period, which is usually the vesting period. Under the intrinsic value
based method, compensation cost is the excess of the quoted market
price of the stock at the grant date over the amount an employee must
pay to acquire the stock
F-22
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -17 IMPACT OF NEW ACCOUNTING STANDARDS (Continued)
Most fixed stock option plans - the most common type of stock
compensation plan - have no intrinsic value at grant date and under
Opinion No. 25 no compensation cost is reconized for them.
Compensation cost is recognized for other types of stock based
compensation plans under Opinion No. 25, including plans with variable,
usually performance-based features. This Statement requires that an
employer's financial statements include certain disclosures about
stock-based employee compensation arrangements regardless of the
method used to account for them. This Statement is effective for
transactions entered into in fiscal years that begin after December 15,
1995. The Association will adopt the Statement on the date the
Association converts from a federal mutual to a federal stock savings
and loan association. The Association has not determined which method
it will use to account for the options at this time and has not
estimated the effect of adoption on the Association's financial
statements.
Earnings Per Share. In March 1997, the Financial Accounting Standards
Board ("FASB") issued Statement No. 128. The Statement establishes
standards for computing and presenting earnings per share and applies
to entities with publicly held common stock or potential common stock.
This Statement simplifies the standards for computing earnings per
share and makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of basic
EPS.
It also requires dual presentations of basic and diluted EPS on the
face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. Basic EPS excludes dilution
and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. This
statement supersedes Opinion 15 and AICPA Accounting Interpretation 1-
102 of Opinion 15. This statement is effective for financial statements
issued for periods ending after December 15, 1997. Management believes
that the impact of adopting SFAS No. 128 will not be material to the
financial statements.
Disclosure of Information about Capital Structure. In February 1997,
the Financial Accounting Standards Board issued Statement No. 129.
F-23
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -17 IMPACT OF NEW ACCOUNTING STANDARDS (Continued)
The Statement incorporates the disclosure requirements of APB Opinion
No. 15, Earnings Per Share and makes them applicable to all public and
nonpublic entities that have issued securities addressed by the
Statement. APB Opinion No. 15 requires disclosure of descriptive
information about securities that is not necessarily related to the
computation of earnings per share.
This statement continues the previous requirements to disclose certain
information about an entity's capital structure found in APB Opinions
No. 10, Omnibus Opinion - 1966, and No. 15, Earnings Per Share, and
FASB Statement No. 47, Disclosure of Long-Term Obligations, for
entities that were subject to the requirements of those standards. This
Statement eliminates the exemption of nonpublic entities from certain
disclosure requirements of Opinion No. 15 as provided by FASB Statement
No. 21, Suspension of the Reporting of Earnings per Share and Segment
Information by Nonpublic Enterprises. It supersedes specific disclosure
requirements of Opinions 10 and 15 and Statement 47 and consolidates
them in this statement for ease of retrieval and for greater visibility
to nonpublic entities. The Statement is effective for financial
statements for periods ending after December 15, 1997. SFAS No. 129
will be adopted by the Association after December 15, 1997, the impact
of adopting the Statement will not be material to the financial
statements.
Reporting Comprehensive Income. In June 1997, the Financial Accounting
Standards board issued Statement No. 130. The Statement establishes
standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set of
general-purpose financial statements. This Statement requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income to be reported in a financial
statement that is displayed with the same prominence as other financial
statements. This Statement does not require a specific format for that
financial statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that
financial statement.
This Statement requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position.
This Statement is effective for fiscal years beginning after December
15, 1997. FASB Statement No. 130 will be adopted by the Association
after December 15, 1997, the impact of adopting the Statement will not
be material to the financial statements.
F-24
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -17 IMPACT OF NEW ACCOUNTING STANDARDS (Continued)
Disclosures about Segments of an Enterprise and Related Information. In
June 1997 the Financial Accounting Standards board issued Statement No.
131. The Statement establishes standards for the way that public
business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and
major customers. This Statement supersedes FASB Statement No. 14,
Financial reporting for segments of Business Enterprise, but retains
the requirement to report information about major customers. It amends
FASB Statement No. 94, Consolidation of all Majority-owned
Subsidiaries, to remove the special disclosure requirements for
previously unconsolidated subsidiaries.
The Statement requires that a public business enterprise report
financial and descriptive information about its reportable operating
segments. Operating segments are components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
Generally, financial information is required to be reported on the
basis that is used internally for evaluating segment performance and
deciding how to allocate resources to segments.
The Statement requires that a public business enterprise report a
measure of segment profit or loss, certain specific revenue and expense
items, and segment assets. It requires reconciliations of total segment
revenues, total segment profit or loss, total segment assets and other
amounts disclosed for segments to corresponding amounts in the
enterprise's general-purpose financial statements. It requires that all
public business enterprises report information about the revenues
derived from the enterprise's products or services (or groups of
similar products and services), about the countries in which the
enterprise earns revenues and holds assets, and about major customers
regardless of whether that information is used in making operating
decisions.
The Statement also requires that a public business enterprise report
descriptive information about the way that the operating segments were
determined, the products and services provided by the operating
segments, differences between the measurements used in reporting
segment information and those used in the enterprise's general-purpose
financial statements, and changes in the measurement of segment amounts
from period to period.
F-25
<PAGE>
SALIDA BUILDING AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -17 IMPACT OF NEW ACCOUNTING STANDARDS (Continued)
This Statement is effective for fiscal years beginning after December
15, 1997. FASB Statement No. 131 will be adopted by the Association
after December 15, 1997, the impact of adopting the Statement will not
be material to the financial statements.
F-26
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such information shall not be relied upon as having been authorized by the
Company, the Association or Trident Securities, Inc. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person in any jurisdiction in which such offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful.
Neither the delivery of this Prospectus nor any sale hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of the Company or the Association since any of the dates as of which
information is furnished herein or since the date hereof.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY..................................................... (i)
SELECTED CONSOLIDATED FINANCIAL INFORMATION
AND OTHER DATA....................................................... (x)
RISK FACTORS........................................................... 1
HIGH COUNTRY BANCORP, INC.............................................. 5
SALIDA BUILDING AND LOAN ASSOCIATION................................... 5
USE OF PROCEEDS........................................................ 6
DIVIDEND POLICY........................................................ 7
MARKET FOR THE COMMON STOCK............................................ 8
CAPITALIZATION......................................................... 9
HISTORICAL AND PRO FORMA REGULATORY
CAPITAL COMPLIANCE................................................... 11
PRO FORMA DATA......................................................... 12
PROPOSED MANAGEMENT PURCHASES.......................................... 15
STATEMENTS OF INCOME................................................... 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................ 17
BUSINESS OF THE COMPANY................................................ 27
BUSINESS OF THE ASSOCIATION............................................ 27
REGULATION............................................................. 45
TAXATION............................................................... 54
MANAGEMENT OF THE COMPANY.............................................. 55
MANAGEMENT OF THE ASSOCIATION.......................................... 56
THE CONVERSION......................................................... 65
CERTAIN RESTRICTIONS ON ACQUISITION OF THE
COMPANY AND THE ASSOCIATION.......................................... 81
CERTAIN ANTI-TAKEOVER PROVISIONS
IN THE ARTICLES OF INCORPORATION AND BYLAWS.......................... 82
DESCRIPTION OF CAPITAL STOCK........................................... 86
REGISTRATION REQUIREMENTS.............................................. 87
LEGAL OPINIONS......................................................... 87
TAX OPINIONS........................................................... 87
EXPERTS................................................................ 87
ADDITIONAL INFORMATION................................................. 87
INDEX TO FINANCIAL STATEMENTS.......................................... 89
Until __________, 1997 (90 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
HIGH COUNTRY BANCORP, INC.
(Holding Company for
Salida Building & Loan Association)
Up to 1,035,000 Shares
COMMON STOCK
----------
PROSPECTUS
----------
TRIDENT SECURITIES, INC.
__________, 1997
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Directors, officers and employees of the Company and/or the Association may be
entitled to benefit from the indemnification provisions contained in the
Colorado Business Corporation Act (the "CBCA"), the Company's Articles of
Incorporation and federal regulations applicable to the Association. The general
effect of these provisions is summarized below:
Colorado Business Corporation Act
Sections 7-109-102 and 7-109-107 of the CBCA permit a Colorado corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding of any type, (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, may not, of itself, create a presumption that these standards
have not been met.
A Colorado corporation may also indemnify any person who was or is a party or
is threatened to be made a party to any proceeding by or in the right of the
corporation by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. However, no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought
determines upon application that such person is fairly and reasonably entitled
to be indemnified.
To the extent that a director, officer, employee or agent of a corporation has
been successful on the merits or otherwise in defense of any proceeding
described above indemnification against expenses (including attorneys' fees)
actually and reasonably incurred by him is mandatory.
Any determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in subsections (a) and (b) must be made by a majority of
the board of directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or by the
stockholders.
Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section is not exclusive.
In addition, a corporation shall have power to purchase and maintain insurance
against any liability of individuals whom the corporation is required to
indemnify.
II-1
<PAGE>
Article XVII of the Articles of Incorporation
A. Persons. The Corporation shall indemnify, to the extent provided in
-------
paragraphs B, D or F:
(1) any person who is or was a director, officer, employee, or agent
of the Corporation; and
(2) any person who served or served at the Corporation's request as a
director, officer, employee, agent, partner or trustee of another
corporation, partnership, joint venture, trust or other enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending or
--------------------------
completed action or suit by or in the right of the Corporation against a person
named in paragraph A by reason of his holding a position named in paragraph A,
the Corporation shall indemnify him if he satisfies the standard in paragraph C,
for expenses (including attorneys' fees but excluding amounts paid in
settlement) actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit.
C. Standard -- Derivative Suits. In case of a threatened, pending or
----------------------------
completed action or suit by or in the right of the Corporation, a person named
in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is the subject of
the suit or action, and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, including, but not
limited to, the taking of any and all actions in connection with the
Corporation's response to any tender offer or any offer or proposal of
another party to engage in a Business Combination (as defined in Article
XV) not approved by the board of directors. However, he shall not be
indemnified in respect of any claim, issue or matter as to which he has
been adjudged liable to the Corporation unless (and only to the extent
that) the court in which the suit was brought shall determine, upon
application, that despite the adjudication but in view of all the
circumstances, he is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened, pending or
------------------------------
completed suit, action or proceeding (whether civil, criminal, administrative or
investigative), other than a suit by or in the right of the Corporation,
together hereafter referred to as a nonderivative suit, against a person named
in paragraph A by reason of his holding a position named in paragraph A, the
Corporation shall indemnify him if he satisfies the standard in paragraph E, for
amounts actually and reasonably incurred by him in connection with the defense
or settlement of the nonderivative suit, including, but not limited to (i)
expenses (including attorneys' fees), (ii) amounts paid in settlement, (iii)
judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative suit, a
-------------------------------
person named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is the subject of the
nonderivative suit and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, including, but not limited
to, the taking of any and all actions in connection with the Corporation's
response to any tender offer or any offer or proposal of another party to engage
in a Business Combination (as defined in Article XV) not approved by the board
of directors and, with respect to any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful. The termination of a
nonderivative suit by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent shall not, in itself, create a presumption
- ---- ----------
that the person failed to satisfy the standard of this subparagraph E(2).
II-2
<PAGE>
F. Determination That Standard Has Been Met. A determination that the
----------------------------------------
standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in subparagraph C(2) (second sentence), the determination may
be made by:
(1) the board of directors by a majority vote of a quorum consisting
of directors of the Corporation who were not parties to the action, suit or
proceeding; or
(2) independent legal counsel (appointed by a majority of the
disinterested directors of the Corporation, whether or not a quorum) in a
written opinion; or
(3) the stockholders of the Corporation.
G. Proration. Anyone making a determination under paragraph F may
---------
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advance Payment. The Corporation shall pay in advance any expenses
---------------
(including attorneys' fees) which may become subject to indemnification under
paragraphs A through G if:
(1) the board of directors authorizes the specific payment; and
(2) the person receiving the payment undertakes in writing to repay
the same if it is ultimately determined that he is not entitled to
indemnification by the Corporation under paragraphs A through G.
I. Nonexclusive. The indemnification and advance payment of expenses
-------------
provided by paragraphs A through H shall not be exclusive of any other rights to
which a person may be entitled by law, bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
J. Continuation. The indemnification provided by this Article XVII
------------
shall be deemed to be a contract between the Corporation and the persons
entitled to indemnification thereunder, and any repeal or modification of this
Article XVII shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or any action, suit
or proceeding theretofore or thereafter brought based in whole or in part upon
any such state of facts. The indemnification and advance payment provided by
paragraphs A through H shall continue as to a person who has ceased to hold a
position named in paragraph A and shall inure to his heirs, executors and
administrators.
K. Insurance. The Corporation may purchase and maintain insurance on
---------
behalf of any person who holds or who has held any position named in paragraph
A, against any liability incurred by him in any such position, or arising out of
his status as such, whether or not the Corporation would have power to indemnify
him against such liability under paragraphs A through H.
L. Intention and Savings Clause. It is the intention of this Article
----------------------------
XVII to provide for indemnification to the fullest extent permitted by the
Business Corporation Act of the State of Colorado, and this Article XVII shall
be interpreted accordingly. If this Article XVII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee, and
agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article XVII that shall
not have been invalidated and to the full extent permitted by applicable law. If
the Business Corporation Act of the State of Colorado is amended, or other
Colorado law is enacted, to permit further or additional indemnification of the
persons defined in this Article XVII A, then the indemnification of such persons
shall be to the fullest extent permitted by the Business Corporation Act of the
State of Colorado, as so amended, or such other Colorado law.
II-3
<PAGE>
Federal Regulations Providing for Indemnification of Directors and Officers of
- ------------------------------------------------------------------------------
Salida Building & Loan Association
- ----------------------------------
Federal regulations require that Salida Building & Loan Association (the
"Association") indemnify any person against whom an action is brought by reason
of that person's role as a director or officer of the Association for (i) any
judgments resulting from the action; (ii) reasonable costs and expenses
(including attorney's fees) incurred in connection with the defense or
settlement of such action; and (iii) reasonable costs and expenses (including
attorney's fees) incurred in connection with enforcing the individual's
indemnification rights against the Association, assuming a final judgment is
obtained in his favor.
The mandatory indemnification provided for by federal regulations is
limited to (i) actions where a final judgment on the merits is in favor of the
officer or director and (ii) in the case of a settlement, final judgment against
the director or officer or final judgment not on the merits, except as to where
the director or officer is found negligent or to have committed misconduct in
the performance of his or her duties, where a majority of the Board of Directors
of the Association determines that the director or officer was acting in good
faith within what he was reasonably entitled to believe was the scope of his or
her employment or authority for a purpose that was in the best interests of the
Association or its members or stockholders.
In addition, the Association has a directors' and officers' liability
policy providing for insurance against certain liabilities incurred by directors
and officers of the Association while serving in their capacities as such.
Item 25. Other Expenses of Issuance and Distribution *
<TABLE>
<S> <C>
Underwriting Fees and Expenses................... $ 173,010
Legal Fees and Expenses.......................... 110,000
Printing, Postage and Mailing.................... 65,000
Accounting Fees and Expenses..................... 75,000
Appraisal and Business Plan Fees and Expenses.... 32,500
Blue Sky Filing Fees and Expenses
(including legal counsel)...................... 25,000
Federal Filing Fees (OTS and SEC)................ 15,000
Conversion Agent Fees............................ 7,500
Stock Transfer Agent fees and certificates....... 7,500
Other Expenses................................... 9,490
---------
Total........................................ $ 520,000
=========
</TABLE>
-------------
* Estimated at the midpoint of the Estimated Valuation Range.
Item 26. Recent Sales of Unregistered Securities.
Not applicable.
Item 27. Exhibits:
The exhibits schedules filed as a part of this registration statement are
as follows:
<TABLE>
<S> <C>
1.1 Engagement Letter with Trident Securities, Inc.
1.2 Form of Agency Agreement with Trident Securities, Inc.
2 Plan of Conversion (Exhibit A to Proxy Statement filed as Exhibit
99.1)
3.1 Articles of Incorporation of High Country Bancorp, Inc.
3.2 Bylaws of High Country Bancorp, Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
4 Form of Common Stock Certificate of High Country Bancorp, Inc.
5 Opinion of Housley Kantarian & Bronstein, P.C. regarding legality of securities being registered
8.1 Federal Tax Opinion of Housley Kantarian & Bronstein, P.C.
8.2 State Tax Opinion
8.3 Opinion of Ferguson & Co., LLP as to the value of subscription rights for tax purposes
10.1 Proposed Employment Agreement between Salida Building & Loan Association and Larry D. Smith
10.2 Proposed Guaranty Agreement between High Country Bancorp, Inc. and Larry D. Smith
10.3 Proposed High Country Bancorp, Inc. 1997 Stock Option and Incentive Plan
10.4 Proposed High Country Bancorp, Inc. Management Recognition Plan and Trust
10.5 Salida Building & Loan Association Long-Term Incentive Plan
10.6 Proposed Salida Building & Loan Association Incentive Compensation Plan
10.7 Proposed Employment Agreement between Salida Building & Loan Association and Scott G. Erchul
10.8 Proposed Guaranty Agreement between High Country Bancorp, Inc. and Scott G. Erchul
23.1 Consent of Grimsley, White & Company
23.2 Consent of Housley Kantarian & Bronstein, P.C. (in opinion filed as Exhibit 5)
23.3 Consent of Ferguson & Co., LLP
24 Power of Attorney (reference is made to the signature page)
27 Financial Data Schedule
99.1 Proxy Statement and Form of Proxy for Solicitation of Members of Salida Building & Loan Association
* 99.2 Proposed Stock Order Form and Form of Certification
99.3 Miscellaneous Marketing Materials
99.4 Appraisal Report
</TABLE>
- ---------------
* To be filed by amendment.
II-5
<PAGE>
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the Town of Salida,
State of Colorado, on August 21, 1997.
HIGH COUNTRY BANCORP, INC.
By: /s/ Larry D. Smith
-------------------------------
Larry D. Smith
President
(Duly Authorized Representative)
We, the undersigned Directors of High Country Bancorp, Inc., hereby severally
constitute and appoint Larry D. Smith, who may act, with full power of
substitution, our true and lawful attorney and agent, to do any and all things
in our names in the capacities indicated below which said Larry D. Smith, who
may act, may deem necessary or advisable to enable High Country Bancorp, Inc. to
comply with the Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
the registration of High Country Bancorp, Inc. common stock, including
specifically, but not limited to, power and authority to sign for us in our
names in the capacities indicated below, the registration statement and any and
all amendments (including post-effective amendments) thereto; and we hereby
ratify and confirm all that said Larry D. Smith shall do or cause to be done by
virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Larry D. Smith President and Chief August 21, 1997
- ------------------------ Executive Officer and Director
Larry D. Smith (Principal Executive Officer)
/s/ Frank L. DeLay Chief Financial Officer August 21, 1997
- ------------------------ (Principal Financial and
Frank L. DeLay Accounting Officer)
/s/ Scott G. Erchul Vice President and Director August 21, 1997
- ------------------------
Scott G. Erchul
/s/ Robert B. Mitchell Chairman of the Board August 21, 1997
- ------------------------ of Directors
Robert B. Mitchell
/s/ Timothy R. Glenn Director August 21, 1997
- ------------------------
Timothy R. Glenn
/s/ Richard A. Young Director August 21, 1997
- ------------------------
Richard A. Young
/s/ Philip W. Harsh Director August 21, 1997
- ------------------------
Philip W. Harsh
</TABLE>
II-7
<PAGE>
EXHIBIT 1.1
[TRIDENT SECURITIES, INC. LETTERHEAD APPEARS HERE]
May 13, 1997
Board of Directors
Salida Building and Loan Association
130 West 2nd Street
Salida, Colorado 81201
RE: Conversion Stock Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and Salida Building and Loan Association (the
"Association") concerning our investment banking services in connection with the
conversion of the Association from a mutual to a capital stock form of
organization.
Trident is prepared to assist the Association in connection with the offering of
its shares of common stock during the subscription offering and community
offering as such terms are defined in the Association's Plan of Conversion (the
"Plan"). The specific terms of the services contemplated hereunder shall be set
forth in a definitive sales agency agreement (the "Agreement") between Trident
and the Association to be executed on the date the prospectus is declared
effective by the appropriate regulatory authorities. The price of the shares
during the subscription offering and community offering will be the price
established by the Association's Board of Directors, based upon an independent
appraisal as approved by the appropriate regulatory authorities, provided such
price is mutually acceptable to Trident and the Association.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the
Association in the sale of its common stock during the subscription offering and
community offering. Additionally, Trident may enter into agreements with other
National Association of Securities Dealers, Inc., ("NASD") member firms to act
as selected dealers, assisting in the sale of the common stock. Trident and the
Association will determine the selected dealers to assist the Association during
the community offering. At the appropriate time, Trident in conjunction with
its counsel, will conduct an examination of the relevant documents and records
of the Association as Trident deems necessary and appropriate. The Association
will make all documents, records and other information deemed necessary by
Trident or its counsel available to them upon request.
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Association:
1. A commission equal to 1.70% of the aggregate dollar amount of capital
stock sold in the state of Colorado and 1.20% of the aggregate dollar amount of
capital stock sold outside the state of Colorado in the subscription and
community offerings, excluding any shares of conversion stock sold to the
Association's directors, executive officers, employees and the benefit plans.
Additionally, commissions will be excluded on those shares sold to "associates"
of the Association's directors, employees and executive officers. The term
"associates" as used herein shall have the same meaning as that found in the
Association's Plan of Conversion.
<PAGE>
TRIDENT SECURITIES, INC.
Board of Directors
May 13, 1997
Page 2
2. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be set by the
Association to reflect market requirements at the time of the stock
allocation in a Syndicated Community Offering.
3. The foregoing fees and commissions are to be payable to Trident at
closing as defined in the Agreement to be entered into between the
Association and Trident.
4. Trident shall be reimbursed for allocable expenses incurred by them,
including legal fees, whether or not the Agreement is consummated.
Trident's out-of-pocket expenses will not exceed $10,000 and its legal
fees will not exceed $25,000. Trident will use its best efforts to
ensure that the expenses of its counsel are reasonable. The Association
will forward to Trident a check in the amount of $10,000 as an advance
payment to defray the allocable expenses of Trident.
It further is understood that the Association will pay all other expenses of the
conversion including but not limited to its attorneys' fees (including out-of-
pocket expenses), NASD filing fees, and filing and registration fees and fees
of either Trident's attorneys or the attorneys relating to any required state
securities law filings, telephone charges, air freight, rental equipment,
supplies, transfer agent charges, fees relating to auditing and accounting and
costs of printing all documents necessary in connection with the foregoing.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the
Association warrants that: (a) the Association has not privately placed any
securities within the last 18 months; (b) there have been no material dealings
within the last 12 months between the Association and any NASD member or any
person related to or associated with any such member; (c) none of the officers
or directors of the Association has any affiliation with the NASD; (d) except as
contemplated by this engagement letter with Trident, the Association has no
financial or management consulting contracts outstanding with any other person;
(e) the Association has not granted Trident a right of first refusal with
respect to the underwriting of any future offering of the Association stock; and
(f) there has been no intermediary between Trident and the Association in
connection with the public offering of the Association's shares, and no person
is being compensated in any manner for providing such service.
The Association agrees to indemnify and hold harmless Trident and each person,
if any, who controls the firm against all losses, claims, damages or
liabilities, joint or several and all legal or other expenses reasonably
incurred by them in connection with the investigation or defense thereof
(collectively, "Losses"), to which they may become subject under the securities
laws or under the common law, that arise out of or are based upon the conversion
or the engagement hereunder of Trident provided, however, that the Association
will not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (i) arises out of or is based upon any untrue
statement of a material fact or the omission of a material fact required to be
stated therein or necessary to make not misleading any statements contained in
any prospectus, or any amendment or supplement thereto, made in reliance on and
in conformity with information forwarded to the Association by Trident expressly
for use therein, or (ii) is attributable to the gross negligence, willful
misconduct or bad faith of Trident. If the foregoing indemnification is
unavailable for any reason, the Association agrees to contribute to such Losses
in the proportion that its financial interest in the conversion bears to that of
the indemnified parties. If the Agreement is entered into
<PAGE>
TRIDENT SECURITIES, INC.
Board of Directors
May 13, 1997
Page 3
with respect to the common stock to be issued in the conversion, the Agreement
will provide for indemnification, which will be in addition to any rights that
Trident or any other indemnified party may have at common law or otherwise. The
indemnification provision of this paragraph will be superseded by the
indemnification provisions of the Agreement entered into by the Association and
Trident.
It is understood that if Trident's engagement hereunder is terminated prior to
consummation of the subscription and community offering or the subject
conversion is terminated for any reason, no fees shall be owed to Trident
hereunder. This letter, therefore, is merely a statement of intent and is not a
binding legal agreement except as to paragraph (4) above with regard to the
obligation to reimburse Trident for allocable expenses to be incurred prior to
the execution of the Agreement and the indemnity described in the preceding
paragraph. While Trident and the Association agree in principle to the contents
hereof and propose to proceed in good faith to work out the arrangements which
respect to the proposed offering, any legal obligations between Trident and the
Association shall be set forth in a duly executed Agreement. Such Agreement
shall be in form and content, satisfactory to Trident and the Association, as
well as their counsel, and Trident's obligations thereunder shall be subject to,
among other things, there being in Trident's opinion no material adverse change
in the condition or obligations of the Association or no market conditions which
might render the sale of the shares by the Association hereby contemplated
inadvisable.
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter. Trident acknowledges receipt of
the advance payment of $10,000.
Your very truly,
TRIDENT SECURITIES, INC.
By: /s/ Willis Smith, II
--------------------------
Willis Smith, II
Senior Vice President
Agreed and accepted to this 15th day of May, 1997
SALIDA BUILDING AND LOAN ASSOCIATION
By: /s/ Larry D. Smith
------------------------
Larry D. Smith
President
<PAGE>
Exhibit 1.2
HIGH COUNTRY BANCORP, INC.
SALIDA BUILDING AND LOAN ASSOCIATION
765,000 to 1,035,000 Shares
Common Stock
(Par Value $0.01 Per Share)
$10.00 Per Share
SALES AGENCY AGREEMENT
----------------------
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
High Country Bancorp, Inc., a Colorado-chartered corporation (the
"Company"), and Salida Building and Loan Association, a federally chartered and
insured mutual savings association (the "Association"), hereby confirm, as of
__________ _____, 1997, their respective agreements with Trident Securities,
Inc. ("Trident"), a broker-dealer registered with the Securities and Exchange
Commission ("Commission") and a member of the National Association of Securities
Dealers, Inc. ("NASD"), as follows:
1. Introductory. The Association intends to convert from a federally
------------
chartered mutual savings association to a federally chartered stock savings
association as a wholly owned subsidiary of the Company (together with the
Offerings, as defined below, the issuance of shares of common stock of the
Association to the Company and the incorporation of the Company, the
"Conversion") pursuant to a plan of conversion adopted on May 15, 1997 (as
amended, the "Plan"). In accordance with the Plan, the Company is offering
shares of its common stock, par value $0.01 per share (the "Shares" and the
"Common Stock"), pursuant to nontransferable subscription rights in a
subscription offering (the "Subscription Offering") to certain depositors and
borrowers of the Association and to the Association's tax-qualified employee
benefit plans (i.e., the Association's Employee Stock Ownership Plan (the
"ESOP")). Concurrently with the Subscription Offering, shares of the Common
Stock not sold in the Subscription Offering are being offered to the general
public in a community offering, with preference being given to natural persons
and trusts of natural persons permanently residing in Chaffee, Lake, Fremont and
Saguache Counties, Colorado (the "Community Offering") (the Subscription and
Community Offerings are sometimes referred to collectively as the "Offerings"),
subject to the right of the Company and the Association, in their absolute
discretion, to reject orders in the Community Offering in whole or in part. In
the Offerings, the Company is offering between 765,000 and 1,035,000 Shares,
with the possibility of offering up to 1,190,250 Shares without a resolicitation
of subscribers, as contemplated by Title 12 of the Code of Federal Regulations,
Part 563b. With the exception of the ESOP, no person, individually or together
with associates of and persons acting in concert with such person, may purchase
in the aggregate more than $250,000 of the Shares issued in the Conversion.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 2
The Company and the Association have been advised by Trident that it
will utilize its best efforts in assisting the Company and the Association with
the sale of the Shares in the Offerings and, if deemed necessary by the Company
in a syndicated community offering. Prior to the execution of this Agreement,
the Company has delivered to Trident the Prospectus dated __________ ___, 1997
(as hereinafter defined) and all supplements thereto to be used in the
Offerings. Such Prospectus contains information with respect to the Company, the
Association and the Shares.
2. Representations and Warranties.
------------------------------
(a) The Company and the Association jointly and severally
represent and warrant to Trident that:
(i) The Company has filed with the Commission a
registration statement, including exhibits and an amendment or
amendments thereto, on Form SB-2 (No. 333-________), including a
Prospectus relating to the Offerings, for the registration of the
Shares under the Securities Act of 1933, as amended (the "Act");
and such registration statement has become effective under the Act
and no stop order has been issued with respect thereto and no
proceedings therefor have been initiated or, to the Company's best
knowledge, threatened by the Commission. Except as the context may
otherwise require, such registration statement, as amended or
supplemented, on file with the Commission at the time the
registration statement became effective, including the Prospectus,
financial statements, schedules, exhibits and all other documents
filed as part thereof, as amended and supplemented, is herein
called the "Registration Statement," and the prospectus, as
amended or supplemented, on file with the Commission at the time
the Registration Statement became effective is herein called the
"Prospectus," except that if the prospectus filed by the Company
with the Commission pursuant to Rule 424(b) of the general rules
and regulations of the Commission under the Act (together with the
enforceable published policies and actions of the Commission
thereunder, the "SEC Regulations") differs from the form of
prospectus on file at the time the Registration Statement became
effective, the term "Prospectus" shall refer to the Rule 424(b)
prospectus from and after the time it is filed with or mailed for
filing to the Commission and shall include any amendments or
supplements thereto from and after their dates of effectiveness or
use, respectively. If any Shares remain unsubscribed following
completion of the Subscription Offering and, if any, the Community
Offering, the Company (i) will promptly file with the Commission a
post-effective amendment to such Registration Statement relating
to the results of the Subscription Offering and, if any, the
Community Offering, any additional information with respect to the
proposed plan of distribution and any revised pricing information
or (ii) if no such post-effective amendment is required, will file
with, or mail for filing to, the Commission a prospectus or
prospectus supplement containing information
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 3
relating to the results of the Subscription and the Community
Offerings and pricing information pursuant to Rule 424(c) of the
Regulations, in either case in a form reasonably acceptable to the
Company and Trident.
(ii) The Association has filed an Application for
Approval of Conversion on Form AC, including exhibits (as amended
or supplemented, the "Form AC" and together with the Form H-(e)1-S
referred to below, the "Conversion Application") with the Office
of Thrift Supervision (the "Office") under the Home Owners' Loan
Act, as amended (the "HOLA") and the enforceable rules and
regulations, including published policies and actions, of the
Office thereunder (the "OTS Regulations"), which has been approved
by the Office; and the Prospectus and the proxy statement for the
solicitation of proxies from members for the special meeting to
approve the Plan (the "Proxy Statement") included as part of the
Form AC have been approved for use by the Office. No order has
been issued by the Office preventing or suspending the use of the
Prospectus or the Proxy Statement; and no action by or before the
Office revoking such approvals is pending or, to the Association's
best knowledge, threatened. The Company has filed with the Office
the Company's application on Form H-(e)1-S promulgated under the
savings and loan holding company provisions of the Home Owners'
Loan Act and the regulations promulgated thereunder ("HOLA") and
has received approval of its acquisition of the Association from
the Office.
(iii) At the date of the Prospectus and at all times
subsequent thereto through and including the Closing Date (i) the
Registration Statement and the Prospectus (as amended or
supplemented, if amended or supplemented) complied with the Act
and the Regulations, (ii) the Registration Statement (as amended
or supplemented, if amended or supplemented) did not contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and (iii) the Prospectus (as
amended or supplemented, if amended or supplemented) did not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading. Representations or
warranties in this subsection shall not apply to statements or
omissions made in reliance upon and in conformity with written
information furnished to the Company or the Association relating
to Trident by or on behalf of Trident expressly for use in the
Registration Statement or Prospectus.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 4
(iv) The Company has been duly incorporated as a Colorado
corporation, and the Association has been duly organized as a
mutual savings association under the laws of the United States,
and each of them is validly existing and in good standing under
the laws of the jurisdiction of its organization with full power
and authority to own its property and conduct its business as
described in the Registration Statement and Prospectus; the
Association is a member in good standing of the Federal Home Loan
Bank of Topeka; and the deposit accounts of the Association are
insured by the Savings Association Insurance Fund ("SAIF")
administered by the Federal Deposit Insurance Corporation ("FDIC")
up to the applicable legal limits. Each of the Company and the
Association is not required to be qualified to do business as a
foreign corporation in any jurisdiction where non-qualification
would have a material adverse effect on the Company and the
Association, taken as a whole. The Association does not own equity
securities of or an equity interest in any business enterprise
except as described in the Prospectus. Upon amendment of the
Association's charter and bylaws as provided in the rules and
regulations of the Office and completion of the sale by the
Company of the Shares as contemplated by the Prospectus, (i) the
Association will be converted pursuant to the Plan to a federally
chartered capital stock savings association with full power and
authority to own its property and conduct its business as
described in the Prospectus, (ii) all of the authorized and
outstanding capital stock of the Association will be owned of
record and beneficially by the Company, and (iii) the Company will
have no direct subsidiaries other than the Association.
(v) The Association has good, marketable and insurable
title to all assets material to its business and to those assets
described in the Prospectus as owned by it, free and clear of all
material liens, charges, encumbrances or restrictions, except for
liens for taxes not yet due, except as described in the Prospectus
and except as could not in the aggregate have a material adverse
effect upon the operations or financial condition of the
Association; and all of the leases and subleases material to the
operations or financial condition of the Association, under which
it holds properties, including those described in the Prospectus,
are in full force and effect as described therein.
(vi) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary actions on the part
of each of the Company and the Association, and this Agreement is
a valid and binding obligation with valid execution and delivery
of each of the Company and the Association, enforceable in
accordance with its terms (except as the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 5
creditors of savings and loan holding companies the accounts of
whose subsidiaries are insured by the FDIC or by general equity
principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law, and except to the
extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy or pursuant to Section 23A
of the Federal Reserve Act, 12 U.S.C. Section 371c
("Section 23A")).
(vii) There is no litigation or governmental proceeding
pending or, to the best knowledge of the Company or the
Association, threatened against or involving the Company, the
Association, or any of their respective assets which individually
or in the aggregate would reasonably be expected to have a
material adverse effect on the condition (financial or otherwise),
results of operations and business, including the assets and
properties, of the Company and the Association, taken as a whole.
(viii) The Company and the Association have received the
opinions of Housley Kantarian & Bronstein, P.C. with respect to
federal tax consequences of the Conversion, and of Grimsley,
White & Company with respect to the Colorado tax consequences of
the Conversion, to the effect that the Conversion will constitute
a tax-free reorganization under the Internal Revenue Code of 1986,
as amended, and will not be a taxable transaction for the
Association or the Company under the laws of Colorado, and the
facts relied upon in such opinions are accurate and complete.
(ix) Each of the Company and the Association has all such
corporate power, authority, authorizations, approvals and orders
as may be required to enter into this Agreement and to carry out
the provisions and conditions hereof, subject to the limitations
set forth herein and subject to the satisfaction of certain
conditions imposed by the Office in connection with its approvals
of the Form AC and the Application H-(e)1-S, and except as may be
required under the securities, or "blue sky," laws of various
jurisdictions, and in the case of the Company, as of the Closing
Date, will have such approvals and orders to issue and sell the
Shares to be sold by the Company as provided herein, and in the
case of the Association, as of the Closing Date, will have such
approvals and orders to issue and sell the Shares of its Common
Stock to be sold to the Company as provided in the Plan, subject
to the issuance of amended charter in the form required for
federally chartered stock savings associations (the "Stock
Charter"), the form of which Stock Charter has been approved by
the Office.
(x) Neither the Company nor the Association is in
violation of any rule or regulation of the Office or the FDIC that
could reasonably be expected to result in any enforcement action
against the Company, the Association, or their
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 6
officers or directors that might have a material adverse effect on
the condition (financial or otherwise), operations, businesses,
assets or properties of the Company and the Association, taken as
a whole.
(xi) The consolidated financial statements and any
related notes or schedules which are included in the Registration
Statement and the Prospectus fairly present the consolidated
financial condition, income, retained earnings and cash flows of
the Association at the respective dates thereof and for the
respective periods covered thereby and comply as to form with the
applicable accounting requirements of the Regulations and the
applicable accounting regulations of the Office. Such financial
statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the
periods involved, except as set forth therein, and such financial
statements are consistent with financial statements and other
reports filed by the Association with supervisory and regulatory
authorities except as such generally accepted accounting
principles may otherwise require. The tables in the Prospectus
accurately present the information purported to be shown thereby
at the respective dates thereof and for the respective periods
therein.
(xii) There has been no material change in the condition
(financial or otherwise), results of operations or business,
including assets and properties, of the Company and the
Association, taken as a whole, since the latest date as of which
such condition is set forth in the Prospectus, except as set forth
therein; and the capitalization, assets, properties and business
of each of the Company and the Association conform to the
descriptions thereof contained in the Prospectus. None of the
Company nor the Association has any material liabilities of any
kind, contingent or otherwise, except as set forth in the
Prospectus.
(xiii) There has been no breach or default (or the
occurrence of any event which, with notice or lapse of time or
both, would constitute a default) under, or creation or imposition
of any lien, charge or other encumbrance upon any of the
properties or assets of the Company and the Association pursuant
to any of the terms, provisions or conditions of, any agreement,
contract, indenture, bond, debenture, note, instrument or
obligation to which the Company or the Association is a party or
by which any of them or any of their respective assets or
properties may be bound or is subject, or violation of any
governmental license or permit or any enforceable published law,
administrative regulation or order or court order, writ,
injunction or decree, which breach, default, encumbrance or
violation would have a material adverse effect on the condition
(financial or otherwise), operations, business, assets or
properties of the Company and the Association taken as a whole;
all agreements which are material to the condition (financial or
otherwise), results of operations or business of the Company and
the
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 7
Association taken as a whole are in full force and effect, and no
party to any such agreement has instituted or, to the best
knowledge of the Company and the Association, threatened any
action or proceeding wherein the Company or the Association would
be alleged to be in default thereunder.
(xiv) None of the Company or the Association is in
violation of its respective charter or bylaws. The execution and
delivery hereof and the consummation of the transactions
contemplated hereby by the Company and the Association do not
conflict with or result in a breach of the charter or bylaws of
the Company or the Association (in either mutual or stock form) or
constitute a material breach of or default (or an event which,
with notice or lapse of time or both, would constitute a default)
under, give rise to any right of termination, cancellation or
acceleration contained in, or result in the creation or imposition
of any lien, charge or other encumbrance upon any of the
properties or assets of the Company or the Association pursuant to
any of the terms, provisions or conditions of, any material
agreement, contract, indenture, bond, debenture, note, instrument
or obligation to which the Company or the Association is a party
or violate any governmental license or permit or any enforceable
published law, administrative regulation or order or court order,
writ, injunction or decree (subject to the satisfaction of certain
conditions imposed by the Office in connection with its approval
of the Conversion Application), which breach, default, encumbrance
or violation would have a material adverse effect on the condition
(financial or otherwise), operations or business of the Company
and the Association taken as a whole.
(xv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus
and prior to the Closing Date (as hereinafter defined), except as
otherwise may be indicated or contemplated therein, none of the
Company or the Association has issued any securities which will
remain issued at the Closing Date or incurred any liability or
obligation, direct or contingent, or borrowed money, except
borrowings in the ordinary course of business, or entered into any
other transaction not in the ordinary course of business and
consistent with prior practices, which is material in light of the
business of the Company and the Association, taken as a whole.
(xvi) Upon consummation of the Conversion, the authorized,
issued and outstanding equity capital of the Company shall be
within the range as set forth in the Prospectus under the caption
"Capitalization," and no Common Stock of the Company shall be
outstanding immediately prior to the Closing Date; the issuance
and the sale of the Shares of the Company have been duly
authorized by all necessary action of the Company and approved by
the Office and, when issued in accordance with the terms of the
Plan and paid for, shall be validly issued,
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 8
fully paid and nonassessable and shall conform to the description
thereof contained in the Prospectus; the issuance of the Shares is
not subject to preemptive rights, except as set forth in the
Prospectus; and good title to the Shares will be transferred by
the Company upon issuance thereof against payment therefor, free
and clear of all claims, encumbrances, security interests and
liens against the Company whatsoever. The certificates
representing the Shares will conform in all material respects with
the requirements of applicable laws and regulations. The issuance
and sale of the capital stock of the Association to the Company
has been duly authorized by all necessary action of the
Association and the Company and appropriate regulatory authorities
(subject to the satisfaction of various conditions imposed by the
Office in connection with its approval of the Conversion
Application), and such capital stock, when issued in accordance
with the terms of the Plan, will be fully paid and nonassessable
and will conform in all material respects to the description
thereof contained in the Prospectus.
(xvii) No approval of any regulatory or supervisory or
other public authority is required in connection with the
execution and delivery of this Agreement or the issuance of the
Shares, except for the declaration of effectiveness of any
required post-effective amendment by the Commission and approval
thereof by the Office and approval of the Company's application on
Form H-(e)1-S by the Office, the issuance of the Stock Charter by
the Office and as may be required under the securities laws of
various jurisdictions.
(xviii) All contracts and other documents required to be
filed as exhibits to the Registration Statement or the Conversion
Application have been filed with the Commission and/or the Office,
as the case may be.
(xix) Grimsley, White & Company, which has audited the
financial statements of the Association at June 30, 1997 and 1996
and for the years ended June 30, 1997 and 1996 included in the
Prospectus, is an independent public accountant within the meaning
of the Code of Professional Ethics of the American Institute of
Certified Public Accountants and Title 12 of the Code of Federal
Regulations, Section 571.2(c)(3).
(xx) For the past five years, the Company and the
Association have timely filed all required federal, state and
local franchise tax returns, and no material deficiency has been
asserted with respect to such returns by any taxing authorities,
and the Company and the Association have paid all taxes that have
become due and, to the best of their knowledge, have made adequate
reserves for similar future tax liabilities, except where any
failure to make such filings, payments and reserves, or the
assertion of such a deficiency, would not have a
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 9
material adverse effect on the condition of the Company and the
Association taken as a whole.
(xxi) All of the loans represented as assets of the
Association on the most recent financial statements of the
Association included in the Prospectus meet or are exempt from all
requirements of federal, state or local law pertaining to lending,
including without limitation truth in lending (including the
requirements of Regulation Z and 12 C.F.R. Part 226 and Section
563.99), real estate settlement procedures, consumer credit
protection, equal credit opportunity and all disclosure laws
applicable to such loans, except for violations which, if
asserted, would not have a material adverse effect on the Company
and the Association taken as a whole.
(xxii) The records of account holders, depositors,
borrowers and other members of the Association delivered to
Trident by the Association or its agent for use during the
Conversion have been prepared or reviewed by the Association and,
to the best knowledge of the Company and the Association, are
reliable and accurate.
(xxiii) None of the Company, the Association, or the
employees of the Company or the Association has made any payment
of funds of the Company or the Association prohibited by law, and
no funds of the Company or the Association have been set aside to
be used for any payment prohibited by law.
(xxiv) To the best knowledge of the Company and the
Association, the Company and the Association are in compliance
with all laws, rules and regulations relating to the discharge,
storage, handling and disposal of hazardous or toxic substances,
pollutants or contaminants and neither the Company nor the
Association believes that the Company or the Association is
subject to liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or
any similar law, except for violations which, if asserted, would
not have a material adverse effect on the Company and the
Association, taken as a whole. There are no actions, suits,
regulatory investigations or other proceedings pending or, to the
best knowledge of the Company or the Association, threatened
against the Company or the Association relating to the discharge,
storage, handling and disposal of hazardous or toxic substances,
pollutants or contaminants. To the best knowledge of the Company
and the Association, no disposal, release or discharge of
hazardous or toxic substances, pollutants or contaminants,
including petroleum and gas products, as any of such terms may be
defined under federal, state or local law, has been caused by the
Company or the Association or, to the best knowledge of the
Company or the Association, has occurred on, in or at any of the
facilities or
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 10
properties of the Company or the Association, except such
disposal, release or discharge which would not have a material
adverse effect on the Company and the Association, taken as a
whole.
(xxv) At the Closing Date, the Company and the Association
will have completed the conditions precedent to, and shall have
conducted the Conversion in all material respects in accordance
with, the Plan, the OTS Regulations and all other applicable laws,
regulations, published decisions and orders, including all terms,
conditions, requirements and provisions precedent to the
Conversion imposed by the Office.
(b) Trident represents and warrants to the Company and the
Association that:
(i) Trident is registered as a broker-dealer with the
Commission, and is in good standing with the Commission and the
NASD.
(ii) Trident is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with
full corporate power and authority to provide the services to be
furnished to the Company and the Association hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action on the part of
Trident, and this Agreement is a legal, valid and binding
obligation of Trident, enforceable in accordance with its terms
(except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of registered broker-dealers
accounts of whose may be protected by the Securities Investor
Protection Corporation or by general equity principles, regardless
of whether such enforceability is considered in a proceeding in
equity or at law, and except to the extent that the provisions of
Sections 8 and 9 hereof may be unenforceable as against public
policy or pursuant to Section 23A).
(iv) Each of Trident and, to Trident's knowledge, its
employees, agents and representatives who shall perform any of the
services required hereunder to be performed by Trident shall be
duly authorized and shall have all licenses, approvals and permits
necessary to perform such services, and Trident is a registered
selling agent in the jurisdictions listed in Exhibit A hereto and
will remain registered in such jurisdictions in which the Company
is relying on such registration for the sale of the Shares, until
the Conversion is consummated or terminated.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 11
(v) The execution and delivery of this Agreement by
Trident, the fulfillment of the terms set forth herein and the
consummation of the transactions contemplated hereby shall not
violate or conflict with the corporate charter or bylaws of
Trident or violate, conflict with or constitute a breach of, or
default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, any material agreement,
indenture or other instrument by which Trident is bound or under
any governmental license or permit or any law, administrative
regulation, authorization, approval or order or court decree,
injunction or order.
(vi) Any funds received by Trident to purchase Common
Stock will be handled in accordance with Rule 15c2-4 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(vii) There is not now pending or, to Trident's knowledge,
threatened against Trident any action or proceeding before the
Commission, the NASD, any state securities commission or any state
or federal court concerning Trident's activities as a broker-
dealer.
3. Employment of Trident; Sale and Delivery of the Shares. On the
------------------------------------------------------
basis of the representations and warranties herein contained, but subject to the
terms and conditions herein set forth, the Company and the Association hereby
employ Trident as their agent to utilize its best efforts in assisting the
Company with the Company's sale of the Shares in the Subscription Offering and
Community Offering. The employment of Trident hereunder shall terminate
(a) forty-five (45) days after the Subscription and Community Offering closes,
unless the Company and the Association, with the approval of the Office, are
permitted to extend such period of time, or (b) upon consummation of the
Conversion, whichever date shall first occur.
In the event the Company is unable to sell a minimum of 765,000 Shares
(or such lesser amount as the Office may permit) within the period herein
provided, this Agreement shall terminate, and the Company and the Association
shall refund promptly to any persons who have subscribed for any of the Shares,
the full amount which it may have received from them, together with interest as
provided in the Prospectus, and no party to this Agreement shall have any
obligation to the other party hereunder, except as set forth in Sections 6, 8(a)
and 9 hereof. Appropriate arrangements for placing the funds received from
subscriptions for Shares in special interest-bearing accounts with the
Association until all Shares are sold and paid for were made prior to the
commencement of the Subscription and Community Offering, with provision for
prompt refund to the purchasers as set forth above, or for delivery to the
Company if all Shares are sold.
If all conditions precedent to the consummation of the Conversion are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 12
on the Closing Date against payment to the Company by any means authorized
pursuant to the Prospectus, at the principal office of the Company at 130 W. 2nd
Street, Salida, Colorado or at such other place as shall be agreed upon between
the parties hereto. The date upon which Trident is paid the compensation due
hereunder is herein called the "Closing Date."
Trident agrees either (a) upon receipt of an executed order form of a
subscriber to forward the offering price of the Common Stock ordered on or
before twelve noon on the next business day following receipt or execution of an
order form by Trident to the Association for deposit in a segregated account or
(b) to solicit indications of interest in which event (i) Trident will
subsequently contact any potential subscriber indicating interest to confirm the
interest and give instructions to execute and return an order form or to receive
authorization to execute the order form on the subscriber's behalf, (ii) Trident
will mail acknowledgements of receipt of orders to each subscriber confirming
interest on the business day following such confirmation, (iii) Trident will
debit accounts of such subscribers on the third business day ("debit date")
following receipt of the confirmation referred to in (i), and (iv) Trident will
forward completed order forms together with such funds to the Association on or
before twelve noon on the next business day following the debit date for deposit
in a segregated account. Trident acknowledges that if the procedure in (b) is
adopted, subscribers' funds are not required to be in their accounts until the
debit date.
In addition to the expenses specified in Section 6 hereof, Trident
shall receive the following compensation for its services hereunder:
(a) A commission equal to 1.70% of the aggregate dollar
amount of Common Stock sold to residents in the State of Colorado in
the Subscription and Community Offerings, and a commission of 1.20% of
the aggregate dollar amount of Common Stock sold to residents outside
the State of Colorado in the Subscription and Community Offerings. All
such fees are to be payable in next-day funds to Trident on the Closing
Date. No commissions shall be payable on shares purchased by the
Association's officers, directors, employees or their associates or
employee plans.
(b) For stock sold by other NASD member firms under selected
dealer's agreements, the commission shall not exceed a fee to be agreed
upon jointly by Trident and the Association to reflect market
requirements at the time of the stock allocation in a Syndicated
Community Offering.
(c) Trident shall be reimbursed for allocable expenses,
incurred by it whether or not the Offerings are successfully completed;
provided, however, that reimbursable legal fees will not exceed $25,000
(excluding out of pocket expenses for which Trident will use its best
efforts to ensure that such expenses are reasonable), that other
reimbursable expenses will not exceed $10,000 and that neither the
Company nor the Association shall pay or reimburse Trident for any of
the foregoing expenses accrued
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 13
after Trident shall have notified the Company or the Association of its
election to terminate this Agreement pursuant to Section 11 hereof or
after such time as the Company or the Association shall have given
notice in accordance with Section 12 hereof that Trident is in breach
of this Agreement. Full payment to defray Trident's reimbursable
expenses shall be made in next-day funds on the Closing Date or, if the
Conversion is not completed and is terminated for any reason, within
ten (10) business days of receipt by the Company of a written request
from Trident for reimbursement of its expenses. Trident acknowledges
receipt of $10,000 advance payment from the Association which shall be
credited against the total reimbursement due Trident hereunder.
(d) Notwithstanding the limitations on reimbursement of
Trident for allocable expenses provided in the immediately preceding
paragraph (c), in the event that a resolicitation or other event causes
the Offerings to be extended beyond their original expiration date,
Trident shall be reimbursed for its allocable expenses incurred during
such extended period, provided that the allowance for allocable
expenses provided for in the immediately preceding paragraph (c) above
have been exhausted and subject to the following. Such reimbursement
shall be in amount equal to the product obtained by dividing $10,000
(original out-of-pocket expenses) by the total number of days of the
unextended Subscription Offering (calculated from the date of the
Prospectus to the intended close of the Subscription Offering as stated
in the Prospectus) and multiplying such product by the number of days
of the extension (that number of days from the date of the supplemental
prospectus used in the extended Subscription Offering to the closing of
the extension of the Subscription Offering described in such
supplemental prospectus).
The Company shall pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Shares. The Company and the Association
shall also pay all expenses of the Conversion incurred by them or on their prior
approval including but not limited to their attorneys' fees, NASD filing fees,
and attorneys' fees relating to any required state securities laws research and
filings, telephone charges, air freight, rental equipment, supplies, transfer
agent charges, fees relating to auditing and accounting and costs of printing
all documents necessary in connection with the Conversion.
4. Offering. Subject to the provisions of Section 7 hereof, Trident
--------
is assisting the Company on a best efforts basis in offering a minimum of
765,000 and a maximum of 1,035,000 Shares, with the possibility of offering up
to 1,190,250 Shares (except as the Office may permit to be decreased or
increased) in the Subscription and Community Offerings. The Shares are to be
offered to the public at the price set forth on the cover page of the Prospectus
and the first page of this Agreement.
5. Further Agreements. The Company and the Association jointly and
------------------
severally covenant and agree that:
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 14
(a) The Company shall deliver to Trident, from time to time,
such number of copies of the Prospectus as Trident reasonably may
request. The Company authorizes Trident to use the Prospectus in any
lawful manner in connection with the offer and sale of the Shares.
(b) The Company will notify Trident immediately upon discovery,
and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement becomes effective or any
supplement to the Prospectus has been filed, (ii) of the issuance by
the Commission of any stop order relating to the Registration Statement
or of the initiation or the threat of any proceedings for that purpose,
(iii) of the receipt of any notice with respect to the suspension of
the qualification of the Shares for offering or sale in any
jurisdiction, and (iv) of the receipt of any comments from the staff of
the Commission relating to the Registration Statement. If the
Commission enters a stop order relating to the Registration Statement
at any time, the Company will make every reasonable effort to obtain
the lifting of such order at the earliest possible moment.
(c) During the time when a prospectus is required to be
delivered under the Act, the Company will comply so far as it is able
with all requirements imposed upon it by the Act, as now in effect and
hereafter amended, and by the Regulations, as from time to time in
force, so far as necessary to permit the continuance of offers and
sales of or dealings in the Shares in accordance with the provisions
hereof and the Prospectus. If during the period when the Prospectus is
required to be delivered in connection with the offer and sale of the
Shares any event relating to or affecting the Company and the
Association, taken as a whole, shall occur as a result of which it is
necessary, in the opinion of counsel for Trident, with the concurrence
of counsel to the Company, to amend or supplement the Prospectus in
order to make the Prospectus not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of
the Shares, the Company forthwith shall prepare and furnish to Trident
a reasonable number of copies of an amendment or amendments or of a
supplement or supplements to the Prospectus (in form and substance
satisfactory to counsel for Trident) which shall amend or supplement
the Prospectus so that, as amended or supplemented, the Prospectus
shall not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at the time the
Prospectus is delivered to a purchaser of the Shares, not misleading.
The Company will not file or use any amendment or supplement to the
Registration Statement or the Prospectus of which Trident has not first
been furnished a copy or to which Trident shall reasonably object after
having been furnished such copy. For the purposes of this subsection
the Company and the Association shall furnish such information with
respect to themselves as Trident from time to time may reasonably
request.
(d) The Company and the Association have taken or will take
all reasonably necessary action as may be required to qualify or
register the Shares for offer and sale
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 15
by the Company under the securities or blue sky laws of such
jurisdictions as Trident and either the Company or its counsel may
agree upon; provided, however, that the Company shall not be obligated
to qualify as a foreign corporation to do business under the laws of
any such jurisdiction. In each jurisdiction where such qualification or
registration shall be effected, the Company, unless Trident agrees that
such action is not necessary or advisable in connection with the
distribution of the Shares, shall file and make such statements or
reports as are, or reasonably may be, required by the laws of such
jurisdiction.
(e) Appropriate entries will be made in the financial records of
the Association sufficient to establish a liquidation account for the
benefit of eligible account holders as of December 31, 1995 and
supplemental eligible account holders as of September 30, 1997 in
accordance with the requirements of the Office.
(f) The Company will file a registration statement for the
Common Stock under Section 12(g) of the Exchange Act, prior to
completion of the stock offering pursuant to the Plan. The Company
shall maintain the effectiveness of such registration for a minimum
period of three years or for such shorter period as may be required by
applicable law.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than 45 days after the
close of the period covered thereby, an earnings statement (in form
complying with the provisions of Rule 158 of the regulations
promulgated under the Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following
the effective date (as defined in said Rule 158) of the Registration
Statement.
(h) For a period of three (3) years from the date of this
Agreement (unless the Common Stock shall have been deregistered under
the Exchange Act), the Company will furnish to Trident, as soon as
publicly available after the end of each fiscal year, a copy of its
annual report to shareholders for such year; and the Company will
furnish to Trident (i) as soon as publicly available, a copy of each
report or definitive proxy statement of the Company filed with the
Commission under the Exchange Act or mailed to shareholders, and
(ii) from time to time, such other public information concerning the
Company as Trident may reasonably request.
(i) The Company shall use the net proceeds from the sale of the
Shares consistently with the manner set forth in the Prospectus.
(j) The Company shall not deliver the Shares until each and
every condition set forth in Section 7 hereof has been satisfied,
unless such condition is waived by Trident.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 16
(k) The Company shall advise Trident, if necessary, as to the
allocation of deposits, in the case of eligible account holders and
supplemental eligible account holders and votes, in the case of other
members, and of the Shares in the event of an oversubscription and
shall provide Trident final instructions as to the allocation of the
Shares ("Allocation Instructions") in such event and such information
shall be accurate and reliable. Trident shall be entitled to rely on
such instructions and shall have no liability in respect of its
reliance thereon, including without limitation, no liability for or
related to any denial or grant of a subscription in whole or in part.
(l) The Company and the Association will take such actions and
furnish such information as are reasonably requested by Trident in
order for Trident to ensure compliance with the NASD's "Interpretation
Relating to Free-Riding and Withholding."
6. Payment of Expenses. Whether or not the Conversion is consummated,
-------------------
the Company and the Association shall pay or reimburse Trident for (a) all
filing fees paid or incurred by Trident in connection with all filings with the
NASD with respect to the Subscription and Community Offerings and, (b) in
addition, if the Company is unable to sell a minimum of 765,000 Shares or such
lesser amount as the Office may permit or the Conversion is otherwise
terminated, the Company and the Association shall reimburse Trident for
allocable expenses incurred by Trident relating to the offering of the Shares as
provided in Section 3 hereof; provided, however, that neither the Company nor
the Association shall pay or reimburse Trident for any of the foregoing expenses
accrued after Trident shall have notified the Company or the Association of its
election to terminate this Agreement pursuant to Section 11 hereof or after such
time as the Company or the Association shall have given notice in accordance
with Section 12 hereof that Trident is in breach of this Agreement.
7. Conditions of Trident's Obligations. Except as may be waived by
-----------------------------------
Trident, the obligations of Trident as provided herein shall be subject to the
accuracy of the representations and warranties contained in Section 2 hereof as
of the date hereof and as of the Closing Date, to the performance by the Company
and the Association of their obligations hereunder and to the following
conditions:
(a) At the Closing Date, Trident shall receive the favorable
opinions of Housley Kantarian & Bronstein, P.C., special counsel for
the Company and the Association, and _____________________, counsel to
the Association, dated the Closing Date, addressed to Trident,
substantially as set forth in Exhibits B and C, respectively, hereto.
In rendering such opinions, such counsel may rely as to matters of
fact on certificates of officers and directors of the Company and the
Association and certificates of public officials delivered pursuant
hereto. Such counsel may assume that any agreement is the valid and
binding obligation of any parties to such agreement other than
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 17
the Company and the Association. Such opinions may be governed by, and
interpreted in accordance with, the Legal Opinion Accord (the "Accord")
of the ABA Section of Business Law (1991), and, as a consequence,
references in such opinions to such counsel's "knowledge" may be
limited to "actual knowledge" as defined in the Accord (or knowledge
based on certificates). Such opinions may be limited to present
statutes, regulations and judicial interpretations and to facts as they
presently exist; in rendering such opinions, such counsel need assume
no obligation to revise or supplement them should the present laws be
changed by legislative or regulatory action, judicial decision or
otherwise; and such counsel need express no view, opinion or belief
with respect to whether any proposed or pending legislation, if
enacted, or any regulations or any policy statements issued by any
regulatory agency, whether or not promulgated pursuant to any such
legislation, would affect the validity of the execution and delivery by
the Company and the Association of this Agreement or the issuance of
the Shares.
(b) At the Closing Date, Trident shall receive the letter of
Housley Kantarian & Bronstein, P.C., special counsel for the Company
and the Association, dated the Closing Date, addressed to Trident,
substantially as set forth in Exhibit D, hereto.
(c) Counsel for Trident shall have been furnished such documents
as they reasonably may require for the purpose of enabling them to
review or pass upon the matters required by Trident, and for the
purpose of evidencing the accuracy, completeness or satisfaction of any
of the representations, warranties or conditions herein contained,
including but not limited to, resolutions of the Board of Directors of
the Company and the Association regarding the authorization of this
Agreement and the transactions contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion
of Trident, (i) there shall have been no material change in the
condition, financial or otherwise, business or results of operations of
the Company and the Association, taken as a whole, since the latest
date as of which such condition is set forth in the Prospectus, except
as referred to therein; (ii) there shall have been no transaction
entered into by the Company and the Association after the latest date
as of which the financial condition of the Company or the Association
is set forth in the Prospectus other than transactions referred to or
contemplated therein, transactions in the ordinary course of business,
and transactions which are not material to the Company and the
Association, taken as a whole; (iii) none of the Company or the
Association shall have received from the Office or Commission any
direction (oral or written) to make any change in the method of
conducting their respective businesses which is material to the
business of the Company and the Association, taken as a whole, with
which they have not complied; (iv) no action, suit or proceeding, at
law or in equity or before or by any federal or state commission, board
or other administrative agency, shall be pending or threatened against
the Company or the Association or affecting any of their respective
assets, wherein an unfavorable
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 18
decision, ruling or finding would have a material adverse effect on the
business, operations, financial condition or income of the Company and
the Association, taken as a whole; and (v) the Shares shall have been
qualified or registered for offering and sale by the Company under the
securities or blue sky laws of such jurisdictions as Trident and the
Company shall have agreed upon.
(e) At the Closing Date, Trident shall receive a certificate
of the principal executive officer and the principal financial officer
of each of the Company and the Association, dated the Closing Date, to
the effect that: (i) they have examined the Prospectus and, at the time
the Prospectus became authorized by the Company for use, the Prospectus
did not contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading
with respect to the Company or the Association; (ii) since the date the
Prospectus became authorized by the Company for use, no event has
occurred which should have been set forth in an amendment or supplement
to the Prospectus which has not been so set forth, including
specifically, but without limitation, any material change in the
business, condition (financial or otherwise) or results of operations
of the Company or the Association and, the conditions set forth in
clauses (ii) through (iv) inclusive of subsection (d) of this Section 7
have been satisfied; (iii) to the best knowledge of such officers, no
order has been issued by the Commission or the Office to suspend the
Subscription Offering or the Community Offering or the effectiveness of
the Prospectus, and no action for such purposes has been instituted or
threatened by the Commission or the Office; (iv) to the best knowledge
of such officers, no person has sought to obtain review of the final
actions of the Office and division approving the Plan; and (v) all of
the representations and warranties contained in Section 2 of this
Agreement are true and correct, with the same force and effect as
though expressly made on the Closing Date.
(f) At the Closing Date, Trident shall receive, among other
documents, (i) copies of the letters from the Office authorizing the
use of the Prospectus and the Proxy Statement, (ii) a copy of the order
of the Commission declaring the Registration Statement effective;
(iii) copies of the letters from the Office evidencing the corporate
existence of the Association; (iv) a copy of the letter from the
appropriate Colorado authority evidencing the incorporation (and, if
generally available from such authority, good standing) of the Company;
(v) a copy of the Company's corporate charter certified by the
appropriate Colorado governmental authority; and, (vi) if available, a
copy of the letter from the Office approving the Association's Stock
Charter.
(g) As soon as available after the Closing Date, Trident shall
receive a copy of the Association's certified Federal Stock Charter
executed by the appropriate federal governmental authority.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 19
(h) Concurrently with the execution of this Agreement, Trident
acknowledges receipt of a letter from Grimsley, White & Company,
independent certified public accountants, addressed to Trident and the
Company, in substance and form satisfactory to counsel for Trident,
with respect to the financial statements and certain financial
information contained in the Prospectus.
(i) At the Closing Date, Trident shall receive a letter in
form and substance satisfactory to counsel for Trident from Grimsley,
White & Company, independent certified public accountants, dated the
Closing Date and addressed to Trident and the Company, confirming the
statements made by them in the letter delivered by them pursuant to the
preceding subsection as of a specified date not more than five (5) days
prior to the Closing Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of Trident and its counsel, satisfactory to Trident and its counsel. Any
certificates signed by an officer or director of the Company or the Association
prepared for Trident's reliance and delivered to Trident or to counsel for
Trident shall be deemed a representation and warranty by the Company and the
Association to Trident as to the statements made therein. If any condition to
Trident's obligations hereunder to be fulfilled prior to or at the Closing Date
is not so fulfilled, Trident may terminate this Agreement or, if Trident so
elects, may waive any such conditions which have not been fulfilled, or may
extend the time of their fulfillment. If Trident terminates this Agreement as
aforesaid, the Company and the Association shall reimburse Trident for its
expenses as provided in Section 3(b) hereof.
8. Indemnification.
---------------
(a) The Company and the Association jointly and severally agree
to indemnify and hold harmless Trident, its officers, directors and
employees and each person, if any, who controls Trident within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all loss, liability, claim, damage and expense
whatsoever and shall further promptly reimburse such persons for any
legal or other expenses reasonably incurred by each or any of them in
investigating, preparing to defend or defending against any such
action, proceeding or claim (whether commenced or threatened) arising
out of or based upon (A) any misrepresentation by the Company or the
Association in this Agreement or any breach of warranty by the Company
or the Association with respect to this Agreement or arising out of or
based upon any untrue or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact required to be
stated or necessary to make not misleading any statements contained in
(i) the Registration Statement or the Prospectus or (ii) any
application (including the Form AC and the Form H-(e)1-S) or other
document or communication (in this Section 8 collectively called
"Application") prepared or executed by or on behalf
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 20
of the Company or the Association or based upon written information
furnished by or on behalf of the Company or the Association, whether or
not filed in any jurisdiction, to effect the Conversion or qualify the
Shares under the securities laws thereof or filed with the Office or
Commission, unless such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company or
the Association with respect to Trident by or on behalf of Trident
expressly for use in the Prospectus or any amendment or supplement
thereof or in any Application, as the case may be, or (B) the
participation by Trident in the Conversion. This indemnity shall be in
addition to any liability the Company and the Association may have to
Trident otherwise.
(b) The Company shall indemnify and hold Trident harmless for
any liability whatsoever arising out of (i) the Allocation Instructions
or (ii) any records of account holders, depositors, borrowers and other
members of the Association delivered to Trident by the Association or
its agents for use during the Conversion.
(c) Trident agrees to indemnify and hold harmless the Company
and the Association, their officers, directors and employees and each
person, if any, who controls the Company and the Association within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
to the same extent as the foregoing indemnity from the Company and the
Association to Trident, but only with respect to (A) statements or
omissions, if any, made in the Prospectus or any amendment or
supplement thereof, in any Application or to a purchaser of the Shares
in reliance upon, and in conformity with, written information furnished
to the Company or the Association with respect to Trident by or on
behalf of Trident expressly for use in the Prospectus or in any
Application; (B) any misrepresentation by Trident in Section 2(b) of
this Agreement; or (C) any liability of the Company or the Association
which is found in a final judgment by a court of competent jurisdiction
(not subject to further appeal) to have principally and directly
resulted from gross negligence or willful misconduct of Trident.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party
of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this Section 8. In
case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with the other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Section 8 for any legal or other
expenses subsequently
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 21
incurred by such indemnified party in connection with the defense
thereof other than the reasonable cost of investigation except as
otherwise provided herein. In the event the indemnifying party elects
to assume the defense of any such action and retain counsel acceptable
to the indemnified party, the indemnified party may retain additional
counsel, but shall bear the fees and expenses of such counsel unless
(i) the indemnifying party shall have specifically authorized the
indemnified party to retain such counsel or (ii) the parties to such
suit include such indemnifying party and the indemnified party, and
such indemnified party shall have been advised by counsel that one or
more material legal defenses may be available to the indemnified party
which may not be available to the indemnifying party, in which case the
indemnifying party shall not be entitled to assume the defense of such
suit notwithstanding the indemnifying party's obligation to bear the
fees and expenses of such counsel. An indemnifying party against whom
indemnity may be sought shall not be liable to indemnify an indemnified
party under this Section 8 if any settlement of any such action is
effected without such indemnifying party's consent. To the extent
required by law, this Section 9 is subject to and limited by the
provisions of Section 23A.
9. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
Section 8 above is for any reason held to be unavailable to Trident, the Company
and/or the Association other than in accordance with its terms, the Company or
the Association and Trident shall contribute to the aggregate losses,
liabilities, claims, damages, and expenses of the nature contemplated by said
indemnity agreement incurred by the Company or the Association and Trident (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Association on the one hand and Trident on the other from
the offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above, but
also the relative fault of the Company or the Association on the one hand and
Trident on the other hand in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Association on the one hand and Trident on the other shall
be deemed to be in the same proportions as the total net proceeds from the
Conversion received by the Company and the Association bear to the total fees
received by Trident under this Agreement. The relative fault of the Company or
the Association on the one hand and Trident on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Association or by Trident
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 22
The Company and the Association and Trident agree that it would not be
just and equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, Trident shall not be required
to contribute any amount in excess of the amount by which fees owed Trident
pursuant to this Agreement exceeds the amount of any damages which Trident has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. To the extent required by law, this Section 9 is subject to
and limited by the provisions of Section 23A.
10. Survival of Agreements, Representations and Indemnities. The
-------------------------------------------------------
respective indemnities of the Company and the Association and Trident and the
representation and warranties of the Company and the Association and of Trident
set forth in or made pursuant to this Agreement shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of Trident or the Company or the Association
or any controlling person or indemnified party referred to in Section 8 hereof,
and shall survive any termination or consummation of this Agreement and/or the
issuance of the Shares, and any legal representative of Trident, the Company,
the Association and any such controlling persons shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
11. Termination. Trident may terminate this Agreement by giving the
-----------
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence
has materially disrupted the United States securities markets such as
to make it, in Trident's reasonable opinion, impracticable to proceed
with the offering of the Shares; or if trading on the New York Stock
Exchange shall have suspended; or if the United States shall have
become involved in a war or major hostilities; or if a general banking
moratorium has been declared by a state or federal authority which has
material effect on the Association or the Conversion; or if a
moratorium in foreign exchange trading by major international
associations or persons has been declared; or if there shall have been
a material change in the capitalization, condition or business of the
Company, or if the Association shall have sustained a material or
substantial loss by fire, flood, accident, hurricane, earthquake,
theft, sabotage or other calamity or malicious act, whether or not said
loss
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 23
shall have been insured; or if there shall have been a material change
in the condition or prospects of the Company or the Association.
(b) If Trident elects to terminate this Agreement as provided
in this Section, the Company and the Association shall be notified
promptly by Trident by telephone or telegram, confirmed by letter.
(c) If this Agreement is terminated by Trident for any of the
reasons set forth in subsection (a) above, and to fulfill its
obligations, if any, pursuant to Sections 3, 6, 8(a) and 9 of this
Agreement and upon demand, the Company and the Association shall pay
Trident the full amount so owing thereunder.
(d) The Association may terminate the Conversion in accordance
with the terms of the Plan. Such termination shall be without liability
to any party, except that the Company and the Association shall be
required to fulfill their obligations pursuant to Sections 3(b), 3(c),
6, 8(a) and 9 of this Agreement.
12. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to Trident shall be
mailed, delivered or telegraphed and confirmed to Trident Securities, Inc., 4601
Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr. Willis
Smith, II (with a copy to Malizia, Spidi, Sloane & Fisch, P.C., 1301 K Street,
N.W., Suite 700 East, Washington, D.C. 20005, Attention: Charles E. Sloane,
Esquire) and if sent to the Company or the Association shall be mailed,
delivered or telegraphed and confirmed to Salida Building and Loan Association,
130 W. 2nd Street, Salida, Colorado 81201-0309, Attention: Larry D. Smith,
President (with a copy to Housley Kantarian & Bronstein, P.C., Suite 700, 1220 -
19th Street, N.W., Washington, D.C. 20036, Attention: Howard S. Parris,
Esquire).
13. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, Trident, the Company, the Association and the controlling
and other persons referred to in Section 8 hereof, and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained.
14. Construction. Unless governed by preemptive federal law, this
------------
Agreement shall be governed by and construed in accordance with the substantive
laws of North Carolina.
15. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 24
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
HIGH COUNTRY BANCORP, INC. SALIDA BUILDING AND LOAN ASSOCIATION
By: By:
------------------------------- ------------------------------
Larry D. Smith Larry D. Smith
President President
Date: Date:
------------------------------- -------------------------------
Agreed to and accepted:
TRIDENT SECURITIES, INC.
By:
-------------------------------
Date:
<PAGE>
Exhibit A
Jurisdictions where Trident is a Registered Selling Agent
Trident Securities, Inc. is a registered selling agent in the jurisdictions
--
listed below:
Alabama Missouri
Arizona Nebraska
Arkansas Nevada
California New Hampshire
Colorado New Jersey
Connecticut New Mexico
Delaware New York
District of Columbia North Carolina
Florida North Dakota (Trident Securities, Inc.
only, no agents)
Georgia Ohio
Idaho Oklahoma
Illinois Oregon
Indiana Pennsylvania
Iowa Rhode Island
Kansas South Carolina
Kentucky Tennessee
Louisiana Texas
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan West Virginia
Minnesota Wisconsin
Mississippi Wyoming
Trident Securities, Inc. is not a registered selling agent in the jurisdictions
---
listed below:
Alaska
Hawaii
Montana
South Dakota
Utah
<PAGE>
Exhibit B
__________ ____, 1997
Trident Securities, Inc.
4601 Six Forks Road
Suite 400
Raleigh, North Carolina 27609
Re: Salida Building and Loan Association
High Country Bancorp, Inc.
----------------------------------------
Ladies and Gentlemen:
We are rendering this opinion to Trident Securities, Inc. ("Trident" or
"you") as special counsel for Salida Building and Loan Association (the
"Association") and High Country Bancorp, Inc. (the "Company"), pursuant to
Section 7(a) of the Agency Agreement dated ____________ ____, 1997 (the "Agency
Agreement") by and among the Association, the Company and you, as agent for the
sale of up to 1,190,250 shares of common stock, par value $0.01 per share, of
the Company (the "Common Stock") issued in connection with the conversion of the
Association from a federally chartered mutual savings association to a federally
chartered capital stock savings association and the simultaneous issuance of all
of the issued and outstanding stock of the converted Association to the Company
(collectively, the "Conversion") in accordance with the Association's Plan of
Conversion (the "Plan"). All references in this opinion to instruments and other
defined terms shall mean the instruments and other terms as defined in the
Agency Agreement, except to the extent they are otherwise defined herein or the
context otherwise requires.
As special counsel for the Association and the Company, we have
reviewed such corporate records, certificates, and other documents, and such
questions of law, as we have considered necessary or appropriate for the purpose
of rendering this opinion. In the course of our review, we have assumed the
genuineness of all signatures on original documents, and the due execution and
delivery of all documents requiring due execution and delivery for the
effectiveness thereof, except with respect to execution and delivery of the
Agency Agreement by the Company and the Association as to which we have relied
upon representations of officers of the Association and the Company. With
respect to questions of good standing of the Association and the Company, we
have relied solely upon the official letters of appropriate governmental
authorities and representations of officers of the Association and the Company.
As to questions of fact material to the opinions hereinafter expressed,
we have relied upon the representations and warranties of the Company and the
Association made in the Agency
B-2
<PAGE>
Agreement and the certificates of officers delivered at the closing. We have
made no examination or investigation for purposes of these opinions to verify
the accuracy or completeness of any financial, accounting, pro forma, valuation,
or statistical information or information with respect to Trident set forth in
the Registration Statement, the Prospectus, the Agency Agreement, or any of the
documents referred to herein or otherwise furnished to Trident or with respect
to any other accounting or financial matters and express no opinion with respect
thereto. We have also assumed for the purposes of the opinions expressed herein
that the Agency Agreement is a valid and binding obligation of Trident.
Anything to the contrary, expressly stated or implied, notwithstanding,
each of the opinions hereinafter expressed is subject to the following further
qualifications whether or not such opinions refer to such qualifications:
(1) We offer no opinion and do not purport to opine as to the
enforceability of provisions contained in any documents relating to the
Conversion or contemplated by the Agency Agreement or documents as to which the
Association or the Company is a party (a) relating to disclaimers, liability
limitations with respect to third parties, releases, or legal or equitable
rights, or discharges of defenses and remedies, (b) fixing the amount of
liquidated damages, (c) requiring the payment of interest on interest, (d)
providing for indemnification or contribution, and (e) relating to the payment
of attorney's fees.
(2) Our opinions below are limited to the matters expressly set forth
in this opinion letter, and no opinion is to be implied or inferred beyond the
matters stated. Without limiting the foregoing, we express no opinion as to the
anti-fraud provisions of federal and state securities laws.
(3) We have made no independent investigation for purposes of these
opinions as to the accuracy or completeness of any representation, warranty,
date, or other information, written or oral, made or furnished in connection
with the Agency Agreement, and we have relied on the certificates of officers of
the Company and the Association that none of such information contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements made not misleading.
(4) We are not required to be licensed to practice law in any
jurisdiction other than the District of Columbia. The opinions expressed herein
are limited solely to the federal banking and securities laws and regulations
and Colorado corporate law applicable to the Agency Agreement and the
transactions contemplated thereby, and we do not opine on any other federal law
or the laws of any other applicable jurisdiction.
(5) We have acted as special counsel in connection with the application
of federal securities and banking law and regulations and Colorado corporate law
applicable to the Agency Agreement and the Conversion and, consequently, there
may exist matters of a legal nature concerning the Company, the Association,
their subsidiary, or affiliated parties in connection with which we have not
been consulted and have not represented the Company, the Association, or their
subsidiary.
B-3
<PAGE>
(6) This opinion should in no way be construed as an opinion as to the
materiality of the contents of the Registration Statement, the Prospectus, or
the Conversion Application.
(7) Except as otherwise expressly stated, this opinion shall be
governed and interpreted in accordance with the Legal Opinion Accord of the
American Bar Association Section of Business Law (1991).
Based upon and subject to the foregoing and in reliance thereon, and
subject to the assumptions, exceptions and qualifications set forth herein, it
is our opinion that:
(i) the Company has been duly incorporated, and is
validly existing as a corporation in good standing under the laws
of its jurisdiction of incorporation, and the Association is
validly existing as a mutual savings association in good standing
under the laws of the United States, each with full power and
authority to own its properties and conduct its business as
described in the Prospectus;
(ii) the Association is a member of the Federal Home Loan
Bank of Topeka, and the deposit accounts of the Association are
insured by the SAIF up to the applicable legal limits;
(iii) to our actual knowledge, the activities of the
Association as such activities are described in the Prospectus are
permitted under federal and Colorado law to subsidiaries of a
Colorado business corporation and the Association does not have any
subsidiaries;
(iv) the Plan complies with, and, to our actual
knowledge, the Conversion of the Association from a federally
chartered mutual savings association to a federally chartered stock
savings association and the creation of the Company as a holding
company for the Association have been effected in all material
respects in accordance with, the HOLA and the OTS Regulations; to
our actual knowledge, all of the terms, conditions, requirements
and provisions with respect to the Plan and the Conversion imposed
by the Office in its letters approving the Plan and the Conversion,
except with respect to the filing or submission of certain required
post-Conversion reports or other materials by the Company or the
Association, have been complied with by the Company and the
Association; and, to our actual knowledge, no person has sought to
obtain regulatory or judicial review of the final action of the
Office in approving the Plan;
(v) the Company has authorized Common Stock as set forth
in the Registration Statement and the Prospectus, and the
description of such Common Stock in the Registration Statement and
the Prospectus is accurate in all material respects;
B-4
<PAGE>
(vi) the issuance and sale of the Shares have
been duly and validly authorized by all necessary corporate
action on the part of the Company; the Shares, upon receipt of
payment and issuance in accordance with the terms of the Plan
and this Agreement, will be validly issued, fully paid,
nonassessable and, except as disclosed in the Prospectus, free
of preemptive rights, and purchasers of the Shares from the
Company upon issuance thereof against payment therefore will
acquire such Shares free and clear of all claims,
encumbrances, security interests and liens created by the
Company;
(vii) the form of certificate used to evidence
the Shares is in proper form and complies in all material
respects with applicable Colorado law;
(viii) the issuance and sale of the capital stock
of the Association to the Company have been duly authorized by
all necessary corporate action of the Association and the
Company and have received the approval of the Office, and such
capital stock, upon receipt of payment and issuance in
accordance with the terms of the Plan, will be validly issued,
fully paid and nonassessable and owned of record and, to our
actual knowledge, beneficially by the Company;
(ix) subject to the satisfaction of the
conditions to the Office's approval of the Conversion
Application, no further approval, authorization, consent or
other order of any federal government board or body is
required in connection with the execution and delivery of this
Agreement, issuance of the Shares and the consummation of the
Conversion, except with respect to the issuance to the
Association of the Stock Charter by the Office and as may be
required under the "blue sky" laws of various jurisdictions;
(x) the execution and delivery of this
Agreement and the consummation of the Conversion have been
duly and validly authorized by all necessary corporate action
on the part of each of the Company and the Association;
(xi) the statements in the Prospectus and
incorporated by reference in the Proxy Statement under the
captions "Regulation," "Taxation," "Dividend Policy," "Certain
Restrictions on Acquisition of the Company and the
Association" and "Description of Capital Stock," insofar as
they are, or refer to, statements of law or legal conclusions
(excluding financial data included therein, as to which an
opinion is not expressed), have been prepared or reviewed by
us and are correct in all material respects;
(xii) the Conversion Application has been
approved by the Office, and the Prospectus and the Proxy
Statement have been authorized for use by the Office; the
Registration Statement and any post-effective amendment
thereto has been declared effective by the Commission; and, to
our actual knowledge, no proceedings are pending by or before
the Commission or the Office seeking to revoke or rescind the
orders declaring the Registration Statement effective or
B-5
<PAGE>
approving the Conversion Application or, to our actual
knowledge, are contemplated or threatened;
(xiii) the execution and delivery of this Agreement
and the consummation of the Conversion by the Company and the
Association do not conflict with or result in a breach of the
charter or bylaws of the Company or the Association (in either
mutual or stock form); and
(xiv) the Conversion Application, the Registration
Statement, the Prospectus and the Proxy Statement, in each
case as amended, comply as to form in all material respects
with the requirements of the Act, the HOLA, the SEC
Regulations and the OTS Regulations, as the case may be
(except as to information with respect to Trident included
therein and financial statements, notes to financial
statements, financial tables and other financial and
statistical data, including the appraisal, included therein,
as to which no opinion is expressed); to our actual knowledge,
all documents and exhibits required to be filed with the
Conversion Application and the Registration Statement have
been so filed and the descriptions in the Conversion
Application and the Registration Statement of such documents
and exhibits are accurate in all material respects.
This opinion is being rendered solely for the benefit of the addressee
hereof and may not be relied upon by, nor may copies be delivered to, any other
person without our prior written consent. The opinion may be delivered to your
counsel. This opinion is given as of the date hereof and we assume no obligation
to advise you of changes that may hereafter be brought to our attention.
Very truly yours,
Housley, Kantarian & Bronstein, P.C.
B-6
<PAGE>
Exhibit C
---------
[Letterhead of Local Attorneys]
__________ ____, 1997
Trident Securities, Inc.
4601 Six Forks Road
Suite 400
Raleigh, North Carolina 27609
Re: Salida Building and Loan Association
High Country Bancorp, Inc.
------------------------------------------
Ladies and Gentlemen:
We are rendering this opinion to Trident Securities, Inc. ("Trident" or
"you") as general counsel to Salida Building and Loan Association (the
"Association") and High Country Bancorp, Inc. (the "Company") at the time of the
conversion of the Association from a federally chartered mutual savings
association to a federally chartered capital stock savings association and the
simultaneous issuance of all of the issued and outstanding stock of the
converted Association to the Company (the "Conversion") in accordance with the
Association's Plan of Conversion (the "Plan"). Except to the extent they are
otherwise defined herein or the context otherwise requires, all references in
this opinion to instruments and other defined terms shall mean the instruments
and other terms as defined in the Agency Agreement dated __________ _____, 1997
(the "Agreement") by and among the Association, the Company, and Trident. Our
representation was limited solely to matters of Colorado law and this opinion is
delivered to you pursuant to Section 7(a) of the Agreement.
As general counsel to the Company and the Association, with respect to
the Association and the Company, we have examined such corporate records,
certificates, and other documents, and such questions of law, as we have
considered necessary or appropriate for the purpose of rendering this opinion.
In the course of our examination, we have assumed the genuineness of all
signatures on original documents, and the due execution and delivery of all
documents requiring due execution and delivery for the effectiveness thereof. As
to matters of fact relating to our opinion, we have relied on certificates and
written statements of officers of the Association and the Company.
Based upon and subject to the foregoing and in reliance thereon, and
subject to the assumptions, exceptions, and qualifications set forth herein, it
is our opinion that:
(i) to our actual knowledge, the Association has
obtained all licenses, permits and other governmental
authorizations currently required for the conduct of its
business as such business is described in the Prospectus, all
such licenses,
C-1
<PAGE>
permits and other governmental authorizations are in full
force and effect and the Association is in all material
respects complying therewith, except where the failure to hold
such licenses, permits or governmental authorizations or the
failure to so comply would not have a material adverse effect
on the Company and the Association, taken as a whole;
(ii) there are no material legal or governmental
proceedings pending or, to our actual knowledge, threatened
against or involving the assets of the Company or the
Association (provided that for this purpose we do not regard
any litigation or governmental procedure to be "threatened"
unless the potential litigant or government authority has
manifested to the management of the Company or the
Association, or to us, a present intention to initiate such
litigation or proceeding);
(iii) to our actual knowledge, the execution and
delivery of the Agreement and the consummation of the
Conversion by the Company and the Association do not
constitute a material breach of or default (or an event which,
with notice or lapse of time or both, would constitute a
default) under, give rise to any right of termination,
cancellation or acceleration contained in, or result in the
creation or imposition of any lien, charge or other
encumbrance upon any of the properties or assets of the
Company or the Association pursuant to any of the terms,
provisions or conditions of, any material agreement, contract,
indenture, bond, debenture, note, instrument or obligation to
which the Company or the Association is a party or violate any
governmental license or permit or any enforceable published
law, administrative regulation or order or court order, writ,
injunction or decree (subject to the satisfaction of certain
conditions imposed by the Office in connection with its
approval of the Conversion Application), which breach,
default, encumbrance or violation would have a material
adverse effect on the condition (financial or otherwise),
operations, business, assets or properties of the Company and
the Association taken as a whole;
(iv) to our actual knowledge, there has been no
material breach of any provision of the Company's or the
Association's charter or bylaws or breach or default (or the
occurrence of any event which, with notice or lapse of time or
both, would constitute a default) under any agreement,
contract, indenture, bond, debenture, note, instrument or
obligation to which the Company or the Association is a party
or by which any of them or any of their respective assets or
properties may be bound, or any governmental license or
permit, or a violation of any enforceable published law,
administrative regulation or order, or court order, writ,
injunction or decree which breach, default, encumbrance or
violation would have a material adverse effect on the
condition (financial or otherwise), operations, business,
assets or properties of the Company and the Association taken
as a whole; and,
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<PAGE>
(v) the Agreement is a legal, valid and binding
obligation of each of the Company and the Association,
enforceable in accordance with its terms (except as the
enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization, receivership,
conservatorship or similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of
creditors of depository institutions whose accounts are
insured by the FDIC or savings and loan holding companies the
accounts of whose subsidiaries are insured by the FDIC or by
general equity principles, regardless of whether such
enforceability is considered in a proceeding in equity or at
law, and except to the extent that the provisions of Sections
8 and 9 hereof may be unenforceable as against public policy
or pursuant to Section 23A, as to which we render no opinion);
This opinion is being rendered solely for the benefit of the addressee
hereof and that of the addressee's and the Company's counsel and may not be
relied upon by, nor may copies be delivered to, any other person without our
prior written consent. We hereby consent to the delivery of this opinion to your
counsel named in the Agreement and to the Company's counsel in connection with
the consummation of the Conversion. This opinion is given as of the date hereof
and we assume no obligation to advise you of changes that may hereafter be
brought to our attention.
Very truly yours,
----------------------------
C-3
<PAGE>
Exhibit D
---------
__________ ____, 1997
Trident Securities, Inc.
4601 Six Forks Road
Suite 400
Raleigh, North Carolina 27609
Re: Salida Building and Loan Association
High Country Bancorp, Inc.
------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel for High Country Bancorp, Inc. (the
"Company") and Salida Building and Loan Association (the "Association") in
connection with the preparation and filing with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), of the Company's Registration Statement on Form SB-2 (No.
333-______), as amended, and the Association's Application for Conversion on
Form AC, as amended, relating to the offering of the Company's common stock (the
"Common Stock") in a subscription offering in connection with the conversion of
the Association from a federally chartered mutual savings association to a
federally chartered stock savings association (the "Conversion") and the
issuance of the Association's capital stock to the Company pursuant to the
Association's plan of conversion, originally adopted by the Association's Board
of Directors on May 15, 1997. Such registration statement, as amended, when it
became effective is herein called the "Registration Statement," and the related
Prospectus dated ____________ ____, 1997 is herein called the "Prospectus." Such
application for conversion, as amended, when it received approval is herein
called the "Conversion Application." This letter is furnished pursuant to
Section 7(b) of the Agency Agreement dated ___________ ____, 1997 (the "Agency
Agreement") among the Company, the Association, and Trident Securities, Inc.
("Trident" or "you").
Because the primary purpose of our professional engagement was not to
establish or confirm factual matters or financial, accounting, or statistical
matters and because of the wholly or partially non-legal character of many of
the statements contained in the Conversion Application, the Registration
Statement, and the Prospectus, for purposes of this letter, we are not passing
upon and do not assume any responsibility for the accuracy, completeness, or
fairness of the statements contained in the Conversion Application, the
Registration Statement, or the Prospectus and we make no representation that we
have independently verified the accuracy, completeness, or fairness of such
statements. Without limiting the foregoing, for purposes of this letter, we
assume no responsibility for, and have not independently verified, the accuracy,
completeness, or fairness of the financial statements and schedules and other
financial and statistical data and stock valuation information, or information
regarding you included in the
D-1
<PAGE>
Conversion Application, the Registration Statement, and the Prospectus, and we
have not examined the accounting, financial, or statistical records from which
such financial statements, schedules, and data are derived. We note that,
although certain portions of the Conversion Application, the Registration
Statement, and the Prospectus (including financial statements and schedules and
stock valuation information) have been included therein on the authority of
"experts" within the meaning of the Securities Act, we are not such experts with
respect to any portion of the Conversion Application or the Registration
Statement, including without limitation such financial statements or schedules
or the other financial or statistical data included therein.
Based on such counsel's participation in conferences with
representatives of the Company, the Association, its counsel, the independent
appraiser, the independent certified public accountants, Trident and its
counsel, review of documents and understanding of applicable law (including the
requirements of Form SB-2 and the character of the Registration Statement
contemplated thereby) and the experience such counsel has gained in its practice
under the Act, nothing has come to such counsel's attention that would lead it
to believe that the Registration Statement, as amended (except as to information
in respect of Trident contained therein and except as to the financial
statements, notes to financial statements, financial tables and other financial
and statistical data contained therein, as to which such counsel need express no
view), at the time it became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein not misleading, or that the
Prospectus, as amended (except as to information in respect of Trident contained
therein and except as to financial statements, notes to financial statements,
financial tables and other financial and statistical data contained therein as
to which such counsel need express no view), as of the date of the Prospectus
and as of the date hereof, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (in making
this statement such counsel may state that it has not undertaken to verify
independently the information in the Registration Statement or Prospectus and,
therefore, does not assume any responsibility for the accuracy or completeness
thereof).
We are furnishing this letter to you solely for your benefit. This
letter is not to be used, circulated, quoted, or otherwise referred to for any
other purpose, except that a copy may be provided to your counsel.
Very truly yours,
Housley, Kantarian & Bronstein, P.C.
D-2
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
HIGH COUNTRY BANCORP, INC.
ARTICLE I
NAME
The name of the corporation is High Country Bancorp, Inc. (hereinafter, the
"Corporation"), and the address of the initial principal office of the
Corporation is 130 West 2nd Street, Salida, Colorado 81201.
ARTICLE II
REGISTERED OFFICE
The address of the Corporation's registered office in the State of Colorado
is 130 West 2nd Street, Salida, Colorado 81201. The name of the Corporation's
registered agent at such address is Larry D. Smith.
ARTICLE III
POWERS
The purpose for which the Corporation is organized is to act as a savings
institution holding company and to transact all other lawful business for which
corporations may be incorporated pursuant to the laws of the State of Colorado.
The Corporation shall have all the powers of a corporation organized under the
Colorado Business Corporation Act.
ARTICLE IV
TERM
The Corporation is to have perpetual existence.
ARTICLE V
INCORPORATOR
The name and mailing address of the incorporator is as follows:
Name Mailing Address
---- ---------------
Larry D. Smith 130 West 2nd Street
Salida, Colorado 81201
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ARTICLE VI
CAPITAL STOCK
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 4,000,000 of which 3,000,000 are to be
shares of common stock, $0.01 par value per share, and of which 1,000,000 are to
be shares of serial preferred stock, $0.01 par value per share. The shares may
be issued by the Corporation from time to time as approved by the board of
directors of the Corporation without the approval of the stockholders except as
otherwise provided in this Article VI or the rules of a national securities
exchange, if applicable. The consideration for the issuance of the shares shall
be paid to or received by the Corporation in full before their issuance and
shall not be less than the par value per share. The consideration for the
issuance of the shares shall be cash, services rendered, personal property
(tangible or intangible), real property, leases of real property or any
combination of the foregoing. In the absence of actual fraud in the transaction,
the judgment of the board of directors as to the value of such consideration
shall be conclusive. Upon payment of such consideration such shares shall be
deemed to be fully paid and nonassessable. In the case of a stock dividend, the
part of the surplus of the Corporation which is transferred to stated capital
upon the issuance of shares as a stock dividend shall be deemed to be the
consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. Common Stock. Except as provided in these Articles, the holders of
------------
the common stock shall exclusively possess all voting power. Each holder of
shares of common stock shall be entitled to one vote for each share held by such
holder, except as otherwise expressly set forth in these Articles.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and sinking fund or retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock, and on any class or
series of stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends, but only when and as
declared by the board of directors of the Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having preference
over the common stock in any such event, the full preferential amounts to which
they are respectively entitled, the holders of the common stock and of any class
or series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
Each share of common stock shall have the same relative powers, preferences
and rights as, and shall be identical in all respects with, all the other shares
of common stock of the Corporation, except as otherwise expressly set forth in
these Articles.
B. Serial Preferred Stock. Except as provided in these Articles, the
----------------------
board of directors of the Corporation is authorized, by resolution or
resolutions from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each such series, and the qualifications, limitations or restrictions
thereof, including, but not limited to determination of any of the following:
(1) the distinctive serial designation and the number of shares
constituting such series;
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<PAGE>
(2) the dividend rates or the amount of dividends to be paid on the shares
of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to
dividends;
(3) the voting powers, full or limited, if any, of the shares of such
series;
(4) whether the shares of such series shall be redeemable and, if so, the
price or prices at which, and the terms and conditions upon which such
shares may be redeemed;
(5) the amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation;
(6) whether the shares of such series shall be entitled to the benefits of
a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and, if so entitled, the amount of such
fund and the manner of its application, including the price or prices
at which such shares may be redeemed or purchased through the
application of such funds;
(7) whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the
Corporation and, if so convertible or exchangeable, the conversion
price or prices, or the rate or rates of exchange, and the adjustments
thereof, if any, at which such conversion or exchange may be made, and
any other terms and conditions of such conversion or exchange;
(8) the subscription or purchase price and form of consideration for which
the shares of such series shall be issued; and
(9) whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial
preferred stock and whether such shares may be reissued as shares of
the same or any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series,
except as otherwise expressly set forth in these Articles.
