<PAGE>
As filed with the Securities and Exchange Commission on September 19, 1997
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NORTH ARKANSAS BANCSHARES, INC.
(Name of Small Busciness Issuer in its charter)
Tennessee 6035 [to be applied for]
- --------------------------------------------------------------------------------
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation or organization) classification code number) identification
number)
200 Olivia Drive
Newport, Arkansas 72112
(870) 523-3611
- --------------------------------------------------------------------------------
(Address and telephone number of principal executive offices and principal place
of business)
Brad Snider, President
and Chief Executive Officer
North Arkansas Bancshares, Inc.
200 Olivia Drive
Newport, Arkansas 72112
(870) 523-3611
- --------------------------------------------------------------------------------
(Name, address and telephone number of agent for service)
Copies to:
Gary R. Bronstein, Esquire
Joan S. Guilfoyle, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Approximate date of proposed sale to the public: As soon as practicable
after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [] _____________
If 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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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
=============================================================================================
Title of Each Class Dollar Proposed Maximum Proposed Maximum
of Securities To Be Amount To Offering Price Aggregate Amount Of
Registered Be Registered Per Share Offering Price (1) Registration Fee
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01
par value $3,703,000 $10.00 $3,703,000 $1122.12
=============================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(d).
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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
PROSPECTUS
Up to 322,000 Shares of Common Stock
NORTH ARKANSAS BANCSHARES, INC.
200 Olivia Drive
Newport, Arkansas 72112
(870) 523-3611
================================================================================
Newport Federal Savings Bank is converting from a federally chartered
mutual savings bank to a federally chartered stock savings bank. As part of the
Conversion, Newport Federal Savings Bank will become a wholly owned subsidiary
of North Arkansas Bancshares, Inc. (the "Company"). The Company was formed in
September 1997 and upon completion of the Conversion will own all of the shares
of Newport Federal Savings Bank. The Common Stock of the Company is being
offered to the public in accordance with a Plan of Conversion. The Plan of
Conversion must be approved by the Office of Thrift Supervision and by a
majority of the votes eligible to be cast by members of Newport Federal Savings
Bank. The offering will not go forward if Newport Federal Savings Bank does not
receive these approvals and the Company does not sell at least the minimum
number of shares.
The shares of Common Stock are first being offered pursuant to
nontransferable subscription rights in a Subscription Offering. Depositor and
borrower members as of certain eligibility dates will receive subscription
rights. Shares of Common Stock not subscribed for in the Subscription Offering
may be offered for sale in a community offering with preference given to
residents of Jackson County, Arkansas.
================================================================================
TERMS OF OFFERING
An independent appraiser has estimated the market value of the converted Newport
Federal Savings Bank to be between $2,380,000 and $3,220,000, which establishes
the number of shares to be offered at a price of $10 per share. Subject to
Office of Thrift Supervision approval, up to 370,300 shares, an additional 15%
above the maximum number of shares, may be offered. Based on these estimates, we
are making the following offering of shares of Common Stock:
. Price Per Share: $10
. Number of Shares Minimum/Maximum: 238,000 to 322,000
. Offering Expenses: $400,000
. Net Proceeds to the Company
Minimum/Maximum: $1,980,000 to $2,820,000
Please refer to Risk Factors beginning on page 1 of this document.
These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
Neither the Securities and Exchange Commission, Office of Thrift Supervision,
nor any state securities regulator has approved or disapproved these securities
or determined if this prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
For information on how to subscribe, call the Stock Information Center at (870)
523-3340.
TRIDENT SECURITIES, INC.
The date of this Prospectus is ________, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Questions and Answers About the Stock Offering
Summary
Selected Financial and Other Data
Risk Factors
Proposed Purchases by Directors and Officers
The Company
Newport Federal Savings Bank
Use of Proceeds
Dividends
Market for the Common Stock
Capitalization
Historical and Pro Forma Capital Compliance
Pro Forma Data
Newport Federal Savings Bank Statements of Income
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Business of North Arkansas Bancshares, Inc.
Business of Newport Federal Savings Bank
Regulation
Taxation
Management of the Company
Management of Newport Federal Savings Bank
The Conversion
Restrictions on Acquisitions of the Company
Description of Capital Stock
Legal and Tax Matters
Experts
Additional Information
Index to Financial Statements of Newport Federal Savings Bank
Glossary
</TABLE>
This document contains forward-looking statements which involve risks
and uncertainties. The Company's actual 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 document.
Please see the Glossary beginning on page A-___ for the meaning of
capitalized terms that are not defined in this document.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q. WHAT IS A MUTUAL TO STOCK CONVERSION?