ARTICLE VII
PREEMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive right
to purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of any class or series or carrying
any right to purchase stock of any class or series; but any such unissued stock,
bonds, certificates or indebtedness, debentures or other securities convertible
into or exchangeable for stock or carrying any right to purchase stock may be
issued pursuant to resolution of the board of directors of the Corporation to
such persons, firms, corporations or associations, whether or not holders
thereof, and upon such terms as may be deemed advisable by the board of
directors in the exercise of its sole discretion.
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<PAGE>
ARTICLE VIII
REPURCHASE OF SHARES
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness, or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law.
ARTICLE IX
MEETINGS OF STOCKHOLDERS; CUMULATIVE VOTING
A. Notwithstanding any other provision of these Articles or the bylaws of
the Corporation, no action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing, without
a meeting, to the taking of any action is specifically denied.
B. Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the board of directors of the
Corporation, or by a committee of the board of directors which has been duly
designated by the board of directors and whose powers and authorities, as
provided in a resolution of the board of directors or in the bylaws of the
Corporation, include the power and authority to call such meetings, but such
special meetings may not be called by any other person or persons, except as
provided by Colorado law.
C. Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by proxy, but no such proxy
shall be voted or acted upon after 11 months from its date, unless the proxy
provides for a longer period. Without limiting the manner in which a
stockholder may authorize another person or persons to act for him as proxy, the
following shall constitute a valid means by which a stockholder may grant such
authority.
1. A shareholder may appoint a proxy by signing an appointment form,
either personally or by the shareholder's attorney-in-fact.
2. A shareholder may appoint a proxy by transmitting or authorizing
the transmission of a telegram, teletype, or other electronic transmission
providing a written statement of the appointment to the proxy, to a proxy
solicitor, proxy support service organization, or other person duly
authorized by the proxy to receive appointments as agent for the proxy, or
to the Corporation; except that the transmitted appointment shall set forth
or be transmitted with written evidence from which it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment.
3. Any complete copy, including an electronically transmitted
facsimile, of an appointment of a proxy may be substituted for or used in
lieu of the original appointment for any purpose for which the original
appointment could be used.
D. There shall be no cumulative voting by stockholders of any class or
series in the election of directors of the Corporation.
E. Meetings of stockholders may be held at such place as the bylaws may
provide.
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ARTICLE X
NOTICE FOR NOMINATIONS AND PROPOSALS
A. Nominations for the election of directors and proposals for any new
business to be taken up at any annual or special meeting of stockholders may be
made by the board of directors of the Corporation, by a committee appointed by
the Board of Directors for this purpose, or by any stockholder of the
Corporation entitled to vote generally in the election of directors. In order
for a stockholder of the Corporation to make any such nominations and/or
proposals, he or she shall give notice thereof in writing, delivered or mailed
by first class United States mail, postage prepaid, to the Secretary of the
Corporation not less than thirty days nor more than sixty days prior to the date
of any such meeting; provided, however, that if less than forty days' notice of
the meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than the
close of business on the tenth day following the day on which notice of the
meeting was mailed to stockholders. Each such notice given by a stockholder
with respect to nominations for the election of directors shall set forth (i)
the name, age, business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of each
such nominee, and (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee. In addition, the stockholder
making such nomination shall promptly provide any other information reasonably
requested by the Corporation.
B. Each such notice given by a stockholder to the Secretary with respect
to business proposals to be brought before a meeting shall set forth in writing
as to each matter: (i) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting;
(ii) the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business; (iii) the class and number of shares of the
Corporation which are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in these Articles to the contrary, no new business shall be conducted at the
meeting except in accordance with the procedures set forth in this Article.
C. The Chairman of the annual or special meeting of stockholders may, if
the facts warrant, determine and declare to such meeting that a nomination or
proposal was not made in accordance with the foregoing procedure, and, if he
should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for action at the next
succeeding special or annual meeting of the stockholders taking place thirty
days or more thereafter. This provision shall not require the holding of any
adjourned or special meeting of stockholders for the purpose of considering such
defective nomination or proposal.
ARTICLE XI
DIRECTORS
A. Number; Vacancies. The number of directors of the Corporation shall
-----------------
be such number, not less than five nor more than fifteen (exclusive of
directors, if any, to be elected by holders of preferred stock of the
Corporation, voting separately as a class), as shall be set forth from time to
time in the bylaws, provided that no decrease in the number of directors shall
have the effect of shortening the term of any incumbent director, and provided
further that no action shall be taken to decrease or increase the number of
directors unless at least two-thirds of the directors then in office shall
concur in said action. Vacancies in the board of directors of the Corporation,
however caused, and newly created directorships shall be filled by a vote of
two-thirds of the directors then in office, whether or not a quorum, and any
director so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of the class to which the director has been
chosen expires and when the director's successor is elected and qualified.
B. Qualifications. Each director of the Corporation must at all times
--------------
be a resident of the State of Colorado. For the purposes of this section,
"resident" means any natural person who occupies a dwelling within Colorado, has
an intention to remain within Colorado for a period of time (manifested by
establishing a physical, on-going, non transitory presence within Colorado) and
continues to reside in Colorado for the term of his or her directorship.
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<PAGE>
C. Classified Board. The board of directors of the Corporation shall be
----------------
divided into three classes of directors which shall be designated Class I, Class
II and Class III. The members of each class shall be elected for a term of
three years and until their successors are elected and qualified. Such classes
shall be as nearly equal in number as the then total number of directors
constituting the entire board of directors shall permit, with the terms of
office of all members of one class expiring each year. Subject to the
provisions of this Article XI, should the number of directors not be equally
divisible by three, the excess director or directors shall be assigned to
Classes III or II as follows: (i) if there shall be an excess of one
directorship over a number equally divisible by three, such extra directorship
shall be classified in Class III; and (ii) if there be an excess of two
directorships over a number equally divisible by three, one shall be classified
in Class III and the other in Class II. At the first annual meeting of
stockholders, directors of Class I shall be elected to hold office for a term
expiring at the third succeeding annual meeting thereafter. At the second
annual meeting of stockholders, directors of Class II shall be elected to hold
office for a term expiring at the third succeeding annual meeting thereafter.
At the third annual meeting of stockholders, directors of Class III shall be
elected to hold office for a term expiring at the third succeeding annual
meeting thereafter. Thereafter, at each succeeding annual meeting, directors of
each class shall be elected for three year terms. Notwithstanding the
foregoing, the director whose term shall expire at any annual meeting shall
continue to serve until such time as his successor shall have been duly elected
and shall have qualified unless his position on the board of directors shall
have been abolished by action taken to reduce the size of the board of directors
prior to said meeting.
Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the immediately
preceding paragraph. The board of directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Notwithstanding the foregoing, no
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director. Should the number of directors of the Corporation be
increased, the additional directorships shall be allocated among classes as
appropriate so that the number of directors in each class is as specified in the
immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect one or
more directors of the Corporation, the board of directors shall consist of said
directors so elected in addition to the number of directors fixed as provided in
this Article XI. Notwithstanding the foregoing, and except as otherwise may be
required by law or by the terms and provisions of the preferred stock of the
Corporation, whenever the holders of any one or more series of preferred stock
of the Corporation shall have the right, voting separately as a class, to elect
one or more directors of the Corporation, the terms of the director or directors
elected by such holders shall expire at the next succeeding annual meeting of
stockholders.
ARTICLE XII
REMOVAL OF DIRECTORS
Notwithstanding any other provision of these Articles or the bylaws of the
Corporation, no member of this board of directors of the Corporation may be
removed, except for cause, and then only by the affirmative vote of the holders
of at least 80% of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called for that
purpose. Notwithstanding the foregoing, whenever the holders of any one or more
series of preferred stock of the Corporation shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
preceding provisions of this Article XII shall not apply with respect to the
director or directors elected by such holders of preferred stock.
6
<PAGE>
ARTICLE XIII
ACQUISITION OF CAPITAL STOCK
A. Five-Year Prohibition. For a period of five years from the
---------------------
effective date of the completion of the conversion of Salida Building and Loan
Association, Salida, Colorado, from mutual to stock form (which entity shall
become a wholly owned subsidiary of the Corporation upon such conversion), no
person shall directly or indirectly offer to acquire or acquire the beneficial
ownership of more than 10% of any class of equity security of the Corporation,
unless such offer or acquisition shall have been approved in advance by a two-
thirds vote of the Continuing Directors, as defined in Article XIV hereof. In
addition, for a period of five years from the completion of the conversion of
Salida Building and Loan Association from mutual to stock form (which entity
shall become a wholly owned subsidiary of the Corporation upon such conversion),
and notwithstanding any provision to the contrary in these Articles or in the
bylaws of the Corporation, where any person directly or indirectly acquires
beneficial ownership of more than 10% of any class of equity security of the
Corporation in violation of this Article XIII, the securities beneficially owned
in excess of 10% shall not be counted as shares entitled to vote, shall not be
voted by any person or counted as voting shares in connection with any matter
submitted to the stockholders for a vote, and shall not be counted as
outstanding for purposes of determining a quorum or the affirmative vote
necessary to approve any matter submitted to the stockholders for a vote.
B. Prohibition After Five Years. If, at any time after five years from
----------------------------
the effective date of the completion of the conversion of Salida Building and
Loan Association from mutual to stock form (which entity shall become a wholly-
owned subsidiary of the Corporation upon such conversion), any person shall
acquire the beneficial ownership of more than 10% of any class of equity
security of the Corporation without the prior approval by a two-thirds vote of
the Continuing Directors, as defined in Article XIV hereof, then the record
holders of Voting Stock, as defined in Article XIV hereof, of the Corporation
beneficially owned by such acquiring person shall have only the voting rights
set forth in this paragraph B on any matter requiring their vote or consent.
With respect to each vote in excess of 10% of the voting power of the
outstanding shares of Voting Stock of the Corporation which such record holders
would otherwise be entitled to cast without giving effect to this paragraph B,
such record holders in the aggregate shall be entitled to cast only one-
hundredth (1/100) of a vote, and the aggregate voting power of such record
holders, so limited for all shares of Voting Stock of the Corporation
beneficially owned by such acquiring person, shall be allocated proportionately
among such record holders. For each such record holder, this allocation shall be
accomplished by multiplying the aggregate voting power, prior to imposing the
limitations of this paragraph B, of the outstanding shares of Voting Stock of
the Corporation beneficially owned by such record holder by a fraction whose
numerator is the number of votes equal to 10% of the shares of Voting Stock of
the Corporation and whose denominator is the total number of votes represented
by the shares of Voting Stock of the Corporation that are beneficially owned by
such acquiring person; any share held by such record holder in excess of the
allocated amount as determined in accordance with the previous clause shall be
entitled to cast one-hundredth of a vote. A person who is a record owner of
shares of Voting Stock of the Corporation that are beneficially owned
simultaneously by more than one person shall have, with respect to such shares,
the right to cast the least number of votes that such person would be entitled
to cast under this paragraph B by virtue of such shares being so beneficially
owned by any of such acquiring persons.
C. Definitions. The term "person" means an individual, a group acting in
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concert, a corporation, a partnership, an association, a joint stock company, a
trust, an unincorporated organization or similar company, a syndicate or any
other group acting in concert formed for the purpose of acquiring, holding,
voting or disposing of securities of the Corporation. The term "acquire"
includes every type of acquisition, whether effected by purchase, exchange,
operation of law or otherwise. The term group "acting in concert" includes (a)
knowing participation in a joint activity or conscious parallel action towards a
common goal whether or not pursuant to an express agreement, and (b) a
combination or pooling of voting or other interest in the Corporation's
outstanding shares for a common purpose, pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. The term "beneficial ownership" shall have the meaning defined in
Rule 13d-3 of the General Rules and Regulations under the Securities and
Exchange Act of 1934, as in effect on the date of filing of these Articles.
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D. Exclusion for Employee Benefit Plans, Directors, Officers, Employees
--------------------------------------------------------------------
and Certain Proxies. The restrictions contained in this Article XIII shall not
- -------------------
apply to (i) any underwriter or member of an underwriting or selling group
involving a public sale or resale of securities of the Corporation or a
subsidiary thereof; provided, however, that upon completion of the sale or
resale of such securities, no such underwriter or member of such selling group
is a beneficial owner of more than 10% of any class of equity security of the
Corporation, (ii) any proxy granted to one or more Continuing Directors, as
defined in Article XIV hereof, by a stockholder of the Corporation or (iii) any
employee benefit plans of the Corporation. In addition, the Continuing
Directors, as defined in Article XIV hereof, the officers and employees of the
Corporation and its subsidiaries, the directors of subsidiaries of the
Corporation, the employee benefit plans of the Corporation and its subsidiaries,
entities organized or established by the Corporation or any subsidiary thereof
pursuant to the terms of such plans and trustees and fiduciaries with respect to
such plans acting in such capacity shall not be deemed to be a group with
respect to their beneficial ownership of voting stock of the Corporation solely
by virtue of their being directors, officers or employees of the Corporation or
a subsidiary thereof or by virtue of the Continuing Directors, as defined in
Article XIV hereof, the officers and employees of the Corporation and its
subsidiaries and the directors of subsidiaries of the Corporation being
fiduciaries or beneficiaries of an employee benefit plan of the Corporation or a
subsidiary of the Corporation. Notwithstanding the foregoing, no director,
officer or employee of the Corporation or any of its subsidiaries or group of
any of them shall be exempt from the provisions of this Article XIII should any
such person or group become a beneficial owner of more than 10% of any class of
equity security of the Corporation.
E. Determinations. A majority of the Continuing Directors, as defined in
--------------
Article XIV hereof, shall have the power to construe and apply the provisions of
this Article XIII and to make all determinations necessary or desirable to
implement such provisions, including but not limited to matters with respect to
(a) the number of shares beneficially owned by any person, (b) whether a person
has an agreement, arrangement or understanding with another as to the matters
referred to in the definition of beneficial ownership, (c) the application of
any other definition or operative provision of this Article XIII to the given
facts or (d) any other matter relating to the applicability or effect of this
Article XIII. Any constructions, applications, or determinations made by the
Continuing Directors pursuant to this Article XIII in good faith and on the
basis of such information and assistance as was then reasonably available for
such purpose shall be conclusive and binding upon the Corporation and its
stockholders.
ARTICLE XIV
APPROVAL OF CERTAIN BUSINESS COMBINATIONS
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this section.
A. (1) Except as otherwise expressly provided in this Article XIV, the
affirmative vote of the holders of (i) at least 80% of the outstanding
shares entitled to vote thereon (and, if any class or series of shares is
entitled to vote thereon separately, the affirmative vote of the holders of
at least 80% of the outstanding shares of each such class or series), and
(ii) at least a majority of the outstanding shares entitled to vote
thereon, not including shares deemed beneficially owned by a Related Person
(as hereinafter defined), shall be required in order to authorize any of
the following:
(a) any merger or consolidation of the Corporation with or into
a Related Person (as hereinafter defined);
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage, or any other capital device,
of all or any Substantial Part (as hereinafter defined) of the assets
of the Corporation (including without limitation any voting securities
of a subsidiary) or of a subsidiary, to a Related Person;
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(c) any merger or consolidation of a Related Person with or into the
Corporation or a subsidiary of the Corporation;
(d) any sale, lease, exchange, transfer or other disposition of all
or any Substantial Part of the assets of a Related Person to the
Corporation or a subsidiary of the Corporation;
(e) the issuance of any securities of the Corporation or a subsidiary
of the Corporation to a Related Person;
(f) the acquisition by the Corporation or a subsidiary of the
Corporation of any securities of a Related Person;
(g) any reclassification of the common stock of the Corporation, or
any recapitalization involving the common stock of the Corporation; and
(h) any agreement, contract or other arrangement providing for any of
the transactions described in this Article XIV.
(2) Such affirmative vote shall be required notwithstanding any other
provision of these Articles, any provision of law, or any agreement with
any regulatory agency or national securities exchange which might otherwise
permit a lesser vote or no vote.
(3) The term "Business Combination" as used in this Article XIV shall
mean any transaction which is referred to in any one or more of
subparagraphs A(1)(a) through (h) above.
B. The provisions of paragraph A shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by any other provision of these
Articles, any provision of law, or any agreement with any regulatory agency or
national securities exchange, if the Business Combination shall have been
approved by a two-thirds vote of the Continuing Directors (as hereinafter
defined); provided, however, that such approval shall only be effective if
obtained at a meeting at which a Continuing Director Quorum (as hereinafter
defined) is present.
C. For the purposes of this Article XIV the following definitions apply:
(1) The term "Principal Shareholder" shall mean and include any
individual, corporation, partnership, or other person or entity which,
together with its "Affiliates" and "Associates" (as defined in Rule 12b-2
under the Securities Exchange Act of 1934), "beneficially owns" (as
hereinafter defined) in the aggregate ten percent (10%) or more of the
outstanding shares of Voting Stock, and any Affiliate or Associate of any
such individual, corporation, partnership, or other person or entity.
(2) The term "Related Person" shall mean and include (a) any
individual, corporation, partnership or other person or entity which
together with its "Affiliates" (as that term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934), "beneficially owns" (as that term is
defined in Rule 13d-3 of the General Rules and Regulations under the
Securities Act of 1934) in the aggregate 10% or more of the outstanding
shares of the common stock of the Corporation; and (b) any "Affiliate" (as
that term is defined in Rule 12b-2 under the Securities Exchange Act of
1934) of any such individual, corporation, partnership or other person or
entity. Without limitation, any shares of the common stock of the
Corporation which any Related Person has the right to acquire pursuant to
any agreement, or upon exercise or conversion rights, warrants or options,
or otherwise, shall be deemed "beneficially owned" by such Related Person.
9
<PAGE>
(3) The term "Substantial Part" shall mean more than 25 percent of
the total assets of the Corporation, as of the end of its most recent
fiscal year ending prior to the time the determination is made.
(4) The term "Voting Stock" shall mean the stock of the Corporation
entitled to vote in the election of directors.
(5) The term "Continuing Director" shall mean any member of the board
of directors of the Corporation who is unaffiliated with the Related Person
and was a member of the board prior to the time that the Related Person
became a Related Person, and any successor of a Continuing Director who is
unaffiliated with the Related Person and is recommended to succeed a
Continuing Director by a majority of Continuing Directors then on the
board.
(6) The term "Continuing Director Quorum" shall mean two-thirds of
the Continuing Directors capable of exercising the powers conferred on
them.
(7) Any corporation, partnership, person, or entity will be deemed to
be a "Beneficial Owner" of or to own beneficially any share or shares of
stock of the Corporation: (a) which it owns directly, whether or not of
record; or (b) which it has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement or arrangement or understanding or upon exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or which it has
the right to vote pursuant to any agreement, arrangement, or understanding;
or (c) which are owned directly or indirectly (including shares deemed to
be owned through application of clause (b) above) by any Affiliate or
Associate; or (d) which are owned directly or indirectly (including shares
deemed to be owned through application of clause (b) above) by any other
corporation, person, or entity with which it or any of its Affiliates or
Associates have any agreement or arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of Voting Stock.
For purpose only of determining the percentage of the outstanding shares of
Voting Stock which any corporation, partnership, person, or other entity
beneficially owns, directly or indirectly, the outstanding shares of Voting
Stock will be deemed to include any shares of Voting Stock which such
corporation, partnership, person or other entity beneficially owns pursuant to
the foregoing provisions of this subsection (whether or not such shares of
Voting Stock are in fact issued or outstanding), but shall not include any other
shares of Voting Stock which may be issuable either immediately or at some
future date pursuant to any agreement, arrangement, or understanding or upon
exercise of conversion rights, exchange rights, warrants, options, or otherwise.
ARTICLE XV
FAIR PRICE REQUIREMENTS
A. General Requirement. No "Business Combination" (as defined in
-------------------
Article XIV hereof) shall be effected unless all of the following conditions, to
the extent applicable, are fulfilled.
1. The ratio of (a) the aggregate amount of the cash and the fair
market value of the other consideration to be received per share by the holders
of the common stock of the Corporation in the Business Combination to (b) the
"Market Price" (as hereinafter defined) of the common stock of the Corporation
immediately prior to the announcement of the Business Combination or the
solicitation of the holders of the common stock of the Corporation regarding the
Business Combination, whichever is first, shall be at least as great as the
ratio of (x) the highest price per share previously paid by the "Principal
Shareholder" (whether before or after it became a Principal Shareholder) for any
of the shares of common stock of the Corporation at any time Beneficially Owned,
directly, or indirectly, by the Principal Shareholder to (y) the Market Price of
the common stock of the Corporation on the trading date immediately prior to the
earliest date on which the Principal Shareholder (whether before or after it
became a
10
<PAGE>
Principal Shareholder) purchased any shares of common stock of the Corporation
during the two year period prior to the date on which the Principal Shareholder
acquired the shares of common stock of the Corporation at any time owned by it
for which it paid the highest price per share (or, if the Principal Shareholder
did not purchase any shares of common stock of the Corporation during the two
year period, the Market Price of the common stock of the Corporation on the date
of two years prior to the date on which the Principal Shareholder acquired the
shares of common stock of the Corporation at any time owned by it for which it
paid the highest price per share).
2. The aggregate amount of the cash and the fair market value of the
other consideration to be received per share by the holders of the common stock
of the Corporation in the Business Combination shall be not less than the
highest price per share previously paid by the Principal Shareholder (whether
before or after it became a Principal Shareholder) for any of the shares of
common stock of the Corporation at any time Beneficially Owned, directly or
indirectly, by the principal Shareholder.
3. The consideration to be received by the holders of the common stock of
the Corporation in the Business Combination shall be in the same form and of the
same kind as the consideration paid by the Principal Shareholder in acquiring
the majority of the shares of common stock of the Corporation already
Beneficially Owned, directly or indirectly, by the Principal Shareholder.
The conditions imposed by this Article XV shall be in addition to all other
conditions (including, without limitation, the vote of the holders of any class
or series of stock of the Corporation) otherwise imposed by law, by any other
Article of these Articles, by any resolution of the board of directors providing
for the issuance of a class or series of stock, or by any agreement between the
Corporation and any national securities exchange or national securities
quotation system.
B. Certain Definitions. For the purpose of this Article XV, the
-------------------
definitions of "Business Combination," "Principal Shareholder," "Substantial
Part," "Voting Stock," and "Beneficial Owner" set forth in Article XIV hereof
will apply to this Article XV.
The "Market Price" of the common stock of the Corporation shall be the mean
between the high "bid" and the low "asked" prices of the common stock in the
over-the-counter market on the day on which such value is to be determined or,
if no shares were traded on such date, on the next preceding day on which such
shares were traded, as reported by the National Association of Securities
Dealers Automated Quotation System ("Nasdaq"), the Nasdaq Bulletin Board or
other national quotation service. If the common stock of the Corporation is not
regularly traded in the over-the-counter market but is registered on a national
securities exchange or traded in the national over-the-counter market, the
market value of the common stock shall mean the closing price of the common
stock on such national securities exchange or market on the day on which such
value is to be determined or, if no shares were traded on such day, on the next
preceding day on which shares were traded, as reported by National Quotation
Bureau, Incorporated or other national quotation service. If no such quotations
are available, the fair market value of the date in question of a share of such
stock as determined by the board of directors in good faith; and in the case of
property other than cash or stock, the fair market value of such property other
than cash or stock, the fair market value of such property on the date in
question as determined by the board of directors in good faith.
C. Exceptions. The provisions of this Article XV shall not apply to a
----------
Business Combination which was approved by two-thirds of those members of the
board of directors of the Corporation who were directors prior to the time when
the Principal Shareholder became a principal Shareholder. The provisions of
which this Article XV also shall not apply to a Business Combination which (a)
does not change any shareholder's percentage ownership in the shares of stock
entitled to vote in the election of directors of any successor of the
Corporation from the percentage of the shares of Voting Stock Beneficially Owned
by such shareholder; (b) provides for the provisions of this Article XV, without
any amendment, change, alteration, or deletion, to apply to any successor to the
Corporation; and (c) does not transfer all or a Substantial Part of the
Corporation's assets other than to a wholly-owned subsidiary of the Corporation;
provided, however, that nothing contained in this Article XV shall permit the
Corporation to issue any of its shares of
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<PAGE>
Voting Stock or to transfer any of its assets to a wholly-owned subsidiary of
the Corporation if such issuance of shares of Voting Stock or transfer of assets
is part of a plan to transfer such shares of Voting Stock or assets to a
Principal Shareholder.
D. Additional Provisions. Nothing contained in this Article XV shall be
---------------------
construed to relieve a Principal Shareholder from any fiduciary obligation
imposed by law. In addition, nothing contained in this Article XV shall prevent
any shareholders of the Corporation from objecting to any Business Combination
and from demanding any appraisal rights which may be available to such
shareholders.
E. Notwithstanding Article XX or any other provisions of these Articles
or the bylaws of the Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, these Articles or the bylaws of the
Corporation), the affirmative vote of the holders of at least 80% of the
outstanding shares entitled to vote thereon (and, if any class or series is
entitled to vote thereon separately, the affirmative vote of the holders of at
least 80% of the outstanding shares of each such class or series) shall be
required to amend or repeal or adopt any provisions inconsistent with this
Article XV.
ARTICLE XVI
EVALUATION OF BUSINESS COMBINATIONS
In connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and of the shareholders, when evaluating a
Business Combination (as defined in Article XIV) or a tender or exchange offer,
the board of directors of the Corporation may, in addition to considering the
adequacy of the amount to be paid in connection with any such transaction,
consider all of the following factors and any other factors which it deems
relevant; (i) the social and economic effects of the transaction on the
Corporation and its subsidiaries, employees, depositors, loan and other
customers, creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located; (ii) the business and
financial condition and earnings prospects of the acquiring person or entity,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
acquisition and other likely financial obligations of the acquiring person or
entity and the possible effect of such conditions upon the Corporation and its
subsidiaries and the other elements of the communities in which the Corporation
and its subsidiaries operate or are located; and (iii) the competence,
experience, and integrity of the acquiring person or entity and its or their
management.
ARTICLE XVII
LIABILITY
A. Elimination of Directors' Liability. Directors of the Corporation
-----------------------------------
shall have no liability to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that this Article
XVII shall not eliminate liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not made in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) acts specified in Section 7-108-403 of the
Colorado Business Corporation Act pertaining to unlawful distributions, or (iv)
for any transaction from which a director derived an improper personal benefit.
If the Colorado Business Corporation Act is amended after the effective date of
these Articles to further eliminate or limit the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Colorado Business
Corporation Act, as so amended.
B. Limitation of Director's and Officer's Liability. No director or
------------------------------------------------
officer shall be personally liable for any injury to person or property arising
out of a tort committed by an employee unless such director or officer was
12
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personally involved in the situation giving rise to the litigation or unless
such director or officer committed a criminal offense in connection with such
situation.
Any repeal or modification of the forgoing paragraphs by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director or officer of the Corporation existing at the time of such repeal or
modification.
ARTICLE XVIII
INDEMNIFICATION
A. Indemnification. The Corporation shall indemnify any person who was
---------------
or is a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, including actions by or in the right of
the Corporation, whether civil, criminal, administrative, or investigative, by
reason of the fact that such person is or was a director, officer, employee,
fiduciary or agent of the Corporation, or was serving at the request of the
Corporation as a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit, or proceeding to the full extent permissible under Colorado
law.
B. Advancement of Expenses. Reasonable expenses incurred by an officer,
-----------------------
director, employee, fiduciary or agent of the Corporation in defending any
action, suit, or proceeding described in Section A of this Article XVIII may be
paid by the Corporation in advance of the final disposition of such action,
suit, or proceeding if authorized by the board of directors (without regard to
whether participating members thereof are parties to such action, suit, or
proceeding) or as otherwise required and to the fullest extent permitted by
Colorado law, upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that the person is not
entitled to be indemnified by the Corporation.
ARTICLE XIX
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to adopt,
repeal, alter, amend and rescind the bylaws of the Corporation by a vote of two-
thirds of the board of directors. Notwithstanding any other provision of these
Articles or the bylaws of the Corporation (and notwithstanding the fact that
some lesser percentage may be specified by law), the bylaws shall not be
adopted, repealed, altered, amended or rescinded by the stockholders of the
Corporation except by the vote of the holders of not less than 80% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed adoption, repeal, alteration, amendment or
rescission is included in the notice of such meeting), or, as set forth above,
by the board of directors.
ARTICLE XX
AMENDMENT OF ARTICLES OF INCORPORATION
The Corporation reserves the right to repeal, alter, amend or rescind any
provision contained in these Articles in the manner now or hereafter prescribed
by law, and all rights conferred on stockholders herein are granted subject to
this reservation. Notwithstanding the foregoing, the provisions set forth in
Articles IX, X, XI, XII, XIII, XIV, XV, XVI, XVII, XVIII, XIX and this Article
XX may not be repealed, altered, amended or rescinded in any respect unless the
same is approved by the affirmative vote of the holders of not less than 80% of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as a single
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting); except that such repeal, alteration,
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amendment or rescission may be made by the affirmative vote of the holders of a
majority of the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors (considered for this purpose as a
single class) if the same is first approved by a majority of the Continuing
Directors, as defined in Article XIV of these Articles.
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I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the Corporation Act of the State of
Colorado, do make these Articles, hereby declaring and certifying that this is
our act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 19th day of August , 1997.
/s/ Larry D. Smith
---------------------------
Larry D. Smith
Incorporator
Attest: /s/ Richard A. Young
--------------------
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Exhibit 3.2
BYLAWS
OF
HIGH COUNTRY BANCORP, INC.
ARTICLE I
PRINCIPAL EXECUTIVE OFFICE
The principal executive office of High Country Bancorp, Inc. (the
"Corporation") shall be at 130 West 2/nd/ Street, Salida, Colorado 81201. The
Corporation may also have offices at such other places within or without the
State of Colorado as the board of directors shall from time to time determine.
ARTICLE II
STOCKHOLDERS
SECTION 1. Place of Meetings. All annual and special meetings of
-----------------
stockholders shall be held at the principal executive office of the Corporation
or at such other place within or without the State of Colorado as the board of
directors may determine and as designated in the notice of such meeting.
SECTION 2. Annual Meeting. A meeting of the stockholders of the
--------------
Corporation for the election of directors and for the transaction of any other
business of the Corporation shall be held annually at such date and time as the
board of directors may determine.
SECTION 3. Special Meetings. Special meetings of the stockholders for any
----------------
purpose or purposes may be called at any time by the board of directors or by a
committee of the board of directors, and only such persons as are specifically
permitted to call meetings by the Colorado Business Corporation Act in
accordance with the provisions of the Corporation's Articles of Incorporation.
SECTION 4. Conduct of Meetings. Annual and special meetings shall be
-------------------
conducted in accordance with these Bylaws or as otherwise prescribed by the
board of directors. The chairman or the chief executive officer of the
Corporation shall preside at such meetings.
SECTION 5. Notice of Meeting. Written notice stating the place, day and
-----------------
hour of the meeting and the purpose or purposes for which the meeting is called
shall be mailed by the secretary or the officer performing his duties, not less
than ten days nor more than sixty days before the meeting to each stockholder of
record entitled to vote at such meeting, except that if the number of authorized
shares is to be increased, at least thirty days notice will be given. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the stockholder at his address as it appears on the
stock transfer books or records of the Corporation as of the record date
prescribed in Section 6 of this Article II, with postage thereon prepaid. If a
stockholder is present at a meeting, or in writing waives notice thereof before
or after the meeting, notice of the meeting to such stockholder shall be
unnecessary. When any stockholders' meeting, either annual or special, is
adjourned for thirty days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. It shall not be necessary to give
any notice of the time and place of any meeting adjourned for less than thirty
days or of the business to be transacted at such adjourned meeting, other than
an announcement at the meeting at which such adjournment is taken.
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SECTION 6. Fixing of Record Date. For the purpose of determining
---------------------
stockholders entitled to notice of or to vote at any meeting of stockholders, or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as the record
date for any such determination of stockholders. Such date in any case shall be
not more than seventy days prior to the date on which the particular action,
requiring such determination of stockholders, is to be taken. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof, unless the meeting is adjourned for more than one hundred
and twenty days, in which case the board will fix a new record date.
SECTION 7. Voting Lists. The officer or agent having charge of the stock
------------
transfer books for shares of the Corporation shall make, at least ten days
before each meeting of stockholders, a complete record of the stockholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each.
The record, for a period of ten days before such meeting, shall be kept on file
at the principal office of the Corporation, and shall be subject to inspection
by any stockholder for any purpose germane to the meeting at any time during
usual business hours. Such record shall also be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
stockholder for any purpose germane to the meeting during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the stockholders entitled to examine such record or transfer books or to
vote at any meeting of stockholders.
SECTION 8. Quorum. A majority of the outstanding shares of the
------
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
SECTION 9. Proxies. At all meetings of stockholders, a stockholder may
-------
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney in fact. Proxies solicited on behalf of the management shall be voted
as directed by the stockholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
after eleven months from the date of its execution unless otherwise provided in
the proxy.
SECTION 10. Voting. Except as is otherwise specified in the Articles of
------
Incorporation, at each election for directors every stockholder entitled to vote
at such election shall be entitled to one vote for each share of stock held.
Unless otherwise provided by the Articles of Incorporation, by statute, or by
these Bylaws, a majority of those votes cast by stockholders at a lawful meeting
shall be sufficient to pass on a transaction or matter.
SECTION 11. Voting of Shares in the Name of Two or More Persons. When
---------------------------------------------------
ownership of stock stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, at any meeting of the
stockholders of the Corporation any one or more of such stockholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose name shares of stock stand, the vote or votes to
which these persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
SECTION 12. Voting of Shares by Certain Holders. Shares standing in the
-----------------------------------
name of another corporation may be voted by any officer, agent or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian trustee or conservator may be voted by him,
either in person or by proxy, without a transfer of such shares into his name.
Shares standing in the name of a trustee may be voted by him, either in person
or by proxy, but no trustee
2
<PAGE>
shall be entitled to vote shares held by him without a transfer of such shares
into his name. Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority to do so
is contained in an appropriate order of the court or other public authority by
which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Corporation, nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
SECTION 13. Inspectors of Election. In advance of any meeting of
----------------------
stockholders, the chairman of the board or the board of directors may appoint
any persons, other than nominees for office, as inspectors of election to act at
such meeting or any adjournment thereof. The number of inspectors shall be
either one or three. If the board of directors so appoints either one or three
inspectors, that appointment shall not be altered at the meeting. If inspectors
of election are not so appointed, the chairman of the board may make such
appointment at the meeting. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by appointment in
advance of the meeting or at the meeting by the chairman of the board or the
president.
Unless otherwise prescribed by applicable law, the duties of such
inspectors shall include: determining the number of shares of stock and the
voting power of each share, the shares of stock represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining the result; and such acts as may
be proper to conduct the election or vote with fairness to all stockholders.
SECTION 14. Nominating Committee. The board of directors or a committee
--------------------
appointed by the board of directors shall act as a nominating committee for
selecting the nominees for election as directors. Except in the case of a
nominee substituted as a result of the death or other incapacity of a management
nominee, the nominating committee shall deliver written nominations to the
secretary at least twenty days prior to the date of the annual meeting. Provided
such committee makes such nominations, no nominations for directors except those
made by the nominating committee shall be voted upon at the annual meeting
unless other nominations by stockholders are made in writing and delivered to
the secretary of the Corporation in accordance with the provisions of the
Corporation's Articles of Incorporation.
SECTION 15. New Business. Any new business to be taken up at the annual
------------
meeting shall be stated in writing and filed with the secretary of the
Corporation in accordance with the provisions of the Corporation's Articles of
Incorporation. This provision shall not prevent the consideration and approval
or disapproval at the annual meeting of reports of officers, directors and
committees, but in connection with such reports no new business shall be acted
upon at such annual meeting unless stated and filed as provided in the
Corporation's Articles of Incorporation.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the Corporation
--------------
shall be under the direction of its board of directors. The chairman shall
preside at all meetings of the board of directors.
3
<PAGE>
SECTION 2. Number, Term and Election. The board of directors shall
-------------------------
consist of six members and shall be divided into three classes as nearly equal
in number as possible. The members of each class shall be elected for a term of
three years and until their successors are elected or qualified. The board of
directors shall be classified in accordance with the provisions of the
Corporation's Articles of Incorporation.
SECTION 3. Regular Meetings. A regular meeting of the board of directors
----------------
shall be held at such time and place as shall be determined by resolution of the
board of directors without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the board of directors
----------------
may be called by or at the request of the chairman, the chief executive officer
or one-third of the directors. The person calling the special meetings of the
board of directors may fix any place as the place for holding any special
meeting of the board of directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person.
SECTION 5. Notice. Written notice of any special meeting shall be given
------
to each director at least two days previous thereto delivered personally or by
telegram or at least seven days previous thereto delivered by mail at the
address at which the director is most likely to be reached. Such notice shall
be deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid if mailed or when delivered to the telegraph
company if sent by telegram. Any director may waive notice of any meeting by a
writing filed with the secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the board of
directors need be specified in the notice or waiver of notice of such meeting.
SECTION 6. Quorum. A majority of the number of directors fixed by Section
------
2 of this Article III shall constitute a quorum for the transaction of business
at any meeting of the board of directors, but if less than such majority is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time. Notice of any adjourned meeting shall be given in
the same manner as prescribed by Section 5 of this Article III.
SECTION 7. Manner of Acting. The act of the majority of the directors
----------------
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by these Bylaws, the
Articles of Incorporation, or the Business Corporation Act of the State of
Colorado.
SECTION 8. Action Without a Meeting. Any action required or permitted to
------------------------
be taken by the board of directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the directors.
SECTION 9. Resignation. Any director may resign at any time by sending a
-----------
written notice of such resignation to the home office of the Corporation
addressed to the chairman of the board. Unless otherwise specified therein such
resignation shall take effect upon receipt thereof by the chairman of the board.
SECTION 10. Vacancies. Any vacancy occurring in the board of directors
---------
shall be filled in accordance with the provisions of the Corporation's Articles
of Incorporation. Any directorship to be filled by reason of an increase in the
number of directors may be filled by the affirmative vote of two-thirds of the
directors then in office or by election at an annual meeting or at a special
meeting of the stockholders held for that purpose. The term of such director
shall be in accordance with the provisions of the Corporation's Articles of
Incorporation.
4
<PAGE>
SECTION 11. Removal of Directors. Any director or the entire board of
--------------------
directors may be removed only in accordance with the provisions of the
Corporation's Articles of Incorporation.
SECTION 12. Compensation. Directors, as such, and advisory or emeritus
------------
directors may receive compensation for service on the board of directors.
Members of either standing or special committees may be allowed such
compensation as the board of directors may determine.
SECTION 13. Advisory and Emeritus Directors. The board of directors may
-------------------------------
by resolution appoint as advisory directors individuals whom the board believes
possess knowledge, experience and other qualifications which may prove valuable
to the Corporation, and may appoint as emeritus directors individuals who have
retired from the board after extended and faithful service. Advisory and
emeritus directors may sit with the board of directors at regular and special
meetings and discuss any question under consideration; provided, however, that
advisory and emeritus directors shall cast no vote. The board of directors
shall have the power to remove any advisory or emeritus director with or without
cause at any time.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, as they may determine to be necessary
or appropriate for the conduct of the business of the Corporation, and may
prescribe the duties, constitution and procedures thereof. Each committee shall
consist of one or more directors of the Corporation appointed by a majority of
the whole board. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.
The board shall have power at any time to change the members of, to fill
vacancies in, and to discharge any committee of the board. Any member of any
such committee may resign at any time by giving notice to the Corporation;
provided, however, that notice to the board, the chairman of the board, the
chief executive officer, the chairman of such committee, or the secretary shall
be deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective. Any member of any such committee may be removed
at any time, either with or without cause, by the affirmative vote of a majority
of the authorized number of directors at any meeting of the board called for
that purpose.
ARTICLE V
OFFICERS
SECTION 1. Positions. The officers of the Corporation shall be a
---------
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be elected by the board of directors. The board of directors may
designate one or more vice presidents as executive vice president or senior vice
president. The board of directors may also elect or authorize the appointment
of such other officers as the business of the Corporation may require. The
officers shall have such authority and perform such duties as the board of
directors may from time to time authorize or determine. In the absence of
action by the board of directors, the officers shall have such powers and duties
as generally pertain to their respective offices.
5
<PAGE>
SECTION 2. Election and Term of Office. The officers of the Corporation
---------------------------
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of the stockholders. If the
election of officers is not held at such meeting, such election shall be held as
soon thereafter as possible. Each officer shall hold office until his successor
shall have been duly elected and qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided. Election
or appointment of an officer, employee or agent shall not of itself create
contract rights. The board of directors may authorize the Corporation to enter
into an employment contract with any officer in accordance with state law; but
no such contract shall impair the right of the board of directors to remove any
officer at any time in accordance with Section 3 of this Article V.
SECTION 3. Removal. Any officer may be removed by vote of two-thirds of
-------
the board of directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. Remuneration. The remuneration of the officers shall be fixed
------------
from time to time by the board of directors, and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director of
the Corporation.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. To the extent permitted by applicable law, and
---------
except as otherwise prescribed by the Corporation's Articles of Incorporation or
these Bylaws with respect to certificates for shares, the board of directors or
the executive committee may authorize any officer, employee, or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation. Such authority may be general or
confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
-------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by one or more officers, employees or
agents of the Corporation in such manner, including in facsimile form, as shall
from time to time be determined by resolution of the board of directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise employed
--------
shall be deposited from time to time to the credit of the Corporation in any of
its duly authorized depositories as the board of directors may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. The shares of the Corporation shall
-----------------------
be represented by certificates signed by the chairman of the board of directors
or the president or a vice president and by the treasurer or an assistant
treasurer or the secretary or an assistant secretary of the Corporation, and may
be sealed with the seal of the Corporation or a facsimile thereof. Any or all
of the signatures upon a certificate may be facsimiles if the certificate is
countersigned
6
<PAGE>
by a transfer agent, or registered by a registrar, other than the Corporation
itself or an employee of the Corporation. If any officer who has signed or
whose facsimile signature has been placed upon such certificate shall have
ceased to be such officer before the certificate is issued, it may be issued by
the Corporation with the same effect as if he were such officer at the date of
its issue.
SECTION 2. Form of Share Certificates. All certificates representing
--------------------------
shares issued by the Corporation shall set forth upon the face or back that the
Corporation will furnish to any stockholder upon request and without charge a
full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof, and the qualifications, limitations or restrictions of such preferences
and/or rights, so far as the same have been fixed and determined, and the
authority of the board of directors to fix and determine the relative rights and
preferences of subsequent series.
Each certificate representing shares shall state upon the face thereof:
that the Corporation is organized under the laws of the State of Colorado; the
name of the person to whom issued; the number and class of shares, the
designation of the series, if any, which such certificate represents; and the
par value of each share represented by such certificate, or a statement that the
shares are without par value. Other matters in regard to the form of the
certificates shall be determined by the board of directors.
SECTION 3. Payment for Shares. No certificate shall be issued for any
------------------
share until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration for the issuance
--------------------------
of shares shall be paid in accordance with the provisions of the Corporation's
Articles of Incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of capital stock of the
------------------
Corporation shall be made only on its stock transfer books. Authority for such
transfer shall be given only the holder of record thereof or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Corporation. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Corporation shall be deemed by the Corporation
to be the owner thereof for all purposes.
SECTION 6. Lost Certificates. The board of directors may direct a new
-----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new certificate,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
ARTICLE VIII
FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the last day of June of
each year. The Corporation shall be subject to an annual audit as of the end of
its fiscal year by independent public accountants appointed by and responsible
to the board of directors.
7
<PAGE>
ARTICLE IX
DIVIDENDS
Dividends upon the stock of the Corporation, subject to the provisions of
the Articles of Incorporation, if any, may be declared by the board of directors
at any regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property or in the Corporation's own stock. Dividends may be paid in
cash, in property, in the Corporation's own stock, or through a dividend
reinvestment plan, if such plan should be approved and adopted.
ARTICLE X
CORPORATION SEAL
The corporate seal of the Corporation shall be in such form as the board of
directors shall prescribe.
ARTICLE XI
AMENDMENTS
In accordance with the Corporation's Articles of Incorporation, these
Bylaws may be repealed, altered, amended or rescinded by the stockholders of the
Corporation only by vote of not less than 80% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose (provided that notice of such proposed
repeal, alteration, amendment or rescission is included in the notice of such
meeting). In addition, the board of directors may repeal, alter, amend or
rescind these Bylaws by vote of two-thirds of the board of directors at a legal
meeting held in accordance with the provisions of these Bylaws.
8
<PAGE>
EXHIBIT 4
COMMON STOCK
NUMBER ___ ___ SHARES
HIGH COUNTRY BANCORP, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO
This certifies that
is the owner of CUSIP _________
fully paid and nonassessable shares of common stock, par value $0.01 per share,
of
High Country Bancorp, Inc. (the "Corporation"), a Colorado corporation. The
shares represented by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, or by his duly
authorized attorney or legal representative, upon the surrender of this
certificate properly endorsed. This certificate is not valid until countersigned
and registered by the Corporation's transfer agent and registrar.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed
by the facsimile signatures of its duly authorized officers and has caused a
facsimile of its corporate seal to be hereunto affixed.
Dated:
- ------------------------- -------------------------
Richard A. Young Larry D. Smith
Secretary President
Countersigned and Registered:
By:
-----------------------------
Transfer Agent and Registrar
-----------------------------
Authorized Signature
[CORPORATE SEAL]
- --------------------------------------------------------------------------------
RESTRICTIONS ON TRANSFER
The Articles of Incorporation includes a provision which prohibits any person
from directly or indirectly acquiring or offering to acquire the beneficial
ownership of more than 10% of any class of equity security of the Corporation.
Such provision eliminates the voting rights of securities acquired in violation
of the provision. Such provision will expire five years from the date of
completion of the conversion of Salida Building & Loan Association, Salida,
Colorado (the "Association") from mutual to stock form. The Articles of
Incorporation also impose certain restrictions on the voting rights of
beneficial owners of more than 10% of any class of equity security of the
Corporation after five years from the date of completion of the conversion of
the Association from mutual to stock form. The Corporation will furnish without
charge to each stockholder who so requests additional information with respect
to such restrictions. Such request may be made in writing to the Secretary of
the Corporation.
- --------------------------------------------------------------------------------
<PAGE>
The shares represented by this certificate are issued subject to all
the provisions of the Articles of Incorporation and Bylaws of the Corporation as
from time to time amended (copies of which are on file at the principal
executive office of the Corporation), to all of which the holder by acceptance
hereof assents.
The Corporation will furnish without charge to each stockholder who so
requests, a full statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Such requests shall be made in writing to the
Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF TRANSFERS MIN ACT - ..........Custodian.......... under Uniform Transfers
(Cust) (Minor)
to Minors Act.......................
(State)
Additional abbreviations may also be used though not in the above list.
For value received,______hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------
/ /
- --------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
of the common stock evidenced by this certificate, and do hereby irrevocably
constitute and appoint , Attorney, to transfer the said
------------------
shares on the books of the Corporation, with full power of substitution.
Dated
--------------
--------------------------------------
Signature
--------------------------------------
Signature
In presence of:
-------------------
SEE REVERSE SIDE FOR RESTRICTIONS ON TRANSFER
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
EXHIBIT 5
[Letterhead of Housley Kantarian & Bronstein, P.C.]
August 21, 1997
Board of Directors
High Country Bancorp, Inc.
130 West 2/nd/ Street
Salida, Colorado 81201
RE: Registration Statement on Form SB-2
Ladies and Gentlemen:
You have requested our opinion as special counsel to High Country Bancorp,
Inc. (the "Corporation") in connection with the Registration Statement on Form
SB-2 to be filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Registration Statement"). The
Registration Statement relates to shares of common stock of the Corporation (the
"Common Stock") to be issued in connection with the simultaneous conversion of
Salida Building & Loan Association from mutual to stock form and reorganization
into the holding company form of ownership as a wholly owned subsidiary of the
Corporation (the "Conversion").
In rendering this opinion, we understand that the Common Stock will be
offered and sold in the manner described in the Prospectus which is a part of
the Registration Statement. We have examined such records and documents and
made such examination as we have deemed relevant in connection with this
opinion.
Based upon the foregoing, it is our opinion that the shares of Common Stock
will, when issued and sold as contemplated by the Registration Statement, be
legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus under the
heading "Legal Opinions."
Very truly yours,
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By: /s/ Howard S. Parris
--------------------------
Howard S. Parris
<PAGE>
8.1
[LETTERHEAD OF HOUSLEY KANTARIAN & BRONSTEIN, P.C. APPEARS HERE]
August 21, 1997
Board of Directors
Salida Building and Loan Association
130 W. 2nd Street
Salida, Colorado 81201-0309
Re: Certain Federal Income Tax Consequences Relating
to Proposed Holding Company Conversion
------------------------------------------------
Gentlemen:
In accordance with your request, set forth hereinbelow is the opinion
of this firm relating to certain federal income tax consequences of the proposed
conversion of Salida Building and Loan Association (the "Association") from a
federally chartered mutual savings and loan association to a federally chartered
stock savings and loan association (the "Stock Association") and the concurrent
acquisition of 100% of the outstanding capital stock of the Stock Association by
High Country Bancorp, Inc. (the "Holding Company"), a Colorado corporation
formed at the direction of the Board of Directors of the Association to become
the parent holding company of the Stock Association (the "Conversion").
For purposes of this opinion, we have examined such documents and
questions of law as we have considered necessary or appropriate, including but
not limited to the Plan of Conversion as adopted by the Association's Board of
Directors on May 15, 1997 (the "Plan"); the federal mutual charter and bylaws of
the Association; the articles of incorporation and bylaws of the Holding
Company; and the affidavit of the President of the Association supporting this
federal tax opinion. In such examination, we have assumed, and have not
independently verified, the genuineness of all signatures on original documents
where due execution and delivery are requirements to the effectiveness thereof.
Terms used but not defined herein, whether capitalized or not, shall have the
same meaning as defined in the Plan.
<PAGE>
Board of Directors
Salida Building and Loan Association
August 21, 1997
Page 2
BACKGROUND
----------
Based solely upon our review of such documents, and upon such
information as the Association has provided to us (which we have not attempted
to verify in any respect), and in reliance upon such documents and information,
we set forth hereinbelow a general summary of the relevant facts and proposed
transaction, qualified in its entirety by reference to the documents cited
above.
The Association is a federally chartered mutual savings and loan
association which was chartered as a federal savings and loan association in
1993 and is in the process of converting to a federally chartered stock savings
and loan association. It is currently a member of the Federal Home Loan Bank
system and its deposits are insured by the Federal Deposit Insurance Corporation
("FDIC") up to the applicable limits. The Association is subject to
comprehensive regulation and supervision by the FDIC and the Office of Thrift
Supervision ("OTS"), and to examination by the OTS. The Association operates
through offices located in Salida, Buena Vista and Leadville, Colorado.
The principal business of the Association historically has consisted of
attracting deposits from the general public and investing these deposits in
loans secured by first mortgages on single-family residences in the
Association's market area. The Association derives its income principally from
interest earned on loans and, to a lesser extent, interest earned on
mortgage-backed securities and investment securities and noninterest income.
Funds for these activities are provided principally by operating revenues,
deposits and repayments of outstanding loans and investment securities and
mortgage-backed securities. At June 30, 1997, the Association had total assets
of $76.3 million, deposits of $56.2 million, and equity (substantially
restricted) of $6.0 million.
As a federally chartered mutual savings and loan association, the
Association has no authorized capital stock. Instead, the Association, in mutual
form, has a unique equity structure. A savings depositor of the Association is
entitled to payment of interest on his or her account balance as declared and
paid by the Association, but has no right to a distribution of any earnings of
the Association except for interest paid on his deposit. Rather, such earnings
become retained earnings (or equity) of the Association. However, a savings
depositor does have a right to share pro rata, with respect to the withdrawal
value of his respective savings account, in any liquidation proceeds distributed
if the Association is ever liquidated.
Further, savings depositors and certain borrowers are members of the
Association and thereby have voting rights in the Association. Under the
Association's federal mutual charter, as amended, each savings depositor is
entitled to cast one vote for each $100 or fraction thereof held
<PAGE>
Board of Directors
Salida Building and Loan Association
August 21, 1997
Page 3
in a withdrawable deposit account of the Association, and each borrower member
(hereinafter "borrower") is entitled to one vote in addition to the votes (if
any) to which such person is otherwise entitled in such borrower's capacity as a
savings depositor of the Association. Also under such federal mutual charter, no
member is entitled to cast more than 1,000 votes. All of the interests held by a
savings depositor in the Association cease when such depositor closes his or her
accounts with the Association.
The Holding Company was incorporated in August 1997 under the laws of
the State of Colorado to act as the savings and loan holding company of the
Stock Association upon consummation of the Conversion. Prior to consummation of
the Conversion, the Holding Company has not been engaged in, and is not expected
to engage in, any material operations. After the Conversion, the Holding
Company's principal business will be the business of the Stock Association. The
Holding Company has an authorized capital structure of 3,000,000 shares of
common stock (the "Common Stock") and 1,000,000 shares of serial preferred
stock, par value $0.01 per share.
PROPOSED TRANSACTION
--------------------
The Association's Board of Directors has determined that the Conversion
will be beneficial to the communities within its primary market area and persons
residing within those communities. The Conversion will provide those persons
with an opportunity to be an equity owner of the Association through ownership
in the Holding Company. The Association believes that, by combining quality
service and products with a local ownership base, its customers and community
members who become stockholders will be more inclined to do business with the
Association. This is consistent with the Association's objective of being a
locally owned financial institution servicing local needs. The Board of
Directors also believes that equity ownership will enable local stockholders to
participate in the Association's success and profitability through possible
capital appreciation and dividends. In addition, the Board of Directors of the
Association has decided that in order to attract new capital to the Association
to increase its net worth, to support future savings growth, to increase the
amount of funds available for other lending and investment, to provide greater
resources for the expansion of customer services and to facilitate future
expansion, it would be advantageous for the Association to undertake the
Conversion.
Further, the Board of Directors of the Association has determined that
in order to enhance flexibility of operations, diversification of business
activities and geographic operations, financial capability for business and
regulatory purposes, and to enable the Stock Association to more effectively
compete with other types of financial services organizations, it would be
advantageous to have the stock of Stock Association held by a parent holding
company. The Board of Directors
<PAGE>
Board of Directors
Salida Building and Loan Association
August 21, 1997
Page 4
has also determined that the Conversion would enhance the future access of the
Holding Company and the Stock Association to the capital markets.
Accordingly, pursuant to the Plan, the Association will be converted
from a federally chartered mutual savings and loan association to a federally
chartered stock savings and loan association. The Stock Association will then
issue to the Holding Company 100,000 shares of the Stock Association's common
stock, representing all of the shares of capital stock to be issued by the Stock
Association in the Conversion, and the Holding Company will make payment to the
Stock Association of an amount equal to at least 50% of the aggregate net
proceeds realized by the Holding Company from the sale of its Common Stock sold
pursuant to the Plan (after deducting the amount necessary to fund a loan to an
Employee Stock Ownership Plan being established in connection with the
Conversion), or such other portion of the aggregate net proceeds as may be
authorized or required by the OTS. The Holding Company currently anticipates
making such payment to the Stock Association of an amount equal to 50% of the
aggregate net proceeds from the sale of the Common Stock.
Also pursuant to the Plan, the Holding Company will offer its shares of
Common Stock for sale in a Subscription Offering. Shares of Common Stock
remaining, if any, may then be offered to the general public in a Community
Offering. Shares of the Common Stock not otherwise subscribed for in the
Subscription Offering and Community Offering may be offered at the discretion of
the Holding Company to certain members of the general public as part of a
community offering on a best efforts basis by a selling group of selected
broker-dealers.
The purchase price per share and total number of shares of Common Stock
to be offered and sold pursuant to the Plan will be determined by the Boards of
Directors of the Association and the Holding Company, on the basis of the
estimated pro forma market value of the Stock Association, as a subsidiary of
--- -----
the Holding Company, which will in turn be determined by an independent
appraiser. The aggregate purchase price for all shares of the Common Stock will
be equal to such estimated pro forma market value. Pursuant to the Plan, all
--- -----
such shares of Common Stock will be issued and sold at a uniform price per
share. The Conversion, including the sale of newly issued shares of the stock of
the Stock Association to the Holding Company, will be deemed effective
concurrently with the closing of the sale of the Common Stock.
Under the Plan and in accordance with regulations of the OTS, the
shares of Common Stock will first be offered through the Subscription Offering
pursuant to non-transferable subscription rights on the basis of preference
categories in the following order of priority:
<PAGE>
Board of Directors
Salida Building and Loan Association
August 21, 1997
Page 5
(1) Eligible Account Holders;
(2) Tax-Qualified Employee Stock Benefit Plans (i.e., the ESOP);
(3) Supplemental Eligible Account Holders; and
(4) Other Members.
However, any shares of Common Stock sold in excess of the high end of the
Valuation Range may be first sold to Tax-Qualified Employee Stock Benefit Plans
set forth in category (2) above.
Any shares of Common Stock not subscribed for in the Subscription
Offering will be offered in the Community Offering in the following order of
priority:
(a) Natural persons and trusts of natural persons who are
permanent Residents of the Association's Local Community; and
(b) The general public.
Shares not sold in the Subscription Offering and the Community
Offering, if any, may thereafter be offered for sale to certain members of the
general public as part of a community offering on a best efforts basis by a
selling group of selected broker-dealers. The sale of shares in the Subscription
Offering, Community Offering, and as sold through the selected broker-dealers
would be consummated at the same time.
The Plan also provides for the establishment of a Liquidation Account
by the Stock Association for the benefit of all Eligible Account Holders and
Supplemental Eligible Account Holders in an amount equal to the net worth (or
regulatory capital) of the Association as of the date of the latest statement of
financial condition contained in the final prospectus issued in connection with
the Conversion. The establishment of the Liquidation Account will not operate to
restrict the use or application of any of the net worth accounts of the Stock
Association, except that the Stock Association may not declare or pay cash
dividends on or repurchase any of its stock if the result thereof would be to
reduce its net worth below the amount required to maintain the Liquidation
Account. All such account holders will have an inchoate interest in a
proportionate amount of the Liquidation Account with respect to each savings
account held and will be paid by the Stock Association in event of liquidation
prior to any liquidating distribution being made with respect to capital stock.
Under the Plan, the Conversion shall not be deemed to be a liquidation of the
Association for purposes of distribution of the Liquidation Account. Instead,
upon
<PAGE>
Board of Directors
Salida Building and Loan Association
August 21, 1997
Page 6
consummation of the Conversion, the Liquidation Account, together with the
related rights and obligations of the Stock Association, shall be assumed by the
Stock Association.
Following the Conversion, voting rights in the Stock Association will
rest exclusively with the sole holder of stock in the Stock Association, which
will be the Holding Company. Voting rights in the Holding Company will rest
exclusively in the holders of the Common Stock. The Conversion will not
interrupt the business of the Association. The Stock Association will, after the
Conversion, engage in the same business as that of the Association immediately
prior to the Conversion, and will continue to be subject to regulation and
supervision by the OTS and the FDIC. Further, the deposits of the Stock
Association will continue to be insured by the FDIC. Each depositor will retain
a withdrawable savings account or accounts equal in dollar amount to, and on the
same terms and conditions as, the withdrawable account or accounts at the time
of Conversion except to the extent funds on deposit are used to pay for Common
Stock purchased in connection with the Conversion. All loans of the Association
will remain unchanged and retain their same characteristics in the Stock
Association immediately following the Conversion.
The Plan must be approved by the OTS and by an affirmative vote of at
least a majority of the total votes eligible to be cast at a meeting of the
Association's members called to vote on the Plan.
Immediately prior to the Conversion, the Association will have a
positive net worth determined in accordance with generally accepted accounting
principles.
OPINION
-------
Based on the foregoing and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed transaction.
1. The Conversion will constitute a reorganization within the
meaning of Section 368(a)(1)(F) of the Internal Revenue Code
of 1986, as amended (the "Code"), and no gain or loss will be
recognized to either the Association or to the Stock
Association as a result of the Conversion (see Rev. Rul. 80-
105, 1980-1 C.B. 78).
2. The assets of the Association will have the same basis in the
hands of the Stock Association as in the hands of the
Association immediately prior to the Conversion (Section
362(b) of the Code).
<PAGE>
Board of Directors
Salida Building and Loan Association
August 21, 1997
Page 7
3. The holding period of the assets of the Association to be
received by the Stock Association will include the period
during which the assets were held by the Association prior to
the Conversion (Section 1223(2) of the Code).
4. No gain or loss will be recognized by the Stock Association
upon its receipt of money from the Holding Company in exchange
for shares of common stock of Stock Association (Section
1032(a) of the Code). The Holding Company will be transferring
solely cash to the Stock Association in exchange for all the
outstanding capital stock of the Stock Association and
therefore will not recognize any gain or loss upon such
transfer. (Section 351(a) of the Code; see Rev. Rul. 69-357,
1969-1 C.B. 101).
5. No gain or loss will be recognized by the Holding Company upon
its receipt of money in exchange for shares of the Common
Stock (Section 1032(a) of the Code).
6. No gain or loss will be recognized by the Eligible Account
Holders, Supplemental Eligible Account Holders or Other
Members of the Association upon the issuance to them of
deposit accounts in the Stock Association in the same dollar
amount and on the same terms and conditions in exchange for
their deposit accounts in the Association held immediately
prior to the Conversion. (Section 1001(a) of the Code; Treas.
Reg. ss.1.1001-1(a)).
7. The tax basis of the savings accounts of the Eligible Account
Holders, Supplemental Eligible Account Holders, and Other
Members in the Stock Association received as part of the
Conversion will equal the tax basis of such account holders'
corresponding deposit accounts in the Association surrendered
in exchange therefor (Section 1012 of the Code).
8. Each depositor of the Association will recognize gain upon the
receipt of his or her respective interest in the Liquidation
Account established by the Stock Association pursuant to the
Plan and the receipt of his or her subscription rights deemed
to have been received for federal income tax purposes, but
only to the extent of the excess of the combined fair market
value of a depositor's interest in such Liquidation Account
and subscription rights over the depositor's basis in the
former interests in the Association other than deposit
accounts. Persons who subscribe in the Conversion but who are
not depositors of the Association will recognize gain upon the
receipt of subscription rights deemed to have been received
for federal income tax purposes, but only to the extent of the
excess of the fair market value of such subscription rights
over such person's former interests in the Association, if
any.
<PAGE>
Board of Directors
Salida Building and Loan Association
August 21, 1997
Page 8
Any such gain realized in the Conversion would be subject to
immediate recognition.
9. The basis of each account holder's interest in the Liquidation
Account received in the Conversion and to be established by
the Stock Association pursuant to the Conversion will be equal
to the value, if any, of that interest.
10. No gain or loss will be recognized upon the exercise of a
subscription right in the Conversion. (Rev. Rul. 56-572, 1956-
2 C.B.182).
11. The basis of the shares of Common Stock acquired in the
Conversion will be equal to the purchase price of such shares,
increased, in the case of such shares acquired pursuant to the
exercise of subscription rights, by the fair market value, if
any, of the subscription rights exercised (Section 1012 of the
Code).
12. The holding period of the Common Stock acquired in the
Conversion pursuant to the exercise of subscription rights
will commence on the date on which the subscription rights are
exercised (Section 1223(6) of the Code). The holding period of
the Common Stock acquired in the Community Offering will
commence on the date following the date on which such stock is
purchased (Rev. Rul. 70-598, 1970-2 C.B. 168; Rev. Rul. 66-97,
1966-1 C.B. 190).
SCOPE OF OPINION
----------------
Our opinion is limited to the federal income tax matters described
above and does not address any other federal income tax considerations or any
state, local, foreign, or other federal tax considerations. If any of the
information upon which we have relied is incorrect, or if changes in the
relevant facts occur after the date hereof, our opinion could be affected
thereby. Moreover, our opinion is based on the case law, Code, Treasury
Regulations thereunder and Internal Revenue Service rulings as they now exist.
These authorities are all subject to change, and such change may be made with
retroactive effect. We can give no assurance that, after such change, our
opinion would not be different. We undertake no responsibility to update or
supplement our opinion subsequent to consummation of the Conversion. Prior to
that time, we undertake to update or supplement our opinion in the event of a
material change in the federal income tax consequences set forth above and to
file such revised opinion as an exhibit to the Registration Statement and the
Association's Application for Conversion on Form AC ("Form AC"). This opinion is
not binding on the Internal Revenue Service and there can be no assurance, and
none is hereby given, that the Internal Revenue Service will not take a position
contrary to one or more
<PAGE>
Board of Directors
Salida Building and Loan Association
August 21, 1997
Page 9
of the positions reflected in the foregoing opinion, or that our opinion will be
upheld by the courts if challenged by the Internal Revenue Service.
CONSENTS
--------
We hereby consent to the filing of this opinion with the OTS as an
exhibit to the Application H-(e)1-S filed by the Company with the OTS in
connection with the Conversion and the reference to our firm in the Application
H-(e)1-S under Item 110.55 therein.
We also hereby consent to the filing of this opinion with the SEC and
the OTS as exhibits to the Registration Statement and Form AC, respectively, and
the references to our firm in the Prospectus, which is a part of both the
Registration Statement and Form AC, under the headings "The Conversion -- Effect
of Conversion to Stock Form on Depositors and Borrowers of the Association --
Tax Effects" and "Tax Opinion."
Very truly yours,
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By: /s/ Howard S. Parris
---------------------------------
Howard S. Parris
<PAGE>
Exhibit 8.2
[LETTERHEAD OF GRIMSLEY, WHITE & COMPANY APPEARS HERE]
August 21, 1997
Board of Directors
Salida Building and Loan Association
Board Members:
You have requested our opinion as to the Colorado income tax consequences
relating to the proposed conversion of Salida Building and Loan Association (the
"Bank") from a federally chartered mutual savings bank to a federally chartered
stock savings band ("Stock Bank") and the formation of High Country Bancorp,
Inc. ("Holding Company") which will acquire all of the outstanding stock of
Stock Bank.
You have submitted to us a copy of the federal income tax opinion ("Federal
Opinion") relating to the federal income tax consequences of the proposed
transactions prepared by your counsel. Housley Kantarian & Bronstein, P.C.,
Washington, D.C.
Our opinion regarding the Colorado income tax consequences of the proposed
transaction is based on the same facts and conditions contained in the Federal
Opinion dated August 21, 1997. It is also based on existing Colorado tax law
which is subject to change. We have not reviewed the legal documents necessary
to effectuate the steps to be undertaken, and we assume that all steps will be
properly effectuated under state and federal law and will be consistent with the
legal documentation.
In our opinion, the Colorado income tax consequences of the proposed transaction
are the same as the federal income tax consequences of the proposed transaction
identified in the Federal Opinion.
The State of Colorado has adopted federal taxable income, as currently amended,
as the starting point for computing Colorado taxable income. Income tax terms
are defined in relation to the Internal Revenue Code of 1986 as amended.
Taxpayers are required to use the same taxable year and accounting methods as
are used in computing federal taxable income (Colorado Revised Statutes L.1992,
c330, Section 9, eff. 4-16-92)
Several specific modifications to federal taxable income are enumerated in the
Colorado Statutes in determining taxable income for Colorado purposes, however,
there are no specific modifications which apply to the proposed transaction.
<PAGE>
Board of Directors
Salida Building and Loan Association
August 21, 1997
Page 2
Our opinion as expressed above is rendered only with respect to the Colorado
income tax consequences of the specific matters discussed herein, and we express
no opinion with respect to any other Colorado tax matter or any other federal,
state, local or foreign tax matter relating to the proposed transaction. Our
opinion is based on the facts and conditions as stated herein, whether directly
or by reference to the Federal
Opinion. If any of the foregoing is not entirely complete or accurate, it is
imperative that we be informed immediately, as the inaccuracy or incompleteness
could have a material effect on our conclusions. In rendering our opinion, we
are relying upon the relevant provisions of the Internal Revenue Code of 1986,
as amended, and Colorado Statutes, as amended, the regulations and rules
thereunder and judicial and administrative interpretations thereof, which are
subject to change or modification by subsequent legislative, regulatory,
administrative, or judicial decisions. Any such changes could have an effect on
the validity of our opinion. We undertake no responsibility to update or
supplement our opinion. Our opinion is not binding on the Internal Revenue
Service or the Colorado Department of Revenue, nor can any assurance be given
that any of the foregoing parties will not take a contrary position or that our
opinion will be upheld if challenged by such parties.
Very truly yours
/s/ Grimsley, White & Company
<PAGE>
EXHIBIT 8.3
[LETTERHEAD OF FERGUSON & COMPANY APPEARS HERE]
AUGUST 15, 1997
BOARD OF DIRECTORS
SALIDA BUILDING AND LOAN ASSOCIATION
130 WEST 2ND STREET
SALIDA, COLORADO 81201
PLAN OF CONVERSION, SUBSCRIPTION RIGHTS
---------------------------------------
DEAR DIRECTORS:
Terms used in this letter not otherwise defined herein have the same
meanings for such terms in the Plan of Conversion adopted by the Board of
Directors of Salida Building and Loan Association, Salida, Colorado (the
"Association"), under which the Association will convert from a mutual savings
and loan association to a stock savings and loan association and issue all of
the Association's stock to High Country Bancorp, Inc. (the "Holding Company").
Simultaneously, the Holding Company will issue shares of common stock.
We understand that in accordance with the Plan of Conversion, Subscription
Rights to purchase shares of Common Stock in the Holding Company are to be
issued to (1) Eligible Account Holders, (2) The Association's tax qualified
employee plans, (3) Supplemental Eligible Account Holders, and (4) Other
Members. Based solely upon our observation that the Subscription Rights will be
available to such parties without cost, will be legally non-transferable and of
short duration, and will afford such parties the right only to purchase shares
of Common Stock at the same price to be paid by members of the general public in
the Community Offering, but without undertaking any independent investigation of
state or federal laws or the position of the Internal Revenue Service with
respect to such issue, we are of the belief that:
(1) the Subscription Rights will have no ascertainable market value; and
(2) the price at which the Subscription Rights are exercisable will not be
more or less than the pro forma market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates and other external forces (e.g.,
natural disasters or significant global events) occur from time to time and may
materially affect the value of thrift stocks as a whole or the holding Company's
value. Accordingly, no assurance can be given that persons who subscribe to
shares of Common Stock in the Conversion will thereafter be able to sell such
shares at the same price paid in the Subscription Offering.
Sincerely,
Robin L. Fussell
Principal
<PAGE>
EX 10.1
SALIDA BUILDING & LOAN ASSOCIATION
--------------------------
Employment Agreement with
Lorin D. Smith
--------------------------
AGREEMENT entered into and effective this day____ of_________ , 1997, by
and between Salida Building & Loan Association (the "Association") and Lorin D.
Smith (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Association
as its President and Chief Executive Officer and is experienced in all phases of
the business of the Association; and
WHEREAS, the Board of Directors (the "Board") of the Association
believes it is in the best interests of the Association to enter into this
Agreement with the Employee in order to assure continuity of management of the
Association and to reinforce and encourage the continued attention and
dedication of the Employee to his assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
-------------
When used anywhere in this Agreement, the following terms shall have the
meaning set forth herein.
(a) "Change in Control" shall mean any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 25% of the voting
stock of the Association or the Holding Company thereof, (ii) the acquisition of
the ability to control the election of a majority of the Association's or the
Company's Directors, (iii) the acquisition of a controlling influence over the
management or policies of the Association or of the Company by any person or by
persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), or (iv) during any period of two consecutive
years, individuals (the "Continuing Directors") who at the beginning of such
period constitute the Board of Directors of the Association or of the Company
(the "Existing Board") cease for any reason to constitute at least two-thirds
thereof, provided that any individual whose election or nomination for election
as a member of the Existing Board was approved by a vote of at least two-thirds
of the Continuing Directors then in office shall be considered a Continuing
Director. For purposes of this paragraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association,
<PAGE>
joint venture, pool, syndicate, sole proprietorship, unincorporated organization
or any other form of entity not specifically listed herein.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to occur solely by reason of a transaction in which the Association
converts to the stock form of organization, or creates an independent holding
company in connection therewith. The decision of the Board as to whether a
Change in Control has occurred shall be conclusive and binding.
(b) "Company" shall mean High Country Bancorp, Inc.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(d) "Codes 280G Maximum" shall mean the product of 2.99 and the
Employee's "base amount" as defined in Codess.280G(b)(3).
(e) "Disability" shall mean a physical or mental infirmity which
impairs the Employee's ability to substantially perform his duties under this
Agreement and which results in the Employee becoming eligible for long-term
disability benefits under the Association's long-term disability plan (or, if
the Association has no such plan in effect, which impairs the Employee's ability
to substantially perform his duties under this Agreement for a period of 180
consecutive days).
(f) "Effective Date" shall mean the date referenced in the opening
paragraph of this Agreement.
(g) "Good Reason" shall mean any of the following events, which has not
been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move his personal residence, or perform his principal
executive functions, more than 30 miles from his primary office as of the later
of the Effective Date and the most recent voluntary relocation by the Employee;
(ii) a material reduction in the Employee's base compensation under this
Agreement as the same may be increased from time to time; (iii) the failure by
the Association or the Company to continue to provide the Employee with
compensation and benefits provided under this Agreement as the same may be
increased from time to time, or with benefits substantially similar to those
provided to him under any of the employee benefit plans in which the Employee
now or hereafter becomes a participant, or the taking of any action by the
Association or the Company which would directly or indirectly reduce any of such
benefits or deprive the Employee of any material fringe benefit enjoyed by him
under this Agreement; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position; (v) a failure to reelect the Employee to the Board of Directors of the
Association or the Company, if the Employee has served on such Board at any time
during the term of the Agreement; or (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Association.
-2-
<PAGE>
(h) "Just Cause" shall mean, in the good faith determination
of the Association's Board of Directors, the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provision of this
Agreement. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. No act, or failure to
act, on the Employee's part shall be considered "willful" unless he has acted,
or failed to act, with an absence of good faith and without a reasonable belief
that his action or failure to act was in the best interest of the Association
and the Company.
(i) "Protected Period" shall mean the period that begins on the date six
months before a Change in Control and ends on the later of the first annual
anniversary of the Change in Control or the expiration date of this Agreement.
(j) "Trust" shall mean a grantor trust that is designed in accordance
with Revenue Procedure 92-64 and has a trustee independent of the Association
and the Company.
2. Employment. The Employee is employed as the President and Chief
----------
Executive Officer of the Association. The Employee shall render such
administrative and management services for the Association as are currently
rendered and as are customarily performed by persons situated in a similar
executive capacity. The Employee shall also promote, by entertainment or
otherwise, as and to the extent permitted by law, the business of the
Association. The Employee's other duties shall be such as the Board may from
time to time reasonably direct, including normal duties as an officer of the
Association.
3. Base Compensation. The Association agrees to pay the Employee during the
-----------------
term of this Agreement a salary at the rate of $______ per annum, payable in
cash not less frequently than monthly. The Board shall review, not less often
than annually, the rate of the Employee's salary, and in its sole discretion may
decide to increase his salary.
4. Discretionary Bonuses. The Employee shall participate in an equitable
---------------------
manner with all other senior management employees of the Association in
discretionary bonuses that the Board may award from time to time to the
Association's senior management employees. No other compensation provided for in
this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.
5. Participation in Retirement, Medical and Other Plans.
----------------------------------------------------
(a) The Employee shall be eligible to participate in any of the
following plans or programs that the Association may now or in the future
maintain: group hospitalization, disability, health, dental, sick leave, life
insurance, travel and/or accident insurance, auto allowance/auto lease,
retirement, pension, and/or other present or future qualified or nonqualified
-3-
<PAGE>
plans provided by the Association, generally which benefits, taken as a whole,
must be at least as favorable as those in effect on the Effective Date.
(b) The Employee shall also be eligible to participate in any fringe
benefits which are or may become available to the Association's senior
management employees, including for example: any stock option or incentive
compensation plans, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement. The Employee shall be reimbursed for all reasonable out-of-pocket
business expenses which he shall incur in connection with his services under
this Agreement upon substantiation of such expenses in accordance with the
policies of the Association.
6. Term. The Association hereby employs the Employee, and the Employee
----
hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending 36 months thereafter (or such earlier date as
is determined in accordance with Section 10 or 12 hereof). Additionally, on each
annual anniversary date from the Effective Date, the Employee's term of
employment shall be extended for an additional one-year period beyond the then
effective expiration date, provided the Board determines in a duly adopted
resolution that the performance of the Employee has met the Board's requirements
and standards, and that this Agreement shall be extended. Only those members of
the Board of Directors who have no personal interest in this Employment
Agreement shall discuss and vote on the approval and subsequent review of this
Agreement.
7. Loyalty; Noncompetition.
-----------------------
(a) During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all his full business time, attention, skill, and efforts
to the faithful performance of his duties hereunder; provided, however, from
time to time, Employee may serve on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Association or any of its subsidiaries
or affiliates, or unfavorably affect the performance of Employee's duties
pursuant to this Agreement, or will not violate any applicable statute or
regulation. "Full business time" is hereby defined as that amount of time
usually devoted to like companies by similarly situated executive officers.
During the term of his employment under this Agreement, the Employee shall not
engage in any business or activity contrary to the business affairs or interests
of the Association.
(b) Nothing contained in this Section shall be deemed to prevent or
limit the Employee's right to invest in the capital stock or other securities of
any business dissimilar from that of the Association, or, solely as a passive or
minority investor, in any business.
8. Standards. The Employee shall perform his duties under this Agreement in
---------
accordance with such reasonable standards as the Board may establish from time
to time. The Association will provide Employee with the working facilities and
staff customary for similar executives and necessary for him to perform his
duties.
-4-
<PAGE>
9. Vacation and Sick Leave. At such reasonable times as the Board shall
-----------------------
in its discretion permit, the Employee shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time, provided that:
(a) The Employee shall be entitled to an annual vacation in accordance
with the policies that the Board periodically establishes for senior management
employees of the Association.
(b) The Employee shall not receive any additional compensation from the
Association on account of his failure to take a vacation or sick leave, and the
Employee shall not accumulate unused vacation or sick leave from one fiscal year
to the next, except in either case to the extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Association for such additional periods of time and
for such valid and legitimate reasons as the Board may in its discretion
determine. Further, the Board may grant to the Employee a leave or leaves of
absence, with or without pay, at such time or times and upon such terms and
conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12 hereof, the
-------------------------------
Employee's employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this Agreement shall
terminate upon his death during the term of this Agreement, in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which his death occurred.
(b) Disability. (1) The Association may terminate the Employee's
employment after having established the Employee's Disability, in which event
the Employee shall be entitled to the compensation and benefits provided for
under this Agreement for (i) any period during the term of this Agreement and
prior to the establishment of the Employee's Disability during which the
Employee is unable to work due to the physical or mental infirmity, and (ii) any
period of Disability which is prior to the Employee's termination of employment
pursuant to this Section 10(b); provided that any benefits paid pursuant to the
Association's long term disability plan will continue as provided in such plan
without reduction for payments made pursuant to this Agreement.
(2) During any period that the Employee shall receive disability
benefits and to the extent that the Employee shall be physically and mentally
able to do so, he shall furnish
-5-
<PAGE>
such information, assistance and documents so as to assist in the continued
ongoing business of the Association and, if able, shall make himself available
to the Association to undertake reasonable assignments consistent with his prior
position and his physical and mental health. The Association shall pay all
reasonable expenses incident to the performance of any assignment given to the
Employee during the disability period.
(c) Just Cause. The Board may, by written notice to the Employee,
immediately terminate his employment at any time, for Just Cause. The Employee
shall have no right to receive compensation or other benefits for any period
after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. The Board may, by
written notice to the Employee, immediately terminate his employment at any time
for a reason other than his Disability or Just Cause, in which event the
Employee shall be entitled to receive the following compensation and benefits
(unless such termination occurs during the Protected Period, in which event the
benefits and compensation provided for in Section 12 shall apply): (i) the
salary provided pursuant to Section 3 hereof, up to the expiration date of this
Agreement, including any renewal term (the "Expiration Date"), plus said salary
for an additional 12-month period, and (ii) at the Employee's election either
(A) cash in an amount equal to the cost to the Employee of obtaining all health,
life, disability and other benefits which the Employee would have been eligible
to participate in through the Expiration Date based upon the benefit levels
substantially equal to those that the Association provided for the Employee at
the date of termination of employment or (B) continued participation under such
Association benefit plans through the Expiration Date, but only to the extent
the Employee continues to qualify for participation therein. All amounts payable
to the Employee shall be paid, at the option of the Employee, either (I) in
periodic payments through the Expiration Date, or (II) in one lump sum within
ten days of such termination.
(e) Good Reason. The Employee shall be entitled to receive the
compensation and benefits payable under subsection 10(d) hereof in the event
that the Employee voluntarily terminates employment within 90 days of an event
that constitutes Good Reason, (unless such voluntary termination occurs during
the Protected Period, in which event the benefits and compensation provided for
in Section 12 shall apply).
(f) Termination or Suspension Under Federal Law. (1) If the Employee is
removed and/or permanently prohibited from participating in the conduct of the
Association's affairs by an order issued under Sections 8(e)(4) or 8(g)(1) of
the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4) and (g)(1)),
all obligations of the Association under this Agreement shall terminate, as of
the effective date of the order, but vested rights of the parties shall not be
affected.
(2) If the Association is in default (as defined in Section 3(x)(1)
of FDIA), all obligations under this Agreement shall terminate as of the date of
default; however, this Paragraph shall not affect the vested rights of the
parties.
-6-
<PAGE>
(3) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA
(12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the
Employee from participating in the conduct of the Association's affairs, the
Association's obligations under this Agreement shall be suspended as of the date
of such service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Association may in its discretion (i) pay the Employee
all or part of the compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.
(4) Any payments made to the Employee pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with both 12
U.S.C. Section 1828(k) and any regulations promulgated thereunder, and
Regulatory Bulletin 27A, but only to the extent required thereunder on the date
any payment is required pursuant to this Agreement.
(g) Voluntary Termination by Employee. Subject to Section 12 hereof, the
Employee may voluntarily terminate employment with the Association during the
term of this Agreement, upon at least 90 days' prior written notice to the Board
of Directors, in which case the Employee shall receive only his compensation,
vested rights and employee benefits up to the date of his termination (unless
such termination occurs pursuant to Section 10(d) hereof or within the Protected
Period, in Section 12(a) hereof, in which event the benefits and compensation
provided for in Sections 10(d) or 12, as applicable, shall apply).
(h) Post-termination Health Insurance. If the Employee's employment
terminates with the Association or the Company for any reason other than Just
Cause, the Employee shall be entitled to purchase from the Association, at the
Employee's own expense which shall not exceed applicable COBRA rates, family
medical insurance under any group health plan that the Association or the
Company maintains for its employees. This right shall be (i) in addition to, and
not in lieu of, any other rights that the Employee has under this Agreement, and
(ii) shall continue until the Employee first becomes eligible for participation
in Medicare.
11. No Mitigation. The Employee shall not be required to mitigate the amount
-------------
of any payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.
12. Change in Control.
-----------------
(a) Trigger Events. The Employee shall be entitled to collect the
severance benefits set forth in Subsection (b) hereof in the event that either
(i) the Employee voluntarily terminates employment for any reason within the 30-
day period beginning on the date of a Change in Control, (ii) the Employee
voluntarily terminates employment within 90 days of an event that both occurs
during the Protected Period and constitutes Good Reason, or (iii) the
Association or the Company or their successor(s) in interest terminate the
Employee's employment without his written consent and for any reason other than
Just Cause during the Protected Period.
-7-
<PAGE>
(b) Amount of Severance Benefit. If the Employee becomes entitled to
collect severance benefits pursuant to Section 12(a) hereof, the Association
shall pay the Employee a severance benefit equal to the difference between the
Code ss.280G Maximum and the sum of any other "parachute payments" as defined
under Code ss.280G(b)(2) that the Employee receives on account of the Change in
Control.
The amount payable under this Section 12(b) shall be paid either (i) in
one lump sum within ten days of the later of the date of the Change in Control
and the Employee's last day of employment with the Association or the Company,
or (ii) if prior to the date which is 90 days before the date on which a Change
in Control occurs, the Employee filed a duly executed irrevocable written
election in the form attached hereto as Exhibit "A", payment of such amount
shall be made according to the elected schedule. Deferred amounts shall bear
interest from the date on which they would otherwise be payable until the date
paid at a rate equal to 120% of the applicable federal rate, compounded
semiannually, as determined under Code Section 1274(d) and the regulations
thereunder.
In the event that the Employee, the Association, and the Company
jointly agree that the Employee has collected an amount exceeding the Code
ss.280G Maximum, the parties may agree in writing that such excess shall be
treated as a loan ab initio, which the Employee shall repay to the Association,
on terms and conditions mutually agreeable to the parties, together with
interest at the applicable federal rate provided for in Section 7872(f)(2)(B) of
the Code.
(c) Funding of Grantor Trust upon Change in Control. Not later than ten
business days after a Change in Control, the Association shall (i) deposit in a
Trust an amount equal to the Code ss.280G Maximum, unless the Employee has
previously provided a written release of any claims under this Agreement, and
(ii) provide the trustee of the Trust with a written direction to hold said
amount and any investment return thereon in a segregated account for the benefit
of the Employee, and to follow the procedures set forth in the next paragraph as
to the payment of such amounts from the Trust. Upon the later of the Trust's
final payment of all amounts payable to the Employee under Section 12(b) of this
Agreement or the date 90 days following the expiration of the Protected Period,
the trustee of the Trust shall pay to the Association the entire balance
remaining in the segregated account maintained for the benefit of the Employee.
The Employee shall thereafter have no further interest in the Trust.
Prior to the date which is 90 days following the expiration of the
Protected Period, the Employee may provide the trustee of the Trust with a
written notice requesting that the trustee pay to the Employee an amount
designated in the notice as being payable pursuant to this Agreement. Within
three business days after receiving said notice, the trustee of the Trust shall
send a copy of the notice to the Association via overnight and registered mail
return receipt requested. Unless prior to the tenth (10th) business day after
mailing said notice to the Association, the Association provides the trustee
with a written notice directing the trustee to withhold payment, on such date
the trustee of the Trust shall pay the Employee the amount designated therein
according to the schedule elected by the Employee pursuant to Section 12(b)
hereof, or in the absence of such an election, payment shall be made
immediately. In the event the Association directs the trustee to
-8-
<PAGE>
withhold payment, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to this Agreement, and the costs of such arbitration shall be paid by the
Association. The trustee shall choose the arbitrator to settle the dispute, and
such arbitrator shall be bound by the rules of the American Arbitration
Association in making his determination. The parties and the trustee shall be
bound by the results of the arbitration and, within 3 days of the determination
by the arbitrator, the trustee shall pay from the Trust the amounts required to
be paid to the Employee and/or the Association, and in no event shall the
trustee be liable to either party for making the payments as determined by the
arbitrator.
13. Indemnification. The Association and the Company agree that their
---------------
respective Bylaws shall continue to provide for indemnification of directors,
officers, employees and agents of the Association and the Company, including the
Employee during the full term of this Agreement, and to at all times provide
adequate insurance for such purposes.
14. Reimbursement of Employee for Enforcement Proceedings. In the event
-----------------------------------------------------
that any dispute arises between the Employee and the Association as to the terms
or interpretation of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action that the Employee takes to defend
against any action taken by the Association or the Company, the Employee shall
be reimbursed for all costs and expenses, including reasonable attorneys' fees,
arising from such dispute, proceedings or actions, provided that the Employee
obtains either a written settlement or a final judgement by a court of competent
jurisdiction substantially in his favor. Such reimbursement shall be paid within
ten days of Employee's furnishing to the Association written evidence, which may
be in the form, among other things, of a canceled check or receipt, of any costs
or expenses incurred by the Employee.
15. Federal Income Tax Withholding. The Association may withhold all
------------------------------
federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation or
ruling.
16. Successors and Assigns.
----------------------
(a) Association. This Agreement shall not be assignable by the
Association, provided that this Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Association which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Association.
(b) Employee. Since the Association is contracting for the unique
and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating his rights or duties hereunder without first obtaining
the written consent of the Association; provided, however, that nothing in this
paragraph shall preclude (i) the Employee from designating a beneficiary to
receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Employee or his estate
from assigning any rights hereunder to the person or persons entitled thereunto.
-9-
<PAGE>
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement shall be
----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by Federal law, the
--------------
laws of the State of Colorado shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
19. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. Entire Agreement. This Agreement, together with any understanding
----------------
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement between the parties hereto and shall supersede
any prior agreement between the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
ATTEST: SALIDA BUILDING & LOAN ASSOCIATION
By:
- ----------------------------- -----------------------------------
Secretary Its Chairman of the Board
WITNESS:
- ----------------------------- --------------------------------------
Lorin D. Smith
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<PAGE>
Ex 10.2
HIGH COUNTRY BANCORP, INC.
--------------------------
Guaranty Agreement
--------------------------
THIS AGREEMENT is entered into this ___ day of __________, 1997 (the
"Effective Date"), by and between High Country Bancorp, Inc. (the "Company") and
Lorin D. Smith (the "Employee").
WHEREAS, the Employee has heretofore been employed by Salida Building &
Loan Association (the "Association") as its President and Chief Executive
Officer, and has entered into an agreement (the "Association Agreement") dated
_______________, 1997, with the Employee; and
WHEREAS, the Board of Directors (the "Board") of the Company believes
it is in the best interests of the Company to enter into this Agreement with the
Employee in order to assure continuity of management of the Association and to
reinforce and encourage the long-term retention of the Employee; and
WHEREAS, the parties desire by this writing to set forth the Company's
commitment to guarantee the Association's obligations under the Association
Agreement with the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Consideration from Company: Joint and Several Liability. The Company
-------------------------------------------------------
hereby agrees that to the extent permitted by law, it shall be jointly and
severally liable with the Association for the payment of all amounts due under
the Association Agreement, provided that Section 10(f) of the Association
Agreement shall be innaplicable to this Agreement. The Board may in its
discretion at any time during the term of this Agreement agree to pay the
Employee a base salary for the remaining term of this Agreement. If the Board
agrees to pay such salary, the Board shall thereafter review, not less often
than annually, the rate of the Employee's salary, and in its sole discretion may
decide to increase his salary.
2. Discretionary Bonuses; Participation in Retirement, Medical and
---------------------------------------------------------------
Other Plans. The Employee shall participate in an equitable manner with all
- -----------
other senior management employees of the Company in discretionary bonuses that
the Board may award from time to time to the Company's senior management
employees, as well as in (i) any of the following plans or programs that the
Company may now or in the future maintain: group hospitalization, disability,
health, dental, sick leave, life insurance, travel and/or accident insurance,
auto allowance/auto lease, retirement, pension, and/or other present or future
qualified plans provided by the Company, generally which benefits, taken as a
whole, must be at least as favorable as those in
<PAGE>
effect on the Effective Date; and (ii) any fringe benefits which are or may
become available to the Company's senior management employees, including for
example: any stock option or incentive compensation plans, and any other
benefits which are commensurate with the responsibilities and functions to be
performed by the Employee under this Agreement.
3. Indemnification. The Company agrees that its Bylaws shall continue to
---------------
provide for indemnification of directors, officers, employees and agents of the
Company, including the Employee, during the full term of this Agreement, and to
at all times provide adequate insurance for such purposes.
4. Successors and Assigns.
----------------------
(a) Company. This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Company which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company.
(b) Attachment. Except as required by law, no right to receive payments
under this Agreement shall be subject to anticipation, commutation, alienation,
sale, assignment, encumbrance, charge, pledge, or hypothecation or to exclusion,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
5. Amendments. No amendments or additions to this
----------
Agreement shall be binding unless made in writing and signed by all of the
parties, except as herein otherwise specifically provided.
6. Applicable Law. Except to the extent preempted by
---------------
Federal law, the laws of the State of Colorado shall govern this Agreement in
all respects, whether as to its validity, construction, capacity, performance or
otherwise.
7. Severability. The provisions of this Agreement shall be
------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.
8. Entire Agreement. This Agreement, together with any
----------------
understanding or modifications thereof as agreed to in writing by the parties,
shall constitute the entire agreement between the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
ATTEST: HIGH COUNTRY BANCORP, INC.
By
- ------------------------------ --------------------------------
Secretary Its Chairman of the Board
WITNESS:
- ------------------------------ ----------------------------------
Lorin D. Smith
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<PAGE>
EXHIBIT 10.3
HIGH COUNTRY BANCORP, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of the Company through
providing select key Employees and Directors of the Association, the Company,
and their Affiliates with the opportunity to acquire Shares. By encouraging
such stock ownership, the Company seeks to attract, retain and motivate the best
available personnel for positions of substantial responsibility and to provide
additional incentives to Directors and key Employees of the Company or any
Affiliate to promote the success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in accordance
with Paragraph 5(c).
(c) "Association" shall mean Salida Building & Loan Association.
(d) "Awards" shall mean, collectively, Options and SARs, unless the context
clearly indicates a different meaning.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean both the Stock Option Committee appointed by the
----
Board in accordance with Paragraph 5(a) hereof, and the Board.
---
(h) "Common Stock" shall mean the common stock of the Company.
(i) "Company" shall mean High Country Bancorp, Inc.
(j) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company, in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus or advisory capacity.
(k) "Director" shall mean any member of the Board, and any member of the
board of directors of any Affiliate that the Board has by resolution designated
as being eligible for participation in this Plan.
(l) "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
(m) "Effective Date" shall mean the date specified in Paragraph 14 hereof.
-1-
<PAGE>
(n) "Employee" shall mean any person employed by the Company, the
Association, or an Affiliate.
(o) "Exercise Price" shall mean the price per Optioned Share at which an
Option or SAR may be exercised.
(p) "ISO" shall mean an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(q) "Market Value" shall mean the fair market value of the Common Stock,
as determined under Paragraph 7(b) hereof.
(r) "Non-Employee Director" shall have the meaning provided in Rule 16b-3.
(s) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan but which is not intended to be and is not
identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an Award granted
pursuant to this Plan.
(v) "Participant" shall mean any person who receives an Award pursuant to
the Plan.
(w) "Plan" shall mean this 1997 Stock Option and Incentive Plan.
(x) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(y) "Share" shall mean one share of Common Stock.
(z) "SAR" (or "Stock Appreciation Right") means a right to receive the
appreciation in value, or a portion of the appreciation in value, of a specified
number of shares of Common Stock.
(aa) "Year of Service" shall mean a full twelve-month period, measured from
the date of an Award and each annual anniversary of that date, during which a
Participant has not terminated Continuous Service for any reason.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten
years from the Effective Date, unless sooner terminated pursuant to Paragraph 16
hereof. No Award shall be granted under the Plan after ten years from the
Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan shall
be established by the Committee, but shall not exceed 10 years; provided,
however, that in the case of an Employee who owns Shares representing more than
10% of the outstanding Common Stock at the time an ISO is granted, the term of
such ISO shall not exceed five years .
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. Except as otherwise required under Section 11, the
aggregate number of Shares deliverable pursuant to Awards shall not exceed
________ Shares, which equals 10% of the Shares issued by the
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<PAGE>
Company in connection with the Association's conversion from mutual to stock
form. Such Shares may be authorized but unissued Shares, Shares held in
treasury, or Shares held in a grantor trust created by the Company. If any
Awards should expire, become unexercisable, or be forfeited for any reason
without having been exercised, the Optioned Shares shall, unless the Plan shall
have been terminated, be available for the grant of additional Awards under the
Plan.
(b) Special Rule for SARs. The number of Shares with respect to which an
SAR is granted, but not the number of Shares which the Company delivers or could
deliver to an Employee or individual upon exercise of an SAR, shall be charged
against the aggregate number of Shares remaining available under the Plan;
provided, however, that in the case of an SAR granted in conjunction with an
Option, under circumstances in which the exercise of the SAR results in
termination of the Option and vice versa, only the number of Shares subject to
the Option shall be charged against the aggregate number of Shares remaining
available under the Plan. The Shares involved in an Option as to which option
rights have terminated by reason of the exercise of a related SAR, as provided
in Paragraph 10 hereof, shall not be available for the grant of further Options
under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be administered by the
Committee, which shall consist of not less than two (2) members of the Board who
are Non-Employee Directors. Members of the Committee shall serve at the
pleasure of the Board. In the absence at any time of a duly appointed
Committee, the Plan shall be administered by the Board.
(b) Powers of the Committee. Except as limited by the express provisions
of the Plan or by resolutions adopted by the Board, the Committee shall have
sole and complete authority and discretion (i) to select Participants and grant
Awards, (ii) to determine the form and content of Awards to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee without a meeting, shall be
deemed the action of the Committee.
(c) Agreement. Each Award shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The
terms of each such Agreement shall be in accordance with the Plan, but each
Agreement may include such additional provisions and restrictions determined by
the Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular,
the Committee shall set forth in each Agreement (i) the Exercise Price of an
Option or SAR, (ii) the number of Shares subject to the Award, and its
expiration date, (iii) the manner, time, and rate (cumulative or otherwise) of
exercise or vesting of such Award, and (iv) the restrictions, if any, to be
placed upon such Award, or upon Shares which may be issued upon exercise of such
Award. The Chairman of the Committee and such other Directors and officers as
shall be designated by the Committee are hereby authorized to execute Agreements
on behalf of the Company and to cause them to be delivered to the recipients of
Awards.
(d) Effect of the Committee's Decisions. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
(e) Indemnification. In addition to such other rights of indemnification
as they may have, the members of the Committee shall be indemnified by the
Company in connection with any claim, action, suit or proceeding relating to any
action taken or failure to act under or in connection with the Plan or any
Award, granted hereunder
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<PAGE>
to the full extent provided for under the Company's governing instruments with
respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. Only Employees shall be eligible to receive Awards. In
selecting those Employees to whom Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of their services to
the Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, the Committee shall automatically make
the Awards specified in Sections 6(b) and 9 hereof, and (ii) no Employee shall
receive Options to purchase more than 25% of the Shares reserved under Paragraph
4(a), and no non-Employee Director shall receive Options on the Effective Date
to purchase more than 5% of the Shares reserved under Paragraph 4(a), with all
non-Employee Directors as a group receiving Options on the Effective Date to
purchase no more than 30% of the Shares reserved under Paragraph 4(a). [THESE
RESTRICTIONS WILL BE INAPPLICABLE IF THE PLAN IS ADOPTED MORE THAN ONE YEAR
AFTER THE CONVERSION.]
(b) Automatic Grants to Employees. On the Effective Date, each of the
following Employees shall receive an Option (in the form of an ISO, to the
extent permissible under the Code) to purchase the number of Shares listed
below, at an Exercise Price per Share equal to the Market Value of a Share on
the Effective Date; provided that such grant shall not be made to an Employee
whose Continuous Service terminates on or before the Effective Date:
<TABLE>
<CAPTION>
Percentage of Shares
Participant Reserved under Paragraph 4(a)
----------- -----------------------------
<S> <C>
Larry D. Smith 25%
</TABLE>
With respect to each of the above-named Participants, the Option granted to
the Participant hereunder (i) shall vest in accordance with the general rule set
forth in Paragraph 8(a) of the Plan, (ii) shall have a term of ten years from
the Effective Date, and (iii) shall be subject to the general rule set forth in
Paragraph 8(c) with respect to the effect of a Participant's termination of
Continuous Service on the Participant's right to exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the date the
Option is granted, of the Shares with respect to which ISOs are exercisable for
the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present or future Affiliate of the Company) shall not exceed $100,000.
Notwithstanding the foregoing, the Committee may grant Options in excess of the
foregoing limitations, in which case Options granted in excess of such
limitation shall be Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns
Shares representing more than 10% of the Company's outstanding Shares of Common
Stock at the time an ISO is granted, the Exercise Price shall not be less than
110% of the Market Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including the NASDAQ National Market
System) on the date in question, then the Market Value per Share shall be the
average of the highest and lowest selling price on such exchange on such date,
or if there were no sales on such date, then the Exercise Price shall be the
mean between the bid and asked price on such date. If the Common Stock is
traded otherwise than on a national securities exchange on the date in question,
then the Market Value per
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Share shall be the mean between the bid and asked price on such date, or, if
there is no bid and asked price on such date, then on the next prior business
day on which there was a bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair market value as
determined by the Committee, in its sole and absolute discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Each Option shall become exercisable with respect to
twenty percent (20%) of the Optioned Shares upon the Participant's completion of
each of five Years of Service, provided that an Option shall become fully (100%)
exercisable immediately upon termination of the Participant's Continuous Service
due to the Participant's Disability or death. An Option may not be exercised
for a fractional Share. IF THE PLAN IS ADOPTED MORE THAN ONE YEAR AFTER THE
ASSOCIATION'S CONVERSION, OPTIONS MAY BECOME EXERCISABLE ACCORDING TO A
DIFFERENT SCHEDULE, WITH VESTING ACCELERATED TO 100% UPON AN OPTIONEE'S
RETIREMENT OR TERMINATION OF SERVICE IN CONNECTION WITH A CHANGE IN CONTROL.
(b) Procedure for Exercise. A Participant may exercise Options, subject
to provisions relative to its termination and limitations on its exercise, only
by (1) written notice of intent to exercise the Option with respect to a
specified number of Shares, and (2) payment to the Company (contemporaneously
with delivery of such notice) in cash, in Common Stock, or a combination of cash
and Common Stock, of the amount of the Exercise Price for the number of Shares
with respect to which the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at its executive
offices. Common Stock utilized in full or partial payment of the Exercise Price
for Options shall be valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised. Upon a Participant's
exercise of an Option, the Company may, if provided by the Committee in the
underlying Agreement, pay to the Participant a cash amount up to but not
exceeding the amount of dividends, if any, declared on the underlying Shares
between the date of grant and the date of exercise of the Option.
(c) Period of Exercisability. Except to the extent otherwise provided in
the terms of an Agreement, an Option may be exercised by a Participant only
while he is an Employee and has maintained Continuous Service from the date of
the grant of the Option, or within one year after termination of such Continuous
Service (but not later than the date on which the Option would otherwise
expire), except if the Employee's Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall have the meaning set
forth in any unexpired employment or severance agreement between the
Participant and the Association and/or the Company (and, in the absence of
any such agreement, shall mean termination because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary
duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final cease-and-desist order),
then the Participant's rights to exercise such Option shall expire on the
date of such termination;
(2) death, then to the extent that the Participant would have been
entitled to exercise the Option immediately prior to his death, such Option
of the deceased Participant may be exercised within two years from the date
of his death (but not later than the date on which the Option would
otherwise expire) by the personal representatives of his estate or person
or persons to whom his rights under such Option shall have passed by will
or by laws of descent and distribution.
(d) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
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(e) Mandatory Six-Month Holding Period. Notwithstanding any other
provision of this Plan to the contrary, common stock of the Company that is
purchased upon exercise of an Option or SAR may not be sold within the six-month
period following the grant of that Option or SAR.
9. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(a) Automatic Grants. Notwithstanding any other provisions of this Plan,
each Director who is not an Employee but is a Director on the Effective Date
shall receive, on said date, Non-ISOs to purchase a number of Shares equal to
the lesser of five percent (5%) of the number of Shares reserved under Paragraph
4(a) hereof, and the quotient obtained by dividing --
(i) 30 percent (30%) of the number of Shares reserved under Paragraph 4(a)
hereof, by
(ii) the number of Directors entitled to receive an Option on the Effective
Date, pursuant to this Paragraph 9(a).
Such Non-ISOs shall have an Exercise Price per Share equal to the Market
Value of a Share on the date of grant. Each Director, including each Director
who joins the Board after the Effective Date and who is not then an Employee, is
eligible to receive discretionary grants under the Plan.
(b) Terms of Exercise. Options received under the provisions of this
Paragraph (i) shall become exercisable in accordance with paragraph 8(a) of the
Plan, and (ii) may be exercised from time to time by written notice of intent to
exercise the Option with respect to all or a specified number of the Optioned
Shares, and payment to the Company (contemporaneously with the delivery of such
notice), in cash, in Common Stock, or a combination of cash and Common Stock, of
the amount of the Exercise Price for the number of the Optioned Shares with
respect to which the Option is then being exercised. Each such notice and
payment shall be delivered, or mailed by prepaid registered or certified mail,
addressed to the Treasurer of the Company at the Company's executive offices.
Upon a Director's exercise of an Option, the Company may, if provided by the
Committee in the underlying Agreement (which may not be utilized to pay out such
dividends unless the Plan would maintain conformity with Rule 16b-3), pay to the
Director a cash amount up to but not exceeding the amount of dividends, if any,
declared on the underlying Shares between the date of grant and the date of
exercise of the Option. A Director who exercises Options pursuant to this
Paragraph may satisfy all applicable federal, state and local income and
employment tax withholding obligations, in whole or in part, by irrevocably
electing to have the Company withhold shares of Common Stock, or to deliver to
the Company shares of Common Stock that he already owns, having a value equal to
the amount required to be withheld; provided that to the extent not inconsistent
herewith, such election otherwise complies with those requirements of Paragraphs
8 and 19 hereof.
Options granted under this Paragraph shall have a term of ten years;
provided that Options granted under this Paragraph shall expire one year after
the date on which a Director terminates Continuous Service on the Board for a
reason other than death, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's death during
the term of his directorship, Options granted under this Paragraph shall become
immediately exercisable, and may be exercised within two years from the date of
his death by the personal representatives of his estate or person or persons to
whom his rights under such Option shall have passed by will or by laws of
descent and distribution, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's Disability
during his or her directorship, the Director's Option shall become immediately
exercisable, and such Option may be exercised within one year of the termination
of directorship due to Disability, but not later than the date that the Option
would otherwise expire. Unless otherwise inapplicable or inconsistent with the
provisions of this Paragraph, the Options to be granted to Directors hereunder
shall be subject to all other provisions of this Plan.
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<PAGE>
(c) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
10. SARS (STOCK APPRECIATION RIGHTS)
(a) Granting of SARs. In its sole discretion, the Committee may from time
to time grant SARs to Employees either in conjunction with, or independently of,
any Options granted under the Plan. An SAR granted in conjunction with an
Option may be an alternative right wherein the exercise of the Option terminates
the SAR to the extent of the number of shares purchased upon exercise of the
Option and, correspondingly, the exercise of the SAR terminates the Option to
the extent of the number of Shares with respect to which the SAR is exercised.
Alternatively, an SAR granted in conjunction with an Option may be an additional
right wherein both the SAR and the Option may be exercised. An SAR may not be
granted in conjunction with an ISO under circumstances in which the exercise of
the SAR affects the right to exercise the ISO or vice versa, unless the SAR, by
its terms, meets all of the following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference between the Exercise
Price of the ISO and the Market Value of the Shares subject to the ISO at
the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is transferable, and under
the same conditions;
(4) The SAR may be exercised only when the ISO may be exercised; and
(5) The SAR may be exercised only when the Market Value of the Shares
subject to the ISO exceeds the Exercise Price of the ISO.
(b) Exercise Price. The Exercise Price as to any particular SAR shall not
be less than the Market Value of the Optioned Shares on the date of grant.
(c) Timing of Exercise. The provisions of Paragraph 8(c) regarding the
period of exercisability of Options are incorporated by reference herein, and
shall determine the period of exercisability of SARs.
(d) Exercise of SARs. An SAR granted hereunder shall be exercisable at
such times and under such conditions as shall be permissible under the terms of
the Plan and of the Agreement granted to a Participant, provided that an SAR may
not be exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the Company except
for applicable withholding taxes, an amount equal to the excess of (or, in the
discretion of the Committee if provided in the Agreement, a portion of) the
excess of the then aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the aggregate Exercise
Price of such number of Optioned Shares. This amount shall be payable by the
Company, in the discretion of the Committee, in cash or in Shares valued at the
then Market Value thereof, or any combination thereof.
(e) Procedure for Exercising SARs. To the extent not inconsistent
herewith, the provisions of Paragraph 8(b) as to the procedure for exercising
Options are incorporated by reference, and shall determine the procedure for
exercising SARs.
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<PAGE>
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Awards, and the Exercise Price thereof, shall be proportionately
adjusted for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the Company which
results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of shares, or similar
event in which the number or kind of shares is changed without the receipt or
payment of consideration by the Company.
(b) Transactions in which the Company is Not the Surviving Entity. In the
event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding
Awards, together with the Exercise Prices thereof, shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other securities which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs
(a) or (b)(1) hereof shall be made in such a manner as not to constitute a
modification, within the meaning of Section 424(h) of the Code, of outstanding
ISOs.
(d) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Paragraph, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Award before the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Awards or reserved for issuance under the Plan.
12. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds Awards may transfer such Awards (but not Incentive
Stock Options) to his or her spouse, lineal ascendants, lineal descendants, or
to a duly established trust for the benefit of one or more of these individuals.
Awards so transferred may thereafter be transferred only to the Participant who
originally received the grant or to an individual or trust to whom the
Participant could have initially transferred the Awards pursuant to this
Paragraph 12. Awards which are transferred pursuant to this Paragraph 12 shall
be exercisable by the transferee according to the same terms and conditions as
applied to the Participant.
13. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the later of the
date on which the Committee makes the determination of granting such Award, and
the Effective Date. Notice of the determination shall be given to each
Participant to whom an Award is so granted within a reasonable time after the
date of such grant.
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<PAGE>
14. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval by a
favorable vote of stockholders owning at least a majority of the total votes
eligible to be cast at a duly called meeting of the Company's stockholders held
in accordance with applicable laws, provided that the Plan shall not be
submitted for such approval within the six-month period after the Association
completes its mutual-to-stock conversion. No Awards may be made prior to
approval of the Plan by the stockholders of the Company.
15. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize the Committee
to direct execution of an instrument providing for the modification of any
outstanding Award, provided no such modification shall confer on the holder of
said Award any right or benefit which could not be conferred on him by the grant
of a new Award at such time, or impair the Award without the consent of the
holder of the Award.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without
the consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Award unless the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applicable state securities law, and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company to obtain
approval from any regulatory body or authority deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares hereunder shall
relieve the Company of any liability in respect of the non-issuance or sale of
such Shares. As a condition to the exercise of an Option or SAR, the Company may
require the person exercising the Option or SAR to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions.
18. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of Options and/or
SARs shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding obligations. The
Committee, in its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have the Company
withhold Shares, or to deliver to the Company Shares that he already owns,
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having a value equal to the amount required to be withheld. The value of the
Shares to be withheld, or delivered to the Company, shall be based on the Market
Value of the Shares on the date the amount of tax to be withheld is to be
determined. As an alternative, the Company may retain, or sell without notice,
a number of such Shares sufficient to cover the amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to participate or
participation in the Plan create or be deemed to create any legal or equitable
right of the Employee, Director, or any other party to continue service with the
Company, the Association, or any Affiliate of such corporations. Except to the
extent provided in Paragraphs 6(b) and 9(a), no Employee or Director shall have
a right to be granted an Award or, having received an Award, the right to again
be granted an Award. However, an Employee or Director who has been granted an
Award may, if otherwise eligible, be granted an additional Award or Awards.
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws of
the State of Colorado, except to the extent that federal law shall be deemed to
apply.
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EXHIBIT 10.4
HIGH COUNTRY BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the terms and
conditions hereinafter stated.
1.02 Through acceptance of their appointment to the Committee, each member
of the Committee hereby accepts his or her appointment hereunder upon the terms
and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of
experience and ability in key positions of responsibility by providing Employees
and Directors of the Company, the Association, and their Affiliates with a
proprietary interest in the Company, and as compensation for their past
contributions to the Association, and as an incentive to make such contributions
in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Internal Revenue Code of 1986, as amended.
3.02 "Association" means Salida Building & Loan Association.
3.03 "Beneficiary" means the person or persons designated by a Participant
to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if any
or if none, his estate.
3.04 "Board" means the Board of Directors of the Company.
3.05 "Committee" means the Management Recognition Plan Committee appointed
by the Board pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock of the Company.
3.07 "Company" means High Country Bancorp, Inc.
3.08 "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company in the case of transfers
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between payroll locations of the Company or between the Company, an Affiliate or
a successor, or in the case of a Director's performance of services in an
emeritus or advisory capacity.
3.09 "Date of Conversion" means the date of the conversion of the
Association from mutual to stock form.
3.10 "Director" means a member of the Board.
3.11 "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
3.12 "Effective Date" means the date on which the Plan first becomes
effective, as determined under Section 8.07 hereof.
3.13 "Employee" means any person who is employed by the Company or an
Affiliate.
3.14 "Non-Employee Director" shall have the meaning provided in Rule 16b-3
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
3.15 "Participant" means an Employee or Director who holds a Plan Share
Award.
3.16 "Plan" means this High Country Bancorp, Inc. Management Recognition
Plan.
3.17 "Plan Shares" means shares of Common Stock held in the Trust which
are awarded or issuable to a Participant pursuant to the Plan.
3.18 "Plan Share Award" means a right granted under this Plan to receive
Plan Shares.
3.19 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.02 and 5.03.
3.20 "Trust" and "Trust Agreement" mean that agreement entered into
pursuant to the terms hereof between the Company and the Trustee, and "Trust"
means the trust created thereunder.
3.21 "Trustee" means that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan assets for the
purposes set forth herein.
3.22 "Year of Service" shall mean a full twelve-month period, measured
from the date of a Plan Share Award and each annual anniversary of that date,
during which a Participant's Continuous Service has not terminated for any
reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall be administered
and interpreted by the Committee, which shall consist of not less than two
members of the Board who are Non-Employee Directors. In the absence at any time
of a duly appointed Committee, the Plan shall be administered by those members
of the Board who are Non-Employee Directors, and by the Board if there are less
than two Non-Employee Directors.
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<PAGE>
The Committee shall have all of the powers allocated to it in this and
other Sections of the Plan. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion (i) to make Plan Share Awards to such
Employees as the Committee may select, (ii) to determine the form and content of
Plan Share Awards to be issued under the Plan, (iii) to interpret the Plan, (iv)
to prescribe, amend and rescind rules and regulations relating to the Plan, and
(v) to make other determinations necessary or advisable for the administration
of the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. Subject to
Section 4.02, the interpretation and construction by the Committee of any
provisions of the Plan or of any Plan Share Award granted hereunder shall be
final and binding. The Committee shall act by vote or written consent of a
majority of its members, and shall report its actions and decisions with respect
to the Plan to the Board at appropriate times, but in no event less than one
time per calendar year. The Committee may recommend to the Board one or more
persons or entity to act as Trustee(s) in accordance with the provisions of this
Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee shall be appointed
or approved by, and will serve at the pleasure of, the Board. The Board may in
its discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan Share Award
already made or impair a participant's vested rights under a Plan Share Award.
Members of the Board who are eligible for or who have been granted Plan Share
Awards (other than pursuant to Section 6.04) may not vote on any matters
affecting the administration of the Plan or the grant of Plan Shares or Plan
Share Awards (although such members may be counted in determining the existence
of a quorum at any meeting of the Board during which actions with regard thereto
are taken). Further, with respect to all actions taken by the Board in regard
to the Plan, such action shall be taken by a majority of the Board where such a
majority of the directors acting in the matter are Non-Employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or the Committee or
the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any Plan Shares or Plan Share Awards granted under it.
If a member of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Company shall indemnify such member, subject to the
indemnification provisions of 12 C.F.R. Section 545.121, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Company to the Trust, provided that the Association may also make contributions
to the Trust. Such amounts shall be paid to the Trustee at the time of
contribution. No contributions to the Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; MAXIMUM PLAN SHARE AWARDS. The Trustee
shall invest Trust assets only in accordance with the Trust Agreement; provided
that the Trust shall not purchase, and Plan Share Awards shall not be made with
respect to, more than four percent (4%) of the number of Shares issued on the
Date of Conversion. Common stock purchased by the Trust may be newly issued
shares, treasury shares, or shares held in a grantor trust.
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5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON PLAN SHARE
RESERVES. Upon the allocation of Plan Share Awards under Section 6.02, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated. Any Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to Section 7.01 shall
be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Except as otherwise provided in Section 6.04 hereof,
the Committee shall make Plan Share Awards only to Employees. In selecting
those Employees to whom Plan Share Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of their services to
the Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, (i) the Committee shall automatically
make the Plan Share Awards specified in Sections 6.04 and 6.05 hereof; and (ii)
no Employee shall receive Plan Share Awards relating to more than 25% of the
Plan Shares reserved under Section 5.02, and no non-employee Director shall
receive Plan Share Awards relating to more than 5% of the Plan Shares reserved
under Section 5.02, with all non-employee Directors as a group receiving Plan
Share Awards on the Effective Date relating to no more than 30% of the Plan
Shares reserved under Section 5.02. [THESE RESTRICTIONS WILL BE INAPPLICABLE IF
THE PLAN RECEIVES STOCKHOLDER APPROVAL MORE THAN ONE YEAR AFTER THE DATE OF
CONVERSION.]
6.02 ALLOCATIONS. The Committee will determine which Employees will be
granted discretionary Plan Share Awards, and the number of Shares covered by
each Plan Share Award, provided that in no event shall any Awards be made which
will violate the governing instruments of the Association or its Affiliates or
any applicable federal or state law or regulation. In the event Plan Shares are
forfeited for any reason or additional shares of Common Stock are purchased by
the Trustee, the Committee may, from time to time, determine which of the
Employees referenced in Section 6.01 above will be granted additional Plan Share
Awards to be awarded from the forfeited or acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable after a determination
is made pursuant to Section 6.02 that a Plan Share Award is to be made, the
Committee shall notify the Participant in writing of the grant of the Award, the
number of Plan Shares covered by the Award, and the terms upon which the Plan
Shares subject to the Award may be earned. The date on which the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards. The Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. Notwithstanding any
other provisions of this Plan, each Director who is not an Employee but is a
Director on the Effective Date shall receive, on said date, a Plan Share Award
for a number of Shares equal to the lesser of five (5%) of the number of Plan
Shares which the Trust is authorized to purchase pursuant to Section 5.02 of the
Plan and the quotient obtained by dividing --
(i) 30 percent (30%) of the number of Plan Shares which the Trust is
authorized to purchase pursuant to Section 5.02 of the Plan, by
(ii) the number of Directors entitled to receive Plan Share Awards on the
Effective Date, pursuant to this Section 6.04.
Directors, including Non-Employee Directors who join the Board after the
Effective Date, are eligible to receive discretionary Awards under the Plan.
Plan Share Awards received under the provisions of this Section shall become
vested and nonforfeitable according to the general rules set forth in
subsections (a), and (b) of Section 7.01, and the Committee shall have no
discretion to alter or accelerate said vesting requirements. Unless otherwise
inapplicable or inconsistent with the provisions of this Section, the Plan Share
Awards to be granted hereunder shall be subject to all other provisions of this
Plan.
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6.05 AUTOMATIC GRANTS TO EMPLOYEES. On the Effective Date, each of the
following individuals shall receive a Plan Share Award as to the number of Plan
Shares listed below, provided that such award shall not be made to an individual
who is not an Employee on the Effective Date:
<TABLE>
<CAPTION>
Employee Shares Subject to Plan Share Award
-------- ----------------------------------
<S> <C>
Larry D. Smith 25%
</TABLE>
Plan Share Awards received under the provisions of this Section shall
become vested and nonforfeitable according to the general rules set forth in
subsections (a) and (b) of Section 7.01, and the Committee shall have no
discretion to alter said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
6.06 ALLOCATIONS NOT REQUIRED. Notwithstanding anything to the contrary
in Sections 6.01 and 6.02, but subject to Sections 6.04 and 6.05, no Employee or
Director shall have any right or entitlement to receive a Plan Share Award
hereunder, such Awards being at the total discretion of the Committee, nor shall
any Employees or Directors as a group have such a right. The Committee may,
with the approval of the Board (or, if so directed by the Board) return all
Common Stock in the Plan Share Reserve to the Company at any time, and cease
issuing Plan Share Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Twenty percent (20%) of the Plan Shares subject to a
Plan Share Award shall be earned and become non-forfeitable by a Participant
upon his or her completion of each of five Years of Service. [MAY BE DIFFERENT
IF PLAN RECEIVES STOCKHOLDER APPROVAL MORE THAN ONE YEAR AFTER THE DATE OF
CONVERSION.]
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR DISABILITY.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose service with
the Company or an Affiliate terminates due to the Participant's death or
Disability shall be deemed earned as of the Participant's last day of service
with the Company or an Affiliate and shall be distributed as soon as practicable
thereafter. [IF THE PLAN RECEIVES STOCKHOLDER APPROVAL MORE THAN ONE YEAR AFTER
THE DATE OF CONVERSION, VESTING WOULD ACCELERATE TO 100% UPON A PARTICIPANT'S
RETIREMENT OR TERMINATION OF SERVICE IN CONNECTION WITH A CHANGE IN CONTROL.]
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid to a Participant
or Beneficiary under Section 7.03, such Participant or Beneficiary shall also be
entitled to receive, with respect to each Plan Share paid, an amount equal to
any cash dividends (including special large and nonrecurring dividends,
including one that has the effect of a return of capital to the Company's
stockholders) and a number of shares of Common Stock equal to any stock
dividends, declared and paid with respect to a share of Common Stock between the
date the relevant Plan Share Award was initially granted to such Participant and
the date the Plan Shares are being distributed. There shall also be distributed
an appropriate amount of net earnings, if any, of the Trust with respect to any
cash dividends so paid out.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Except as provided in
Subsections (c), and (d) below, the Trustee shall distribute Plan Shares and
accumulated cash from dividends and interest to the Participant or his
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Beneficiary, as the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
(b) FORM OF DISTRIBUTION. The Trustee shall distribute all Plan Shares,
together with any shares representing stock dividends, in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned.
Payments representing cash dividends (and earnings thereon) shall be made in
cash.
(c) WITHHOLDING. The Trustee shall withhold from any cash payment made
under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of such cash payment is not sufficient, the
Trustee shall require the Participant or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the Plan Shares.
The Trustee shall pay over to the Company or Affiliate which employs or employed
such Participant any such amount withheld from or paid by the Participant or
Beneficiary.
(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS. Notwithstanding Subsections
(a) and (b) above, no Plan Shares may be distributed prior to the date which is
five (5) years from the Date of Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares of Common Stock
unless such action is approved in advance by a majority vote of non-employee
directors of the Board. To the extent this limitation would delay the date on
which a Participant receives Plan Shares, the Participant may elect to receive
from the Trust, in lieu of vested Plan Shares, a cash amount equal to the fair
market value of such Plan Shares. Any Plan Shares remaining undistributed
solely by reason of the operation of this Subsection (d) shall be distributed to
the Participant or his Beneficiary on the date which is five years from the Date
of Conversion.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be distributed unless and
until all of the requirements of all applicable law and regulation shall have
been fully complied with, including the receipt of approval of the Plan by the
stockholders of the Company by such vote, if any, as may be required by
applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock held by the Trust
(whether or not subject to a Plan Share Award) shall be voted by the Trustee in
the same proportion as the trustee of the Company's Employee Stock Ownership
Plan votes Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner directed by the Board.
7.05. DEFERRAL ELECTIONS BY PARTICIPANTS. At any time that is at least
six months prior to the date on which a Participant becomes vested in the first
20% of his or her Plan Share Award, the Participant may irrevocably elect, on
the form attached hereto as Exhibit "A" (the "Election Form"), to defer the
receipt of all or a percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award (the "Deferred
Shares"). The MRP Committee shall establish and maintain an individual account
in the name of each Participant who files an Election Form for the purpose of
tracking deferred earnings attributable to cash dividends paid on Deferred
Shares (the "Cash Account"). On the last day of each fiscal year of the
Company, the Committee shall credit to the Participant's Cash Account earnings
on the balance of the Cash Account at a rate equal to the yield on Common Stock,
as determined from time to time by the MRP Committee in its sole discretion.
The Deferred Shares, together with any cash or stock dividends attributable
thereto (the "Deferred Earnings"), will be distributed to the Participant in
accordance with the deferral schedule (the "Deferral Schedule") selected by the
Participant in his or her Election Form. The Trustees shall hold each
Participant's Deferred Shares and Deferred Earnings in the Trust until
distribution is required pursuant to the election set forth in the
Participant's Election Form.
The Trustee shall distribute a Participant's Deferred Shares and Deferred
Earnings in accordance with the Participant's Election Form, unless the
Participant terminates Continuous Service for a reason other than the
Participant's (i) death, (ii) Disability, (iii) early retirement after age 55
and completion of 10 or more years of
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<PAGE>
Continuous Service, or (iv) normal retirement after age 65. Within 90 days after
receiving notice of a Participant's death, the Trustee shall distribute any
balance of the Participant's Deferred Shares and Deferred Earnings to the
Participant's designated beneficiary, if living, or if such designated
beneficiary is deceased or the Participant failed to designate a beneficiary, to
the Participant's estate. Notwithstanding the preceding, at any time prior to
his or her death, a Participant may elect to have the balance of his or her
Deferred Shares and Deferred Earnings distributed to his or her beneficiary or
estate over a period of time designated by the Participant. If, on the other
hand, a Participant's Continuous Service terminates for a reason other than the
Participant's death, Disability, early retirement, or normal retirement, the
Participant's Deferred Shares and Deferred Earnings shall be distributed to the
Participant in a lump sum occurring as soon as reasonably practicable.
Notwithstanding any other provision of the Plan or a Participant's Election
Form, in the event the Participant suffers an unforeseeable emergency hardship
within the contemplation of this paragraph, the Participant may apply to the
Committee for a distribution of all or a portion of his Deferred Shares and
Deferred Earnings prior to the basis for any such distribution. The hardship
must result from a sudden and unexpected illness or accident of the Participant
or a dependent of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of purposes which
are not considered hardships include post-secondary school expenses or the
desire to purchase a residence. In no event will a distribution be made to the
extent the hardship could be relieved through reimbursement or compensation by
insurance or otherwise, or by liquidation of the Participant's nonessential
assets to the extent such liquidation would not itself cause a severe financial
hardship. The amount of any distribution hereunder shall be limited to the
amount necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship and the amount
which qualifies for distribution, if any, shall be made by the Committee in its
sole discretion. The Committee may require evidence of the purpose and amount
of the need, and may establish such application or other procedures as it deems
appropriate.
No Participant may assign his or her claim to Deferred Shares and Deferred
Earnings during his or her lifetime, and any deferral election made hereunder
shall be irrevocable. A Participant's right to Deferred Shares and Deferred
Earnings shall at all times constitute an unsecured promise of the Company to
pay benefits as they come due. The right of the Participant or his or her
beneficiary to receive benefits hereunder shall be solely an unsecured claim
against the general assets of the Company. Neither the Participant nor his or
her beneficiary shall have any claim against or rights in any specific assets or
other fund of the Company, and any assets in the Trust shall be deemed general
assets of the Company.
All distributions made by the Company and/or the Trustees pursuant to
elections made hereunder shall be subject to applicable federal, state, and
local tax withholding and to such other deductions as shall at the time of such
payment be required under any income tax or other law, whether of the United
States or any other jurisdiction, and, in the case of payments to a beneficiary,
the delivery to the Committee and/or Trustees of all necessary waivers,
qualifications and other documentation.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number and kind of shares
which may be purchased under the Plan, and the number and kind of shares subject
to outstanding Plan Share Awards, shall be proportionately adjusted for any
increase, decrease, change or exchange of shares of Common Stock for a different
number or kind of shares or other securities of the Company which results from a
merger, consolidation, recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in which the number
or kind of shares is changed without the receipt or payment of consideration by
the Company.
7
<PAGE>
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE SURVIVING ENTITY. In the
event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding Plan
Share Awards shall be adjusted for any change or exchange of shares of Common
Stock for a different number or kind of shares or other securities which results
from the Transaction.
(c) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR DIFFERENT SHARES
OR SECURITIES. If, by reason of any adjustment made pursuant to this Section, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the shares pursuant to the Plan Share Award before the adjustment
was made. In addition, the Committee shall have the discretionary authority to
impose on the Shares subject to Plan Share Awards to Employees such restrictions
as the Committee may deem appropriate or desirable, including but not limited to
a right of first refusal, or repurchase option, or both of these restrictions.
(d) OTHER ISSUANCES. Except as expressly provided in this Section, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into shares of Common Stock or stock of another class,
for cash or property or for labor or services either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number or class of shares of
Common Stock then subject to Plan Share Awards or reserved for issuance under
the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by resolution, at
any time amend or terminate the Plan; provided that no amendment or termination
of the Plan shall, without the written consent of a Participant, impair any
rights or obligations under a Plan Share Award theretofore granted to the
Participant.
The power to amend or terminate the Plan in accordance with this Section
8.02 shall include the power to direct the Trustee to return to the Company all
or any part of the assets of the Trust, including shares of Common Stock held in
the Plan Share Reserve. However, the termination of the Trust shall not affect
a Participant's right to earn Plan Share Awards and to receive a distribution of
Common Stock relating thereto, including earnings thereon, in accordance with
the terms of this Plan and the grant by the Committee or the Board.
8.03 NONTRANSFERABILITY. Plan Share Awards may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
or any other provision of this Plan, a Participant who holds Plan Share Awards
may transfer such Awards to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Plan Share Awards so transferred may thereafter be
transferred only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially transferred the
Awards pursuant to this Section 8.03. Plan Share Awards which are transferred
pursuant to this Section 8.03 shall be exercisable by the transferee according
to the same terms and conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor any grant of a
Plan Share Award or Plan Shares hereunder nor any action taken by the Trustee,
the Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Employee or Director to continue
in the service of the Company, the Association, or an Affiliate thereof.
8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed and construed
under the laws of the State of Colorado to the extent not preempted by Federal
law.
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<PAGE>
8.07 EFFECTIVE DATE. The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders of the Company who own at least a
majority of the total votes eligible to be cast at a duly called meeting of the
Company's stockholders held in accordance with applicable laws, provided that
the Plan shall not be submitted for such approval within the six-month period
after the Date of Conversion. Stockholder approval may be unnecessary, or
involve a different vote requirement, if the Plan is implemented more than one
year after the Conversion. In no event shall Plan Share Awards be made prior to
the Effective Date.
8.08 TERM OF PLAN. This Plan shall remain in effect until the earlier of
(i) termination by the Board, or (ii) the distribution of all assets of the
Trust. Termination of the Plan shall not affect any Plan Share Awards
previously granted, and such Awards shall remain valid and in effect until they
have been earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the Trust associated
with the Plan be treated as a grantor trust of the Company under the provisions
of Section 671 et seq. of the Code, as the same may be amended from time to
-- ---
time, and (ii) that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of general unsecured
creditors of the Company, the Plan constitutes a mere unfunded promise to make
benefit payments in the future, the Plan is unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be maintained in conformity
with Revenue Procedure 92-64 (as the same may be amended from time to time).
9
<PAGE>
TRUST AGREEMENT UNDER THE
HIGH COUNTRY BANCORP, INC.
MANAGEMENT RECOGNITION PLAN
_______________
Trust Agreement
_______________
This Agreement made this _____ day of _________, 1997 by and between High
Country Bancorp, Inc. (the "Company") and Non-Employee Directors Mitchell,
Glenn, Young, and Harsh (acting by majority, the "Trustee").
WHEREAS, the Company maintains the High Country Bancorp, Inc. Management
Recognition Plan (the "Plan"), and has incurred or expects to incur liability
under the terms of the Plan with respect to the individuals participating in the
Plan ("Participants"); and
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's general creditors in the event of Insolvency, as defined in
Section 3(a) hereof, until paid to Participants and their beneficiaries in such
manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish this Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
----------------------------------
(a) The Company hereby deposits, or will shortly hereafter deposit, with
the Trustee in trust (i) a number of shares of the Company's common stock
("Common Stock") equal to four percent (4%) of the number of shares of Common
Stock issued by the Company in connection with the conversion of Salida Building
& Loan Association (the "Association") from mutual-to-stock form, or (ii) an
amount expected to be sufficient to permit the Trust to purchase said shares.
Said shares or amount shall become the initial principal of the Trust to be
held, administered and disposed of by the Trustee as provided in this Trust
Agreement.
(b) The Trust shall become irrevocable upon the effective date of the
Plan.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Participants and general creditors
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<PAGE>
as herein set forth. Participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Trust Agreement shall be mere
unsecured contractual rights of Participants and their beneficiaries against the
Company. Any assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with the
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither the Trustee nor any
Participant or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
-----------------------------------------------------------------
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Participant
(and his or her beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under the Plan),
and the time of commencement for payment of such amounts. Except as otherwise
provided herein, the Trustee shall make payments to Participants and their
beneficiaries in accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plan and shall pay amounts withheld to the
appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company.
(b) The entitlement of a Participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Participants or
their beneficiaries as they become due under the terms of the Plan. The Company
shall notify the Trustee of its decision to make payment of benefits directly
prior to the time amounts are payable to Participants or their beneficiaries.
In addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, the Company shall make the balance of each such payment as it falls due.
The Trustee shall notify the Company where principal and earnings are not
sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
--------------------------------------------------------------------------
When Company Is Insolvent.
- -------------------------
(a) The Trustee shall cease payment of benefits to Participants and their
beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(c) The Board of Directors and the Chief Executive Officer of the Company
shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or their
beneficiaries.
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<PAGE>
(1) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(2) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants or their
beneficiaries, shall liquidate the Trust's investment in Common Stock, and shall
hold the assets of the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants or their beneficiaries as general creditors of the Company with
respect to benefits due under the Plan or otherwise.
(3) The Trustee shall resume the payment of benefits to Participants
or their beneficiaries in accordance with Section 2 of this Trust Agreement only
after the Trustee has determined that the Company is not Insolvent (or is no
longer Insolvent).
(d) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to
Participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
Section 4. Payments to the Company.
-----------------------------------
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan Participants and their beneficiaries
pursuant to the terms of the Plan.
Section 5. Investment Authority.
--------------------------------
(a) The Trustee shall have sole discretion as to the investment of Trust
assets, except that to the extent reasonably practicable, the Trustee shall
invest all assets of the Trust in Common Stock provided that the Trust shall not
purchase from time to time a number of shares of Common Stock exceeding 4% of
the shares of Common Stock issued in the Association's mutual-to-stock
conversion.
(b) All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Participants, except that voting rights with respect
to Common Stock will be exercised in accordance with the terms of the Plan.
(c) Subject to applicable federal and state securities laws, if for any
reason the Trustee will be selling shares of Common Stock, the Trustee shall
sell such shares by (i) giving each Beneficiary 20 business days within which to
purchase, at fair market value, all or part of the shares of Common Stock that
the Trustee holds for the benefit of the Beneficiary, and (ii) to the extent
purchases by Beneficiaries are insufficient to eliminate the Trusts' excess
holdings of Common Stock, to offer to sell, and to sell, all or any part of the
excess shares held by the Trust to the following purchasers, listed here by
order of priority: first, the Company; second, any benefit plan maintained by
the Company or the Association; third, directors of the Association; fourth,
officers of the Association; fifth, members of the general public.
3
<PAGE>
Section 6. - Disposition of Income.
----------------------------------
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
---------------------------------
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 60 days following the close of each calendar
year and within 20 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchased and sold with the cost or net
proceeds of such purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other property held in
the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee.
-------------------------------------
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity, the terms of the Plan or this Trust and is given in writing
by the Company. In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments, except in those cases where the Trustee shall have been found by
a court of competent jurisdiction to have acted with gross negligence or willful
misconduct. If the Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with respect to any of its
duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
4
<PAGE>
Section 9. Compensation and Expenses of Trustee.
------------------------------------------------
The Company shall pay all administrative expenses and the Trustee's fees
and expenses relating to the Plan and this Trust. If not so paid, the fees and
expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee.
-----------------------------------------------
The Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) may resign at any time by written notice to the
Company, which resignation shall be effective 30 days after the Company receives
such notice (unless the Company and the Trustee agree otherwise). The Trustee
(or any individual serving as one of the trustees who act by majority as the
Trustee) may be removed by the Company on 30 days notice or upon shorter notice
accepted by the Trustee.
If the Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date or resignation or
removal under this section. If no such appointment has been made, the Trustee
may apply to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of the Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust. Upon resignation or
removal of the Trustee and appointment of a successor trustee, all assets shall
subsequently be transferred to the successor trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation, removal or
transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
-------------------------------------
If the Trustee resigns or is removed in accordance with Section 10 hereof,
the Company may appoint any other party as a successor to replace the Trustee
upon resignation or removal. The appointment shall be effective when accepted
in writing by the new trustee, who shall have all of the rights and powers of
the former trustee, including ownership rights in the Trust assets. The former
trustee shall execute any instrument necessary or reasonably requested by the
Company or the successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts of any prior
trustee and may retain or dispose of existing Trust assets, subject to Sections
7 and 8 hereof. The successor trustee shall not be responsible for, and the
Company shall indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior trustee or from any
other past event, or any condition existing at the time it becomes successor
trustee.
Section 12. Amendment or Termination.
-------------------------------------
(a) This Trust Agreement may be amended by a written instrument executed
by the Trustee and the Company, provided that no such amendment shall make the
Trust revocable.
(b) The Trust shall not terminate until the date on which Participants
and their beneficiaries are no longer entitled to benefits pursuant to the terms
hereof. Upon termination of the Trust, the Trustee shall return any assets
remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their beneficiaries if
they are then entitled to payment of benefits), the Company may terminate this
Trust prior to the time all benefit payments under the Plan have been made. All
assets in the Trust at termination shall be returned to the Company.
5
<PAGE>
Section 13. Miscellaneous.
--------------------------
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant to the terms of
the Plan.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado, to the extent not preempted by federal
law.
(d) The Trustee agrees to be bound by the terms of the Plan, as in effect
from time to time.
(e) The Trustee shall act by vote or written consent of a majority of its
duly appointed members.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused
this Agreement to be executed, and its corporate seal affixed, and the Trustees
have executed this Agreement, this ___ day of August, 1997.
ATTEST: HIGH COUNTRY BANCORP, INC.
______________________________ By: ____________________________________
Its President
ATTEST:
______________________________ ____________________________________
Trustee
______________________________ ____________________________________
Trustee
______________________________ ____________________________________
Trustee
______________________________ ____________________________________
Trustee
6
<PAGE>
EXHIBIT 10.5
SALIDA BUILDING & LOAN ASSOCIATION
LONG-TERM INCENTIVE PLAN
The Board of Directors of Salida Building & Loan Association adopted this
Long-Term Incentive Plan, effective June __, 1997, to recognize the
contributions of the Board of Directors to the growth, success and profitability
of the Association and to encourage the continued contributions of its Directors
to the Association's long-term financial success through a performance-based
incentive benefit plan.
ARTICLE I
DEFINITIONS
-----------
The following words and phrases, when used in the Plan, shall have the
meanings set forth below unless the context clearly indicates otherwise.
"Account" shall mean a bookkeeping account maintained by the Association in
the name of the Participant.
"Affiliate" shall mean any "parent corporation" or "subsidiary corporation"
of the Association, as the terms are defined in Section 424(e) and (f),
respectively, of the Internal Revenue Code.
"Association" shall mean Salida Building & Loan Association, and any
successor to its interest.
"Beneficiary" shall mean the person or persons whom a Participant may
designate as the beneficiary of the Participant's Benefits under Articles II and
III. A Participant's election of a Beneficiary shall be made on the Election
Form, shall be revocable by the Participant during his lifetime, and shall be
effective only upon its delivery to an executive officer of the Association and
acceptance by the Board, which acceptance shall be presumed unless, within ten
business days of delivery of the Participant's election, the Board provides the
Participant with a written notice detailing the reasons for its rejection.
"Benefits" shall mean, collectively, the benefits payable under Articles II
and III of the Plan.
"Board" shall mean the Board of Directors of the Association.
"Change in Control" shall mean any of the following events:
(a) When the Association is in the "mutual" form of organization, a
"Change in Control" shall be deemed to have occurred if: (i) as a result of, or
in connection with, any
1
<PAGE>
exchange offer, merger or other business combination, sale of assets or
contested election, any combination of the foregoing transactions, or any
similar transaction, the persons who were Directors of the Association before
such transaction cease to constitute a majority of the Board of Directors of the
Association or any successor to the Association, (ii) the Association transfers
substantially all of its assets to another corporation which is not an Affiliate
of the Association, (iii) the Association sells substantially all of the assets
of an Affiliate which accounted for 50% or more of the controlled group's assets
immediately prior to such sale, (iv) any "person" including a "group",
exclusive of the Board of Directors of the Association or any committee thereof,
is or becomes the "beneficial owner", directly or indirectly, of proxies of the
Association representing twenty-five percent (25%) or more of the combined
voting power of the Association's members, or (v) the Association is merged or
consolidated with another corporation and, as a result of the merger or
consolidation, less than seventy percent (70%) of the outstanding proxies
relating to the surviving or resulting corporation are given, in the aggregate,
by the former members of the Association.
(b) If the Association shall be in the "stock" form of organization, a
"Change in Control" shall mean any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 25% of the voting
stock of the Association or the Holding Company thereof, (ii) the acquisition of
the ability to control the election of a majority of the Association's or the
Company's Directors, (iii) the acquisition of a controlling influence over the
management or policies of the Association or of the Company by any person or by
persons acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), or (iv) during any period of two consecutive
years, individuals (the "Continuing Directors") who at the beginning of such
period constitute the Board of Directors of the Association or of the Company
(the "Existing Board") cease for any reason to constitute at least two-thirds
thereof, provided that any individual whose election or nomination for election
as a member of the Existing Board was approved by a vote of at least two-thirds
of the Continuing Directors then in office shall be considered a Continuing
Director. Notwithstanding the foregoing, the Company's ownership of the
Association shall not of itself constitute a Change in Control for purposes of
the Agreement. For purposes of this paragraph only, the term "person" refers to
an individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
---
occur solely by reason of a transaction in which the Association converts to the
stock form of organization, or creates an independent holding company in
connection therewith. The decision of the Board as to whether a Change in
Control has occurred shall be conclusive and binding.
"Director" shall mean a member of the Board.
"Effective Date" shall mean the date on which the Plan first becomes
effective, as referenced in the opening paragraph of this document.
2
<PAGE>
"Election Form" shall mean the form attached hereto as Exhibit "A".
"Employee" shall mean any person who is employed by the Association.
"Employee Directors" shall mean Lorin D. Smith and Scott G. Erchul.
"Participant" shall mean an individual who serves as a Director of the
Association on or after the Effective Date.
"Plan" shall mean the Salida Building & Loan Association Long-Term
Incentive Plan.
"Safe Performance Factor" shall mean a composite factor derived from an
assessment of specific operating characteristics as determined by the Board, in
its discretion, for each calendar year during the term of this Plan; provided
that said Safe Performance Factor shall in no event be less than 0 or more than
1.2. Attached as Exhibit "B" is the formula that the Board has adopted for the
purpose of making such determination.
"Trust" shall mean the trust created under the Trust Agreement.
"Trust Agreement" shall mean the agreement entered into between the
Association and the Trustee, pursuant to the terms hereof.
"Trustee" shall mean the person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan Assets for the
purposes set forth herein.
ARTICLE II
CREDITS TO ACCOUNTS
-------------------
Non-Employee Directors. Each Participant who is a Non-Employee Director on
the Effective Date shall have his Account credited with an amount equal to the
product of $2,846 and his full years of service as a Director prior to the
Effective Date.
On each June 30 following 1997, each Participant who is a Non-Employee
Director on such date shall have his Account credited with an additional amount
equal to the product of $2,846 and the Safe Performance Factor.
Employee Directors. The Accounts of Employee Directors Smith and Erchul
shall be credited on the Effective Date with an amount equal to $99,684 and
$32,049, respectively. An Employee Director's Account will be credited, on each
June 30 following 1997, which the Employee Director's 65/th/ birthday, with an
additional amount equal to the product of the Annual Credit set forth below and
the Safe Performance Factor, provided the Employee Director continues to be an
employee of the Association on such date.
3
<PAGE>
<TABLE>
<CAPTION>
Director Annual Credit
-------- -------------
<S> <C>
Smith $11,076
Erchul $ 5,342
</TABLE>
Investment Return. Prior to distribution under the terms of the Plan, each
Participant's Account shall be credited with a rate of return, on any amounts
previously credited, equal to the highest rate of interest paid by the
Association on one-year certificates of deposit. Notwithstanding the foregoing,
if the Association converts to stock form, Participants may prospectively elect
between the return of such certificates of deposit and the dividend-adjusted
rate of return on the Association's common stock (or that of its holding
company, as applicable).
Vesting. Amounts credited to Participants' Accounts on the Effective Date
and thereafter shall be fully vested.
Final Year Adjustments. In the event of an Employee Director's disability
or death, his Account shall be credited with an amount equal to the difference
(if any) between (i) 50% of the present value of all benefits which would have
been credited to his Account if he had otherwise remained employed by the
Association to age 65, and (ii) the benefits which are actually credited to his
Account at the time of his termination. If the Employee Director's employment
terminates for any reason other than Just Cause in connection with or following
a Change in Control, his Account shall be credited with an amount equal to the
difference (if any) between (i) 100% of the present value of all benefits which
would have been credited to his Account if he had otherwise remained employed by
the Association to age 65, and (ii) the benefits which are actually credited to
his Account at the time of his termination, subject to applicable "golden
parachute" limitations under (S)280G of the Internal Revenue Code of 1986, as
amended.
ARTICLE III
DISTRIBUTION FROM ACCOUNTS; ELECTION FORMS
------------------------------------------
General Rule. Account balances shall be paid, in cash, in ten equal annual
installments beginning during the first quarter of the calendar year which next
follows the calendar year in which the Participant ceases to be a Director for
any reason, with any subsequent payments being made by the last day of the first
quarter of each subsequent calendar year until the Participant has received the
entire amount of his Account. Notwithstanding the foregoing: (i) a Participant
may elect on his Election Form to have his Account paid in a single lump sum
distribution, or in annual payments over a period of less than ten years, and
(ii) to the extent required under federal banking law, the amounts otherwise
payable to a Participant shall be reduced to the extent that on the date of a
Participant's termination of employment, either (A) the present value of his
Benefits exceeds the limitations that are set forth in Regulatory Bulletin 27a
of the Office of Thrift Supervision, as in effect on the Effective Date, or (B)
such reduction is necessary to avoid subjecting the Association to liability
under Section 280G of the Internal Revenue Code of 1986, as amended.
4
<PAGE>
Death Benefits. If a Participant dies before receiving all Benefits
payable pursuant to the preceding paragraph, then the remaining balance of the
Participant's Account shall be distributed in a lump sum to the Participant's
designated Beneficiary (or estate, in the absence of a validly named or living
Beneficiary) not later than the first day of the second month following the date
of the Participant's death; provided that a Participant may specify on the
Election Form a distribution period that effectuates the annual installment
payments selected by the Participant (with payments made as though the
Participant survived to collect all benefits and retired on the date of his
death if payments had not previously commenced).
Elections. To be effective, a Participant's initial Election Form must be
submitted more than one year before the date on which the Participant first
becomes entitled to receive benefits from the Plan. Elections made pursuant to
this Article III shall be irrevocable, provided that beneficiary designations
made pursuant to executed Election Forms shall be revocable during the
Participant's lifetime and a Participant may, by submitting an effective
superseding Election Form at any time and from time to time, prospectively
change the designated Beneficiary and the manner of payment to a Beneficiary.
ARTICLE IV
SOURCE OF BENEFITS
------------------
General Rule. Benefits shall constitute an unfunded, unsecured promise by
the Association to pay such payments in the future, as and to the extent such
Benefits become payable. Benefits shall be paid from the general assets of the
Association, and no person shall, by virtue of this Plan, have any interest in
such assets, other than as an unsecured creditor of the Association. For any
fiscal year during which a Trust is maintained, (i) the Trustee shall inform the
Board annually prior to the commencement of each fiscal year as to the manner in
which such Trust assets shall be invested, and (ii) the Board shall, as soon as
practicable after the end of each fiscal year of the Association, provide the
Trustee with a schedule specifying the amounts payable to each Participant, and
the date for making such payments.
Change in Control. In the event of a Change in Control, the Association
shall contribute to the Trust an amount sufficient to provide the Trust with
assets having an overall value equivalent to the value of the aggregate Account
balances under the Plan.
ARTICLE V
ASSIGNMENT
----------
Except as otherwise provided by this Plan, it is agreed that neither the
Participant nor his Beneficiary nor any other person or persons shall have any
right to commute, sell, assign, transfer, encumber and pledge or otherwise
convey the right to receive any Benefits hereunder, which Benefits and the
rights thereto are expressly declared to be nontransferable.
5
<PAGE>
ARTICLE VI
NO RETENTION OF SERVICES
------------------------
The Benefits payable under this Plan shall be independent of, and in
addition to, any other compensation payable by the Association to a Participant,
whether in the form of fees, bonus, retirement income under employee benefit
plans sponsored or maintained by the Association or otherwise. This Plan shall
not be deemed to constitute a contract of employment between the Association and
any Participant.
ARTICLE VII
RIGHTS OF DIRECTORS;
--------------------
TERMINATION OR SUSPENSION UNDER FEDERAL LAW
-------------------------------------------
The rights of the Participants and their Beneficiaries under this Plan
shall be (if any) solely those rights of unsecured creditors of the Association.
If the Participant is removed and/or permanently prohibited from participating
in the conduct of the Association's affairs by an order issued under Sections
8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C.
1818(e)(4) or (g)(1)), all obligations of the Association under this Plan shall
terminate, as of the effective date of the order; vested rights of the parties
shall not be affected. If the Association is in default (as defined in Section
3(x)(1) of FDIA), all obligations under this Plan shall terminate as of the date
of default; however, the provisions of this Paragraph shall not affect the
vested rights of the parties.
All obligations under this Plan shall terminate, except to the extent that
continuation of this Plan is necessary for the continued operation of the
Association: (i) by the Director of the Office of Thrift Supervision ("Director
of OTS"), or his designee, at the time that the Federal Deposit Insurance
Corporation ("FDIC") or its successor enters into an agreement to provide
assistance to or on behalf of the Association under the authority set forth in
Section 13(c) of FDIA; or (ii) by the Director of the OTS, or his designee, at
the time that the Director of the OTS, or his designee approves a supervisory
merger to resolve problems related to operation of the Association or when the
Association is determined by the Director of the OTS to be in an unsafe or
unsound condition. Such action shall not affect any vested rights of the
parties.
If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the Participant from
participating in the conduct of the Association's affairs, the Association's
obligations under this Plan shall be suspended as of the date of such service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Association may in its discretion (i) pay the Participant all or
part of the compensation withheld while its contract obligations were suspended,
and (ii) reinstate (in whole or in part) any of its obligations which were
suspended.
6
<PAGE>
ARTICLE VIII
REORGANIZATION
--------------
The Association agrees that it will not merge or consolidate with any other
corporation or organization, or permit its business activities to be taken over
by any other organization, unless and until the succeeding or continuing
corporation or other organization shall expressly assume the rights and
obligations of the Association herein set forth. The Association further agrees
that it will not cease its business activities or terminate its existence, other
than as heretofore set forth in this Paragraph, without having made adequate
provision for the fulfillment of its obligation hereunder.
ARTICLE IX
AMENDMENT AND TERMINATION
-------------------------
The Board may amend or terminate the Plan at any time, provided that no
such amendment or termination shall, without the written consent of an affected
Participant, alter or impair any vested rights of the Participant under the
Plan.
ARTICLE X
STATE LAW
---------
This Plan shall be construed and governed in all respects under and by the
laws of the State of Colorado, except to the extent preempted by federal law.
If any provision of this Plan shall be held by a court of competent jurisdiction
to be invalid or unenforceable, the remaining provisions hereof shall continue
to be fully effective.
ARTICLE XI
HEADINGS; GENDER
----------------
Headings and subheadings in this Plan are inserted for convenience and
reference only and constitute no part of this Plan. This Plan shall be
construed, where required, so that the masculine gender includes the feminine.
ARTICLE XII
INTERPRETATION OF THE PLAN
--------------------------
The Board shall have sole and absolute discretion to administer, construe,
and interpret the Plan, and the decisions of the Board shall be conclusive and
binding on all affected parties, unless such decisions are arbitrary and
capricious.
7
<PAGE>
ARTICLE XIII
LEGAL FEES
----------
In the event any dispute shall arise between a Participant and the
Association as to the terms or interpretation of this Plan, whether instituted
by formal legal proceedings or otherwise, including any action taken by a
Participant to enforce the terms of this Plan or in defending against any action
taken by the Association, the Association shall reimburse the Participant for
all costs and expenses, including reasonable attorneys' fees, arising from such
dispute, proceedings or actions; provided that the Participant shall return such
amounts to the Association if he fails to obtain a final judgment by a court of
competent jurisdiction or obtain a settlement of such dispute, proceedings, or
actions substantially in his favor. Such reimbursements to a Participant shall
be paid within 10 days of the Participant furnishing to the Association written
evidence, which may be in the form, among other things, of a canceled check or
receipt, of any costs or expenses incurred by the Participant. Any such request
for reimbursement by a Participant shall be made no more frequently than at 30
day intervals.
ARTICLE XIV
DURATION OF PLAN
----------------
Unless terminated earlier in accordance with Article IX, this Plan shall
remain in effect during the term of service of the Participants and until all
Benefits payable hereunder have been made.
8
<PAGE>
EXHIBIT 10.6
SALIDA BUILDING & LOAN ASSOCIATION
INCENTIVE COMPENSATION PLAN
___________________
BASIC PLAN DOCUMENT
___________________
<PAGE>
SALIDA BUILDING & LOAN ASSOCIATION
INCENTIVE COMPENSATION PLAN
___________________________
BASIC PLAN DOCUMENT
___________________________
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. General Provisions................................. 1
ARTICLE II. Definitions........................................ 1
ARTICLE III. Eligibility and Participation...................... 4
ARTICLE IV. Benefits........................................... 4
ARTICLE V. Deferred Compensation.............................. 8
ARTICLE VI. Plan Administration................................ 9
ARTICLE VII. Amendment and Termination.......................... 9
ARTICLE VIII. General Provisions................................. 10
</TABLE>
<PAGE>
SALIDA BUILDING & LOAN ASSOCIATION
INCENTIVE COMPENSATION PLAN
___________________
BASIC PLAN DOCUMENT
___________________
ARTICLE I. GENERAL PROVISIONS
1.01 Purpose. This Basic Plan Document and the Adoption Agreement
-------
executed by the Employer together establish the Plan, which is being implemented
and maintained for the purpose of providing select Directors, Key Employees, and
Employees with incentive compensation in the form of Bonuses, Stock Options, and
Restricted Stock in the event the Employer meets certain performance goals
indicative of its profitability and stability in comparison to other financial
institutions in its Peer Group.
1.02 Construction. The Employer intends that the Plan be an unfunded
------------
plan maintained primarily for the purpose of providing Incentive Awards, and
that the Plan not constitute an "employee benefit plan" within the meaning of
---
ERISA. Notwithstanding the foregoing, it is intended that Article V of the Plan
shall be maintained primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees within the
meaning of Section 201(2) of ERISA. The Plan shall be administered, construed,
and interpreted in a manner consistent with the purpose and intent set forth in
this Section.
1.03 Effective Date. The Plan shall become effective on July 1, 1997.
--------------
ARTICLE II. DEFINITIONS
Unless the context clearly requires otherwise, the terms defined in this
Article II shall, for all purposes of this Plan, have the respective meanings
specified in this Article II.
2.01 "Adoption Agreement" means the Adoption Agreement executed by the
------------------
Employer.
2.02 "Basic Plan Document" means this Basic Plan Document associated with
-------------------
the Salida Building & Loan Association Incentive Compensation Plan.
2.03 "Beneficiary" means the person or persons designated as a
-----------
Participant's beneficiary or beneficiaries in accordance with Section 4.07
hereof or a Participant's deferred compensation agreement.
2.04 "Board" means the Employer's Board of Directors.
-----
-1-
<PAGE>
2.05 "Bonus Pool" has the meaning set forth in the Adoption Agreement.
----------
2.06 "Bonuses" mean cash bonuses payable to Participants pursuant to
-------
Section 4.01 hereof.
2.07 "CAMEL Rating" means the most recent CAMEL rating given for its
------------
safety and soundness.
2.08 "Cause" means personal dishonesty, incompetence, willful misconduct,
-----
breach of duty involving personal profits, intentional failure to perform stated
duties, willful violation of a material provision of any law, rule or regulation
(other than traffic violations or similar offense), or a material violation of a
final cease-and-desist order or any other action which results in a substantial
financial loss to the Employer. A determination of "Cause" shall be made by the
Committee within its sole discretion.
2.09 "Change in Control" means (i) in the case of a stock institution,
-----------------
the acquisition of beneficial ownership of 25% or more of any Employer's
outstanding voting stock, and (ii) in the case of a mutual institution, a change
in the Board such that as the result of a merger or other business combination,
the persons who were Directors at any time during the one-year period before the
transaction cease to constitute a majority of the Board of the Employer or its
successor.
2.10 "Code" means the Internal Revenue Code of 1986, as amended from time
----
to time. References to a Code section shall include any comparable section or
sections of future legislation that amends, supplements or supersedes such
section.
2.11 "Committee" means the committee specified in the Adoption Agreement.
---------
In the absence at any time of a duly appointed committee, the Plan shall be
administered by those members of the Employer's Board who are "Non-Employee
Directors" within the meaning of Rule 16b-3.
2.12 "Common Stock" means the common stock identified in the Adoption
------------
Agreement.
2.13 "Compensation" means (i) in the case of an Employee, the Employee's
------------
base salary for the Plan Year, as in effect on the last day of the Plan Year,
and (ii) in the case of a Director who is not an Employee, the total fees that
the Director receives for service on the Board during the Plan Year.
2.14 "CRA" means the rating that the Employer or its primary banking
---
subsidiary receives for compliance with the Community Reinvestment Act, as
amended from time to time, and for any particular Plan Year shall mean the most
recent CRA Rating as of the last day of the Plan Year.
2.15 "Director" means any member of the Board.
--------
-2-
<PAGE>
2.16 "Disability" means a physical or mental condition that is expected
----------
to be of indefinite duration and to substantially impair the ability of a
Participant to fulfill his duties to the Employer.
2.17 "Eligible Director", "Eligible Employee", and "Eligible Key
----------------- ----------------- ------------
Employee" shall have the meaning set forth in the Adoption Agreement.
- --------
2.18 "Employee" means any individual who performs service for any
--------
Employer and who is treated as an employee for payroll tax purposes.
2.19 "Employer" has the meaning set forth in the Adoption Agreement.
--------
2.20 "ERISA" means the Employee Retirement Income Security Act of 1974,
-----
as amended from time to time.
2.21 "Factors" mean, collectively, the factors identified in the Adoption
-------
Agreement as being determinant of the Bonus Pool. When used in the singular,
Factor means any Factor identified in the Adoption Agreement.
- ------
2.22 "Incentive Awards" mean any benefits provided pursuant to Article IV
----------------
hereof, as modified by the Adoption Agreement.
2.23 "Market Value" means the fair market value of a Share on the date of
------------
an Incentive Award, and shall be determined by the Committee in its discretion,
provided that --
(i) if the Common Stock is listed on a national securities exchange
(including the Nasdaq National Market or SmallCap Market), Market Value
means the average of the highest and lowest selling prices on the exchange
on the most recent date on which a sale occurred; and
(ii) if the Common Stock is traded otherwise than on a national
securities exchange but bid and asked prices are available, Market Value
means the average of its bid and asked price on the most recent date on
which there was a bid and asked price.
2.24 "NPA Ratio" means nonperforming loans (loans over 90 days delinquent
---------
and real estate owned) as a percentage of the Employer's total assets as of the
last day of the Plan Year, as determined by the Committee in accordance with
generally accepted accounting principles.
2.25 "Option" a stock option that is granted pursuant to Section 4.03
------
hereof.
2.26 "Participant" means an individual who has received an Incentive Award
-----------
pursuant to Article IV hereof or has made a deferred compensation election
pursuant to Article V hereof.
-3-
<PAGE>
2.27 "Participant Determination Date" has the meaning set forth in the
------------------------------
Adoption Agreement.
2.28 "Peer Group" means the group of publicly traded financial
----------
institutions identified in the Adoption Agreement.
2.29 "Peer Group Adjustment Factor" means with respect to each Factor
----------------------------
other than the NPA Factor, the ratio of the median Factor for the Peer Group for
the current Plan Year to the median Factor for the Peer Group for the
immediately preceding Plan Year, and the converse of this ratio for the NPA
Factor.
2.30 "Plan" means the Employer's Incentive Compensation Plan, as
----
established by the Employer's execution of the Adoption Agreement.
2.31 "Restricted Stock Award" means an award pursuant to Section 4.02
----------------------
hereof.
2.32 "ROAA" means return-on-average assets, as determined by the Committee
----
(i) in accordance with generally accepted accounting principles, and (ii) on a
pre-dividend, pre-loan loss reserve, and pre-Plan payment basis.
2.33 "Safety and Soundness Factor" has the meaning set forth in the
---------------------------
Adoption Agreement.
2.34 "Share" means one share of Common Stock.
-----
2.35 "Year of Service" means the number of full 12-month periods, measured
---------------
from the date of an Incentive Award and each anniversary of that date during
which a Participant has remained in the service of the Employer.
ARTICLE III. ELIGIBILITY AND PARTICIPATION
The Committee shall make determinations of eligibility and participation in
accordance with the Adoption Agreement. The Committee shall have the
discretion, before a new Plan Year begins, to change (i) the employees
participating in the Plan, and/or (ii) the formula for calculating the Bonus
Pool.
ARTICLE IV. BENEFITS
As soon as practicable after the end of the Plan Year, the Committee shall
make the Incentive Awards provided for in this Article IV.
4.01 Bonuses. In accordance with the Adoption Agreement, the Committee
-------
shall determine the Bonuses payable to Eligible Directors, Eligible Employees,
and Eligible Key Employees, and shall promptly notify the Employer of the
Bonuses to be paid to such individuals.
-4-
<PAGE>
Notwithstanding the foregoing, the Committee shall, except under extraordinary
circumstances, proportionately reduce the Bonuses paid hereunder for the Plan
Year to the extent necessary to ensure that the aggregate amount paid as Bonuses
does not jeopardize the status of the Employer (or its primary banking
subsidiary) as a well-capitalized institution.
4.02 Restricted Stock Award. To the extent, if any, required under the
----------------------
Adoption Agreement, the Committee shall make Restricted Stock Awards to Eligible
Directors and Eligible Key Employees, and shall promptly provide each recipient
of an award with a notice thereof.
(a) General Vesting Rule. The Shares subject to a Restricted Stock
Award shall become vested and nonforfeitable according to the schedule set forth
in the Adoption Agreement. The Employer shall deliver to the Committee all
Shares subject to Restricted Stock Awards, and the Committee shall hold such
Shares in escrow until they are transferred to Participants in accordance with
this Section. In this regard, the relationship of the Committee to the Employer
shall be that of agent to principal.
(b) Exception for Change in Control or Termination due to Death or
Disability. Notwithstanding the vesting schedule set forth in the Adoption
Agreement, all Shares subject to a Participant's Restricted Stock Award shall
become fully (100%) vested upon the date of a Change in Control, or the
Participant's termination of service with the Employer due to his death or
Disability. Such Shares shall be transferred to the Participant (or, in the
event of his death, his Beneficiary) as soon as practicable after the event that
accelerates vesting hereunder.
(c) Accrual of Dividends. Whenever the Committee transfers Shares to
a Participant or Beneficiary under this Section, such Participant or Beneficiary
shall also be entitled to receive, with respect to each Share transferred, both
an amount equal to any cash dividends declared and paid between the date the
relevant Restricted Stock Award was initially granted to the Participant and the
date the Shares are being transferred. The Participant shall also receive the
net earnings, if any, that are attributable to any cash dividends so paid out.
(d) Timing of Distributions. The Committee shall transfer the Shares
subject to a Restricted Stock Award to the Participant or his Beneficiary, as
the case may be, as soon as practicable after the later of (i) the date they
have become fully vested and nonforfeitable, or (ii) the date of distribution
that the Participant elects in writing on a form and in a manner that is both
acceptable to the Committee and delivered to the Committee within the 30-day
period after the Participant receives the Restricted Stock Award covering such
Shares. Any election that a Participant makes hereunder shall be irrevocable.
(e) Form of Distribution. Whenever a Participant becomes entitled to
receive Shares in accordance herewith, the Committee shall transfer such Shares,
together with any Shares representing stock dividends, in the form of Common
Stock. One Share of Common Stock shall be given for each Share earned.
Payments representing cash dividends (and earnings thereon) shall be made in
cash.
-5-
<PAGE>
(f) Voting of Shares held in Escrow. After a Restricted Stock Award
has been granted hereunder, the Committee shall vote the Shares subject thereto
in the manner directed by the Board, and otherwise in the manner determined by
the Committee in its sole discretion.
4.03 Stock Options. To the extent, if any, required under the Adoption
-------------
Agreement, the Committee shall grant Options to Eligible Directors and Eligible
Key Employees, and shall promptly provide each recipient of an Option with a
stock option agreement specifying the terms and conditions of the Option;
provided that each Option shall have an exercise price per Share equal to its
Market Value on the date of the grant, shall become exercisable in accordance
with the schedule set forth in the Adoption Agreement, and shall expire on the
earlier of ten years after the date of its grant, and --
(a) two years after a Participant's service with the Employer
terminates due to his death;
(b) immediately upon the Participant's termination of service for
Cause;
(c) three months after a Participant's service with the Employer
terminates for a reason other than death or Cause.
Notwithstanding the provision of any Option which provides for its exercise
in installments, all Options outstanding on the date of a Change in Control
shall become immediately exercisable.
4.04 Revocation for Cause. Notwithstanding anything herein to the
--------------------
contrary, if the Participant is discharged from service with the Employer for
Cause or is discovered after termination of service to have engaged in conduct
that would have justified termination for Cause, the Committee may immediately
revoke, rescind, and terminate any Incentive Award made under this Plan to the
extent a Participant has not collected a Bonus, exercised an Option, or received
Shares upon the vesting of a Restricted Stock Award.
4.05 Duty of the Committee. The Committee shall have no responsibility to
---------------------
Participants other than (i) to inform the Employer, as soon as practicable after
the end of each Plan Year, in writing, as to the Bonuses to be provided, (ii) to
provide Eligible Directors and Eligible Key Employees with stock option
agreements and Restricted Stock Awards, and (iii) to follow such reasonable
directions as the Employer shall make as to the provision of such Incentive
Awards to Participants.
4.06 Minority, Disability, or Incompetency. If any Incentive Award
-------------------------------------
becomes payable or transferable under this Plan to a minor, to a person under
legal disability or to a person not adjudicated incompetent but who the
Committee in its discretion determines to be incapable by reason of illness or
mental or physical disability of managing his financial affairs, the Committee
may direct that such Incentive Award be paid or transferred to the legal
representative or custodian
-6-
<PAGE>
of such person or to any relative or friend of such person, or that such amount
be paid directly for such person's support and maintenance. Payments so made in
good faith shall completely discharge the Committee and the Employer of any and
all obligations and liabilities with respect to such Incentive Awards.
4.07 Designation of Beneficiary. A Participant may file with the Committee
--------------------------
a written designation of a Beneficiary who is to receive his or her vested
benefits in the event of the Participant's death prior to his or her collection
of said benefits. Such designation of Beneficiary may be changed at any time by
written notice to the Committee. The designation last filed with the Committee
shall be controlling. In the event of the death of a Participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of the Participant's death, the Participant's estate shall be deemed to be
the Beneficiary for purposes of this Plan.
4.08 Source of Benefits. To the extent required under the Adoption
------------------
Agreement, the Employer shall pay Bonuses out of its general assets, provided
that the Board may in its discretion establish and fund a grantor trust meeting
the requirements of Revenue Procedure 92-64, as amended or revised from time to
time. Nothing contained in the Plan itself shall constitute, or be treated as,
a trust or create any fiduciary relationship (other than the Committee's
retention of Shares in escrow pursuant to Section 4.02). Except to the extent
provided in Section 4.02, the Employer shall not be under any obligation to
segregate any assets for the purpose of providing Incentive Awards, and no
person or entity which is entitled to payment under the terms of the Plan shall
have any claim, right, security interest, or other interest in any fund, trust,
account, insurance contract, or asset of the Employer. To the extent that a
Participant or any other person acquires a right to receive any Benefit under
the Plan, such right shall be limited to that of a recipient of an unfunded,
unsecured promise to pay amounts in the future and the Participant's (or other
person's) position with respect to such amounts shall be that of a general
unsecured creditor.
4.09 Shares Subject to the Plan. Except as otherwise required hereunder,
--------------------------
the aggregate number of Shares deliverable to Participants pursuant to the Plan
shall not exceed the number of Shares designated in the Adoption Agreement.
Such Shares may either be authorized but unissued Shares or Shares held in
treasury. The number and kind of shares which may be purchased or issued under
the Plan, and the number and kind of shares subject to outstanding Incentive
Awards, shall be equitably adjusted for any increase, decrease, change, or
exchange of Shares for a different number or kind of shares or other securities
of the Company or another company which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock dividend, split-up,
combination of shares, or similar event in which the number or kind of shares is
changed (including a transaction in which the Employer is not the surviving
entity). In addition, the Committee shall have the discretionary authority to
impose on the Shares subject to Incentive Awards such restrictions as the
Committee may deem appropriate or desirable, including but not limited to a
right of first refusal, or repurchase option, or both of these restrictions.
If an Option should expire, become unexercisable or be forfeited for any
reason without having been exercised in full, or if a Restricted Stock Award
should be forfeited for any reason,
-7-
<PAGE>
the Shares subject to such Options or Restricted Stock Award shall, unless the
Plan shall have been terminated, be available for the grant of additional
Options or Restricted Share Awards under the Plan.
ARTICLE V. DEFERRED COMPENSATION
This Article of the Plan establishes a deferred compensation program for
Participants, subject to the terms and conditions provided in this Basic Plan
Document and in the Adoption Agreement. In addition, the terms and conditions
of the Deferred Compensation attached as Exhibit "A" are incorporated herein by
reference, and may not be changed except through affirmative Board action in
accordance with Article VII hereof.
5.01 General Deferral Procedure. In accordance with this Article, the
--------------------------
individuals specified in the Adoption Agreement may elect, within 30 days of
becoming a Participant or in advance of any July 1st, to defer all or any
portion of the fees and/or salary otherwise payable to him from any Employer, in
cash, for any future Plan Year in which the Plan is in effect. Deferred amounts
shall be credited by the Employer at the end of each calendar quarter, in
accordance with the terms of the deferred compensation agreement entered into
between the Participants and the Employer that would otherwise pay the
Participant cash compensation.
The funds so credited quarter-annually shall be credited by the Employer to
a bookkeeping account ("Deferral Account") in the name of each Participant
according to the terms of the Participant's deferred compensation agreement. In
addition to the funds deferred quarter-annually and credited to the Deferral
Accounts of Participants, the Employer shall adjust each Account at the end of
each Plan Year (i) to credit the Participant's Deferral Account with the
appreciation or depreciation that would have occurred if the Deferral Account
had been invested in the manner that the Participant selects in the deferred
compensation agreement from among the measures selected by the Employer in the
Adoption Agreement.
5.02 Distributions to Participants. A Participant's Deferral Account shall
-----------------------------
be paid, in cash, in accordance with those terms set forth in his deferred
compensation agreement which are applicable to the deferred amounts. If a
Participant should die before receiving all deferred compensation benefits
payable under this Article, then such payment(s) shall be made to the
Participant's Beneficiary.
5.03 Agreements. Deferred compensation agreements made hereunder shall be
----------
prospective only and shall be irrevocable with respect to amounts deferred
pursuant thereto, except that a Participant may at any time and from time to
time (i) change the Beneficiary designated therein, (ii) prospectively change
the investment selection applicable to his Deferral Account, and/or (iii) file a
deferred compensation agreement which supersedes a prior deferred compensation
agreement as to amounts deferred on or after the July 1st which coincides with
or next follows execution of the superseding agreement. In addition, a
Participant may at any time
-8-
<PAGE>
file a written notice with the Employer pursuant to which the Participant ceases
future accruals as soon as practicable after the Employer receives such notice.
ARTICLE VI. PLAN ADMINISTRATION
6.01 The Committee. In its sole and absolute discretion, which discretion
-------------
when exercised shall be final and binding on all parties affected thereby, the
Committee shall have the authority and the responsibility to control the
administration and operation of the Plan in accordance with its terms including,
without limiting the generality of the foregoing, the powers and duties: (i) to
interpret, apply, and administer the Plan, to decide all questions of
eligibility, participation, status, benefits, and rights of Participants and
Beneficiaries under the Plan; (ii) to establish and amend such rules and
procedures as it deems necessary or appropriate to the proper administration of
the Plan; (iii) to employ or retain such agents as it deems necessary or
advisable to assist in the administration of the Plan, and to delegate to the
extent permitted by applicable law such powers and duties as it deems necessary
or advisable, (iv) to prepare and file all statements, returns, and reports
required to be filed by the Plan with any agency of government; (v) to comply
with all requirements of applicable state and federal law including applicable
securities, labor, and tax law; and (vi) to perform all functions otherwise
assigned to it under the terms of the Plan.
6.02 Claims Procedure. Claims for Benefits under the Plan shall be filed
----------------
in writing with the Committee. Written notice of the Committee's disposition of
a claim generally shall be furnished to the claimant within 60 days after the
application therefor is filed. However, if special circumstances exist of which
the Committee notifies the claimant within such 60-day period, the Committee may
extend such period to the extent necessary, but in no event beyond 180 days
after the claim is filed. In the event the claim is denied, the reasons for the
denial shall be specifically set forth in writing, pertinent provisions of the
Plan shall be cited and, where appropriate, an explanation as to how the
claimant can perfect the claim will be provided. Any claimant who has been
denied a Benefit shall be entitled, upon request to the Committee, to appeal the
denial of his claim within 60 days following the Committee's determination
described in the preceding sentence. Upon such appeal, the claimant, or his
representative, shall be entitled to examine pertinent documents, submit issues
and comments in writing to the Committee, and meet with the Committee. The
Committee shall review its decision and issue a final decision to the claimant
in writing, generally within 60 days following such appeal. However, if special
circumstances exist of which the Committee notifies the claimant within such 60-
day period, the Committee may extend such period to the extent necessary, but in
no event beyond 120 days following such appeal.
ARTICLE VII. AMENDMENT AND TERMINATION
The Employer, acting by its Board, reserves the right at any time to
terminate or amend the Plan in any manner and for any reason; provided that no
amendment or termination shall, without the consent of the Participant or, if
applicable, the Beneficiary, either (i) adversely affect such Participant's or
Beneficiary's rights with respect to Benefits accrued as of the date of such
-9-
<PAGE>
amendment or termination, or (ii) suspend or terminate the Plan during a Plan
Year without providing for both advance written notice to Participants and the
payment of Benefits for the portion of the Plan Year during which the Plan was
in effect.
ARTICLE VIII. GENERAL PROVISIONS
8.01 Prohibition Against Alienation. Benefits payable to a Participant or
------------------------------
Beneficiary under the terms of this Plan shall not be subject in any manner to
alienation, anticipation, sale, transfer, assignment, pledge, hypothecation,
attachment, receivership, or encumbrance of any kind, nor shall it pass to any
trustee in bankruptcy or be reached or applied by any legal process for the
payment of any obligations of the Participant or Beneficiary, except at such
times and in such manner as provided in this Plan.
8.02 No Enlargement of Employment Rights. Nothing contained in this Plan
-----------------------------------
shall give or be construed as giving any Employee or Director the right to be
retained in the service of any Employer, or shall interfere with the right of
any Employer to discharge or otherwise terminate any Employee's or Director's
service at any time.
8.03 Gender. Whenever any masculine terminology is used in this Plan, it
------
shall be taken to include the feminine, unless the context otherwise indicates.
8.04 Applicable Law. This Plan shall be construed and regulated, and its
--------------
validity and effect and the rights hereunder of all parties interested shall at
all times be determined, in accordance with the laws of the State of Colorado,
except to the extent such state law is preempted by federal law.
8.05 Titles and Headings. The titles and headings included herein are
-------------------
included for convenience only and shall not be construed as in any way affecting
or modifying the text of this Plan, which text shall control.
8.06 Withholding. The Committee and each Employer reserve the right to
-----------
withhold from payments of Bonuses and other Incentive Awards such amounts of
income, payroll, and other taxes as it deems advisable or required, and if the
amount of such cash payment is not sufficient, the Committee or any Employer may
require that the Participant or Beneficiary pay the amount required to be
withheld as a condition of delivering Bonuses or other Incentive Awards.
8.07 Stockholder Approval. The effectiveness of this Plan shall be
--------------------
contingent on its approval by the favorable vote of the holders of the Common
Stock, only to the extent required under federal or state law or the Adoption
Agreement. Any Incentive Awards made prior to the receipt of such approval
shall be contingent thereon. Section 4.01 and Article V of the Plan shall be
effective whether or not the Plan receives stockholder approval.
-10-
<PAGE>
Exhibit "A"
SALIDA BUILDING & LOAN ASSOCIATION
INCENTIVE COMPENSATION PLAN
_______________________________
DEFERRED COMPENSATION AGREEMENT
_______________________________
AGREEMENT, made this ____ day of ________, 199_, by and between
_______________ (the "Participant"), and Salida Building & Loan Association (the
"Employer").
WHEREAS, Salida Building & Loan Association has established the Salida
Building & Loan Association Incentive Compensation Plan (the "Plan"), and the
Participant is eligible to make a deferred compensation election pursuant to
Article V of said Plan;
NOW THEREFORE, it is mutually agreed as follows:
1. The Participant, by the execution hereof, agrees to participate in the
Plan upon the terms and conditions set forth therein, and, in accordance
therewith, makes the following elections:
a. The Participant hereby elects to defer ______ percent (____%) of
the fees/salary and _____ percent (____%) of bonus compensation otherwise earned
from the date of this Agreement forward.
b. Until distributed to the Participant, the amounts deferred
pursuant hereto shall appreciate or depreciate for each Plan Year as though they
were invested as follows:
___% in a fund having the highest interest rate which the Employer
pays on certificates of deposit having a term of one year.
___% in a fund invested in common stock of [holding company].
c. The amounts deferred and any related accumulated income on such
deferrals shall be distributed, in cash, beginning on the first day of the month
following the Participant's _____ termination of service with the Employer,/*/
______ attainment of age ______, OR ______ the later to occur of these events.
d. The Participant hereby elects to have the amount deferred
hereunder and any earnings attributable thereto be distributed as follows:
_____ one lump sum, OR _____ substantially equal annual (____ monthly) payments
over a period of ______ years.
________________
/*/ The Participant shall be treated as having terminated service upon ending
all duties and positions with the Employer (including those of an honorary
director).
<PAGE>
Deferred Compensation Agreement
Page 2
2. The Participant hereby designates _______________________ to be his or
her beneficiary and to receive the balance of any unpaid deferred compensation
and related earnings.
3. With respect to amounts deferred while this Agreement is in effect,
the elections made hereunder shall be irrevocable, except that a Participant may
at any time and from time to time prospectively change (i) the investment
election made in paragraph 1.b. hereof, and (ii) the beneficiary designation
made in paragraph 2 hereof. A Participant may at any time file a new agreement
that supersedes this Agreement with respect to amounts earned from the date of
the superseding agreement forward.
4. The Employer agrees to make payment of the amount due the Participant
in accordance with the terms of the Plan and the elections made by the
Participant herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
PARTICIPANT
___________________________________________
Participant
EMPLOYER
SALIDA BUILDING & LOAN ASSOCIATION
By_________________________________________
Its______________________________________
-2-
<PAGE>
Ex 10.7
SALIDA BUILDING & LOAN ASSOCIATION
--------------------------
Employment Agreement with
Scott G. Erchul
--------------------------
AGREEMENT entered into and effective this_____ day of__________, 1997,
by and between Salida Building & Loan Association (the "Association") and Scott
G. Erchul (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Association
as its Senior Vice President and is experienced in all phases of the business of
the Association; and
WHEREAS, the Board of Directors (the "Board") of the Association
believes it is in the best interests of the Association to enter into this
Agreement with the Employee in order to assure continuity of management of the
Association and to reinforce and encourage the continued attention and
dedication of the Employee to his assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
-------------
When used anywhere in this Agreement, the following terms shall have
the meaning set forth herein.
(a) "Change in Control" shall mean any one of the following
events: (i) the acquisition of ownership, holding or power to vote more than 25%
of the voting stock of the Association or the Holding Company thereof, (ii) the
acquisition of the ability to control the election of a majority of the
Association's or the Company's Directors, (iii) the acquisition of a controlling
influence over the management or policies of the Association or of the Company
by any person or by persons acting as a "group" (within the meaning of Section
13(d) of the Securities Exchange Act of 1934), or (iv) during any period of two
consecutive years, individuals (the "Continuing Directors") who at the beginning
of such period constitute the Board of Directors of the Association or of the
Company (the "Existing Board") cease for any reason to constitute at least
two-thirds thereof, provided that any individual whose election or nomination
for election as a member of the Existing Board was approved by a vote of at
least two-thirds of the Continuing Directors then in office shall be considered
a Continuing Director. For purposes of this paragraph only, the term "person"
refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein.
<PAGE>
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to occur solely by reason of a transaction in which the Association
converts to the stock form of organization, or creates an independent holding
company in connection therewith. The decision of the Board as to whether a
Change in Control has occurred shall be conclusive and binding.
(b) "Company" shall mean High Country Bancorp, Inc.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and as interpreted through applicable rulings and
regulations in effect from time to time.
(d) "Codess.280G Maximum" shall mean the product of 2.99 and
the Employee's "base amount" as defined in Codess.280G(b)(3).
(e) "Disability" shall mean a physical or mental infirmity
which impairs the Employee's ability to substantially perform his duties under
this Agreement and which results in the Employee becoming eligible for long-term
disability benefits under the Association's long-term disability plan (or, if
the Association has no such plan in effect, which impairs the Employee's ability
to substantially perform his duties under this Agreement for a period of 180
consecutive days).
(f) "Effective Date" shall mean the date referenced in the
opening paragraph of this Agreement.
(g) "Good Reason" shall mean any of the following events, which
has not been consented to in advance by the Employee in writing: (i) the
requirement that the Employee move his personal residence, or perform his
principal executive functions, more than 30 miles from his primary office as of
the later of the Effective Date and the most recent voluntary relocation by the
Employee; (ii) a material reduction in the Employee's base compensation under
this Agreement as the same may be increased from time to time; (iii) the failure
by the Association or the Company to continue to provide the Employee with
compensation and benefits provided under this Agreement as the same may be
increased from time to time, or with benefits substantially similar to those
provided to him under any of the employee benefit plans in which the Employee
now or hereafter becomes a participant, or the taking of any action by the
Association or the Company which would directly or indirectly reduce any of such
benefits or deprive the Employee of any material fringe benefit enjoyed by him
under this Agreement; (iv) the assignment to the Employee of duties and
responsibilities materially different from those normally associated with his
position; (v) a failure to reelect the Employee to the Board of Directors of the
Association or the Company, if the Employee has served on such Board at any time
during the term of the Agreement; or (vi) a material diminution or reduction in
the Employee's responsibilities or authority (including reporting
responsibilities) in connection with his employment with the Association.
-2-
<PAGE>
(h) "Just Cause" shall mean, in the good faith determination
of the Association's Board of Directors, the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provision of this
Agreement. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. No act, or failure to
act, on the Employee's part shall be considered "willful" unless he has acted,
or failed to act, with an absence of good faith and without a reasonable belief
that his action or failure to act was in the best interest of the Association
and the Company.
(i) "Protected Period" shall mean the period that begins on the
date six months before a Change in Control and ends on the later of the first
annual anniversary of the Change in Control or the expiration date of this
Agreement.
(j) "Trust" shall mean a grantor trust that is designed in
accordance with Revenue Procedure 92-64 and has a trustee independent of the
Association and the Company.
2. Employment. The Employee is employed as the Senior Vice President
----------
of the Association. The Employee shall render such administrative and management
services for the Association as are currently rendered and as are customarily
performed by persons situated in a similar executive capacity. The Employee
shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Association. The Employee's other duties
shall be such as the Board may from time to time reasonably direct, including
normal duties as an officer of the Association.
3. Base Compensation. The Association agrees to pay the Employee
-----------------
during the term of this Agreement a salary at the rate of $_____ per annum,
payable in cash not less frequently than monthly. The Board shall review, not
less often than annually, the rate of the Employee's salary, and in its sole
discretion may decide to increase his salary.
4. Discretionary Bonuses. The Employee shall participate in an
---------------------
equitable manner with all other senior management employees of the Association
in discretionary bonuses that the Board may award from time to time to the
Association's senior management employees. No other compensation provided for in
this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.
5. Participation in Retirement, Medical and Other Plans.
----------------------------------------------------
(a) The Employee shall be eligible to participate in any of the
following plans or programs that the Association may now or in the future
maintain: group hospitalization, disability, health, dental, sick leave, life
insurance, travel and/or accident insurance, auto allowance/auto lease,
retirement, pension, and/or other present or future qualified or nonqualified
-3-
<PAGE>
plans provided by the Association, generally which benefits, taken as a whole,
must be at least as favorable as those in effect on the Effective Date.
(b) The Employee shall also be eligible to participate in any
fringe benefits which are or may become available to the Association's senior
management employees, including for example: any stock option or incentive
compensation plans, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement. The Employee shall be reimbursed for all reasonable out-of-pocket
business expenses which he shall incur in connection with his services under
this Agreement upon substantiation of such expenses in accordance with the
policies of the Association.
6. Term. The Association hereby employs the Employee, and the
----
Employee hereby accepts such employment under this Agreement, for the period
commencing on the Effective Date and ending 36 months thereafter (or such
earlier date as is determined in accordance with Section 10 or 12 hereof).
Additionally, on each annual anniversary date from the Effective Date, the
Employee's term of employment shall be extended for an additional one-year
period beyond the then effective expiration date, provided the Board determines
in a duly adopted resolution that the performance of the Employee has met the
Board's requirements and standards, and that this Agreement shall be extended.
Only those members of the Board of Directors who have no personal interest in
this Employment Agreement shall discuss and vote on the approval and subsequent
review of this Agreement.
7. Loyalty; Noncompetition.
-----------------------
(a) During the period of his employment hereunder and except
for illnesses, reasonable vacation periods, and reasonable leaves of absence,
the Employee shall devote all his full business time, attention, skill, and
efforts to the faithful performance of his duties hereunder; provided, however,
from time to time, Employee may serve on the boards of directors of, and hold
any other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Association or any of its subsidiaries
or affiliates, or unfavorably affect the performance of Employee's duties
pursuant to this Agreement, or will not violate any applicable statute or
regulation. "Full business time" is hereby defined as that amount of time
usually devoted to like companies by similarly situated executive officers.
During the term of his employment under this Agreement, the Employee shall not
engage in any business or activity contrary to the business affairs or interests
of the Association.
(b) Nothing contained in this Section shall be deemed to
prevent or limit the Employee's right to invest in the capital stock or other
securities of any business dissimilar from that of the Association, or, solely
as a passive or minority investor, in any business.
8. Standards. The Employee shall perform his duties under this
---------
Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Association will provide Employee with the
working facilities and staff customary for similar executives and necessary for
him to perform his duties.
-4-
<PAGE>
9. Vacation and Sick Leave. At such reasonable times as the Board
-----------------------
shall in its discretion permit, the Employee shall be entitled, without loss of
pay, to absent himself voluntarily from the performance of his employment under
this Agreement, all such voluntary absences to count as vacation time, provided
that:
(a) The Employee shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management employees of the Association.
(b) The Employee shall not receive any additional compensation
from the Association on account of his failure to take a vacation or sick leave,
and the Employee shall not accumulate unused vacation or sick leave from one
fiscal year to the next, except in either case to the extent authorized by the
Board.
(c) In addition to the aforesaid paid vacations, the Employee
shall be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Association for such additional periods
of time and for such valid and legitimate reasons as the Board may in its
discretion determine. Further, the Board may grant to the Employee a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual
sick leave benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12 hereof, the
-------------------------------
Employee's employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this Agreement shall
terminate upon his death during the term of this Agreement, in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which his death occurred.
(b) Disability. (1) The Association may terminate the
Employee's employment after having established the Employee's Disability, in
which event the Employee shall be entitled to the compensation and benefits
provided for under this Agreement for (i) any period during the term of this
Agreement and prior to the establishment of the Employee's Disability during
which the Employee is unable to work due to the physical or mental infirmity,
and (ii) any period of Disability which is prior to the Employee's termination
of employment pursuant to this Section 10(b); provided that any benefits paid
pursuant to the Association's long term disability plan will continue as
provided in such plan without reduction for payments made pursuant to this
-------
Agreement.
-5-
<PAGE>
(2) During any period that the Employee shall receive
disability benefits and to the extent that the Employee shall be physically and
mentally able to do so, he shall furnish such information, assistance and
documents so as to assist in the continued ongoing business of the Association
and, if able, shall make himself available to the Association to undertake
reasonable assignments consistent with his prior position and his physical and
mental health. The Association shall pay all reasonable expenses incident to the
performance of any assignment given to the Employee during the disability
period.
(c) Just Cause. The Board may, by written notice to the
Employee, immediately terminate his employment at any time, for Just Cause. The
Employee shall have no right to receive compensation or other benefits for any
period after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. The Board may,
by written notice to the Employee, immediately terminate his employment at any
time for a reason other than his Disability or Just Cause, in which event the
Employee shall be entitled to receive the following compensation and benefits
(unless such termination occurs during the Protected Period, in which event the
benefits and compensation provided for in Section 12 shall apply): (i) the
salary provided pursuant to Section 3 hereof, up to the expiration date of this
Agreement, including any renewal term (the "Expiration Date"), plus said salary
for an additional 12-month period, and (ii) at the Employee's election either
(A) cash in an amount equal to the cost to the Employee of obtaining all health,
life, disability and other benefits which the Employee would have been eligible
to participate in through the Expiration Date based upon the benefit levels
substantially equal to those that the Association provided for the Employee at
the date of termination of employment or (B) continued participation under such
Association benefit plans through the Expiration Date, but only to the extent
the Employee continues to qualify for participation therein. All amounts payable
to the Employee shall be paid, at the option of the Employee, either (I) in
periodic payments through the Expiration Date, or (II) in one lump sum within
ten days of such termination.
(e) Good Reason. The Employee shall be entitled to receive the
compensation and benefits payable under subsection 10(d) hereof in the event
that the Employee voluntarily terminates employment within 90 days of an event
that constitutes Good Reason, (unless such voluntary termination occurs during
the Protected Period, in which event the benefits and compensation provided for
in Section 12 shall apply).
(f) Termination or Suspension Under Federal Law. (1) If the
Employee is removed and/or permanently prohibited from participating in the
conduct of the Association's affairs by an order issued under Sections 8(e)(4)
or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4)
and (g)(1)), all obligations of the Association under this Agreement shall
terminate, as of the effective date of the order, but vested rights of the
parties shall not be affected.