A: The Conversion is a change in our form of organization. Currently, we
operate as a federally chartered mutual savings bank with no
stockholders. As a result of the Conversion, we will become a federally
chartered stock savings bank. As part of our Conversion, the Company is
offering for sale shares of its Common Stock The Company will be our
sole stockholder and will purchase our stock in exchange for a portion
of the proceeds from its offering.
Q: WHAT IS THE PURPOSE OF THE OFFERING?
A: The stock offering will increase our capital and the amount of funds
available to us for lending and investment activities. This will give
us greater flexibility to diversify operations and expand into other
geographic markets if we choose to do so. As a stock savings
association operating through a holding company structure, we will have
the ability to plan and develop long-term growth and improve our future
access to the capital markets. If our earnings are sufficient in the
future, you might also receive dividends and benefit from the long-term
appreciation of our stock price.
Q: HOW MANY SHARES OF STOCK WILL BE SOLD?
A: Between 238,000 and 322,000 shares of Common Stock will be sold, all at
a price of $10.00 per share. The number of shares to be sold may be
increased to 370,300 shares without further notice to you if market or
financial conditions change prior to completion of the Conversion or if
additional shares are needed to fill the order of our employee stock
ownership plan (the "ESOP").
Q: HOW DO I PURCHASE THE STOCK?
A: You must complete and return the Stock Order Form to us together with
your payment or your authorization for withdrawal of the payment amount
from an account you have with us, on or before ________, 1997. See
pages ___ to __.
Q: HOW MUCH STOCK MAY I PURCHASE?
A: The minimum purchase is 25 shares (or $250). The maximum purchase in
the subscription offering is 5,000 shares (or $50,000), for any
individual person or persons ordering through a single account.
Eligible Account Holders, Supplemental Eligible Account Holders and
Other Members with more than one account at Newport on the applicable
eligibility record date may purchase up to 5.0% of the total offering
of shares (14,000 shares if a total of
(i)
<PAGE>
280,000 shares are sold). In certain instances, your purchase might be
grouped together with purchases by persons with other accounts with
whom you are affiliated or related and in that event the aggregate
purchases may not exceed 5.0% of the total offering of shares (14,000
shares if a total of 280,000 shares are sold). We may decrease or
increase the maximum purchase limitation without notifying you. In the
event that the offering is oversubscribed, shares will be allocated
based upon a formula.
If shares are sold in a Community Offering, the maximum number of
shares that may be purchased by any party, when combined with the
number of shares purchased by other parties with whom your shares may
be aggregated is 5.0% of the total offering of shares.
See pages ___ to ___.
Q: WHAT HAPPENS IF THERE ARE NOT ENOUGH SHARES TO FILL ALL ORDERS?
A: You might not receive any or all of the shares you want to purchase.
If there is an over subscription, the stock will be offered on a
priority basis to the following persons:
. ELIGIBLE ACCOUNT HOLDERS - Persons who had a deposit account
with us on December 31, 1995 with a balance of at least
$50.00. Any remaining shares will be offered to:
. OUR ESOP. Any remaining shares will be offered to:
. SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS - Persons who had a
deposit account with us on ________, 1997 with a balance of at
least $50.00. Any remaining shares will be offered to:
. OTHER MEMBERS - Other depositors and certain borrowers of
ours, as of _______, 1997.
If the above persons do not subscribe for all of the shares, the
remaining shares will be offered to certain members of the general
public with preference given to people who live in Jackson County,
Arkansas. See pages ___ to ___.
Q: WHAT PARTICULAR FACTORS SHOULD I CONSIDER WHEN DECIDING WHETHER OR NOT
TO BUY THE STOCK?
A: Because of the small size of the offering, there may not be an active
market for the shares, which may make it difficult to resell any shares
you may own. Also, before you decide to purchase stock, you should also
read the Risk Factors section on pages ___ of this document.
Q: AS A DEPOSITOR OR BORROWER MEMBER OF NEWPORT FEDERAL SAVINGS BANK, WHAT
WILL HAPPEN IF I DO NOT PURCHASE ANY STOCK?
(ii)
<PAGE>
A: You presently have voting rights while we are in the mutual form;
however, once we convert to the stock form you will lose your voting
rights unless you purchase stock. You are not required to purchase
stock. Your deposit account, certificate accounts and any loans you may
have with us will be not be affected. See pages __ to __.
Q: WHO CAN HELP ANSWER ANY OTHER QUESTIONS I MAY HAVE ABOUT THE STOCK
OFFERING?
A: In order to make an informed investment decision, you should read this
entire document. This section highlights selected information and may
not contain all of the information that is important to you. In
addition, you should contact:
STOCK INFORMATION CENTER
NORTH ARKANSAS BANCSHARES, INC.