(2) If the Association is in default (as defined in
Section 3(x)(1) of FDIA), all obligations under this Agreement shall terminate
as of the date of default; however, this Paragraph shall not affect the vested
rights of the parties.
-6-
<PAGE>
(3) If a notice served under Section 8(e)(3) or (g)(1) of
the FDIA (12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits
the Employee from participating in the conduct of the Association's affairs, the
Association's obligations under this Agreement shall be suspended as of the date
of such service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Association may in its discretion (i) pay the Employee
all or part of the compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.
(4) Any payments made to the Employee pursuant to this
Agreement, or otherwise, are subject to and conditioned upon their compliance
with both 12 U.S.C. Section 1828(k) and any regulations promulgated thereunder,
and Regulatory Bulletin 27A, but only to the extent required thereunder on the
date any payment is required pursuant to this Agreement.
(g) Voluntary Termination by Employee. Subject to Section 12
hereof, the Employee may voluntarily terminate employment with the Association
during the term of this Agreement, upon at least 90 days' prior written notice
to the Board of Directors, in which case the Employee shall receive only his
compensation, vested rights and employee benefits up to the date of his
termination (unless such termination occurs pursuant to Section 10(d) hereof or
within the Protected Period, in Section 12(a) hereof, in which event the
benefits and compensation provided for in Sections 10(d) or 12, as applicable,
shall apply).
(h) Post-termination Health Insurance. If the Employee's
employment terminates with the Association or the Company for any reason other
than Just Cause, the Employee shall be entitled to purchase from the
Association, at the Employee's own expense which shall not exceed applicable
COBRA rates, family medical insurance under any group health plan that the
Association or the Company maintains for its employees. This right shall be (i)
in addition to, and not in lieu of, any other rights that the Employee has under
this Agreement, and (ii) shall continue until the Employee first becomes
eligible for participation in Medicare.
11. No Mitigation. The Employee shall not be required to mitigate the
-------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.
12. Change in Control.
-----------------
(a) Trigger Events. The Employee shall be entitled to collect
the severance benefits set forth in Subsection (b) hereof in the event that
either (i) the Employee voluntarily terminates employment for any reason within
the 30-day period beginning on the date of a Change in Control, (ii) the
Employee voluntarily terminates employment within 90 days of an event that both
occurs during the Protected Period and constitutes Good Reason, or (iii) the
Association or the Company or their successor(s) in interest terminate the
Employee's employment without his written consent and for any reason other than
Just Cause during the Protected Period.
-7-
<PAGE>
(b) Amount of Severance Benefit. If the Employee becomes
entitled to collect severance benefits pursuant to Section 12(a) hereof, the
Association shall pay the Employee a severance benefit equal to the difference
between the Code ss.280G Maximum and the sum of any other "parachute payments"
as defined under Code ss.280G(b)(2) that the Employee receives on account of the
Change in Control.
The amount payable under this Section 12(b) shall be paid either (i) in
one lump sum within ten days of the later of the date of the Change in Control
and the Employee's last day of employment with the Association or the Company,
or (ii) if prior to the date which is 90 days before the date on which a Change
in Control occurs, the Employee filed a duly executed irrevocable written
election in the form attached hereto as Exhibit "A", payment of such amount
shall be made according to the elected schedule. Deferred amounts shall bear
interest from the date on which they would otherwise be payable until the date
paid at a rate equal to 120% of the applicable federal rate, compounded
semiannually, as determined under Code Section 1274(d) and the regulations
thereunder.
In the event that the Employee, the Association, and the Company
jointly agree that the Employee has collected an amount exceeding the Code
ss.280G Maximum, the parties may agree in writing that such excess shall be
treated as a loan ab initio, which the Employee shall repay to the Association,
---------
on terms and conditions mutually agreeable to the parties, together with
interest at the applicable federal rate provided for in Section 7872(f)(2)(B) of
the Code.
(c) Funding of Grantor Trust upon Change in Control. Not later
than ten business days after a Change in Control, the Association shall (i)
deposit in a Trust an amount equal to the Code ss.280G Maximum, unless the
Employee has previously provided a written release of any claims under this
Agreement, and (ii) provide the trustee of the Trust with a written direction to
hold said amount and any investment return thereon in a segregated account for
the benefit of the Employee, and to follow the procedures set forth in the next
paragraph as to the payment of such amounts from the Trust. Upon the later of
the Trust's final payment of all amounts payable to the Employee under Section
12(b) of this Agreement or the date 90 days following the expiration of the
Protected Period, the trustee of the Trust shall pay to the Association the
entire balance remaining in the segregated account maintained for the benefit of
the Employee. The Employee shall thereafter have no further interest in the
Trust.
Prior to the date which is 90 days following the expiration of the
Protected Period, the Employee may provide the trustee of the Trust with a
written notice requesting that the trustee pay to the Employee an amount
designated in the notice as being payable pursuant to this Agreement. Within
three business days after receiving said notice, the trustee of the Trust shall
send a copy of the notice to the Association via overnight and registered mail
return receipt requested. Unless prior to the tenth (10th) business day after
mailing said notice to the Association, the Association provides the trustee
with a written notice directing the trustee to withhold payment, on such date
the trustee of the Trust shall pay the Employee the amount designated therein
according to the schedule elected by the Employee pursuant to Section 12(b)
hereof, or in the absence of such an election, payment shall be made
immediately. In the event the Association directs the trustee to
-8-
<PAGE>
withhold payment, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Employee pursuant
to this Agreement, and the costs of such arbitration shall be paid by the
Association. The trustee shall choose the arbitrator to settle the dispute, and
such arbitrator shall be bound by the rules of the American Arbitration
Association in making his determination. The parties and the trustee shall be
bound by the results of the arbitration and, within 3 days of the determination
by the arbitrator, the trustee shall pay from the Trust the amounts required to
be paid to the Employee and/or the Association, and in no event shall the
trustee be liable to either party for making the payments as determined by the
arbitrator.
13. Indemnification. The Association and the Company agree that their
---------------
respective Bylaws shall continue to provide for indemnification of directors,
officers, employees and agents of the Association and the Company, including the
Employee during the full term of this Agreement, and to at all times provide
adequate insurance for such purposes.
14. Reimbursement of Employee for Enforcement Proceedings. In the
-----------------------------------------------------
event that any dispute arises between the Employee and the Association as to the
terms or interpretation of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action that the Employee takes to defend
against any action taken by the Association or the Company, the Employee shall
be reimbursed for all costs and expenses, including reasonable attorneys' fees,
arising from such dispute, proceedings or actions, provided that the Employee
obtains either a written settlement or a final judgement by a court of competent
jurisdiction substantially in his favor. Such reimbursement shall be paid within
ten days of Employee's furnishing to the Association written evidence, which may
be in the form, among other things, of a cancelled check or receipt, of any
costs or expenses incurred by the Employee.
15. Federal Income Tax Withholding. The Association may withhold all
------------------------------
federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation or
ruling.
16. Successors and Assigns.
----------------------
(a) Association. This Agreement shall not be assignable by the
Association, provided that this Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Association which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Association.
(b) Employee. Since the Association is contracting for the
unique and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating his rights or duties hereunder without first obtaining
the written consent of the Association; provided, however, that nothing in this
paragraph shall preclude (i) the Employee from designating a beneficiary to
receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Employee or his estate
from assigning any rights hereunder to the person or persons entitled thereunto.
-9-
<PAGE>
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement shall be
----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by Federal law, the
--------------
laws of the State of Colorado shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
19. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. Entire Agreement. This Agreement, together with any understanding
----------------
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement between the parties hereto and shall supersede
any prior agreement between the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
ATTEST: SALIDA BUILDING & LOAN ASSOCIATION
By:
- --------------------------- -------------------------------
Secretary Its Chairman of the Board
WITNESS:
- --------------------------- ----------------------------------
Scott G. Erchul
-10-
<PAGE>
Ex 10.8
HIGH COUNTRY BANCORP, INC.
--------------------------
Guaranty Agreement
--------------------------
THIS AGREEMENT is entered into this day ____ of __________, 1997 (the
"Effective Date"), by and between High Country Bancorp, Inc. (the "Company") and
Scott G. Erchul (the "Employee").
WHEREAS, the Employee has heretofore been employed by Salida Building &
Loan Association (the "Association") as its Senior Vice President, and has
entered into an agreement (the "Association Agreement") dated _______________,
1997, with the Employee; and
WHEREAS, the Board of Directors (the "Board") of the Company believes
it is in the best interests of the Company to enter into this Agreement with the
Employee in order to assure continuity of management of the Association and to
reinforce and encourage the long-term retention of the Employee; and
WHEREAS, the parties desire by this writing to set forth the Company's
commitment to guarantee the Association's obligations under the Association
Agreement with the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Consideration from Company: Joint and Several Liability. The
-------------------------------------------------------
Company hereby agrees that to the extent permitted by law, it shall be jointly
and severally liable with the Association for the payment of all amounts due
under the Association Agreement, provided that Section 10(f) of the Association
Agreement shall be innaplicable to this Agreement. The Board may in its
discretion at any time during the term of this Agreement agree to pay the
Employee a base salary for the remaining term of this Agreement. If the Board
agrees to pay such salary, the Board shall thereafter review, not less often
than annually, the rate of the Employee's salary, and in its sole discretion may
decide to increase his salary.
2. Discretionary Bonuses; Participation in Retirement, Medical and
---------------------------------------------------------------
Other Plans. The Employee shall participate in an equitable manner with all
- -----------
other senior management employees of the Company in discretionary bonuses that
the Board may award from time to time to the Company's senior management
employees, as well as in (i) any of the following plans or programs that the
Company may now or in the future maintain: group hospitalization, disability,
health, dental, sick leave, life insurance, travel and/or accident insurance,
auto allowance/auto lease, retirement, pension, and/or other present or future
qualified plans provided by the Company, generally which benefits, taken as a
whole, must be at least as favorable as those in effect on the Effective Date;
and (ii) any fringe benefits which are or may become available to
<PAGE>
the Company's senior management employees, including for example: any stock
option or incentive compensation plans, and any other benefits which are
commensurate with the responsibilities and functions to be performed by the
Employee under this Agreement.
3. Indemnification. The Company agrees that its Bylaws shall continue
---------------
to provide for indemnification of directors, officers, employees and agents of
the Company, including the Employee, during the full term of this Agreement, and
to at all times provide adequate insurance for such purposes.
4. Successors and Assigns.
----------------------
(a) Company. This Agreement shall inure to the benefit of and
be binding upon any corporate or other successor of the Company which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Company.
(b) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
5. Amendments. No amendments or additions to this Agreement shall be
----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
6. Applicable Law. Except to the extent preempted by Federal law, the
--------------
laws of the State of Colorado shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
7. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
8. Entire Agreement. This Agreement, together with any understanding
----------------
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement between the parties hereto.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
ATTEST: HIGH COUNTRY BANCORP, INC.
By
- --------------------------- ---------------------------
Secretary Its Chairman of the Board
WITNESS:
- --------------------------- -----------------------------
Scott G. Erchul
-3-
<PAGE>
Exhibit 23.1
[LETTERHEAD OF GRIMSLEY, WHITE & COMPANY APPEARS HERE]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
As the independent certified public accountant of Salida Building and Loan
Association, we hereby consent to the use of our report and to all references to
our Firm included in or made part of this Registration Statement.
August 21, 1997
/s/ Grimsley, White & Company
Grimsley, White & Company
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF FERGUSON AND COMPANY APPEARS HERE]
AUGUST 21, 1997
BOARD OF DIRECTORS
SALIDA BUILDING AND LOAN ASSOCIATION
130 WEST 2ND STREET
SALIDA, COLORADO 81201
DIRECTORS:
We hereby consent to the use of our firm's name in the Form AC Application
for Conversion of Salida Building and Loan Association, Salida, Colorado, and
any amendments thereto, and in the Form SB-2 Registration Statement of High
Country Bancorp, Inc., and any amendments thereto. We also hereby consent to
the inclusion of, summary of, and references to our Appraisal Report and our
opinion concerning subscription rights in such filings including the Prospectus
of High Country Bancorp, Inc.
Sincerely,
Robin L. Fussell
Principal
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 894,995
<INT-BEARING-DEPOSITS> 2,381,315
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 5,339,762
<INVESTMENTS-MARKET> 5,412,136
<LOANS> 63,126,864
<ALLOWANCE> 604,000
<TOTAL-ASSETS> 76,324,102
<DEPOSITS> 56,152,178
<SHORT-TERM> 9,500,000
<LIABILITIES-OTHER> 693,704
<LONG-TERM> 4,020,000
0
0
<COMMON> 0
<OTHER-SE> 5,958,220
<TOTAL-LIABILITIES-AND-EQUITY> 76,324,102
<INTEREST-LOAN> 5,249,291
<INTEREST-INVEST> 430,557
<INTEREST-OTHER> 84,302
<INTEREST-TOTAL> 5,764,150
<INTEREST-DEPOSIT> 2,179,408
<INTEREST-EXPENSE> 2,813,331
<INTEREST-INCOME-NET> 2,950,819
<LOAN-LOSSES> 282,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,755,253
<INCOME-PRETAX> 55,501
<INCOME-PRE-EXTRAORDINARY> 55,501
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,416
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 8.02
<LOANS-NON> 140,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 96,000
<RECOVERIES> 7,000
<ALLOWANCE-CLOSE> 604,000
<ALLOWANCE-DOMESTIC> 604,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
EX 99.1
THE SALIDA BUILDING AND LOAN ASSOCIATION
130 West 2nd Street
Salida, Colorado 81201
(719) 539-2516
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of The Salida Building and Loan Association (the "Association") will
be held at the Association's office located at 130 West 2nd Street, Salida,
Colorado, on _________, 1997 at __:__ _.m. Business to be taken up at the
Special Meeting shall be:
(1) To consider and vote upon the adoption of a Plan of Conversion
providing for the conversion of the Association from a
federally chartered mutual savings and loan association to a
federally chartered stock savings and loan association (the
"Converted Association") as a wholly owned subsidiary of High
Country Bancorp, Inc., a newly organized Colorado corporation
formed by the Association for the purpose of becoming the
holding company for the Association, and the related
transactions provided for in such plan, including the adoption
of an amended Federal Stock Charter and Bylaws for the
Converted Association pursuant to the laws of the United
States and the Rules and Regulations administered by the
Office of Thrift Supervision.
(2) To consider and vote upon any other matters that may lawfully
come before the Special Meeting.
Note: As of the date of mailing of this Notice of Special Meeting of
Members, the Board of Directors is not aware of any other
matters that may come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those
members of the Association at the close of business on _________, 1997, who
continue as members until the Special Meeting and, should the Special Meeting
be, from time to time, adjourned to a later time, until the final adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Richard A. Young
Secretary
, 1997
- --------------
Salida, Colorado
--------------
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS PROXY
MATERIAL AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL
MEETING, TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS
POSSIBLE TO ASSURE THAT YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU
FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE>
THE SALIDA BUILDING AND LOAN ASSOCIATION
130 West 2nd Street
Salida, Colorado 81201
(719) 539-2516
PROXY STATEMENT
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF
DIRECTORS OF SALIDA BUILDING AND LOAN ASSOCIATION FOR USE AT A SPECIAL MEETING
OF ITS MEMBERS TO BE HELD ON , 1997 AND ANY ADJOURNMENT OF THAT
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MEETING, FOR THE PURPOSES SET FORTH IN THE FOREGOING NOTICE OF SPECIAL MEETING.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR THE PLAN OF CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A Special Meeting of Members (the "Special Meeting") of The Salida
Building and Loan Association (the "Association") will be held at the
Association's office located at 130 West 2nd Street, Salida, Colorado on
_________, ___________, 1997, at __:__ _.m., local time, for the purpose of
considering and voting upon a Plan of Conversion (the "Plan"), which was
unanimously adopted by the Association's Board of Directors and which, if
approved by a majority of the total votes eligible to be cast by the members,
will permit the Association to convert from a federal mutual savings and loan
association to a federal stock savings and loan association (the "Converted
Association") as a wholly owned subsidiary of High Country Bancorp, Inc. (the
"Company"), a Colorado corporation formed by the Association for the purpose of
becoming the holding company for the Association. The conversion of the
Association to the Converted Association, the acquisition of control of the
Converted Association by the Company and the issuance and sale of the Company's
common stock, par value $.01 per share (the "Common Stock") are collectively
referred to herein as the "Conversion." The Conversion is contingent upon the
members' approval of the Plan at the Special Meeting or any adjournment thereof.
The Plan provides in part that after receiving final authorization from
the Office of Thrift Supervision ("OTS"), the Company will offer for sale shares
of its Common Stock through the issuance of nontransferable subscription rights,
first to depositors as of December 31, 1995, with $50.00 or more on deposit in
the Association on that date ("Eligible Account Holders"), second to the
Company's Employee Stock Ownership Plan (the "ESOP") (a tax-qualified employee
stock benefit plan of the Company, as defined in the Plan), third to depositors
with $50.00 or more on deposit in the Association on September 30, 1997, the
last day of the calendar quarter preceding approval of the Plan by the OTS
("Supplemental Eligible Account Holders"), and fourth to other members entitled
to vote at the Special Meeting ("Other Members") (the "Subscription Offering").
Subscription rights received in any of the foregoing categories will be
subordinated to the subscription rights of those in a prior category, with the
exception that any shares of Common Stock sold in excess of the high end of the
estimated value range as established in an independent appraisal, as discussed
below, may be first sold to the ESOP. The Company may offer any shares remaining
after the Subscription Offering to certain members of the general public in a
community offering (the "Community Offering"). In the Community Offering,
preference will be given to natural persons and trusts of natural persons who
are permanent residents of Chaffee, Lake, Fremont and Saguache Counties in
Colorado (the "Local Community"). Any shares of Common Stock not purchased in
the Subscription and Community Offerings may be sold as part of a community
offering on a best efforts basis by a selling group of selected broker-dealers
to be managed by Trident Securities, Inc. (the "Syndicated Community Offering").
The aggregate price of the Common Stock to be issued by the Company under the
Plan is currently estimated to be between $7,650,000 and $10,350,000, subject to
adjustment, as determined by an independent appraisal of the Association's
estimated pro forma market value as converted and as a wholly owned subsidiary
of the Company. See "The Conversion -- Stock Pricing and Number of Shares to be
Issued" in the accompanying Prospectus.
<PAGE>
Adoption of the proposed Charter and Bylaws of the Converted
Association is an integral part of the Plan. Copies of the Plan and the proposed
Charter and Bylaws for the Converted Association are attached to this Proxy
Statement as exhibits. These documents provide, among other things, for the
termination of voting rights of members and creation of their rights to receive
any surplus remaining in the event of liquidation of the Association. These
rights, except for the rights of Eligible Account Holders and Supplemental
Eligible Account Holders in the liquidation account established for their
benefit upon completion of the Conversion, will vest exclusively in the Company
as the sole holder of the Converted Association's outstanding capital stock. For
further information, see "The Conversion -- Effect of Conversion to Stock Form
on Depositors and Borrowers of the Association" in the accompanying Prospectus.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE ASSOCIATION UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" APPROVAL OF THE PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN
OF CONVERSION WILL NOT OBLIGATE ANY PERSON TO PURCHASE STOCK.
---
The Conversion will be accomplished through adoption of a new Charter
and Bylaws to authorize the issuance of capital stock by the Association to the
Company. Under the Plan, up to 1,035,000 shares of the Common Stock, subject to
adjustment, are being offered for sale by the Company. Upon completion of the
Conversion, the Converted Association will issue all of its newly issued shares
of capital stock (100,000 shares) to the Company in exchange for at least 50% of
the net proceeds of the Conversion. None of the Association's assets will be
distributed in order to effect the Conversion other than to pay expenses
incident thereto.
The net proceeds from the sale of Common Stock in the Conversion will
substantially increase the Association's capital, which will increase the amount
of funds available for lending and investment, and support current operations
and the continued growth of the Association's business. The holding company
structure will provide greater flexibility than the Association alone would have
for diversification of business activities and geographic operations. Management
believes that this increased capital and operating flexibility will enable the
Association to compete more effectively with other savings institutions and
other types of financial service organizations. Management also believes that
the Conversion will enhance the future access of the Company and the Converted
Association to the capital markets.
HIGH COUNTRY BANCORP, INC.
High Country Bancorp, Inc. was incorporated under the laws of the State
of Colorado in August 1997 at the direction of the Board of Directors of the
Association for the purpose of serving as a savings and loan holding company of
the Converted Association upon the acquisition of all of the capital stock
issued by the Converted Association in the Conversion. The Company has received
approval from the OTS to acquire control of the Converted Association, subject
to satisfaction of certain conditions. Prior to the Conversion, the Company has
not engaged and will not engage in any material operations. Upon consummation of
the Conversion, the Company will have no significant assets other than the
outstanding capital stock of the Converted Association, up to 50% of the net
proceeds of the Conversion (after deducting amounts infused into the Association
and used to fund the ESOP) and a note receivable from the ESOP. Upon
consummation of the Conversion, the Company's principal business will be
overseeing the business of the Converted Association and investing the portion
of the net Conversion proceeds retained by it, and the Company will register
with the OTS as a savings and loan holding company.
As a holding company, the Company will have greater flexibility than
the Association to diversify its business activities through existing or newly
formed subsidiaries or through acquisition or merger with other financial
institutions, although the Company currently does not have any plans,
agreements, arrangements or understandings with respect to any such acquisitions
or mergers. After the Conversion, the Company will be classified as a unitary
savings and loan holding company and will be subject to regulation by the OTS.
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The Company's executive offices are located at 130 West 2nd Street,
Salida, Colorado 81201, and its main telephone number is (719) 539-2516.
THE SALIDA BUILDING AND LOAN ASSOCIATION
The Association is a federal mutual savings and loan association
operating through offices located in Salida, Colorado, Buena Vista, Colorado and
Leadville, Colorado and serving Chaffee, Lake, Fremont and Saguache Counties in
Colorado. The Association was chartered in 1886 as the first state-chartered
building and loan association in Colorado. The Association received federal
insurance of its deposit accounts and became a member of the FHLB in 1937. The
Association became a federally-chartered association on August 16, 1993 under
its current name of Salida Building and Loan Association. At June 30, 1997, the
Association had total assets of $76.3 million, loans receivable (net) of $63.1
million, total deposits of $561 million and equity of $6.0 million.
Historically, the Association has operated as a traditional savings
institution by emphasizing the origination of loans secured by one- to
four-family residences. Since fiscal 1996, the Association has significantly
increased its origination of consumer, commercial business and commercial real
estate loans, including loans for the purchase and development of raw land, all
of which loans have been originated in its market area. For more information,
see "Risk Factors -- Risks Posed by Certain Lending Activities" and "Business of
the Association" in the accompanying Prospectus.
The Association is subject to examination and comprehensive regulation
by the OTS, and the Association's savings deposits are insured up to applicable
limits by the SAIF, which is administered by the FDIC. The Association is a
member of and owns capital stock in the FHLB of Topeka, which is one of 12
regional banks in the FHLB System. The Association is further subject to
regulations of the Federal Reserve Board governing reserves to be maintained and
certain other matters. Regulations significantly affect the operations of the
Association. See "Regulation -- Depository Institution Regulation" in the
accompanying Prospectus.
The Association's executive offices are located at 130 West 2nd Street,
Salida, Colorado 81201, and its main telephone number is (719) 539-2516.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Association has fixed the close of
business on _________, 1997 as the record date (the "Voting Record Date") for
the determination of members entitled to notice of and to vote at the Special
Meeting. All holders of the Association's deposits or other authorized accounts
are members of the Association under its current mutual charter. Borrowers as of
___________, 1997, the date of the Association's adoption of its present federal
mutual charter, are members of the Association for as long as such borrowings
are in existence. However, persons who had borrowings at such date but who no
longer had such borrowings on the Voting Record Date, as well as persons who
became borrowers after such date, are not members of the Association. All
members of record as of the close of business on the Voting Record Date who
continue as such until the date of the Special Meeting will be entitled to vote
at the Special Meeting or any adjournment thereof.
Each depositor member will be entitled at the Special Meeting to cast
one vote for each $100, or fraction thereof, of the aggregate withdrawal value
of all of his savings accounts in the Association as of the Voting Record Date.
Borrower members will be entitled to one vote at the Special Meeting in addition
to any votes such borrower member may have as a result of being a depositor in
the Association. No member may cast more than 1,000 votes.
Approval of the Plan to be presented at the Special Meeting will
require the affirmative vote of at least a majority of the total outstanding
votes of the Association's members eligible to be cast at the Special Meeting.
As of the Voting Record Date for the Special Meeting, there were approximately
_______ votes eligible to be cast, of which _____ votes constitute a majority.
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Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. All properly executed proxies received by the Association
will be voted in accordance with the instructions indicated thereon by the
members giving such proxies. If no contrary instructions are given, such proxies
will be voted in favor of the Plan. If any other matters are properly presented
before the Special Meeting and may properly be voted upon, the proxies solicited
hereby will be voted on such matters by the proxy holders named therein as
directed by the Board of Directors of the Association. Valid, previously
executed general proxies, which typically are obtained from members when they
open their accounts at the Association, will not be used to vote for approval of
the Plan of Conversion, even if the respective members do not execute another
proxy or attend the Special Meeting and vote in person. Any member giving a
proxy will have the right to revoke his proxy at any time before it is voted by
delivering written notice or a duly executed proxy bearing a later date to the
Secretary of the Association, provided that such written notice is received by
the Secretary prior to the Special Meeting or any adjournment thereof, or by
attending the Special Meeting and voting in person. Attendance at the Special
Meeting, by itself, will not be sufficient to revoke a proxy.
FAILURE TO RETURN AN EXECUTED PROXY FOR THE SPECIAL MEETING OR TO
ATTEND THE SPECIAL MEETING AND VOTE IN PERSON WOULD HAVE THE SAME EFFECT AS
VOTING AGAINST THE CONVERSION.
Proxies may be solicited by officers, directors or other employees of
the Association, in person, by telephone or through other forms of
communication. Such persons will be reimbursed by the Association only for their
expenses incurred in connection with such solicitation.
The proxies solicited hereby will be used only at the Special Meeting
and at any adjournment thereof; they will not be used at any other meeting.
DESCRIPTION OF PLAN OF CONVERSION
The OTS has approved the Plan, subject to the Plan's approval by the
members of the Association entitled to vote on the matter and subject to the
satisfaction of certain other conditions imposed by the OTS in its approval.
Approval by the OTS, however, does not constitute a recommendation or
endorsement of the Plan.
Effect of Conversion to Stock Form on Depositors and Borrowers of the
Association
General. Each depositor in a mutual savings institution such as the
Association has both a deposit account and a pro rata interest in the retained
earnings of that institution based upon the balance in his or her deposit
account. However, this interest is tied to the depositor's account and has no
tangible market value separate from such deposit account. Any other depositor
who opens a deposit account obtains a pro rata interest in the retained earnings
of the institution without any additional payment beyond the amount of the
deposit. A depositor who reduces or closes his or her account receives a portion
or all of the balance in the account but nothing for his or her ownership
interest, which is lost to the extent that the balance in the account is
reduced.
Consequently, depositors normally do not have a way to realize the
value of their ownership, which has realizable value only in the unlikely event
that the mutual institution is liquidated. In such event, the depositors of
record at that time, as owners, would share pro rata if any residual retained
earnings remained, after other claims are paid.
Upon consummation of the Conversion, permanent nonwithdrawable capital
stock will be created to represent the ownership of the institution. The stock
is separate and apart from deposit accounts and is not and cannot be insured by
the FDIC. Transferable certificates will be issued to evidence ownership of the
stock, which will enable the stock to be sold or traded, if a purchaser is
available, with no effect on any account held in the Association. Under the
Plan, all of the capital stock of the Converted Association will be acquired by
the Company in exchange for a portion of the
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<PAGE>
net proceeds from the sale of the Common Stock in the Conversion. The Common
Stock will represent an ownership interest in the Company and will be issued
upon consummation of the Conversion to persons who elect to participate in the
Conversion by purchasing the shares being offered.
Continuity. During the Conversion process, the normal business of the
Association of accepting deposits and making loans will continue without
interruption. The Converted Association will continue to be subject to
regulation by the OTS and the FDIC, and FDIC insurance of accounts will continue
without interruption. After the Conversion, the Converted Association will
continue to provide services for depositors and borrowers under current policies
and by its present management and staff.
The Board of Directors serving the Association at the time of the
Conversion will serve as the Board of Directors of the Converted Association
after the Conversion. Following the Conversion, the Board of Directors of the
Company will consist of the individuals serving on the Board of Directors of the
Association. All officers of the Association at the time of the Conversion will
retain their positions with the Converted Association after the Conversion.
Voting Rights. Upon the completion of the Conversion, depositor and
borrower members as such will have no voting rights in the Converted Association
or the Company and, therefore, will not be able to elect directors of the
Converted Association or the Company or to control their affairs. Currently
these rights are accorded to depositors of the Association. Subsequent to the
Conversion, voting rights will be vested exclusively in the stockholders of the
Company which, in turn, will own all of the stock of the Converted Association.
Each holder of Common Stock shall be entitled to vote on any matter to be
considered by the stockholders of the Company, subject to the provisions of the
Company's Articles of Incorporation.
After the Conversion, holders of Savings Accounts in and obligors on
loans of the Converted Association will not have voting rights in the
Association. Exclusive voting rights with respect to the Company shall be vested
in the holders of the Common Stock, holders of Savings Accounts in and obligors
on loans of the Converted Association and the Association will not have any
voting rights in the Company except and to the extent that such persons become
stockholders of the Company, and the Company will have exclusive voting rights
with respect to the Converted Association's capital stock.
Deposit Accounts and Loans. The Association's deposit accounts, the
balances of individual accounts and existing federal deposit insurance coverage
will not be affected by the Conversion. Furthermore, the Conversion will not
affect the loan accounts, the balances of these accounts and the obligations of
the borrowers under their individual contractual arrangements with the
Association.
Tax Effects. The Association has received an opinion from its special
counsel, Housley Kantarian & Bronstein, P.C., Washington, D.C., as to the
material federal income tax consequences of the Conversion to the Association,
and as to the generally applicable material federal income tax consequences of
the Conversion to the Association's account holders and to persons who purchase
Common Stock in the Conversion. The opinion provides that the Conversion will
constitute a reorganization for federal income tax purposes under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended ("Code"). Among
other things, the opinion also provides that: (i) no gain or loss will be
recognized by the Association in its mutual or stock form by reason of the
Conversion; (ii) no gain or loss will be recognized by its account holders upon
the issuance to them of accounts in the Converted Association in stock form
immediately after the Conversion, in the same dollar amounts and on the same
terms and conditions as their accounts at the Association immediately prior to
the Conversion; (iii) the tax basis of each account holder's interest in the
liquidation account will be equal to the value, if any, of that interest; (iv)
the tax basis of the Common Stock purchased in the Conversion will be equal to
the amount paid therefor increased, in the case of Common Stock acquired
pursuant to the exercise of Subscription Rights, by the fair market value, if
any, of the Subscription Rights exercised; (v) the holding period for the Common
Stock purchased in the Conversion will commence upon the exercise of such
holder's Subscription Rights and otherwise on the day following the date of such
purchase; and (vi) gain or loss will be recognized to account holders
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upon the receipt of liquidation rights or the receipt or exercise of
Subscription Rights in the Conversion, to the extent such liquidation rights and
Subscription Rights are deemed to have value, as discussed below.
The opinion of Housley Kantarian & Bronstein, P.C., is based in part
upon, and subject to the continuing validity in all material respects through
the date of the Conversion of, various representations of the Association and
upon certain assumptions and qualifications, including that the Conversion is
consummated in the manner and according to the terms provided in the Plan. Such
opinion is also based upon the Code, regulations now in effect or proposed
thereunder, current administrative rulings and practice and judicial authority,
all of which are subject to change and such change may be made with retroactive
effect. Unlike private letter rulings received from the Internal Revenue Service
("IRS"), an opinion is not binding upon the IRS and there can be no assurance
that the IRS will not take a position contrary to the positions reflected in
such opinion, or that such opinion will be upheld by the courts if challenged by
the IRS.
Housley Kantarian & Bronstein, P.C. has advised the Association that an
interest in a liquidation account has been treated by the IRS, in a series of
private letter rulings which do not constitute formal precedent, as having
nominal, if any, fair market value and therefore it is likely that the interests
in the liquidation account established by the Association as part of the
Conversion will similarly be treated as having nominal, if any, fair market
value. Accordingly, it is likely that such depositors of the Association who
receive an interest in such liquidation account established by the Association
pursuant to the Conversion will not recognize any gain or loss upon such
receipt.
Housley Kantarian & Bronstein, P.C. has further advised the Association
that the federal income tax treatment of the receipt of Subscription Rights
pursuant to the Conversion is uncertain, and recent private letter rulings
issued by the IRS have been in conflict. For instance, the IRS adopted the
position in one private ruling that Subscription Rights will be deemed to have
been received to the extent of the minimum pro rata distribution of such rights,
together with the rights actually exercised in excess of such pro rata
distribution, and with gain recognized to the extent of the combined fair market
value of the pro rata distribution of Subscription Rights plus the Subscription
Rights actually exercised. Persons who do not exercise their Subscription Rights
under this analysis would recognize gain upon receipt of rights equal to the
fair market value of such rights, regardless of exercise, and would recognize a
corresponding loss upon the expiration of unexercised rights that may be
available to offset the previously recognized gain. Under another IRS private
ruling, Subscription Rights were deemed to have been received only to the extent
actually exercised. This private ruling required that gain be recognized only if
the holder of such rights exercised such rights, and that no loss be recognized
if such rights were allowed to expire unexercised. There is no authority that
clearly resolves this conflict among these private rulings, which may not be
relied upon for precedential effect. However, based upon express provisions of
the Code and in the absence of contrary authoritative guidance, Housley
Kantarian & Bronstein, P.C. has provided in its opinion that gain will be
recognized upon the receipt rather than the exercise of Subscription Rights.
Further, also based upon a published IRS ruling and consistent with recognition
of gain upon receipt rather than exercise of the Subscription Rights, Housley
Kantarian & Bronstein, P.C. has provided in its opinion that the subsequent
exercise of the Subscription Rights will not give rise to gain or loss.
Regardless of the position eventually adopted by the IRS, the tax consequences
of the receipt of the Subscription Rights will depend, in part, upon their
valuation for federal income tax purposes.
If the Subscription Rights are deemed to have a fair market value, the
receipt of such rights will be taxable to Eligible Account Holders, Supplemental
Eligible Account Holders and other eligible members who exercise their
Subscription Rights, even though such persons would not have received any cash
from which to pay taxes on such taxable income. The Association could also
recognize a gain on the distribution of such Subscription Rights in an amount
equal to their aggregate value. In the opinion of Ferguson & Company, whose
opinion is not binding upon the IRS, the Subscription Rights do not have any
value, based on the fact that such rights are acquired by the recipients without
cost, are non-transferable and of short duration and afford the recipients the
right only to purchase shares of the Common Stock at a price equal to its
estimated fair market value, which will be the same price as the price paid by
purchasers in the Community Offering for unsubscribed shares of Common Stock.
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members are encouraged to consult with their own tax advisors as
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to the tax consequences in the event that the Subscription Rights are deemed to
have a fair market value. Because the fair market value, if any, of the
Subscription Rights issued in the Conversion depends primarily upon the
existence of certain facts rather than the resolution of legal issues, Housley
Kantarian & Bronstein, P.C., has neither adopted the opinion of Ferguson &
Company, as its own nor incorporated such opinion of Ferguson & Company in its
opinion issued in connection with Conversion.
The Association has also received the opinion of Grimsley, White &
Company that no gain or loss will be recognized as a result of the Conversion
for purposes of Colorado income tax laws.
THE FEDERAL AND STATE INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT
PURPORT TO CONSIDER ALL ASPECTS OF FEDERAL AND STATE INCOME TAXATION WHICH MAY
BE RELEVANT TO EACH ELIGIBLE ACCOUNT HOLDER, SUPPLEMENTAL ACCOUNT HOLDER AND
OTHER MEMBER ENTITLED TO SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE, SUCH
AS TRUSTS, INDIVIDUAL RETIREMENT ACCOUNTS, OTHER EMPLOYEE BENEFIT PLANS,
INSURANCE COMPANIES AND ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL ELIGIBLE ACCOUNT
HOLDERS AND OTHER MEMBERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH ELIGIBLE ACCOUNT
HOLDER, SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER AND OTHER MEMBER IS URGED TO
CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR AS TO THE EFFECT OF SUCH
FEDERAL AND STATE INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND
CIRCUMSTANCES, INCLUDING THE RECEIPT AND EXERCISE OF SUBSCRIPTION RIGHTS, AND
ALSO AS TO ANY OTHER TAX CONSEQUENCES ARISING OUT OF THE CONVERSION.
Liquidation Account. In the unlikely event of a complete liquidation of
the Association in its present mutual form, each holder of a deposit account in
the Association would receive his pro rata share of any assets of the
Association remaining after payment of claims of all creditors (including the
claims of all depositors to the withdrawal value of their accounts). His pro
rata share of such remaining assets would be the same proportion of such assets
as the value of his deposit account was to the total of the value of all deposit
accounts in the Association at the time of liquidation.
After the Conversion, each deposit account holder on a complete
liquidation would have a claim of the same general priority as the claims of all
other general creditors of the Association. Therefore, except as described
below, a claim of such account holder would be solely in the amount of the
balance in the related deposit account plus accrued interest, and the account
holder would not have any interest in the value of the Association above that
amount.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the net worth of the Association as of the date of its latest statement of
financial condition contained in the final Prospectus. Each Eligible Account
Holder (a qualifying depositor of the Association on December 31, 1995) and each
Supplemental Eligible Account Holder (a person with a qualifying deposit in the
Association on September 30, 1997) would be entitled, on a complete liquidation
of the Converted Association after completion of the Conversion, to an interest
in the liquidation account. Each Eligible Account Holder would have an initial
interest in such liquidation account for each deposit account held in the
Association on December 31, 1995 and each Supplemental Eligible Account Holder
would have an initial interest in such liquidation account for each qualifying
deposit held in the Association on September 30, 1997. The interest as to each
qualifying deposit account would be in the same proportion of the total
liquidation account as the balance of such qualifying deposit account was to the
balance in all deposit accounts of Eligible Account Holders and Supplemental
Eligible Account Holders on such respective date. However, if the amount in the
qualifying deposit account on any annual closing date (September 30) of the
Association subsequent to the relevant eligibility date is less than the amount
in such account on the relevant eligibility date, or any subsequent closing
date, then the Eligible Account Holder's or Supplemental Eligible Account
Holder's interest in the liquidation account would be reduced from time to time
by an amount proportionate to any such reductions, and such interest would
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cease to exist if he or she ceases to maintain an account at the Converted
Association that has the same Social Security number as appeared on his or her
account(s) at the relevant eligibility date. The interest in the liquidation
account would never be increased, notwithstanding any increase in the related
deposit account after the Conversion.
Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders were satisfied would
be distributed to the entity or persons holding the Converted Association's
capital stock at that time.
A merger, consolidation, sale of bulk assets or similar combination or
transaction with an FDIC-insured institution in which the Converted Association
is not the surviving insured institution would not be considered to be a
"liquidation" under which distribution of the liquidation account could be made.
In such a transaction, the liquidation account would be assumed by the surviving
institution.
The creation and maintenance of the liquidation account will not
restrict the use or application of any of the capital accounts of the Converted
Association, except that the Converted Association may not declare or pay a cash
dividend on, or repurchase any of, its capital stock if the effect of such
dividend or repurchase would be to cause its retained earnings to be reduced
below the aggregate amount then required for the liquidation account.
Interpretation and Amendment of the Plan
To the extent permitted by law, all interpretations of the Plan by the
Association will be final. The Plan provides that the Association's Board of
Directors shall have the sole discretion to interpret and apply the provisions
of the Plan to particular facts and circumstances and to make all determinations
necessary or desirable to implement such provisions, including but not limited
to matters with respect to giving preference in the Community Offering to
natural persons and trusts of natural persons who are permanent residents of the
Local Community, and any and all interpretations, applications and
determinations made by the Board of Directors in good faith and on the basis of
such information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Association and its members and
subscribers in the Subscription and Community Offerings, subject to the
authority of the OTS.
The Plan provides that, if deemed necessary or desirable by the Board
of Directors, the Plan may be substantively amended by a two-thirds vote of the
Board of Directors at any time prior to submission of the Plan and proxy
materials to the Association's members. After submission of the Plan and proxy
materials to the members, the Plan may be amended by a two-thirds vote of the
Board of Directors at any time prior to the Special Meeting and at any time
following the Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors may generally modify or terminate the Plan
upon the order of the regulatory authorities without resoliciting proxies or
otherwise obtaining approval of the amended Plan by members at another Special
Meeting. However, any modification of the Plan that results in a material change
in the terms of the Conversion would require such a resolicitation of proxies
and another meeting of members.
The Plan further provides that in the event that mandatory new
regulations pertaining to conversions are adopted by the OTS or any successor
agency prior to completion of the Conversion, the Plan will be amended to
conform to such regulations without a resolicitation of proxies or another
Special Meeting. In the event that such new conversion regulations contain
optional provisions, the Plan may be amended to utilize such optional provisions
at the discretion of the Board of Directors without a resolicitation of proxies
or another Special Meeting. By adoption of the Plan, the Association's members
will be deemed to have authorized amendment of the Plan under the circumstances
described above.
8
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Conditions and Termination
Completion of the Conversion requires the approval of the Plan by the
affirmative vote of not less than a majority of the total outstanding votes of
the members of the Association and the sale of all shares of the Common Stock
within 24 months following approval of the Plan by the members. If these
conditions are not satisfied, the Plan will be terminated, and the Association
will continue its business in the mutual form of organization. The Plan may be
terminated by the Board of Directors at any time prior to the Special Meeting
and, with the approval of the OTS, by the Board of Directors at any time
thereafter.
Review By Administrative and Judicial Authorities
Federal law provides (i) that persons aggrieved by a final action of
the OTS which approves, with or without conditions, a plan of conversion may
obtain review of such final action only by filing a written petition in the
United States Court of Appeals for the circuit in which the principal office or
residence of such person is located, or in the United States Court of Appeals,
for the District of Columbia Circuit, requesting that the final action of the
OTS be modified, terminated or set aside, and (ii) that such petition must be
filed within 30 days after publication of notice of such final action in the
Federal Register, or 30 days after the date of mailing of the notice and proxy
statement for the meeting of the converting institution's members at which the
conversion is to be voted on, whichever is later.
Other
All statements made in this Proxy Statement are hereby qualified by the
contents of the Plan which is attached hereto as Exhibit A and should be
consulted for further information. In addition, attention is directed to the
section entitled "The Conversion" in the accompanying Prospectus for a more
detailed discussion of various aspects of the Plan. Adoption of the Plan by the
Association's members shall be deemed approval of the authority of the Board of
Directors to amend or terminate the Plan in accordance with its terms.
CHARTER AND BYLAWS
The following is a summary of certain provisions of the Charter and
Bylaws which will become effective upon the conversion of the Association into a
federally chartered stock savings and loan association. Complete copies of the
Charter and Bylaws of the Converted Association are attached as Exhibits B and
C, respectively, to this Proxy Statement.
The Converted Association will be authorized to issue 3,000,000 shares
of common stock with a par value of $1.00 per share. The Converted Association's
common stock will not be insured by the FDIC. All of the Converted Association's
outstanding common stock will be owned by the Company. Accordingly, exclusive
voting rights with respect to the affairs of the Converted Association after the
Conversion will be vested in the Board of Directors of the Company.
The Converted Association's Charter will provide that the number of
Directors shall be not fewer than five nor more than 15, with the exact number
to be fixed in the Converted Association's Bylaws. The proposed Bylaws provide
that the number of the Converted Association's directors shall be six. Directors
generally will serve for terms of three years, and the terms of Directors will
be staggered so that approximately one-third of the Board is elected each year.
In addition to the common stock, the Converted Association will be
authorized to issue 1,000,000 shares of serial preferred stock, par value $1.00
per share. The Board of Directors will be permitted, without further stockholder
approval, to authorize the issuance of preferred stock in series and to fix the
voting powers, designations, preferences and relative, participating, optional,
conversion and other special rights of the shares of each series of the
preferred stock
9
<PAGE>
and the qualifications, limitations and restrictions thereof. Preferred stock
may rank prior to common stock in dividend rights, liquidation preferences, or
both, and may have voting rights.
Neither the Charter nor the Bylaws of the Converted Association provide
for indemnification of officers and directors. However, the Converted
Association will be required by OTS regulations (as is currently required of the
Association) to indemnify its directors, officers and employees against legal
and other expenses incurred in defending lawsuits brought against them by
reasons of the performance of their official duties. Indemnification may be made
to any such person only if final judgment on the merits is in his or her favor
or, in case of (i) settlement, (ii) final judgment against him or her, or (iii)
final judgment in his or her favor, other than on the merits, if a majority of
the directors of the Converted Association determines that he or she was acting
in good faith within the scope of his or her employment or authority as he or
she could reasonably have perceived it under the circumstances and for a purpose
he or she could have reasonably believed under the circumstances was in the best
interest of the Converted Association or its stockholders. If a majority of the
directors of the Converted Association concludes that in connection with an
action any person ultimately may become entitled to indemnification, the
directors may authorize payment of reasonable costs and expenses arising from
defense or settlement of such action.
HOW TO ORDER STOCK
The accompanying Prospectus contains information about the business and
financial condition of the Association and additional information about the
Conversion and the Subscription Offering and the Community Offering. Enclosed is
a Stock Order Form to be used to subscribe for stock. You are not obligated to
subscribe for stock, and voting to approve the Conversion will not obligate you
to subscribe for stock.
All Subscription Rights are nontransferable and will expire if not
exercised by returning the accompanying Stock Order Form with full payment (or
appropriate instructions authorizing withdrawal from a savings or certificate
account at the Association) for all shares for which subscription is made to the
Company by 12:00 p.m., local time, on ________, 1997, unless extended by the
Association. A postage-paid reply envelope is provided for this purpose.
Provided that not all of the shares are subscribed for in the Subscription
Offering by members of the Association, the remaining shares may be offered to
certain members of the general public in the Community Offering with preference
given to natural persons and trusts of natural persons who are permanent
residents of the Local Community. Any shares of Common Stock not purchased in
the Subscription and Community Offerings may be offered, at the discretion of
the Company, to certain members of the general public as part of a community
offering on a best efforts basis by a selling group of broker-dealers to be
managed by Trident Securities, Inc.
The information contained in this Proxy Statement is limited in its
scope to use in the solicitation of proxies for the Special Meeting to vote on
the Plan of Conversion. It is not intended for use in the offering of the Common
Stock. Such offering is made only by the Prospectus.
ADDITIONAL INFORMATION
The information contained in the accompanying Prospectus, including a
more detailed description of the Plan, is intended to help you evaluate the
Conversion and is incorporated herein by reference.
All persons eligible to vote at the Special Meeting should review both
this Proxy Statement and the accompanying Prospectus.
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS PROXY
MATERIAL AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL
MEETING, TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS
POSSIBLE TO ASSURE THAT YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU
10
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FROM VOTING IN PERSON IF YOU ATTEND THE SPECIAL MEETING. YOU MAY REVOKE YOUR
PROXY BY WRITTEN INSTRUMENT DELIVERED TO THE SECRETARY OF THE ASSOCIATION AT ANY
TIME PRIOR TO OR AT THE SPECIAL MEETING OR BY ATTENDING THE SPECIAL MEETING AND
VOTING IN PERSON.
11
<PAGE>
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY THE COMMON STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
Richard A. Young
Secretary
_________, 1997
Salida, Colorado
12
<PAGE>
EXHIBIT 99.1-EXA
EXHIBIT A
SALIDA BUILDING & LOAN ASSOCIATION
SALIDA, COLORADO
PLAN OF CONVERSION
FROM MUTUAL TO STOCK ORGANIZATION
I. GENERAL.
On May 15, 1997, the Board of Directors of Salida Building & Loan
Association, Salida, Colorado (the "Association"), after careful study and
consideration, adopted by unanimous vote this Plan of Conversion from Mutual to
Stock Organization (the "Plan"), whereby the Association will convert from a
federal mutual savings and loan association to a federal capital stock savings
bank (the "Converted Association") as a wholly owned subsidiary of a Holding
Company to be formed at the direction of the Association (the "Conversion").
The Conversion is subject to regulations of the Office of Thrift
Supervision of the United States Department of the Treasury ("OTS") pursuant to
Section 5(i) of the Home Owners' Loan Act and Part 563b of the Rules and
Regulations Applicable to All Savings Associations.
The Plan is subject to the prior written approval of the OTS and must be
adopted by the affirmative vote of at least a majority of the total outstanding
votes of the Members of the Association. Pursuant to the Plan, shares of
Conversion Stock in the Holding Company will be offered in a Subscription
Offering pursuant to non-transferable Subscription Rights at a predetermined and
uniform price first to the Association's Eligible Account Holders of record as
of December 31, 1995, second to the Association's Tax-Qualified Employee Stock
Benefit Plans, third to Supplemental Eligible Account Holders of record as of
the last day of the calendar quarter preceding OTS approval of the Association's
application to convert to stock form, and fourth to Other Members of the
Association. Concurrently with the Subscription Offering, shares not subscribed
for in the Subscription Offering may be offered by the Association to the
general public in a Community Offering. Shares remaining, if any, may then be
offered to the general public in an underwritten public offering or otherwise.
The aggregate Purchase Price of the Conversion Stock will be based upon an
independent appraisal of the Association and will reflect the estimated pro
forma market value of the Converted Association, as a subsidiary of the Holding
Company.
It is the desire of the Board of Directors to attract new capital to the
Converted Association to increase its net worth, to support future savings
growth, to increase the amount of funds available for other lending and
investment, to provide greater resources for the expansion of customer services
and to facilitate future expansion. In addition, the Board of Directors
currently intends to implement stock option plans and other stock benefit plans
subsequent to the Conversion to better attract and retain qualified directors
and officers. It is the further desire of the Board of Directors to reorganize
the Converted Association as the wholly owned subsidiary of the Holding Company
to enhance flexibility of operations, diversification of business opportunities
and financial capability for business and regulatory purposes and to enable the
Converted Association to compete more effectively with other financial service
organizations.
No change will be made in the Board of Directors or Management of the
Association as a result of the Conversion.
II. DEFINITIONS.
Acting in Concert: The term "Acting in Concert" means (i) knowing
-----------------
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. A
person (as defined by 12 C.F.R. (S)563b.2(a)(26)) who acts in concert with
another person ("other party") shall also be deemed
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to be acting in concert with any person who is also acting in concert with that
other party, except that any Tax-Qualified Employee Stock Benefit Plan will not
be deemed to be acting in concert with its trustee or a person who serves in a
similar capacity solely for the purpose of determining whether stock held by the
trustee and stock held by the Tax-Qualified Employee Benefit Plan will be
aggregated.
Associate: The term "Associate," when used to indicate a relationship with
---------
any person, means (i) any corporation or organization (other than the
Association, the Holding Company or a majority-owned subsidiary of the
Association or the Holding Company) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities; (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity, except that such term shall not
include a "Tax-Qualified Employee Stock Benefit Plan," as defined herein; and
(iii) any relative or spouse of such person, or any relative of such spouse, who
has the same home as such person or who is a director of the Association or the
Holding Company, or any of their subsidiaries.
Association: The term "Association" means Salida Building & Loan
-----------
Association, in its present form as a federal mutual savings and loan
association.
Capital Stock: The term "Capital Stock" means any and all authorized
-------------
shares of stock of the Converted Association.
Community Offering: The term "Community Offering" means the offering of
------------------
shares of Conversion Stock to the general public by the Holding Company
concurrently with or after commencement of the Subscription Offering, giving
preference to natural persons and trusts of natural persons (including
individual retirement and Keogh retirement accounts and personal trusts in which
such natural persons have substantial interests) who are permanent Residents of
the Association's Local Community.
Conversion: The term "Conversion" means (i) the amendment of the
----------
Association's federal mutual charter and bylaws to authorize issuance of shares
of Capital Stock by the Converted Association and to conform to the requirements
of a federal capital stock savings bank under the laws of the United States and
applicable regulations; (ii) the issuance and sale of Conversion Stock by the
Holding Company in the Subscription and Community Offerings and/or in an
underwritten public offering or otherwise; and (iii) the purchase by the Holding
Company of all the Capital Stock of the Converted Association to be issued in
the Conversion immediately following or concurrently with the close of the sale
of the Conversion Stock.
Conversion Stock: The term "Conversion Stock" means the shares of common
----------------
stock to be issued and sold by the Holding Company pursuant to the Plan.
Converted Association: The term "Converted Association" means Salida
---------------------
Building & Loan Association in its form as a federal capital stock savings bank
resulting from the conversion of the Association to the stock form of
organization in accordance with the terms of the Plan.
Eligibility Record Date: The term "Eligibility Record Date" means the
-----------------------
close of business on December 31, 1995.
Eligible Account Holder: The term "Eligible Account Holder" means each
-----------------------
holder of one or more Qualifying Deposits in the Association on the Eligibility
Record Date.
Holding Company: The term "Holding Company" means a corporation to be
---------------
incorporated by the Association under state law for the purpose of becoming a
holding company for the Converted Association through the issuance and sale of
Conversion Stock under the Plan and the concurrent acquisition of 100% of the
Capital Stock to be issued and sold pursuant to the Plan.
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<PAGE>
Holding Company Stock: The term "Holding Company Stock" means any and all
---------------------
authorized shares of stock of the Holding Company.
Independent Appraiser: The term "Independent Appraiser" means a person
---------------------
independent of the Association, experienced and expert in the area of corporate
appraisal, and acceptable to the OTS, retained by the Association to prepare an
appraisal of the pro forma market value of the Converted Association, as a
subsidiary of the Holding Company.
Local Community: The term "Local Community" means Chaffee, Lake, Fremont
---------------
and Saquache Counties in Colorado.
Market Maker: The term "Market Maker" means a dealer (i.e., any person who
------------
engages, either for all or part of such person's time, directly or indirectly,
as agent, broker or principal in the business of offering, buying, selling or
otherwise dealing or trading in securities issued by another person) who, with
respect to a particular security, (i)(a) regularly publishes bona fide,
competitive bid and offer quotations in a recognized interdealer quotation
system or (b) furnishes bona fide competitive bid and offer quotations on
request and (ii) is ready, willing and able to effect transactions in reasonable
quantities at its quoted prices with other brokers or dealers.
Member: The term "Member" means any person or entity who qualifies as a
------
member of the Association under its federal mutual charter and bylaws prior to
the Conversion.
Officer: The term "Officer" means an executive officer of the Holding
-------
Company or the Association (as applicable), including the Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents in charge of
principal business functions, Secretary and Treasurer.
Order Form: The term "Order Form" means the order form or forms to be used
----------
by Eligible Account Holders, Supplemental Eligible Account Holders and other
persons eligible to purchase Conversion Stock pursuant to the Plan.
Other Member: The term "Other Member" means any person, other than an
------------
Eligible Account Holder or a Supplemental Eligible Account Holder, who is a
Member as of the Voting Record Date.
OTS: The term "OTS" means the Office of Thrift Supervision of the United
---
States Department of the Treasury or any successor agency having jurisdiction
over the Conversion.
Plan: The term "Plan" means this Plan of Conversion under which the
----
Association will convert from a federal mutual savings and loan association to a
federal capital stock savings bank as a wholly owned subsidiary of the Holding
Company, as originally adopted by the Board of Directors or amended in
accordance with the terms hereof.
Qualifying Deposit: The term "Qualifying Deposit" means each savings
------------------
balance in any Savings Account in the Association as of the close of business on
the Eligibility Record Date, or the Supplemental Eligibility Record Date, as
applicable, which is equal to or greater than $50.00.
Registration Statement: The term "Registration Statement" means the
----------------------
Registration Statement on Form S-1 on Form SB-2, or such other form as may be
appropriate, and any amendments thereto, filed by the Holding Company with the
SEC pursuant to the Securities Act of 1933, as amended, to register shares of
Conversion Stock.
Resident: The term "Resident," as used in this Plan in relation to the
--------
preference afforded natural persons and trusts of natural persons in the Local
Community, means any natural person who occupies a dwelling within the Local
Community, has an intention to remain within the Local Community for a period of
time (manifested by establishing a physical, ongoing, non-transitory presence
within the Local Community) and continues to reside therein at the time of the
Subscription and Community Offerings. The Association may utilize deposit or
loan records or such other
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<PAGE>
evidence provided to it to make the determination as to whether a person is
residing in the Local Community. To the extent the "person" is a corporation or
other business entity, the principal place of business or headquarters shall be
within the Local Community. To the extent the "person" is a personal benefit
plan, the circumstances of the beneficiary shall apply with respect to this
definition. In the case of all other benefit plans, circumstances of the trustee
shall be examined for purposes of this definition. In all cases, such
determination shall be in the sole discretion of the Association.
Sale: The terms "sale" and "sell" mean every contract to sell or otherwise
----
dispose of a security or an interest in a security for value, but such terms do
not include an exchange of securities in connection with a merger or acquisition
approved by the OTS or any other federal agency having jurisdiction.
Savings Account: The term "Savings Account" means a withdrawable deposit
---------------
in the Association.
SEC: The term "SEC" means the Securities and Exchange Commission or any
---
successor agency.
Special Meeting: The term "Special Meeting" means the Special Meeting of
---------------
Members to be called for the purpose of submitting the Plan to the Members for
their approval.
Subscription Offering: The term "Subscription Offering" means the offering
---------------------
of shares of Conversion Stock to Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans, Supplemental Eligible Account Holders and Other
Members under the Plan, giving preference within each subscription priority
category to natural persons and trusts of natural persons (including individual
retirement and Keogh retirement accounts and personal trusts in which such
natural persons have substantial interests) who are permanent Residents of the
Local Community if such preference is permitted by applicable law and approved
by the Association's Board of Directors in its sole discretion.
Subscription and Community Prospectus: The term "Subscription and
-------------------------------------
Community Prospectus" means the final prospectus to be used in connection with
the Subscription and Community Offerings.
Subscription Rights: The term "Subscription Rights" means non-
-------------------
transferable, non-negotiable, personal rights of Eligible Account Holders, Tax-
Qualified Employee Stock Benefit Plans, Supplemental Eligible Account Holders
and Other Members to purchase Conversion Stock offered under the Plan.
Supplemental Eligibility Record Date: The term "Supplemental Eligibility
------------------------------------
Record Date" means the last day of the calendar quarter preceding the approval
of the Plan by the OTS.
Supplemental Eligible Account Holder: The term "Supplemental Eligible
------------------------------------
Account Holder" means each holder of one or more Qualifying Deposits in the
Association (other than Officers and directors of the Association and their
Associates) on the Supplemental Eligibility Record Date.
Tax-Qualified Employee Stock Benefit Plan: The term "Tax-Qualified
-----------------------------------------
Employee Stock Benefit Plan" means any defined benefit plan or defined
contribution plan of the Association or the Holding Company, such as an employee
stock ownership plan, stock bonus plan, profit sharing plan or other plan,
which, with its related trust, meets the requirements to be "qualified" under
section 401 of the Internal Revenue Code of 1986, as amended. "Non-Tax-
Qualified Employee Stock Benefit Plan" means any defined benefit plan or defined
contribution plan which is not so qualified.
Voting Record Date: The term "Voting Record Date" means the date fixed by
------------------
the Board of Directors of the Association to determine Members of the
Association entitled to vote at the Special Meeting.
A-4
<PAGE>
III. STEPS PRIOR TO SUBMISSION OF THE PLAN TO THE MEMBERS FOR APPROVAL.
Prior to submission of the Plan to its Members for approval, the
Association must receive approval from the OTS of an Application for Approval of
Conversion on Form AC, which includes the Plan to convert to the stock form of
organization (the "Application"). The following steps must be taken prior to
such regulatory approval:
A. The Board of Directors shall adopt the Plan by not less than a
two-thirds vote.
B. Promptly after adoption of the Plan by the Board of Directors,
the Association shall notify its Members of the adoption of the Plan by
publishing a statement in a newspaper having a general circulation in each
community in which the Association maintains an office and/or by mailing a
letter to each of its Members.
C. A press release relating to the proposed Conversion may be
submitted to the local media.
D. Copies of the Plan adopted by the Board of Directors shall be
made available for inspection by Members at each office of the Association.
E. The Association shall cause the Holding Company to be
incorporated under state law, and the Board of Directors of the Holding
Company shall concur in the Plan by at least a two-thirds vote.
F. The Association shall submit or cause to be submitted the
Application to the OTS. The Holding Company shall submit or cause to be
submitted an Application H-(e)1 or Application H-(e)1-S to the OTS and the
Registration Statement to the SEC. Upon receipt of advice from the
regulatory authorities that the Application has been received and is in the
prescribed form, the Association shall publish a "Notice of Filing of an
Application for Conversion to a Stock Savings and Loan Association" in a
newspaper of general circulation, as referred to in Paragraph III.B.
herein. The Association also shall prominently display a copy of such
notice in each of its offices. The Holding Company shall publish notice of
the filing of the Application H-(e)1 or H-(e)1-S in accordance with
applicable regulations.
G. The Association shall obtain an opinion of its tax advisors or a
favorable ruling from the United States Internal Revenue Service which
shall state that the Conversion will not result in a taxable reorganization
for federal income tax purposes to the Association. Receipt of a favorable
opinion or ruling is a condition precedent to completion of the Conversion.
H. The Plan shall be submitted to a vote of the Members at the
Special Meeting after approval by the OTS .
IV. MEETING OF MEMBERS.
Following receipt of approval of the Plan by the OTS, the Special Meeting
to vote on the Plan shall be scheduled in accordance with the Association's
bylaws and applicable regulations. Notice of the Special Meeting will be given
by means of a proxy statement authorized for use by the OTS. Promptly after
receipt of approval and at least 20 days but not more than 45 days prior to the
Special Meeting, the Association will distribute proxy solicitation materials to
all voting Members as of the Voting Record Date established for voting at the
Special Meeting. Proxy materials will also be sent to each beneficial holder of
an Individual Retirement Account where the name of the beneficial holder is
disclosed on the Association's records. The proxy solicitation materials will
include a copy of the Proxy Statement and other documents authorized for use by
the regulatory authorities and may also include a Subscription and Community
Prospectus as provided in Paragraph VI. below. The Association will also advise
each Eligible Account Holder and Supplemental Eligible Account Holder not
entitled to vote at the Special Meeting of the proposed Conversion and the
scheduled Special Meeting and provide a postage paid card on which to indicate
whether
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<PAGE>
he or she wishes to receive the Subscription and Community Prospectus, if the
Subscription and Community Offerings are not held concurrently with the proxy
solicitation.
Pursuant to applicable regulations, an affirmative vote of at least a
majority of the total outstanding votes of the Members will be required for
approval of the Plan. Voting may be in person or by proxy. The OTS shall be
promptly notified of the actions of the Members at the Special Meeting.
V. SUMMARY PROXY STATEMENT.
The Proxy Statement to be furnished to Members may be in summary form,
provided that a statement is made in boldface type that a more detailed
description of the proposed transaction may be obtained by returning an enclosed
postage paid card or other written communication requesting a supplemental
information statement. Without prior approval from the OTS, the Special Meeting
shall not be held fewer than 20 days after the last day on which the
supplemental information statement is mailed to Members requesting the same.
The supplemental information statement may be combined with the Subscription and
Community Prospectus if the Subscription and Community Offerings are commenced
concurrently with the proxy solicitation of Members for the Special Meeting.
VI. OFFERING DOCUMENTS.
The Holding Company may commence the Subscription Offering and, provided
that the Subscription Offering has commenced, may commence the Community
Offering concurrently with or during the proxy solicitation of Members and may
close the Subscription and Community Offerings before the Special Meeting,
provided that the offer and sale of the Conversion Stock shall be conditioned
upon approval of the Plan by the Members at the Special Meeting.
The Association's proxy solicitation materials may require Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members to return to
the Association by a reasonable date certain a postage-paid written
communication requesting receipt of a Subscription and Community Prospectus in
order to be entitled to receive a Subscription and Community Prospectus,
provided that the Subscription Offering shall not be closed until the expiration
of 30 days after mailing proxy solicitation materials to voting Members and a
postage-paid written communication to non-voting Eligible Account Holders and
Supplemental Eligible Account Holders. If the Subscription Offering is
commenced within 45 days after the Special Meeting, the Association shall
transmit, no more than 30 days prior to the commencement of the Subscription
Offering, to each voting Member who had been furnished with proxy solicitation
materials and to each non-voting Eligible Account Holder and Supplemental
Eligible Account Holder, written notice of the commencement of the Subscription
Offering which shall state that the Association is not required to furnish a
Subscription and Community Prospectus to them unless they return by a reasonable
date certain a postage-paid written communication requesting the receipt of the
Subscription and Community Prospectus.
Prior to commencement of the Subscription and Community Offerings, the
Holding Company shall file the Registration Statement with the SEC pursuant to
the Securities Act of 1933, as amended. The Holding Company shall not
distribute the Subscription and Community Prospectus until the Registration
Statement containing the same has been declared effective by the SEC and the
aforementioned documents have been approved by the OTS. The Subscription and
Community Prospectus may be combined with the Proxy Statement for the Special
Meeting.
VII. CONSUMMATION OF CONVERSION.
The date of consummation of the Conversion will be the effective date of
the amendment of the Association's federal mutual charter to read in the form of
a federal stock charter, which shall be the date of the issuance and sale of the
Conversion Stock. After receipt of all orders for Conversion Stock, and
concurrently with the execution thereof, the amendment of the Association's
federal mutual charter to authorize the issuance of shares of Capital Stock and
to conform to the requirements of a federal capital stock savings bank will be
declared effective by the OTS, and the amended bylaws approved by the Members
will become effective. At such time, the Conversion Stock will be issued
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<PAGE>
and sold by the Holding Company, the Capital Stock to be issued in the
Conversion will be issued and sold to the Holding Company, and the Converted
Association will become a wholly owned subsidiary of the Holding Company. The
Converted Association will issue to the Holding Company 100,000 shares of its
common stock, representing all of the shares of Capital Stock to be issued by
the Converted Association in the Conversion, and the Holding Company will make
payment to the Converted Association of at least 50 percent of the aggregate net
proceeds realized by the Holding Company from the sale of the Conversion Stock
under the Plan, or such other portion of the aggregate net proceeds as may be
authorized or required by the OTS.
VIII. STOCK OFFERING.
A. General.
-------
The aggregate purchase price of all shares of Conversion Stock which
will be offered and sold will be equal to the estimated pro forma market
value of the Converted Association, as a subsidiary of the Holding
Company, as determined by an independent appraisal. The exact number of
shares of Conversion Stock to be offered will be determined by the Board
of Directors of the Association and the Board of Directors of the Holding
Company, or their respective designees, in conjunction with the
determination of the Purchase Price (as that term is defined in Paragraph
VIII.B. below). The number of shares to be offered may be subsequently
adjusted prior to completion of the Conversion as provided below.
B. Independent Evaluation and Purchase Price of Shares.
---------------------------------------------------
All shares of Conversion Stock sold in the Conversion will be sold
at a uniform price per share referred to in this Plan as the "Purchase
Price." The Purchase Price and the total number of shares of Conversion
Stock to be offered in the Conversion will be determined by the Board of
Directors of the Association and the Board of Directors of the Holding
Company, or their respective designees, immediately prior to the
simultaneous completion of all such sales contemplated by this Plan on
the basis of the estimated pro forma market value of the Converted
Association, as a subsidiary of the Holding Company, at such time. The
estimated pro forma market value of the Converted Association, as a
subsidiary of the Holding Company, will be determined for such purpose by
an Independent Appraiser on the basis of such appropriate factors as are
not inconsistent with applicable regulations. Immediately prior to the
Subscription and Community Offerings, a subscription price range of
shares for the offerings will be established (the "Valuation Range"),
which will vary from 15% above to 15% below the midpoint of such range.
The number of shares of Conversion Stock ultimately issued and sold will
be determined at the close of the Subscription and Community Offerings
and any other offering. The subscription price range and the number of
shares to be offered may be changed subsequent to the Subscription and
Community Offerings as the result of any appraisal updates prior to the
completion of the Conversion, without notifying eligible purchasers in
the Subscription and Community Offerings and without a resolicitation of
subscriptions, provided the aggregate Purchase Price is not below the low
end or more than 15 percent above the high end of the Valuation Range
previously approved by the OTS or if, in the opinion of the Boards of
Directors of the Association and the Holding Company, the new Valuation
Range established by the appraisal update does not result in a materially
different capital position of the Converted Association.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Association and the Holding Company and to the OTS that,
to the best knowledge of the Independent Appraiser, nothing of a material
nature has occurred which, taking into account all relevant factors,
would cause the Independent Appraiser to conclude that the aggregate
value of the Conversion Stock at the Purchase Price is incompatible with
its estimate of the aggregate consolidated pro forma market value of the
Converted Association, as a subsidiary of the Holding Company. If such
confirmation is not received, the Association may cancel the Subscription
and Community Offerings
A-7
<PAGE>
and/or any other offering, extend the Conversion, establish a new
Valuation Range, extend, reopen or hold new Subscription and Community
Offerings and/or other offerings or take such other action as the OTS may
permit.
C. Subscription Offering.
---------------------
Non-transferable Subscription Rights to purchase shares of
Conversion Stock will be issued at no cost to Eligible Account Holders,
Tax-Qualified Employee Stock Benefits Plans, Supplemental Eligible
Account Holders and Other Members of the Association pursuant to
priorities established by applicable regulations. All shares must be
sold, and, to the extent that Conversion Stock is available, no
subscriber will be allowed to purchase fewer than 25 shares of Conversion
Stock, provided that this number shall be decreased if the aggregate
purchase price exceeds $500. The priorities established by applicable
regulations for the purchase of shares are as follows:
1. Category No. 1: Eligible Account Holders.
a. Each Eligible Account Holder shall receive, without
payment, non-transferable Subscription Rights to purchase Conversion
Stock in an amount equal to the greater of (i) $250,000 of the
Conversion Stock, (ii) one-tenth of one percent of the total
offering of shares of Conversion Stock or (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock to be issued by a
fraction of which the numerator is the amount of the Qualifying
Deposit of the Eligible Account Holder and the denominator is the
total amount of Qualifying Deposits of all Eligible Account Holders
in the Converted Association in each case on the Eligibility Record
Date.
b. Non-transferable Subscription Rights to purchase
Conversion Stock received by Officers and directors of the
Association and their Associates based on their increased deposits
in the Association in the one year period preceding the Eligibility
Record Date shall be subordinated to all other subscriptions
involving the exercise of non-transferable Subscription Rights to
purchase shares pursuant to this Subscription Category.
c. In the event of an oversubscription for shares of
Conversion Stock pursuant to this Category, shares of Conversion
Stock shall be allocated among subscribing Eligible Account Holders,
giving preference to natural persons and trusts of natural persons
who are permanent Residents of the Local Community, if such
preference is permitted by applicable law and approved by the
Association's Board of Directors in its sole discretion, as follows:
(I) Shares of Conversion Stock shall be allocated
among subscribing Eligible Account Holders so as to permit
each such Account Holder, to the extent possible, to
purchase a number of shares of Conversion Stock sufficient
to make its total allocation equal to 100 shares or the
total amount of its subscription, whichever is less.
(II) Any shares not so allocated shall be allocated
among the subscribing Eligible Account Holders on an
equitable basis, related to the amounts of their respective
aggregate Qualifying Deposits, as compared to the total
aggregate Qualifying Deposits of all subscribing Eligible
Account Holders.
2. Category No.2: Tax-Qualified Employee Stock Benefit Plans.
a. Tax-Qualified Employee Stock Benefit Plans of the
Converted Association shall receive, without payment, non-
transferable Subscription Rights to purchase up to 10% of the shares
of Conversion Stock issued in the Conversion.
A-8
<PAGE>
b. Subscription rights received in this Category shall be
subordinated to the Subscription Rights received by Eligible Account
Holders pursuant to Category No. 1, provided that any shares of
Conversion Stock sold in excess of the high end of the Valuation
Range may be first sold to Tax-Qualified Employee Stock Benefit
Plans.
3. Category No. 3: Supplemental Eligible Account Holders.
a. In the event that the Eligibility Record Date is more
than 15 months prior to the date of the latest amendment of the
Application filed prior to OTS approval, then each Supplemental
Eligible Account Holder shall receive, without payment, non-
transferable Subscription Rights to purchase Conversion Stock in an
amount equal to the greater of (i) $250,000 of the Conversion Stock,
(ii) one-tenth of one percent of the total offering of shares of
Conversion Stock or (iii) 15 times the product (rounded down to the
next whole number) obtained by multiplying the total number of the
shares of Conversion Stock to be issued by a fraction of which the
numerator is the amount of the Qualifying Deposit of the
Supplemental Eligible Account Holder and the denominator is the
total amount of the Qualifying Deposits of all Supplemental Eligible
Account Holders on the Supplemental Eligibility Record Date.
b. Subscription Rights received pursuant to this Category
shall be subordinated to the Subscription Rights received by the
Eligible Account Holders and by Tax-Qualified Employee Stock Benefit
Plans pursuant to Category Nos. 1 and 2.
c. Any non-transferable Subscription Rights to purchase
shares received by an Eligible Account Holder in accordance with
Category No. 1 shall reduce to the extent thereof the Subscription
Rights to be distributed to such Eligible Account Holder pursuant to
this Category.
d. In the event of an oversubscription for shares of
Conversion Stock pursuant to this Category, shares of Conversion
Stock shall be allocated among the subscribing Supplemental Eligible
Account Holders, giving preference to natural persons and trusts of
natural persons who are permanent Residents of the Local Community,
if such preference is permitted by applicable law and approved by
the Association's Board of Directors in its sole discretion, as
follows:
(I) Shares of Conversion Stock shall be allocated
among subscribing Supplemental Eligible Account Holders so
as to permit each such Supplemental Eligible Account Holder,
to the extent possible, to purchase a number of shares of
Conversion Stock sufficient to make its total allocation
(including the number of shares of Conversion Stock, if any,
allocated in accordance with Category No. 1) equal to 100
shares of Conversion Stock or the total amount of its
subscription, whichever is less.
(II) Any shares of Conversion Stock not allocated
in accordance with subparagraph (I) above shall be allocated
among the subscribing Supplemental Eligible Account Holders
on an equitable basis, related to the amounts of their
respective aggregate Qualifying Deposits on the Supplemental
Eligibility Record Date as compared to the total aggregate
Qualifying Deposits of all subscribing Supplemental Eligible
Account Holders in each case on the Supplemental Eligibility
Record Date.
4. Category No. 4: Other Members.
a. Each Other Member, other than those Members who are
Eligible Account Holders or Supplemental Eligible Account Holders,
shall receive, without payment, non-transferable
A-9
<PAGE>
Subscription Rights to purchase Conversion Stock in an amount equal
to the greater of (i) $250,000 of the Conversion Stock or (ii) one-
tenth of one percent of the total offering of shares of Conversion
Stock.
b. Subscription Rights received pursuant to this Category
shall be subordinated to the Subscription Rights received by
Eligible Account Holders, Tax-Qualified Employee Stock Benefit Plans
and Supplemental Eligible Account Holders pursuant to Category Nos.
1, 2 and 3.
c. In the event of an oversubscription for shares of
Conversion Stock pursuant to this Category, the shares of Conversion
Stock available shall be allocated among subscribing Other Members,
giving preference to natural persons and trusts of natural persons
who are permanent Residents of the Local Community, if such
preference is permitted by applicable law and approved by the
Association's Board of Directors in its sole discretion, so as to
permit each subscribing Other Member, to the extent possible, to
purchase a number of shares sufficient to make his or her total
allocation of Conversion Stock equal to the lesser of 100 shares or
the number of shares subscribed for by the Other Member. The shares
remaining thereafter will be allocated among subscribing Other
Members whose subscriptions remain unsatisfied on an equitable basis
as determined by the Board of Directors.
Order Forms may provide that the maximum purchase limitation
shall be based on the midpoint of the Valuation Range. In the event
the aggregate Purchase Price of the Conversion Stock issued and sold
is below the midpoint of the Valuation Range, that portion of
subscriptions in excess of the maximum purchase limitation will be
refunded. In the event the aggregate Purchase Price of Conversion
Stock issued and sold is above the midpoint of the Valuation Range,
persons who have subscribed for the maximum purchase limitation may
be given the opportunity to increase their subscriptions so as to
purchase the maximum number of shares subject to the availability of
shares. The Association will not otherwise notify subscribers of any
change in the number of shares of Conversion Stock offered.
D. Community Offering.
------------------
1. Any shares of Conversion Stock not purchased through the
exercise of Subscription Rights in the Subscription Offering may be
sold in a Community Offering, which may commence concurrently with
the Subscription Offering. Shares of Conversion Stock will be
offered in the Community Offering to the general public, giving
preference to natural persons and the trusts of natural persons
(including individual retirement and Keogh retirement accounts and
personal trusts in which such natural persons have substantial
interests) who are permanent Residents of the Local Community. The
Community Offering may commence concurrently with or as soon as
practicable after the completion of the Subscription Offering and
must be completed within 45 days after the last day of the
Subscription Offering, unless extended by the Holding Company with
the approval of the OTS. The offering price of the Conversion Stock
to the general public in the Community Offering will be the same
price paid for such stock by Eligible Account Holders and other
persons in the Subscription Offering. If sufficient shares are not
available to satisfy all orders in the Community Offering, the
shares available will be allocated by the Holding Company in its
discretion. The Holding Company shall have the right to accept or
reject orders in the Community Offering in whole or in part.
2. Orders accepted in the Community Offering shall be
filled up to a maximum of 2% of the Conversion Stock, and thereafter
remaining shares shall be allocated on an equal number of shares
basis per order until all orders have been filled.
A-10
<PAGE>
3. The Conversion Stock to be offered in the Community
Offering will be offered and sold in a manner that will achieve the
widest distribution of the Conversion Stock.
E. Other Offering.
--------------
In the event a Community Offering does not appear feasible,
the Association will immediately consult with the OTS to determine
the most viable alternative available to effect the completion of
the Conversion. Should no viable alternative exist, the Association
may terminate the Conversion with the concurrence of the OTS.
F. Limitations Upon Purchases of Shares of Conversion Stock.
--------------------------------------------------------
The following additional limitations and exceptions shall
apply to all purchases of Conversion Stock:
1. No Person may purchase fewer than 25 shares of
Conversion Stock in the Conversion, to the extent such shares are
available.
2. Purchases of Conversion Stock in the Community Offering
by any person, when aggregated with purchases by an Associate of
that person, or a group of persons Acting in Concert, shall not
exceed $250,000 of the Conversion Stock, except that Tax-Qualified
Employee Stock Benefit Plans may purchase up to 10% of the total
shares of Conversion Stock to be issued in the Conversion, and
shares to be held by the Tax-Qualified Employee Stock Benefit Plans
and attributable to a participant thereunder shall not be aggregated
with shares of Conversion Stock purchased by such participant or any
other purchaser of Conversion Stock in the Conversion.
3. Officers and directors of the Association and the
Holding Company, and Associates thereof, may not purchase in the
aggregate more than 34% of the shares of Conversion Stock issued in
the Conversion, or such greater amount as may be permitted under
applicable legal limits.
4. Directors of the Holding Company and the Association
shall not be deemed to be Associates or a group Acting in Concert
with other directors solely as a result of membership on the Board
of Directors of the Holding Company or the Association or any of
their subsidiaries.
5. Purchases of shares of Conversion Stock in the
Conversion by any person, when aggregated with purchases by an
Associate of that person, or a group of persons Acting in Concert,
shall not exceed $250,000 of the Conversion Stock, except that Tax-
Qualified Employee Stock Benefit Plans may purchase up to 10% of the
total shares of Conversion Stock to be issued in the Conversion, and
shares purchased by the Tax-Qualified Employee Stock Benefit Plans
and attributable to a participant thereunder shall not be aggregated
with shares purchased by such participant or any other purchaser of
Conversion Stock in the Conversion.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, the Holding Company and the Association
may increase or decrease any of the purchase limitations set forth herein
at any time. In the event that the individual purchase limitation is
increased after commencement of the Subscription and Community Offerings,
the Holding Company and the Association shall permit any person who
subscribed for the maximum number of shares of Conversion Stock to
purchase an additional number of shares, such that such person shall be
permitted to subscribe for the then maximum number of shares permitted to
be subscribed for by such person, subject to the rights and preferences
of any person who has priority Subscription Rights. In the event that
either the individual purchase limitation or the number of shares of
Conversion Stock to be sold in the Conversion is decreased after
commencement of the Subscription and
A-11
<PAGE>
Community Offerings, the orders of any person who subscribed for the
maximum number of shares of Conversion Stock shall be decreased by the
minimum amount necessary so that such person shall be in compliance with
the then maximum number of shares permitted to be subscribed for by such
person.
Each person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under the Plan or otherwise imposed by law, rule or
regulation. In the event that such purchase limitations are violated by
any person (including any Associate or group of persons affiliated or
otherwise Acting in Concert with such person), the Holding Company shall
have the right to purchase from such person at the actual Purchase Price
per share all shares acquired by such person in excess of such purchase
limitations or, if such excess shares have been sold by such person, to
receive the difference between the actual Purchase Price per share paid
for such excess shares and the price at which such excess shares were
sold by such person. This right of the Holding Company to purchase such
excess shares shall be assignable by the Holding Company.
G. Restrictions on and Other Characteristics of Stock Being Sold.
-------------------------------------------------------------
1. Transferability.
---------------
Except as provided in Paragraph XIII. below, Conversion
Stock purchased by persons other than directors and Officers of the
Association and directors and Officers of the Holding Company will
be transferable without restriction. Conversion Stock purchased by
such directors or Officers shall not be sold for a period of one
year from the date of Conversion except for any sale of such shares
(i) following the death of the original purchaser or (ii) resulting
from an exchange of securities in a merger or acquisition approved
by the applicable regulatory authorities.
The Conversion Stock issued by the Holding Company to such
directors and Officers shall bear the following legend giving
appropriate notice of the one-year holding period restriction:
"The shares of stock evidenced by this Certificate are
restricted as to transfer for a period of one year from the
date of this Certificate pursuant to applicable regulations
of the Office of Thrift Supervision of the United States
Department of the Treasury. Except in the event of the death
of the registered holder, the shares represented by this
Certificate may not be sold prior thereto without a legal
opinion of counsel for the Holding Company that said sale is
permissible under the provisions of applicable laws and
regulations."
In addition, the Holding Company shall give appropriate
instructions to the transfer agent for the Holding Company Stock
with respect to the applicable restrictions relating to the transfer
of restricted stock. Any shares of Holding Company Stock
subsequently issued as a stock dividend, stock split or otherwise,
with respect to any such restricted stock, shall be subject to the
same holding period restrictions for such directors and Officers as
may be then applicable to such restricted stock.
2. Repurchase and Dividend Rights.
------------------------------
Pursuant to present regulations, except as otherwise
permitted by the OTS, the Holding Company may not, for a period of
three years from the date of Conversion, repurchase Holding Company
Stock from any person, with the exception of (i) repurchases on a
pro rata basis pursuant to offers approved by the OTS and made to
all stockholders, (ii) repurchases of qualifying shares of directors
or, (iii) unless prohibited by the OTS, repurchases of shares to
fund employee stock benefit plans of the Holding Company or the
Association. Upon 10 days' written notification to the OTS Regional
Director for the Converted Association and the Chief Counsel of the
Corporate and Securities Division of the OTS, however, the Holding
Company may make open market repurchases
A-12
<PAGE>
of outstanding Holding Company Stock, provided that (i) such
Regional Director and Chief Counsel do not object based on a
determination that (a) the repurchases would materially adversely
affect the financial condition of the Converted Association, (b) the
information submitted by the Converted Association is insufficient
upon which to base a conclusion as to whether the Converted
Association's financial condition would be materially adversely
affected, or (c) the Converted Association does not demonstrate a
valid purpose for the repurchases. Except as otherwise permitted by
the OTS, (i) no repurchases may occur in the first year following
the Conversion; (ii) any repurchases in the second and third years
following the Conversion must be part of an open-market stock
repurchase program that allows no more than five percent (5%) of the
outstanding Holding Company Stock to be purchased during any 12
month period; and (iii) any repurchases within the first three years
following the Conversion must not cause the Converted Association to
become "undercapitalized," as defined pursuant to 12 C.F.R. (S)565.4
or a successor regulation.
Present regulations also provide that the Converted
Association may not declare or pay a cash dividend on or repurchase
any of its Capital Stock if the result thereof would be to reduce
the regulatory capital of the Converted Association below the amount
required for the Liquidation Account. Further, any dividend declared
or paid on, or repurchase of, the Capital Stock shall be in
compliance with the Rules and Regulations of the OTS, or other
applicable regulations.
The above limitations shall not preclude payment of
dividends on, or repurchases of, Holding Company Stock in the event
applicable federal regulatory limitations are liberalized subsequent
to the Conversion.
3. Voting Rights.
-------------
After Conversion, holders of Savings Accounts and obligors
on loans will not have voting rights in the Converted Association.
Exclusive voting rights with respect to the Holding Company shall be
vested in the holders of Holding Company Stock, and the Holding
Company will have exclusive voting rights with respect to the
Capital Stock. Each stockholder of the Holding Company will be
entitled to vote on any matters coming before the stockholders of
the Holding Company for consideration and will be entitled to one
vote for each share of stock owned by said stockholder.
4. Purchases by Officers, Directors and Associates Following
---------------------------------------------------------
Conversion.
----------
Without the prior approval of the OTS, Officers and
directors of the Converted Association and Officers and directors of
the Holding Company, and their Associates, shall be prohibited for a
period of three years following completion of the Conversion from
purchasing outstanding shares of Holding Company Stock, except from
a broker or dealer registered with the SEC. Notwithstanding this
restriction, negotiated transactions involving more than 1% of the
total outstanding shares of Holding Company Stock and purchases made
and shares held by a Tax-Qualified Employee Stock Benefit Plan or
Non-Tax-Qualified Employee Stock Benefit Plan which may be
attributable to Officers or directors may be made without OTS
permission or the use of a broker or dealer.
H. Mailing of Offering Materials and Collation of Subscriptions.
------------------------------------------------------------
The sale of all shares of Conversion Stock offered pursuant to the
Plan must be completed within 24 months after approval of the Plan at the
Special Meeting. After approval of the Plan by the OTS and the
declaration of the effectiveness of the Subscription and Community
Prospectus by the SEC, the Holding Company shall distribute such
Subscription and Community Prospectus and Order Forms for the purchase of
shares in accordance with the terms of the Plan.
A-13
<PAGE>
The recipient of an Order Form will be provided neither fewer than
20 days nor more than 45 days from the date of mailing, unless extended,
to complete, execute and return properly the Order Form to the Holding
Company or the Association. Self-addressed, postage paid return envelopes
will accompany these forms when mailed. The Association or Holding
Company will collate the returned executed Order Forms upon completion of
the Subscription Offering. Failure of any eligible subscriber to return a
properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such person of any
rights to purchase shares of Conversion Stock hereunder.
The sale of all shares of Conversion Stock shall be completed within
45 days after the last day of the Subscription Offering unless extended
by the Holding Company and the Association with the approval of the OTS.
I. Method of Payment.
-----------------
Payment for all shares of Conversion Stock subscribed for in the
Subscription and Community Offerings must be received in full by the
Association or the Holding Company, together with properly completed and
executed Order Forms, indicating thereon the number of shares being
subscribed for and such other information as may be required thereon, on
or prior to the expiration date specified on the Order Form, unless such
date is extended by the Holding Company and the Association; provided,
however, that payments by Tax-Qualified Employee Stock Benefit Plans for
Conversion Stock may be made to the Association concurrently with the
completion of the Conversion.
Payment for all shares of Conversion Stock may be made in cash (if
delivered in person) or by check or money order, or, if the subscriber
has a Savings Account in the Association (including a certificate of
deposit), the subscriber may authorize the Association to charge the
subscriber's Savings Account for the purchase amount. The Association
shall pay interest at not less than the passbook rate on all amounts paid
in cash or by check or money order to purchase shares of Conversion Stock
in the Subscription and Community Offerings from the date payment is
received until the Conversion is completed or terminated. The Association
shall not knowingly loan funds or otherwise extend credit to any person
for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Association to charge its Savings
Account, the funds will remain in the subscriber's Savings Account and
will continue to earn interest, but may not be used by the subscriber
until all Conversion Stock has been sold or the Conversion is terminated,
whichever is earlier. The withdrawal will be given effect only
concurrently with the sale of all shares of Conversion Stock in the
Conversion and only to the extent necessary to satisfy the subscription
at a price equal to the Purchase Price. The Association will allow
subscribers to purchase shares of Conversion Stock by withdrawing funds
from certificate accounts without the assessment of early withdrawal
penalties. In the case of early withdrawal of only a portion of such
account, the certificate evidencing such account shall be cancelled if
the remaining balance of the account is less than the applicable minimum
balance requirement. In that event, the remaining balance will earn
interest at the passbook rate. This waiver of the early withdrawal
penalty is applicable only to withdrawals made in connection with the
purchase of Conversion Stock under the Plan.
Tax-Qualified Employee Stock Benefit Plans may subscribe for shares
by submitting an Order From, and in the case of an employee stock
ownership plan, together with evidence of a loan commitment from the
Holding Company or an unrelated financial institution for the purchase of
the shares of Conversion Stock, during the Subscription Offering and by
making payment for the shares of Conversion Stock on the date of the
closing of the Conversion.
A-14
<PAGE>
J. Undelivered, Defective or Late Order Forms; Insufficient Payment.
----------------------------------------------------------------
In the event an Order Form (i) is not delivered and is returned to
the Holding Company or the Association by the United States Postal
Service (or the Holding Company or the Association is unable to locate
the addressee); (ii) is not received by the Holding Company or the
Association, or is received by the Holding Company or the Association
after termination of the date specified thereon; (iii) is defectively
completed or executed; or (iv) is not accompanied by the total required
payment for the shares of Conversion Stock subscribed for (including
cases in which the subscribers' Savings Accounts are insufficient to
cover the authorized withdrawal for the required payment), the
Subscription Rights of the person to whom such rights have been granted
will not be honored and will be treated as though such person failed to
return the completed Order Form within the time period specified therein.
Alternatively, the Holding Company or the Association may, but will not
be required to, waive any irregularity relating to any Order Form or
require the submission of a corrected Order Form or the remittance of
full payment for subscribed shares of Conversion Stock by such date as
the Holding Company or the Association may specify. Subscription orders,
once tendered, cannot be revoked. The Holding Company's and the
Association's interpretation of the terms and conditions of this Plan and
acceptability of the Order Forms will be final and conclusive.
K. Members in Non-Qualified States or in Foreign Countries.
-------------------------------------------------------
The Holding Company will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons
entitled to subscribe for Conversion Stock pursuant to the Plan reside.
However, no such person will be offered or receive any Conversion Stock
under this Plan who resides in a foreign country or who resides in a
state of the United States with respect to which any or all of the
following apply: (i) a small number of persons otherwise eligible to
subscribe for shares of Conversion Stock under this Plan reside in such
state or foreign country; (ii) the granting of Subscription Rights or the
offer or sale of shares of Conversion Stock to such person would require
the Holding Company or the Association or their employees to register,
under the securities laws of such state, as a broker, dealer, salesman or
agent or to register or otherwise qualify its securities for sale in such
state or foreign country; and (iii) such registration qualification would
be impracticable for reasons of cost or otherwise. No payments will be
made in lieu of the granting of Subscription Rights to any such person.
L. Sales Commissions.
-----------------
Sales commissions may be paid as determined by the Boards of
Directors of the Association and the Holding Company or their designees
to securities dealers assisting subscribers in making purchases of
Conversion Stock in the Subscription Offering or in the Community
Offering, if the securities dealer is named by the subscriber on the
Order Form. In addition, a sales commission may be paid to a securities
dealer for advising and consulting with respect to, or for managing the
sale of Conversion Stock in, the Subscription Offering, the Community
Offering or any other offering.
IX. CHARTER AND BYLAWS.
As part of the Conversion, a federal stock charter and bylaws will be
adopted to authorize the Converted Association to operate as a federal capital
stock savings bank. By approving the Plan, the Members of the Association will
thereby approve amending the Association's existing federal mutual charter and
bylaws to read in the form of a federal stock charter and bylaws. Prior to
completion of the Conversion, the proposed federal stock charter and bylaws may
be amended in accordance with the provisions and limitations for amending the
Plan under Paragraph XIV. below. The effective date of the amendment of the
Association's federal mutual charter and bylaws to read in the form of a federal
stock charter and bylaws shall be the date of the issuance of the Conversion
Stock, which shall be the date of consummation of the Conversion.
A-15
<PAGE>
X. REGISTRATION AND MARKET MAKING.
In connection and concurrently with the Conversion, the Holding Company
shall register the Holding Company Stock with the SEC pursuant to the Securities
Exchange Act of 1934, as amended, and shall undertake not to deregister the
Holding Company Stock for a period of three years thereafter.
The Holding Company shall use its best efforts to encourage and assist
various Market Makers to establish and maintain a market for the Holding Company
Stock. The Holding Company shall also use its best efforts to have the Holding
Company Stock quoted on the National Association of Securities Dealers, Inc.
Automated Quotation System or listed on a national or regional securities
exchange.
XI. STATUS OF SAVINGS ACCOUNTS AND LOANS SUBSEQUENT TO CONVERSION.
All Savings Accounts in the Association will retain the same status after
Conversion as these accounts had prior to Conversion. Subject to Paragraph
VIII.I. hereof, each holder of a Savings Account in the Association shall
retain, without payment, a withdrawable Savings Account or Savings Accounts in
the Converted Association, equal in dollar amount and on the same terms and
conditions as in effect prior to Conversion. All Savings Accounts will continue
to be insured by the Savings Association Insurance Fund of the Federal Deposit
Insurance Corporation up to the applicable limits of insurance coverage. All
loans shall retain the same status after Conversion as these loans had prior to
Conversion. After Conversion, holders of Savings Accounts and obligors on loans
of the Association will not have voting rights in the Converted Association.
Exclusive voting rights with respect to the Holding Company shall be vested in
the holders of the Conversion Stock issued by the Holding Company, and the
Holding Company will have exclusive voting rights with respect to the Converted
Association's Capital Stock.
XII. LIQUIDATION ACCOUNT.
After the Conversion, holders of Savings Accounts will not be entitled to
share in the residual assets after liquidation of the Converted Association.
However, pursuant to applicable regulations, the Association shall, at the time
of the Conversion, establish a Liquidation Account in an amount equal to its
regulatory capital as of the date of the latest statement of financial condition
contained in the final prospectus to be used in connection with the Conversion.
The function of the Liquidation Account is to establish a priority on
liquidation, and, except as provided in Paragraph VIII.G.2. above, the existence
of the Liquidation Account shall not operate to restrict the use or application
of any of the net worth accounts of the Converted Association.
The Liquidation Account shall be maintained by the Converted Association
subsequent to Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Converted Association. Each Eligible Account Holder and Supplemental Eligible
Account Holder shall, with respect to each Savings Account held, have a related
inchoate interest in a portion of the Liquidation Account ("subaccount
balance").
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder and/or a Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the Liquidation Account by a fraction of
which the numerator is the amount of the qualifying deposit in the related
Savings Account and the denominator is the total amount of the qualifying
deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders in the Association. Such initial subaccount balance shall not be
increased but shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder to which the subaccount relates at the
close of business on any annual closing date subsequent to the Eligibility
Record Date or Supplemental Eligibility Record Date is less than the lesser of
(i) the deposit balance in such Savings Account at the close of business on any
annual closing date subsequent to the Eligibility Record Date or the
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Supplemental Eligibility Record Date, or (ii) the amount of the Qualifying
Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any increase in the deposit balance of the related Savings
Account. If any such Savings Account is closed, the related subaccount balance
shall be reduced to zero.
In the event of a complete liquidation of the Converted Association (and
only in such event), each Eligible Account Holder and Supplemental Eligible
Account Holder shall be entitled to receive a liquidation distribution from the
Liquidation Account in the amount of the then-current adjusted subaccount
balances for Savings Accounts then held before any liquidation distribution may
be made to stockholders. No merger, consolidation, sale of bulk assets or
similar combination or transaction with another institution insured by the
Federal Deposit Insurance Corporation shall be considered to be a complete
liquidation for these purposes. In such transactions, the Liquidation Account
shall be assumed by the surviving institution.
XIII. RESTRICTIONS ON ACQUISITION OF HOLDING COMPANY.
A. Present regulations provide that for a period of three years
following completion of the Conversion, no person (i.e., an individual, a group
acting in concert, a corporation, a partnership, an association, a joint stock
company, a trust or any unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding or
disposing of securities of an insured institution or its holding company) shall
directly, or indirectly, offer to purchase or actually acquire the beneficial
ownership of more than 10% of any class of Holding Company Stock without the
prior approval of the OTS. However, approval is not required for purchases
directly from the Holding Company or underwriters or a selling group acting on
its behalf with a view towards public resale, or for purchases not exceeding 1%
per annum of the shares outstanding, or for the acquisition of securities by one
or more Tax-Qualified Employee Stock Benefit Plans of the Holding Company or the
Converted Association, provided that the plan or plans do not have beneficial
ownership in the aggregate of more than 25% of any class of Holding Company
Stock. Civil penalties may be imposed by the OTS for willful violation or
assistance of any violation. Where any person, directly or indirectly, acquires
beneficial ownership of more than 10% of any class of Holding Company Stock
within such three-year period, without the prior approval of the OTS, Holding
Company Stock beneficially owned by such person in excess of 10% shall not be
counted as shares entitled to vote and shall not be voted by any person or
counted as voting shares in connection with any matter submitted to the
stockholders for a vote.
B. The Holding Company may provide in its Articles of Incorporation a
provision that, for a period of five years following the date of the completion
of the Conversion, no person shall directly or indirectly offer to acquire or
actually acquire the beneficial ownership of more than 10% of any class of
Holding Company Stock except with respect to purchases by one or more Tax-
Qualified Employee Stock Benefit Plans of the Holding Company or Converted
Association. The Holding Company may provide in its Articles of Incorporation
for such other provisions affecting the acquisition of Holding Company Stock as
shall be determined by its Board of Directors.
XIV. INTERPRETATION AND AMENDMENT OR TERMINATION OF THE PLAN.
The Association's Board of Directors shall have the sole discretion to
interpret and apply the provisions of the Plan to particular facts and
circumstances and to make all determinations necessary or desirable to implement
such provisions, including but not limited to matters with respect to giving
preference to natural persons and trusts of natural persons who are permanent
Residents of the Association's Local Community, and any and all interpretations,
applications and determinations made by the Board of Directors in good faith and
on the basis of such information and assistance as was then reasonably available
for such purpose shall be conclusive and binding upon the Association and its
members and subscribers in the Subscription and Community Offerings, subject to
the authority of the OTS.
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If deemed necessary or desirable, the Plan may be substantively amended at
any time prior to submission of the Plan and proxy materials to the Members by a
two-thirds vote of the Association's Board of Directors. After submission of
the Plan and proxy materials to the Members, the Plan may be amended by a two-
thirds vote of the Association's Board of Directors at any time prior to the
Special Meeting and at any time following such Special Meeting with the
concurrence of the OTS. In its discretion, the Board of Directors may modify or
terminate the Plan upon the order of the regulatory authorities without a
resolicitation of proxies or another Special Meeting.
In the event that mandatory new regulations pertaining to conversions are
adopted by the OTS or any successor agency prior to the completion of the
Conversion, the Plan will be amended to conform to the new mandatory regulations
without a resolicitation of proxies or another Special Meeting. In the event
that new conversion regulations adopted by the OTS or any successor agency prior
to completion of the Conversion contain optional provisions, the Plan may be
amended to utilize such optional provisions at the discretion of the Board of
Directors without a resolicitation of proxies or another Special Meeting.
By adoption of the Plan, the Association's Members authorize the Board of
Directors to amend and/or terminate the Plan under the circumstances set forth
above.
XV. EXPENSES OF THE CONVERSION.
The Holding Company and the Association will use their best efforts to
assure that expenses incurred in connection with the Conversion shall be
reasonable.
XVI. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS.
The Holding Company and the Converted Association may make scheduled
discretionary contributions to their Tax-Qualified Employee Stock Benefit Plans,
provided such contributions do not cause the Converted Association to fail to
meet its then-applicable regulatory capital requirements.
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EXHIBIT B
SALIDA BUILDING & LOAN ASSOCIATION
FEDERAL STOCK CHARTER
SECTION 1. CORPORATE TITLE. The full corporate title of the association is
Salida Building & Loan Association (the "association").
SECTION 2. OFFICE. The home office shall be located at 130 West 2nd Street, in
the Town of Salida, in the State of Colorado.
SECTION 3. DURATION. The duration of the association is perpetual.
SECTION 4. PURPOSE AND POWERS. The purpose of the association is to pursue any
or all of the lawful objectives of a Federal association chartered under Section
5 of the Home Owners' Loan Act and to exercise all of the express, implied, and
incidental powers conferred thereby and by all acts amendatory thereof and
supplemental thereto, subject to the Constitution and laws of the United States
as they are now in effect, or as they may hereafter be amended, and subject to
all lawful and applicable rules, regulations, and orders of the Office of Thrift
Supervision ("Office").
SECTION 5. CAPITAL STOCK. The total number of shares of all classes of the
capital stock which the association has authority to issue is 4,000,000 of which
3,000,000 shares shall be common stock, of par value of $1.00 per share and of
which 1,000,000 shares shall be serial preferred stock of par value of $1.00 per
share. The shares may be issued from time to time as authorized by the board of
directors without approval of its stockholders except as otherwise provided in
this Section 5 or to the extent that such approval is required by governing law,
rule, or regulation. The consideration for the issuance of the shares shall be
paid in full before their issuance and shall not be less than the par value.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of shares of the association. The consideration for
the shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted), labor, or services actually
performed for the association, or any combination of the foregoing. In the
absence of actual fraud in the transaction, the value of such property, labor,
or services, as determined by the board of directors of the association, shall
be conclusive. Upon payment of such consideration, such shares shall be deemed
to be fully paid and nonassessable. In the case of a stock dividend, that part
of the surplus of the association which is transferred to stated capital upon
the issuance of shares as a share dividend shall be deemed to be the
consideration for their issuance.
Except for shares issuable in connection with the conversion of the
association from the mutual to the stock form of capitalization, no shares of
capital stock (including shares issuable upon conversion, exchange, or exercise
of other securities) shall be issued, directly or indirectly, to officers,
directors, or controlling persons of the association other than as part of a
general public offering or as qualifying shares to a director, unless their
issuance or the plan under which they would be issued has been approved by a
majority of the total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, provided,
that this restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of preferred stock,
voting as a class or series, to elect some members of the board of directors,
less than a majority thereof, in the event of default in the payment of
dividends on any class or series of preferred stock;
(ii) To any provision which would require the holders of preferred stock,
voting as a class or series, to approve the merger or consolidation of the
association with another corporation or the sale, lease, or conveyance (other
than by mortgage or pledge) of properties or business in exchange for securities
of a corporation other than the
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association if the preferred stock is exchanged for securities of such other
corporation: Provided, That no provision may require such approval for
transactions undertaken with the assistance or pursuant to the direction of the
Office, the Federal Deposit Insurance Corporation, or the Resolution Trust
Corporation;
(iii) To any amendment which would adversely change the specific terms
of any class or series of capital stock as set forth in this Section 5 (or in
any supplementary sections hereto), including any amendment which would create
or enlarge any class or series ranking prior thereto in rights and preferences.
An amendment which increases the number of authorized shares of any class or
series of capital stock, or substitutes the surviving association in a merger or
consolidation for the association, shall not be considered to be such an adverse
change.
A description of the different classes and series (if any) of the
association's capital stock and a statement of the designations, and the
relative rights, preferences, and limitations of the shares of each class of and
series (if any) of capital stock are as follows:
A. COMMON STOCK. Except as provided in this Section 5 (or in any
supplementary sections thereto), the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and of sinking fund, retirement fund, or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any class or series
of stock entitled to participate therewith as to dividends out of any assets
legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
association, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the association available for distribution remaining after: (i)
payment or provision for payment of the association's debts and liabilities;
(ii) distributions or provisions for distributions in settlement of its
liquidation account; and (iii) distributions or provisions for distributions to
holders of any class or series of stock having preference over the common stock
in the liquidation, dissolution, or winding up of the association. Each share
of common stock shall have the same relative rights as and be identical in all
respects with all the other shares of common stock.
B. PREFERRED STOCK. The association may provide in supplementary sections
to its charter for one or more classes of preferred stock, which shall be
separately identified. The shares of any class may be divided into and issued
in series, with each series separately designated so as to distinguish the
shares thereof from the shares of all other series and classes. The terms of
each series shall be set forth in a supplementary section to the charter. All
shares of the same class shall be identical except as to the following relative
rights and preferences, as to which there may be variations between different
series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the shares
of such series, whether dividends shall be cumulative and, if so, from which
date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
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(c) The voting powers, full or limited, if any, of shares of such series;
(d) Whether the shares of such series shall be redeemable and, if so, the
price(s) at which, and the terms and conditions on which, such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event of
voluntary or involuntary liquidation, dissolution, or winding up of the
association;
(f) Whether the shares of such series shall be entitled to the benefit of
a sinking or retirement fund to be applied to the purchase or redemption of such
shares, and if so entitled, the amount of such fund and the manner of its
application, including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the
association and, if so, the conversion price(s) or the rate(s) of exchange, and
the adjustments thereof, if any, at which such conversion or exchange may be
made, and any other terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such series
shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption of
supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established by a
supplementary charter section adopted by the board of directors, the association
shall file with the Secretary to the Office a dated copy of that supplementary
section of this charter establishing and designating the series and fixing and
determining the relative rights and preferences thereof.
SECTION 6. PREEMPTIVE RIGHTS. Holders of the capital stock of the association
shall not be entitled to preemptive rights with respect to any shares of the
association which may be issued.
SECTION 7. LIQUIDATION ACCOUNT. Pursuant to the requirements of the Office's
regulations (12 C.F.R. Subchapter D), the association shall establish and
maintain a liquidation account for the benefit of its savings account holders as
of December 31, 1995 and September 30, 1997 ("eligible savers"). In the event
of a complete liquidation of the association, it shall comply with such
regulations with respect to the amount and the priorities on liquidation of each
of the association's eligible savers' inchoate interest in the liquidation
account, to the extent it is still in existence; provided, that an eligible
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savers' inchoate interest in the liquidation account shall not entitle such
eligible saver to any voting rights at meetings of the association's
stockholders.
SECTION 8. CERTAIN PROVISIONS APPLICABLE FOR FIVE YEARS. Notwithstanding
anything contained in the association's charter or bylaws to the contrary, for a
period of five years from the date of completion of the conversion of the
association from a mutual savings and loan association to a stock association,
the following provisions shall apply:
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A. BENEFICIAL OWNERSHIP LIMITATION. No person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of more than 10
percent of any class of an equity security of the association. This limitation
shall not apply to a transaction in which the association forms a holding
company without change in the respective beneficial ownership interests of its
stockholders other than pursuant to the exercise of any dissenter and appraisal
rights, the purchase of shares by underwriters in connection with a public
offering, or the purchase of shares by a tax-qualified employee stock benefit
plan which is exempt from the approval requirements under (S)574.3(c)(1)(vi) of
the Office's regulations.
In the event shares are acquired in violation of this Section 8, all shares
beneficially owned by any person in excess of 10 percent shall be considered
"excess shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to the stockholders for a vote.
For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock company, a
trust, an unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of the
equity securities of the association.
(2) The term "offer" includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for, or
request or invitation for tenders of, a security or interest in a
security for value.
(3) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise.
(4) The term "acting in concert" means (a) knowing participation in
a joint activity or conscious parallel action towards a common goal
whether or not pursuant to an express agreement, or (b) a combination
or pooling of voting or other interests in the securities of an issuer
for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangements, whether written or
otherwise.
B. CUMULATIVE VOTING LIMITATION. Stockholders shall not be permitted
to cumulate their votes for election of directors.
C. CALL FOR SPECIAL MEETINGS. Special meetings of stockholders
relating to changes in control of the association or amendments to its charter
shall be called only upon direction of the board of directors.
SECTION 9. DIRECTORS. The association shall be under the direction of a board
of directors. The authorized number of directors, as stated in the
association's bylaws, shall not be fewer than five or more than fifteen except
when a greater number is approved by the Director of the Office.
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SECTION 10. AMENDMENT OF CHARTER. Except as provided in Section 5, no
amendment, addition, alteration, change, or repeal of this charter shall be
made, unless such is first proposed by the board of directors of the
association, then preliminarily approved by the Office, which preliminary
approval may be granted by the Office pursuant to regulations specifying
preapproved charter amendments, and thereafter approved by the stockholders by a
majority of the total votes eligible to be cast at a legal meeting. Any
amendment, addition, alteration, change, or repeal so acted upon shall be
effective upon filing with the Office in accordance with regulatory procedures
or on such other date as the Office may specify in its preliminary approval.
Attest: ____________________________ By: ________________________________
Richard A. Young Larry D. Smith
Secretary President and Chief Executive
Salida Building & Loan Officer Salida Building &
Association Loan Association
Attest: ____________________________ By: ________________________________
Secretary Director of the Office of Thrift
Office of Thrift Supervision Supervision
Declared effective as of _________________________.
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EXHIBIT C
BYLAWS
SALIDA BUILDING & LOAN ASSOCIATION
ARTICLE I - HOME OFFICES
The home office of the association shall be 130 West 2nd Street, in the
Town of Salida in the State of Colorado.
ARTICLE II - SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
shareholders shall be held at the home office of the association or at such
other place in the State of Colorado in which the principal place of business of
the association is located as the board of directors may determine.
SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the
association for the election of directors and for the transaction of any other
business of the association shall be held annually within 120 days after the end
of the association's fiscal year on the Third Thursday in October if not a legal
holiday, and, if a legal holiday, then on the next day following which is not a
legal holiday, at 10:00 a.m., or at such other date and time within such 120-day
period as the board of directors may determine.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office"), may be called at any time by the
chairman of the board, the president, or a majority of the board of directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the association entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the meeting
and shall be delivered to the home office of the association addressed to the
chairman of the board, the president, or the secretary.
SECTION 4. CONDUCT OF MEETINGS. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws. The
board of directors shall designate, when present, either the chairman of the
board or the president to preside at such meetings.
SECTION 5. NOTICE OF MEETINGS. Written notice stating the place, day, and
hour of the meeting and the purpose(s) for which the meeting is called shall be
delivered not fewer than 10 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, or the secretary, or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the association as of the record date prescribed in Section
6 of this Article II with postage prepaid. When any shareholders' meeting,
either annual or special, is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. It shall
not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.
SECTION 6. FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the board of directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more
than 60 days and, in case of a meeting of shareholders, not fewer than 10 days
prior to the date on which the particular action,
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requiring such determination of shareholders, is to be taken. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to any
adjournment.
SECTION 7. VOTING LISTS. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the association shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment, arranged in alphabetical
order, with the address and the number of shares held by each. This list of
shareholders shall be kept on file at the home office of the association and
shall be subject to inspection by any shareholder at any time during usual
business hours for a period of 20 days prior to such meeting. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder during the entire time of the meeting.
The original stock transfer book shall constitute prima facie evidence of the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the board of directors may
elect to follow the procedures prescribed in (S)552.6(d) of the Office's
regulations as now or hereafter in effect.
SECTION 8. QUORUM. A majority of the outstanding shares of the
association entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares is represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies solicited on behalf of the management
shall be voted as directed by the shareholder or, in the absence of such
direction, as determined by a majority of the board of directors. No proxy
shall be valid more than eleven months from the date of its execution except for
a proxy coupled with an interest.
SECTION 10. VOTING OF SHARES IN THE NAME OF TWO OR MORE PERSONS. When
ownership stands in the name of two or more persons, in the absence of written
directions to the association to the contrary, at any meeting of the
shareholders of the association, any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
SECTION 11. VOTING OF SHARES OF CERTAIN HOLDERS. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her, without a transfer of such shares into his or her name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer into his or her name if authority to do so is contained in
an appropriate order of the court or other public authority by which such
receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
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Neither treasury shares of its own stock held by the association nor shares
held by another corporation, if a majority of the shares entitled to vote for
the election of directors of such other corporation are held by the association,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
SECTION 12. CUMULATIVE VOTING. Unless otherwise provided in the
association's charter, every shareholder entitled to vote at an election for
directors shall have the right to vote, in person or by proxy, the number of
shares owned by the shareholder for as many persons as there are directors to be
elected and for whose election the shareholder has a right to vote, or to
cumulate the votes by giving one candidate as many votes as the number of such
directors to be elected multiplied by the number of shares shall equal or by
distributing such votes on the same principle among any number of candidates.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails
or refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies; receiving votes,
ballots, or consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and tabulating
all votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all shareholders.
SECTION 14. NOMINATING COMMITTEE. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the association. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the secretary of the association at least five days prior to
the date of the annual meeting. Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the association. Ballots bearing the
names of all persons nominated by the nominating committee and by shareholders
shall be provided for use at the annual meeting. However, if the nominating
committee shall fail or refuse to act at least 20 days prior to the annual
meeting, nominations for directors may be made at the annual meeting by any
shareholder entitled to vote and shall be voted upon.
SECTION 15. NEW BUSINESS. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the
association at least five days before the date of the annual meeting, and all
business so stated, proposed, and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the annual meeting. Any
shareholder may make any other proposal at the annual meeting and the same may
be discussed and considered, but unless stated in writing and filed with the
secretary at least five days before the meeting, such proposal shall be laid
over for action at an adjourned, special, or annual meeting of the shareholders
taking place 30 days or more thereafter. This provision shall not prevent the
consideration and approval or disapproval at the annual meeting of reports of
officers, directors, and committees; but in connection with such reports, no new
business shall be acted upon at such annual meeting unless stated and filed as
herein provided.
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<PAGE>
SECTION 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the association
shall be under the direction of its board of directors. The board of directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, either the chairman of the board or
the president to preside at its meetings.
SECTION 2. NUMBER AND TERM. The board of directors shall consist of six
(6) members and shall be divided into three classes as nearly equal in number as
possible. The members of each class shall be elected for a term of three years
and until their successors are elected and qualified. One class shall be
elected by ballot annually.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The board of directors may
provide, by resolution, the time and place, within the association's normal
lending territory, for the holding of additional regular meetings without other
notice than such resolution.
SECTION 4. QUALIFICATION. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the association
unless the association is a wholly owned subsidiary of a holding company.
SECTION 5. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the president,
or one-third of the directors. The persons authorized to call special meetings
of the board of directors may fix any place, within the association's normal
lending territory, as the place for holding any special meeting of the board of
directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person but shall not constitute attendance for the
purpose of compensation pursuant to Section 12 of this Article III.
SECTION 6. NOTICE. Written notice of any special meeting shall be given
to each director at least two days prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall
be deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed or when delivered to the telegraph company if sent by
telegram. Any director may waive notice of any meeting by a writing filed with
the secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the board of directors need be
specified in the notice of waiver or notice of such meeting.
SECTION 7. QUORUM. A majority of the number of directors fixed by Section
2 of this Article III shall constitute a quorum for the transaction of business
at any meeting of the board of directors; but if less than such majority is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time. Notice of any adjourned meeting shall be given in the
same manner as prescribed by Section 6 of this Article III.
SECTION 8. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
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<PAGE>
SECTION 9. ACTION WITHOUT A MEETING. Any action required or permitted to
be taken by the board of directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the directors.
SECTION 10. RESIGNATION. Any director may resign at any time by sending a
written notice of such resignation to the home office of the association
addressed to the chairman of the board or the president. Unless otherwise
specified, such resignation shall take effect upon receipt by the chairman of
the board or the president. More than three consecutive absences from regular
meetings of the board of directors, unless excused by resolution of the board of
directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the board of directors.
SECTION 11. VACANCIES. Any vacancy occurring on the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of directors for a
term of office continuing only until the next election of directors by the
shareholders.
SECTION 12. COMPENSATION. Directors, as such, may receive a stated salary
for their services. By resolution of the board of directors, a reasonable fixed
sum, and reasonable expenses of attendance, if any, may be allowed for actual
attendance at each regular or special meeting of the board of directors.
Members of either standing or special committees may be allowed such
compensation for actual attendance at committee meetings as the board of
directors may determine.
SECTION 13. PRESUMPTION OF ASSENT. A director of the association who is
present at a meeting of the board of directors at which action on any
association matter is taken shall be presumed to have assented to the action
taken unless his or her dissent or abstention shall be entered in the minutes of
the meeting or unless he or she shall file a written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
association within five days after the date a copy of the minutes of the meeting
is received. Such right to dissent shall not apply to a director who voted in
favor of such action.
SECTION 14. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors. If less than the entire board is to be removed, no one of the
directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of
the shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this section shall apply, in respect to the removal of a director or directors
so elected, to the vote of the holders of the outstanding shares of that class
and not to the vote of the outstanding shares as a whole.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
SECTION 1. APPOINTMENT. The board of directors, by resolution adopted by
a majority of the full board, may designate the chief executive officer and two
or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
SECTION 2. AUTHORITY. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the
C-5
<PAGE>
authority of the board of directors with reference to: the declaration of
dividends; the amendment of the charter or bylaws of the association, or
recommending to the stockholders a plan of merger, consolidation, or conversion;
the sale, lease, or other disposition of all or substantially all of the
property and assets of the association otherwise than in the usual and regular
course of its business; a voluntary dissolution of the association; a revocation
of any of the foregoing; or the approval of a transaction in which any member of
the executive committee, directly or indirectly, has any material beneficial
interest.
SECTION 3. TENURE. Subject to the provisions of Section 8 of this Article
IV, each member of the executive committee shall hold office until the next
regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
SECTION 4. MEETINGS. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee
may be called by any member thereof upon not less than one day's notice stating
the place, date, and hour of the meeting, which notice may be written or oral.
Any member of the executive committee may waive notice of any meeting and no
notice of any meeting need be given to any member thereof who attends in person.
The notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
SECTION 5. QUORUM. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted to
be taken by the executive committee at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the members of the executive committee.
SECTION 7. VACANCIES. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
SECTION 8. RESIGNATIONS AND REMOVAL. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the association. Unless otherwise
specified, such resignation shall take effect upon its receipt; the acceptance
of such resignation shall not be necessary to make it effective.
SECTION 9. PROCEDURE. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
SECTION 10. OTHER COMMITTEES. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as it may
determine to be necessary or appropriate for the conduct of the business of the
association and may prescribe the duties, constitution, and procedures thereof.
C-6
<PAGE>
ARTICLE V - OFFICERS
SECTION 1. POSITIONS. The officers of the association shall be a
president, one or more vice presidents, a secretary, and a treasurer, each of
whom shall be elected by the board of directors. The board of directors may
also designate the chairman of the board as an officer. The president shall be
the chief executive officer, unless the board of directors designates the
chairman of the board as chief executive officer. The president shall be a
director of the association. The offices of the secretary and treasurer may be
held by the same person and a vice president may also be either the secretary or
the treasurer. The board of directors may designate one or more vice presidents
as executive vice president or senior vice president. The board of directors
may also elect or authorize the appointment of such other officers as the
business of the association may require. The officers shall have such authority
and perform such duties as the board of directors may from time to time
authorize or determine. In the absence of action by the board of directors, the
officers shall have such powers and duties as generally pertain to their
respective offices.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the association
shall be elected annually at the first meeting of the board of directors held
after each annual meeting of the stockholders. If the election of officers is
not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly
elected and qualified or until the officer's death, resignation, or removal in
the manner hereinafter provided. Election or appointment of an officer,
employee, or agent shall not of itself create contractual rights. The board of
directors may authorize the association to enter into an employment contract
with any officer in accordance with regulations of the Office, but no such
contract shall impair the right of the board of directors to remove any officer
at any time in accordance with Section 3 of this Article V.
SECTION 3. REMOVAL. Any officer may be removed by the board of directors
whenever in its judgment the best interests of the association will be served
thereby, but such removal, other than for cause, shall be without prejudice to
the contractual rights, if any, of the person so removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. REMUNERATION. The remuneration of the officers shall be fixed
from time to time by the board of directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
SECTION 1. CONTRACTS. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee, or agent of the association to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the association. Such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
association and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the association shall be signed by one or more officers, employees, or
agents of the association in such manner as shall from time to time be
determined by the board of directors.
SECTION 4. DEPOSITS. All funds of the association not otherwise employed
shall be deposited from time to time to the credit of the association in any
duly authorized depositories as the board of directors may select.
C-7
<PAGE>
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
capital stock of the association shall be in such form as shall be determined by
the board of directors and approved by the Office. Such certificates shall be
signed by the chief executive officer or by any other officer of the association
authorized by the board of directors, attested by the secretary or an assistant
secretary, and sealed with the corporate seal or a facsimile thereof. The
signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the association itself or one of its employees. Each certificate for
shares of capital stock shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares are issued, with the
number of shares and date of issue, shall be entered on the stock transfer books
of the association. All certificates surrendered to the association for transfer
shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares has been surrendered and canceled,
except that in the case of a lost or destroyed certificate, a new certificate
may be issued upon such terms and indemnity to the association as the board of
directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock of the
association shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
or her attorney authorized by a duly executed power of attorney and filed with
the association. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the association shall be deemed by the association
to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the association shall end on the 30th day of June of
each year. The association shall be subject to an annual audit as of the end of
its fiscal year by independent public accountants appointed by and responsible
to the board of directors. The appointment of such independent accountants
shall be subject to annual ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the association's charter and the regulations and
orders of the Office, the board of directors may, from time to time, declare,
and the association may pay, dividends on its outstanding shares of capital
stock.
ARTICLE X - CORPORATE SEAL
The board of directors shall provide an association seal which shall be two
concentric circles between which shall be the name of the association. The year
of incorporation or an emblem may appear in the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of the
Office at any time by a majority of the full board of directors or by a majority
of the votes cast by the stockholders of the association at any legal meeting.
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<PAGE>
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE SALIDA BUILDING AND LOAN ASSOCIATION
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON ____________, 1997)
The undersigned member of The Salida Building and Loan Association (the
"Association") hereby appoints _______________, _______________ and
_______________ or any one of them, with full powers of substitution, as
attorneys-in-fact and agents for and in the name of the undersigned, to vote
such votes as the undersigned may be entitled to cast at the Special Meeting of
Members (the "Meeting") of Salida Building and Loan Association to be held at
the Association's office located at 130 West 2nd Street, Salida, Colorado, on
_________, ___________, 1997, at __:__ _.m., local time, and at any adjournments
thereof. They are authorized to cast all votes to which the undersigned is
entitled, as follows:
Adoption of the Plan of Conversion, providing for the conversion of the
Association from a federally chartered mutual savings and loan
association to a federally chartered stock savings and loan association
(the "Converted Association"), as a wholly owned subsidiary of High
Country Bancorp, Inc., and the related transactions provided for in
such plan, including the adoption of an amended Charter and Bylaws for
the Converted Association.
FOR AGAINST
--- -------
[_] [_]
In their discretion, on any other matters that may lawfully come before
the meeting.
NOTE: The Board of Directors is not aware of any other matter that may come
before the Meeting.
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PLAN IF
NO CHOICE IS MADE HEREON
Should the undersigned be present and elect to vote at said Meeting or
at any adjournment thereof and, after notification to the Secretary of The
Salida Building and Loan Association at said Meeting of the member's decision to
terminate this Proxy, then the power of said attorneys-in-fact or agents shall
be deemed terminated and of no further force and effect. The undersigned hereby
revokes any and all proxies heretofore given.
The undersigned acknowledges receipt of a Notice of Special Meeting of
the Members of The Salida Building and Loan Association to be held on
____________, 1997 and a Proxy Statement dated ________, 1997 and a Prospectus
dated __________, 1997 prior to the execution of this Proxy.
---------------------
Date
---------------------
Signature
Note: Only one signature is required in the
case of a joint account.
<PAGE>
EXHIBIT 99.3
HIGH COUNTRY BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
SALIDA BUILDING AND LOAN ASSOCIATION
SALIDA, COLORADO
PROPOSED MARKETING MATERIALS
8-15-97
[DRAFT]
<PAGE>
Marketing Materials
High Country Bancorp, Inc.
Salida, Colorado
Table of Contents
-----------------
I. Press Releases
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
A. Explanation
B. Method of Distribution
C. Example
IV. Cover Letters
A. Explanation
B. Examples
V. IRA Mailing
A. Explanation
B. Quantity
C. IRA Mailing Example
VI. Individual Letters and Community Meeting Invitation
A. Explanation
B. Method of Distribution
C. Examples
VII. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
VIII. Proxy Reminder
A. Explanation
B. Example
1
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers receive prompt accurate
information in a simultaneous manner, Trident advises the Association to
forward press releases to area newspapers, radio stations, etc. at various
points during the conversion process.
Only press releases approved by Conversion Counsel and the OTS will be
forwarded for publication in any manner.
B. Schedule
1. OTS Approval of Conversion
2. Close of Stock Offering
2
<PAGE>
C. Distribution List
National Distribution List
--------------------------
National Thrift News Wall Street Journal
- -------------------- -------------------
212 West 35th Street World Financial Center
13th Floor 200 Liberty
New York, New York 10001 New York, NY 10004
Richard Chang
American Banker SNL Securities
- --------------- --------------
One State Street Plaza Post Office Box 2124
New York, New York 10004 Charlottesville, Virginia 22902
Michael Weinstein
Barrons Investors Business Daily
- ------- ------------------------
Dow Jones & Company 12655 Beatrice Street
Barrons Statistical Information Post Office Box 661750
200 Burnett Road Los Angeles, California 90066
Chicopee, Massachusetts 01020
New York Times
- --------------
229 West 43rd Street
New York, NY 10036
3
<PAGE>
Local Media List
----------------
(To be provided)
Newspaper
- ---------
Radio
- -----
4
<PAGE>
D. Press Release Examples
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Larry D. Smith
(719) 539-2516
SALIDA BUILDING AND LOAN ASSOCIATION
-------------------------------------
CONVERSION TO STOCK FORM APPROVED
---------------------------------
Salida, Colorado (____________, 1997) - Larry D. Smith, President and CEO
of Salida Building and Loan Association ("Salida Building and Loan" or the
"Association"), Salida, Colorado, announced that Salida Building and Loan has
received approval from the Office of Thrift Supervision to convert from a
federally-chartered mutual savings and loan association to a federally-chartered
stock savings and loan association. In connection with the Conversion, Salida
Building and Loan has formed a holding company, High Country Bancorp, Inc., to
hold all of the outstanding capital stock of Salida Building and Loan.
High Country Bancorp, Inc. is offering up to 1,035,000 shares of its common
stock, subject to adjustment, at a price of $10.00 per share. Certain account
holders and borrowers of the Association will have an opportunity to subscribe
for stock through a Subscription Offering that closes on ___________, 1997.
Shares that are not subscribed for during the Subscription Offering may be
offered to certain members of the general public in a Community Offering, with
first preference given to natural persons and trusts of natural persons who are
residents of Chaffer, Lake, Fremont and Saguache Counties. The Subscription
Offering and Community Offering, if conducted, will be managed by Trident
Securities, Inc. of Raleigh, North Carolina. Copies of the Prospectus relating
to the offerings and describing the Plan of Conversion will be mailed to
customers on or about ____________, 1997.
As a result of the Conversion, Salida Building and Loan will be structured
in the stock form
5
<PAGE>
as are all commercial banks and an increasing number of savings institutions and
will be a wholly-owned subsidiary of High Country Bancorp, Inc. According to Mr.
Smith, "Our day to day operations will not change as a result of the Conversion
and deposits will continue to be insured by the FDIC up to the applicable legal
limits."
Customers with questions concerning the stock offering should call Salida
Building and Loan's Stock Information Center at (719) ________, or visit one of
Salida Building and Loan's offices.
6
<PAGE>
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Larry D. Smith
(719) 539-2516
SALIDA BUILDING AND LOAN COMPLETES INITIAL STOCK OFFERING
---------------------------------------------------------
Salida, Colorado - (____________, 1997) Larry D. Smith, President and CEO
of Salida Building and Loan Association ("Salida Building and Loan" or the
"Association"), announced today that High Country Bancorp, Inc., the proposed
holding company for Salida Building and Loan, has completed its initial stock
offering in connection with the Association's conversion from mutual to stock
form. A total of ____________ shares were sold at the price of $10.00 per
share.
On ____________, 1997, Salida Building and Loan's Plan of Conversion was
approved by the Association's voting members at a special meeting of members.
Mr. Smith said that the officers and boards of directors of High Country
Bancorp, Inc. and Salida Building and Loan wished to express their thanks for
the response to the stock offering and that Salida Building and Loan looks
forward to serving the needs of its customers and new stockholders as a
community-based stock institution. The stock is anticipated to commence trading
on ____________, 1997 on the OTC "Small Cap." Trident Securities, Inc. of
Raleigh, North Carolina managed the stock offering.
7
<PAGE>
II. Advertisements
A. Explanation
The intended use of the attached advertisement "A" is to notify Salida
Building and Loan's customers and members of the local community that the
conversion offering is underway.
The intended use of advertisement "B" is to remind Salida Building and
Loan's customers of the closing date of the Subscription Offering.
B. Media Schedule
1. Advertisement A - To be run immediately following OTS approval and
possibly run weekly for the first three weeks.
2. Advertisement B - To be run during the last week of the subscription
offering.
Trident may feel it is necessary to run more ads in order to remind
customers of the close of the Subscription Offering and the Community
Offering, if conducted.
Alternatively, Trident may, depending upon the response from the customer
base, choose to run fewer ads or no ads at all.
These ads will run in the local newspapers.
The ad size will be as shown or smaller.
8
<PAGE>
- --------------------------------------------------------------------------------
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO
BUY THESE SECURITIES. THE OFFER IS MADE ONLY BY THE PROSPECTUS. THESE SHARES
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION,
THE OFFICE OF THRIFT SUPERVISION OR THE FEDERAL DEPOSIT INSURANCE CORPORATION,
NOR HAS SUCH COMMISSION, OFFICE OR CORPORATION PASSED UPON THE ACCURACY OR
ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NEW ISSUE __________, 1997
1,035,000 SHARES
These shares are being offered pursuant
to a Plan of Conversion whereby
SALIDA BUILDING AND LOAN ASSOCIATION
Salida, Colorado, will
convert from a federal mutual savings and loan association to a
federal capital stock savings and loan association
and become a wholly owned subsidiary of
HIGH COUNTRY BANCORP, INC.
COMMON STOCK
_______________
PRICE $10.00 PER SHARE
_______________
TRIDENT SECURITIES, INC.
For a copy of the prospectus call (719) ________.
Copies of the prospectus may be obtained in any State in which this announcement
is circulated from Trident Securities, Inc. or such other brokers and dealers
as may legally offer these securities in such state.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
- -------------------------------------------------------------------------------
9
<PAGE>
- -------------------------------------------------------------------------------
SALIDA BUILDING AND LOAN ASSOCIATION
__________ __, 1997 IS THE DEADLINE TO
ORDER STOCK OF HIGH COUNTRY BANCORP, INC.
Customers of Salida Building and Loan Association
have the opportunity
to invest in Salida Building and Loan Association
by subscribing
for common stock in its proposed holding company
HIGH COUNTRY BANCORP, INC.
A Prospectus relating to these securities is
available at our office or by calling our
Stock Information Center at (719) ________.
This announcement is neither an offer to sell nor a
solicitation of an offer to buy the stock of
High Country Bancorp, Inc. The offer is made only by the
Prospectus. The shares of common stock are not
deposits or savings accounts and will not be insured
by the Federal Deposit Insurance Corporation
or any other government agency.
Copies of the Prospectus may be obtained in any State in which this announcement
is circulated from Trident Securities, Inc. or such other brokers and dealers
as may legally offer these securities in such state.
- -------------------------------------------------------------------------------
10
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
conversion. It serves two purposes: a) to answer some of the most commonly
asked questions in "plain, everyday language"; and b) to highlight in
brochure form the purchase commitments of the Association's officers and
directors shown in the Prospectus. Although most of the answers are taken
verbatim from the Prospectus, it saves the individual from searching for
the answer to a simple question.
B. Method of Distribution
There are four primary methods of distribution of the Question and Answer
brochure. However, regardless of the method the brochures are always
accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing to
all members of the Association.
2. Question and Answer brochures are available in Salida Building and
Loan's offices.
3. Question and Answer brochures may be sent out in a standard
information packet to all interested investors who phone the Stock
Information Center requesting information.
11
<PAGE>
PROPOSED OFFICER AND DIRECTOR PURCHASES
<TABLE>
<CAPTION>
Percent of Shares
Aggregate Price of Purchased Based
Name and Position Total Shares Amount of Purchase on Midpoint of Offer
- ----------------- ------------ ------------------ -------------------
<S> <C> <C> <C>
Robert B. Mitchell, Chairman of the Board
Larry D. Smith, President and Director
Scott G. Erchul, Vice President and Director
Timothy G. Glenn, Director
Phillip W. Harsh, Director
Richard A. Young, Director
Frank L. DeLay, Chief Financial Officer -------- $-------
Total
============ ================== ===================
</TABLE>
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY HIGH COUNTRY BANCORP, INC. COMMON STOCK. SUCH OFFERS AND
SOLICITATIONS MAY BE MADE ONLY BY MEANS OF THE PROSPECTUS. COPIES OF THE
PROSPECTUS MAY BE OBTAINED BY CALLING THE STOCK INFORMATION CENTER AT (719)
______________.
THE SHARES OF HIGH COUNTRY BANCORP, INC. COMMON STOCK BEING OFFERED ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
12
<PAGE>
HIGH COUNTRY BANCORP, INC.
(HOLDING COMPANY FOR SALIDA BUILDING AND LOAN ASSOCIATION)
QUESTIONS AND ANSWERS
REGARDING
THE PLAN OF CONVERSION
On May 15, 1997, the Board of Directors of Salida Building and Loan Association
("Salida Building and Loan" or the "Association") unanimously adopted the Plan
of Conversion (the "Plan"), pursuant to which Salida Building and Loan will
convert from a federally-chartered mutual savings and loan association to a
federally-chartered stock savings and loan association (the "Conversion"). In
addition, all of Salida Building and Loan's outstanding capital stock will be
issued to High Country Bancorp, Inc. (the "Holding Company"), which was
organized by Salida Building and Loan to own Salida Building and Loan as a
subsidiary.
This brochure is provided to answer general questions you might have about the
Conversion. Following the Conversion, Salida Building and Loan will continue to
provide financial services to its depositors, borrowers and other customers as
it has in the past and will operate with its existing management and employees.
The Conversion will not affect the terms, balances, interest rates or existing
federal insurance coverage on Salida Building and Loan's deposits or the terms
or conditions of any loans to existing borrowers under their individual contract
arrangements with Salida Building and Loan.
For complete information regarding the Conversion, see the Prospectus and the
Proxy Statement dated __________, 1997 and the Proxy Statement dated __________,
1997. Copies of each of the Prospectus and the Proxy Statement may be obtained
by calling the Stock Information Center at (719) ________.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY HIGH COUNTRY BANCORP, INC. COMMON STOCK. OFFERS TO BUY OR TO
SELL MAY BE MADE ONLY BY THE PROSPECTUS. PLEASE READ THE PROSPECTUS PRIOR TO
MAKING AN INVESTMENT DECISION.
THE SHARES OF HIGH COUNTRY BANCORP, INC. COMMON STOCK BEING OFFERED IN THE
SUBSCRIPTION AND COMMUNITY OFFERINGS ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND
ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
13
<PAGE>
QUESTIONS AND ANSWERS
Questions and Answers Regarding the Subscription and Community Offerings
MUTUAL TO STOCK CONVERSION
--------------------------
1. Q. WHAT IS A "CONVERSION"?
A. Conversion is a change in the legal form of organization. Salida
Building and Loan currently operates as a federally-chartered mutual
savings and loan association with no stockholders. Through the
Conversion, Salida Building and Loan will become a federally-chartered
stock savings and loan association, and the stock of its holding
company, High Country Bancorp, Inc. will be held by stockholders who
purchase stock in the Subscription and Community Offerings or in the
open market following the Offerings.
2. Q. WHY IS SALIDA BUILDING AND LOAN CONVERTING?
A. Salida Building and Loan, as a mutual savings and loan association,
does not have stockholders and has no authority to issue capital
stock. By converting to the stock form of organization, the
Association will be structured in the form used by commercial banks,
most business entities and a growing number of savings institutions.
The Conversion will be important to the future growth and performance
of the Salida Building and Loan by providing a larger capital base
from which the Association may operate, the ability to attract and
retain qualified management through stock-based employee benefit
plans, enhanced ability to diversify into other financial services
related activities and expanded ability to render services to the
public.
Salida Building and Loan believes that converting to the stock form of
organization will allow Salida Building and Loan to more effectively
compete with local community banks, thrifts, and with statewide and
regional banks, which are in stock form. Salida Building and Loan
believes that by combining its existing quality service and products
with a local ownership base the Association's customers and community
members who become stockholders will be inclined to do more business
with Salida Building and Loan.
Furthermore, because Salida Building and Loan competes with local and
regional banks not only for customers, but also for employees. Salida
Building and Loan believes that the stock form of organization will
better afford the Association the opportunity to attract and retain
employees, management and directors through various stock benefit
plans which are not available to mutual savings institutions.
14
<PAGE>
3. Q. IS SALIDA BUILDING AND LOAN'S MUTUAL TO STOCK CONVERSION
BENEFICIAL TO THE COMMUNITIES THAT THE ASSOCIATION SERVES?
A. Management believes that the structure of the Subscription and
Community Offerings is in the best interest of the communities that
Salida Building and Loan serves because following the Conversion it is
anticipated that a significant portion of the Common Stock will be
owned by local residents desiring to share in the ownership of a local
community financial institution. Management desires that a
significant portion of the shares of common stock sold in the
Offerings will be sold to residents of the Association's Local
Community (Chaffee, Lake, Fremont and Saguache Counties, Colorado).
4. Q. WHAT EFFECT WILL THE CONVERSION HAVE ON DEPOSIT ACCOUNTS AND
LOANS?
A. Terms and balances of accounts in Salida Building and Loan and
interest rates paid on such accounts will not be affected by the
Conversion. Insurable accounts will continue to be insured by the
Federal Deposit Insurance Corporation ("FDIC") up to the maximum
amount permitted by law. The Conversion also will not affect the
terms or conditions of any loans to existing borrowers or the rights
and obligations of these borrowers under their individual contractual
arrangements with Salida Building and Loan.
5. Q. WILL THE CONVERSION CAUSE ANY CHANGES IN SALIDA BUILDING AND
LOAN'S PERSONNEL?
A. No. Both before and after the Conversion, Salida Building and Loan's
business of accepting deposits, making loans and providing financial
services will continue without interruption with the same board of
directors, management and staff.
6. Q. WHAT APPROVALS MUST BE RECEIVED BEFORE THE CONVERSION BECOMES
EFFECTIVE?
A. First, the Board of Directors of Salida Building and Loan must adopt
the Plan of Conversion, which occurred on May 15, 1997. Second, the
Office of Thrift Supervision must approve the applications required to
effect the Conversion. These approvals have been obtained. Third,
the Plan of Conversion must be approved by a majority of all votes
eligible to be cast by Salida Building and Loan's voting members. A
Special Meeting of voting members will be held on __________ __, 1997,
to consider and vote upon the Plan of Conversion.
THE HOLDING COMPANY
-------------------
7. Q. WHAT IS A HOLDING COMPANY?
A. A holding company is a company that owns another entity. Concurrent
with the Conversion, Salida Building and Loan will become a subsidiary
of High Country Bancorp, Inc., a company organized by Salida Building
and Loan to acquire all of the capital stock of Salida Building and
Loan to be outstanding after the Conversion.
15
<PAGE>
8. Q. IF I DECIDE TO BUY STOCK IN THIS OFFERING, WILL I OWN STOCK IN THE
HOLDING COMPANY OR SALIDA BUILDING AND LOAN?
A. You will own stock in High Country Bancorp, Inc. However, High
Country Bancorp, Inc., as a holding company, will own all of the
outstanding capital stock of Salida Building and Loan.
9. Q. WHY DID THE BOARD OF DIRECTORS FORM THE HOLDING COMPANY?
A. The Board of Directors believes that the Conversion of Salida Building
and Loan and the formation of the Holding Company will result in a
stronger financial institution with the ability to provide additional
flexibility to diversify the Association's business activities. The
Holding Company will also be able to use stock-based incentive
programs to attract and retain executive and other personnel.
ABOUT BECOMING A STOCKHOLDER
----------------------------
10. Q. WHAT ARE THE SUBSCRIPTION AND COMMUNITY OFFERINGS?
A. Under the Plan of Conversion adopted by Salida Building and Loan, the
Holding Company is offering shares of stock in the Subscription
Offering, to certain current and former customers of the Association
and to the Association's Employee Stock Ownership Plan ("ESOP").
Shares which are not subscribed for in the Subscription Offering, if
any, may be offered to the general public in a Community Offering with
preference given to natural persons who are permanent residents of the
Association's Local Community (Chaffee, Lake, Fremont and Saguache
Counties). These Offerings are consistent with the board's objective
of High Country Bancorp, Inc. being a locally owned financial
institution. The Subscription Offering and Community Offering, if
conducted, are being managed by Trident Securities, Inc. It is
anticipated that any shares not subscribed for in either the
Subscription or Community Offerings may be offered for sale in a
Syndicated Community Offering, which is an offering on a best efforts
basis by a selling group of broker-dealers.
11. Q. MUST I PAY A COMMISSION TO BUY STOCK IN CONJUNCTION WITH THE
SUBSCRIPTION, COMMUNITY OR COMMUNITY OFFERINGS?
A. No. You will not pay a commission to buy the stock if the stock is
purchased in the Subscription Offering or Community Offering, if
conducted.
12. Q. HOW MANY SHARES OF HIGH COUNTRY BANCORP, INC. STOCK WILL BE ISSUED IN
THE CONVERSION?
A. It is currently expected that between 765,000 shares and 1,035,000
shares of common stock will be sold at a price of $10.00 per share.
As a result of changes in market and financial conditions prior to the
completion of the conversion or to fill orders of the ESOP and subject
to the Office of Thrift supervision approval, the offering may be
increased to 1,190,250 shares without further notice to you.
13. Q. HOW WAS THE PRICE DETERMINED?
A. The aggregate price of the common stock was determined by Ferguson &
Company,
16
<PAGE>
an independent appraisal firm specializing in the thrift industry, and
was approved by the Office of Thrift Supervision. The price is based
on the pro forma market value of Salida Building and Loan and the
Holding Company as determined by the independent valuation.
14. Q. WHO IS ENTITLED TO BUY STOCK IN THE CONVERSION?
A. The shares of High Country Bancorp, Inc. to be issued in the
Conversion are being offered in the Subscription Offering in the
following order of priority to: (i) Eligible Account Holder (The term
"Eligible Account Holders" shall hereinafter mean depositors whose
accounts in the Association total $50.00 or more as of December 31,
1995), (ii) the Association's ESOP, (iii) depositors with $50.00 or
more on deposit at the Association as of September 30, 1997, other
than Eligible Account Holders, ("Supplemental Eligible Account
Holders"), (iv) depositors and borrowers of the Association as of
_____________, 1997, other than Eligible Account Holders and
Supplemental Eligible Account Holders ("Other Members"), subject to
the priorities and purchase limitations set forth in the Plan of
Conversion. Subject to the prior rights of holders of subscription
rights, Common Stock not subscribed for in the Subscription Offering
may be offered in the Community Offering to certain members of the
general public, with preference given to natural persons and trusts of
natural persons residing in the Association's Local Community
(Chaffee, Lake, Fremont and Saguache Counties). Shares, if any, not
subscribed for in the Subscription or Community Offerings may be
offered to the general public in a Syndicated Community Offering.
15. Q. ARE THE SUBSCRIPTION RIGHTS TRANSFERABLE?
A. No. Subscription rights granted to Salida Building and Loan's
Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members in the Conversion are not transferable. Persons
violating such prohibition, directly or indirectly, may lose their
right to purchase stock in the Conversion and be subject to other
possible sanctions.
16. Q. WHAT ARE THE MINIMUM AND MAXIMUM NUMBERS OF SHARES THAT I CAN PURCHASE
IN THE CONVERSION?
A. The minimum number of shares is 25. The maximum number of shares that
may be purchased in aggregate in the Conversion by any person or
entity other than the ESOP, together with any associate or persons or
entities acting in concert with such person, currently is $250,000 of
common stock issued in the conversion.
17. Q. ARE THE BOARD OF DIRECTORS AND MANAGEMENT OF SALIDA BUILDING AND LOAN
BUYING A SIGNIFICANT AMOUNT OF THE STOCK OF THE HOLDING COMPANY?
A. Directors and executive officers of the Association are expected to
subscribe for _________ shares. The purchase price paid by directors
and executive officers will be the same $10.00 per share price as that
paid by all other persons who order stock in the Subscription or
Community Offerings.
17
<PAGE>
18. Q. HOW DO I SUBSCRIBE FOR SHARES OF STOCK?
A. To subscribe for shares of stock in the Subscription Offering, you
should send or deliver a stock order form together with full payment
(or appropriate instructions for withdrawal from permitted deposit
accounts as described below) to Salida Building and Loan in the
postage-paid envelope provided. The stock order form and payment or
withdrawal authorization instructions must be received prior to the
close of the Subscription Offering, which will terminate at 12:00
p.m., Local Time, on __________ __, 1997, unless extended. Payment
for shares may be made in cash (if made in person) or by check or
money order. Subscribers who have deposit accounts with Salida
Building and Loan may include instructions on the stock order form
requesting withdrawal from such deposit account(s) to purchase shares
of High Country Bancorp, Inc. Withdrawals from certificates of
deposit may be made without incurring an early withdrawal penalty. IT
IS THE RESPONSIBILITY OF EACH SUBSCRIBER QUALIFYING AS AN ELIGIBLE
ACCOUNT HOLDER, SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER OR OTHER MEMBER
TO LIST COMPLETELY ALL ACCOUNT NUMBERS FOR QUALIFYING SAVINGS ACCOUNTS
OR LOANS AS OF THE QUALIFYING DATE ON THE STOCK ORDER FORM.
If shares remain available for sale after the expiration of the
Subscription Offering, they may be offered in the Community Offering,
which may commence at any time after the commencement of the
Subscription Offering and may terminate at any time without notice,
but may not terminate later than ______________, 1998. Persons who
wish to order stock in the Community Offering should return their
stock order form as soon as possible after the Community Offering
begins. Members of the general public should contact the Stock
Information Center at (719) ________ for additional information.
19. Q. MAY I USE FUNDS IN A RETIREMENT ACCOUNT TO PURCHASE STOCK?
A. Yes. If you are interested in using funds held in your retirement
account at Salida Building and Loan, the Stock Information Center can
assist you in transferring those funds to a self-directed IRA, if
necessary, and directing the trustee to purchase the stock. This
process may be done without an early withdrawal penalty and generally
without a negative tax consequence to your retirement account. Due to
the additional paperwork involved, IRA transfers must be completed by
_________. For additional information, call the Stock Information
Center at (719) __________.
20. Q. WILL I RECEIVE INTEREST ON FUNDS I SUBMIT FOR A STOCK PURCHASE?
A. Yes. Salida Building and Loan will pay interest at its passbook rate
from the date the funds are received until completion of the stock
offering or termination of the Conversion. All funds authorized for
withdrawal from deposit accounts with Salida Building and Loan will
continue to earn interest at the contractual rate until the date of
the completion of the Conversion.
21. Q. MAY I OBTAIN A LOAN FROM SALIDA BUILDING AND LOAN TO PAY FOR SHARES
18
<PAGE>
PURCHASED IN THE CONVERSION?
A. No. Federal regulations prohibit Salida Building and Loan from making
loans for this purpose. However, federal regulations do not prohibit
you from obtaining a loan from another source for the purpose of
purchasing stock in the Conversion.
22. Q. IF I BUY STOCK IN THE CONVERSION, HOW WOULD I GO ABOUT BUYING
ADDITIONAL SHARES OR SELLING SHARES IN THE AFTERMARKET?
A. The Holding Company has never issued capital stock to the public and,
consequently, there is no existing market for the Common Stock.
Although the Holding Company has received conditional approval to
trade its Common Stock on the Nasdaq SmallCap Market under the symbol
"___" there can be no assurance that the Holding Company will meet
Nasdaq SmallCap Market listing requirements, which currently include a
minimum of two market makers in the Common Stock. Trident Securities
has indicated its intention to make a market in the Common Stock, and
the Association anticipates that it will be able to secure at least
one additional market maker for the Common Stock. However, it is
unlikely that an active trading market for the Common Stock will
develop, and there can be no assurance that the shares of Common Stock
being offered in the Conversion can be resold at or above the $10.00
purchase price.
23. Q. WHAT IS THE HOLDING COMPANY'S DIVIDEND POLICY?
A. The Board of Directors of the Holding Company intends to adopt a
policy of paying regular cash dividends at an annual rate of $0.30 per
share (3.0%) commencing no earlier than the quarter ending March 31,
1998. Dividends will be subject to determination and declaration by
the Board of Directors, which will take into account a number of
factors, including the operating results and financial condition of
the Holding Company, net worth and capital requirements and regulatory
restrictions on the payment of dividends by the Association to the
Holding Company upon which dividends paid by the Holding Company
eventually will be primarily dependent. There can be no assurance
that dividends will in fact be paid on the Common Stock or that, if
paid, such dividends will not be reduced or eliminated in future
periods.
24. Q. WILL THE FDIC INSURE THE SHARES OF THE HOLDING COMPANY?
A. No. The shares of High Country Bancorp, Inc. are not savings deposits
or savings accounts and are not insured by the FDIC or any other
government agency.
25. Q. IF I SUBSCRIBE FOR SHARES AND LATER CHANGE MY MIND, WILL I BE ABLE TO
GET A REFUND OR MODIFY MY ORDER?
A. No. Your order cannot be canceled, withdrawn or modified once it has
been received by Salida Building and Loan without the consent of the
Holding Company.
19
<PAGE>
ABOUT VOTING "FOR" THE PLAN OF CONVERSION
-----------------------------------------
26. Q. AM I ELIGIBLE TO VOTE AT THE SPECIAL MEETING OF MEMBERS TO BE HELD TO
CONSIDER THE PLAN OF CONVERSION?
A. You are eligible to vote at the Special Meeting of Members to be held
on __________ __, 1997 if you were a depositor or borrower of Salida
Building and Loan at the close of business on the Voting Record Date
(_______, 1997) or as a borrower of Salida Building and Loan on
(________, ____) and continue as such until the Special Meeting. If
you were a member on the Voting Record Date, you should have received
a proxy statement and a proxy card with which to vote.
27. Q. HOW MANY VOTES DO I HAVE?
A. Each account holder is entitled to one vote for each $100, or fraction
thereof, on deposit in such account(s). Each borrower member is
entitled to cast one vote in addition to the number of votes, if any,
he or she is entitled to cast as an account holder. No member may
cast more than 1,000 votes.
28. Q. IF I VOTE "AGAINST" THE PLAN OF CONVERSION AND IT IS APPROVED, WILL I
BE PROHIBITED FROM BUYING STOCK DURING THE SUBSCRIPTION OFFERING?
A. No. Voting against the Plan of Conversion in no way restricts you
from purchasing High Country Bancorp, Inc. stock in the Subscription
Offering.
29. Q. DID THE BOARD OF DIRECTORS OF SALIDA BUILDING AND LOAN UNANIMOUSLY
ADOPT THE PLAN OF CONVERSION?
A. Yes. Salida Building and Loan's Board of Directors unanimously
adopted the Plan of Conversion and urges that all members vote "FOR"
approval of such Plan.
30. Q. WHAT HAPPENS IF SALIDA BUILDING AND LOAN DOES NOT GET ENOUGH VOTES TO
APPROVE THE PLAN OF CONVERSION?
A. The Conversion would not take place, and Salida Building and Loan
would remain a mutual savings institution.
31. Q. AS A QUALIFYING DEPOSITOR OR BORROWER OF SALIDA BUILDING AND LOAN, AM
I REQUIRED TO VOTE?
A. No. However, failure to return your proxy card or otherwise vote will
have the same effect as a vote AGAINST the Plan of Conversion.
32. Q. WHAT IS A PROXY CARD?
A. A proxy card gives you the ability to vote without attending the
Special Meeting in person. If you received more than one
informational packet, then you should vote the proxy cards in all
packets. Your proxy card is located in the window sleeve of your
informational packet(s).
You may attend the meeting and vote, even if you have returned your
proxy card, if you choose to do so. However, if you are unable to
attend, you still are represented by proxy. Previously executed
proxies, other than those proxies sent pursuant to the
20
<PAGE>
Conversion, will not be used to vote for approval of the Plan of
Conversion, even if the respective members do not execute another
proxy or attend the Special Meeting and vote in person.
33. Q. HOW CAN I GET FURTHER INFORMATION CONCERNING THE STOCK OFFERING?
A. You may call the Stock Information Center at (719) ________ for
further information or to request a copy of the Prospectus, a stock
order form, a proxy statement or a proxy card.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY HIGH COUNTRY BANCORP, INC. COMMON STOCK. SUCH OFFERS AND
SOLICITATIONS MAY BE MADE ONLY BY MEANS OF THE PROSPECTUS. COPIES OF THE
PROSPECTUS MAY BE OBTAINED BY CALLING THE STOCK INFORMATION CENTER AT (719)
______________.
THE SHARES OF HIGH COUNTRY BANCORP, INC. COMMON STOCK BEING OFFERED ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
21
<PAGE>
IV. Cover Letters for Initial Mailing
A. Explanation
These cover letters are used as an introduction for the Offering and Proxy
materials mailed to potential investors.
B. Examples
22
<PAGE>
(Salida Building and Loan Letterhead)
____________, 1997
Dear Valued Customer:
Salida Building and Loan Association ("Salida Building and Loan" or the
"Association") is pleased to announce that it has received regulatory approval
to proceed with its plan to convert to a federally-chartered stock savings and
loan association. This stock conversion is the most significant event in the
history of Salida Building and Loan in that it allows customers, community
members, directors and employees an opportunity to own stock in High Country
Bancorp, Inc., the proposed holding company for the Association.
Since 1886, the Association has successfully operated as a mutual company.
We want to assure you that the Conversion will not affect the terms, balances,
interest rates or existing FDIC insurance coverage deposits at the Association,
or the terms or conditions of any loans to existing borrowers under their
individual contract arrangements with the Association. Let us also assure you
that the Conversion will not result in any changes in the management, personnel
or the Board of Directors of the Association.
As one of our valued members, you have the opportunity to invest in the
Association's future by purchasing stock in High Country Bancorp, Inc. without
paying a sales commission.
If you decide to exercise your subscription rights to purchase shares, you
must return the properly completed stock order form together with full payment
for the subscribed shares so that it is received by the Association not later
than 12:00 p.m. Local Time on __________, 1997.
Enclosed is a proxy card. Your Board of Directors solicits your vote "FOR"
the Association's Plan of Conversion. A vote in favor of the Plan does not
obligate you to purchase stock. Please sign and return your proxy card promptly;
your vote is important to us.
We have also enclosed a Prospectus and Proxy Statement which fully
describes the Association, its management, board and financial strength and the
Plan of Conversion. Please review it carefully before you vote or invest. For
your convenience we have established a Stock Information Center. If you have any
questions, please call the Stock Information Center collect at (719) _____.
We look forward to continuing to provide quality financial services to you
in the future.
Sincerely,
Larry D. Smith
President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and Proxy Statement. There shall be no sale of stock in
any state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
23
<PAGE>
(Salida Building and Loan Letterhead)
____________, 1997
Dear Interested Investor:
Salida Building and Loan Association ("Salida Building and Loan" or the
"Association") is pleased to announce that it has received regulatory approval
to proceed with its plan to convert to a federally-chartered stock savings and
loan association. This stock conversion is the most significant event in the
history of the Association in that it allows customers, community members,
directors and employees an opportunity to own stock in High Country Bancorp,
Inc., the proposed holding company for the Association.
Since 1886, the Association has successfully operated as a mutual company.
We want to assure you that the Conversion will not affect the terms, balances,
interest rates or existing FDIC insurance coverage on the Association deposits,
or the terms or conditions of any loans to existing borrowers under their
individual contract arrangements with the Association.
Let us also assure you that the Conversion will not result in any changes
in the management, personnel or the Board of Directors of the Association.
Enclosed is a Prospectus which fully describes the Association, its
management, board and financial strength. Please review it carefully before you
make an investment decision. If you decide to invest, please return to the
Association a properly completed stock order form together with full payment for
shares at your earliest convenience but not later than 12:00 p.m. Local Time on
_________, 1997. For your convenience we have established a Stock Information
Center. If you have any questions, please call the Stock Information Center
collect at (719) ________.
We look forward to continuing to provide quality financial services to you
in the future.
Sincerely,
Larry D. Smith
President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and Proxy Statement. There shall be no sale of stock in
any state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
24
<PAGE>
(Salida Building and Loan Letterhead)
_____________, 1997
Dear Friend:
Salida Building and Loan Association ("Salida Building and Loan" or the
"Association") is pleased to announce that we have received regulatory approval
to proceed with its plan to convert to a federally-chartered stock savings and
loan association. This stock conversion is the most significant event in the
history of Salida Building and Loan in that it allows customers, community
members, directors and employees an opportunity to own stock in High Country
Bancorp, Inc., the proposed holding company for the Association.
Since 1886, the Association has successfully operated as a mutual company.
We want to assure you that the Conversion will not affect the terms, balances,
interest rates or existing FDIC insurance coverage on the Association deposits,
or the terms or conditions of any loans to existing borrowers under their
individual contract arrangements with the Association.
Let us also assure you that the Conversion will not result in any changes
in the management, personnel or the Board of Directors of the Association.
Our records indicate that you were a depositor of the Association on
__________, but that you were not a member on _____________, 1997. Therefore,
under applicable law, you are entitled to subscribe for Common Stock in High
Country Bancorp, Inc.'s Subscription Offering. Orders submitted by you and
others in the Subscription Offering are contingent upon the current members'
approval of the Plan of Conversion at a special meeting of members to be held on
_________, 1997 and upon receipt of all required regulatory approvals. Since you
are no longer a current member, you are not entitled to vote at the special
meeting of members.
If you decide to exercise your subscription rights to purchase shares, you
must return the properly completed stock order form together with full payment
for the subscribed shares so that it is received at the Association not later
than 12:00 p.m. Local Time on _________, 1997.
Enclosed is a Prospectus which fully describes the Association, its
management, board and financial strength. Please review it carefully before you
invest. For your convenience we have established a Stock Information Center. If
you have any questions, please call the Stock Information Center collect at
(719) ________.
We look forward to providing quality financial services to you in the
future.
Sincerely,
Larry D. Smith
President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and Proxy Statement. There shall be no sale of stock in
any state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL
25
<PAGE>
AGENCY.
26
<PAGE>
(Salida Building and Loan Letterhead)
___________, 1997
Dear Member:
As a qualified member of Salida Building and Loan Association ("Salida
Building and Loan" or the "Association"), you have the right to vote upon the
Association's proposed Plan of Holding Company Conversion and also generally
have the right to subscribe for shares of common stock of High Country Bancorp,
Inc., the proposed holding company for Salida Building and Loan through the
mutual to stock conversion of the Association. However, the proposed plan of
Holding Company Conversion provides that High Country Bancorp, Inc. will not
offer stock in any state in which compliance with the securities laws would be
impracticable for reasons of cost or otherwise. Unfortunately, the securities
laws of your state would require High Country Bancorp, Inc. to register its
common stock and /or its employees in order to sell the common stock to you.
Such registration would be prohibitively expensive or otherwise impracticable in
light of the few members residing in your state.
You may vote on the proposed Plan of Holding Company Conversion and we urge
you to read the enclosed Summary Proxy Statement and execute the enclosed
Revocable Proxy. Questions regarding the execution of the Revocable Proxy
should be directed to Salida Building and Loan's Stock Information Center at
(719)______________.
Sincerely,
Larry D. Smith
President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and Proxy Statement. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
27
<PAGE>
(Trident Letterhead)
___________,1997
To Members and Friends of Salida Building and Loan Association:
At the request of High Country Bancorp, Inc. (the "Holding Company") and
Salida Building and Loan Association ("Salida Building and Loan") we have
enclosed their Prospectus and a Stock Order Form for your use should you decide
to subscribe for shares of Common Stock of the Holding company being issued in
connection with the conversion of Salida Building and Loan from a federally-
charted mutual savings bank to a federally-chartered stock savings bank and the
formation of the Holding Company as the parent holding company for Salida
Building and Loan.
If you decide to exercise your subscription rights to purchase shares, you
must return the properly completed Stock Order Form together with full payment
for the subscribed shares (or appropriate instructions authorizing withdrawal in
such amount from your authorized deposit account(s) at Salida Building and Loan)
so that it is received at Salida Building and Loan's office no later than 12:00
noon, Eastern Time on ________, 1997.
The Holding Company has asked us to forward these documents to you in view
of certain requirements of the securities laws in your state. Should you have
any questions you may contact the Stock Information Center at (__) ___________.
Sincerely,
TRIDENT SECURITIES, INC.
The shares of common stock offered in the conversion are not savings
accounts or deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other government agency.
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer will be made only by the Prospectus. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
28
<PAGE>
V. IRA Mailing
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of the
Association in order to alert the customers that funds held in an IRA can
be used to purchase stock. Since this transaction is not as simple as
designating funds from a certificate of deposit like a normal stock
purchase, this letter informs the customer that this process is slightly
more detailed and involves a personal visit to the Association.
B. Quantity
One IRA letter is proposed to be mailed to each IRA customer of the
Association. These letters would be mailed following OTS approval for the
conversion and after each customer has received the initial mailing
containing a Proxy Statement and a Prospectus.
C. Example - See following page.
29
<PAGE>
(Salida Building and Loan Letterhead)
_____________, 1997
Dear Individual Retirement Account Participant:
As you know, Salida Building and Loan Association is in the process of
converting from a federally-chartered mutual savings and loan association to a
federally-chartered stock savings and loan association and has formed High
Country Bancorp, Inc. to hold all of the stock of Salida Building and Loan (the
"Conversion"). Through the Conversion, certain current and former depositors
and borrowers of Salida Building and Loan have the opportunity to purchase
shares of common stock of High Country Bancorp, Inc. in a Subscription
Offering. High Country Bancorp, Inc. currently is offering up to 1,035,000
shares, subject to adjustment, of High Country Bancorp, Inc. at a price of
$10.00 per share.
As the holder of an individual retirement account ("IRA") at Salida
Building and Loan, you have an opportunity to become a shareholder in High
Country Bancorp, Inc. using funds being held in your IRA. If you desire to
purchase shares of common stock of High Country Bancorp, Inc. through your IRA,
Salida Building and Loan can assist you in self-directing those funds. This
process can be done without an early withdrawal penalty and generally without a
negative tax consequence to your retirement account.
If you are interested in ordering High Country Bancorp, Inc. Common Stock
utilizing IRA funds, you must contact our Conversion Center at (719) __________
no later than __________, 1997.
Sincerely,
Larry D. Smith
President and CEO
This letter is neither an offer to sell nor a solicitation of an offer to buy
High Country Bancorp, Inc. common stock. The offer is made only by the
Prospectus, which was recently mailed to you.
THE SHARES OF HIGH COUNTRY BANCORP, INC. COMMON STOCK ARE NOT DEPOSITS AND WILL
NOT BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
30
<PAGE>
VI. Individual Letters and Community Meeting Invitations
A. Explanation
In order to educate the public about the stock offering, Trident
suggests holding Community meetings in various locations. In an effort
to target a group of interested investors, Trident requests that each
Director of the Association submit a list of acquaintances that he or
she would like to invite to a community meeting.
B. Method of Distribution of Invitations and Prospect Letters
Each Director submits his list of prospects.
Invitations are sent to each Director's prospects through the mail.
All invitations are preceded by a Prospectus and all attendees are
given a Prospectus at the meeting. Letters will be sent to prospects
to thank them for their attendance and to remind them of closing
dates.
C. Examples enclosed.
31
<PAGE>
- --------------------------------------------------------------------------------
The Directors and Officers
of
Salida Building and Loan Association
cordially invite you to attend a brief
presentation regarding the stock offering of
High Country Bancorp, Inc., our proposed holding company
Please join us at the
______________________
___________________
_________________________
__________________
_____________________
for refreshments
YOU MUST RESPOND BY ____________ TO RESERVE A SEAT
R.S.V.P. (719) _____________
This is not an offer to sell or a solicitation of an offer to buy stock.
The offer will be made only by a Prospectus! There shall be no sale of stock in
any state in which any offer, solicitation of an offer or sales of stock would
be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
- --------------------------------------------------------------------------------
32
<PAGE>
Sent to prospects who are customers*
_______________, 1997
&salutation& &firstname& &last name&
&address&
&city&, &state& &zip&
Dear &prefername&
Recently you may have read in the newspaper that Salida Building and Loan
Association ("The Association") will convert from a federally-chartered mutual
savings and loan association to a federally-chartered stock savings and loan
association. This is the most significant event in the history of the
Association in that it allows customers, employees and directors the opportunity
to share in Salida Building and Loan's future by becoming charter stockholders
of the Association's newly-formed holding company, High Country Bancorp, Inc.
As a customer of Salida Building and Loan, you should have received a
packet of information regarding the conversion, including a Prospectus and a
Proxy Statement. In addition, we are holding several presentations for friends
of the officers and directors to discuss the stock offering in more detail. You
will receive an invitation in the near future.
Please feel free to call me or the Salida Building and Loan's Stock
Information Center at (719) ________ if you have any questions. I look forward
to seeing you at one of our informational presentations.
Sincerely,
Larry D. Smith
President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
33
<PAGE>
*Sent to prospects who are not customers*
____________, 1997
&salutation& &firstname& &lastname&
&address&
&city&, &state& &zip&
Dear &prefername&:
Recently you may have read in the newspaper that Salida Building and Loan
Association ("The Association") will be converting from a federally-chartered
mutual savings and loan association to a federally-chartered stock savings and
loan association. This is the most significant event in the history of the
Association in that it allows customers, employees and directors the opportunity
to share in Salida Building and Loan's future by becoming charter stockholders
of the Association's holding company, High Country Bancorp, Inc.
[Director] has asked that you be sent a Prospectus and stock order form
which will allow you to become a charter stockholder, should you desire. In
addition, we are holding several presentations for friends of the officers and
directors of Salida Building and Loan to discuss the stock offering in more
detail. You will receive an invitation in the near future.
Please feel free to call me or the Salida Building and Loan's Stock
Information Center at (719) _______ if you have any questions. I look forward to
seeing you at one of our information presentations.
Sincerely,
Larry D. Smith
President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
34
<PAGE>
*Sent to those attending a community meeting*
____________, 1997
&salutation& &firstname& &lastname&
&address&
&City&, &state& &zip&
Dear &prefername&:
Thank you for attending our informational presentation relating to Salida
Building and Loan Association's conversion to a stock company. The information
presented at the meeting and the Prospectus you recently received should assist
you in making an informed investment decision.
Obviously, we are excited about this stock offering and the opportunity to
share in the future of Salida Building and Loan. This conversion is the most
important event in our history and it gives the Association the strength to
compete in the future and will provide the Association additional corporate
flexibility.
We may contact you in the near future to get an indication of your interest
in our offering. If you make a decision to invest, please return your order form
no later than ___________, 1997. If you have any questions, please call the
Stock Information Center at (719) ________.
Sincerely,
Larry D. Smith
President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
35
<PAGE>
* Sent to those not attending a community meeting *
_________, 1997
&salutation& &firstname& &lastname&
&address&
&city&, &state& &zip&
Dear &prefername&:
I am sorry you were unable to attend our recent presentation regarding
Salida Building and Loan Association's mutual to stock conversion. The Board of
Directors and management team of Salida Building and Loan are committed to
contributing to long term shareholder value and as a group we are personally
investing approximately $_________ of our own funds. We are enthusiastic about
the stock offering and the opportunity to share in the future of Salida Building
and Loan.
We have established a Stock Information Center to assist you with any
questions regarding the stock offering. Should you require any assistance
between now and ___________, 1997, I encourage you to either stop by our Stock
Information Center or call (719) __________.
I hope you will join me as a charter stockholder in High Country Bancorp,
Inc.
Sincerely,
Larry D. Smith
President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
36
<PAGE>
* Final Reminder Letter *
_________, 1997
&salutation&firstname&lastname&
&address&
&city&, &state& &zip&
Dear &prefername&:
I am writing to remind you that the deadline for purchasing stock in High
Country Bancorp, Inc. is quickly approaching. I hope you will join me in
becoming a charter stockholder in one of Colorado's newest publicly owned
financial institutions.
The deadline for becoming a charter stockholder is ____________, 1997. If
you have any questions, please call our Stock Information Center at (719)
__________.
Once again, I look forward to having you join me as a charter stockholder
in High Country Bancorp, Inc.
Sincerely,
Larry D. Smith
President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
37
<PAGE>
VII. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) As a notice to
Salida Building and Loan's customers and members of the local community
that the stock sale is underway and (2) to remind the customers of the end
of the Subscription Offering. Trident has learned in the past that many
people forget the deadline for subscribing and therefore we suggest the use
of these simple reminders.
B. Quantity
Approximately 2 - 3 Counter cards will be used at teller windows and on
customer service representatives' desk.
Approximately 1 - 2 Lobby posters will be used at Salida Building and
Loan's office.
C. Example
D. Size
The counter card will be approximately 8 1/2" x 11".
The lobby poster will be approximately 16" x 20".
38
<PAGE>
C.
POSTER OR COUNTER CARD
================================================================================
"TAKE STOCK IN OUR FUTURE"
"HIGH COUNTRY BANCORP, INC.
STOCK OFFERING MATERIALS
AVAILABLE HERE"
SALIDA BUILDING AND LOAN ASSOCIATION
This is not an offer to sell or a solicitation of an offer to buy stock.
This offer will be made only by a Prospectus. There shall be no sale of stock in
any state in which any offer, solicitation of an offer or sale of stock will be
unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
================================================================================
39
<PAGE>
VIII. Proxy Reminder
A. Explanation
A proxy reminder is used when the majority of votes needed to adopt the
Plan of Conversion is still outstanding. The proxy reminder is mailed to
those "target vote" depositors who have not previously returned their
signed proxy.
The target vote depositors are determined by the conversion agent.
B. Example
C. Size
Proxy reminder is approximately 8 1/2" x 11".
40
<PAGE>
B. Example
- --------------------------------------------------------------------------------
P R O X Y R E M I N D E R
SALIDA BUILDING AND LOAN ASSOCIATION
YOUR VOTE ON OUR STOCK CONVERSION PLAN HAS NOT BEEN RECEIVED. YOUR VOTE IS VERY
- --------- --------------------- -----------------
IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO VOTING AGAINST
- ---------
THE PLAN.
VOTING FOR THE CONVERSION WILL NOT AFFECT THE INSURANCE OF YOUR ACCOUNTS.
DEPOSIT ACCOUNTS WILL CONTINUE TO BE FEDERALLY INSURED UP TO THE APPLICABLE
LIMITS.
YOU MAY PURCHASE STOCK IF YOU WISH, BUT VOTING DOES NOT OBLIGATE YOU TO BUY
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL, OR DELIVER, THE
----------------------------
PROXY CARD TO SALIDA BUILDING AND LOAN TODAY.
PLEASE VOTE ALL PROXY CARDS RECEIVED.
---
WE RECOMMEND THAT YOU VOTE TO APPROVE THE PLAN OF CONVERSION. THANK YOU.
THE BOARD OF DIRECTORS AND MANAGEMENT OF
SALIDA BUILDING AND LOAN ASSOCIATION
- --------------------------------------------------------------------------------
IF YOU RECENTLY MAILED THE PROXY,
PLEASE ACCEPT OUR THANKS AND DISREGARD THIS REQUEST.
FOR FURTHER INFORMATION CALL (719) _______.
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of High Country Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
41
<PAGE>
Exhibit 99.4
CONVERSION VALUATION REPORT
______________________________________________
Valued as of August 8, 1997
SALIDA BUILDING AND LOAN ASSOCIATION
Salida, Colorado
Prepared By:
Ferguson & Company
Suite 550
122 W. John Carpenter Freeway
Irving, TX 75039
972/869-1177
<PAGE>
[LETTERHEAD OF FERGUSON & COMPANY APPEARS HERE]
STATEMENT OF APPRAISER'S INDEPENDENCE
SALIDA BUILDING AND LOAN ASSOCIATION
------------------------------------
SALIDA, COLORADO
----------------
We are the appraiser for Salida Building and Loan Association in connection
with its mutual to stock conversion. We are submitting our independent estimate
of the pro forma market value of the Association's stock to be issued in the
conversion. In connection with our appraisal of the Association's to-be-issued
stock, we have received a fee which was not related to the estimated final
value. The estimated pro forma market value is solely the opinion of our
company and it was not unduly influenced by the Association, its conversion
counsel, its selling agent, or any other party connected with the conversion.
We also received a fixed fee for assisting the Association in connection with
the preparation of its business plan to be submitted with the conversion
application.
Salida Building and Loan Association has agreed to indemnify Ferguson &
Company under certain circumstances against liabilities arising out of our
services. Specifically, we are indemnified against liabilities arising from our
appraisal except to the extent such liabilities are determined to have arisen
because of our negligence or willful conduct.
Ferguson & Company
Robin L. Fussell
Principal
August 15, 1997
<PAGE>
[LETTERHEAD OF FERGUSON & COMPANY APPEARS HERE]
AUGUST 15, 1997
BOARD OF DIRECTORS
SALIDA BUILDING AND LOAN ASSOCIATION
130 WEST 2ND STREET
SALIDA, COLORADO 81201
DEAR DIRECTORS:
We have completed and hereby provide, as of August 8, 1997, an independent
appraisal of the estimated pro forma market value of Salida Building and Loan
Association ("SB&LA" or the "Association"), Salida, Colorado, in connection with
the conversion of SB&LA from the mutual to stock form of organization
("Conversion"). This appraisal report is furnished pursuant to the regulatory
filing of the Association's Application for Conversion ("Form AC") with the
Office of Thrift Supervision ("OTS").
Ferguson & Company ("F&C") is a consulting firm that specializes in
providing financial, economic, and regulatory services to financial
institutions. The background and experience of F&C is presented in Exhibit I. We
believe that, except for the fees we will receive for preparing the appraisal
and assisting with SB&LA's business plan, we are independent. F&C personnel are
prohibited from owning stock in conversion clients for a period of at least one
year after conversion.
In preparing our appraisal, we have reviewed SB&LA's Application for
Approval of Conversion, including the Proxy Statement as filed with the OTS. We
conducted an analysis of SB&LA that included discussions with Grimsley, White &
Company, CPA's, the Association's independent auditors, and with Housley
Kantarian and Bronstein, P.C., the Association's conversion counsel. In
addition, where appropriate, we considered information based on other available
published sources that we believe is reliable; however, we cannot guarantee the
accuracy or completeness of such information.
We also reviewed the economy in SB&LA's primary market area and compared
the Association's financial condition and operating results with that of
selected publicly traded thrift institutions. We reviewed conditions in the
securities markets in general and in the market for thrifts stocks in
particular.
Our appraisal is based on SB&LA's representation that the information
contained in the Form AC and additional evidence furnished to us by the
Association and its independent auditors are truthful, accurate, and complete.
We did not independently verify the financial statements and other information
provided by SB&LA and its auditors, nor did we independently value the
Association's assets or liabilities. The valuation considers SB&LA only as a
going concern and should not be considered an indication of its liquidation
value.
It is our opinion that, as of August 8, 1997, the estimated pro forma
market value of Salida Building and Loan Association was $9,000,000, or 900,000
shares at $10.00 per share. The resultant valuation range was $7,650,000 at the
minimum (765,000 shares at $10.00 per share) to $10,350,000 at the maximum
(1,035,000 shares at $10.00 per share), based on a range of 15 percent below and
above the midpoint valuation. The supermaximum was $11,902,500 (1,190,250 shares
at $10.00 per share).
<PAGE>
BOARD OF DIRECTORS
AUGUST 15, 1997
PAGE 2
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of common
stock in the conversion. Moreover, because such valuation is necessarily based
upon estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to sell such
shares at prices related to the foregoing estimate of the Association's pro
forma market value. F&C is not a seller of securities within the meaning of any
federal or state securities laws and any report prepared by F&C shall not be
used as an offer or solicitation with respect to the purchase or sale of any
securities.
Our opinion is based on circumstances as of the date hereof, including
current conditions in the United States securities markets. Events occurring
after the date hereof, including, but not limited to, changes affecting the
United States securities markets and subsequent results of operations of SB&LA,
could materially affect the assumptions used in preparing this appraisal.
The valuation reported herein will be updated as provided in the OTS
conversion regulations and guidelines. Any updates will consider, among other
things, any developments or changes in SB&LA's financial performance and
condition, management policies, and current conditions in the equity markets for
thrift shares. Should any such new developments or changes be material, in our
opinion, to the valuation of the shares, appropriate adjustments will be made to
the estimated pro forma market value. The reasons for any such adjustments will
be explained in detail at the time.
Respectfully,
FERGUSON & COMPANY
Robin L. Fussell
Principal
<PAGE>
FERGUSON & COMPANY
- -------------------
TABLE OF CONTENTS
SALIDA BUILDING AND LOAN ASSOCIATION
SALIDA, COLORADO
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION 1
SECTION I. - FINANCIAL CHARACTERISTICS 1
PAST & PROJECTED ECONOMIC CONDITIONS 1
FINANCIAL CONDITION OF INSTITUTION 2
BALANCE SHEET TRENDS 2
ASSET/LIABILITY MANAGEMENT 2
INCOME AND EXPENSE TRENDS 2
REGULATORY CAPITAL REQUIREMENTS 3
LENDING 3
NONPERFORMING ASSETS 3
CLASSIFIED ASSETS 3
LOAN LOSS ALLOWANCE 3
MORTGAGE-BACKED SECURITIES AND INVESTMENTS 3
SAVINGS DEPOSITS 3
BORROWINGS 4
SUBSIDIARIES 4
LEGAL PROCEEDINGS 4
EARNINGS CAPACITY OF THE INSTITUTION 4
ASSET-SIZE-EFFICIENCY OF ASSET UTILIZATION 4
INTANGIBLE VALUES 4
EFFECT OF GOVERNMENT REGULATIONS 4
OFFICE FACILITIES 5
SECTION II - MARKET AREA 1
DEMOGRAPHICS 1
</TABLE>
i
<PAGE>
FERGUSON & COMPANY
- ------------------
TABLE OF CONTENTS - CONTINUED
SALIDA BUILDING AND LOAN ASSOCIATION
SALIDA, COLORADO
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION III - COMPARISON WITH PUBLICLY TRADED THRIFTS 1
COMPARATIVE DISCUSSION 1
SELECTION CRITERIA 1
PROFITABILITY 2
BALANCE SHEET CHARACTERISTICS 2
RISK FACTORS 2
SUMMARY OF FINANCIAL COMPARISON 3
FUTURE PLANS 3
SECTION IV - CORRELATION OF MARKET VALUE 1
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED 1
FINANCIAL ASPECTS 1
MARKET AREA 2
MANAGEMENT 2
DIVIDENDS 2
LIQUIDITY 3
THRIFT EQUITY MARKET CONDITIONS 3
COLORADO ACQUISITIONS 3
EFFECT OF INTEREST RATES ON THRIFT STOCK 4
ADJUSTMENTS CONCLUSION 6
VALUATION APPROACH 6
VALUATION CONCLUSION 7
</TABLE>
ii
<PAGE>
FERGUSON & COMPANY
- -------------------
TABLE OF CONTENTS - CONTINUED
SALIDA BUILDING AND LOAN ASSOCIATION
SALIDA, COLORADO
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
- ---- ----------- ----
<S> <C> <C>
SECTION I - FINANCIAL CHARACTERISTICS
1 Selected Financial Data 6
2 Operating Ratios 7
3 Interest Rate Shock 8
4 Interest Rate Sensitivity Analysis 9
5 Regulatory Capital Compliance 10
6 Loan Portfolio Composition 11
7 Loan Maturities 12
8 Loan Origination, Purchase, and Repayment Activity 13
9 Average Balances, Rates, and Yields 14
10 Rate/Volume Analysis 15
11 Loan Delinquencies at June 30, 1997 16
12 Non-Performing Assets 17
13 Analysis of the Allowance for Loan Losses 18
14 Allocation of the Allowance for Loan Losses 19
15 Investment Securities 20
16 Investments at June 30, 1997 21
17 Deposit Portfolio 22
18 Savings Deposits Details 23
19 Certificates of Deposits Maturities 24
20 Savings Flows 25
21 Jumbo CD Maturities 26
22 Borrowings 26
23 Offices 27
SECTION II - MARKET AREA
1 Demographic Trends 3
2 Percent Employment by Industry 4
3 Market Area Deposits 5
4 Summary of Building Permits 6
SECTION III - COMPARISON WITH PUBLICLY
TRADED THRIFTS
1 Comparatives General Characteristics 4
2 Key Financial Indicators 5
3 Pro Forma Comparisons 6
</TABLE>
iii
<PAGE>
FERGUSON & COMPANY
- -------------------
TABLE OF CONTENTS - CONTINUED
SALIDA BUILDING AND LOAN ASSOCIATION
SALIDA, COLORADO
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
- ------ ----------- ----
<S> <C>
SECTION IV - CORRELATION OF MARKET VALUE
1 Appraisal Earnings Adjustments 2
2 Colorado Acquisitions 8
3 Recent Conversions 11
4 Comparison of Pricing Ratios 14
</TABLE>
<TABLE>
<CAPTION>
FIGURE
NUMBER LIST OF FIGURES
- ------ ---------------
PAGE
----
<S> <C>
SECTION IV - CORRELATION OF MARKET VALUE
1 SNL Index 15
2 Interest Rates 16
</TABLE>
EXHIBIT TITLE
--------------
Exhibit I - Ferguson & Company Qualifications
Exhibit II - Selected Region, State, and Comparatives Information
Exhibit III - Salida Building and Loan Association TAFS Report
Exhibit IV - Comparative Group TAFS and BankSource Reports
Exhibit V - Selected Publicly Traded Thrifts
Exhibit VI - Comparative Group Selection
Exhibit VII - Pro Forma Calculations
Pro Forma Assumptions
Pro Forma Effect of Conversion Proceeds At the Minimum of the Range
Pro Forma Effect of Conversion Proceeds At the Midpoint of the Range
Pro Forma Effect of Conversion Proceeds At the Maximum of the Range
Pro Forma Effect of Conversion Proceeds At the SuperMax of the Range
Pro Forma Analysis Sheet
iv
<PAGE>
SECTION I
FINANCIAL CHARACTERISTICS
<PAGE>
FERGUSON & COMPANY SECTION 1
- ------------------ ---------
INTRODUCTION
Salida Building and Loan Association ("SB&LA" or "Association") is a
federally chartered, federally insured mutual savings association located in
Salida, Colorado. It was chartered in 1886 as the first state chartered building
and loan association in Colorado. It received its federal insurance of accounts
and joined the Federal Home Loan Bank system in 1937, and converted to a federal
charter in 1993. In May 1997, the Board of Directors adopted a plan to convert
to a stock owned savings association via a standard mutual to stock conversion.
In connection with the conversion, the Association will form a holding company,
High Country Bancorp, Inc., ("HCBI" or (Holding Company").
At June 30, 1997, SB&LA had total assets of $76.3 million, loans of $63.1
million, mortgage-backed securities of $5.3 million, interest-bearing deposits
in other banks of $2.4 million, deposits of $56.2 million, borrowings of $13.5
million, and net worth of $6.0 million, or 7.8% of assets.
The Association has three offices. The main office is located in Salida and
the Association has branches in Buena Vista and Leadville. Salida and Buena
Vista are in Chaffee County and Leadville is in Lake County. Colorado is in the
southwestern portion of the United States. SB&LA's offices are located in the
western half of Colorado.
SB&LA is a traditional thrift with a growing emphasis on loans other than
1-4 dwelling units. It invests primarily in (1) 1-4 family loans, (2) consumer
and commercial loans, (3) mortgage backed securities, and (4) temporary cash
investments. It is funded principally by savings deposits and borrowings.
The Association offers a full spectrum of real estate loan products to
accommodate its customer base and single family loans dominate the Association's
loan portfolio. At June 30, 1997, loans on 1-4 family dwellings made up 65.0%
of total assets and 76.0% of the gross loan portfolio. Consumer loans were
11.2% of the loan portfolio and commercial real estate and non-real estate loans
were 12.8% of the loan portfolio. Mortgage backed securities made up 7.0% of
total assets. Cash and cash equivalents made up 4.3% of SB&LA's assets at June
30, 1997.
SB&LA had $175,000 in non-performing assets at June 30, 1997, as compared
to $73,000 at June 30, 1996.
Savings deposits increased $13.67 million during the period from June 30,
1993 to 1997, a compound annual growth rate of 7.23%. Savings increased $3.62
million (7.89%) from June 30, 1995 to 1996, and increased $6.62 million (13.35%)
from June 30, 1996 to 1997. SB&LA has also relied extensively on borrowings
during recent years. It had $3.00 million in borrowings at June 30, 1995, $7.15
million at June 30, 1996, and $13.52 million at June 30, 1997.
The Association's capital to assets ratio has decreased slightly during the
period of four years ending June 30, 1997. Equity capital, as a percentage of
assets, has decreased from 8.64% at June 30, 1993, to 7.81% at June 30, 1997.
The compound annual asset growth rate was 12.80% during the period, while the
compound annual rate of growth for equity was 9.98%.
SB&LA's profitability, as measured by return on average assets ("ROAA"),
has been at the top of its peer group average of thrifts filing TFR's with the
OTS, consisting of OTS supervised thrifts with assets between $50 million and
$100 million. For the years ending December 31, 1994, 1995, and 1996, and the
three months ending March 31, 1997, SB&LA ranked in the 88th, 74th, 33rd, and
58th percentile, respectively, in ROAA, based on information derived from the
TAFS thrift database published by Sheshunoff Information Services Inc. (See
Exhibit III, page 2). In return on equity for the same periods, SB&LA ranked in
the 87th, 79th, 40th, and 80th percentile, respectively.
I. FINANCIAL CHARACTERISTICS
PAST & PROJECTED ECONOMIC CONDITIONS
Fluctuations in thrift earnings in recent years have occurred within the
time frames as a result of changing temporary trends in interest rates and other
economic factors. However, the year-to-year results have been upward while the
general trends in the thrift industry have been improving as interest rates
declined. Interest rates began a
1
<PAGE>
FERGUSON & COMPANY SECTION 1
- ------------------ ---------
general upward movement during late 1993, followed by a decline in interest
margins and profitability. Rates began a general decline in mid 1995 and then
leveled off on the short end and increased on the long end. SB&LA's spread was
4.41% for the year ended June 30, 1996 and 4.19% for the year ended June 30,
1997.
The thrift industry generally is better equipped to cope with changing
interest rates than it was in the past, and investors have recognized the
demonstrated ability of the thrift industry to maintain interest margins in
spite of rising interest rates. However, rate increases and the shortening of
the time elapsed between increases during 1994 placed pressure on portfolio
managers to shorten maturities, which negatively impacts the future earnings of
financial institutions. SB&LA has a much higher exposure to interest rate risk
than the thrift industry in general.
FINANCIAL CONDITION OF INSTITUTION
BALANCE SHEET TRENDS
As Table I.1 shows, SB&LA experienced healthy growth in assets during the
two years ending June 30, 1997. Assets increased $21.51 million during the
period. Loans increased $21.59 million, or 52.0%. Mortgage-backed securities,
interest-earning cash, and investment securities combined decreased $1.69
million, or 17.9% during the period. Savings deposits increased by $10.24
million, or 22.3%. Equity increased $579 thousand, or 10.8%.
ASSET/LIABILITY MANAGEMENT
Managing interest rate risk is a major component of the strategy used in
operating a thrift. Most of a thrift's interest earning assets are long-term,
while most of the interest bearing liabilities have short to intermediate terms
to contractual maturity. To compensate, asset/liability management techniques
include (1) making long term loans with interest rates that adjust to market
periodically, (2) investing in assets with shorter terms to maturity, (3)
lengthening the terms to maturities of liabilities, and (4) seeking to employ
any combination of the aforementioned techniques artificially through the use of
synthetic hedge instruments. Table I.3 provides asset and liability repricing
gap information and table I.4 provides rate shock information at varying levels
of interest rate change. The Association has significant exposure to interest
rate increases, but its exposure will be reduced through the equity raised in
the conversion. Notwithstanding the Association's interest rate risk position,
it has maintained a healthy interest rate spread consistently in recent years.
Assets have become more rate sensitive as intermediate term loans have assumed a
larger percentage of the loan portfolio and a significant portion (43.85%) of
the Association's deposits are in passbook and transaction accounts, which are
not generally as rate sensitive as CD's.
SB&LA's basic approach to interest rate risk management has been to
emphasize shorter term loans, sell long term fixed rate loans in the secondary
market, and develop a deposit portfolio of transaction accounts. SB&LA currently
is not utilizing synthetic hedge instruments. It has used borrowings extensively
in recent years, and at June 30, 1997, it had over $4.0 million in borrowings
with maturities beyond one year. SB&LA's business plan calls for continued
emphasis on shorter term and adjustable rate loans.
INCOME AND EXPENSE TRENDS
SB&LA was profitable for each of the two fiscal years ended June 30, 1997.
Fluctuations in income over the period have resulted principally from (1)
changes in non-interest expense, principally the SAIF assessment of
approximately $297,000 in 1997, and (2) previous service funding of $237,000 for
a directors' benefit plan in 1997, (3) losses on loan sales of $56,000 in 1997
and $93,000 in 1996, and (4) higher than normal loan loss provisions. In
addition, opening a new branch office in Buena Vista in early fiscal 1997, and
the completion of a new office for the Leadville branch during the fiscal 1996
year, both impacted earnings. The new branch and the new office required a
transfer of funds from earning assets to non-earning assets and, in addition,
added to overhead costs because of additional maintenance, depreciation,
insurance, taxes, utilities, and personnel costs. These additional expenses
will become less relevant as the Association grows in size.
Net interest income increased in the year ended June 30, 1997 and 1996, as
compared to the prior years, principally as a result of growth.
2
<PAGE>
FERGUSON & COMPANY SECTION 1
- ------------------ ---------
REGULATORY CAPITAL REQUIREMENTS
As Table I.5 demonstrates, SB&LA meets all regulatory capital requirements,
and meets the regulatory definition of a "Well Capitalized" institution.
Moreover, the additional capital raised in the stock conversion will add to the
existing capital cushion.
LENDING
Table I.6 provides an analysis of the Association's loan portfolio by type
of loan and security. This analysis shows that, at June 30, 1996 and 1997,
SB&LA's loan composition was dominated by 1-4 family dwelling loans. Table I.7
provides information on loan maturities and repricing opportunities at June 30,
1997. The schedule shows that, at that date, approximately 56% of the portfolio
was scheduled to mature in more than five years and 45% was scheduled to mature
in more than ten years.
Table I.8 provides information with respect to loan originations. It
indicates that loan origination activity was extremely healthy for both 1996 and
1997, with total originations for each year in excess of 70% of the amount of
net loans at the beginning of the year.
Table I.9 provides rates, yields, and average balances for each of the two
years ended June 30, 1997. Interest rates earned on interest-earning assets
decreased from 8.67% in 1996 to 8.55% in 1997. Interest rates paid on interest-
bearing liabilities increased from 4.27% in 1996 to 4.37% for 1997. SB&LA's
spread decreased from 4.41% in 1996 to 4.19% in 1997. Net interest margin
decreased 27 basis points from 4.65% in 1996 to 4.38% in 1997, as a result of
the 22 basis points spread compression combined with the decline in net earning
assets resulting from the investments in non-earning office premises.
Table I.10 provides a rate volume analysis, measuring differences in
interest earning assets and interest costing liabilities and the interest rates
thereon during the years ended June 30, 1995 versus 1996, and June 30, 1996
versus 1997. The table shows that most of the increase in net interest income
for each year resulted from volume.
NON-PERFORMING ASSETS
As shown in Table I.11, the Association had $140,000 in loans that were
over 90 days delinquent at June 30, 1997. The Association had discontinued
interest accrual on these loans at June 30, 1997. As shown in Table I.12, SB&LA
had $175 thousand in nonperforming assets at June 30, 1997, and $73 thousand at
June 30, 1996.
CLASSIFIED ASSETS
SB&LA had $420 thousand in classified assets at June 30, 1997. All of the
classified assets were classified as substandard. The Association had a loan
loss allowance of $604,000, or 143.8% of classified assets at June 30, 1997.
LOAN LOSS ALLOWANCE
Table I.13 provides an analysis of SB&LA's loan loss allowance. Table I.14
shows the allocation of the loan loss allowance among the various loan
categories as of June 30, 1996, and 1997.
MORTGAGE-BACKED SECURITIES AND INVESTMENTS
Table I.15 provides a breakdown of investments as of June 30, 1995, 1996,
and 1997. Table I.16 provides maturity information for investments as of June
30, 1997.
SAVINGS DEPOSITS
At June 30, 1997, SB&LA's deposit portfolio was composed as follows:
Checking, NOW, and MMDA accounts--$13.933 million or 24.81%; passbook accounts--
$10.691 million or 19.04%; and certificate accounts--$31.528 million or 56.15%
(see Table I.17). Table I.18 provides a break down of transaction accounts and
time deposits by rate ranges as of June 30, 1995, 1996, and 1997. Table I.19
provides maturity information by rate range for time deposits as of June 30,
1997. It shows that, as of June 30, 1997, 80.28% of SB&LA's time deposits were
maturing within one year and 94.00% were maturing within two years. Table I.20
provides savings flow information
3
<PAGE>
FERGUSON & COMPANY SECTION 1
- ------------------ ---------
for the years ended June 30, 1996 and 1997. It shows that the Association
experienced healthy deposit growth rates for both years.
SB&LA is not overly dependent on jumbo certificates of deposit. At June 30,
1997, the Association had $8.668 million in certificates that were issued for
$100 thousand or more, or 15.44% of its total deposits (see Table I.21).
BORROWINGS
SB&LA had $13.52 million in borrowings at June 30, 1997. Rates on the
borrowings ranged from 5.81% to 8.12% and maturities extended to the year 2002
(see Table I.22).
SUBSIDIARIES
SB&LA has no subsidiaries.
LEGAL PROCEEDINGS
From time to time, SB&LA becomes involved in legal proceedings principally
related to the enforcement of its security interest in real estate loans. In
the opinion of Management of the Association, no legal proceedings are in
process or pending that would have a material effect on SB&LA's financial
position, results of operations, or liquidity.
EARNINGS CAPACITY OF THE INSTITUTION
As in any interest sensitive industry, the future earnings capacity of
SB&LA will be affected by the interest rate environment. Historically, the
thrift industry has performed at less profitable levels in periods of rising
interest rates. This performance is due principally to the general composition
of the assets and the limited repricing opportunities afforded even the
adjustable rate loans. The converse earnings situation (falling rates) does not
afford the same degree of profitability potential for thrifts due to the
tendency of borrowers to refinance both high rate fixed rate loans and
adjustable loans as rates decline.
SB&LA is no exception to the aforementioned phenomenon. With its current
asset and liability structure, however, its exposure to rising interest rates is
significant.
The addition of capital through the conversion will encourage SB&LA to
grow. The business plan projects healthy asset growth over the three year period
ending June 30, 2000. As growth is attained, the leverage of that new capital
should, from a ratio of expenses to total assets standpoint, reduce the
operating expense ratio.
ASSET-SIZE-EFFICIENCY OF ASSET UTILIZATION
At its current size and in its current asset configuration, SB&LA is not an
efficient operation. With total assets of approximately $76.3 million at June
30, 1997, SB&LA has approximately 37 full time equivalent employees. The
Association should become more efficient as growth is attained and recent office
premise expansion is absorbed.
INTANGIBLE VALUES
SB&LA's greatest intangible value lies in its loyal deposit base. SB&LA has
a 111 year history of sound operations. At June 30, 1996, the Association had
21.76% of the deposit market in its area (up from 20.94% at June 30, 1994), and
it has the ability to increase market share.
SB&LA has no significant intangible values that could be attributed to
unrecognized asset gains on investments and real estate. It had approximately
$9.4 million in loan servicing at June 30, 1997.
EFFECT OF GOVERNMENT REGULATIONS
SB&LA's business plan calls for a continuation of its current strategies.
Government regulations will have the greatest impact in the area of cost of
compliance and reporting. The conversion will create an additional layer of
regulations and reporting and thereby increase the cost to the Association.
4
<PAGE>
FERGUSON & COMPANY SECTION 1
- ------------------ ---------
OFFICE FACILITIES
SB&LA's main office is a well maintained facility that the Association
occupied in 1974. It is adequate for customer service and convenience, but it is
not currently adequate for the Association's internal needs. Management is
contemplating either adding a branch in Salida, expanding the existing main
office, or acquiring another main office. Table I.23 provides information on
SB&LA's offices. The two branch offices are new.
5
<PAGE>
FERGUSON & COMPANY SECTION 1
- ------------------ ---------
<TABLE>
<CAPTION>
TABLE I.1 - SELECTED FINANCIAL DATA
Compound
At June 30 Growth
-------------------------------------------------------
1997 1996 1995 1994 1993 Rate
---- ---- ---- ---- ---- --------
($000's)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
- ----------------------------------
Total assets $ 76,324 $ 63,185 $ 54,813 $ 49,204 $ 47,142 12.80%
Cash 895 511 1,355 1,463 2,463 -22.37%
Interest bearing deposits 2,381 1,577 513 639 1,882 6.06%
Securities available for sale - 989 1,385 1,454 2,169 NM
Securities held to maturity 5,340 6,843 8,368 9,910 9,748 -13.97%
Loans receivable, net 63,127 50,076 41,537 34,456 30,049 20.39%
Savings deposits 56,152 49,537 45,914 43,965 42,478 7.23%
Borrowings 13,520 7,150 3,000 - - NM
Equity substantially restricted 5,958 5,907 5,379 4,792 4,072 9.98%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1997 1996 1995 1994 1993
----- ---- ---- ---- ----
($000'S)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA:
- -------------------------
Interest income $ 5,764 $ 4,948 $ 3,911 $ 3,557 $ 3,858
Interest expense 2,813 2,293 1,603 1,401 1,714
--------------------------------------------------
NET INTEREST INCOME 2,951 2,655 2,308 2,156 2,144
Provision for loan losses 282 59 59 60 62
--------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 2,669 2,596 2,249 2,096 2,082
--------------------------------------------------
Noninterest income 141 146 146 122 198
--------------------------------------------------
SUB-TOTAL 2,810 2,742 2,395 2,218 2,280
--------------------------------------------------
Noninterest expense:
Compensation and benefits 1,345 868 730 626 544
Other 1,410 948 771 661 725
----------------------------------------------------
Total noninterest expense 2,755 1,816 1,501 1,287 1,269
----------------------------------------------------
INCOME BEFORE TAXES 55 926 894 931 1,011
Income tax expense 11 407 327 347 367
----------------------------------------------------
NET INCOME $44 $519 $567 $584 $644
====================================================
</TABLE>
SOURCE: OFFERING CIRCULAR 6
<PAGE>
FERGUSON & COMPANY TABLE 1.2 - OPERATING RATIOS SECTION I
- ------------------ ---------
<TABLE>
<CAPTION>
AT OR FOR THE
YEARS ENDED JUNE 30,
------------------------
1997 1996
---- ----
<S> <C> <C>
PERFORMANCE RATIOS:
- -------------------
Return on assets (ratio of net earnings
to average total assets) 0.06% 0.86%
Return on equity (ratio of net earnings
to average equity) 0.75% 9.15%
Ratio of average interest-earning assets to
average interest-bearing liabilities 104.64% 106.15%
Ratio of net interest income, after provision
for loan losses, to noninterest expense 96.88% 142.95%
Net interest rate spread 4.19% 4.41%
Net yield on average interest-earning assets 4.38% 4.65%
QUALITY RATIOS:
- ---------------
Non-performing loans to total loans
at end of period 0.21% 0.14%
Non-performing loans to total assets 0.18% 0.12%
Non-performing assets to total assets
at end of period 0.23% 0.12%
Allowance for loan losses to non-performing
loans at end of period 431.00% 563.00%
Allowance for loan losses to total loans, net 0.96% 0.82%
CAPITAL RATIOS:
- ---------------
Equity to total assets at end of period 7.81% 9.35%
Average equity to average assets 8.32% 9.42%
OTHER DATA:
- -----------
Number of full service offices 3 2
</TABLE>
SOURCE: OFFERING CIRCULAR 7
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
TABLE I.3 - INTEREST RATE SHOCK
<TABLE>
<CAPTION>
NET PORTFOLIO VALUE
MARCH 31, 1997
---------------------------------------------------------------
ESTIMATED
NPV AS A
CHANGE ESTIMATED PERCENT
IN RATES NPV OF ASSETS $ CHANGE % CHANGE
- -------------------- ---------------- ----------------- ---------- ----------
($000's)
<S> <C> <C> <C> <C>
+400 bp $ 4,498 6.26% (4,542) -50%
+300 bp 5,679 7.75% (3,361) -37%
+200 bp 6,886 9.21% (2,154) -24%
+100 bp 8,029 10.55% (1,011) -11%
0 bp 9,040 11.68% - -
--100 bp 9,769 12.46% 729 8%
--200 bp 9,997 12.67% 957 11%
--300 bp 10,092 12.73% 1,052 12%
--400 bp 10,314 12.92% 1,274 14%
</TABLE>
SOURCE: OFFICE OF THRIFT SUPERVISION, RISK MANAGEMENT DIVISION
8
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
<TABLE>
<CAPTION>
TABLE I.4 - INTEREST RATE SENSITIVITY ANALYSIS
AT JUNE 30, 1997
-------------------------------------------------------------------------------------
Over Three Over One Over Three Over Five
Three Months Months to to Three to Five to Ten Over Ten
or Less One Year Years Years Years Years Total
-------------------------------------------------------------------------------------
($000's)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
- -----------------------
Mortgage loans $ 4,934 $8,340 $1,322 $2,222 $6,929 $28,783 $52,530
Commercial loans 1,435 1,543 600 1,127 250 - 4,955
Consumer loans 229 941 2,022 3,214 244 - 6,650
Interest-bearing deposits 2,381 - - - - - 2,381
FHLB stock - - - - - 989 989
Mortgage-backed securities 1,887 3,184 261 - - 8 5,340
----------------------------------------------------------------------------------
Total interest-earning assets $10,866 $14,008 $4,205 $6,563 $7,423 $29,780 $72,845
==================================================================================
INTEREST-BEARING LIABILITIES:
- ----------------------------
NOW accounts $ 8,225 $ - $ - $ - $ - - $8,225
Money market deposit accounts 3,347 - - - - - 3,347
Savings accounts 10,691 - - - - - 10,691
Certificates of deposit 7,749 17,561 5,394 773 51 - 31,528
FHLB advances 2,000 7,630 3,760 130 - - 13,520
-----------------------------------------------------------------------------------
$32,012 $ 25,191 $ 9,154 $ 903 $ 51 $ - $67,311
===================================================================================
Interest-earning assets less
interest-bearing liabilities $(21,146) $(11,183) $ (4,949) $ 5,660 $7,372 $29,780
======================================================================
Cumulative interest-rate sensitivity gap $(21,146) $(32,329) $(37,278) $(31,618) $(24,246) $ 5,534
======================================================================
Cumulative interest-rate sensitivity gap
as a percentage of interest-earning assets -29.03% -44.38% -51.17% -43.40% -33.28% 7.60%
=======================================================================
Cumulative ratio of interest earning
assets to interest-bearing liabilities 33.94% 43.48% 43.82% 52.99% 63.98% 108.22%
=======================================================================
Cumulative interest rate sensitivity gap
as a percent of total assets -27.71% -42.36% -48.84% -41.43% -31.77% 7.25%
=======================================================================
</TABLE>
SOURCE: OFFERING CIRCULAR 9
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
TABLE I.5 - REGULATORY CAPITAL COMPLIANCE
<TABLE>
<CAPTION>
Percent of
Amount Assets
-------------------
($000's)
<S> <C> <C>
Tangible capital $5,955 7.80%
Tangible capital requirement 1,145 1.50%
------------------
Excess (deficit) $4,810 6.30%
==================
Core capital $5,955 7.80%
Core capital requirement 2,290 3.00%
------------------
Excess (deficit) $3,665 4.80%
==================
Risk-based capital $6,550 13.76%
Risk-based capital requirement 3,809 8.00%
------------------
Excess (deficit) $2,741 5.76%
==================
</TABLE>
SOURCE: OFFERING CIRCULAR 10
<PAGE>
FERGUSON & COMPANY TABLE I.6 - LOAN PORTFOLIO COMPOSITION SECTION I
- ------------------ ---------
<TABLE>
<CAPTION>
AT JUNE 30,
---------------------------------------------
1997 1996
---------------------- ----------------------
Amount Percent Amount Percent
------ ------- ------ -------
($000'S)
<S> <C> <C> <C> <C>
MORTGAGE LOANS:
1-4 family 49,602 76.00% 41,248 79.17%
Commercial 1,644 2.52% 1,381 2.65%
Land development 2,390 3.66% 1,500 2.88%
---------------------- ----------------------
Total mortgage loans 53,636 82.19% 44,129 84.70%
---------------------- ----------------------
Consumer loans 6,476 9.92% 4,770 9.16%
Loans on savings accounts 765 1.17% 824 1.58%
Commercial loans 4,287 6.57% 2,285 4.39%
Other loans 98 0.15% 92 0.18%
---------------------- ----------------------
TOTAL LOANS 65,262 100.00% 52,100 100.00%
---------------------- ----------------------
Less:
Undisbursed loans in process 1,123 1,247
Deferred fees and discounts 408 366
Allowance for losses 604 411
------- -------
LOAN PORTFOLIO, NET 63,127 50,076
======= =======
</TABLE>
SOURCE: OFFERING CIRCULAR 11
<PAGE>
FERGUSON & COMPANY TABLE I.7 - LOAN MATURITIES SECTION I
- ------------------ --------------------------- ---------
The following table sets forth certain information at June 30, 1997, regarding
the amount of loans maturing in the loan portfolio, based on contractual terms
to maturity.
<TABLE>
<CAPTION>
3 to 12 1 to 3 3 to 5 5 to 10 Over
3 Months Months Years Years Years 10 Years Total
------------ ------------ ------------ ------------ ------------ ------------ ------------
($000,s)
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans $ 4,934 $ 8,340 $ 1,322 $ 2,222 $ 6,929 $ 28,783 $ 52,530
Commercial loans 1,435 1,543 600 1,127 250 4,955
Consumer loans 229 941 2,022 3,214 244 6,650
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total $ 6,598 $ 10,824 $ 3,944 $ 6,563 $ 7,423 $ 28,783 $ 64,135
============ ============ ============ ============ ============ ============ ============
</TABLE>
12
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
Table I.8 - Loan Origination, Purchase, and Repayment Activity
<TABLE>
<CAPTION>
For the Year Ended June 30,
----------------------------
1997 1996
($000's)
<S> <C> <C>
Net loans, beginning of period $50,076 $41,537
ORIGINATIONS BY TYPE:
Mortgage loans:
1-4 family 19,174 18,973
Commercial 981 1,898
Land development 1,813 1,641
Consumer loans 9,179 6,323
Loans on savings accounts 604 694
Commercial loans 4,669 2,906
----------------------------
Total loans originated 36,420 32,435
----------------------------
LOANS SOLD 3,968 3,398
----------------------------
REPAYMENTS: 19,636 20,525
----------------------------
DECREASE (INCREASE) IN OTHER ITEMS, NET: 235 (27)
----------------------------
Net increase (decrease) in loans receivable, net 13,051 8,539
----------------------------
Net loans, end of period $63,127 $50,076
============== =============
</TABLE>
SOURCE: OFFERING CIRCULAR 13
<PAGE>
FERGUSON & COMPANY TABLE I.9-AVERAGE BALANCES, RATES, AND YIELDS SECTION I
- ------------------ ---------
<TABLE>
<CAPTION> Year Ended June 30,
-----------------------------------------------------------------------
1997 1996
-------------------------------- ---------------------------------
Average Interest Average Interest
Outstanding Earned/ Average Outstanding Earned/ Average
Balance Paid Yield/Rate Balance Paid Yield/Rate
-------------------------------- --------------------------------
($000's)
<S> <C> <C> <C> <C> <C> <C>
INTEREST/DIVIDEND-EARNING ASSETS:
- --------------------------------
Interest-bearing deposits $ 1,398 $ 84 6.01% $ 543 $ 41 7.55%
Investments 7,234 431 5.96% 9,081 581 6.40%
Loans 58,752 5,249 8.93% 47,442 4,326 9.12%
----------------------------- -----------------------------
Total interest\dividend-earning assets 67,384 $5,764 8.55% 57,066 $ 4,948 8.67%
================= =================
Non-interest earning assets 3,845 3,120
---------- ----------
Total assets $ 71,229 $ 60,186
========== ==========
INTEREST-BEARING LIABILITIES:
- ----------------------------
Savings deposits $ 53,890 2,179 4.04% $ 48,451 $ 1,967 4.06%
FHLB advances 10,508 634 6.03% 5,308 326 6.14%
----------------------------- -----------------------------
Total interest-bearing liabilities 64,398 $2,813 4.37% 53,759 $ 2,293 4.27%
================= =================
Non-interest bearing liabilities 908 760
----------- -----------
Total liabilities 65,306 54,519
----------- -----------
Equity 5,923 5,667
----------- -----------
Total liabilities and equity $ 71,229 $ 60,186
=========== ===========
Net interest\dividend income $2,951 $ 2,655
========= =========
Net interest\dividend rate spread (1) 4.19% 4.41%
======= =======
Net interest\dividend earnings assets $ 2,986 $ 3,307
=========== ===========
Net interest\dividend margin (2) 4.38% 4.65%
======= =======
Average interest\dividend-earning assets to
average interest-bearing liabilities 104.64% 106.15%
========= =========
</TABLE>
(1) Net interest rate spread represents the difference between the average
yield on interest-earning assets and the average rate on interest-
bearing liabilities.
(2) Net interest margin represents net interest income divided by average
interest-earning assets.
SOURCE: OFFERING CIRCULAR 14
<PAGE>
FERGUSON & COMPANY TABLE I.10 - RATE/VOLUME ANALYSIS SECTION I
- ------------------ ---------
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
---------------------------------------- -----------------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Total Due to Total
------------------------------ ------------------------------
Rate/ Increase Rate/ Increase
Volume Rate Volume (Decrease) Volume Rate Volume (Decrease)
------ ---- ------ --------- ------ ---- ------- ---------
($000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Interest-bearing deposits $66 $(8) $(13) $45 $(8) $ - $ - $(8)
Investments (118) (40) 8 (150) (82) 81 (12) (13)
Loans 1,033 (90) (21) 922 837 176 45 1,058
---------------------------------------- -----------------------------------------
Total interest-earning assets 981 (138) (26) 817 747 257 33 1,037
---------------------------------------- -----------------------------------------
INTEREST-BEARING LIABILITIES:
Deposits 221 (9) (1) 211 125 282 23 430
FHLB advances 321 (6) (5) 310 273 (3) (11) 259
---------------------------------------- -----------------------------------------
Total interest - bearing liabilities 542 (15) (6) 521 398 279 12 689
---------------------------------------- -----------------------------------------
Increase (decrease) in
net interest income $439 $(123) $(20) $296 $349 $(22) $21 $348
======================================== =========================================
</TABLE>
SOURCE: OFFERING CIRCULAR 15
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
TABLE I.11 - LOAN DELINQUENCIES AT JUNE 30, 1997
<TABLE>
<CAPTION>
1997 1996
---------------------- --------------------
Percent Percent
of Gross of Gross
Amount Loans Amount Loans
------ ----- ------ -----
($000'S)
<S> <C> <C> <C> <C>
Mortgage loans $ - 0.00% $ - 0.00%
Non-residential - 0.00% - 0.00%
Consumer loans 136 0.21% 73 0.14%
Commercial loans 4 0.00% - 0.00%
Other loans - 0.00% - 0.00%
-------------------- ---------------------
Total $ 140 0.21% $ 73 0.14%
==================== =====================
</TABLE>
SOURCE: OFFERING CIRCULAR 16
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
TABLE I.12 - NON-PERFORMING ASSETS
The table below sets forth the amounts and categories of non-performing assets.
Loans are placed on non-accrual status when the collection of principal or
interest becomes doubtful.
<TABLE>
<CAPTION>
JUNE 30,
---------------------------
1997 1996
---- ----
($000'S)
<S> <C> <C>
Non-accruing loans:
Real estate:
One- to four-family - -
Multi-family - -
Non-residential - -
Construction - -
Consumer 136 73
Commercial 4 -
Other - -
---------------------------
Total 140 73
---------------------------
Accruing loans delinquent 90 days or more:
Real estate:
One- to four-family - -
Multi-family - -
Non-residential - -
Construction - -
Consumer - -
Commercial - -
Other - -
---------------------------
Total - -
---------------------------
Total non-performing loans 140 73
---------------------------
Repossessed assets 35 -
---------------------------
Total non-performing assets 175 73
===========================
Total non-performing loans as a
percentage of total net loans 0.22% 0.15%
===========================
Total non-performing assets as a
percentage of total assets 0.23% 0.12%
===========================
</TABLE>
SOURCE: OFFERING CIRCULAR 17
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
TABLE I.13 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1997 1996
---- ----
($000's)
<S> <C> <C>
Balance at beginning of period $ 411 $ 405
--------- ---------
Charge-offs:
One- to four-family (32) (26)
Multi-family - -
Non-residential - -
Construction - -
Consumer (64) (27)
Commercial - -
Other - -
--------- ---------
(96) (53)
--------- ---------
Recoveries: 7 -
--------- ---------
Net (charge-offs) (89) (53)
--------- ---------
Additions charged to operations 282 59
--------- ---------
Balance at end of period $ 604 $ 411
========= =========
Allowance for loan losses to total
non-performing loans at end of period 431.00% 563.00%
========= =========
Allowance for loan losses to net
loans at end of period 0.96% 0.82%
========= =========
</TABLE>
SOURCE: OFFERING CIRCULAR 18
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
TABLE I.14 - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
AT JUNE 30,
------------------------------------------------
1997 1996
----------------------- -----------------------
Percent Percent
of Loans of Loans
in Each in Each
Amount of Category Amount of Category
Loan Loss to Gross Loan Loss to Gross
Allowance Loans Allowance Loans
--------- ----- --------- -----
($000's)
<S> <C> <C> <C> <C>
Mortgage Loans
Residential $ 203 76.00% $ 203 77.84%
Commercial 7 2.52% 7 4.02%
Land 100 3.66% 0 0.00%
Consumer Loans 294 17.82% 201 15.26%
---------------------- ----------------------
$ 604 100.00% $ 411 100.00%
====================== ======================
</TABLE>
SOURCE: OFFERING CIRCULAR 19
<PAGE>
FERGUSON & COMPANY SECTION 1
- ------------------ ---------
TABLE I.15 - INVESTMENT SECURITIES
<TABLE>
<CAPTION>
At June 30,
-------------------------------
1997 1996 1995
--------- --------- -----------
($000's)
<S> <C> <C> <C>
U.S. Treasury securities $ - $ 989 $ 974
Interest-bearing deposits 2,381 1,577 513
Mortgage-backed securities 5,340 6,843 8,368
Federal Home Loan Bank stock 988 564 411
--------- --------- -----------
TOTAL $8,709 $ 9,973 $ 10,266
========= ========= ===========
</TABLE>
SOURCE: OFFERING CIRCULAR 20
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
<TABLE>
<CAPTION>
TABLE I.16 - INVESTMENTS AT JUNE 30, 1997
MATURITY PERIOD AT JUNE 30, 1997
------------------------------------ ------------------ ---------------
One Year or Less One to Five Years Over Five Years Total
----------------- ------------------ ------------------ ---------------
Book Book Book Book
Value Yield Value Yield Value Yield Value Yield
----- ----- ----- ----- ----- ----- ----- -----
($000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing deposits $2,381 5.50% $ - $ - $2,381 5.50%
Mortgage-backed securities 460 6.77% 1,340 6.77% 3,540 6.77% 5,340 6.77%
FHLB stock - - 988 6.68% 988 6.68%
------- ----- ------- ------ ------- ------ ------ -----
Total investment securities $2,841 5.71% $1,340 6.77% $4,528 6.76% $8,709 6.41%
======= ===== ======= ====== ======= ====== ====== =====
</TABLE>
SOURCE: OFFERING CIRCULAR 21
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
TABLE I.17 - DEPOSIT PORTFOLIO
<TABLE>
<CAPTION>
Balance Percent
Interest June 30, of
Category Term Rate (1) 1997 Deposits
- -------- ---- -------- ---- --------
($000's)
------
<S> <C> <C> <C> <C>
SAVINGS AND TRANSACTIONS ACCOUNTS
- ---------------------------------
Now accounts None 1.67% $ 8,225 14.65%
Passbook accounts None 2.97% 10,691 19.04%
Demand None 0.00% 2,361 4.20%
Money market accounts None 2.93% 3,347 5.96%
------------ -----------
24,624 43.85%
------------ -----------
CERTIFICATES OF DEPOSIT
- ---------------------------------
FIXED TERM, FIXED RATE 3 months 3.70% 187 0.33%
Fixed term, fixed rate 6 months 5.16% 4,039 7.19%
Fixed term, fixed rate 9 months 5.19% 1,586 2.82%
Fixed term, fixed rate 10 months 5.45% 3,963 7.06%
Fixed term, fixed rate 12 months 5.78% 7,958 14.17%
Fixed term, fixed rate 15 months 5.53% 2,893 5.15%
Fixed term, fixed rate 18 months 5.38% 4,590 8.17%
Fixed term, fixed rate 24 months 6.37% 536 1.07%
Fixed term, fixed rate 30 months 5.64% 2,295 4.09%
Fixed term, fixed rate 36 months 6.40% 306 0.54%
Fixed term, fixed rate 48 months 5.88% 2,458 4.38%
Other 7.20% 717 1.28%
------------ -----------
TOTAL CERTIFICATES OF DEPOSIT 31,528 56.15%
------------ -----------
TOTAL SAVINGS DEPOSITS $ 56,152 100.00%
============ ===========
</TABLE>
(1) Indicates weighted average interest rate at June 30, 1997.
SOURCE: OFFERING CIRCULAR 22
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
Table I.18 - Savings Deposits Detail
<TABLE>
<CAPTION>
At June 30,
--------------------------------------------------------------------
1997 1996 1995
---------------------- ---------------------- ----------------------
Percent of Percent of Percent of
Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ -----
($000's)
<S> <C> <C> <C> <C> <C> <C>
Transactions and Savings Deposits:
- ---------------------------------
NOW and money market accounts $13,933 24.81% $10,938 22.08% $6,277 13.67%
Passbook accounts 10,691 19.04% 9,975 20.14% 14,442 31.46%
---------------------- ---------------------- ----------------------
Total transaction accounts 24,624 43.85% 20,913 42.22% 20,719 45.13%
---------------------- ---------------------- ----------------------
Certificates:
- ------------
3.00 - 4.00 187 0.33% 906 1.83% 3,631 7.91%
4.01 - 5.00% 3,156 5.62% 5,948 12.01% 8,362 18.21%
5.01 - 6.00% 22,629 40.30% 17,788 35.91% 6,010 13.09%
6.01 - 7.00 4,946 8.81% 3,111 6.28% 6,215 13.54%
Over 7.00% 610 1.09% 871 1.76% 976 2.13%
---------------------- ---------------------- ----------------------
Total certificates 31,528 56.15% 28,624 57.78% 25,194 54.87%
---------------------- ---------------------- ----------------------
Total deposits $56,152 100.00% $49,537 100.00% $45,913 100.00%
====================== ====================== ======================
</TABLE>
SOURCE: OFFERING CIRCULAR 23
<PAGE>
FERGUSON & COMPANY TABLE I.19 - CERTIFICATES OF DEPOSIT MATURITIES SECTION I
- ------------------ ---------
The table below provides CD maturities at June 30, 1997, by year in rate ranges.
<TABLE>
<CAPTION>
3.00 - 4.01- 5.01- OVER PERCENT
4.00% 5.00% 7.00% 7.00% TOTAL OF TOTAL
----- ----- ----- ----- ----- --------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Certificates maturing in:
One year $ 187 $ 2,996 $ 18,468 $ 3,659 $ 25,310 80.28%
One to two years - 161 3,123 1,042 4,326 13.72%
Two to three years - - 768 300 1,068 3.39%
Over three years - - 604 220 824 2.61%
-----------------------------------------------------------
Total $ 187 $ 3,157 $ 22,963 $ 5,221 $ 31,528 100.00%
===========================================================
Percent of total 0.59% 10.01% 72.83% 16.56% 100.00%
=================================================
</TABLE>
SOURCE: OFFERING CIRCULAR 24
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
TABLE I.20 - SAVINGS FLOWS
The following table sets forth the savings flows for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------
1997 1996
---- ----
($000's)
<S> <C> <C>
Opening balance $ 49,537 $ 45,914
Net increase (decrease)
before interest credited 4,797 2,026
Interest credited 1,818 1,597
---------- ----------
Ending Balance $ 56,152 $ 49,537
========== ==========
Net increase (decrease) $ 6,615 $ 3,623
========== ==========
Percent increase (decrease) 13.35% 7.89%
========== ==========
</TABLE>
SOURCE: OFFERING CIRCULAR 25
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
TABLE I.21-JUMBO CD MATURITIES
<TABLE>
<CAPTION>
JUMBO CERTIFICATES OF DEPOSIT
MATURING IN PERIOD ENDING: Amount
- ----------------------------------- -----------
($000's)
<S> <C>
Within three months or less $2,562
Three through six months 2,411
Six through twelve months 2,347
Over 12 months 1,348
-----------
Total $8,668
==========
</TABLE>
TABLE I.22 - BORROWINGS
<TABLE>
<CAPTION>
Rate
Amount Range
------------------------
($000's)
<S> <C> <C>
Due within one year 9,500 6.40-8.12%
Due within one to two years 3,000 5.18-6.72%
Due within two to three years 500 6.79%
Due within three to five years 520 6.80%
---------
13,520
=========
</TABLE>
SOURCE: OFFERING CIRCULAR 26
<PAGE>
FERGUSON & COMPANY SECTION I
- ------------------ ---------
TABLE I.23 - OFFICES
<TABLE>
<CAPTION>
Net Book Year Owned or Square
Physical address Value (1) Occupied Leased Footage
- ---------------- --------- -------- -------- -------
($000's)
<S> <C> <C> <C> <C>
130 West 2nd $763 1974 Owned 10,750
Salida, Colorado
Main Office
600 Harrison $805 1996 Owned 3,800
Leadville, Colorado
Branch Office
713 East Main $480 1996 Owned 2,400
Buena Vista, Colorado
Branch Office
</TABLE>
(1) Cost less accumulated depreciation and amortization.
SOURCE: OFFERING CIRCULAR 27
<PAGE>
SECTION II
MARKET AREA
<PAGE>
FERGUSON & COMPANY SECTION II
- ------------------ ----------
II. MARKET AREA
DEMOGRAPHICS
Salida Building and Loan Association ("SB&LA" or "Association") conducts
its operations through three offices located in Chaffee County (Salida and Buena
Vista) and Lake County (Leadville), Colorado. Colorado is in the southwestern
region of the United States. Chaffee County and Lake County are in the western
half of Colorado.
SB&LA has determined that its principal trade area is the two counties in
which its offices are located--Chaffee and Lake. Table II.1 presents historical
and projected trends for the United States, Colorado, Lake County, Chaffee
County, and zip codes 81201 (Salida), 80461 (Leadville), and 81211 (Buena
Vista), which include the Association's home office and branches, respectively.
The information addresses population, income, employment, and housing trends.
As indicated in Table II.1, population growth rates for Chaffee County and
the State of Colorado are well above the United States rate. Growth rates for
Chaffee County and Colorado are close, with Chaffee County having a slight edge.
Household income growth for Chaffee County is projected to be above that of the
State of Colorado and the United States for the period 1996 to 2001. Population
growth rates for Lake County are slightly below the United States and well below
Colorado and Chaffee County. Projected household income growth for Lake County
is flat, but well above that of the United States, and below Colorado and
Chaffee County.
In the period from 1990 until 1996, the population of the State of Colorado
grew 16.49%. During the same period, the Chaffee County population increased
17.60%, Lake county population increased 6.18%, and the United States population
increased 6.67%. The population of zip code 81201 increased 22.36%, 81211 grew
17.41%, and the population of zip code 80461 increased 6.49% from 1990 to 1996.
Projections of population growth from 1996 through 2001 indicate that the State
of Colorado will increase 11.33%, Chaffee County is projected to increase by
11.97%, Lake County is projected to increase by 4.64%, and the United States
population is projected to increase by 5.09%. The population of zip code 81201
is projected to increase 14.81%, 81211 is projected to grow 11.62%, and the
population of zip code 80461 is projected to increase 4.79% from 1996 to 2001.
Household income is projected to increase by 5.78% for Chaffee County and
decrease by .24% for Lake County from 1996 to 2001. For the same period,
household income is projected to increase by 2.89% for the State of Colorado and
decline by 3.88% for the United States. Per capita and household income levels
for the State of Colorado are slightly higher than those of the United States,
but per capita and household income levels for Chaffee County, Lake County, and
zip codes 80461, 81201, and 81211 are well below both the State of Colorado and
the United States.
The 2001 estimate shows that, for Chaffee County, households with incomes
less than $15,000 are expected to be 25%; those with incomes between $15,000 and
$25,000 are estimated at 23%; those with incomes between $25,000 and $50,000 are
estimated at 35%; those with incomes between $50,000 and $100,000 are estimated
at 15%; and households with incomes in excess of $100,000 are projected to be
3%. The 2001 estimates for Lake County are projected to be 15%, 22%, 37%, 23%,
and 3%, respectively. The 2001 estimates for Colorado are 17%, 15%, 35%, 26%,
and 7%, respectively.
The number of households in Chaffee County is projected to increase by
12.93% from 1996 to 2001, above the projection for the State of Colorado which
calls for an increase of 11.00% and well above the projected growth rate for the
United States at 5.14%. The number of households in Lake County is projected to
increase 4.63% from 1996 to 2001, well below Chaffee County and the State of
Colorado, but in line with the United States.
With projections of healthy growth in population and number of households,
combined with projections of a growing household income, the market for housing
units will be good. Chaffee County has approximately 6,500 housing units, of
which 52.53% are owner occupied, and a vacancy rate of 25.95%. Lake County has
approximately 3,500 housing units, of which 43.49% are owner occupied, and a
vacancy rate of 32.46%.
1
<PAGE>
FERGUSON & COMPANY SECTION II
- ------------------ ----------
The principal sources of employment in Chaffee County are services--27.2%;
trade--25.4%; and public administration--24.1%. The principal sources of
employment in Lake County are services--29.5%; trade--21.0%; and public
administration--25.5%.
Analysis of the data presented above presents a picture of healthy economic
opportunity, suggesting that SB&LA's growth opportunities within its current
market area will be good.
Based on information publicly available on deposits as of June 30, 1996
(see Table II.3), Chaffee and Lake Counties had $233.8 million in deposits and
SB&LA had 21.76% of the deposit market, up from 19.82% at June 30, 1995 and also
up from 20.94% of the market at June 30, 1994. SB&LA's recent deposit growth
rate has been good, slightly better than the overall market. SB&LA's competition
consists of six commercial bank offices, two credit union offices, and one
thrift office. SB&LA's growth has occurred as a result of SB&LA providing
superior service, building a new branch office in Leadville, and opening a new
office in Buena Vista. Table II.3 shows that from June 30, 1994 to 1996, SB&LA's
deposits increased by $6.89 million (15.7%) while the overall market gained
$23.79 million in deposits (11.3%). SB&LA's business plan projects that its
deposits will grow at a healthy pace during the business plan period.
Building permit information (See Table II.4) coupled with high projected
population, household, and household income growth rates in SB&LA's market area
portend a healthy level of building. SB&LA has limited competition from other
financial institutions for the residential loan opportunities.
Growth opportunities for SB&LA can be assessed by reviewing economic
factors in its market area. The salient factors include growth trends, economic
trends, and competition from other financial institutions. We have reviewed
these factors to assess the potential for the market area. In assessing the
growth potential of SB&LA, we must also assess the willingness and flexibility
of management to respond to the competitive factors that exist in the market
area. Our analysis of the economic potential and the potential of management
affects the valuation of the Association. Management has demonstrated its
flexibility through the change in operations in recent years from a traditional
thrift to a hybrid thrift/commercial bank operation. SB&LA has retained the
traditional residential lending and it has expanded its portfolio to include
increasing amounts of consumer loans, commercial non-real estate loans, and
commercial real estate loans. It has expanded its deposit products and now has
over $2.0 million in interest free checking accounts. It built a new office for
its Leadville branch in fiscal 1996, and it opened a new branch in Buena Vista
in fiscal 1997. Management has positioned the Association to serve all facets of
the market.
2
<PAGE>
FERGUSON & COMPANY SECTION II
- ------------------ ----------
TABLE II.1 - DEMOGRAPHIC TRENDS
KEY ECONOMIC INDICATORS
<TABLE>
<CAPTION>
=================================================================================================================================
UNITED LAKE CHAFFEE ZIP CODE ZIP CODE ZIP CODE
KEY ECONOMIC INDICATOR STATES COLORADO COUNTY COUNTY 80461 (1) 81201 (2) 81211 (3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Population, 2001 Est. 278,802,003 4,272,336 6,674 16,703 6,187 10,754 6,841
1996 - 2001 Percent Change, Est. 5.09 11.33 4.64 11.97 4.79 14.81 11.62
Total Population, 1996 Est. 265,294,885 3,837,552 6,378 14,917 5,904 9,367 6,129
1990 - 96 Percent Change, Est. 6.67 16.49 6.18 17.60 6.49 22.36 17.41
Total Population, 1990 248,709,873 3,294,394 6,007 12,684 5,544 7,655 5,220
- ---------------------------------------------------------------------------------------------------------------------------------
Household Income, 2001 Est. 33,189 37,521 30,478 27,464 30,535 26,244 30,458
1996 - 2001 Percent Change, Est. (3.88) 2.89 (0.24) 5.78 (0.13) 4.80 7.36
Household Income, 1996 Est. 34,530 36,468 30,551 25,963 30,576 25,041 28,370
- ---------------------------------------------------------------------------------------------------------------------------------
Per Capita Income, 1990 16,738 18,076 14,746 13,566 14,747 13,343 10,824
- ---------------------------------------------------------------------------------------------------------------------------------
Household Inc. Dist.-2001 Est. (%)
$15,000 and less 20 17 15 25 15 26 21
$15,000 - $25,000 16 15 22 23 22 24 22
$25,000 - $50,000 34 35 37 35 37 35 38
$50,000 - $100,000 24 26 23 15 23 13 17
$100,000 - $150,000 4 5 3 2 3 2 2
$150,000 and over 2 2 0 1 0 1 0
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Unemployment rate, 1990 6.24 4.12 6.73 7.41 6.51 7.05 4.58
- ---------------------------------------------------------------------------------------------------------------------------------
Median Age of Population, 1996 Est. 34.3 34.1 33.2 39.5 33.4 42.0 36.8
Median Age of Population, 1990 32.9 32.5 31.2 37.1 31.5 40.2 33.7
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Average Housing Value, 1990 79,098 91,930 52,487 70,203 51,694 65,674 77,353
- ---------------------------------------------------------------------------------------------------------------------------------
Total Households, 2001 Est. 103,293,062 1,646,503 2,643 6,523 2,461 4,570 2,325
1996 - 2001 Percent Change, Est. 5.14 11.00 4.63 12.93 4.77 14.85 13.80
Total Households, 1996 98,239,161 1,483,326 2,526 5,776 2,349 3,979 2,043
1990 - 96 Percent Change, Est. 6.84 15.66 6.05 19.14 6.39 22.36 21.25
Total Households, 1990 91,947,410 1,282,489 2,382 4,848 2,208 3,252 1,685
- ---------------------------------------------------------------------------------------------------------------------------------
Total Housing Units, 1990 101,641,260 1,696,270 3,527 6,547 3,192 3,965 2,704
% Vacant 10.07 14.14 32.46 25.95 31.01 20.10 37.68
% Occupied 89.93 85.86 67.54 74.05 69.99 79.90 62.32
% By Owner 57.78 54.25 43.49 52.53 44.36 55.84 45.93
% By Renter 32.15 31.61 24.04 21.52 25.63 24.06 16.38
=================================================================================================================================
</TABLE>
(1) Leadville; (2) Salida; and (3) Buena Vista
SOURCE: SCAN/US, INC.
3
<PAGE>
FERGUSON & COMPANY SECTION II
- ------------------ ----------
TABLE 11.2 - PERCENT EMPLOYMENT BY INDUSTRY
<TABLE>
<CAPTION>
UNITED CHAFFEE LAKE
INDUSTRY STATES COLORADO COUNTY COUNTY
================================= ======== ========== ========= ========
<S> <C> <C> <C> <C>
Construction/Agriculture/Mini 9.5 9.9 8.1 14.8
Manufacturing 17.7 8.8 6.1 1.5
Transportation/Utilities 7.1 5.2 3.1 2.6
Trade 21.2 21.9 25.4 21.0
Finance/Insurance 6.9 8.1 6.0 5.1
Services 32.7 30.7 27.2 29.5
Public Administration 4.8 15.4 24.1 25.5
</TABLE>
SOURCE: STATE OF COLORADO ESC.
4
<PAGE>
FERGUSON & COMPANY SECTION II
- ------------------ ----------
TABLE II.3 - MARKET AREA DEPOSITS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1996 1995 1994
--------------- --------------- -------------
(in Thousands)
<S> <C> <C> <C>
LAKE AND CHAFFEE COUNTY DEPOSITS
TOTAL SALIDA BUILDING AND LOAN $ 50,884 $ 46,779 $ 43,996
------------- ------------ ------------
Number of Branches 2 2 2
OTHER THRIFTS 24,192 42,977 36,770
------------- ------------ ------------
Number 1 1 1
Number of branches 1 1 1
TOTAL THRIFTS 75,076 89,756 80,766
------------- ------------ ------------
Number 2 2 2
Number of branches 3 3 3
TOTAL BANK DEPOSITS $ 155,754 $ 143,477 $ 126,372
------------- ------------ ------------
Number 5 5 5
Number of Branches 6 5 5
TOTAL CREDIT UNION DEPOSITS $ 3,019 $ 2,792 $ 2,918
------------- ------------ ------------
Number 2 2 2
Number of Branches 2 2 2
TOTAL DEPOSITS $ 233,849 $ 236,025 $ 210,056
============= ============ ============
PERCENT OF DEPOSITS HELD BY
SALIDA BUILDING AND LOAN 21.76% 19.82% 20.94%
============= ============ ============
- -----------------------------------------------------------------------------------------
</TABLE>
SOURCE: BRANCHSOURCE, A PRODUCT OF SHESHUNOFF INFORMATION SERVICES, INC.
5
<PAGE>
FERGUSON & COMPANY SECTION II
- ------------------
TABLE II.4-BUILDING PERMITS
<TABLE>
<CAPTION>
YEAR NUMBER AMOUNT
------ -------- --------------
<S> <C> <C>
1990 241 4,540,309
1991 274 7,242,909
1992 330 10,414,490
1993 389 10,287,358
1994 460 20,054,665
1995 577 21,664,331
1996 609 22,001,601
1996 Break Down
- ----------------------------
Residential 538 16,491,601
Commercial 71 5,510,000
-------- --------------
609 22,001,601
======== ==============
1996 Geographical Break Down:
- ----------------------------
Chaffee County 12,000,575
Salida 5,304,333
Buena Vista 3,500,722
Poncha Springs 1,195,971
--------------
22,001,601
==============
</TABLE>
SOURCE: CHAFFEE COUNTY DEPARTMENT OF BUILDING, SANITATION, AND ZONING
6
<PAGE>
SECTION III
COMPARISON WITH PUBLICLY
TRADED THRIFTS
<PAGE>
FERGUSON & COMPANY SECTION III
- ------------------ -----------
III. COMPARISON WITH PUBLICLY TRADED THRIFTS
COMPARATIVE DISCUSSION
This section presents an analysis of Salida Building and Loan Association
("SB&LA" or "Association") relative to a group of twelve publicly traded thrift
institutions ("Comparative Group"). Such analysis is necessary to determine the
adjustments that must be made to the pro forma market value of SB&LA's stock.
Table III.1 presents a listing of the comparative group with general information
about the group. Table III.2 presents key financial indicators relative to
profitability, balance sheet composition and strength, and risk factors. Table
III.3 presents a pro forma comparison of SB&LA to the comparative group.
Exhibits III and IV contain selected financial information on SB&LA and the
comparative group. This information is derived from quarterly TFR's filed with
the OTS and call reports filed with the FDIC. The selection criteria and
comparison with the Comparative Group are discussed below.
SELECTION CRITERIA
Ideally, the comparative group would consist of thrifts in the same
geographic region with identical local economies, asset size, capital level,
earnings performance, asset quality, etc. However, there are few comparably
sized institutions with stock that is liquid enough to provide timely,
meaningful market values. Therefore, we have selected a group of comparatives
that are either listed on the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX"), or Nasdaq. We excluded companies that are apparent
takeover targets and companies with unusual characteristics that tend to distort
both mean and median calculations. For example, we have excluded all companies
with losses during the trailing twelve months. We have also excluded mutual
holding companies (see Exhibit VI).
Because of the limited number of similar size thrifts with sufficient
trading volume, we looked for members of the comparative group among thrifts
with assets under $100 million in the Southwest, Midwest, and Southeast regions.
The Southwest Region, which includes Colorado, had 2 thrifts that met the size
requirements. We found 42 thrifts in the regions named above that met the asset
size requirements (we consider 10 to be the minimum number), and we retained 12
and eliminated 30 for the following reasons: (a) One was a mutual holding
company; (b) Five had no price to earnings ratio for the most recent quarter;
(c) One had agreed to be acquired; (d) Nine had non-performing assets in excess
of 1.00% of total assets; (e) Fifteen had less than 60% of their assets in
loans; and (f) Four had loans serviced in excess of 30% of assets. After
eliminating the thrifts described above, there were 12 left.
The principal source of data was SNL Securities, Charlottesville, Virginia.
There are approximately 410 publicly traded thrifts listed on NYSE, AMEX, or
Nasdaq. In developing statistics for the entire country, we eliminated certain
institutions that skewed the results, in order to make the data more meaningful:
. We eliminated companies with losses,
. We eliminated indicated acquisition targets,
. We eliminated companies with price/earnings ratios in excess of 25, and
. We eliminated companies that had not reported as a stock institution for
one complete year.
The resulting group of 254 publicly traded thrifts is included in Exhibit V.
The selected group of comparatives has sufficient trading volume to provide
meaningful price data. Nine of the comparative group members are located in the
Midwest and the other three are located in the Southeast Region. With total
assets of approximately $76.3 million, SB&LA is slightly below the group
selected, which has average assets of $80.8 million and median assets of $84.4
million. However, SB&LA's
1
<PAGE>
FERGUSON & COMPANY SECTION III
- ------------------ -----------
assets after conversion will be in line with the comparative group. Pro forma
assets at the midpoint are $83.7 million.
PROFITABILITY
Using the comparison of profitability components as a percentage of average
assets, SB&LA was below the comparative group in net income, .68% to .73%; loss
provisions, .40% to .08%; other income, .20% to .33%; operating expense, 3.04%
to 2.53%; efficiency ratio, 70.00% to 61.90%; and core income, .68% to .96%.
SB&LA was above the comparative group in net interest income, 4.14% to 3.73%.
SB&LA's operating expense minus other income was 2.84% versus 2.20% for the
comparative group. After conversion, deployment of the proceeds will provide
additional income, and SB&LA will compare more favorably with the comparative
group in terms of return on average assets, with a return of .85% at the
midpoint of the appraisal range. Pro forma return on average equity is 4.90% at
the midpoint, versus a mean of 4.78% and median of 4.62% for the comparative
group. The Comparative group's net income of .73% on average assets and its
return on equity percentages are after the SAIF assessment. The Comparative
group's core income of .96% on average assets factors out the SAIF assessment.
As compared with the Comparative group, SB&LA has a better interest spread
and it has less noninterest income. SB&LA's loan loss provision and operating
expenses are higher. SB&LA's loss provision ratio is higher because its loan
portfolio has a higher level of risk than the comparative group. SB&LA's
earnings are currently being impeded by a new branch that opened in Buena Vista
during fiscal year 1997 and a new branch building in Leadville completed during
fiscal year 1996. Transferring earning assets to office premises, coupled with
the increased overhead associated with additional premises and staff, will
impede earnings until the additional facilities are utilized through asset
growth.
BALANCE SHEET CHARACTERISTICS
The general asset composition of SB&LA is similar to that of the
comparative group, but more retail oriented. SB&LA has a lower level of passive
investments with 11.42% of its assets invested in cash, investments, and
mortgage-backed securities, versus 21.57% for the comparative group. SB&LA has a
higher percentage of its assets in loans, at 82.71% versus 75.33% for the
comparative group. SB&LA's percentage of earning assets to interest costing
liabilities is much lower than that of the group. SB&LA has 107.62% and the
comparative group averages 123.07%. After conversion, SB&LA's ratio will be
closer to that of the group of comparatives; however, it will continue to be
lower than that of the comparative group because of SB&LA's investment in
premises.
The liability side differs mainly in that SB&LA has a higher percentage of
borrowings and a lower percentage of equity. SB&LA has borrowings equal to
17.71% of assets versus 7.13% for the comparative group and SB&LA has deposits
equal to 73.57% of assets versus 72.63% for the comparative group. SB&LA's
equity is 7.81% of assets versus 18.84% for the comparative group. SB&LA's
equity ratio after conversion will be closer to that of the comparative group.
SB&LA's pro forma equity ratio at the midpoint is 16.0%.
RISK FACTORS
Both SB&LA and the comparative group have low levels of nonperforming
assets, with SB&LA's being slightly lower than the comparative group. SB&LA's
loan loss allowance is .96% of net loans, which compares favorably with the
comparative group, which is .63%. SB&LA's one year gap to assets is negative
42.36% versus positive 9.18% for the comparative group. However, the
comparative group average is based on information provided by only two of the
twelve members of the group. SB&LA's interest rate risk position exposes it to
interest rate increases.
2
<PAGE>
FERGUSON & COMPANY SECTION III
- ------------------ -----------
SUMMARY OF FINANCIAL COMPARISON
Based on the above discussion of operational, balance sheet, and risk
characteristics of SB&LA compared with the group, we believe that SB&LA's
performance is level with that of the comparative group. While SB&LA's capital
level is below the comparative group, the conversion proceeds will increase its
capital to that of the comparatives. Otherwise, SB&LA's earnings are hindered
by its new branch building in Leadville and its new branch in Buena Vista.
Future asset growth is needed to reduce the drag on earnings created by the
buildings. What is most impressive about SB&LA is its interest rate spread.
Its spread has ranged between 4.53% and 4.14% during 1994 to 1997 (see Exhibit
III).
FUTURE PLANS
SB&LA's future plans are to remain a well capitalized but leveraged,
profitable institution with good asset quality and a commitment to serving the
needs of its trade area, emphasizing lending. The business plan emphasizes
growth in mortgage lending, consumer lending, and commercial non-real estate
lending in ratios that are close to the current composition of the loan
portfolio. Management recognizes that it will take time to invest the proceeds
of its capital infusion in a manner consistent with its historic performance and
current policy. During that period of time, management is willing to accept a
lower return on equity.
In recent years, SB&LA has experienced healthy growth. The Association's
business plan projects that it will continue to experience growth in loans,
savings deposits, and liquidity at a healthy pace. The additional capital
raised by the sale of Common Stock will initially be used to purchase short term
investment securities. Adjustable rate and short to intermediate term loans
will be emphasized. The Association will continue to sell some of its long
term, fixed rate loans.
SB&LA has no current plans to open or acquire branches. However, the
additional capital and the formation of a holding company would make acquisition
of branches or another financial institution a viable option. Management intends
to expand and will open additional full service branches and loan production
offices if necessary to meet the Association's growth plans.
Increasing market penetration by increasing the number of services and
products available, coupled with opening additional offices, are the most likely
methods to be employed to achieve growth on a long-term basis.
3
<PAGE>
<TABLE>
<CAPTION>
FERGUSON & COMPANY TABLE III.1 - COMPARATIVES GENERAL CHARACTERISTICS SECTION III
- ------------------ -----------
Number Assets Stock Market
Type of ($000) Price Value
Ticker Short Name City State Thrift (1) Offices MRQ ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. Munster IN Traditional 4 94,179 15.000 14.46
CCFH CCF Holding Company Jonesboro GA Traditional 4 86,940 17.125 14.12
CIBI Community Investors Bancorp Bucyrus OH Traditional 3 97,446 15.250 14.17
CKFB CKF Bancorp Inc. Danville KY Traditional 1 60,197 20.000 18.54
INCB Indiana Community Bank SB Lebanon IN Traditional 3 91,329 15.250 14.06
LOGN Logansport Financial Corp. Logansport IN Traditional 1 83,152 14.000 17.65
LXMO Lexington B&L Financial Corp. Lexington MO Traditional 1 59,748 16.125 17.54
MIVI Mississippi View Holding Co. Little Falls MN Traditional 1 69,755 15.125 12.38
SFFC StateFed Financial Corporation Des Moines IA Traditional 2 85,679 21.750 17.05
SOBI Sobieski Bancorp Inc. South Bend IN Traditional 3 79,080 16.375 12.44
SSB Scotland Bancorp Inc Laurinburg NC Traditional 2 69,479 17.188 32.89
SZB SouthFirst Bancshares Inc. Sylacauga AL Traditional 2 92,910 17.000 14.40
Maximum 4 97,446 21.750 32.89
Minimum 1 59,748 14.000 12.38
Average 2 80,825 16.682 16.64
Median 2 84,416 16.250 14.43
</TABLE>
(1) Determined by reference to TAFS and Banksource reports
published by Sheshunoff. TAFS reports are derived from
TFR reports filed with the OTS and BankSource reports are
derived from call reports filed with the FDIC.
SOURCE: SNL & F&C CALUCATIONS 4
<PAGE>
FERGUSON & COMPANY SECTION III
- ------------------ -----------
TABLE III.2 - KEY FINANCIAL INDICATORS
<TABLE>
<CAPTION>
SALIDA
BUILDING AND COMPARATIVE
LOAN ASSOCIATION GROUP
---------------- -----------
<S> <C> <C>
PROFITABILITY
(% of average assets)
Net income (1) 0.68 0.73
Net interest income 4.14 3.73
Loss (recovery) provisions 0.40 0.08
Other operating income 0.20 0.33
Operating expense (2) 3.04 2.53
Efficiency ratio (2) 70.00 61.90
Core income (excluding gains
and losses on asset sales) (1) 0.68 0.96
BALANCE SHEET FACTORS
(% of assets)
Cash and investments 4.42 16.69
Mortgage-backed securities (including CMO's) 7.00 4.88
Loans 82.71 75.33
Savings deposits 73.57 72.63
Borrowings 17.71 7.13
Equity 7.81 18.84
Tangible equity 7.81 18.84
RISK FACTORS
(%)
Earning assets/costing liabilities 107.62 123.07
Non-performing assets/assets 0.23 0.50
Loss allowance/non performing assets 345.14 131.12
Loss allowance/loans 0.96 0.63
One year gap/assets (3) (42.36) 9.18
</TABLE>
(1) Used appraisal earnings.
(2) Excluded SAIF assessment, loss on loan sales, and directors' benefit plan
cost.
(3) Only two of the 12 in the group reported one year gap.
SOURCE: SNL SECURITIES, F&C CALCULATIONS,
AND OFFERING CIRCULAR
5
<PAGE>
FERGUSON & COMPANY TABLE III.3 - PRO FORMA COMPARISONS SECTION III
- ------------------ -----------
SALIDA BULIDING AND LOAN ASSOCIATION
AS OF AUGUST 8, 1997
<TABLE>
<CAPTION>
Ticker Name Price Mk Value PE P/Book P/TBook P/Assets Div Yld Assets
($) ($Mil) (X) (%) (%) (%) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALIDA B&LA
-----------
Before Conversion N/A N/A N/A N/A N/A N/A 3.00 76,324
Pro Forma Supermax 10.000 11.90 16.7 75.0 75.0 13.8 3.00 86,233
Pro Forma Maximum 10.000 10.35 15.2 71.3 71.3 12.2 3.00 84,891
Pro Forma Midpoint 10.000 9.00 13.8 67.4 67.4 10.7 3.00 83,724
Pro Forma Minimum 10.000 7.65 12.2 62.8 62.8 9.3 3.00 82,557
COMPARATIVE GROUP
-----------------
Averages 16.682 16.64 31.4 112.5 112.5 21.6 2.15 80,825
Medians 16.250 14.43 23.9 111.2 111.2 17.4 1.98 84,416
COLORADO THRIFTS
----------------
Averages 17.750 293.97 16.1 150.6 152.6 19.5 2.48 1,510,376
Medians 17.750 293.97 16.1 150.6 152.6 19.5 2.48 1,510,376
SOUTHWEST REGION THRIFTS
------------------------
Averages 24.672 98.50 16.4 137.3 145.8 14.6 2.08 833,404
Medians 21.688 51.66 16.0 136.0 147.4 17.0 1.92 356,112
ALL PUBLIC THRIFTS
------------------
Averages 23.572 192.05 16.7 148.4 156.4 15.3 1.87 1,453,495
Medians 21.344 61.85 16.4 141.9 148.2 14.0 1.82 414,239
COMPARATIVE GROUP
-----------------
AMFC AMBFinancial-IN 15.000 14.46 22.1 102.6 102.6 15.4 1.60 94,179
CCFH CCFHoldingCo-GA 17.125 14.12 51.9 119.1 119.1 17.0 3.21 86,940
CIBI CommunityInvrs-OH 15.250 14.17 15.4 129.0 129.0 14.9 2.10 97,446
CKFB CKFBancorp-KY 20.000 18.54 23.3 120.6 120.6 30.8 2.50 60,197
INCB IndianaCommBkSB-IN 15.250 14.06 31.8 124.3 124.3 15.4 2.36 91,329
LOGN LogansprtFinCrp-IN 14.000 17.65 14.9 110.6 110.6 21.2 2.86 83,152
LXMO LexingtonB&LFin-MO 16.125 17.54 31.0 106.3 106.3 29.4 1.86 59,748
MIVI MissViewHoldCo-MN 15.125 12.38 17.8 97.3 97.3 17.8 1.06 69,755
SFFC StateFedFinCorp-IA 21.750 17.05 15.0 111.9 111.9 19.9 1.84 85,679
SOBI SobieskiBancorp-IN 16.375 12.44 28.7 93.5 93.5 15.7 1.71 79,080
SSB ScotlandBancorp-NC 17.188 32.89 24.6 127.8 127.8 47.3 1.75 69,479
SZB SouthFstBncshrs-AL 17.000 14.40 100.0 107.5 107.5 15.0 2.94 92,910
</TABLE>
6
<PAGE>
FERGUSON & COMPANY TABLE III.3 - PRO FORMA COMPARISONS SECTION III
- ------------------ -----------
SALIDA BUILDING AND LOAN ASSOCIATION
AS OF AUGUST 8, 1997
<TABLE>
<CAPTION>
Ticker Name Eq/A TEq/A EPS ROAA ROAE
(%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C>
SALIDA B&LA
-----------
Before Conversion 7.8 7.8 N/A 0.68 8.15
Pro Forma Supermax 18.4 18.4 0.60 0.89 4.49
Pro Forma Maximum 17.1 17.1 0.66 0.87 4.69
Pro Forma Midpoint 16.0 16.0 0.73 0.85 4.90
Pro Forma Minimum 14.8 14.8 0.82 0.82 5.14
COMPARATIVE GROUP
-----------------
Averages 18.8 18.8 0.71 0.96 4.78
Medians 16.6 16.6 0.69 1.00 4.62
COLORADO THRIFTS
----------------
Averages 12.9 12.8 1.10 1.21 8.59
Medians 12.9 12.8 1.10 1.21 8.59
SOUTHWEST REGION THRIFTS
------------------------
Averages 10.9 10.6 1.65 0.92 8.61
Medians 12.6 11.7 1.31 0.97 8.26
ALL PUBLIC THRIFTS
------------------
Averages 11.0 10.7 1.52 1.00 9.98
Medians 9.4 9.0 1.31 0.95 9.22
COMPARATIVE GROUP
-----------------
AMFC AMBFinancial-IN 15.0 15.0 0.68 0.80 4.54
CCFH CCFHoldingCo-GA 14.3 14.3 0.33 0.42 2.37
CIBI CommunityInvrs-OH 11.5 11.5 0.99 0.99 8.18
CKFB CKFBancorp-KY 23.7 23.7 0.86 1.29 5.05
INCB IndianaCommBkSB-IN 12.4 12.4 0.48 0.50 3.92
LOGN LogansprtFinCrp-IN 19.2 19.2 0.94 1.51 7.40
LXMO LexingtonB&LFin-MO 27.6 27.6 0.52 1.18 3.91
MIVI MissViewHoldCo-MN 18.3 18.3 0.85 1.01 5.56
SFFC StateFedFinCorp-IA 17.8 17.8 1.45 1.37 7.36
SOBI SobieskiBancorp-IN 15.4 15.4 0.57 0.57 3.28
SSB ScotlandBancorp-NC 37.0 37.0 0.70 1.71 4.69
SZB SouthFstBncshrs-AL 14.0 14.0 0.17 0.16 1.13
</TABLE>
Note: Stock prices are closing prices or last
trade. Pro forma calculations for Salida are
based on sales at $10 a share with a midpoint
of $9,000,000, minimum of $7,650,000, and
maximum of $10,350,000.
SOURCES: SALIDA'S AUDITED AND UNAUDITED
FINANCIAL STATEMENTS, SNL SECURITIES, AND F&C
CALCULATIONS.
7
<PAGE>
SECTION IV
CORRELATION OF MARKET
VALUE
<PAGE>
FERGUSON & COMPANY SECTION IV
- ------------------ ----------
IV CORRELATION OF MARKET VALUE
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED
Certain factors must be considered to determine whether adjustments are
required in correlating SB&LA's market value to the comparative group. Those
factors include financial aspects, market area, management, dividends,
liquidity, thrift equity market conditions, and subscription interest.
This section addresses the aforementioned factors and the estimated pro
forma market value of the to-be-issued common shares and compares the resulting
market value of the Association to the members of its comparative group and the
selected group of publicly held thrifts.
FINANCIAL ASPECTS
Section III includes a discussion regarding a comparison of SB&LA's
earnings, balance sheet characteristics, and risk factors with its comparative
group. Table III.2 presents a comparison of certain key indicators, and Table
III.3 presents certain key indicators on a pro forma basis after conversion.
As shown in Table III.2, from an earnings viewpoint, SB&LA is below its
comparative group in core income as a percentage of average assets. SB&LA's
core income is based on appraisal earnings which factors out unusual or
nonrecurring items and the comparative group's core income is computed on the
same basis. SB&LA's net interest income as a percent of assets is 4.14% versus
3.73% for the comparatives. The difference is attributable to 1) the loan mix
(i.e., SB&LA has more in consumer and commercial loans, which have higher
yields); 2) SB&LA's higher ratio of loans to assets and lower ratio of
investments to assets versus the comparative group; and 3) SB&LA's deposit mix,
which includes more transaction accounts. SB&LA's spread is sufficient for its
net interest income as a percent of assets to exceed that of the comparative
group, despite the group having significantly higher equity and therefore a much
higher ratio of interest earning assets to interest bearing liabilities.
SB&LA's loan loss provisions are well above its comparative group, with
loss provisions of .40% of assets versus .08% of assets for the comparative
group. This results from SB&LA having higher levels of consumer and commercial
loans, which generally entail more risk. SB&LA's other operating income is .20%
of average assets, versus .33% for the comparative group. SB&LA's lower ratio
results from its highly competitive pricing of services.
SB&LA's operating expense ratio, at 3.04% of average assets, is well above
that of the comparative group, which is 2.53%. SB&LA's higher ratio results from
its generally higher level of commercial bank type loans and deposits and from
its new building in Leadville and new branch in Buena Vista, as discussed more
fully in Section III.
After SB&LA completes its stock conversion, its core income as a percentage
of average assets will increase. Table III.3 projects that SB&LA's return on
assets will be .85% at the midpoint, versus a mean of .96% and median of 1.00%
for the comparative group.
SB&LA's pro forma equity to assets ratio at the midpoint is 16.0%, versus a
mean of 18.8% and median of 16.6% for the comparative group.. SB&LA's pro forma
return on equity is 4.90% at the midpoint versus a mean of 4.78% and median of
4.62% for the comparative group.
SB&LA's recorded earnings have been adjusted for appraisal purposes. The
Association recorded higher than normal loan loss provisions, losses on loan
sales, higher than normal directors' retirement expense, and the SAIF resolution
assessment.
1
<PAGE>
FERGUSON & COMPANY SECTION IV
- ------------------ ----------
TABLE IV.1 - APPRAISAL EARNINGS ADJUSTMENTS
<TABLE>
<S> <C>
Net income, year ended June 30, 1997 $ 44,000
Plus SAIF assessment 297,000
Plus previous service cost of 237,000
directors' benefit plan
Plus loan loss provisions in excess of 107,000
normal amount--282,000 - 175,000
Plus losses on loan sales 56,000
Plus estimated costs of branch opening 10,000
Less applicable taxes on above adjustments at 38% -268,000
----------
Appraisal earnings, year ended June 30, 1997 $ 483,000
==========
</TABLE>
SB&LA's asset composition is less passive than the comparative group. SB&LA
has a higher ratio of loans to assets, lower ratio of investments and mortgage-
backed securities to assets, higher ratio of borrowings to assets, and lower
ratio of equity to assets. From the risk factor viewpoint, SB&LA is below the
comparative group. SB&LA has a slightly lower level of non performing assets,
though its loan composition is riskier. SB&LA's loan loss allowance is .96% of
net loans, comparing favorably with the comparative group, which is .63%. SB&LA
has a higher level of consumer and commercial loans, which entail a higher level
of risk. Its ratio of interest earning assets to interest bearing liabilities
(107.62%) is well below the comparative group (123.07%). SB&LA's ratio will be
much closer to the comparative group after conversion. From an interest rate
risk factor, SB&LA has more exposure than the comparative group.
We believe that NO ADJUSTMENT is necessary relative to financial aspects of
-------------
SB&LA.
MARKET AREA
Section II describes SB&LA's market area.
We believe that NO ADJUSTMENT is required for sb&la's market area.
-------------
MANAGEMENT
The President, who functions as CEO, has been with SB&LA 19 years, serving
as CEO since 1991. The Vice President and Chief Lending Officer has been with
the Association for 6 years. The CFO has been with the Association for 5 years.
Compared with the comparative group, SB&LA's management has done a better job of
planning and preparing for the Association's future. SB&LA has a management
succession plan.
We believe an UPWARD ADJUSTMENT is required for SB&LA's management.
-----------------
DIVIDENDS
Table III.3 provides dividend information relative to the comparative group
and the thrift industry as a whole. The comparative group is paying a mean yield
on price of 2.15% and a median of 1.98%, while all public thrifts are paying a
mean of 1.87% and median of 1.82%. SB&LA intends to pay a dividend at an initial
annual rate of 3.00%.
We believe that NO ADJUSTMENT is required relative to SB&LA'S intention
-------------
to pay dividends.
2
<PAGE>
FERGUSON & COMPANY SECTION IV
- ------------------ ----------
LIQUIDITY
The Holding Company has never issued capital stock to the public, and as a
result, no existing market for the Common Stock exists. Although the Holding
Company has applied to list its Common Stock on the Nasdaq Small Cap market,
there can be no assurance that a liquid trading market will develop.
A public market having the desirable characteristics of depth, liquidity,
and orderliness depends upon the presence, in the market place, of both willing
buyers and sellers of the Common Stock. These characteristics are not within the
control of the Association or the market.
The peer group includes companies with sufficient trading volume to develop
meaningful pricing characteristics for the stock. The market value of the
comparative group ranges from $12.38 million to $32.89 million, with a mean
value of $16.64 million. The midpoint of SB&LA's valuation range is $9.0
million at $10 a share, or 900,000 shares.
We believe that NO ADJUSTMENT is required relative to the liquidity of
-------------
SB&LA'S stock.
THRIFT EQUITY MARKET CONDITIONS
The SNL Thrift Index is summarized in Figure IV.1. As the table
demonstrates, the Thrift Index has performed well since the end of 1990. The
Index has grown as follows: Year ended December 31, 1991--increased 49.0% from
96.6 to 143.9; Year ended December 31, 1992--increased 39.7% to 201.1; Year
ended December 31, 1993--increased 25.6% to 252.5; Year ended December 31,
1994--decreased 3.1% to 244.7; Year ended December 31, 1995--increased 53.9% to
376.5; Year ended December 31, 1996--increased 28.4% to 483.6; and Period ended
August 8, 1997--increased 37.4% to 664.6. It is market value weighted with a
base value of 100 as of March 31, 1984.
As shown in Figure IV.1, which is a graph of the SNL Thrift Index covering
from December 31, 1990 through August 8, 1997, the market, as depicted by the
index, has experienced fluctuations recently. It dipped in the latter part of
1994, but recovered during the first quarter of 1995. During 1995, the Index
continued a more robust increase and moved from 244.7 at year end 1994 to 376.5
by December 31, 1995, an increase of 53.9%. However, the Index was flat for the
first six months of 1996, but it has picked up since June 30, 1996. It closed
1996 at 483.6, up 28.4% from 1995. It is up 37.4% (to 664.6) from December 31,
1996 to August 8, 1997.
The increase in the SNL Index, in general, has been parallel with the
increases in other equity markets with some interim fluctuations caused by
changes or anticipated changes in interest rates. Another factor, however, is
also notable. In other markets, increased prices are responding to improved
profits, with price to earnings ratios increasing as earnings potentials are
anticipated. However, the thrift IPO market has been affected by speculation
that the majority of the institutions will become viable consolidation
candidates and sell at some expanded multiple of book value.
COLORADO ACQUISITIONS
Table IV.2 provides information relative to acquisitions of financial
institutions in Colorado between January 1, 1996 and May 31, 1997. There were
two thrift acquisitions and ten bank acquisitions announced during that time
frame. Currently, there is one publicly held thrift in the State of Colorado.
There are 13 publicly held thrifts in the southwest region of the country. Bank
acquisitions in Colorado since January 1, 1996, have averaged 216.3% of tangible
book value and 13.1 times earnings. The median price has been 210.0% of
tangible book value and 14.4 times earnings. Thrifts generally sell at lower
price/book multiples than do banks. Thrifts in Colorado during that period have
averaged 167.0% of tangible book value and 24.6 times earnings.
3
<PAGE>
FERGUSON & COMPANY SECTION IV
- ------------------ ----------
EFFECT OF INTEREST RATES ON THRIFT STOCK
The current interest rate environment and the anticipated rate environment
will affect the pricing of thrift stocks and all other interest sensitive
stocks. As the economy continues to expand, the fear of inflation can return.
The Federal Reserve, in its resolve to curb inflation, has increased rates in
the past, but has more recently relented and passed several opportunities to
increase rates until March 25, 1997, when the Federal Open Market Committee
("FOMC") increased the discount rate 25 basis points. In some minds, this was an
attempt to head off inflationary trends. According to the FOMC, "This action was
taken in light of persisting strength in demand, which is progressively
increasing the risk of inflationary imbalances developing in the economy that
would eventually undermine the long expansion."/1/ This increase was clearly
telegraphed by Chairman Greenspan who voiced concern about the levels of the
equity markets. Following the March 25 increase, unemployment rates were
announced at the 5.2% level, down from the 5.5% level at the beginning of 1996,
and significantly down from the 6.7% level at the beginning of 1994./2/ The good
news about unemployment gave way to speculation that the March 25th increase was
just the first of at least two or three increases, and the speculation was given
some credence at that time by rises in the Employment Cost index, an increase in
Unit Labor Cost, and an upward trend in the price of crude oil. By April 1,
1997, following the rate increase, the equities markets lost all of the gains
registered since the first of the year. By the end of April 1997, the market had
begun a rebound and has trended upward since then. There have been specific days
of price adjustment, but the overall trend is up. Chairman Greenspan, in recent
public appearances, has not articulated concerns about market levels and
inflation.
The thrift equities market is following the market in general. However, the
thrift equities market can continue to be influenced by the speculation that
there will eventually be a buyout, and the fact that thrift IPO stock can be
purchased at significant discounts from book value. These two facts could keep
the thrift equities market from falling as much as the other general markets if
there is a period of adjustment. However, if the mergers and acquisitions levels
drop, if there were another sharp and sustained rise in the interest rates, or
if other equity markets have protracted adjustment, the market in thrift
equities would also adjust. Recent earnings reports by financial institutions
that have made major acquisitions in the recent past have been disappointing.
Even Wells Fargo, the master at merger profitability, had to admit that its
latest acquisition produced losses.
What is likely to happen in the short to intermediate term is that rates
will float around current levels for the next few months. The yield curve will
continue to be of normal configuration. Most economists feel that a rise of
three quarters of one percent on the short side and less on the long side could
severely dampen the economy, but such increases are highly unlikely at this
time. Following the March increase in rates, additional data has caused the
concerns about rising inflation to moderate. Since lower rates benefit corporate
earnings, the housing and stock markets, and the bond market, the economy has
continued its expansion, but at a slightly slower rate.
With the Federal Reserve always ready to raise (or lower) rates as economic
conditions warrant, it is likely that before this expansion cycle is over,
interest rates will rise. The supply and demand portion of the equation is
nicely balanced, and a continuation of such equilibrium will probably restrain
rising rates in the near term. It is even possible that in the short-term,
interest rates might ease a bit.
The consumer seems to be happier now than in the past. Job markets remain
strong and the unemployment rate is at 4.8%--the lowest since November 1973.
Consumer confidence is at a 28 year high. Our continuing economic health has
always been dependent upon meaningful consumer participation, because consumers
(household sector) actually account for 68% of the Gross Domestic Product
("GDP").
________________________
/1/ US Financial Data, published by the Research Division of the Federal Reserve
Bank of St. Louis, MO.
/2/ National Economic Trends, the Federal Reserve Bank of St. Louis, MO.
4
<PAGE>
FERGUSON & COMPANY SECTION IV
- ------------------ ----------
In the second quarter of 1997, consumers seemed to rein in their
consumption. This lowering of consumption may be only to catch their economic
breath and repay credit card debt, and other personal debt which has
accumulated. Manufacturing is still strong, even with the slight drop in retail
sales, home purchases and other big ticket items.
With consumer confidence at a high level, jobs plentiful, inflation
seemingly in check, and the economy healthy and continuing to expand, why
shouldn't the economy continue to roll onward and upward? From an analytical
view, there is little on the economic horizon, at this time, that would
interfere with continuing economic expansion for at least another 12 to 18
months.
Thrift net interest margins have remained stable. The equilibrium in the
supply and demand portion of the interest rate market has helped continue the
profitability mode of the industry that started in 1993. Access to mortgage-
backed securities and derivatives has made it possible for many to be profitable
without making loans in significant volumes. With reduced deposit insurance
premiums, perhaps they will become more willing to compete for customer
deposits. However, even with portfolios replete with adjustable rate loans and
adjustable MBS's, there remains a real fear that a quickly rising rate
environment can cause the cost of funds to rise faster than the adjustable
assets can accommodate, and accordingly, spreads would narrow. If rates rise in
a slow and orderly manner, then the negative impact on spreads will be less, and
the adjustable rate assets will have time to rise and protect rate spreads.
As clearly illustrated, the SNL Thrift Index has performed well over the
last six years. It moved in tandem with all interest sensitive stocks and
reflected the weakness in the market as investors began to consider the
importance of increases in rates and their impact on the net interest margins of
thrifts. The clear implication is that rising interest rates will have a
negative impact on earnings.
Figure IV.2 graphically displays the rate environment since December 31,
1996. At that time, the yield curve was relatively flat, with only a 110 basis
point ("BP") difference between the federal funds rate and the 30 year treasury.
Since that time, the yield curve has changed very little with a 103 BP spread
between the federal funds rate and the 30 year treasury rate at August 8, 1997.
At December 31, 1996, the spread between the 1 year T-Bill and the 5 year
T-Note was 73 BP, and the spread between the 5 year T-Note and the 30 year bond
was 48 BP. On August 8, 1997, the spreads were 75 and 41 BP, respectively.
From December 31, 1996 to August 8, 1997, the Fed Funds rate increased 32
BP and the Prime Rate increased 25 BP.
Increased cost of funds will serve to narrow the net interest margins of
thrifts. A thrift's ability to maintain net interest margins through business
cycles is important to investors, unless thrifts can offset the decline in net
interest income by other sources of revenue or reductions in noninterest
expense. The former is difficult and the latter is unlikely.
SB&LA, with its interest rate risk, is more vulnerable to rising rates than
most. However, Management of SB&LA has paid more attention to spread management
than gap management, and the Association has maintained a healthy spread in
recent years. Its continuing growth in short to intermediate term loans
continues to mitigate its rate risk position.
During 1993, conversion stocks often experienced first day 30% or more
increases in value. As Table IV.3 shows, recent price appreciation has become
quite robust, approaching 1993 levels. Table IV.3 provides information on nine
conversions completed since January 31, 1997. The average change in price since
conversion is a gain of 58.4% and the median change is a gain of 52.5%. Within
that group, all have increased in value with a range of a low of 38.8% to a high
of 82.5%. The average increase in value at one day, one week, and one month
after conversion has been 43.4%, 44.4%, and 47.4%, respectively. The
5
<PAGE>
FERGUSON & COMPANY SECTION IV
- ------------------ ----------
median increase in value at one day, one week, and one month after conversion
has been 33.8%, 37.5%, and 40.0%, respectively.
Because of the lack of complete earnings information on recent conversions,
a meaningful comparison of the price earnings ratios is difficult to make.
However, there is sufficient information to review the price to book ratio. The
average price-to-book ratio, as of August 8, 1997, is 98.0% and the median is
96.1%. That compares to the offering price to pro forma book, where the average
was 71.2% and the median was 71.9%.
We believe a DOWNWARD ADJUSTMENT is required for the new issue discount.
-------------------
ADJUSTMENTS CONCLUSION
ADJUSTMENTS SUMMARY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NO CHANGE UPWARD DOWN
<S> <C> <C> <C>
Financial Aspects X
Market Area X
Management X
Dividends X
Liquidity X
Thrift Equity Market Conditions X
- --------------------------------------------------------------------------------
</TABLE>
VALUATION APPROACH
Typically, investors rely on the price/earnings ratio as the most
appropriate indicator of value. We consider price/earnings to be one of the
important pricing methods in valuing a thrift stock. Price/book is a well
recognized yardstick for measuring the value of financial institution stocks in
general. Another method of viewing thrift values is price/assets, which is more
meaningful in situations where the subject is thinly capitalized. Given the
healthy condition of the thrift industry today, more emphasis is placed on
price/earnings and price/book. Generally, price/earnings and price/book should
be considered in tandem.
Table III.3 presents SB&LA's pro forma ratios and compares them to the
ratios of its comparative group and the publicly held thrift industry as a
whole. SB&LA's earnings for the twelve months ended June 30, 1997, were
approximately $44,000, with adjustments of $439,000 required to determine
appraisal earnings of $483,000. Management has indicated an intention, through
its diversification of deposit and loan products, to exhibit the flexibility in
operations needed to serve both the public and the institution. The Association
is positioned to manage reasonable interest rate variations. The Association
projects healthy growth.
The comparative group traded at an average of 31.4 times earnings at August
8, 1997, and at 112.5% of book value. The comparative group traded at a median
of 23.9 times earnings and a median of 111.2% of book value. At the midpoint of
the valuation range, SB&LA is priced at 13.8 times earnings and 67.4% of book
value. At the maximum end of the range, SB&LA is priced at 15.2 times earnings
and 71.3% of book value. At the supermaximum, SB&LA is priced at 16.7 times
earnings and 75.0% of book value.
The midpoint valuation of $9,000,000 represents a discount of 40.1% from
the average and a discount of 39.4% from the median of the comparative group on
a price/book basis. The price/earnings ratio
6
<PAGE>
FERGUSON & COMPANY SECTION IV
- ------------------ ----------
for SB&LA at the midpoint represents a discount of 56.1% from the comparative
group's mean and a discount of 42.3% from the median price/earnings ratio.
The maximum valuation of $10,350,000 represents a discount of 36.6% from
the average and 35.9% from the median of the comparative group on a price/book
basis. The price/earnings ratio for SB&LA at the maximum represents a discount
of 51.6% from the average and a discount of 36.4% from the median of the
comparative group.
As shown in Table IV.3, conversions closing since January 31, 1997, have
closed at an average price to book ratio of 71.2% and median of 71.9%. SB&LA's
pro forma price to book ratio is 67.4% at the midpoint, 71.3% at the maximum,
and 75.0% at the supermaximum of the range. At the midpoint, SB&LA is 5.3% below
the average and 6.3% below the median. At the maximum of the range, SB&LA is .1%
above the average and .8% below the median. At the supermaximum of the range,
SB&LA's pro forma price to book ratio is 5.3% above the average and 4.3% above
the median.
VALUATION CONCLUSION
We believe that as of August 8, 1997, the estimated pro forma market value
of SB&LA was $9,000,000. The resulting valuation range was $7,650,000 at the
minimum to $10,350,000 at the maximum, based on a range of 15% below and 15%
above the midpoint valuation. The supermaximum is $11,902,500, based on 1.15
times the maximum. Pro forma comparisons with the comparative group are
presented in Table III.3 based on calculations shown in Exhibit VII.
7
<PAGE>
FERGUSON & COMPANY TABLE IV.2 - COLORADO ACQUISITIONS SECTION IV
- ------------------ ----------
(ANNOUNCED SINCE JANUARY 1, 1996)
<TABLE>
<CAPTION>
Bank/ Bank/
Buyer City ST Thrift Seller City ST Thrift
- ----- ---- -- ------ ------ ---- -- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Zions Bancorporation Salt Lake City UT Bank Aspen Bancshares, Inc. Aspen CO Bank
Community Bankshares, Inc Denver CO Bank First Western Bancorporation La Jara CO Bank
ColoEast Bankshares Inc Lamar CO Bank 405 Corporation La Junta CO Bank
Community First Bankshares, Inc Fargo ND Bank Mountain Parks Financial Corp. Denver CO Bank
Dickinson Financial Corporation Kansas City MO Bank Air Academy National Bancorp USAF Academy CO Bank
First National of Nebraska, Inc Omaha NE Bank Boulder Bancorp Boulder CO Bank
Mountain Parks Financial Corp. Denver CO Bank High Plains Bank Corp. Kiowa CO Bank
Community First Bankshares, Inc Fargo ND Bank Financial Bancorp, Inc. Trinidad CO Bank
Mountain Parks Financial Corp. Denver CO Bank Charter Bancorp Englewood CO Bank
Southern Colorado Bank HC Pagosa Springs CO Bank Mancos Bancorporation, Inc. Mancos CO Bank
First Colorado Bancorp Lakewood CO Thrift Delta Federal Savings FSB Delta CO Thrift
Peoples National Bank Monument CO Bank Colorado Springs S&LA Colorado Springs CO Thrift
Maximun--banks and thrifts
Minimum--banks and thrifts
Average--banks and thrifts
Median--banks and thrifts
Average--banks only
Median--banks only
Average--thrifts only
Median--thrifts only
</TABLE>
SOURCE: SNL & F&C CALCUATIONS 8
<PAGE>
FERGUSON & COMPANY TABLE IV.2 - COLORADO ACQUISITIONS SECTION IV
- ------------------ ----------
(ANNOUNCED SINCE JANUARY 1, 1996)
<TABLE>
<CAPTION>
Buyer Seller Ann'd Ann'd Ann'd Ann'd
Total Total Completed/ Deal Deal Deal Pr/ Deal Pr/
Assets Assets Announce Terminated Value Pr/Bk Tg Bk 4-Qtr
Seller ($000) ($000) Date Status Date ($M) (%) (%) EPS (x)
- ------ ------ ------ ---- ------ ---- ----- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aspen Bancshares, Inc. 6,783,341 450,944 11/19/96 Completed 5/16/97 72.50 237.1 276.2 16.5
First Western Bancorporation NA 39,875 11/8/96 Pending NA 6.30 185.3 185.3 7.7
405 Corporation 104,973 20,968 7/1/96 Pending NA NA NA NA NA
Mountain Parks Financial Corp. 2,293,703 462,892 6/25/96 Completed 12/18/96 115.50 224.3 300.1 14.4
Air Academy National Bancorp 1,394,400 61,078 6/4/96 Completed 9/12/96 6.50 234.7 234.7 14.4
Boulder Bancorp 6,143,890 125,929 4/16/96 Completed 8/6/96 32.00 165.1 165.1 NM
High Plains Bank Corp. 421,239 39,611 3/18/96 Completed 7/31/96 NA NA NA NA
Financial Bancorp, Inc. 2,326,787 66,719 3/11/96 Completed 10/1/96 12.00 136.7 136.7 12.4
Charter Bancorp 421,239 17,642 1/10/96 Completed 7/3/96 4.00 NA NA NA
Mancos Bancorporation, Inc. 18,663 15,281 1/1/96 Completed 4/10/96 NA NA NA NA
Delta Federal Savings FSB 1,509,514 38,153 5/21/97 Pending NA 5.80 167.0 167.0 24.6
Colorado Springs S&LA 51,033 70,786 6/30/96 Completed 1/10/97 NA NA NA NA
Maximun--banks and thrifts 6,783,341 462,892 115.50 237.1 300.1 24.6
Minimum--banks and thrifts 18,663 15,281 4.00 136.7 136.7 7.7
Average--banks and thrifts 1,951,707 117,490 31.83 192.9 209.3 15.0
Median--banks and thrifts 1,394,400 50,477 9.25 185.3 185.3 14.4
Average--banks only 2,212,026 130,094 35.54 197.2 216.3 13.1
Median--banks only 1,394,400 50,477 12.00 204.8 210.0 14.4
Average--thrifts only 780,274 54,470 5.80 167.0 167.0 24.6
Median--thrifts only 780,274 54,470 5.80 167.0 167.0 24.6
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 9
<PAGE>
FERGUSON & COMPANY TABLE IV.2 - COLORADO ACQUISITIONS SECTION IV
- ------------------ (ANNOUNCED SINCE JANUARY 1, 1996) ----------
<TABLE>
<CAPTION>
Final Final Final Final
Deal Deal Deal Pr/ Deal Pr/
Value Pr/Bk Tg Bk 4-Qtr
Seller ($M) (%) (%) EPS (x)
- ------ ------ ----- ------- -------
<S> <C> <C> <C> <C>
Aspen Bancshares, Inc. 91.90 280.7 323.0 22.2
First Western Bancorporation NA NA NA NA
405 Corporation NA NA NA NA
Mountain Parks Financial Corp. 140.60 240.2 357.4 18.0
Air Academy National Bancorp 6.50 269.3 269.3 13.3
Boulder Bancorp 32.00 165.1 165.1 NA
High Plains Bank Corp. NA NA NA NA
Financial Bancorp, Inc. 12.70 131.1 131.1 12.4
Charter Bancorp 4.00 NA NA NA
Mancos Bancorporation, Inc. NA NA NA NA
Delta Federal Savings FSB NA NA NA NA
Colorado Springs S&LA NA NA NA NA
Maximun--banks and thrifts 140.60 280.7 357.4 22.2
Minimum--banks and thrifts 4.00 131.1 131.1 12.4
Average--banks and thrifts 47.95 217.3 249.2 16.5
Median--banks and thrifts 22.35 240.2 269.3 15.6
Average--banks only 47.95 217.3 249.2 16.5
Median--banks only 22.35 240.2 269.3 15.6
Average--thrifts only NA NA NA NA
Median--thrifts only NA NA NA NA
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 10
<PAGE>
FERGUSON & COMPANY TABLE IV.3 - RECENT CONVERSIONS SECTION IV
- ------------------ (COMPLETED SINCE JANUARY 31,1997) ----------
<TABLE>
<CAPTION>
Conversion Gross Offering
Assets Proceeds Price
Ticker Short Name State IPO Date ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> C>
FSPT FirstSpartan Financial Corp. SC 07/09/97 375,526 88,608 20.000
GOSB GSB Financial Corp. NY 07/09/97 96,323 22,483 10.000
FBNW FirstBank Corp. ID 07/02/97 133,194 19,838 10.000
CFBC Community First Banking Co. GA 07/01/97 352,532 48,271 20.000
HCBB HCB Bancshares Inc. AR 05/07/97 171,241 26,450 10.000
PSFC Peoples-Sidney Financial Corp. OH 04/28/97 86,882 17,854 10.000
HMLK Hemlock Federal Financial Corp IL 04/02/97 146,595 20,763 10.000
GSLA GS Financial Corp. LA 04/01/97 86,521 34,385 10.000
MRKF Market Financial Corp. OH 03/27/97 45,547 13,357 10.000
Maximum 375,526 88,608 20.000
Minimum 45,547 13,357 10.000
Average 166,040 32,445 12.222
Median 133,194 22,483 10.000
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 11
<PAGE>
FERGUSON & COMPANY TABLE IV.3 - RECENT CONVERSION SECTION IV
- ------------------ (COMPLETED SINCE JANUARY 31, 1997) ----------
<TABLE>
<CAPTION>
CONVERSION PRICING RATIOS
--------------------------------------------
Price/ Price/ Price/ Price/ Current Current Current
Pro-Forma Pro-Forma Pro-Forma Adjusted Stock Price/ Price/Tang
Book Value Tang. Book Earnings Assets Price Book Value Book Value
Ticker (%) (%) (x) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
FSPT 73.0 73.0 26.0 19.1 35.625 NA NA
GOSB 73.4 73.4 23.2 18.9 14.375 NA NA
FBNW 71.9 71.9 19.2 13.0 18.250 NA NA
CFBC 72.7 72.7 36.1 12.0 34.000 NA NA
HCBB 72.0 72.0 29.0 13.4 13.875 NA NA
PSFC 71.2 71.2 11.5 17.0 16.500 NA NA
HMLK 71.6 71.6 37.5 12.4 15.250 104.7 104.7
GSLA 63.8 63.8 38.7 28.4 15.250 93.2 93.2
MRKF 71.1 71.1 26.2 22.7 14.250 96.1 96.1
Maximum 73.4 73.4 38.7 28.4 35.625 104.7 104.7
Minimum 63.8 63.8 11.5 12.0 13.875 93.2 93.2
Average 71.2 71.2 27.5 17.4 19.708 98.0 98.0
Median 71.9 71.9 26.2 17.0 15.250 96.1 96.1
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 12
<PAGE>
FERGUSON & COMPANY TABLE IV.3 - RECENT CONVERSIONS SECTION IV
- ------------------ (COMPLETED SINCE JANUARY 31,1997) ----------
<TABLE>
<CAPTION>
Price One Price One Price One POST CONVERSION INCREASE (DECREASE)
-----------------------------------
Day After Week After Month After One One One To
Conversion Conversion Conversion Day Week Month Date
Ticker ($) ($) ($) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
FSPT 36.688 37.000 35.625 83.4 85.0 78.1 78.1
GOSB 14.625 14.875 14.375 46.3 48.8 43.8 43.8
FBNW 15.813 15.563 17.750 58.1 55.6 77.5 82.5
CFBC 31.875 33.000 34.000 59.4 65.0 70.0 70.0
HCBB 12.625 12.750 12.875 26.3 27.5 28.8 38.8
PSFC 12.563 12.875 13.250 25.6 28.8 32.5 65.0
HMLK 12.875 12.875 13.000 28.8 28.8 30.0 52.5
GSLA 13.375 13.750 14.000 33.8 37.5 40.0 52.5
MRKF 12.938 12.250 12.625 29.4 22.5 26.3 42.5
Maximum 36.688 37.000 35.625 83.4 85.0 78.1 82.5
Minimum 12.563 12.250 12.625 25.6 22.5 26.3 38.8
Average 18.153 18.326 18.611 43.4 44.4 47.4 58.4
Median 13.375 13.750 14.000 33.8 37.5 40.0 52.5
</TABLE>
SOURCE: SNL F&C CALUCATIONS 13
<PAGE>
FERGUSON & COMPANY TABLE IV.4 SECTION IV
- ------------------ ----------
COMPARISON OF PRICING RATIOS
<TABLE>
<CAPTION>
Salida Group Percent Premium
Building Compared to (Discount) Versus
----------------- ------------------
and Loan Average Median Average Median
-------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C>
COMPARISON OF PE RATIO AT
MIDPOINT TO:
- ----------------------------
Comparative group 13.8 31.4 23.9 (56.1) (42.3)
Colorado thrifts 13.8 16.1 16.1 (14.3) (14.3)
Southwest Region thrifts 13.8 16.4 16.0 (15.9) (13.8)
All public thrifts 13.8 16.7 16.4 (17.4) (15.9)
Recent conversions 13.8 27.5 26.2 (49.8) (47.3)
COMPARISON OF PE RATIO AT
MAXIMUM TO:
- ----------------------------
Comparative group 15.2 31.4 23.9 (51.6) (36.4)
Colorado thrifts 15.2 16.1 16.1 (5.6) (5.6)
Southwest Region thrifts 15.2 16.4 16.0 (7.3) (5.0)
All public thrifts 15.2 16.7 16.4 (9.0) (7.3)
Recent conversions 15.2 27.5 26.2 (44.7) (42.0)
COMPARISON OF PE RATIO AT
SUPERMAXIMUM TO:
- ----------------------------
Comparative group 16.7 31.4 23.9 (46.8) (30.1)
Colorado thrifts 16.7 16.1 16.1 3.7 3.7
Southwest Region thrifts 16.7 16.4 16.0 1.8 4.4
All public thrifts 16.7 16.7 16.4 - 1.8
Recent conversions 16.7 27.5 26.2 (39.3) (36.3)
COMPARISON OF PB RATIO AT
MIDPOINT TO:
- ----------------------------
Comparative group 67.4 112.5 111.2 (40.1) (39.4)
Colorado thrifts 67.4 150.6 150.6 (55.2) (55.2)
Southwest Region thrifts 67.4 137.3 136.0 (50.9) (50.4)
All public thrifts 67.4 148.4 141.9 (54.6) (52.5)
Recent conversions 67.4 71.2 71.9 (5.3) (6.3)
COMPARISON OF PB RATIO AT
MAXIMUM TO:
- ----------------------------
Comparative group 71.3 112.5 111.2 (36.6) (35.9)
Colorado thrifts 71.3 150.6 150.6 (52.7) (52.7)
Southwest Region thrifts 71.3 137.3 136.0 (48.1) (47.6)
All public thrifts 71.3 148.4 141.9 (52.0) (49.8)
Recent conversions 71.3 71.2 71.9 0.1 (0.8)
COMPARISON OF PB RATIO AT
SUPERMAXIMUM TO:
- ----------------------------
Comparative group 75.0 112.5 111.2 (33.3) (32.6)
Colorado thrifts 75.0 150.6 150.6 (50.2) (50.2)
Southwest Region thrifts 75.0 137.3 136.0 (45.4) (44.9)
All public thrifts 75.0 148.4 141.9 (49.5) (47.1)
Recent conversions 75.0 71.2 71.9 5.3 4.3
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 14
<PAGE>
FERGUSON & COMPANY FIGURE IV.1 - SNL INDEX SECTION IV
- ------------------ ----------
<TABLE>
<CAPTION>
% CHANGE SINCE
---------------------
SNL PREVIOUS
DATE INDEX DATE 12/31/96
---- ----- ---- --------
<S> <C> <C> <C>
12/31/90 96.6
12/31/91 143.9 49.0%
12/31/92 201.1 39.7%
12/31/93 252.5 25.6%
12/31/94 244.7 -3.1%
12/31/95 376.5 53.9%
12/31/96 483.6 28.4%
3/31/97 527.7 9.1% 9.1%
4/30/97 537.2 1.8% 11.1%
5/30/97 577.9 7.6% 19.5%
6/30/97 624.6 8.1% 29.2%
7/31/97 684.5 9.6% 41.5%
8/8/97 664.6 -2.9% 37.4%
</TABLE>
[GRAPH APPEARS HERE]
SOURCE: SNL & F&C CALCULATIONS 15
<PAGE>
FERGUSON & COMPANY FIGURE IV.2 - INTEREST RATES SECTION IV
- ------------------ ----------
<TABLE>
<CAPTION>
----------------------------------------------------------------------- -----------------
1 Year 5 Year 10 Year 30 Year 1 to 30
Fed Fds (*) T-bill Treas. Treas. Treas. Yr. Spread
----------------------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
31-Dec-96 5.18 5.48 6.12 6.34 6.58 1.10
----------------------------------------------------------------------- -----------------
17-Jan-97 5.19 5.60 6.33 6.56 6.81
31-Jan-97 5.18 5.60 6.36 6.62 6.89 1.29
------------------------------------------------------------------------ -----------------
14-Feb-97 5.05 5.48 6.14 6.37 6.65
27-Feb-97 5.16 5.52 6.25 6.45 6.71 1.19
------------------------------------------------------------------------- ----------------
14-Mar-97 5.19 5.69 6.41 6.58 6.85
31-Mar-97 5.40 5.91 6.75 6.96 7.15 1.24
------------------------------------------------------------------------- ----------------
18-Apr-97 5.48 6.00 6.80 6.92 7.13
30-Apr-97 5.45 5.89 6.57 6.71 6.95 1.06
-------------------------------------------------------------------------- ---------------
16-May-97 5.49 5.85 6.54 6.68 6.90
30-May-97 5.43 5.85 6.60 6.75 6.99 1.14
-------------------------------------------------------------------------- ---------------
13-Jun-97 5.48 5.71 6.40 6.52 6.80
27-Jun-97 5.42 5.64 6.33 6.45 6.75 1.11
-------------------------------------------------------------------------- --------------
18-Jul-97 5.44 5.53 6.14 6.23 6.52
8-Aug-97 5.50 5.57 6.22 6.37 6.63 1.06
-------------------------------------------------------------------------- --------------
RATES DECEMBER 31, 1996 THROUGH AUGUST 8, 1997
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------- ---------------
1 Year 5 Year 10 Year 30 Year 1 to 30
Fed Fds(*) T-bill Treas. Treas. Treas. Yr. Spread
--------------------------------------------------------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
8-Aug-97 5.50 5.57 6.22 6.37 6.63 1.06
--------------------------------------------------------------------------- --------------
Current Yield Curve
</TABLE>
[GRAPH APPEARS HERE]
SOURCE: FINANCIAL DATA, FEDERAL RESERVE
BANK OF ST. LOUIS, MO. 16
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT I
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT I - FIRM QUALIFICATIONS
EXHIBIT I
Ferguson & Company (F&C), is a financial, economic, and regulatory
consulting firm providing services to financial institutions. It is located in
Irving, Texas. Its services to financial institutions include:
. Mergers and acquisition services
. Business plans
. Fairness opinions and conversion appraisals
. Litigation support
. Operational and efficiency consulting
. Human resources evaluation and management
F&C developed several financial institution databases of information
derived from periodic financial reports filed with regulatory authorities by
financial institutions. For example, F&C developed TAFS and BankSource. TAFS
includes thrifts filing TFR's with the OTS and BankSource includes banks and
savings banks filing call reports with the FDIC. Both databases include
information from the periodic reports plus numerous calculations derived from
F&C's analysis. In addition, both databases are interactive, permitting the
user to conduct merger analysis, do peer group comparisons, and a number of
other items. In 1994, F&C sold its electronic publishing segment to Sheshunoff
Information Services Inc., Austin, Texas.
Brief biographical information is presented below on F&C's principals:
WILLIAM C. FERGUSON, MANAGING PARTNER
- -------------------------------------
Mr. Ferguson has approximately 30 years of experience providing various services
to financial institutions. He was a partner in a CPA firm prior to founding F&C
in 1984. Mr. Ferguson is a frequent speaker for financial institution seminars
and he has testified before Congressional Committees several times on his
analysis of the state of the thrift industry. Mr. Ferguson has a B.A. degree
from Austin Peay University and an M.S. degree from the University of Tennessee.
He is a CPA.
CHARLES M. HEBERT, PRINCIPAL
- ----------------------------
Mr. Hebert has over 30 years of experience providing services to and managing
financial institutions. He spent 7 years as a national bank examiner, 14 years
in bank management, 5 years in thrift management, and has spent the last 8 years
on the F&C consulting staff. Mr. Hebert holds a B.S. degree from Louisiana State
University.
ROBIN L. FUSSELL, PRINCIPAL
- ---------------------------
Mr. Fussell has over 25 years of experience providing professional services to
and managing financial institutions. He worked on the audit staff of a "Big
Six" accounting firm for 12 years, served as CFO of a thrift for 3 years, and
has worked in financial institution consulting for the last 13 years. He is a
co-founder of F&C. He holds a B.S. degree from East Carolina University. He is
a CPA.
1
<PAGE>
EXHIBIT II
<PAGE>
FERGUSON COMPANY
- ----------------
EXHIBIT II.1 - SELECTED PUBLICLY HELD SOUTHWEST THRIFTS
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBSA Coastal Bancorp Inc. Houston TX SW SAIF NASDAQ NA 30.250
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93 30.750
FFBA First Colorado Bancorp Inc. Lakewood CO SW SAIF NASDAQ 01/02/96 17.750
GUPB GFSB Bancorp Inc. Gallup NM SW SAIF NASDAQ 06/30/95 19.000
ISBF ISB Financial Corporation New Iberia LA SW SAIF NASDAQ 04/07/95 24.375
JXVL Jacksonville Bancorp Inc. Jacksonville TX SW SAIF NASDAQ 04/01/96 16.625
MERI Meritrust Federal SB Thibodaux LA SW SAIF NASDAQ NA 40.500
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95 18.125
Maximum 40.500
Minimum 16.625
Average 24.672
Median 21.688
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 1
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 - SELECTED PUBLICLY HELD SOUTHWEST THRIFTS
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBSA 150.39 13.1 154.1 185.4 5.1 1.59 2,964,082 3.3 2.8 2.31 0.41
FBHC 25.44 20.8 132.4 142.1 8.0 1.30 318,668 6.0 5.6 1.48 0.51
FFBA 293.97 16.1 150.6 152.6 19.5 2.48 1,510,376 12.9 12.8 1.10 1.21
GUPB 15.28 22.6 112.6 112.6 18.4 2.11 86,911 16.3 16.3 0.84 0.93
ISBF 168.22 22.0 139.7 164.7 18.2 1.64 938,968 12.2 10.5 1.11 0.92
JXVL 41.00 7.3 122.7 122.7 18.3 3.01 226,182 14.9 14.9 2.28 1.33
MERI 31.35 13.8 167.3 167.3 13.7 1.73 228,485 8.2 8.2 2.94 1.05
TSH 62.31 15.9 119.0 119.0 15.8 2.76 393,556 13.3 13.3 1.14 1.00
Maximum 293.97 22.6 167.3 185.4 19.5 3.01 2,964,082 16.3 16.3 2.94 1.33
Minimum 15.28 7.3 112.6 112.6 5.1 1.30 86,911 3.3 2.8 0.84 0.41
Average 98.50 16.4 137.3 145.8 14.6 2.08 833,404 10.9 10.6 1.65 0.92
Median 51.66 16.0 136.0 147.4 17.0 1.92 356,112 12.6 11.7 1.31 0.97
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 2
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.1 SELECTED PUBLICLY HELD SOUTHWEST THRIFTS
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBSA 12.30 N 08/08/97 0.54 13.8 0.55 0.39 11.51
FBHC 8.10 N 08/08/97 0.37 17.9 0.43 0.60 9.70
FFBA 8.59 N 08/08/97 0.23 15.9 0.28 1.19 9.25
GUPB 4.89 N 08/08/97 0.18 22.6 0.21 0.81 4.74
ISBF 6.15 N 08/08/97 0.33 21.0 0.29 0.77 6.29
JXVL 8.42 N 08/08/97 0.78 10.1 0.41 1.75 11.48
MERI 13.46 N 08/08/97 0.22 11.4 0.89 1.27 15.91
TSH 6.93 N 08/08/97 0.27 14.6 0.31 0.99 7.48
Maximum 13.46 0.78 22.6 0.89 1.75 15.91
Minimum 4.89 0.18 10.1 0.21 0.39 4.74
Average 8.61 0.37 15.9 0.42 0.97 9.55
Median 8.26 0.30 15.2 0.36 0.90 9.48
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 3
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2 - SELECTED PUBLICLY HELD COLORADO THRIFTS
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA First Colorado Bancorp Inc. Lakewood CO SW SAIF NASDAQ 01/02/96 17.750
Maximum 17.750
Minimum 17.750
Average 17.750
Median 17.750
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 4
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2-SELECTED PUBLICLY HELD COLORADO THRIFTS
<TABLE>
<CAPTION>
Tangible
Current Price/ Current Current Current Total Equity/ Equity/ Core Core
Market LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA
Value Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA 293.97 16.1 150.6 152.6 19.5 2.48 1,510,376 12.9 12.8 1.10 1.21
Maximum 293.97 16.1 150.6 152.6 19.5 2.48 1,510,376 12.9 12.8 1.10 1.21
Minimum 293.97 16.1 150.6 152.6 19.5 2.48 1,510,376 12.9 12.8 1.10 1.21
Average 293.97 16.1 150.6 152.6 19.5 2.48 1,510,376 12.9 12.8 1.10 1.21
Median 293.97 16.1 150.6 152.6 19.5 2.48 1,510,376 12.9 12.8 1.10 1.21
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 5
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.2-SELECTED PUBLICLY HELD COLORADO THRIFTS
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA 8.59 N 08/08/97 0.23 15.9 0.28 1.19 9.25
Maximum 8.59 0.23 15.9 0.28 1.19 9.25
Minimum 8.59 0.23 15.9 0.28 1.19 9.25
Average 8.59 0.23 15.9 0.28 1.19 9.25
Median 8.59 0.23 15.9 0.28 1.19 9.25
</TABLE>
Source: SNL & F&C calculations 6
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.3-COMPARATIVES GENERAL
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
of ($000) Price Value
Ticker Short Name City State Offices MRQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. Munster IN 4 94,179 04/01/96 15.000 14.46
CCFH CCF Holding Company Jonesboro GA 4 86,940 07/12/95 17.125 14.12
CIBI Community Investors Bancorp Bucyrus OH 3 97,446 02/07/95 15.250 14.17
CKFB CKF Bancorp Inc. Danville KY 1 60,197 01/04/95 20.000 18.54
INCB Indiana Community Bank SB Lebanon IN 3 91,329 12/15/94 15.250 14.06
LOGN Logansport Financial Corp. Logansport IN 1 83,152 06/14/95 14.000 17.65
LXMO Lexington B&L Financial Corp. Lexington MO 1 59,748 06/06/96 16.125 17.54
MIVI Mississippi View Holding Co. Little Falls MN 1 69,755 03/24/95 15.125 12.38
SFFC StateFed Financial Corporation Des Moines IA 2 85,679 01/05/94 21.750 17.05
SOBI Sobieski Bancorp Inc. South Bend IN 3 79,080 03/31/95 16.375 12.44
SSB Scotland Bancorp Inc Laurinburg NC 2 69,479 04/01/96 17.188 32.89
SZB SouthFirst Bancshares Inc. Sylacauga AL 2 92,910 02/14/95 17.000 14.40
Maximum 4 97,446 21.750 32.89
Minimum 1 59,748 14.000 12.38
Average 2 80,825 16.682 16.64
Median 2 84,416 16.250 14.43
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 7
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.4 - COMPARATIVES BALANCE SHEETS
<TABLE>
<CAPTION>
Total Mortgage- Investment & Loan
Total Cash and Backed Net Foreclosed Servicing Total Other
Assets Investments Securities Loans Real Estate Rights Intangibles Assets
($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMB Financial Corp. 94,179 20,936 3,827 70,890 99 - - 2,254
CCF Holding Company 86,940 13,177 3,821 70,600 - - - 3,163
Community Investors Bancorp 97,446 21,990 1,952 74,110 57 - - 1,289
CKF Bancorp Inc. 60,197 5,004 456 54,035 86 - - 972
Indiana Community Bank SB 91,329 16,913 2,828 71,330 - - - 3,086
Logansport Financial Corp. 83,152 19,871 8,032 59,490 8 - - 3,783
Lexington B&L Financial Corp. 59,748 13,794 1,959 NA 11 - - 1,315
Mississippi View Holding Co. 69,755 23,944 4,942 43,978 34 - - 1,750
StateFed Financial Corporation 85,679 12,496 - NA 2,703 - - 2,302
Sobieski Bancorp Inc. 79,080 18,771 14,182 57,698 - - - 2,611
Scotland Bancorp Inc 69,479 19,979 442 47,923 - - - 1,577
SouthFirst Bancshares Inc. 92,910 21,973 5,235 66,757 157 - - 3,920
Maximum 97,446 23,944 14,182 74,110 2,703 - - 3,920
Minimum 59,748 5,004 - 43,978 - - - 972
Average 80,825 17,404 3,973 61,681 271 - - 2,335
Median 84,416 19,321 3,325 63,124 23 - - 2,278
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 8
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.4 - COMPARATIVES BALANCE SHEETS
<TABLE>
<CAPTION>
Total Total Subordinated Other Total Preferred Common
Deposits Borrowings Debt Liabilities Liabilities Equity Equity
($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
AMB Financial Corp. 65,483 13,500 - 1,109 80,092 - 14,087
CCF Holding Company 72,194 1,500 - 801 74,495 - 12,445
Community Investors Bancorp 72,015 13,631 - 579 86,225 - 11,221
CKF Bancorp Inc. 42,853 2,243 - 847 45,943 - 14,254
Indiana Community Bank SB 79,413 - - 604 80,017 - 11,312
Logansport Financial Corp. 60,400 4,500 - 2,292 67,192 - 15,960
Lexington B&L Financial Corp. 42,359 - - 884 43,243 - 16,505
Mississippi View Holding Co. 55,943 - - 1,077 57,020 - 12,735
StateFed Financial Corporation 50,346 19,000 - 1,100 70,446 - 15,233
Sobieski Bancorp Inc. 58,996 7,100 - 803 66,899 - 12,181
Scotland Bancorp Inc 42,451 - - 1,298 43,749 - 25,730
SouthFirst Bancshares Inc. 63,817 14,083 - 2,022 79,922 - 12,988
Maximum 79,413 19,000 - 2,292 86,225 - 25,730
Minimum 42,359 - - 579 43,243 - 11,221
Average 58,856 6,296 - 1,118 66,270 - 14,554
Median 59,698 3,372 - 981 68,819 - 13,538
</TABLE>
<TABLE>
<CAPTION>
Regulatory
Total Tangible
Equity Capital
($000) ($000)
Short Name MRQ MRQ
<S> <C> <C>
AMB Financial Corp. 14,087 11,500
CCF Holding Company 12,445 NA
Community Investors Bancorp 11,221 10,200
CKF Bancorp Inc. 14,254 12,224
Indiana Community Bank SB 11,312 NA
Logansport Financial Corp. 15,960 16,011
Lexington B&L Financial Corp. 16,505 13,027
Mississippi View Holding Co. 12,735 10,848
StateFed Financial Corporation 15,233 NA
Sobieski Bancorp Inc. 12,181 8,800
Scotland Bancorp Inc 25,730 NA
SouthFirst Bancshares Inc. 12,988 12,988
Maximum 25,730 16,011
Minimum 11,221 8,800
Average 14,554 11,950
Median 13,538 11,862
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 9
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.4 - COMPARATIVE BALANCE SHEETS
<TABLE>
<CAPTION>
Regulatory Regulatory Loan Loss
Core Total Tangible Core Risk-Based NPAs/ Reserves/ Reserves/
Capital Capital Capital/ Capital/ Capital/ Assets Assets NPLs
($000) ($000) Tangible Adj Tangible Risk-Weightd (%) (%) (%)
Short Name MRQ MRQ Assets (%) Assets (%) Assets (%) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMB Financial Corp. 11,500 11,900 13.4 13.4 26.6 0.81 0.40 56.74
CCF Holding Company NA NA 15.5 15.5 37.3 0.34 0.65 189.90
Community Investors Bancorp 10,200 10,600 10.2 10.2 20.4 0.72 0.47 71.32
CKF Bancorp Inc. 12,224 12,353 20.9 20.9 36.8 0.89 0.18 30.66
Indiana Community Bank SB NA NA NA NA NA NA 0.56 NA
Logansport Financial Corp. 16,011 16,239 21.8 21.8 41.6 0.61 0.27 45.60
Lexington B&L Financial Corp. 13,027 13,189 22.8 22.8 46.4 0.63 0.37 60.05
Mississippi View Holding Co. 10,848 11,280 14.9 14.9 31.7 0.21 1.24 772.32
StateFed Financial Corporation NA NA 13.2 13.2 22.7 NA NA NA
Sobieski Bancorp Inc. 8,800 9,000 11.9 11.9 28.5 0.25 0.25 102.04
Scotland Bancorp Inc 18,008 18,251 NA NA NA - 0.35 NM
SouthFirst Bancshares Inc. 12,988 13,256 12.7 12.7 23.5 0.50 0.29 86.73
Maximum 18,008 18,251 22.8 22.8 46.4 0.89 1.24 772.32
Minimum 8,800 9,000 10.2 10.2 20.4 - 0.18 30.66
Average 12,623 12,896 15.7 15.7 31.6 0.50 0.46 157.26
Median 12,224 12,353 14.2 14.2 30.1 0.56 0.37 71.32
</TABLE>
SOURCE: SNL & F&C CALCULATION 10
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.4 - COMPARATIVES BALANCE SHEETS
<TABLE>
<CAPTION>
Publicly Tangible Earn Assets/ Full-Time Loans Cash &
Reported Publicly Rep Int Bearing Equivalent Serviced Investments MBS/
Book V Book Value Liabilities Employees For Others (ex MBS) Assets
($) ($) (%) (Actual) - Assets (%) (%)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
AMB Financial Corp. 14.62 14.62 117.82 NA NA 18.17 4.06
CCF Holding Company 14.38 14.38 110.17 NA 9,845 10.76 4.39
Community Investors Bancorp 11.82 11.82 112.79 NA NA 20.56 2.00
CKF Bancorp Inc. 16.59 16.59 132.43 8 - 7.56 0.76
Indiana Community Bank SB 12.27 12.27 112.01 NA NA 15.42 3.10
Logansport Financial Corp. 12.66 12.66 122.75 13 - 14.24 9.66
Lexington B&L Financial Corp. 15.17 15.17 140.79 NA NA 19.81 3.28
Mississippi View Holding Co. 15.55 15.55 123.03 21 - 27.24 7.08
StateFed Financial Corporation 19.44 19.44 116.34 NA NA 14.58 -
Sobieski Bancorp Inc. 17.52 17.52 117.19 22 - 5.80 17.93
Scotland Bancorp Inc 13.45 13.45 160.05 14 - 28.12 0.64
SouthFirst Bancshares Inc. 15.82 15.82 111.43 45 - 18.02 5.63
Maximum 19.44 19.44 160.05 45 9,845 28.12 17.93
Minimum 11.82 11.82 110.17 8 - 5.80 -
Average 14.94 14.94 123.07 21 1,406 16.69 4.88
Median 14.90 14.90 117.51 18 - 16.72 3.67
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 11
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.5 - COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Net Income ROAA ROAE
Average Before Before Core Before Core
Assets Net Income Extra Items ROAA Extra ROAA ROAE Extra ROAE
($000) ($000) ($000) (%) (%) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMB Financial Corp. 87,520 640 640 0.73 0.73 0.80 4.14 4.14 4.54
CCF Holding Company 82,207 220 220 0.27 0.27 0.42 1.49 1.49 2.37
Community Investors Bancorp 93,497 626 626 0.67 0.67 0.99 5.53 5.53 8.18
CKF Bancorp Inc. 59,529 775 775 1.30 1.30 1.29 5.08 5.08 5.05
Indiana Community Bank SB 90,855 150 150 0.17 0.17 0.50 1.29 1.29 3.92
Logansport Financial Corp. 79,217 931 931 1.18 1.18 1.51 5.74 5.74 7.40
Lexington B&L Financial Corp. 61,284 553 553 0.90 0.90 1.18 2.98 2.98 3.91
Mississippi View Holding Co. 69,520 474 474 0.68 0.68 1.01 3.76 3.76 5.56
StateFed Financial Corporation 81,192 921 921 1.13 1.13 1.37 6.11 6.11 7.36
Sobieski Bancorp Inc. 79,053 225 225 0.28 0.28 0.57 1.64 1.64 3.28
Scotland Bancorp Inc 68,900 974 974 1.41 1.41 1.71 3.88 3.88 4.69
SouthFirst Bancshares Inc. 91,348 38 38 0.04 0.04 0.16 0.29 0.29 1.13
Maximum 93,497 974 974 1.41 1.41 1.71 6.11 6.11 8.18
Minimum 59,529 38 38 0.04 0.04 0.16 0.29 0.29 1.13
Average 78,677 544 544 0.73 0.73 0.96 3.49 3.49 4.78
Median 80,205 590 590 0.71 0.71 1.00 3.82 3.82 4.62
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 12
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.5 - COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Loan Total Total Net Loan
Loss Noninterest Noninterest Chargeoffs/
Provision Income Expense Avg Loans
($000) ($000) ($000) (%)
Short Name LTM LTM LTM LTM
<S> <C> <C> <C> <C>
AMB Financial Corp. 31 406 2,593 0.02
CCF Holding Company 141 523 3,147 -
Community Investors Bancorp 140 109 1,872 0.16
CKF Bancorp Inc. 1 57 1,071 -
Indiana Community Bank SB 460 870 3,546 0.54
Logansport Financial Corp. 14 124 1,252 0.03
Lexington B&L Financial Corp. 21 90 1,047 -
Mississippi View Holding Co. 1 187 1,687 0.04
StateFed Financial Corporation 36 108 1,138 NA
Sobieski Bancorp Inc. - 189 2,030 -
Scotland Bancorp Inc 24 70 1,363 -
SouthFirst Bancshares Inc. 18 518 3,333 0.02
Maximum 460 870 3,546 0.54
Minimum - 57 1,047 -
Average 74 271 2,007 0.07
Median 23 156 1,780 0.02
<CAPTION>
Common Dividend Interest
LTM EPS Dividends Payout Income/
After Extra Per Share Ratio Avg Assets
($) ($) (%) (%)
Short Name LTM LTM LTM LTM
<S> <C> <C> <C> <C>
AMB Financial Corp. 0.67 0.24 35.82 7.51
CCF Holding Company 0.22 0.70 318.18 7.17
Community Investors Bancorp 0.67 0.23 33.85 7.70
CKF Bancorp Inc. 0.87 1.44 165.52 7.39
Indiana Community Bank SB 0.15 3.36 NM 7.77
Logansport Financial Corp. 0.73 3.40 465.75 7.46
Lexington B&L Financial Corp. NA NA NA 7.21
Mississippi View Holding Co. 0.58 0.24 41.38 7.40
StateFed Financial Corporation 1.20 0.40 33.33 7.89
Sobieski Bancorp Inc. 0.29 0.07 24.14 7.14
Scotland Bancorp Inc 0.57 0.30 52.63 7.44
SouthFirst Bancshares Inc. 0.04 0.50 NM 7.53
Maximum 1.20 3.40 465.75 7.89
Minimum 0.04 0.07 24.14 7.14
Average 0.54 0.99 130.07 7.47
Median 0.58 0.40 41.38 7.45
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 13
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.5 - COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Interest Net Interest Gain on Real Noninterest G&A Noninterest
Expense/ Income/ Sale/ Estate Income/ Expense/ Expense/
Avg Assets Avg Assets Avg Assets Expense Avg Assets Avg Assets Avg Assets
(%) (%) (%) ($000) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
AMB Financial Corp. 3.73 3.78 0.34 (28) 0.46 2.99 2.96
CCF Holding Company 3.28 3.89 0.24 (30) 0.64 3.86 3.83
Community Investors Bancorp 4.17 3.53 - 121 0.12 1.87 2.00
CKF Bancorp Inc. 3.69 3.69 0.47 42 0.10 1.73 1.80
Indiana Community Bank SB 3.54 4.23 - - 0.96 3.90 3.90
Logansport Financial Corp. 3.68 3.78 (0.11) (2) 0.16 1.58 1.58
Lexington B&L Financial Corp. 3.80 3.41 0.03 - 0.15 1.71 1.71
Mississippi View Holding Co. 3.64 3.76 0.02 (15) 0.27 2.45 2.43
StateFed Financial Corporation 4.47 3.43 - (562) 0.13 2.09 1.40
Sobieski Bancorp Inc. 3.91 3.23 0.09 (3) 0.24 2.57 2.57
Scotland Bancorp Inc 2.87 4.57 0.35 - 0.10 1.98 1.98
SouthFirst Bancshares Inc. 4.06 3.48 0.16 (10) 0.57 3.66 3.65
Maximum 4.47 4.57 0.47 121 0.96 3.90 3.90
Minimum 2.87 3.23 (0.11) (562) 0.10 1.58 1.40
Average 3.74 3.73 0.13 (41) 0.33 2.53 2.48
Median 3.71 3.73 0.06 (3) 0.20 2.27 2.22
<CAPTION>
Net Oper
Expenses/
Avg Assets
(%)
Short Name LTM
<S> <C>
AMB Financial Corp 2.53
CCF Holding Company 3.23
Community Bancorp 1.76
CKF Bancorp Inc. 1.63
Indiana Community Bank SB 2.95
Logansport Financial Corp. 1.43
Lexington B&L Financial Corp. 1.56
Mississippi View Holding Co. 2.18
StateFed Financial Corporation 1.96
Sobieski Bancorp Inc. 2.33
Scotland Bancorp Inc 1.88
SouthFirst Bancshares Inc. 3.09
Maximun 3.23
Minimum 1.43
Average 2.21
Median 2.07
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 14
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.5 - COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Total Amortization Extra and Yield on
Nonrecurring of Tax After Tax Efficiency Preferred Int Earning
Expense Intangibles Provision Items Ratio Dividends Assets
($000) ($000) ($000) ($000) (%) ($000) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> 7.68
AMB Financial Corp. 389 - 360 - 70.51 - 7.39
CCF Holding Company 398 - 13 - 85.40 - 7.78
Community Investors Bancorp 461 - 310 - 51.36 - 7.50
CKF Bancorp Inc. 274 - 416 - 45.63 - 8.06
Indiana Community Bank SB 474 - 80 - 75.29 - 7.68
Logansport Financial Corp. 334 - 514 - 40.17 - 7.33
Lexington B&L Financial Corp. 281 - 297 - 47.98 NA 7.49
Mississippi View Holding Co. 363 - 291 - 60.70 - 8.34
StateFed Financial Corporation 291 - 503 - 58.84 - 7.37
Sobieski Bancorp Inc. 414 - 143 - 74.09 - 7.61
Scotland Bancorp Inc 551 - 545 - 42.34 - 8.04
SouthFirst Bancshares Inc. 430 - 135 - 90.52 -
8.34
Maximum 551 - 545 - 90.52 - 7.33
Minimum 274 - 13 - 40.17 - 7.69
Average 388 - 301 - 61.90 - 7.65
Median 394 - 304 - 59.77 -
<CAPTION>
Cost of
Int Bearing
Liabilities
(%)
Short Name LTM
<S> <C>
AMB Financial Corp. 4.59
CCF Holding Company 4.06
Community Investors Bancorp 4.78
CKF Bancorp Inc. 5.07
Indiana Community Bank SB 4.11
Logansport Financial Corp. 4.79
Lexington B&L Financial Corp. 5.51
Mississippi View Holding Co. 4.50
StateFed Financial Corporation 5.58
Sobieski Bancorp Inc. 4.78
Scotland Bancorp Inc 4.63
SouthFirst Bancshares Inc. 4.93
Maximum 5.58
Minimum 4.06
Average 4.78
Median 4.78
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 15
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.5 - COMPARATIVES OPERATIONS
<TABLE>
<CAPTION>
Interest Loan Loss
Effective Yield Provision/
Tax Rate Spread Avg Assets
(%) (%) (%)
Short Name LTM LTM LTM
<S> <C> <C> <C>
AMB Financial Corp. 36.00 3.09 0.04
CCF Holding Company 5.58 3.33 0.17
Community Investors Bancorp 33.12 3.00 0.15
CKF Bancorp Inc. 34.93 2.43 0.00
Indiana Community Bank SB 34.78 3.95 0.51
Logansport Financial Corp. 35.57 2.89 0.02
Lexington B&L Financial Corp. 34.94 1.82 0.03
Mississippi View Holding Co. 38.04 2.99 0.00
StateFed Financial Corporation 35.32 2.76 0.04
Sobieski Bancorp Inc. 38.86 2.59 -
Scotland Bancorp Inc 35.88 2.98 0.03
SouthFirst Bancshares Inc. 78.03 3.11 0.02
Maximum 78.03 3.95 0.51
Minimum 5.58 1.82 -
Average 36.75 2.91 0.08
Median 35.45 2.99 0.03
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 16
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.6 - COMPARATIVES PRICING CHARACTERISTICS
<TABLE>
<CAPTION>
Current Current Price/ Current
Stock Market LTM Price/
Abbreviated Price Value Core EPS Book V
Ticker Name City State ($) ($M) (x) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
AMFC AMBFinancial-IN Munster IN 15.000 14.46 22.1 102.6
CCFH CCFHoldingCo-GA Jonesboro GA 17.125 14.12 51.9 119.1
CIBI CommunityInvrs-OH Bucyrus OH 15.250 14.17 15.4 129.0
CKFB CKFBancorp-KY Danville KY 20.000 18.54 23.3 120.6
INCB IndianaCommBkSB-IN Lebanon IN 15.250 14.06 31.8 124.3
LOGN LogansprtFinCrp-IN Logansport IN 14.000 17.65 14.9 110.6
LXMO LexingtonB&LFin-MO Lexington MO 16.125 17.54 NA 106.3
MIVI MissViewHoldCo-MN Little Falls MN 15.125 12.38 17.8 97.3
SFFC StateFedFinCorp-IA Des Moines IA 21.750 17.05 15.0 111.9
SOBI SobieskiBancorp-IN South Bend IN 16.375 12.44 28.7 93.5
SSB ScotlandBancorp-NC Laurinburg NC 17.188 32.89 24.6 127.8
SZB SouthFstBncshrs-AL Sylacauga AL 17.000 14.40 100.0 107.5
Maximum 21.750 32.89 100.0 129.0
Minimum 14.000 12.38 14.9 93.5
Average 16.682 16.64 31.4 112.5
Median 16.250 14.43 23.3 111.2
</TABLE>
SOURCE: SNL & F&C CALCUATIONS 17
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.6 - COMPARATIVES PRICING CHARACTETISTICS
<TABLE>
<CAPTION>
Tangible
Current Current Total Equity/ Equity/ Core Core Core
Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE
Book V Assets Yield ($000) (%) (%) ($) (%) (%)
Ticker (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC 102.6 15.4 1.60 94,179 15.0 15.0 0.68 0.80 4.54
CCFH 119.1 17.0 3.21 86,940 14.3 14.3 0.33 0.42 2.37
CIBI 129.0 14.9 2.10 97,446 11.5 11.5 0.99 0.99 8.18
CKFB 120.6 30.8 2.50 60,197 23.7 23.7 0.86 1.29 5.05
INCB 124.3 15.4 2.36 91,329 12.4 12.4 0.48 0.50 3.92
LOGN 110.6 21.2 2.86 83,152 19.2 19.2 0.94 1.51 7.40
LXMO 106.3 29.4 1.86 59,748 27.6 27.6 NA 1.18 3.91
MIVI 97.3 17.8 1.06 69,755 18.3 18.3 0.85 1.01 5.56
SFFC 111.9 19.9 1.84 85,679 17.8 17.8 1.45 1.37 7.36
SOBI 93.5 15.7 1.71 79,080 15.4 15.4 0.57 0.57 3.28
SSB 127.8 47.3 1.75 69,479 37.0 37.0 0.70 1.71 4.69
SZB 107.5 15.0 2.94 92,910 14.0 14.0 0.17 0.16 1.13
Maximum 129.0 47.3 3.21 97,446 37.0 37.0 1.45 1.71 8.18
Minimum 93.5 14.9 1.06 59,748 11.5 11.5 0.17 0.16 1.13
Average 112.5 21.6 2.15 80,825 18.8 18.8 0.73 0.96 4.78
Median 111.2 17.4 1.98 84,416 16.6 16.6 0.70 1.00 4.62
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 18
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.6 - COMPARATIVES PRICING CHARACTERISTICS
<TABLE>
<CAPTION>
ROACE
Before NPAs/ Price/ Core Core Core
Extra Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC 4.14 N 08/08/97 0.81 22.1 0.17 0.67 4.28
CCFH 1.49 N 08/08/97 0.34 NM (0.13) (0.47) (3.13)
CIBI 5.53 N 08/08/97 0.72 14.1 0.27 1.01 8.86
CKFB 5.08 N 08/08/97 0.89 23.8 0.21 1.21 4.96
INCB 1.29 N 08/08/97 NA 25.4 0.15 0.60 4.77
LOGN 5.74 N 08/08/97 0.61 14.6 0.24 1.46 7.53
LXMO NA N 08/08/97 0.63 31.0 0.13 1.00 3.40
MIVI 3.76 N 08/08/97 0.21 18.0 0.21 1.01 5.86
SFFC 6.11 N 08/08/97 NA 12.7 0.43 1.55 8.78
SOBI 1.64 N 08/08/97 0.25 22.7 0.18 0.67 4.04
SSB 3.88 N 08/08/97 - 28.7 0.15 1.47 4.00
SZB 0.29 N 08/08/97 0.50 32.7 0.13 0.47 3.35
Maximum 6.11 0.89 32.7 0.43 1.55 8.86
Minimum 0.29 - 12.7 (0.13) (0.47) (3.13)
Average 3.54 0.50 22.3 0.18 0.89 4.73
Median 3.88 0.56 22.7 0.18 1.01 4.53
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 19
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.7 - COMPARATIVE RISK CHARACTERISTICS
<TABLE>
<CAPTION>
NPAs + Loans Net Loan
NPAs/ 90+ Pst Due/ NPAs/ Reserves/ Reserves/ Chargeoffs/
Assets Assets Equity Loans NPAs Avg Loans
(%) (%) (%) (%) (%) (%)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
AMB Financial Corp. 0.81 0.81 5.44 0.53 49.41 (0.02)
CCF Holding Company 0.34 0.34 2.39 0.79 189.90 0.01
Community Investors Bancorp 0.72 0.72 6.26 0.62 65.53 0.10
CKF Bancorp Inc. 0.89 1.48 3.75 0.20 20.00 -
Indiana Community Bank SB NA NA NA 0.71 NA 0.91
Logansport Financial Corp. 0.61 0.61 3.18 0.38 44.88 0.11
Lexington B&L Financial Corp. 0.63 0.63 2.30 0.49 58.31 -
Mississippi View Holding Co. 0.21 0.25 1.15 1.93 592.47 0.11
StateFed Financial Corporation NA NA NA NA NA NA
Sobieski Bancorp Inc. 0.25 0.25 1.61 0.35 102.04 -
Scotland Bancorp Inc - - - 0.50 NM -
SouthFirst Bancshares Inc. 0.50 0.64 3.59 0.40 57.51 -
Maximum 0.89 1.48 6.26 1.93 592.47 0.91
Minimum - - - 0.20 20.00 (0.02)
Average 0.50 0.57 2.97 0.63 131.12 0.11
Median 0.56 0.62 2.79 0.50 58.31 -
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 20
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT II.7 - COMPARATIVE RISK CHARACTERISTICS
<TABLE>
<CAPTION>
Intangible One Year Earn Assets/
Loans/ Assets/ Cum Gap/ Net Int Bearing
Assets Equity Assets Loans Liabilities
(%) (%) (%) ($000) (%)
Short Name MRQ MRQ MRY MRQ MRQ
<S> <C> <C> <C> <C> <C>
AMB Financial Corp. 75.67 - NA 70,890 117.82
CCF Holding Company 81.85 - NA 70,600 110.17
Community Investors Bancorp 76.52 - NA 74,110 112.79
CKF Bancorp Inc. 89.94 - NA 54,035 132.43
Indiana Community Bank SB 78.66 - 25.59 71,330 112.01
Logansport Financial Corp. 71.82 - NA 59,490 122.75
Lexington B&L Financial Corp. 75.06 - NA NA 140.79
Mississippi View Holding Co. 64.36 - NA 43,978 123.03
StateFed Financial Corporation NA - NA NA 116.34
Sobieski Bancorp Inc. 73.21 - NA 57,698 117.19
Scotland Bancorp Inc 69.32 - NA 47,923 160.05
SouthFirst Bancshares Inc. 72.25 - (7.23) 66,757 111.43
Maximum 89.94 - 25.59 74,110 160.05
Minimum 64.36 - (7.23) 43,978 110.17
Average 75.33 - 9.18 61,681 123.07
Median 75.06 - 9.18 63,124 117.51
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 21
<PAGE>
EXHIBIT III
<PAGE>
FERGUSON & COMPANY EXHIBIT III
- ------------------
SALIDA BUILDING AND LOAN ASSOCIATION
SALIDA, CO
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 51,139 59,290 70,615 74,699
% Change in Assets 3.65 15.94 19.10 5.78
Total Loans 37,401 46,476 58,557 62,320
Deposits 44,480 47,927 53,946 55,700
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,048 5,652 5,843 6,019
Tangible Capital 5,048 5,662 5,840 6,019
Core Capital 5,048 5,662 5,840 6,019
Risk-Based Capital 5,365 6,062 6,292 6,459
Equity Capital/Total Assets 9.87 9.53 8.27 8.06
Core Capital/Risk Based Assets 19.89 17.65 13.71 13.22
Core Capital/Adj Tang Assets 9.87 9.55 8.27 8.06
Tangible Cap/Tangible Assets 9.87 9.55 8.27 8.06
Risk-Based Cap/Risk-Wt Assets 21.13 18.89 14.78 14.19
PROFITABILITY:
Net Income(Loss) 715 576 178 179
Ret on Avg Assets Bef Ext Item 1.31 1.04 0.27 0.99
Return on Average Equity 13.96 10.77 3.06 12.07
Net Interest Income/Avg Assets 4.36 4.25 4.30 3.91
Noninterest Income/Avg Assets 0.38 0.44 0.30 0.43
Noninterest Expense/Avg Assets 2.89 2.96 3.60 2.94
Yield/Cost Spread 4.53 4.34 4.38 4.14
LIQUIDITY:
Int Earn Assets/Int Bear Liab 105.50 105.25 102.79 100.83
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.70 0.39 0.31 0.49
Nonaccrual Loans/Gross Loans 0.68 0.39 0.18 0.44
Nonaccrual Lns/Ln Loss Reserve 67.96 42.30 23.89 61.82
Repos Assets/Tot Assets - - - 0.03
Net Chrg-Off/Av Adj Lns 0.06 0.03 0.11 0.29
Nonmtg 1-4 Constr&Conv Lns/TA 5.18 6.62 7.99 7.48
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 1
<PAGE>
FERGUSON & COMPANY EXHIBIT III
- ------------------
SALIDA BUILDING AND LOAN ASSOCIATION
SALIDA, CO
<TABLE>
<CAPTION>
SELECTED PEER GROUP RATIOS & RANKINGS
1994 1995 1996 3/31/97
<S> <C> <C> <C> <C>
PEER GROUP CATEGORY 3 3 3 3
CAPITAL:
Equity Capital/Total Assets 9.87 9.53 8.27 8.06
Peer Group Percentile 63 50 36 33
Core Cap/Adj Tangible Assets 9.87 9.55 8.27 8.06
Peer Group Percentile 64 53 40 35.00
Tangible Cap/Tangible Assets 9.87 9.55 8.27 8.06
Peer Group Percentile 64 53 40 35
Risk-Based Cap/Risk-Wt Assets 21.13 18.89 14.78 14.19
Peer Group Percentile 63.00 50.00 33.00 26.00
ASSET QUALITY:
Risk Assets/Total Assets 5.18 6.62 8.05 7.51
Peer Group Percentile 60 50 46 47
Risk Weighted Assts/Tot Assts 49.64 54.11 60.31 60.94
Peer Group Percentile 52 36 20 20
Nonaccrual Loans/Gross Loans 1 0 0 0
Peer Group Percentile 32 44 53 40
Repos Assets/Tot Assets - - - 0.03
Peer Group Percentile 100 100 39 47
90+ Day Del Loans/Gross Loans - - - -
Peer Group Percentile 100 100 100 100
90Day P Due+NonAccr-(1-4)/LLR 40.57 41.84 23.89 61.82
Peer Group Percentile 28 31 39 22
LIQUIDITY:
Avg Reg Liquidity Ratio 9.08 7.49 5.62 5.54
Peer Group Percentile 31 14 6 5
PROFITABILITY:
Ret on Avg Assets Bef Ext Item 1.31 1.04 0.27 0.99
Peer Group Percentile 88 74 33 58
Return on Equity Capital 13.05 10.19 3.05 11.90
Peer Group Percentile 87 79 40 80
Int Earn Assets/Int Bear Liab 105.50 105.25 102.79 100.83
Peer Group Percentile 47 38 20 13
Yield on Earning Assts 7.56 8.35 8.69 8.40
Peer Group Percentile 75 81 92 86
Cost of Funds 3.03 4.00 4.31 4.26
Peer Group Percentile 93 91 81 78
Yield/Cost Spread 4.53 4.34 4.38 4.14
Peer Group Percentile 94 95 95 92
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 2
<PAGE>
FERGUSON & COMPANY EXHIBIT III
- ------------------
SALIDA BUILDING AND LOAN ASSOCIATION
SALIDA, CO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
6/30/96 9/30/96 12/31/96 3/31/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 64,439 67,112 70,615 74,699
% Change in Assets 2.78 4.15 5.22 5.78
Total Loans 50,945 54,928 58,557 62,320
Deposits 50,884 52,722 53,946 55,700
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,936 5,750 5,843 6,019
Tangible Capital 5,938 5,749 5,840 6,019
Core Capital 5,938 5,749 5,840 6,019
Risk-Based Capital 6,349 6,183 6,292 6,459
Equity Capital/Total Assets 9.21 8.57 8.27 8.06
Core Capital/Risk Based Assets 15.94 14.39 13.71 13.22
Core Capital/Adj Tang Assets 9.21 8.57 8.27 8.06
Tangible Cap/Tangible Assets 9.21 8.57 8.27 8.06
Risk-Based Cap/Risk-Wt Assets 17.05 15.48 14.78 14.19
PROFITABILITY:
Net Income(Loss) 116 (188) 90 179
Ret on Avg Assets Bef Ext Item 0.73 (1.14) 0.52 0.99
Return on Average Equity 7.90 (12.87) 6.21 12.07
Net Interest Income/Avg Assets 4.71 4.12 4.08 3.91
Noninterest Income/Avg Assets (0.06) 0.44 0.37 0.43
Noninterest Expense/Avg Assets 3.07 4.90 3.44 2.94
Yield/Cost Spread 4.73 4.20 4.26 4.14
LIQUIDITY:
Int Earn Assets/Int Bear Liab 105 104 103 101
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.14 0.20 0.31 0.49
Nonaccrual Loans/Gross Loans 0.14 0.19 0.18 0.44
Nonaccrual Lns/Ln Loss Reserve 17.76 24.88 23.89 61.82
Repos Assets/Tot Assets - - - 0.03
Net Chrg-Off/Av Adj Lns 0.34 - 0.03 0.29
Nonmtg 1-4 Constr&Conv Lns/TA 8.22 8.42 7.99 7.48
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 3
<PAGE>
FERGUSON & COMPANY EXHIBIT III
- ------------------
SALIDA BUILDING AND LOAN ASSOCIATION
SALIDA, CO
SELECTED PEER GROUP RATIOS & RANKINGS
<TABLE>
<CAPTION>
6/30/96 9/30/96 12/31/96 3/31/97
Peer Group Category 3 3 3 3
<S> <C> <C> <C> <C>
CAPITAL:
Equity Capital/Total Assets 9.21 8.57 8.27 8.06
Peer Group Percentile 46 42 36 33
Core Cap/Adj Tangible Assets 9.21 8.57 8.27 8.06
Peer Group Percentile 46 44 40 35
Tangible Cap/Tangible Assets 9.21 8.57 8.27 8.06
Peer Group Percentile 46 44 40 35
Risk-Based Cap/Risk-Wt Assets 17.05 15.48 14.78 14.19
Peer Group Percentile 41 36 33 26
ASSET QUALITY:
Risk Assets/Total Assets 8.22 8.42 8.05 7.51
Peer Group Percentile 45 44 46 47
Risk Weighted Assts/Tot Assts 57.79 59.52 60.31 60.94
Peer Group Percentile 25 22 20 20
Nonaccrual Loans/Gross Loans 0.14 0.19 0.18 0.44
Peer Group Percentile 61 54 53 40
Repos Assets/Tot Assets - - - 0.03
Peer Group Percentile 100 100 39 47
90+ Day Del Loans/Gross Loans - - - -
Peer Group Percentile 100 100 100 100
90Day P Due+NonAccr-(1-4)/LLR 17.76 24.42 23.89 61.82
Peer Group Percentile 46 41 39 22
LIQUIDITY:
Avg Reg Liquidity Ratio 6.90 7.71 5.62 5.54
Peer Group Percentile 15 25 6 5
PROFITABILITY:
Ret on Avg Assets Bef Ext Item 0.73 (1.14) 0.52 0.99
Peer Group Percentile 43 20 26 58
Return on Equity Capital 7.82 (13.08) 6.16 11.90
Peer Group Percentile 53 24 36 80
Int Earn Assets/Int Bear Liab 105.29 103.68 102.79 100.83
Peer Group Percentile 36 26 20 13
Yield on Earning Assts 9.12 8.51 8.58 8.40
Peer Group Percentile 97 85 86 86
Cost of Funds 4.40 4.31 4.32 4.26
Peer Group Percentile 75 80 80 78
Yield/Cost Spread 4.73 4.20 4.26 4.14
Peer Group Percentile 97 93 92 92
</TABLE>
SOURCE: TFAS, PUBLISHED BY SHESHUNOFF 4
<PAGE>
EXHIBIT IV
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
AMERICAN SAVINGS, FSB
MUNSTER, IN
TICKER AMFC FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 65,575 69,829 85,390 92,961
% Change in Assets 0.66 6.49 22.28 8.87
Total Loans 52,091 54,932 67,562 69,227
Deposits 58,289 59,599 60,894 68,637
Broker Originated Deposits - - - 695
CAPITAL:
Equity Capital 5,633 6,314 11,192 11,274
Tangible Capital 5,807 6,195 11,162 11,342
Core Capital 5,807 6,195 11,162 11,342
Risk-Based Capital 6,122 6,540 11,502 11,677
Equity Capital/Total Assets 8.59 9.04 13.11 12.13
Core Capital/Risk Based Assets 16.39 16.62 24.13 22.17
Core Capital/Adj Tang Assets 8.83 8.89 13.08 12.19
Tangible Cap/Tangible Assets 8.83 8.89 13.08 12.19
Risk-Based Cap/Risk-Wt Assets 17.28 17.55 24.86 22.82
PROFITABILITY:
Net Income(Loss) 384 375 389 196
Ret on Avg Assets Bef Ext Item 0.59 0.55 0.49 0.88
Return on Average Equity 6.97 6.28 3.77 6.98
Net Interest Income/Avg Assets 3.97 3.69 3.47 3.56
Noninterest Income/Avg Assets 0.59 0.48 0.68 0.54
Noninterest Expense/Avg Assets 3.77 3.20 3.44 2.66
Yield/Cost Spread 4.22 3.91 3.21 3.34
LIQUIDITY:
Int Earn Assets/Int Bear Liab 102.03 103.09 111.46 109.05
Brokered Deposits/Tot Deposits - - - 1.01
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.75 1.26 0.89 1.21
Nonaccrual Loans/Gross Loans 0.98 0.66 0.44 0.79
Nonaccrual Lns/Ln Loss Reserve 126.68 102.50 85.92 155.71
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns (0.18) 0.13 0.01 0.06
Nonmtg 1-4 Constr&Conv Lns/TA 14.00 12.94 15.87 14.26
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 1
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
HERITAGE BANK
JONESBORO, GA
TICKER CCFH FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 67,917 78,822 87,898 86,409
% Change in Assets (4.49) 16.06 11.51 (1.69)
Total Loans 44,468 47,263 64,699 72,012
Deposits 60,766 61,182 66,767 72,217
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,325 12,224 12,533 10,405
Tangible Capital 6,325 12,212 12,514 10,447
Core Capital 6,325 12,212 12,514 10,447
Risk-Based Capital 6,678 12,619 13,065 10,769
Equity Capital/Total Assets 9.31 15.51 14.26 12.04
Core Capital/Risk Based Assets 22.44 37.51 26.50 20.59
Core Capital/Adj Tang Assets 9.31 15.50 14.24 12.08
Tangible Cap/Tangible Assets 9.31 15.50 14.24 12.08
Risk-Based Cap/Risk-Wt Assets 23.69 38.76 27.67 21.22
PROFITABILITY:
Net Income(Loss) 632 562 306 (68)
Ret on Avg Assets Bef Ext Item 0.91 0.77 0.38 (0.31)
Return on Average Equity 10.37 6.06 2.47 (2.37)
Net Interest Income/Avg Assets 3.64 3.33 3.65 3.50
Noninterest Income/Avg Assets 0.66 0.71 0.72 1.14
Noninterest Expense/Avg Assets 2.87 2.88 3.76 5.01
Yield/Cost Spread 3.71 3.13 3.39 3.41
LIQUIDITY:
Int Earn Assets/Int Bear Liab 105.19 114.00 109.96 106.84
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.45 0.76 0.58 0.46
Nonaccrual Loans/Gross Loans 0.44 0.72 0.56 0.46
Nonaccrual Lns/Ln Loss Reserve 46.77 86.36 69.10 59.40
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - 0.05 (0.01) 0.01
Nonmtg 1-4 Constr&Conv Lns/TA 2.53 2.60 14.32 15.21
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 2
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
FIRST FS&LA
BUCYRUS, OH
TICKER CIBI FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 79,922 82,948 95,274 97,007
% Change in Assets 5.42 3.79 14.86 1.82
Total Loans 58,297 62,038 72,268 73,654
Deposits 70,751 71,230 70,358 72,133
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,570 9,784 9,846 10,196
Tangible Capital 5,570 9,772 9,708 10,164
Core Capital 5,570 9,772 9,708 10,164
Risk-Based Capital 5,918 10,143 10,123 10,574
Equity Capital/Total Assets 6.97 11.80 10.33 10.51
Core Capital/Risk Based Assets 14.32 24.10 21.91 19.64
Core Capital/Adj Tang Assets 6.97 11.78 10.20 10.48
Tangible Cap/Tangible Assets 6.97 11.78 10.20 10.48
Risk-Based Cap/Risk-Wt Assets 15.21 25.01 22.84 20.43
PROFITABILITY:
Net Income(Loss) 682 787 612 257
Ret on Avg Assets Bef Ext Item 0.88 0.97 0.68 1.07
Return on Average Equity 13.00 10.25 6.17 10.26
Net Interest Income/Avg Assets 3.22 3.23 3.48 3.24
Noninterest Income/Avg Assets 0.18 0.27 0.28 0.26
Noninterest Expense/Avg Assets 1.81 1.82 2.51 1.80
Yield/Cost Spread 3.07 2.91 3.13 3.01
LIQUIDITY:
Int Earn Assets/Int Bear Liab 107.32 110.86 108.62 107.02
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.06 1.09 0.91 0.95
Nonaccrual Loans/Gross Loans 0.74 0.87 - -
Nonaccrual Lns/Ln Loss Reserve 110.91 131.58 - -
Repos Assets/Tot Assets - - - 0.06
Net Chrg-Off/Av Adj Lns 0.17 0.30 0.41 -
Nonmtg 1-4 Constr&Conv Lns/TA 4.39 4.92 4.72 4.71
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 3
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
CENTRAL KENTUCKY FSB
DANVILLE, KY
TICKER CKFB FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 56,377 56,545 60,014 60,222
% Change in Assets 12.64 0.30 6.13 0.35
Total Loans 45,441 49,997 53,544 54,397
Deposits 44,273 43,126 44,762 43,732
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 11,290 12,295 12,431 12,682
Tangible Capital 10,989 11,781 11,967 12,224
Core Capital 10,989 11,781 11,967 12,224
Risk-Based Capital 11,065 11,881 12,074 12,353
Equity Capital/Total Assets 20.03 21.74 20.71 21.06
Core Capital/Risk Based Assets 39.04 33.63 35.07 35.22
Core Capital/Adj Tang Assets 19.65 21.03 20.10 20.45
Tangible Cap/Tangible Assets 19.65 21.03 20.10 20.45
Risk-Based Cap/Risk-Wt Assets 39.31 33.92 35.38 35.59
PROFITABILITY:
Net Income(Loss) 542 764 827 205
Ret on Avg Assets Bef Ext Item 1.02 1.35 1.40 1.36
Return on Average Equity 6.39 6.48 6.55 6.53
Net Interest Income/Avg Assets 2.98 3.83 3.71 3.64
Noninterest Income/Avg Assets 0.16 0.16 0.65 0.19
Noninterest Expense/Avg Assets 1.60 1.87 2.27 1.62
Yield/Cost Spread 2.46 3.08 2.87 2.76
LIQUIDITY:
Int Earn Assets/Int Bear Liab 123.66 125.92 123.97 124.83
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.48 1.09 1.25 1.20
Nonaccrual Loans/Gross Loans - 0.00 0.16 0.14
Nonaccrual Lns/Ln Loss Reserve - 2.00 81.31 58.91
Repos Assets/Tot Assets - - - 0.50
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 10.51 13.09 12.79 12.79
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 4
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
INDIANA COMMTY BK SB
LEBANON, IN
TICKER INCB FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 88,347 90,666 89,476 91,582
% Change in Assets (0.41) 2.62 (1.31) 2.35
Securities-Book Value 10,314 9,320 5,657 7,769
Securities-Fair Value 10,045 9,409 5,711 7,793
Total Loans & Leases 69,380 72,948 72,836 71,839
Total Deposits 73,660 75,566 77,062 79,222
Loan/Deposit Ratio 94.19 96.54 94.52 90.68
Provision for Loan Losses 92 245 303 72
CAPITAL:
Equity Capital 13,736 14,105 11,316 11,311
Total Qualifying Capital(Est) 14,135 14,609 11,918 11,821
Equity Capital/Average Assets 15.52 15.76 12.37 12.49
Tot Qual Cap/Rk Bsd Asts(Est) 23.85 23.66 18.85 19.00
Tier 1 Cap/Rsk Bsed Asts(Est) 23.02 22.94 17.90 18.18
T1 Cap/Avg Assets(Lev Est) 15.74 15.40 12.57 12.49
Dividends Declared/Net Income - 38.38 2,305.22 122.06
PROFITABILITY:
Net Income(Loss) 78 693 134 136
Return on Average Assets 0.09 0.77 0.15 0.60
Return on Average Equity Cap 0.80 4.98 1.07 4.81
Net Interest Margin 3.67 4.61 4.53 4.65
Net Int Income/Avg Assets 3.43 4.35 4.24 4.40
Noninterest Income/Avg Assets 0.59 0.78 0.88 0.79
Noninterest Exp/Avg Assets 3.14 3.64 4.55 3.91
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 0.37 0.27 0.16 0.20
NPA's/Equity + LLR 1.82 1.36 0.95 1.24
LLR/Nonperf & Restrcd Lns 188.80 225.25 532.74 346.94
Foreclosed RE/Total Assets - - - -
90+ Day Del Loans/Total Loans 0.37 0.27 0.16 0.02
Loan Loss Reserves/Total Lns 0.70 0.61 0.83 0.71
Net Charge-Offs/Average Loans 0.13 0.40 0.51 0.23
Dom Risk R/E Lns/Tot Dom Lns 6.47 7.33 10.96 8.53
LIQUIDITY:
Brokered Dep/Total Dom Deps - - - -
$100M+ Time Dep/Total Dom Dep 3.32 7.66 8.99 9.38
Int Earn Assets/Int Bear Liab 116.06 115.56 112.52 112.47
Pledged Sec/Total Sec - 26.82 22.98 38.62
Fair Value Sec/Amort Cost Sec 97.39 100.33 100.56 100.17
</TABLE>
SOURCE: BANKSOURCE, PUBLISHED BY SHESHUNOFF 5
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
LOGANSPORT SAVINGS BANK, FSB
LOGANSPORT, IN
TICKER LOGN FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 59,452 70,750 77,574 78,772
% Change in Assets 5.73 19.00 9.65 1.54
Total Loans 43,691 49,058 57,068 57,126
Deposits 51,202 52,502 57,396 59,389
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,935 16,672 16,861 15,162
Tangible Capital 7,131 16,671 17,018 15,337
Core Capital 7,131 16,671 17,018 15,337
Risk-Based Capital 7,337 16,894 17,254 15,576
Equity Capital/Total Assets 11.66 23.56 21.74 19.25
Core Capital/Risk Based Assets 21.31 42.94 40.57 36.17
Core Capital/Adj Tang Assets 11.93 23.56 21.89 19.43
Tangible Cap/Tangible Assets 11.93 23.56 21.89 19.43
Risk-Based Cap/Risk-Wt Assets 21.93 43.51 41.13 36.74
PROFITABILITY:
Net Income(Loss) 734 851 869 289
Ret on Avg Assets Bef Ext Item 1.27 1.31 1.17 1.48
Return on Average Equity 11.01 7.21 5.24 7.22
Net Interest Income/Avg Assets 3.27 3.19 3.53 3.60
Noninterest Income/Avg Assets 0.30 0.48 0.33 0.24
Noninterest Expense/Avg Assets 1.66 1.58 2.03 1.48
Yield/Cost Spread 3.09 2.69 2.77 2.92
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108.43 125.00 124.78 118.92
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.64 0.63 0.71 0.62
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - 0.01 (0.00) -
Nonmtg 1-4 Constr&Conv Lns/TA 3.71 5.36 7.22 6.34
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 6
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
B&L BANK
LEXINGTON, MO
TICKER LXMO FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 46,467 50,525 59,569 57,636
% Change in Assets (2.21) 8.73 17.90 (3.25)
Total Loans 40,094 41,115 45,593 44,852
Deposits 39,373 42,864 45,457 43,310
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,671 7,339 13,810 13,045
Tangible Capital 6,671 7,315 13,805 13,027
Core Capital 6,671 7,315 13,805 13,027
Risk-Based Capital 6,826 7,426 13,940 13,189
Equity Capital/Total Assets 14.36 14.53 23.18 22.63
Core Capital/Risk Based Assets 27.93 29.05 46.46 44.48
Core Capital/Adj Tang Assets 14.36 14.48 23.18 22.61
Tangible Cap/Tangible Assets 14.36 14.48 23.18 22.61
Risk-Based Cap/Risk-Wt Assets 28.58 29.49 46.92 45.03
PROFITABILITY:
Net Income(Loss) 609 430 426 147
Ret on Avg Assets Bef Ext Item 1.30 0.89 0.76 1.00
Return on Average Equity 9.51 6.14 3.77 4.38
Net Interest Income/Avg Assets 3.57 3.30 2.97 3.46
Noninterest Income/Avg Assets 0.29 0.09 0.23 0.22
Noninterest Expense/Avg Assets 1.79 1.72 2.12 1.98
Yield/Cost Spread 3.20 2.75 2.11 2.47
LIQUIDITY:
Int Earn Assets/Int Bear Liab 114.52 114.11 127.10 124.91
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.91 1.30 1.28 1.10
Nonaccrual Loans/Gross Loans 0.91 1.23 1.28 1.06
Nonaccrual Lns/Ln Loss Reserve 206.18 252.74 292.54 293.21
Repos Assets/Tot Assets - - - 0.02
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 3.37 2.77 3.00 3.27
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 7
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
COMMUNITY FS&LA
LITTLE FALLS, MN
TICKER MIVI FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 62,111 69,212 70,306 69,756
% Change in Assets (4.36) 11.43 1.58 (0.78)
Total Loans 44,310 43,438 44,095 44,270
Deposits 55,312 54,689 56,426 55,957
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,137 10,912 11,504 11,703
Tangible Capital 6,043 10,692 10,639 10,848
Core Capital 6,043 10,692 10,639 10,848
Risk-Based Capital 6,419 11,092 11,068 11,280
Equity Capital/Total Assets 9.88 15.77 16.36 16.78
Core Capital/Risk Based Assets 18.90 32.13 31.25 31.80
Core Capital/Adj Tang Assets 9.74 15.50 15.32 15.74
Tangible Cap/Tangible Assets 9.74 15.50 15.32 15.74
Risk-Based Cap/Risk-Wt Assets 20.08 33.33 32.51 33.06
PROFITABILITY:
Net Income(Loss) 414 837 520 197
Ret on Avg Assets Bef Ext Item 0.65 1.27 0.74 1.13
Return on Average Equity 7.03 9.82 4.81 6.79
Net Interest Income/Avg Assets 3.40 3.80 3.47 3.64
Noninterest Income/Avg Assets 0.40 0.55 0.43 0.31
Noninterest Expense/Avg Assets 2.40 2.26 2.70 1.96
Yield/Cost Spread 3.23 3.47 2.94 3.05
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108.61 115.61 118.25 117.67
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.09 0.22 0.59 0.47
Nonaccrual Loans/Gross Loans 0.05 - 0.38 0.18
Nonaccrual Lns/Ln Loss Reserve 2.06 - 19.73 9.36
Repos Assets/Tot Assets - - - 0.05
Net Chrg-Off/Av Adj Lns (0.03) 0.33 0.02 0.11
Nonmtg 1-4 Constr&Conv Lns/TA 5.96 2.47 2.85 2.80
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 8
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------ ----------
STATE FS&LA OF DES MOINES
DES MOINES, IA
TICKER SFFC FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 64,977 71,246 79,668 81,709
% Change in Assets 0.12 9.65 11.82 2.56
Total Loans 54,307 60,444 67,706 67,318
Deposits 46,043 46,201 49,422 51,482
Broker Originated Deposits - 396 1,584 1,683
CAPITAL:
Equity Capital 10,101 10,067 9,883 10,144
Tangible Capital 9,641 9,537 9,489 9,079
Core Capital 9,641 9,537 9,489 9,079
Risk-Based Capital 9,845 9,765 9,741 9,333
Equity Capital/Total Assets 15.55 14.13 12.41 12.41
Core Capital/Risk Based Assets 27.98 24.47 20.28 18.92
Core Capital/Adj Tang Assets 15.14 13.63 12.08 11.27
Tangible Cap/Tangible Assets 15.14 13.63 12.08 11.27
Risk-Based Cap/Risk-Wt Assets 28.57 25.05 20.82 19.45
PROFITABILITY:
Net Income(Loss) 803 729 709 234
Ret on Avg Assets Bef Ext Item 1.24 1.07 0.95 1.16
Return on Average Equity 9.56 7.23 6.85 9.35
Net Interest Income/Avg Assets 3.83 3.46 3.32 3.14
Noninterest Income/Avg Assets 0.28 0.35 0.44 0.39
Noninterest Expense/Avg Assets 2.05 2.02 2.27 1.62
Yield/Cost Spread 3.51 2.90 2.91 2.85
LIQUIDITY:
Int Earn Assets/Int Bear Liab 117.65 114.08 109.89 109.26
Brokered Deposits/Tot Deposits - 0.86 3.21 3.27
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.22 0.64 2.27 2.39
Nonaccrual Loans/Gross Loans 0.21 - 0.95 0.89
Nonaccrual Lns/Ln Loss Reserve 57.84 - 260.71 233.86
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns 0.07 - - 0.02
Nonmtg 1-4 Constr&Conv Lns/TA 28.11 27.78 27.96 26.17
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESUNOFF 9
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
SOBIESKI FS&LA
SOUTH BEND, IN
TICKER SOBI FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 70,694 72,595 75,773 76,285
% Change in Assets (4.11) 2.69 4.38 0.68
Total Loans 49,594 45,893 52,234 55,213
Deposits 64,309 61,399 59,714 59,045
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,917 10,002 9,321 8,803
Tangible Capital 5,917 9,964 9,331 8,814
Core Capital 5,917 9,964 9,331 8,814
Risk-Based Capital 6,117 10,164 9,531 9,014
Equity Capital/Total Assets 8.37 13.78 12.30 11.54
Core Capital/Risk Based Assets 19.89 35.15 29.37 27.61
Core Capital/Adj Tang Assets 8.37 13.73 12.31 11.55
Tangible Cap/Tangible Assets 8.37 13.73 12.31 11.55
Risk-Based Cap/Risk-Wt Assets 20.56 35.86 30.00 28.24
PROFITABILITY:
Net Income(Loss) 686 363 74 106
Ret on Avg Assets Bef Ext Item 0.95 0.57 0.10 0.56
Return on Average Equity 12.25 5.09 0.76 4.68
Net Interest Income/Avg Assets 3.53 3.02 2.92 3.04
Noninterest Income/Avg Assets 0.22 0.23 0.37 0.27
Noninterest Expense/Avg Assets 2.20 2.40 3.08 2.41
Yield/Cost Spread 3.45 2.84 2.69 2.88
LIQUIDITY:
Int Earn Assets/Int Bear Liab 105.04 109.97 107.58 108.24
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.30 0.17 0.38 0.37
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 0.50 3.57 4.53 4.85
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESUNOFF 10
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
SCOTLAND SVGS BK
LAURINBURG, NC
TICKER SSB FINANCIAL HIGHLIGHTS
- ----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 57,740 58,049 60,714 61,900
% Change in Assets 4.30 0.54 4.59 1.95
Securities-Book Value 14,250 11,806 11,018 10,424
Securities-Fair Value 14,086 11,912 11,081 10,472
Total Loans & Leases 37,296 42,003 46,305 47,559
Total Deposits 49,124 48,346 42,432 43,616
Loan/Deposit Ratio 76 87 109 109
Provision for Loan Losses 25 12 24 6
CAPITAL:
Equity Capital 7,921 8,860 17,136 17,236
Total Qualifying Capital(Est) 7,897 8,609 16,834 16,983
Equity Capital/Average Assets 14.01 15.30 26.95 28.21
Tot Qual Cap/Rk Bsd Asts(Est) 30.02 30.65 57.41 56.52
Tier 1 Cap/Rsk Bsed Asts(Est) 29.25 29.89 56.62 55.73
T1 Cap/Avg Assets(Lev Est) 13.05 14.11 27.12 27.40
Dividends Declared/Net Income - - 30.14 40.60
PROFITABILITY:
Net Income(Loss) 577 700 647 234
Return on Average Assets 1.02 1.21 1.02 1.53
Return on Average Equity Cap 7.69 8.34 4.08 5.45
Net Interest Margin 3.89 3.82 4.30 4.70
Net Int Income/Avg Assets 3.82 3.73 4.11 4.48
Noninterest Income/Avg Assets 0.27 0.11 0.09 0.07
Noninterest Exp/Avg Assets 2.44 1.96 2.58 2.05
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE - - 0.07 -
NPA's/Equity + LLR - - 0.18 -
LLR/Nonperf & Restrcd Lns - - 745.16 -
Foreclosed RE/Total Assets - - - -
90+ Day Del Loans/Total Loans - - 0.07 -
Loan Loss Reserves/Total Lns 0.54 0.51 0.50 0.50
Net Charge-Offs/Average Loans - - 0.02 -
Dom Risk R/E Lns/Tot Dom Lns 7.58 6.59 6.50 6.28
LIQUIDITY:
Brokered Dep/Total Dom Deps - - - -
$100M+ Time Dep/Total Dom Dep 7.36 8.60 6.66 5.60
Int Earn Assets/Int Bear Liab 115.85 118.12 142.09 139.70
Pledged Sec/Total Sec 2.55 6.02 5.95 6.16
Fair Value Sec/Amort Cost Sec 101.29 107.31 108.53 108.16
</TABLE>
SOURCE: BANKSOURCE, PUBLISHED BY SHESHUNOFF 11
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
FIRST FEDERAL OF THE SOUTH
SYLACAUGA, AL
TICKER SZB FINANCIAL HIGHLIGHTS
- ----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 83,109 84,825 92,006 91,683
% Change in Assets 3.76 2.06 8.47 (0.35)
Total Loans 50,193 55,220 66,513 67,215
Deposits 68,743 65,110 64,887 63,824
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 7,606 11,681 12,565 12,678
Tangible Capital 7,606 11,041 11,785 11,962
Core Capital 7,606 11,041 11,785 11,962
Risk-Based Capital 7,805 11,243 11,988 12,180
Equity Capital/Total Assets 9.15 13.77 13.66 13.83
Core Capital/Risk Based Assets 21.51 24.82 22.98 22.18
Core Capital/Adj Tang Assets 9.15 13.12 12.92 13.15
Tangible Cap/Tangible Assets 9.15 13.12 12.92 13.15
Risk-Based Cap/Risk-Wt Assets 22.08 25.27 23.37 22.58
PROFITABILITY:
Net Income(Loss) 333 625 331 (9)
Ret on Avg Assets Bef Ext Item 0.41 0.74 0.37 (0.04)
Return on Average Equity 4.49 6.48 2.76 (0.29)
Net Interest Income/Avg Assets 3.52 3.46 3.56 3.80
Noninterest Income/Avg Assets 0.78 1.37 0.92 0.74
Noninterest Expense/Avg Assets 3.49 3.62 3.92 3.92
Yield/Cost Spread 3.50 3.26 3.17 3.50
LIQUIDITY:
Int Earn Assets/Int Bear Liab 106.07 112.86 112.33 112.53
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.91 0.69 0.73 0.69
Nonaccrual Loans/Gross Loans 0.41 0.22 0.18 0.27
Nonaccrual Lns/Ln Loss Reserve 98.68 51.50 53.39 67.04
Repos Assets/Tot Assets - - - 0.17
Net Chrg-Off/Av Adj Lns (0.32) 0.25 0.02 0.01
Nonmtg 1-4 Constr&Conv Lns/TA 0.06 0.05 0.04 0.69
</TABLE>
SOURCE: TAFS, PUBLISHED BY SHESHUNOFF 12
<PAGE>
EXHIBIT V
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 42.000
ABBK Abington Bancorp Inc. Abington MA NE BIF NASDAQ 06/10/86 30.250
ABCL Alliance Bancorp Inc. Hinsdale IL MW SAIF NASDAQ 07/07/92 31.375
ABCW Anchor BanCorp Wisconsin Madison WI MW SAIF NASDAQ 07/16/92 50.500
AFCB Affiliated Community Bancorp Waltham MA NE SAIF NASDAQ 10/19/95 24.750
AHM Ahmanson & Company (H.F.) Irwindale CA WE SAIF NYSE 10/25/72 49.688
ALBK ALBANK Financial Corp. Albany NY MA SAIF NASDAQ 04/01/92 37.250
AMFC AMB Financial Corp. Munster IN MW SAIF NASDAQ 04/01/96 15.000
ANDB Andover Bancorp Inc. Andover MA NE BIF NASDAQ 05/08/86 30.125
ASBI Ameriana Bancorp New Castle IN MW SAIF NASDAQ 03/02/87 18.500
ASBP ASB Financial Corp. Portsmouth OH MW SAIF NASDAQ 05/11/95 12.250
ASFC Astoria Financial Corp. Lake Success NY MA SAIF NASDAQ 11/18/93 47.125
BANC BankAtlantic Bancorp Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 16.625
BDJI First Federal Bancorporation Bemidji MN MW SAIF NASDAQ 04/04/95 21.000
BFD BostonFed Bancorp Inc. Burlington MA NE SAIF AMSE 10/24/95 19.625
BFSB Bedford Bancshares Inc. Bedford VA SE SAIF NASDAQ 08/22/94 24.250
BKC American Bank of Connecticut Waterbury CT NE BIF AMSE 12/01/81 37.875
BKCT Bancorp Connecticut Inc. Southington CT NE BIF NASDAQ 07/03/86 27.250
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 10.875
BVCC Bay View Capital Corp. San Mateo CA WE SAIF NASDAQ 05/09/86 25.750
CAFI Camco Financial Corp. Cambridge OH MW SAIF NASDAQ NA 18.500
CAPS Capital Savings Bancorp Inc. Jefferson City MO MW SAIF NASDAQ 12/29/93 16.000
CASB Cascade Financial Corp. Everett WA WE SAIF NASDAQ 09/16/92 14.000
CASH First Midwest Financial Inc. Storm Lake IA MW SAIF NASDAQ 09/20/93 17.375
CATB Catskill Financial Corp. Catskill NY MA BIF NASDAQ 04/18/96 17.000
CBCI Calumet Bancorp Inc. Dolton IL MW SAIF NASDAQ 02/20/92 41.375
CBSA Coastal Bancorp Inc. Houston TX SW SAIF NASDAQ NA 30.250
CBSB Charter Financial Inc. Sparta IL MW SAIF NASDAQ 12/29/95 21.438
CEBK Central Co-operative Bank Somerville MA NE BIF NASDAQ 10/24/86 19.250
CENF CENFED Financial Corp. Pasadena CA WE SAIF NASDAQ 10/25/91 34.375
CFB Commercial Federal Corp. Omaha NE MW SAIF NYSE 12/31/84 39.438
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 22.750
CFSB CFSB Bancorp Inc. Lansing MI MW SAIF NASDAQ 06/22/90 27.000
CFTP Community Federal Bancorp Tupelo MS SE SAIF NASDAQ 03/26/96 17.750
CFX CFX Corp. Keene NH NE BIF AMSE 02/12/87 19.000
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 15.250
CKFB CKF Bancorp Inc. Danville KY MW SAIF NASDAQ 01/04/95 20.000
CLAS Classic Bancshares Inc. Ashland KY MW SAIF NASDAQ 12/29/95 14.750
CMRN Cameron Financial Corp Cameron MO MW SAIF NASDAQ 04/03/95 17.500
CMSB Commonwealth Bancorp Inc. Norristown PA MA SAIF NASDAQ 06/17/96 16.750
CMSV Community Savings FA (MHC) North Palm Beach FL SE SAIF NASDAQ 10/24/94 25.750
CNIT CENIT Bancorp Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 51.250
COFI Charter One Financial Cleveland OH MW SAIF NASDAQ 01/22/88 52.375
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 13.875
CSA Coast Savings Financial Los Angeles CA WE SAIF NYSE 12/23/85 45.813
CTZN CitFed Bancorp Inc. Dayton OH MW SAIF NASDAQ 01/23/92 41.750
CVAL Chester Valley Bancorp Inc. Downingtown PA MA SAIF NASDAQ 03/27/87 24.000
DIBK Dime Financial Corp. Wallingford CT NE BIF NASDAQ 07/09/86 26.625
DIME Dime Community Bancorp Inc. Brooklyn NY MA BIF NASDAQ 06/26/96 18.938
DME Dime Bancorp Inc. New York NY MA BIF NYSE 08/19/86 19.563
DNFC D & N Financial Corp. Hancock MI MW SAIF NASDAQ 02/13/85 19.250
DSL Downey Financial Corp. Newport Beach CA WE SAIF NYSE 01/01/71 21.750
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 17.500
EFBI Enterprise Federal Bancorp West Chester OH MW SAIF NASDAQ 10/17/94 20.500
<CAPTION>
Current
Market
Value
Ticker Short Name ($M)
<S> <C> <C>
AADV Advantage Bancorp Inc. 135.82
ABBK Abington Bancorp Inc. 56.01
ABCL Alliance Bancorp Inc. 167.70
ABCW Anchor BanCorp Wisconsin 228.48
AFCB Affiliated Community Bancorp 160.02
AHM Ahmanson & Company (H.F.) 4,836.42
ALBK ALBANK Financial Corp. 477.73
AMFC AMB Financial Corp. 14.46
ANDB Andover Bancorp Inc. 155.10
ASBI Ameriana Bancorp 59.76
ASBP ASB Financial Corp. 21.09
ASFC Astoria Financial Corp. 988.60
BANC BankAtlantic Bancorp Inc. 381.96
BDJI First Federal Bancorporation 14.71
BFD BostonFed Bancorp Inc. 116.72
BFSB Bedford Bancshares Inc. 27.70
BKC American Bank of Connecticut 87.33
BKCT Bancorp Connecticut Inc. 69.04
BKUNA BankUnited Financial Corp. 96.45
BVCC Bay View Capital Corp. 334.22
CAFI Camco Financial Corp. 59.47
CAPS Capital Savings Bancorp Inc. 30.27
CASB Cascade Financial Corp. 35.95
CASH First Midwest Financial Inc. 47.50
CATB Catskill Financial Corp. 80.24
CBCI Calumet Bancorp Inc. 87.33
CBSA Coastal Bancorp Inc. 150.39
CBSB Charter Financial Inc. 88.96
CEBK Central Co-operative Bank 37.83
CENF CENFED Financial Corp. 196.92
CFB Commercial Federal Corp. 850.00
CFFC Community Financial Corp. 29.01
CFSB CFSB Bancorp Inc. 137.59
CFTP Community Federal Bancorp 82.16
CFX CFX Corp. 249.73
CIBI Community Investors Bancorp 14.17
CKFB CKF Bancorp Inc. 18.54
CLAS Classic Bancshares Inc. 19.25
CMRN Cameron Financial Corp 46.39
CMSB Commonwealth Bancorp Inc. 286.35
CMSV Community Savings FA (MHC) 131.07
CNIT CENIT Bancorp Inc. 84.72
COFI Charter One Financial 2,418.99
CRZY Crazy Woman Creek Bancorp 13.25
CSA Coast Savings Financial 852.85
CTZN CitFed Bancorp Inc. 360.66
CVAL Chester Valley Bancorp Inc. 49.29
DIBK Dime Financial Corp. 137.04
DIME Dime Community Bancorp Inc. 247.95
DME Dime Bancorp Inc. 2,029.05
DNFC D & N Financial Corp. 157.68
DSL Downey Financial Corp. 581.45
EBSI Eagle Bancshares 99.04
EFBI Enterprise Federal Bancorp 41.22
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 1
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF)Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EGFC Eagle Financial Corp. Bristol CT NE SAIF NASDAQ 02/03/87 33.313
EIRE Emerald Isle Bancorp Inc. Quincy MA NE BIF NASDAQ 09/08/86 20.375
EMLD Emerald Financial Corp. Strongsville OH MW SAIF NASDAQ NA 14.250
EQSB Equitable Federal Savings Bank Wheaton MD MA SAIF NASDAQ 09/10/93 38.750
FBBC First Bell Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 06/29/95 16.375
FBCI Fidelity Bancorp Inc. Chicago IL MW SAIF NASDAQ 12/15/93 21.500
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93 30.750
FBSI First Bancshares Inc. Mountain Grove MO MW SAIF NASDAQ 12/22/93 24.250
FCME First Coastal Corp. Westbrook ME NE BIF NASDAQ NA 11.000
FED FirstFed Financial Corp. Santa Monica CA WE SAIF NYSE 12/16/83 33.375
FESX First Essex Bancorp Inc. Andover MA NE BIF NASDAQ 08/04/87 16.625
FFBA First Colorado Bancorp Inc. Lakewood CO SW SAIF NASDAQ 01/02/96 17.750
FFBI First Financial Bancorp Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 18.250
FFBS FFBS BanCorp Inc. Columbus MS SE SAIF NASDAQ 07/01/93 24.000
FFBZ First Federal Bancorp Inc. Zanesville OH MW SAIF NASDAQ 07/13/92 18.000
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 31.250
FFDB FirstFed Bancorp Inc. Bessemer AL SE SAIF NASDAQ 11/19/91 16.531
FFES First Federal of East Hartford East Hartford CT NE SAIF NASDAQ 06/23/87 31.250
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 30.000
FFFD North Central Bancshares Inc. Fort Dodge IA MW SAIF NASDAQ 03/21/96 16.500
FFHH FSF Financial Corp. Hutchinson MN MW SAIF NASDAQ 10/07/94 17.750
FFHS First Franklin Corporation Cincinnati OH MW SAIF NASDAQ 01/26/88 20.000
FFIC Flushing Financial Corp. Flushing NY MA BIF NASDAQ 11/21/95 20.313
FFKY First Federal Financial Corp. Elizabethtown KY MW SAIF NASDAQ 07/15/87 21.750
FFLC FFLC Bancorp Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 27.750
FFOH Fidelity Financial of Ohio Cincinnati OH MW SAIF NASDAQ 03/04/96 15.625
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/93 12.750
FFSX First Fed SB of Siouxland(MHC) Sioux City IA MW SAIF NASDAQ 07/13/92 24.250
FFWC FFW Corp. Wabash IN MW SAIF NASDAQ 04/05/93 28.750
FFWD Wood Bancorp Inc. Bowling Green OH MW SAIF NASDAQ 08/31/93 16.500
FFYF FFY Financial Corp. Youngstown OH MW SAIF NASDAQ 06/28/93 27.500
FGHC First Georgia Holding Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 7.063
FIBC Financial Bancorp Inc. Long Island City NY MA SAIF NASDAQ 08/17/94 20.250
FKFS First Keystone Financial Media PA MA SAIF NASDAQ 01/26/95 26.375
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 23.250
FMCO FMS Financial Corporation Burlington NJ MA SAIF NASDAQ 12/14/88 26.000
FMSB First Mutual Savings Bank Bellevue WA WE BIF NASDAQ 12/17/85 20.625
FNGB First Northern Capital Corp. Green Bay WI MW SAIF NASDAQ 12/29/83 25.750
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 22.000
FRC First Republic Bancorp San Francisco CA WE BIF NYSE NA 24.125
FSBI Fidelity Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 06/24/88 21.250
FSLA First Savings Bank (MHC) Woodbridge NJ MA SAIF NASDAQ 07/10/92 29.000
FSPG First Home Bancorp Inc. Pennsville NJ MA SAIF NASDAQ 04/20/87 19.875
FSTC First Citizens Corp. Newnan GA SE SAIF NASDAQ 03/01/86 29.500
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 22.375
FTFC First Federal Capital Corp. La Crosse WI MW SAIF NASDAQ 11/02/89 24.000
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 11.000
FWWB First SB of Washington Bancorp Walla Walla WA WE SAIF NASDAQ 11/01/95 24.625
GAF GA Financial Inc. Pittsburgh PA MA SAIF AMSE 03/26/96 17.000
GBCI Glacier Bancorp Inc. Kalispell MT WE SAIF NASDAQ 03/30/84 18.500
GDW Golden West Financial Oakland CA WE SAIF NYSE 05/29/59 79.063
GFCO Glenway Financial Corp. Cincinnati OH MW SAIF NASDAQ 11/30/90 27.000
GFSB GFS Bancorp Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 13.375
GPT GreenPoint Financial Corp. New York NY MA BIF NYSE 01/28/94 64.125
<CAPTION>
Current
Market
Value
Ticker Short Name ($M)
<S> <C> <C>
EGFC Eagle Financial Corp. 209.17
EIRE Emerald Isle Bancorp Inc. 45.76
EMLD Emerald Financial Corp. 72.13
EQSB Equitable Federal Savings Bank 23.34
FBBC First Bell Bancorp Inc. 106.61
FBCI Fidelity Bancorp Inc. 60.03
FBHC Fort Bend Holding Corp. 25.44
FBSI First Bancshares Inc. 27.71
FCME First Coastal Corp. 14.95
FED FirstFed Financial Corp. 352.95
FESX First Essex Bancorp Inc. 124.42
FFBA First Colorado Bancorp Inc. 293.97
FFBI First Financial Bancorp Inc. 7.58
FFBS FFBS BanCorp Inc. 37.38
FFBZ First Federal Bancorp Inc. 28.29
FFCH First Financial Holdings Inc. 198.65
FFDB FirstFed Bancorp Inc. 19.03
FFES First Federal of East Hartford 83.63
FFFC FFVA Financial Corp. 135.62
FFFD North Central Bancshares Inc. 53.76
FFHH FSF Financial Corp. 53.83
FFHS First Franklin Corporation 23.84
FFIC Flushing Financial Corp. 162.07
FFKY First Federal Financial Corp. 90.70
FFLC FFLC Bancorp Inc. 64.31
FFOH Fidelity Financial of Ohio 87.41
FFSL First Independence Corp. 12.71
FFSX First Fed SB of Siouxland(MHC) 68.59
FFWC FFW Corp. 20.04
FFWD Wood Bancorp Inc. 36.94
FFYF FFY Financial Corp. 113.17
FGHC First Georgia Holding Inc. 21.56
FIBC Financial Bancorp Inc. 34.87
FKFS First Keystone Financial 32.39
FLFC First Liberty Financial Corp. 179.60
FMCO FMS Financial Corporation 62.08
FMSB First Mutual Savings Bank 55.73
FNGB First Northern Capital Corp. 113.74
FOBC Fed One Bancorp 52.21
FRC First Republic Bancorp 233.84
FSBI Fidelity Bancorp Inc. 32.93
FSLA First Savings Bank (MHC) 210.17
FSPG First Home Bancorp Inc. 53.83
FSTC First Citizens Corp. 54.07
FTF Texarkana First Financial Corp 40.06
FTFC First Federal Capital Corp. 219.38
FTSB Fort Thomas Financial Corp. 15.57
FWWB First SB of Washington Bancorp 259.03
GAF GA Financial Inc. 135.74
GBCI Glacier Bancorp Inc. 126.01
GDW Golden West Financial 4,485.92
GFCO Glenway Financial Corp. 30.78
GFSB GFS Bancorp Inc. 13.21
GPT GreenPoint Financial Corp. 2,888.45
</TABLE>
SOURCE: SNL & F&C CALCULATION 2
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GSB Golden State Bancorp Inc. Glendale CA WE SAIF NYSE 10/01/83 29.125 1,466.40
GSBC Great Southern Bancorp Inc. Springfield MO MW SAIF NASDAQ 12/14/89 16.750 136.18
GSFC Green Street Financial Corp. Fayetteville NC SE SAIF NASDAQ 04/04/96 17.250 74.14
GTFN Great Financial Corporation Louisville KY MW SAIF NASDAQ 03/31/94 33.250 458.54
GUPB GFSB Bancorp Inc. Gallup NM SW SAIF NASDAQ 06/30/95 19.000 15.28
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94 22.750 32.83
HARB Harbor Florida Bancorp Inc. Fort Pierce FL SE SAIF NASDAQ 01/06/94 44.500 221.18
HARL Harleysville Savings Bank Harleysville PA MA SAIF NASDAQ 08/04/87 25.000 41.31
HAVN Haven Bancorp Inc. Woodhaven NY MA SAIF NASDAQ 09/23/93 36.250 158.68
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95 21.250 53.65
HBNK Highland Federal Bank FSB Burbank CA WE SAIF NASDAQ NA 25.625 58.94
HBS Haywood Bancshares Inc. Waynesville NC SE BIF AMSE 12/18/87 18.500 23.16
HFFB Harrodsburg First Fin Bancorp Harrodsburg KY MW SAIF NASDAQ 10/04/95 15.750 31.89
HFFC HF Financial Corp. Sioux Falls SD MW SAIF NASDAQ 04/08/92 21.875 65.17
HFGI Harrington Financial Group Richmond IN MW SAIF NASDAQ NA 11.750 38.27
HFNC HFNC Financial Corp. Charlotte NC SE SAIF NASDAQ 12/29/95 16.250 279.38
HFSA Hardin Bancorp Inc. Hardin MO MW SAIF NASDAQ 09/29/95 16.750 14.39
HIFS Hingham Instit. for Savings Hingham MA NE BIF NASDAQ 12/20/88 23.250 30.31
HMCI HomeCorp Inc. Rockford IL MW SAIF NASDAQ 06/22/90 14.250 24.13
HMNF HMN Financial Inc. Spring Valley MN MW SAIF NASDAQ 06/30/94 24.750 104.24
HOMF Home Federal Bancorp Seymour IN MW SAIF NASDAQ 01/23/88 30.500 103.59
HPBC Home Port Bancorp Inc. Nantucket MA NE BIF NASDAQ 08/25/88 20.750 38.22
HRBF Harbor Federal Bancorp Inc. Baltimore MD MA SAIF NASDAQ 08/12/94 20.000 35.09
HRZB Horizon Financial Corp. Bellingham WA WE BIF NASDAQ 08/01/86 15.375 114.03
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 18.875 8.03
IFSB Independence Federal Savings Washington DC MA SAIF NASDAQ 06/06/85 14.375 18.40
INBI Industrial Bancorp Bellevue OH MW SAIF NASDAQ 08/01/95 14.500 76.51
IPSW Ipswich Savings Bank Ipswich MA NE BIF NASDAQ 05/26/93 22.250 26.43
ISBF ISB Financial Corporation New Iberia LA SW SAIF NASDAQ 04/07/95 24.375 168.22
ITLA ITLA Capital Corp. La Jolla CA WE BIF NASDAQ 10/24/95 18.125 141.91
IWBK InterWest Bancorp Inc. Oak Harbor WA WE SAIF NASDAQ NA 39.625 318.43
JSB JSB Financial Inc. Lynbrook NY MA BIF NYSE 06/27/90 44.563 438.71
JSBA Jefferson Savings Bancorp Ballwin MO MW SAIF NASDAQ 04/08/93 32.000 160.17
JXVL Jacksonville Bancorp Inc. Jacksonville TX SW SAIF NASDAQ 04/01/96 16.625 41.00
KFBI Klamath First Bancorp Klamath Falls OR WE SAIF NASDAQ 10/05/95 19.188 192.24
KNK Kankakee Bancorp Inc. Kankakee IL MW SAIF AMSE 01/06/93 29.500 42.04
KSAV KS Bancorp Inc. Kenly NC SE SAIF NASDAQ 12/30/93 18.500 16.38
KSBK KSB Bancorp Inc. Kingfield ME NE BIF NASDAQ 06/24/93 14.375 17.80
KYF Kentucky First Bancorp Inc. Cynthiana KY MW SAIF AMSE 08/29/95 12.250 16.16
LARK Landmark Bancshares Inc. Dodge City KS MW SAIF NASDAQ 03/28/94 21.500 36.78
LARL Laurel Capital Group Inc. Allison Park PA MA SAIF NASDAQ 02/20/87 21.375 30.82
LFED Leeds Federal Savings Bk (MHC) Baltimore MD MA SAIF NASDAQ 05/02/94 20.875 72.12
LIFB Life Bancorp Inc. Norfolk VA SE SAIF NASDAQ 10/11/94 26.000 256.02
LISB Long Island Bancorp Inc. Melville NY MA SAIF NASDAQ 04/18/94 39.000 934.76
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 14.000 17.65
LSBI LSB Financial Corp. Lafayette IN MW BIF NASDAQ 02/03/95 21.250 20.08
LSBX Lawrence Savings Bank North Andover MA NE BIF NASDAQ 05/02/86 11.875 50.76
LVSB Lakeview Financial West Paterson NJ MA SAIF NASDAQ 12/22/93 32.250 73.13
MAFB MAF Bancorp Inc. Clarendon Hills IL MW SAIF NASDAQ 01/12/90 32.375 498.33
MARN Marion Capital Holdings Marion IN MW SAIF NASDAQ 03/18/93 23.000 40.67
MASB MASSBANK Corp. Reading MA NE BIF NASDAQ 05/28/86 51.875 139.09
MBB MSB Bancorp Inc. Goshen NY MA BIF AMSE 09/03/92 23.500 66.67
MBB MSB Bancorp, Inc. Goshen NY MA BIF AMSE NA 23.500 66.67
MBLF MBLA Financial Corp. Macon MO MW SAIF NASDAQ 06/24/93 23.500 30.93
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 3
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MCBN Mid-Coast Bancorp Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 25.000 5.79
MCBS Mid Continent Bancshares Inc. El Dorado KS MW SAIF NASDAQ 06/27/94 29.250 57.28
MDBK Medford Savings Bank Medford MA NE BIF NASDAQ 03/18/86 30.063 136.52
MECH Mechanics Savings Bank Hartford CT NE BIF NASDAQ 06/26/96 21.750 115.06
MERI Meritrust Federal SB Thibodaux LA SW SAIF NASDAQ NA 40.500 31.35
MFBC MFB Corp. Mishawaka IN MW SAIF NASDAQ 03/25/94 20.500 34.65
MFFC Milton Federal Financial Corp. West Milton OH MW SAIF NASDAQ 10/07/94 13.625 31.47
MFLR Mayflower Co-operative Bank Middleboro MA NE BIF NASDAQ 12/23/87 18.000 16.03
MFSL Maryland Federal Bancorp Hyattsville MD MA SAIF NASDAQ 06/02/87 47.500 152.48
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 15.125 12.38
MLBC ML Bancorp Inc. Villanova PA MA SAIF NASDAQ 08/11/94 20.250 213.97
MSBF MSB Financial Inc. Marshall MI MW SAIF NASDAQ 02/06/95 13.000 16.23
MWBI Midwest Bancshares Inc. Burlington IA MW SAIF NASDAQ 11/12/92 35.000 12.19
MWBX MetroWest Bank Framingham MA NE BIF NASDAQ 10/10/86 6.688 93.32
MWFD Midwest Federal Financial Baraboo WI MW SAIF NASDAQ 07/08/92 21.750 35.34
NASB North American Savings Bank Grandview MO MW SAIF NASDAQ 09/27/85 50.000 112.72
NBN Northeast Bancorp Portland ME NE BIF AMSE 08/19/87 14.750 18.81
NEIB Northeast Indiana Bancorp Huntington IN MW SAIF NASDAQ 06/28/95 17.000 29.97
NHTB New Hampshire Thrift Bncshrs New London NH NE SAIF NASDAQ 05/22/86 16.313 33.41
NMSB NewMil Bancorp Inc. New Milford CT NE BIF NASDAQ 02/01/86 12.625 48.40
NSSB Norwich Financial Corp. Norwich CT NE BIF NASDAQ 11/14/86 22.250 120.44
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 15.250 12.79
NWSB Northwest Savings Bank (MHC) Warren PA MA SAIF NASDAQ 11/07/94 17.375 406.16
NYB New York Bancorp Inc. Douglaston NY MA SAIF NYSE 01/28/88 31.063 670.69
OFCP Ottawa Financial Corp. Holland MI MW SAIF NASDAQ 08/19/94 25.625 125.90
OHSL OHSL Financial Corp. Cincinnati OH MW SAIF NASDAQ 02/10/93 24.500 29.59
PALM Palfed Inc. Aiken SC SE SAIF NASDAQ 12/15/85 15.500 81.90
PBCI Pamrapo Bancorp Inc. Bayonne NJ MA SAIF NASDAQ 11/14/89 20.500 58.28
PBKB People's Bancshares Inc. New Bedford MA NE BIF NASDAQ 10/30/86 16.750 54.40
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 20.500 16.57
PCCI Pacific Crest Capital Agoura Hills CA WE BIF NASDAQ NA 15.125 44.44
PEEK Peekskill Financial Corp. Peekskill NY MA SAIF NASDAQ 12/29/95 16.000 51.09
PERM Permanent Bancorp Inc. Evansville IN MW SAIF NASDAQ 04/04/94 25.250 52.95
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87 25.250 57.42
PFNC Progress Financial Corporation Blue Bell PA MA SAIF NASDAQ 07/18/83 13.250 50.54
PFSB PennFed Financial Services Inc West Orange NJ MA SAIF NASDAQ 07/15/94 29.813 143.76
PFSL Pocahontas FS&LA (MHC) Pocahontas AR SE SAIF NASDAQ 04/05/94 22.250 36.32
PHBK Peoples Heritage Finl Group Portland ME NE BIF NASDAQ 12/04/86 38.875 1,064.04
PHFC Pittsburgh Home Financial Corp Pittsburgh PA MA SAIF NASDAQ 04/01/96 17.125 33.73
PKPS Poughkeepsie Financial Corp. Poughkeepsie NY MA SAIF NASDAQ 11/19/85 8.000 100.76
PRBC Prestige Bancorp Inc. Pleasant Hills PA MA SAIF NASDAQ 06/27/96 16.000 14.64
PSBK Progressive Bank Inc. Fishkill NY MA BIF NASDAQ 08/01/84 30.375 116.06
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 24.125 11.85
PULS Pulse Bancorp South River NJ MA SAIF NASDAQ 09/18/86 20.500 62.95
PVFC PVF Capital Corp. Bedford Heights OH MW SAIF NASDAQ 12/30/92 19.500 49.84
PVSA Parkvale Financial Corporation Monroeville PA MA SAIF NASDAQ 07/16/87 28.000 113.54
PWBC PennFirst Bancorp Inc. Ellwood City PA MA SAIF NASDAQ 06/13/90 16.375 70.45
QCBC Quaker City Bancorp Inc. Whittier CA WE SAIF NASDAQ 12/30/93 20.000 94.06
QCFB QCF Bancorp Inc. Virginia MN MW SAIF NASDAQ 04/03/95 23.500 33.52
RARB Raritan Bancorp Inc. Raritan NJ MA BIF NASDAQ 03/01/87 24.000 57.88
RELY Reliance Bancorp Inc. Garden City NY MA SAIF NASDAQ 03/31/94 28.750 252.32
ROSE TR Financial Corp. Garden City NY MA BIF NASDAQ 06/29/93 27.000 475.44
RVSB Riverview Savings Bank (MHC) Camas WA WE SAIF NASDAQ 10/26/93 25.500 61.62
SFED SFS Bancorp Inc. Schenectady NY MA SAIF NASDAQ 06/30/95 19.031 23.38
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 4
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 21.750 17.05
SFIN Statewide Financial Corp. Jersey City NJ MA SAIF NASDAQ 10/02/95 19.125 90.95
SFSB SuburbFed Financial Corp. Flossmoor IL MW SAIF NASDAQ 03/04/92 27.500 34.70
SFSL Security First Corp. Mayfield Heights OH MW SAIF NASDAQ 01/22/88 16.000 120.07
SISB SIS Bancorp Inc. Springfield MA NE BIF NASDAQ 02/08/95 30.375 169.40
SKAN Skaneateles Bancorp Inc. Skaneateles NY MA BIF NASDAQ 06/02/86 22.875 21.81
SMBC Southern Missouri Bancorp Inc. Poplar Bluff MO MW SAIF NASDAQ 04/13/94 17.250 28.25
SOPN First Savings Bancorp Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 21.250 78.56
SOSA Somerset Savings Bank Somerville MA NE BIF NASDAQ 07/09/86 3.969 66.09
SPBC St. Paul Bancorp Inc. Chicago IL MW SAIF NASDAQ 05/18/87 22.375 760.48
SSB Scotland Bancorp Inc Laurinburg NC SE SAIF AMSE 04/01/96 17.188 32.89
SSM Stone Street Bancorp Inc. Mocksville NC SE SAIF AMSE 04/01/96 21.313 40.45
STFR St. Francis Capital Corp. Milwaukee WI MW SAIF NASDAQ 06/21/93 35.000 185.78
STSA Sterling Financial Corp. Spokane WA WE SAIF NASDAQ NA 18.250 101.59
SWBI Southwest Bancshares Hometown IL MW SAIF NASDAQ 06/24/92 20.750 55.00
SWCB Sandwich Co-operative Bank Sandwich MA NE BIF NASDAQ 07/25/86 33.750 64.33
TBK Tolland Bank Tolland CT NE BIF AMSE 12/19/86 16.125 25.16
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 16.000 13.18
THRD TF Financial Corporation Newtown PA MA SAIF NASDAQ 07/13/94 19.125 78.09
TPNZ Tappan Zee Financial Inc. Tarrytown NY MA SAIF NASDAQ 10/05/95 17.625 26.39
TRIC Tri-County Bancorp Inc. Torrington WY WE SAIF NASDAQ 09/30/93 22.750 13.85
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95 18.125 62.31
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 19.500 16.64
UBMT United Financial Corp. Great Falls MT WE SAIF NASDAQ 09/23/86 23.875 29.21
VABF Virginia Beach Fed. Financial Virginia Beach VA SE SAIF NASDAQ 11/01/80 14.000 69.66
WBST Webster Financial Corp. Waterbury CT NE SAIF NASDAQ 12/12/86 51.750 701.80
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92 26.000 64.39
WEFC Wells Financial Corp. Wells MN MW SAIF NASDAQ 04/11/95 16.000 31.35
WFI Winton Financial Corp. Cincinnati OH MW SAIF AMSE 08/04/88 16.000 31.78
WFSL Washington Federal Inc. Seattle WA WE SAIF NASDAQ 11/17/82 28.375 1,346.74
WRNB Warren Bancorp Inc. Peabody MA NE BIF NASDAQ 07/09/86 17.750 67.12
WSB Washington Savings Bank, FSB Waldorf MD MA SAIF AMSE NA 6.688 28.41
WSFS WSFS Financial Corporation Wilmington DE MA BIF NASDAQ 11/26/86 14.250 177.01
WSTR WesterFed Financial Corp. Missoula MT WE SAIF NASDAQ 01/10/94 22.875 127.30
WVFC WVS Financial Corp. Pittsburgh PA MA SAIF NASDAQ 11/29/93 26.875 46.96
WYNE Wayne Bancorp Inc. Wayne NJ MA SAIF NASDAQ 06/27/96 21.625 45.84
YFCB Yonkers Financial Corporation Yonkers NY MA SAIF NASDAQ 04/18/96 16.750 52.61
YFED York Financial Corp. York PA MA SAIF NASDAQ 02/01/84 25.500 178.71
Maximum 79.063 4.836.42
Minimum 3.969 5.79
Average 23.572 192.05
Median 21.344 61.85
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 5
<PAGE>
FERGUSON & COMPANY EXHIBIT V SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Tangible
Price/ Current Current Current Total Equity/ Equity/ Core Core Core
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Merger Current
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target? Pricing
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 16.3 144.6 154.7 13.3 0.95 1,019,510 9.2 8.7 2.58 0.89 9.89 N 08/08/97
ABBK 16.9 161.5 179.3 11.2 1.32 501,256 6.9 6.3 1.79 0.73 10.71 N 08/08/97
ABCL 17.7 134.1 135.8 11.9 2.07 1,404,263 8.9 8.8 1.77 0.76 8.48 N 08/08/97
ABCW 14.7 190.6 194.3 11.9 1.27 1,925,866 6.2 6.1 3.44 0.96 15.09 N 08/08/97
AFCB 14.5 147.8 148.7 14.7 1.94 1,090,431 9.8 9.7 1.71 1.10 11.14 N 08/08/97
AHM 17.7 244.2 286.6 10.2 1.77 47,532,068 5.2 4.6 2.81 0.70 13.79 N 08/08/97
ALBK 14.4 144.1 164.9 13.3 1.61 3,602,227 9.2 8.1 2.59 1.04 11.23 N 08/08/97
AMFC 22.1 102.6 102.6 15.4 1.60 94,179 15.0 15.0 0.68 0.80 4.54 N 08/08/97
ANDB 11.3 153.9 153.9 12.4 2.26 1,250,943 8.1 8.1 2.66 1.13 14.33 N 08/08/97
ASBI 18.1 137.1 137.2 15.0 3.24 397,730 11.0 11.0 1.02 0.84 7.64 N 08/08/97
ASBP 20.8 115.4 115.4 19.3 3.27 109,414 15.7 15.7 0.59 0.86 4.31 N 08/08/97
ASFC 16.7 164.8 196.3 12.9 1.27 7,664,495 7.8 6.7 2.83 0.79 10.05 N 08/08/97
BANC 22.2 194.7 237.5 11.0 0.70 2,730,474 5.6 4.7 0.75 0.64 10.88 N 08/08/97
BDJI 20.4 122.2 122.2 13.7 - 107,716 11.2 11.2 1.03 0.65 5.35 N 08/08/97
BFD 20.2 127.7 NA 12.0 1.43 975,922 8.8 NA 0.97 0.66 6.51 N 08/08/97
BFSB 15.5 136.6 136.6 20.5 2.31 135,455 14.2 14.2 1.56 1.28 8.90 N 08/08/97
BKC 14.4 174.0 181.2 14.4 3.80 605,857 8.3 8.0 2.63 1.10 12.98 N 08/08/97
BKCT 14.7 157.2 157.2 16.1 3.67 428,362 10.3 10.3 1.86 1.25 12.07 N 08/08/97
BKUNA 19.1 143.3 176.8 5.3 - 1,807,192 5.6 4.9 0.57 0.58 8.04 N 08/08/97
BVCC 17.3 170.3 202.9 10.8 1.24 3,096,213 6.3 5.4 1.49 0.63 10.26 N 08/08/97
CAFI 13.9 129.8 141.1 12.6 2.68 472,430 9.7 9.0 1.33 0.86 9.55 N 08/08/97
CAPS 14.4 146.9 146.9 12.7 1.50 237,915 8.7 8.7 1.11 0.92 10.27 N 08/08/97
CASB 20.0 165.3 165.3 10.2 - 352,321 6.2 6.2 0.70 0.58 9.43 N 08/08/97
CASH 12.6 111.2 125.5 12.7 2.07 374,824 11.4 10.2 1.38 0.93 8.12 N 08/08/97
CATB 21.0 112.7 112.7 28.2 1.65 284,238 25.0 25.0 0.81 1.41 5.10 N 08/08/97
CBCI 14.7 113.5 113.5 17.6 - 496,561 15.5 15.5 2.81 1.37 8.66 N 08/08/97
CBSA 13.1 154.1 185.4 5.1 1.59 2,964,082 3.3 2.8 2.31 0.41 12.30 N 08/08/97
CBSB 20.2 156.4 176.7 22.6 1.49 393,268 14.5 13.0 1.06 1.16 7.78 N 08/08/97
CEBK 13.0 112.8 126.6 11.8 1.66 320,950 10.5 9.4 1.48 0.91 8.88 N 08/08/97
CENF 12.6 164.9 165.2 8.6 1.05 2,295,523 5.2 5.2 2.74 0.73 14.27 N 08/08/97
CFB 13.9 199.5 225.0 12.0 0.71 7,096,665 6.0 5.4 2.84 0.91 14.83 N 08/08/97
CFFC 13.5 120.6 120.6 16.5 2.46 175,414 13.7 13.7 1.69 1.28 9.23 N 08/08/97
CFSB 17.0 213.4 213.4 16.3 2.22 845,438 7.6 7.6 1.59 1.07 13.83 N 08/08/97
CFTP 22.5 110.0 110.0 39.9 1.69 206,049 33.5 33.5 0.79 1.70 5.11 N 08/08/97
CFX 14.0 180.6 193.1 13.4 4.63 1,859,030 7.4 7.0 1.36 0.98 11.60 N 08/08/97
CIBI 15.4 129.0 129.0 14.9 2.10 97,446 11.5 11.5 0.99 0.99 8.18 N 08/08/97
CKFB 23.3 120.6 120.6 30.8 2.50 60,197 23.7 23.7 0.86 1.29 5.05 N 08/08/97
CLAS 22.4 100.6 119.1 14.8 1.90 131,554 14.7 12.7 0.66 0.88 4.49 N 08/08/97
CMRN 17.5 103.4 103.4 23.7 1.60 197,693 23.0 23.0 1.00 1.38 5.52 N 08/08/97
CMSB 20.2 130.0 166.2 12.5 1.67 2,288,986 9.6 7.7 0.83 0.64 6.15 N 08/08/97
CMSV 20.6 165.4 165.4 19.2 3.50 682,314 11.2 11.2 1.25 0.96 8.19 N 08/08/97
CNIT 16.8 164.7 179.3 11.9 1.95 709,550 7.2 6.7 3.06 0.75 10.46 N 08/08/97
COFI 14.4 247.6 264.5 16.6 1.91 14,564,703 6.7 6.3 3.65 1.23 18.22 N 08/08/97
CRZY 19.8 94.5 94.5 24.4 2.88 54,275 25.8 25.8 0.70 1.30 4.54 N 08/08/97
CSA 19.3 190.4 192.9 9.4 - 9,102,743 4.9 4.9 2.38 0.52 10.65 N 08/08/97
CTZN 15.9 182.9 203.1 11.6 0.86 3,097,515 6.4 5.8 2.63 0.82 12.75 N 08/08/97
CVAL 18.9 188.7 188.7 16.2 1.83 305,187 8.6 8.6 1.27 0.92 10.26 N 08/08/97
DIBK 10.2 214.5 222.6 16.8 1.50 814,431 7.8 7.6 2.61 1.88 22.83 N 08/08/97
DIME 19.3 129.9 150.8 18.9 0.95 1,315,026 14.5 12.8 0.98 1.04 6.20 N 08/08/97
DME 15.2 191.6 200.9 10.1 0.82 20,087,176 5.3 5.0 1.29 0.70 13.30 N 08/08/97
DNFC 13.8 177.6 179.6 9.8 1.04 1,608,837 5.6 5.5 1.40 0.81 14.09 N 08/08/97
DSL 15.3 142.5 144.5 9.9 1.47 5,885,670 6.9 6.8 1.42 0.73 9.65 N 08/08/97
EBSI 16.4 146.0 NA 12.0 3.43 666,166 8.7 8.7 1.07 0.79 8.99 N 08/08/97
EFBI 21.4 130.2 130.4 16.1 4.88 256,704 12.3 12.3 0.96 0.79 5.70 N 08/08/97
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 6
<PAGE>
FERGUSON & COMPANY EXHIBIT V SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Tangible
Price/ Current Current Current Total Equity/ Equity/ Core Core Core
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Merger Current
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target? Pricing
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EGFC 17.3 151.3 193.8 10.4 3.00 2,013,359 6.9 5.4 1.93 0.63 8.79 N 08/08/97
EIRE 12.8 152.2 152.2 10.8 1.37 425,014 7.1 7.1 1.59 0.89 12.99 N 08/08/97
EMLD 14.3 157.8 160.3 12.0 1.68 603,080 7.6 7.5 1.00 0.90 11.63 N 08/08/97
EQSB 11.6 155.6 155.6 7.9 - 296,002 5.1 5.1 3.33 0.76 14.87 N 08/08/97
FBBC 14.2 151.9 151.9 14.9 2.44 714,366 9.8 9.8 1.15 1.23 8.92 N 08/08/97
FBCI 16.4 118.0 118.3 12.3 1.49 489,843 10.4 10.4 1.31 0.77 7.37 N 08/08/97
FBHC 20.8 132.4 142.1 8.0 1.30 318,668 6.0 5.6 1.48 0.51 8.10 N 08/08/97
FBSI 16.5 122.5 122.7 17.6 0.83 160,048 14.4 14.3 1.47 1.12 7.33 N 08/08/97
FCME 2.3 111.2 111.2 9.9 - 151,143 8.9 8.9 4.71 4.17 67.90 N 08/08/97
FED 16.4 174.4 176.3 8.4 - 4,193,203 4.8 4.8 2.03 0.52 11.28 N 08/08/97
FESX 12.9 148.4 172.3 10.9 2.89 1,146,854 7.3 6.4 1.29 0.91 12.11 N 08/08/97
FFBA 16.1 150.6 152.6 19.5 2.48 1,510,376 12.9 12.8 1.10 1.21 8.59 N 08/08/97
FFBI 18.8 104.3 104.3 8.1 - 93,156 7.8 7.8 0.97 0.45 5.63 N 08/08/97
FFBS 19.5 141.1 141.1 29.1 2.08 128,676 19.4 19.4 1.23 1.49 7.62 N 08/08/97
FFBZ 17.0 204.3 204.6 14.1 1.33 201,262 7.6 7.5 1.06 0.96 12.66 N 08/08/97
FFCH 15.0 195.0 195.0 11.9 2.30 1,667,178 6.1 6.1 2.08 0.84 13.67 N 08/08/97
FFDB 12.5 114.2 125.2 10.8 3.03 176,528 9.4 8.7 1.32 0.94 9.54 N 08/08/97
FFES 12.7 132.3 132.3 8.5 1.92 983,594 6.4 6.4 2.46 0.70 11.12 N 08/08/97
FFFC 20.0 172.3 176.1 24.3 1.60 558,886 13.2 12.9 1.50 1.34 9.56 N 08/08/97
FFFD 14.9 111.4 111.4 25.3 1.52 212,869 22.7 22.7 1.11 1.91 7.43 N 08/08/97
FFHH 17.8 110.7 110.7 14.2 2.82 378,233 11.4 11.4 1.00 0.84 6.65 N 08/08/97
FFHS 17.0 116.5 117.2 10.5 1.60 226,944 9.0 9.0 1.18 0.64 7.08 N 08/08/97
FFIC 20.9 121.8 121.8 18.8 1.18 860,030 15.5 15.5 0.97 0.94 5.62 N 08/08/97
FFKY 16.1 175.4 186.4 24.0 2.39 377,380 13.7 13.0 1.35 1.53 11.20 N 08/08/97
FFLC 19.1 123.2 123.2 16.6 1.73 387,097 13.5 13.5 1.45 1.01 6.56 N 08/08/97
FFOH 20.6 129.9 147.8 17.0 1.79 513,079 13.1 11.7 0.76 0.96 6.08 N 08/08/97
FFSL 18.0 109.9 109.9 11.5 1.96 110,876 10.4 10.4 0.71 0.69 6.20 N 08/08/97
FFSX 20.4 176.5 178.1 14.6 1.98 468,568 8.3 8.2 1.19 0.73 8.81 N 08/08/97
FFWC 12.0 126.4 126.4 12.7 2.50 158,441 10.0 10.0 2.40 1.10 10.78 N 08/08/97
FFWD 13.0 118.6 118.6 15.1 2.42 163,498 12.7 12.7 1.27 1.23 9.24 N 08/08/97
FFYF 16.5 138.7 138.7 19.0 2.55 599,249 13.7 13.7 1.67 1.27 8.06 N 08/08/97
FGHC 19.1 167.8 183.0 13.8 0.76 156,383 8.2 7.6 0.37 0.79 9.54 N 08/08/97
FIBC 12.8 131.9 132.6 12.3 1.98 282,485 9.4 9.3 1.58 1.00 10.16 N 08/08/97
FKFS 13.5 145.6 145.6 10.3 0.76 314,637 7.1 7.1 1.96 0.77 10.01 N 08/08/97
FLFC 16.2 195.9 218.9 14.4 1.72 1,248,033 7.3 6.6 1.44 0.91 12.24 N 08/08/97
FMCO 11.7 170.6 173.7 11.2 0.77 554,925 6.6 6.5 2.22 1.02 15.76 N 08/08/97
FMSB 14.2 189.1 189.1 12.9 0.97 432,034 6.8 6.8 1.45 1.00 15.01 N 08/08/97
FNGB 20.9 158.3 158.3 17.8 2.49 637,725 11.3 11.3 1.23 0.90 7.86 N 08/08/97
FOBC 15.9 127.5 133.7 14.6 2.64 356,718 11.1 10.6 1.38 0.97 8.35 N 08/08/97
FRC 18.6 145.7 145.8 10.5 - 2,238,033 7.2 7.2 1.30 0.60 9.49 N 08/08/97
FSBI 12.7 134.2 134.2 9.1 1.69 363,302 6.8 6.8 1.67 0.83 11.94 N 08/08/97
FSLA 24.2 223.1 251.7 20.5 1.66 1,024,715 9.2 8.2 1.20 0.89 9.56 N 08/08/97
FSPG 11.2 154.7 157.2 10.3 2.01 522,396 6.7 6.6 1.77 0.97 14.79 N 08/08/97
FSTC 18.8 181.1 241.4 16.5 1.49 326,365 9.1 7.0 1.57 1.21 11.69 N 08/08/97
FTF 13.4 148.9 148.9 23.4 2.50 171,358 15.7 15.7 1.67 1.73 10.43 N 08/08/97
FTFC 15.2 216.6 230.3 14.0 2.00 1,571,981 6.4 6.1 1.58 0.90 13.96 N 08/08/97
FTSB 23.4 108.0 108.0 17.4 2.27 94,681 16.1 16.1 0.47 0.77 3.83 N 08/08/97
FWWB 23.2 161.5 175.5 25.7 1.14 1,007,633 14.8 13.7 1.06 1.17 7.04 N 08/08/97
GAF 19.1 119.3 120.6 18.1 2.82 749,748 15.2 15.0 0.89 1.12 5.80 N 08/08/97
GBCI 15.0 227.8 233.9 22.2 2.60 567,610 9.7 9.5 1.23 1.54 16.25 N 08/08/97
GDW 9.9 180.1 180.1 11.5 0.56 39,095,082 6.4 6.4 7.98 1.23 19.73 N 08/08/97
GFCO 16.1 115.0 116.9 11.0 2.96 280,813 9.6 9.4 1.68 0.68 7.14 N 08/08/97
GFSB 12.9 129.5 129.5 15.0 1.94 88,154 11.6 11.6 1.04 1.20 10.24 N 08/08/97
GPT 19.6 187.1 332.8 21.7 1.56 13,300,046 10.3 6.1 3.27 1.03 9.59 N 08/08/97
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 7
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Tangible
Price/ Current Current Current Total Equity/ Equity/ Core Core Core
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Merger Current
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target? Pricing
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GSB 20.1 186.3 209.7 9.0 - 16,218,259 6.2 5.7 1.45 0.68 10.56 N 08/08/97
GSBC 14.1 227.9 227.9 20.4 2.39 679,153 9.0 9.0 1.19 1.54 15.89 N 08/08/97
GSFC 24.0 117.1 117.1 42.5 2.55 174,605 36.3 36.3 0.72 1.66 4.72 N 08/08/97
GTFN 22.0 163.0 170.2 15.1 1.81 3,046,227 9.2 8.9 1.51 0.72 7.50 N 08/08/97
GUPB 22.6 112.6 112.6 18.4 2.11 86,911 16.3 16.3 0.84 0.93 4.89 N 08/08/97
HALL 13.5 110.7 110.7 8.0 - 409,820 7.2 7.2 1.68 0.61 8.62 N 08/08/97
HARB 16.9 236.1 244.1 19.8 3.15 1,116,718 8.4 8.1 2.63 1.22 14.82 N 08/08/97
HARL 12.8 187.8 187.8 12.3 1.60 336,666 6.5 6.5 1.95 1.02 16.03 N 08/08/97
HAVN 11.5 149.8 150.4 8.9 1.66 1,781,545 6.0 5.9 3.16 0.84 13.80 N 08/08/97
HBFW 18.2 120.6 120.6 16.0 0.94 334,862 13.3 13.3 1.17 0.89 6.29 N 08/08/97
HBNK 18.4 156.4 156.4 11.7 - 504,381 7.5 7.5 1.39 0.67 9.20 N 08/08/97
HBS 15.3 112.0 116.3 15.8 3.03 146,331 14.1 13.7 1.21 1.12 7.43 N 08/08/97
HFFB 21.0 100.5 100.5 29.3 2.54 108,950 26.9 26.9 0.75 1.35 4.99 N 08/08/97
HFFC 13.7 123.0 123.0 11.6 1.92 561,664 9.4 9.4 1.60 0.89 9.66 N 08/08/97
HFGI 17.3 153.2 153.2 8.6 1.02 446,797 5.6 5.6 0.68 0.44 9.25 N 08/08/97
HFNC 22.6 176.1 176.1 33.1 1.72 842,917 18.8 18.8 0.72 1.38 4.71 N 08/08/97
HFSA 19.3 106.8 106.8 13.3 2.87 108,018 12.5 12.5 0.87 0.79 5.37 N 08/08/97
HIFS 12.5 148.9 148.9 13.9 2.07 217,586 9.4 9.4 1.86 1.22 12.54 N 08/08/97
HMCI 18.0 111.2 111.2 7.3 - 331,608 6.5 6.5 0.79 0.42 6.80 N 08/08/97
HMNF 21.0 127.5 127.5 18.4 - 566,865 14.4 14.4 1.18 0.88 5.90 N 08/08/97
HOMF 13.4 178.9 184.6 15.2 1.64 682,796 8.5 8.2 2.28 1.22 14.67 N 08/08/97
HPBC 12.1 182.2 182.2 19.2 3.86 198,748 10.6 10.6 1.72 1.68 15.76 N 08/08/97
HRBF 23.5 124.3 124.3 16.0 2.00 219,462 12.9 12.9 0.85 0.68 5.10 N 08/08/97
HRZB 14.6 140.9 140.9 22.0 2.60 518,661 15.6 15.6 1.05 1.54 9.82 N 08/08/97
HZFS 17.8 97.7 97.7 10.3 1.70 78,368 10.5 10.5 1.06 0.60 5.41 N 08/08/97
IFSB 22.1 107.4 122.4 7.0 1.53 262,753 6.5 5.8 0.65 0.33 4.92 N 08/08/97
INBI 17.9 124.7 124.7 22.1 3.31 346,596 17.7 17.7 0.81 1.27 6.78 N 08/08/97
IPSW 17.5 244.2 244.2 14.0 1.08 189,379 5.7 5.7 1.27 0.97 16.21 N 08/08/97
ISBF 22.0 139.7 164.7 18.2 1.64 938,968 12.2 10.5 1.11 0.92 6.15 N 08/08/97
ITLA 13.3 154.0 154.7 17.5 - 810,494 11.4 11.3 1.36 1.45 12.48 N 08/08/97
IWBK 17.2 256.3 261.9 17.4 1.51 1,832,582 6.8 6.6 2.31 1.10 16.39 N 08/08/97
JSB 17.6 125.4 125.4 28.7 3.14 1,531,115 22.9 22.9 2.53 1.70 7.77 N 08/08/97
JSBA 16.2 137.8 180.9 12.3 1.25 1,296,929 8.2 6.4 1.97 0.70 9.29 N 08/08/97
JXVL 7.3 122.7 122.7 18.3 3.01 226,182 14.9 14.9 2.28 1.33 8.42 N 08/08/97
KFBI 22.6 123.2 123.2 26.4 1.56 727,903 19.6 19.6 0.85 1.19 5.38 N 08/08/97
KNK 15.1 110.9 118.1 12.3 1.63 341,678 11.1 10.5 1.96 0.82 7.89 N 08/08/97
KSAV 12.0 114.1 114.2 15.4 3.24 106,121 13.5 13.5 1.54 1.24 8.86 N 08/08/97
KSBK 11.3 169.9 179.7 12.2 0.56 145,888 7.2 6.8 1.27 1.08 15.21 N 08/08/97
KYF 17.8 112.8 112.8 18.2 4.08 88,923 16.1 16.1 0.69 1.07 5.23 N 08/08/97
LARK 16.8 116.9 116.9 16.1 1.86 228,100 13.8 13.8 1.28 1.04 7.00 N 08/08/97
LARL 11.9 147.3 147.3 15.4 2.43 208,577 10.4 10.4 1.80 1.43 13.48 N 08/08/97
LFED 23.5 158.0 158.0 25.6 3.64 281,899 16.2 16.2 0.89 1.12 6.93 N 08/08/97
LIFB 19.7 163.1 NA 17.2 1.85 1,488,257 10.6 NA 1.32 0.86 8.04 N 08/08/97
LISB 23.1 175.9 177.7 15.8 1.54 5,908,737 9.0 8.9 1.69 0.72 7.63 N 08/08/97
LOGN 14.9 110.6 110.6 21.2 2.86 83,152 19.2 19.2 0.94 1.51 7.40 N 08/08/97
LSBI 24.4 109.4 109.4 10.7 1.60 188,027 9.1 9.1 0.87 0.42 4.44 N 08/08/97
LSBX 8.7 159.4 159.4 13.9 - 366,318 8.7 8.7 1.36 1.73 20.78 N 08/08/97
LVSB 18.4 162.0 202.6 15.4 0.78 481,646 9.5 7.8 1.75 0.95 9.52 N 08/08/97
MAFB 14.2 192.8 NA 15.0 0.87 3,321,464 7.8 NA 2.28 1.16 14.83 N 08/08/97
MARN 14.8 104.1 104.1 23.5 3.83 173,304 22.5 22.5 1.55 1.67 7.28 N 08/08/97
MASB 15.3 144.4 144.4 15.4 2.47 905,417 10.6 10.6 3.39 1.04 10.20 N 08/08/97
MBB 23.5 119.2 277.5 8.2 2.55 810,679 8.4 4.7 1.00 0.48 5.70 N 08/08/97
MBB 23.5 119.2 277.5 8.2 2.55 810,679 8.4 4.7 1.00 0.48 5.70 N 08/08/97
MBLF 18.4 109.3 109.3 14.7 1.70 209,783 13.5 13.5 1.28 0.85 6.32 N 08/08/97
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 8
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Price/ Current Current Current Total
LTM Price/ Price/ T Price/ Dividend Assets
Core EPS Book V Book V Assets Yield ($000)
Ticker (x) (%) (%) (%) (%) MRQ
<S> <C> <C> <C> <C> <C> <C>
MCBN 15.2 114.0 114.0 9.8 2.08 58,925
MCBS 13.8 146.8 146.8 14.0 1.37 408,590
MDBK 13.7 141.5 151.9 12.7 2.40 1,072,557
MECH 7.7 136.5 136.5 14.0 - 823,575
MERI 13.8 167.3 167.3 13.7 1.73 228,485
MFBC 18.8 102.2 102.2 14.0 1.56 248,241
MFFC 24.3 111.1 111.1 15.7 4.40 199,886
MFLR 14.6 136.3 138.7 12.9 3.33 124,688
MFSL 15.0 157.2 159.2 13.2 1.68 1,157,445
MIVI 17.8 97.3 97.3 17.8 1.06 69,755
MLBC 17.9 148.0 150.7 10.3 1.98 2,071,285
MSBF 8.0 63.9 63.9 10.9 2.15 74,698
MWBI 12.8 126.5 126.5 8.8 1.71 139,006
MWBX 13.1 221.5 221.5 16.5 1.79 566,517
MWFD 18.1 204.0 212.4 17.6 1.56 201,070
NASB 13.3 205.3 212.2 16.4 1.60 689,246
NBN 22.4 109.3 126.5 7.6 2.17 247,525
NEIB 14.7 111.9 111.9 17.0 1.88 176,309
NHTB 23.0 142.4 168.0 10.6 3.07 313,038
NMSB 21.8 152.7 152.7 15.0 1.90 323,061
NSSB 17.1 151.4 167.7 16.9 2.52 712,699
NWEQ 14.4 107.5 107.5 13.5 3.41 95,097
NWSB 20.9 204.7 217.5 19.4 1.84 2,091,363
NYB 16.1 401.9 401.9 20.4 1.93 3,283,653
OFCP 20.0 167.4 208.5 14.6 1.56 861,334
OHSL 16.7 116.7 116.7 12.9 3.59 229,812
PALM 21.0 149.5 149.5 12.3 0.77 664,863
PBCI 14.0 123.4 124.3 15.7 4.88 370,987
PBKB 20.9 179.9 186.9 10.3 2.63 585,678
PCBC 15.8 113.5 113.5 20.8 1.95 79,714
PCCI 15.1 169.0 169.0 12.0 - 371,126
PEEK 21.6 108.8 108.8 28.0 2.25 182,560
PERM 22.5 132.6 133.7 12.2 1.58 423,698
PFDC 13.6 131.3 131.3 20.0 2.38 287,564
PFNC 20.4 227.3 257.3 12.1 0.91 418,658
PFSB 14.3 136.6 163.3 10.9 0.94 1,321,751
PFSL 14.3 150.8 150.8 9.6 4.05 378,700
PHBK 15.8 246.5 292.5 19.0 1.96 5,591,180
PHFC 18.6 120.5 121.9 13.2 1.40 256,265
PKPS 22.2 136.8 136.8 11.5 1.25 880,196
PRBC 18.4 96.9 96.9 10.8 0.75 135,721
PSBK 13.6 154.4 172.9 13.2 2.24 878,823
PTRS 12.1 109.8 109.8 9.7 1.49 121,189
PULS 12.0 150.4 150.4 12.1 3.42 520,203
PVFC 8.0 181.1 181.1 12.7 - 356,251
PVSA 11.5 151.0 152.2 11.5 1.86 991,239
PWBC 15.2 141.0 154.6 10.0 2.00 706,237
QCBC 20.0 133.9 134.0 11.7 - 801,402
QCFB 13.1 123.8 123.8 22.4 - 149,637
RARB 15.9 192.3 195.4 15.3 2.00 379,428
RELY 16.1 155.1 215.2 12.8 2.23 1,976,764
ROSE 16.4 200.7 200.7 13.4 2.22 3,551,783
RVSB 23.6 246.1 271.3 27.5 0.94 224,385
SFED 17.2 110.3 110.3 14.3 1.47 168,841
<CAPTION>
Tangible
Equity/ Equity/ Core Core Core
Assets T Assets EPS ROAA ROAE Merger Current
(%) (%) ($) (%) (%) Target? Pricing
Ticker MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C>
MCBN 8.6 8.6 1.64 0.67 7.33 N 08/08/97
MCBS 9.4 9.4 2.12 1.17 11.06 N 08/08/97
MDBK 9.0 8.4 2.19 1.01 11.31 N 08/08/97
MECH 10.2 10.2 2.82 1.95 19.68 N 08/08/97
MERI 8.2 8.2 2.94 1.05 13.46 N 08/08/97
MFBC 13.7 13.7 1.09 0.86 5.51 N 08/08/97
MFFC 13.1 13.1 0.56 0.69 4.30 N 08/08/97
MFLR 9.4 9.3 1.23 0.93 9.66 N 08/08/97
MFSL 8.4 8.3 3.17 0.89 10.76 N 08/08/97
MIVI 18.3 18.3 0.85 1.01 5.56 N 08/08/97
MLBC 7.0 6.9 1.13 0.68 9.23 N 08/08/97
MSBF 17.0 17.0 1.63 1.46 7.85 N 08/08/97
MWBI 6.9 6.9 2.74 0.74 10.69 N 08/08/97
MWBX 7.5 7.5 0.51 1.37 17.82 N 08/08/97
MWFD 8.6 8.3 1.20 1.09 12.42 N 08/08/97
NASB 8.0 7.7 3.75 1.18 16.39 N 08/08/97
NBN 7.8 6.9 0.66 0.50 6.24 N 08/08/97
NEIB 15.2 15.2 1.16 1.21 7.43 N 08/08/97
NHTB 7.5 6.4 0.71 0.51 6.82 N 08/08/97
NMSB 9.8 9.8 0.58 0.80 7.67 N 08/08/97
NSSB 11.2 10.2 1.30 1.05 9.60 N 08/08/97
NWEQ 11.4 11.4 1.06 0.99 7.91 N 08/08/97
NWSB 9.5 9.0 0.83 0.96 9.84 N 08/08/97
NYB 5.1 5.1 1.93 1.45 27.70 N 08/08/97
OFCP 8.7 7.1 1.28 0.76 8.36 N 08/08/97
OHSL 11.0 11.0 1.47 0.86 7.31 N 08/08/97
PALM 8.2 8.2 0.74 0.60 7.44 N 08/08/97
PBCI 12.7 12.7 1.46 1.24 8.63 N 08/08/97
PBKB 5.7 5.5 0.80 0.53 9.27 N 08/08/97
PCBC 18.3 18.3 1.30 1.03 5.45 N 08/08/97
PCCI 7.1 7.1 1.00 0.98 12.40 N 08/08/97
PEEK 25.7 25.7 0.74 1.28 4.47 N 08/08/97
PERM 9.2 9.2 1.12 0.60 6.14 N 08/08/97
PFDC 15.2 15.2 1.86 1.46 9.55 N 08/08/97
PFNC 5.3 4.7 0.65 0.64 12.31 N 08/08/97
PFSB 7.4 6.2 2.09 0.83 10.66 N 08/08/97
PFSL 6.4 6.4 1.56 0.69 11.23 N 08/08/97
PHBK 7.7 6.6 2.46 1.31 16.17 N 08/08/97
PHFC 10.9 10.8 0.92 0.80 6.03 N 08/08/97
PKPS 8.4 8.4 0.36 0.54 6.52 N 08/08/97
PRBC 11.1 11.1 0.87 0.65 4.97 N 08/08/97
PSBK 8.6 7.7 2.24 0.97 11.84 N 08/08/97
PTRS 8.8 8.8 2.00 0.84 9.48 N 08/08/97
PULS 8.1 8.1 1.71 1.06 13.51 N 08/08/97
PVFC 7.0 7.0 2.43 1.35 19.93 N 08/08/97
PVSA 7.6 7.5 2.44 1.08 14.91 N 08/08/97
PWBC 7.1 6.5 1.08 0.64 8.73 N 08/08/97
QCBC 8.8 8.8 1.00 0.60 6.66 N 08/08/97
QCFB 18.1 18.1 1.79 1.66 8.76 N 08/08/97
RARB 7.9 7.8 1.51 1.03 13.25 N 08/08/97
RELY 8.2 6.1 1.79 0.86 10.24 N 08/08/97
ROSE 6.2 6.2 1.65 0.89 14.28 N 08/08/97
RVSB 11.2 10.2 1.08 1.17 10.66 N 08/08/97
SFED 13.0 13.0 1.11 0.82 6.26 N 08/08/97
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 9
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
Price/ Current Current Current Total
LTM Price/ Price/ T Price/ Dividend Assets
Core EPS Book V Book V Assets Yield ($000)
Ticker (x) (%) (%) (%) (%) MRQ
<S> <C> <C> <C> <C> <C> <C>
SFFC 15.0 111.9 111.9 19.9 1.84 85,679
SFIN 14.9 144.8 145.1 13.5 2.09 677,384
SFSB 16.3 125.5 125.9 8.1 1.16 426,705
SFSL 10.9 134.7 137.1 12.6 2.00 634,761
SISB 9.2 165.9 165.9 11.8 1.84 1,434,545
SKAN 13.4 128.6 132.7 8.8 1.75 247,697
SMBC 16.9 108.8 108.8 17.1 2.90 165,688
SOPN 18.8 117.8 117.8 29.0 3.77 271,121
SOSA 15.9 202.5 202.5 12.8 - 514,502
SPBC 17.0 191.7 192.2 16.5 1.79 4,611,394
SSB 24.6 127.8 127.8 47.3 1.75 69,479
SSM 21.1 132.1 132.1 38.1 2.11 106,115
STFR 18.1 144.8 163.8 11.3 1.37 1,645,539
STSA 22.0 150.0 172.0 6.0 - 1,686,395
SWBI 15.2 132.3 132.3 14.6 3.66 378,325
SWCB 15.2 164.2 172.3 13.5 3.56 475,245
TBK 14.4 152.1 156.6 10.6 1.24 238,227
THR 17.2 105.1 105.5 14.5 2.25 91,165
THRD 16.9 101.4 115.6 12.2 2.09 640,746
TPNZ 21.2 124.9 124.9 21.3 1.59 124,150
TRIC 16.5 101.1 101.1 15.5 2.64 89,457
TSH 15.9 119.0 119.0 15.8 2.76 393,556
TWIN 20.1 120.6 120.6 15.5 3.28 107,345
UBMT 20.6 119.7 119.7 27.1 4.11 107,723
VABF 24.6 164.7 164.7 11.3 1.43 617,818
WBST 16.4 207.8 243.2 10.4 1.55 5,943,766
WCBI 16.4 135.6 135.6 20.7 2.31 311,613
WEFC 14.7 109.4 109.4 15.5 3.00 202,035
WFI 12.7 140.9 143.9 10.0 2.88 317,392
WFSL 13.0 193.6 211.9 23.4 3.24 5,760,385
WRNB 10.8 180.8 180.8 18.8 2.93 358,021
WSB 16.3 132.4 132.4 11.0 1.50 258,330
WSFS 10.3 225.5 227.3 11.7 - 1,508,540
WSTR 18.9 122.1 152.6 13.3 1.92 955,639
WVFC 12.8 142.8 142.8 15.9 2.98 294,693
WYNE 19.5 131.5 131.5 17.6 0.93 261,027
YFCB 16.3 122.6 122.6 18.3 1.43 288,089
YFED 20.2 178.6 178.6 15.4 2.35 1,162,393
Maximum 24.6 401.9 401.9 47.3 4.88 47,532,068
Minimum 2.3 63.9 63.9 5.1 - 54,275
Average 16.7 148.4 156.4 15.3 1.87 1,453,495
Mediam 16.4 141.9 148.2 14.0 1.82 414,239
<CAPTION>
Tangible
Equity/ Equity/ Core Core Core
Assets T Assets EPS ROAA ROAE Merger Current
(%) (%) ($) (%) (%) Target? Pricing
Ticker MRQ MRQ LTM LTM LTM (Y/N) Date
<S> <C> <C> <C> <C> <C> <C> <C>
SFFC 17.8 17.8 1.45 1.37 7.36 N 08/08/97
SFIN 9.3 9.3 1.28 0.87 8.80 N 08/08/97
SFSB 6.5 6.5 1.69 0.56 8.52 N 08/08/97
SFSL 9.4 9.2 1.47 1.35 13.81 N 08/08/97
SISB 7.2 7.2 3.30 1.38 18.99 N 08/08/97
SKAN 6.9 6.7 1.71 0.68 10.07 N 08/08/97
SMBC 15.7 15.7 1.02 1.01 6.29 N 08/08/97
SOPN 24.6 24.6 1.13 1.68 6.59 N 08/08/97
SOSA 6.3 6.3 0.25 0.79 13.61 N 08/08/97
SPBC 8.6 8.6 1.32 1.04 11.66 N 08/08/97
SSB 37.0 37.0 0.70 1.71 4.69 N 08/08/97
SSM 28.9 28.9 1.01 1.71 4.84 N 08/08/97
STFR 7.9 7.0 1.93 0.71 8.11 N 08/08/97
STSA 5.5 5.0 0.83 0.44 7.84 N 08/08/97
SWBI 11.0 11.0 1.37 1.01 9.54 N 08/08/97
SWCB 8.2 7.9 2.22 0.96 11.82 N 08/08/97
TBK 6.9 6.8 1.12 0.79 11.78 N 08/08/97
THR 13.8 13.7 0.93 0.83 5.71 N 08/08/97
THRD 11.1 9.9 1.13 0.73 6.42 N 08/08/97
TPNZ 17.0 17.0 0.83 1.00 5.63 N 08/08/97
TRIC 15.3 15.3 1.38 1.02 6.79 N 08/08/97
TSH 13.3 13.3 1.14 1.00 6.93 N 08/08/97
TWIN 12.9 12.9 0.97 0.75 5.88 N 08/08/97
UBMT 22.7 22.7 1.16 1.34 5.74 N 08/08/97
VABF 6.9 6.9 0.57 0.46 6.82 N 08/08/97
WBST 5.0 4.3 3.15 0.71 13.33 N 08/08/97
WCBI 15.2 15.2 1.59 1.41 9.13 N 08/08/97
WEFC 14.2 14.2 1.09 1.06 7.56 N 08/08/97
WFI 7.1 7.0 1.26 0.88 12.23 N 08/08/97
WFSL 12.1 11.2 2.18 1.84 15.84 N 08/08/97
WRNB 10.4 10.4 1.64 1.83 18.86 N 08/08/97
WSB 8.3 8.3 0.41 0.73 8.66 N 08/08/97
WSFS 5.2 5.2 1.39 1.34 23.57 N 08/08/97
WSTR 10.9 8.9 1.21 0.75 6.20 N 08/08/97
WVFC 11.2 11.2 2.10 1.32 10.73 N 08/08/97
WYNE 13.4 13.4 1.11 0.92 6.16 N 08/08/97
YFCB 14.9 14.9 1.03 1.15 6.81 N 08/08/97
YFED 8.6 8.6 1.26 0.77 9.46 N 08/08/97
Maximum 37.0 37.0 7.98 4.17 67.90
Minimum 3.3 2.8 0.25 0.33 3.83
Average 11.0 11.0 1.52 1.00 9.98
Median 9.4 9.4 1.31 0.95 9.22
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 10
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
AADV 0.44 14.6 0.72 0.98 10.77
ABBK 0.17 15.1 0.50 0.81 11.68
ABCL 0.15 17.4 0.45 0.77 8.35
ABCW 0.92 13.9 0.91 0.91 13.93
AFCB 0.39 14.1 0.44 1.10 11.18
AHM 1.90 16.6 0.75 0.73 14.74
ALBK 0.71 13.9 0.67 1.05 11.37
AMFC 0.81 22.1 0.17 0.67 4.28
ANDB 1.01 12.6 0.60 1.00 12.54
ASBI 0.40 18.5 0.25 0.83 7.60
ASBP 1.56 21.9 0.14 0.85 5.43
ASFC 0.45 17.3 0.68 0.75 9.80
BANC NA 20.8 0.20 0.65 11.70
BDJI 0.21 26.3 0.20 0.46 4.01
BFD NA 18.2 0.27 0.64 7.27
BFSB - 16.0 0.38 1.22 8.52
BKC 1.81 13.0 0.73 1.16 14.12
BKCT 1.19 13.6 0.50 1.29 12.72
BKUNA 0.60 19.4 0.14 0.48 8.00
BVCC 0.79 18.4 0.35 0.60 9.52
CAFI 0.36 13.6 0.34 0.92 9.52
CAPS 0.16 13.8 0.29 0.93 10.89
CASB 0.59 21.9 0.16 0.54 8.80
CASH 0.85 14.0 0.31 0.92 7.98
CATB 0.47 20.2 0.21 1.35 5.24
CBCI 1.16 11.9 0.87 1.60 10.40
CBSA 0.54 13.8 0.55 0.39 11.51
CBSB 0.56 21.4 0.25 1.08 7.67
CEBK NA 12.3 0.39 0.96 9.24
CENF 1.28 15.1 0.57 0.60 11.72
CFB 0.89 12.6 0.78 0.97 16.25
CFFC 0.39 14.6 0.39 1.16 8.41
CFSB 0.17 14.4 0.47 1.22 15.91
CFTP 0.35 22.2 0.20 1.70 5.05
CFX 0.72 14.8 0.32 0.96 12.20
CIBI 0.72 14.1 0.27 1.01 8.86
CKFB 0.89 23.8 0.21 1.21 4.96
CLAS 0.70 NA NA 0.79 5.34
CMRN 0.28 19.0 0.23 1.20 5.11
CMSB 0.50 24.6 0.17 0.48 5.01
CMSV 0.57 23.8 0.27 0.81 7.05
CNIT 0.42 15.4 0.83 0.81 11.22
COFI 0.22 13.6 0.96 1.27 18.76
CRZY 0.39 17.3 0.20 1.34 5.07
CSA 1.40 17.6 0.65 0.56 11.43
CTZN 0.41 13.9 0.75 0.89 13.88
CVAL 0.47 17.7 0.34 0.96 10.98
DIBK 0.44 9.4 0.71 1.94 23.80
DIME 0.73 27.9 0.17 0.70 47.43
DME 1.57 19.6 0.25 0.54 10.16
DNFC 0.34 13.4 0.36 0.79 13.92
DSL 0.95 18.1 0.30 0.57 8.03
EBSI 0.88 NA 0.28 0.77 8.71
EFBI 0.01 19.7 0.26 0.83 6.48
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 11
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
EGFC NA 55.5 0.15 0.22 3.22
EIRE 0.40 12.1 0.42 0.93 13.30
EMLD NA 12.3 0.29 0.98 13.07
EQSB 0.68 9.7 1.00 0.88 17.51
FBBC 0.07 14.6 0.28 0.98 10.10
FBCI 0.80 14.5 0.37 0.84 8.12
FBHC 0.37 17.9 0.43 0.60 9.70
FBSI 0.08 15.5 0.39 1.14 7.96
FCME 1.62 21.2 0.13 0.49 5.53
FED 1.39 16.7 0.50 0.51 10.73
FESX 0.62 17.3 0.24 0.67 9.01
FFBA 0.23 15.9 0.28 1.19 9.25
FFBI 0.27 18.3 0.25 0.43 5.54
FFBS 0.03 17.7 0.34 1.62 8.37
FFBZ 0.47 14.1 0.32 1.11 14.72
FFCH 1.61 14.5 0.54 0.84 13.68
FFDB 0.72 12.2 0.34 0.98 10.05
FFES 0.31 14.0 0.56 0.64 10.10
FFFC 0.18 18.3 0.41 1.35 10.37
FFFD 0.12 13.8 0.30 1.84 7.80
FFHH 0.03 15.3 0.29 0.87 7.55
FFHS 0.41 14.7 0.34 0.73 8.16
FFIC 0.32 17.5 0.29 1.02 6.47
FFKY 0.23 14.3 0.38 1.68 12.28
FFLC 0.19 17.8 0.39 0.96 6.91
FFOH 0.18 18.6 0.21 0.89 6.71
FFSL 0.37 17.7 0.18 0.64 6.17
FFSX - 20.9 0.29 0.71 8.70
FFWC 0.22 11.4 0.63 1.12 10.98
FFWD 0.02 11.5 0.36 1.37 10.72
FFYF 0.67 13.8 0.50 1.33 9.62
FGHC 1.41 14.7 0.12 1.00 12.04
FIBC 1.71 12.7 0.40 0.96 10.04
FKFS 2.45 12.7 0.52 0.77 10.73
FLFC 0.82 16.6 0.35 0.91 11.92
FMCO 1.06 10.8 0.60 1.05 16.36
FMSB - 13.6 0.38 0.99 14.73
FNGB 0.06 20.8 0.31 0.89 7.82
FOBC 0.15 16.2 0.34 0.93 8.36
FRC 1.01 17.7 0.34 0.65 8.73
FSBI 0.31 13.3 0.40 0.75 10.90
FSLA 0.60 21.3 0.34 0.98 10.65
FSPG 0.64 12.4 0.40 0.86 12.91
FSTC NA 81.9 0.09 0.21 2.30
FTF 0.12 11.9 0.47 1.86 11.74
FTFC NA 16.7 0.36 0.93 14.48
FTSB 2.02 18.3 0.15 0.97 5.58
FWWB 0.31 20.5 0.30 1.17 7.76
GAF 0.12 16.4 0.26 1.10 6.97
GBCI 0.12 13.6 0.34 1.64 17.10
GDW 1.31 13.2 1.50 0.88 13.91
GFCO 0.16 14.1 0.48 0.79 8.23
GFSB 1.54 11.9 0.28 1.27 11.06
GPT 2.89 17.8 0.90 1.12 10.49
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 12
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
GSB 1.46 16.9 0.43 0.74 11.55
GSBC 1.83 12.3 0.34 1.66 18.62
GSFC 0.16 25.4 0.17 1.66 4.85
GTFN 0.36 19.8 0.42 0.77 8.37
GUPB 0.18 22.6 0.21 0.81 4.74
HALL 0.15 12.1 0.47 0.67 9.40
HARB 0.46 16.6 0.67 1.21 14.61
HARL - 11.8 0.53 1.09 16.89
HAVN 0.74 18.1 0.50 0.53 8.81
HBFW - 17.1 0.31 0.89 6.61
HBNK 3.09 11.1 0.58 1.10 14.97
HBS 2.09 18.5 0.25 0.89 6.02
HFFB - 19.7 0.20 1.39 5.23
HFFC 0.33 12.2 0.45 0.99 10.56
HFGI 0.25 26.7 0.11 0.30 5.89
HFNC 0.99 23.9 0.17 1.15 4.36
HFSA 0.09 17.5 0.24 0.76 6.00
HIFS 0.41 11.4 0.51 1.27 13.18
HMCI 2.91 15.5 0.23 0.51 7.88
HMNF 0.08 20.0 0.31 0.87 5.99
HOMF 0.45 14.1 0.54 1.13 13.40
HPBC - 11.5 0.45 1.68 15.74
HRBF 0.13 20.8 0.24 0.72 5.62
HRZB - 13.7 0.28 1.57 10.19
HZFS 1.02 13.5 0.35 0.76 7.11
IFSB NA 18.0 0.20 0.39 5.96
INBI 0.22 13.9 0.26 1.51 8.43
IPSW 1.52 15.0 0.37 1.03 17.52
ISBF 0.33 21.0 0.29 0.77 6.29
ITLA 1.78 12.6 0.36 1.42 12.81
IWBK 0.64 16.2 0.61 1.10 16.36
JSB NA 16.2 0.69 1.85 8.24
JSBA 0.52 13.8 0.58 0.85 10.53
JXVL 0.78 10.1 0.41 1.75 11.48
KFBI 0.08 21.8 0.22 1.16 5.81
KNK 0.61 14.8 0.50 0.88 8.12
KSAV 0.35 12.2 0.38 1.39 10.15
KSBK NA 12.0 0.30 0.98 13.70
KYF - 15.3 0.20 1.17 7.02
LARK NA 17.3 0.31 0.97 6.83
LARL 0.51 11.6 0.46 1.41 13.36
LFED 0.02 20.9 0.25 1.23 7.61
LIFB NA 19.7 0.33 0.88 8.25
LISB 1.03 22.2 0.44 0.71 7.78
LOGN 0.61 14.6 0.24 1.46 7.53
LSBI 1.34 14.8 0.36 0.68 7.38
LSBX 0.30 9.3 0.32 1.60 18.57
LVSB 0.98 14.7 0.55 1.14 11.56
MAFB NA 12.7 0.64 1.24 15.73
MARN 0.81 14.4 0.40 1.72 7.53
MASB 0.16 14.1 0.92 1.13 10.85
MBB 0.70 23.5 0.25 0.49 5.53
MBB 0.70 23.5 0.25 0.49 5.53
MBLF 0.25 19.6 0.30 0.77 5.77
</TABLE>
SOURCE: SNL & F&C CALCULATION 13
<PAGE>
FERGUSON & COMPANY EXHIBIT V - SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
MCBN 0.40 17.4 0.36 0.57 6.61
MCBS 0.15 12.4 0.59 1.18 11.85
MDBK 0.37 13.4 0.56 1.00 11.31
MECH 1.13 3.9 1.38 3.60 36.83
MERI 0.22 11.4 0.89 1.27 15.91
MFBC NA 17.1 0.30 0.84 6.00
MFFC 0.15 22.7 0.15 0.70 5.11
MFLR 1.02 12.2 0.37 1.08 11.33
MFSL NA 16.7 0.71 0.81 9.61
MIVI 0.21 18.0 0.21 1.01 5.86
MLBC 0.46 22.0 0.23 0.52 7.41
MSBF 0.06 7.2 0.45 1.43 8.39
MWBI 0.82 13.3 0.66 0.72 10.23
MWBX 0.70 11.9 0.14 1.36 18.35
MWFD 0.14 17.0 0.32 1.11 12.90
NASB 3.34 12.1 1.03 1.30 17.21
NBN 1.37 14.2 0.26 0.66 8.48
NEIB NA 13.3 0.32 1.20 7.88
NHTB 0.74 14.1 0.29 0.89 11.96
NMSB 0.87 21.0 0.15 0.81 8.07
NSSB 1.29 16.9 0.33 1.06 9.55
NWEQ NA 13.6 0.28 0.92 7.76
NWSB 0.72 19.7 0.22 0.99 10.33
NYB 1.09 13.4 0.58 1.63 32.18
OFCP 0.16 16.9 0.38 0.87 10.01
OHSL 0.01 14.6 0.42 0.94 8.32
PALM 2.12 15.5 0.25 0.82 9.99
PBCI 2.14 11.7 0.44 1.37 10.69
PBKB 0.82 22.0 0.19 0.50 8.86
PCBC 0.05 16.5 0.31 1.18 6.34
PCCI 1.29 12.6 0.30 1.04 14.25
PEEK NA 23.5 0.17 1.12 4.38
PERM 1.11 20.4 0.31 0.66 6.99
PFDC 0.34 13.2 0.48 1.53 10.08
PFNC 1.46 15.1 0.22 0.84 15.89
PFSB NA 13.6 0.55 0.82 10.99
PFSL 0.10 14.6 0.38 0.66 10.39
PHBK 0.83 15.2 0.64 1.30 16.19
PHFC 1.60 17.1 0.25 0.73 6.50
PKPS 3.81 22.2 0.09 0.58 6.85
PRBC 0.30 14.8 0.27 0.68 5.98
PSBK 0.84 13.6 0.56 0.97 11.59
PTRS 0.50 9.3 0.65 1.06 11.83
PULS 0.57 11.4 0.45 1.10 13.79
PVFC 0.90 11.1 0.44 1.24 17.94
PVSA 0.27 11.3 0.62 1.07 14.75
PWBC 0.58 15.2 0.27 0.67 9.11
QCBC 1.31 16.7 0.30 0.70 7.90
QCFB NA 13.1 0.45 1.55 8.53
RARB 0.29 16.2 0.37 0.99 12.53
RELY NA 15.0 0.48 0.89 10.93
ROSE 0.45 15.3 0.44 0.88 14.63
RVSB 0.10 21.3 0.30 1.28 11.56
SFED 0.68 25.0 0.19 0.54 4.19
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 14
<PAGE>
FERGUSON & COMPANY EXHIBIT V -SELECTED PUBLICLY HELD THRIFTS
- ------------------
<TABLE>
<CAPTION>
NPAs/ Price/ Core Core Core
Assets Core EPS ROAA ROAE
(%) EPS ($) (%) (%)
Ticker MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
SFFC NA 12.7 0.43 1.55 8.78
SFIN 0.41 14.9 0.32 0.82 8.57
SFSB 0.48 16.0 0.43 0.55 8.49
SFSL 0.26 10.3 0.39 1.38 14.86
SISB 0.43 14.6 0.52 0.83 11.63
SKAN 1.46 12.4 0.46 0.72 10.38
SMBC 1.10 17.3 0.25 0.96 6.06
SOPN 0.08 18.3 0.29 1.73 6.96
SOSA 6.28 9.9 0.10 1.33 21.58
SPBC 0.21 15.5 0.36 1.11 12.61
SSB - 28.7 0.15 1.47 4.00
SSM - 38.1 0.14 0.98 2.77
STFR 0.16 15.4 0.57 0.79 9.57
STSA 0.61 18.3 0.25 0.49 8.97
SWBI 0.30 14.8 0.35 1.02 9.50
SWCB 1.08 16.2 0.52 0.88 10.78
TBK 2.13 13.4 0.30 0.83 11.73
THR 1.21 18.2 0.22 0.77 5.49
THRD 0.33 16.5 0.29 0.73 6.60
TPNZ NA 24.5 0.18 0.84 4.87
TRIC - 14.6 0.39 1.08 7.09
TSH 0.27 14.6 0.31 0.99 7.48
TWIN 0.08 16.3 0.30 0.91 7.08
UBMT NA 19.9 0.30 1.39 5.81
VABF 0.68 20.6 0.17 0.54 7.98
WBST 0.85 13.5 0.96 0.82 16.31
WCBI 0.60 15.9 0.41 1.43 9.40
WEFC NA 14.3 0.28 1.06 7.44
WFI 0.29 11.8 0.34 0.86 12.00
WFSL 0.73 12.7 0.56 1.87 15.71
WRNB 1.08 10.8 0.41 1.85 18.09
WSB NA 16.7 0.10 0.72 8.67
WSFS 1.66 10.8 0.33 1.12 21.27
WSTR NA 16.3 0.35 0.83 7.58
WVFC 0.30 13.4 0.50 1.21 10.88
WYNE 0.91 20.0 0.27 0.83 6.02
YFCB 0.57 15.5 0.27 1.13 7.48
YFED 1.24 18.8 0.34 0.84 9.96
Maximum 6.28 81.9 1.50 3.60 47.43
Minimum - 3.9 0.09 0.21 2.30
Average 0.71 16.5 0.39 1.00 10.25
Median 0.48 15.3 0.34 0.96 9.25
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 15
<PAGE>
EXHIBIT VI
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT VI - COMPARATIVE GROUP SELECTION
To search for a comparative group for Salida, we selected all thrifts from the
entire U.S. with assets between $40 million and $100 million that have
sufficient trading volume to produce meaningful market information. All of these
thrifts are listed on either AMEX, NYSE, or Nasdaq. We eliminated thrifts from
the Western, Mid-Atlantic, and Northeast Regions. We kept those selected from
the Midwest, Southeast, and Southwest under the belief that Salida's operations
would be more comparable to operations of thrifts in those regions.
We found 42 thrifts in the asset size and regions described above. We eliminated
30 and retained a group of 12. Normally, we consider 10 to 12 to be the desired
sample size.
We eliminated thrifts for the following reasons: 1) Mutual holding company; 2)
Has not been stock long enough to have one complete quarter as a reporting
stock; 3) Merger agreement has been executed; 4) Non-performing assets of 1.00%
or more of total assets; 5) Loans under 60% of total assets; and 6) Loans
serviced more than 30% of assets.
The group of 42 from which the comparative group was selected is listed on
Exhibit VI.1 and the selected comparative group is listed on Exhibit VI.2. On
Exhibit VI.1, we have underlined the cells that indicate which ones were not
selected and why. Set forth below is a legend for the column summarizing reasons
individual thrifts were not selected.
A Mutual holding company.
B Has not reported as a stock for a full quarter.
C Merger agreement has been executed.
D 1% or more of assets are non-performing.
E Loans are less than 60% of assets.
F Loans serviced exceeds 30% of assets.
1
<PAGE>
FERGUSON & COMPANY EXHIBIT VI.1 - COMPARATIVE GROUP SELECTION
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current Price/
Insurance Stock Market LTM
Agency Price Value Core EPS
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. Munster IN MW SAIF NASDAQ 04/01/96 13.813 14.75 NA
- ----
ATSB AmTrust Capital Corp. Peru IN MW SAIF NASDAQ 03/28/95 12.125 6.44 46.6
- ----
CBES CBES Bancorp, Inc. Excelsior Springs MO MW SAIF NASDAQ 09/30/96 16.813 17.23 NA
- ----
CCFH CCF Holding Company Jonesboro GA SE SAIF NASDAQ 07/12/95 16.250 14.88 27.1
- ---- --------
CENB Century Bancorp, Inc. Thomasville NC SE SAIF NASDAQ 12/23/96 69.500 28.31 NA
- ---- --------
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 17.250 10.92 12.4
CKFB CKF Bancorp, Inc. Danville KY MW SAIF NASDAQ 01/04/95 18.000 16.69 22.0
- ----
CNSB CNS Bancorp, Inc. Jefferson City MO MW SAIF NASDAQ 06/12/96 15.750 26.04 NA
- ----
CSBF CSB Financial Group, Inc. Centralia IL MW SAIF NASDAQ 10/09/95 11.375 10.71 32.5
- ----
CZF CitiSave Financial Corp Baton Rouge LA SW SAIF AMSE 07/14/95 19.500 18.76 29.1
- ----
FFBI First Financial Bancorp, Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 16.500 7.01 22.3
- ----
FFDF FFD Financial Corp. Dover OH MW SAIF NASDAQ 04/03/96 14.000 20.37 NA
- ---- --------
FTNB Fulton Bancorp, Inc. Fulton MO MW SAIF NASDAQ 10/18/96 17.875 30.73 NA
- ---- --------
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 11.250 17.70 23.4
- ----
GFSB GFS Bancorp, Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 23.000 11.36 12.0
- ----
GUPB GFSB Bancorp, Inc. Gallup NM SW SAIF NASDAQ 06/30/95 17.500 15.77 21.6
- ----
GWBC Gateway Bancorp, Inc. Catlettsburg KY MW SAIF NASDAQ 01/18/95 15.250 16.41 22.4
- ----
HBBI Home Building Bancorp Washington IN MW SAIF NASDAQ 02/08/95 21.000 6.54 NM
- ---- --------
HCFC Home City Financial Corp. Springfield OH MW SAIF NASDAQ 12/30/96 13.500 12.85 NA
- ---- --------
HFSA Hardin Bancorp, Inc. Hardin MO MW SAIF NASDAQ 09/29/95 15.500 13.40 20.4
- ----
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 11.500 10.75 25.0
- ----
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 17.500 7.45 31.8
- ----
INCB Indiana Community Bank, SB Lebanon IN MW SAIF NASDAQ 12/15/94 16.500 15.21 35.1
- ----
KYF Kentucky First Bancorp, Inc. Cynthiana KY MW SAIF AMSE 08/29/95 11.500 15.39 16.0
- ----
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 13.250 16.65 15.2
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 15.250 19.29 NA
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 15.250 13.03 18.4
--------
MRKF Market Financial Corporation Mount Healthy OH MW SAIF NASDAQ 03/27/97 12.625 16.86 NA
- ---- --------
MSBF MSB Financial, Inc. Marshall MI MW SAIF NASDAQ 02/06/95 20.750 13.33 13.2
NSLB NS&L Bancorp, Inc. Neosho MO MW SAIF NASDAQ 06/08/95 16.375 12.05 31.5
- ----
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 14.125 13.13 15.2
- ----
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 19.750 16.34 16.3
- ----
PFFC Peoples Financial Corp. Massillon OH MW SAIF NASDAQ 09/13/96 15.250 22.74 NA
- ----
RELI Reliance Bancshares, Inc. Milwaukee WI MW SAIF NASDAQ 04/19/96 7.250 18.33 NA
- ---- --------
SCBS Southern Community Bancshares Cullman AL SE SAIF NASDAQ 12/23/96 13.563 15.43 NA
- ---- --------
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 19.000 13.40 26.0
- ----
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 18.500 14.60 14.6
SOBI Sobieski Bancorp, Inc. South Bend IN MW SAIF NASDAQ 03/31/95 14.750 13.01 30.7
SSB Scotland Bancorp, Inc Laurinburg NC SE SAIF AMSE 04/01/96 15.500 28.52 NA
SZB SouthFirst Bancshares, Inc. Sylacauga AL SE SAIF AMSE 02/14/95 14.250 11.70 NM
- ----
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 14.375 12.24 16.7
- -------------------------------------
WCFB Webster City Federal SB, MHC Webster City IA MW SAIF NASDAQ 08/15/94 14.250 29.93 24.2
- -------------------------------------
Maximum 69.500 30.73 46.6
Minimum 7.250 6.44 12.0
Average 16.829 15.86 23.0
Median 15.375 15.05 22.3
</TABLE>
S0URCE: SNL & F&C CALCULATION 2
<PAGE>
FERGUSON & COMPANY EXHIBIT VI.1 - COMPARATIVE GROUP SELECTION
- ------------------
<TABLE>
<CAPTION>
Tangible ROAA ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Core Before Before Before
Core Price/ Price/ T Price/ Dividend Assets Assets Tang Assets EPS EPS Extra Extra Extra
EPS Book V Book V Assets Yield ($000) (%) (%) ($) ($) (%) (%) (%)
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM MRQ LTM MRQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC 21.6 95.9 95.9 18.6 1.74 83,542 19.4 19.4 NA 0.16 0.49 (0.06) NA
- ----
ATSB 37.9 87.4 88.3 8.9 1.65 72,219 10.2 10.1 0.26 0.08 0.30 0.33 3.00
- ----
CBES 14.5 99.5 99.5 18.8 2.38 91,672 18.9 18.9 NA 0.29 NA 1.28 NA
- ----
CCFH 40.6 113.3 113.3 16.8 3.08 88,509 14.8 14.8 0.60 0.10 0.47 0.42 2.39
- ---------------
CENB NA 95.9 95.9 28.9 - 98,115 30.1 30.1 NA NA NA 1.14 NA
- ---------------
CIBI 12.0 100.1 100.1 11.4 2.32 95,787 11.4 11.4 1.39 0.36 0.64 0.91 4.99
CKFB 20.5 105.8 105.8 27.8 2.44 60,038 25.2 25.2 0.82 0.22 1.29 1.31 4.90
CNSB 39.4 107.9 107.9 26.3 1.27 98,898 24.4 24.4 NA 0.10 NA (0.70) NA
- ----
CSBF 31.6 89.6 95.3 22.5 - 47,527 25.2 24.0 0.35 0.09 0.51 0.89 1.78
- ----
CZF 97.5 152.7 152.7 24.9 2.05 75,286 16.3 16.3 0.67 0.05 0.56 0.39 3.21
- ----
FFBI 17.9 95.7 95.7 7.4 - 94,533 7.8 7.8 0.74 0.23 (0.17) (0.59) (2.04)
- ----
FFDF 20.6 95.2 95.2 23.6 1.43 86,159 24.8 24.8 NA 0.17 0.76 1.07 NA
- ---------------
FTNB NA 124.5 124.5 30.9 1.12 99,462 24.8 24.8 NA NA NA 1.16 NA
- ---------------
FTSB 15.6 112.8 112.8 19.4 2.22 91,109 17.2 17.2 0.48 0.18 0.51 1.16 2.32
- ----
GFSB 11.7 114.3 114.3 13.1 1.74 87,625 11.5 11.5 1.91 0.49 0.96 1.14 8.10
- ----
GUPB 25.7 108.4 108.4 19.3 2.29 81,775 17.8 17.8 0.81 0.17 0.76 0.72 3.68
- ----
GWBC 21.2 96.3 96.3 24.7 2.62 66,439 25.6 25.6 0.68 0.18 0.76 1.10 2.99
- ----
HBBI 21.9 110.1 110.1 14.7 1.43 44,564 12.5 12.5 (0.06) 0.24 (0.36) 0.63 (2.60)
- ---------------
HCFC NA 92.0 92.0 18.9 2.37 68,140 20.5 20.5 NA NA NA 1.22 NA
- ---------------
HFSA 16.2 103.4 103.4 15.3 2.58 97,015 14.8 14.8 0.76 0.24 0.49 0.93 2.82
- ----
HHFC 16.0 103.4 103.4 12.9 3.48 83,659 12.4 12.4 0.46 0.18 0.21 0.77 1.36
- ----
HZFS 15.1 92.0 92.0 10.1 1.83 74,043 10.9 10.9 0.55 0.29 0.14 0.83 1.27
- ----
INCB 27.5 134.5 134.5 17.1 2.18 89,215 12.7 12.7 0.47 0.15 0.15 0.62 1.13
KYF 16.0 106.0 106.0 18.2 4.35 87,874 17.2 17.2 0.72 0.18 0.87 1.05 3.88
- ----
LOGN 15.1 107.9 107.9 21.4 3.02 77,668 19.9 19.9 0.87 0.22 1.20 1.40 5.09
LXMO 21.2 101.5 101.5 31.3 - 61,650 30.8 30.8 NA 0.18 0.88 1.33 NA
MIVI 18.2 100.0 100.0 18.5 1.05 70,329 18.5 18.5 0.83 0.21 0.68 0.98 3.63
- ---------------
MRKF NA NA NA NA - 45,729 16.7 NA NA NA NA 0.65 NA
- ---------------
MSBF 12.7 105.9 105.9 20.2 2.41 66,541 19.1 19.1 1.57 0.41 1.29 1.54 6.07
- ----
NSLB 29.2 101.3 101.3 21.3 3.05 58,394 21.0 21.0 0.52 0.14 0.51 0.85 2.29
- ----
NWEQ 12.6 102.2 102.2 13.6 3.12 96,518 12.3 12.3 0.93 0.28 0.76 1.04 5.88
- ----
PCBC 19.0 107.8 107.8 20.3 2.03 80,408 18.9 18.9 1.21 0.26 0.71 1.43 3.69
- ----
PFFC 22.4 94.3 94.3 25.5 1.97 89,242 27.0 27.0 NA 0.17 0.29 1.09 NA
- ----
RELI 18.1 82.1 NA 41.1 - 44,605 50.1 NA NA 0.10 NA 2.19 NA
- ---------------
SCBS NA 96.6 96.6 21.4 2.21 72,151 22.1 22.1 NA NA NA 0.94 NA
- ---------------
SCCB 23.8 112.8 112.8 29.2 3.16 45,919 25.9 25.9 0.73 0.20 0.90 1.20 3.21
- ----
SFFC 13.6 98.5 98.5 17.5 2.16 82,809 17.8 17.8 1.27 0.34 1.01 1.24 5.29
SOBI 33.5 86.5 86.5 16.5 1.90 78,978 17.7 17.7 0.48 0.11 0.21 0.66 1.18
SSB 21.5 113.6 113.6 41.9 1.94 68,067 36.9 36.9 NA 0.18 1.31 1.77 3.86
SZB 32.4 90.1 90.1 12.6 3.51 93,110 14.0 14.0 0.05 0.11 (0.06) 0.55 (0.43)
- ----
THR 14.4 95.6 96.0 13.7 2.50 89,271 14.3 14.3 0.86 0.25 0.53 0.91 3.59
- ----
WCFB 22.3 137.4 137.4 31.9 5.61 93,811 23.2 23.2 0.59 0.16 0.95 1.35 4.19
- ----
Maximum 97.5 152.7 152.7 41.9 5.61 99,462 50.1 36.9 1.91 0.49 1.31 2.19 8.10
Minimum 11.7 82.1 86.5 7.4 - 4,564 7.8 7.8 (0.06) 0.05 (0.36) (0.70) (2.60)
Average 23.5 104.2 104.9 20.7 2.05 78,057 19.8 19.1 0.74 0.20 0.60 0.92 3.02
Median 20.6 101.5 101.8 19.3 2.17 82,292 18.7 18.7 0.72 0.18 0.60 1.01 3.21
</TABLE>
SOURCE: SNL & F&C CALCULATION 3
<PAGE>
FERGUSON & COMPANY EXHIBIT VI.1 - COMPARATIVE GROUP SELECTION
- ------------------
<TABLE>
<CAPTION>
ROACE
Before NPAs/ Loans/ Loans/ Deposits/
Extra Merger Current Assets Deposits Assets Assets
(%) Target? Pricing (%) (%) (%) (%)
Ticker MRQ (Y/N) Date MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
AMFC (0.30) N 03/31/97 0.43 97.63 75.30 77.13
- ---- ----
ATSB 3.30 N 03/31/97 2.59 103.00 70.99 68.93
- ---- ----
CBES 7.02 N 03/31/97 0.68 128.57 90.86 70.67
- ----
CCFH 2.58 N 03/31/97 0.43 97.24 73.35 75.44
- ---- -----
CENB 5.02 N 03/31/97 0.46 85.12 59.15 69.49
- ---- -----
CIBI 7.81 N 03/31/97 0.69 103.25 75.83 73.45
CKFB 5.19 N 03/31/97 0.52 124.50 88.82 71.34
- ---- -----
CNSB (2.85) N 03/31/97 0.33 78.83 58.59
- ---- -----
CSBF 3.49 N 03/31/97 0.78 78.77 58.56 74.35
- ---- ---- -----
CZF 2.40 Y 03/31/97 0.31 74.23 60.59 81.63
- ---- ----
FFBI (7.34) N 03/31/97 0.14 112.83 78.58 69.65
- ----
FFDF 4.30 N 03/31/97 0.06 94.55 59.75 63.20
- ---- -----
FTNB NA N 03/31/97 NA 127.70 86.96 68.09
- ----
FTSB 6.58 N 03/31/97 1.68 125.39 89.57 71.43
- ---- ----
GFSB 9.93 N 03/31/97 1.65 131.02 87.40 66.71
- ---- ----
GUPB 3.99 N 03/31/97 0.15 79.87 52.60 65.86
- ---- -----
GWBC 4.34 N 03/31/97 0.12 38.94 28.83 74.05
- ---- ---- -----
HBBI 4.92 N 03/31/97 1.14 81.84 63.83 77.99
- ---- ----
HCFC 7.96 N 03/31/97 0.34 102.82 74.78 72.73
- ----
HFSA 5.92 N 03/31/97 0.18 77.31 54.08 69.95
- ---- -----
HHFC 6.24 N 03/31/97 0.26 74.16 51.20 69.04
- ---- ---- -----
HZFS 7.70 N 03/31/97 1.35 92.92 69.58 74.88
- ---- ---- -----
INCB 4.95 N 03/31/97 NA 94.33 81.64 86.55
KYF 5.33 N 03/31/97 - 88.09 54.65 62.03
- ---- -----
LOGN 7.02 N 03/31/97 0.52 99.38 73.44 73.90
LXMO 4.34 N 03/31/97 0.92 107.66 73.93 68.67
MIVI 5.32 N 03/31/97 0.26 79.40 63.61 80.11
- ----
MRKF NA N 03/31/97 NA NA NA 81.84
- ----
MSBF 7.93 N 03/31/97 0.47 151.88 94.31 62.10
- ----
NSLB 4.04 N 03/31/97 - 74.65 54.19 72.60
- ---- ---- -----
NWEQ 8.47 N 03/31/97 1.52 126.07 81.56 64.69
- ---- ----
PCBC 7.65 N 03/31/97 - 19.49 15.13 77.66
- ---- -----
PFFC 4.08 N 03/31/97 0.01 71.94 51.72 71.89
- ---- -----
RELI 3.92 N 03/31/97 - 140.69 56.55 40.19
- ---- ---- -----
SCBS 5.91 N 03/31/97 2.20 70.87 55.02 77.64
- ---- ---- -----
SCCB 4.42 N 03/31/97 1.83 106.77 77.89 72.95
- ---- ----
SFFC 6.96 N 03/31/97 0.79 141.57 82.43 58.23
SOBI 3.78 N 03/31/97 0.24 94.17 70.33 74.69
SSB 4.84 N 03/31/97 0.05 110.81 68.03 61.39
SZB 3.97 N 03/31/97 0.53 102.64 71.32 69.48
- ---- ----
THR 6.35 N 03/31/97 1.23 98.58 66.67 67.63
- ---- ----
WCFB 5.86 N 03/31/97 0.14 77.06 58.47 75.88
- ---- -----
Maximum 9.93 2.59 151.88 94.31 86.55
Minimum (7.34) - 19.49 15.13 40.19
Average 4.83 0.64 96.74 67.32 70.96
Median 4.99 0.43 97.24 69.58 71.66
<CAPTION>
Loans Loans
Borrowings/ Serviced Serviced/
Assets For Others Assets
(%) ($000) (%)
Ticker MRQ MRQ MRQ Reasons for Exclusion
----------------------
<S> <C> <C> <C> <C>
AMFC 1.20 - - SELECTED
- ---- ----
ATSB 20.30 28,300 39.2 B, F
- ---- ----
CBES 9.27 31,455 34.3 F
- ----
CCFH 8.47 NA NA SELECTED
CENB - NA NA B, E
- ----
CIBI 14.61 NA NA SELECTED
CKFB 2.09 - - SELECTED
CNSB - 23,244 23.5 E
- ----
CSBF - - - E
- ----
CZF - 1,249 1.7 C
- ---- ----
FFBI 21.63 52,602 55.6 F
- ---- ----
FFDF 10.54 - - E
- ----
FTNB 6.54 NA NA B
- ----
FTSB 10.32 NA NA D
- ----
GFSB 20.87 15,618 17.8 D
- ----
GUPB 15.31 - - E
- ----
GWBC - - - E
- ----
HBBI 8.93 - - D
- ----
HCFC 6.02 2,410 3.5 B
- ----
HFSA 14.43 3,291 3.4 E
- ----
HHFC 17.93 NA NA E
- ----
HZFS 13.68 1,688 2.3 D
- ----
INCB - NA NA SELECTED
KYF 19.83 - - E
- ----
LOGN 4.38 - - SELECTED
LXMO - NA NA SELECTED
MIVI - - - SELECTED
- ----
MRKF - NA NA B
- ---- ----
MSBF 18.03 33,183 49.9 F
- ----
NSLB 5.14 - - E
- ----
NWEQ 22.54 24,642 25.5 D
- ----
PCBC 3.11 - - E
- ----
PFFC - - - E
- ----
RELI 8.97 NA NA E
- ----
SCBS - - - B, D, E
- ----
SCCB - NA NA D
- ----
SFFC 22.94 - - SELECTED
SOBI 7.22 - - SELECTED
SSB - - - SELECTED
SZB 15.04 - - SELECTED
- ----
THR 16.63 14,361 16.1 D
- ----
WCFB 0.33 - - A, E
- ----
Maximum 22.94 52,602 55.6
Minimum - - -
Average 8.25 7,485 8.8
Median 6.88 - -
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 4
<PAGE>
FERGUSON & COMPANY EXHIBIT VI.2 - COMPARATIVE GROUP SELECTED
- ------------------
<TABLE>
<CAPTION>
Deposit Current Current Price/
Insurance Stock Market LTM
Agency Price Value Core EPS
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC AMB Financial Corp. Munster IN MW SAIF NASDAQ 04/01/96 13.813 14.75 NA
CCFH CCF Holding Company Jonesboro GA SE SAIF NASDAQ 07/12/95 16.250 14.88 27.1
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 17.250 10.92 12.4
CKFB CKF Bancorp, Inc. Danville KY MW SAIF NASDAQ 01/04/95 18.000 16.69 22.0
INCB Indiana Community Bank, SB Lebanon IN MW SAIF NASDAQ 12/15/94 16.500 15.21 35.1
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 13.250 16.65 15.2
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 15.250 19.29 NA
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 15.250 13.03 18.4
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 18.500 14.60 14.6
SOBI Sobieski Bancorp, Inc. South Bend IN MW SAIF NASDAQ 03/31/95 14.750 13.01 30.7
SSB Scotland Bancorp, Inc Laurinburg NC SE SAIF AMSE 04/01/96 15.500 28.52 NA
SZB SouthFirst Bancshares, Inc. Sylacauga AL SE SAIF AMSE 02/14/95 14.250 11.70 NM
Maximum 18.500 28.52 35.1
Minimum 13.250 10.92 12.4
Average 15.714 15.77 21.9
Median 15.375 14.82 20.2
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 5
<PAGE>
FERGUSON & COMPANY EXHIBIT VI.2 - COMPARATIVE GROUP SELECTED
- ------------------
<TABLE>
<CAPTION>
Tangible ROAA ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Core Before Before Before
Core Price/ Price/ T Price/ Dividend Assets Assets Tang Assets EPS EPS Extra Extra Extra
EPS Book V Book V Assets Yield ($000) (%) (%) ($) ($) (%) (%) (%)
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM MRQ LTM MRQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC 21.6 95.9 95.9 18.6 1.74 83,542 19.4 19.4 NA 0.16 0.49 (0.06) NA
CCFH 40.6 113.3 113.3 16.8 3.08 88,509 14.8 14.8 0.60 0.10 0.47 0.42 2.39
CIBI 12.0 100.1 100.1 11.4 2.32 95,787 11.4 11.4 1.39 0.36 0.64 0.91 4.99
CKFB 20.5 105.8 105.8 27.8 2.44 60,038 25.2 25.2 0.82 0.22 1.29 1.31 4.90
INCB 27.5 134.5 134.5 17.1 2.18 89,215 12.7 12.7 0.47 0.15 0.15 0.62 1.13
LOGN 15.1 107.9 107.9 21.4 3.02 77,668 19.9 19.9 0.87 0.22 1.20 1.40 5.09
LXMO 21.2 101.5 101.5 31.3 - 61,650 30.8 30.8 NA 0.18 0.88 1.33 NA
MIVI 18.2 100.0 100.0 18.5 1.05 70,329 18.5 18.5 0.83 0.21 0.68 0.98 3.63
SFFC 13.6 98.5 98.5 17.5 2.16 82,809 17.8 17.8 1.27 0.34 1.01 1.24 5.29
SOBI 33.5 86.5 86.5 16.5 1.90 78,978 17.7 17.7 0.48 0.11 0.21 0.66 1.18
SSB 21.5 113.6 113.6 41.9 1.94 68,067 36.9 36.9 NA 0.18 1.31 1.77 3.86
SZB 32.4 90.1 90.1 12.6 3.51 93,110 14.0 14.0 0.05 0.11 (0.06) 0.55 (0.43)
Maximum 40.6 134.5 134.5 41.9 3.51 95,787 36.9 36.9 1.39 0.36 1.31 1.77 5.29
Minimum 12.0 86.5 86.5 11.4 - 60,038 11.4 11.4 0.05 0.10 (0.06) (0.06) (0.43)
Average 23.1 104.0 104.0 20.9 2.11 79,142 19.9 19.9 0.75 0.20 0.69 0.93 3.20
Median 21.4 100.8 100.8 18.0 2.17 80,894 18.2 18.2 0.82 0.18 0.66 0.95 3.75
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 6
<PAGE>
FERGUSON & COMPANY EXHIBIT VI.2 - COMPARATIVE GROUP SELECTED
- ------------------
<TABLE>
<CAPTION>
ROACE Loans Loans
Before NPAs/ Loans/ Loans/ Deposits/ Borrowings/ Serviced Serviced/
Extra Merger Current Assets Deposits Assets Assets Assets For Others Assets
(%) Target? Pricing (%) (%) (%) (%) (%) ($000) (%)
Ticker MRQ (Y/N) Date MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AMFC (0.30) N 03/31/97 0.43 97.63 75.30 77.13 1.20 - -
CCFH 2.58 N 03/31/97 0.43 97.24 73.35 75.44 8.47 NA NA
CIBI 7.81 N 03/31/97 0.69 103.25 75.83 73.45 14.61 NA NA
CKFB 5.19 N 03/31/97 0.52 124.50 88.82 71.34 2.09 - -
INCB 4.95 N 03/31/97 NA 94.33 81.64 86.55 - NA NA
LOGN 7.02 N 03/31/97 0.52 99.38 73.44 73.90 4.38 - -
LXMO 4.34 N 03/31/97 0.92 107.66 73.93 68.67 - NA NA
MIVI 5.32 N 03/31/97 0.26 79.40 63.61 80.11 - - -
SFFC 6.96 N 03/31/97 0.79 141.57 82.43 58.23 22.94 - -
SOBI 3.78 N 03/31/97 0.24 94.17 70.33 74.69 7.22 - -
SSB 4.84 N 03/31/97 0.05 110.81 68.03 61.39 - - -
SZB 3.97 N 03/31/97 0.53 102.64 71.32 69.48 15.04 - -
Maximum 7.81 0.92 141.57 88.82 86.55 22.94 - -
Minimum (0.30) 0.05 79.40 63.61 58.23 - - -
Average 4.71 0.49 104.38 74.84 72.53 6.33 - -
Median 4.90 0.52 101.01 73.69 73.68 3.24 - -
</TABLE>
SOURCE: SNL & F&C CALCULATIONS 7
<PAGE>
EXHIBIT VII
<PAGE>
FERGUSON & COMPANY EXHIBIT VII
- ------------------
PRO FORMA ASSUMPTIONS
1. Net proceeds from the conversion were invested at the beginning of the
period at 5.65%, which was the approximate rate on the one-year treasury
bill on June 30, 1997. This rate was selected because it is considered more
representative of the rate the Association is likely to earn.
2. Salida's ESOP will acquire 8% of the conversion stock with loan proceeds
obtained from the Holding Company; therefore, there will be no interest
expense. We assumed that the ESOP expense is 10% annually of the initial
purchase.
3. Salida's RP will acquire 4% of the stock through open market purchases
at $10 per share and the expense is recognized ratably over five years as
the shares vest.
4. All pro forma income and expense items are adjusted for income taxes at
a combined state and federal rate of 38.0%.
5. In calculating the pro forma adjustments to net worth, the ESOP and RP
are deducted in accordance with generally accepted accounting principles.
6. Earnings per share ("EPS") calculations have ignored AICPA SOP 93-6.
Calculating EPS under SOP 93-6 and assuming 10% of the ESOP shares are
committed to be released and allocated to the individual accounts at the
beginning of the period would yield EPS of $.88, $.78, $.71, and $.64, and
price to earnings ratios of 11.4, 12.8, 14.1, and 15.5, at the minimum,
midpoint, maximum, and supermaximum of the range, respectively.
1
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT VII
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MINIMUM OF THE CONVERSION VALUATION RANGE
VALUATION DATE AS OF AUGUST 8, 1997
<TABLE>
<CAPTION>
SALIDA BUILDING AND LOAN ASSOCIATION
- --------------------------------------------------
<S> <C>
1. Conversion Proceeds
Pro Forma Market Value $ 7,650,000
Less: Estimated Expenses (499,000)
---------------
Net Conversion Proceeds $ 7,151,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 7,151,000
Less: ESOP Contributions (612,000)
RP Contributions (306,000)
---------------
Net Conversion Proceeds after ESOP & RP $ 6,233,000
Estimated Incremental Rate of Return(1) 3.50%
---------------
Estimated Additional Income $ 218,342
Less: ESOP Expense (37,944)
RP Expense (37,944)
---------------
$ 142,454
===============
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
--------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 483,000 $ 142,454 $ 625,454
b. Pro Forma Net Worth
June 30, 1997 $ 5,958,000 $6,233,000 $12,191,000
c. Pro Forma Net Assets
June 30, 1997 $76,124,000 $6,233,000 $82,357,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 38.0 percent.
2
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT VII
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MIDPOINT OF THE CONVERSION VALUATION RANGE
VALUATION DATE AS OF AUGUST 8, 1997
<TABLE>
<CAPTION>
SALIDA BUILDING AND LOAN ASSOCIATION
- ------------------------------------------
<S> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $9,000,000
Less: Estimated Expenses (520,000)
---------------
Net Conversion Proceeds $8,480,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $8,480,000
Less: ESOP Contributions (720,000)
RP Contributions (360,000)
---------------
Net Conversion Proceeds after ESOP & RP $7,400,000
Estimated Incremental Rate of Return(1) 3.50%
---------------
Estimated Additional Income $ 259,222
Less: ESOP Expense (44,640)
RP Expense (44,640)
---------------
$ 169,942
===============
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-----------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 483,000 $ 169,942 $ 652,942
b. Pro Forma Net Worth
June 30, 1997 $ 5,958,000 $ 7,400,000 $ 13,358,000
c. Pro Forma Net Assets
June 30, 1997 $76,124,000 $ 7,400,000 $ 83,524,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 38.0 percent.
3
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT VII
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MAXIMUM OF THE CONVERSION VALUATION RANGE
VALUATION DATE AS OF AUGUST 8, 1997
<TABLE>
<CAPTION>
SALIDA BUILDING AND LOAN ASSOCIATION
- ---------------------------------------------------
<S> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 10,350,000
Less: Estimated Expenses (541,000)
---------------
Net Conversion Proceeds $ 9,809,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 9,809,000
Less: ESOP Contributions (828,000)
RP Contributions (414,000)
---------------
Net Conversion Proceeds after ESOP & RP $ 8,567,000
Estimated Incremental Rate of Return (1) 3.50%
---------------
Estimated Additional Income $ 300,102
Less: ESOP Expense (51,336)
RP Expense (51,336)
---------------
$ 197,430
===============
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
---------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 483,000 $ 197,430 $ 680,430
b. Pro Forma Net Worth
June 30, 1997 $ 5,958,000 $ 8,567,000 $ 14,525,000
c. Pro Forma Net Assets
June 30, 1997 $ 76,124,000 $ 8,567,000 $ 84,691,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 38.0 percent.
4
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT VII
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE SUPERMAX OF THE CONVERSION VALUATION RANGE
VALUATION DATE AS OF AUGUST 8, 1997
<TABLE>
<CAPTION>
SALIDA BUILDING AND LOAN ASSOCIATION
- ------------------------------------------------------
<S> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 11,902,500
Less: Estimated Expenses $ (565,000)
---------------
Net Conversion Proceeds $ 11,337,500
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 11,337,500
Less: ESOP Contributions $ (952,200)
RP Contributions $ (476,100)
---------------
Net Conversion Proceeds after ESOP & RP $ 9,909,200
Estimated Incremental Rate of Return(1) 3.50%
---------------
Estimated Additional Income $ 347,119
Less: ESOP Expense $ (59,036)
RP Expense $ (59,036)
---------------
$ 229,046
===============
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
---------------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 483,000 $ 229,046 $ 712,046
b. Pro Forma Net Worth
June 30, 1997 $ 5,958,000 $ 9,909,200 $ 15,867,200
c. Pro Forma Net Assets
June 30, 1997 $ 76,124,000 $ 9,909,200 $ 86,033,200
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 38.0 percent.
5
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT VII
PRO FORMA ANALYSIS SHEET
<TABLE>
<CAPTION>
Name of Association: SALIDA BUILDING AND LOAN ASSOCIATION
Date of Market Prices: August 8, 1997 Colorado Publicly All Publicly
Comparatives Held Thrifts Held Thrifts
------------ ------------ ------------
SYMBOLS VALUE Mean Median Mean Median Mean Median
------------------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-Earnings Ratio P/E
- --------------------
Last Twelve Months N/A
At Minimum of Range 12.2
At Midpoint of Range 13.8 31.4 23.9 16.1 16.1 16.7 16.4
At Maximum of Range 15.2
At Supermax of Range 16.7
Price-Book Ratio P/B
- ----------------
At Minimum of Range 62.8%
At Midpoint of Range 67.4% 112.5 111.2 150.6 150.6 148.4 141.9
At Maximum of Range 71.3%
At Supermax of Range 75.0%
Price-Asset Ratio P/A
- -----------------
At Minimum of Range 9.3%
At Midpoint of Range 10.8% 21.6 17.4 19.5 19.5 15.3 14.0
At Maximum of Range 12.2%
At Supermax of Range 13.8%
Twelve Mo. Earnings Base Y $ 483,000
Period Ended June 30, 1997
Book Value B $ 5,958,000
As of June 30, 1997
Total Assets A $76,124,000
As of June 30, 1997
Return on Money (1) R 3.50%
Conversion Expense X $ 520,000
Underwriting Commission C 0.00%
Percentage Underwritten S 0.00%
Estimated Dividend
Dollar Amount DA $ 270,000
Yield DY 3.00%
ESOP Contributions P $ 720,000
RP Contributions I $ 360,000
ESOP Annual Expense E $ 44,640
RP Annual Contributions M $ 44,640
Cost of ESOP Borrowings F 0.00%
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 38.0 percent.
6
<PAGE>
FERGUSON & COMPANY
- ------------------
EXHIBIT VII
PRO FORMA ANALYSIS SHEET
Calculation of Estimated Value (V) at Midpoint Value
<TABLE>
<CAPTION>
<S> <C> <C>
1. V= P/A(A-X-P-I) $ 9,000,000
---------------------------
1-P/A(1-(CxS))
2. V= P/B(B-X-P-I) $ 9,000,000
---------------------------
1-P/B(1-(CxX))
3. V= P/E(Y-R(X+P+I)-(E+M)) $ 9,000,000
---------------------------
1-P/E(R(1-(CxX))
<CAPTION>
Value
Estimated Value Per Share Total Shares Date
--------------- --------- -------------- ----------------------
<S> <C> <C> <C>
$9,000,000 $10.00 900,000 August 8, 1997
Range of Value
$9.0 million x 1.15 = $10.35 million or 1,035,000 shares at $10.00 per share
$9.0 million x 0.85 = $7.65 million or 765,000 shares at $10.00 per share
Value
Final Value Per Share Total Shares Date
---------------- --------- -------------- ---------------------
$11,902,500 $10.00 1,190,250 August 8, 1997
</TABLE>
7