200 OLIVIA DRIVE
NEWPORT, ARKANSAS
(870) 523-3340
(iii)
<PAGE>
SUMMARY
This summary highlights selected information from this document and may
not contain all the information that is important to you. To understand the
stock offering fully, you should read carefully this entire document, including
the financial statements and the notes to the financial statements of Newport
Federal Savings Bank. References in this document to "we," "us," and "our" refer
to Newport Federal Savings Bank. In certain instances where appropriate, "us" or
"our" refers collectively to North Arkansas Bancshares, Inc. and Newport Federal
Savings Bank. References in this document to "the Company" refer to North
Arkansas Bancshares, Inc.
NORTH ARKANSAS BANCSHARES, INC.
North Arkansas Bancshares, Inc. was formed in September 1997, at our
direction, as a Tennessee corporation to be the holding company for Newport
Federal Savings Bank. The Company is not an operating company and has not
engaged in any significant business to date. The holding company structure will
provide greater flexibility in terms of operations, expansion and
diversification. See page ___.
NEWPORT FEDERAL SAVINGS BANK
We are a community and customer oriented federal mutual savings bank
with one office located in Newport, Arkansas. We were originally founded in 1934
as a federally chartered mutual savings and loan association. In 1995, we
changed our name to Newport Federal Savings Bank Our primary market area
consists of Jackson County, Arkansas. Historically, we have emphasized
residential mortgage lending, primarily originating one- to four-family mortgage
loans. We also make consumer loans, commercial real estate loans and commercial
business loans. At June 30, 1997, we had total assets of $34.4 million, deposits
of $31.1 million, and total retained earnings of $2.3 million. See pages ___to
___.
On August 20, 1997, we entered into a Purchase and Assumption Agreement
with NationsBank, N.A. pursuant to which we agreed to purchase the deposits of
the Newport branch of NationsBank and to purchase the real estate on which the
office is located and certain loans and other assets. We expect to assume
approximately $6 million in deposits based on the balance of deposits at the
branch as of June 30, 1997. We must obtain regulatory approval before we can
close this transaction. Assuming we obtain such approval, we expect that this
transaction will close in January 1998.
THE STOCK OFFERING
The Company is offering between 238,000 and 322,000 shares of Common
Stock at $10.00 per share. The number of shares to be sold may be increased to
370,300 shares without further notice to you if market or financial conditions
change prior to completion of the Conversion or if additional shares are needed
to fill the order of our ESOP.
(iv)
<PAGE>
STOCK PURCHASES
The Company is first offering its shares of Common Stock in a
Subscription Offering. Depositor and borrower members as of certain eligibility
dates will receive subscription rights. The shares of Common Stock will be
offered on the basis of priorities. Any remaining shares may be offered in a
Community Offering or in a Syndicated Community Offering. See pages __ to __.
SUBSCRIPTION RIGHTS
You may not sell or assign your subscription rights. Any transfer of
subscription rights is prohibited by law. All persons exercising their
subscription rights will be required to certify that they are purchasing shares
solely for their own account and that they have no agreement or understanding
regarding the sale or transfer of shares.
THE OFFERING RANGE AND DETERMINATION OF THE PRICE PER SHARE
The offering range is based on an independent appraisal of the pro
forma market value of the common stock by Ferguson & Company ("Ferguson"), an
appraisal firm experienced in appraisals of savings institutions. Ferguson has
estimated, that in its opinion as of September 2, 1997 the aggregate pro forma
market value of the Common Stock ranged between $2.4 million and $3.2 million
(with a midpoint of $2.8 million) (the "Estimated Valuation Range"). The pro
forma market value of the shares is our market value after giving effect to the
sale of shares in this offering. The appraisal was based in part upon our
financial condition and operations and the effect of the additional capital
raised by the sale of Common Stock in this offering. The $10.00 price per share
was determined by our board of directors and is the price most commonly used in
stock offerings involving conversions of mutual savings institutions. The
independent appraisal will be updated prior to the consummation of the
Conversion. If the pro forma market value of the Common Stock is either below
$2.4 million or above $3.7 million, we will notify you and you will have the
opportunity to modify or cancel your order. See pages __ to __.
TERMINATION OF THE OFFERING
The Subscription Offering will terminate at 12:00 p.m., Central Time,
on ________, 1997. The Community Offering, if any, may terminate at any time
without notice but no later than ___________, 1997, without approval by the OTS.
BENEFITS TO MANAGEMENT FROM THE OFFERING
Our full-time employees will participate in the offering through
purchases of stock by our ESOP, which is a form of retirement plan. Following
the Conversion, we also intend to implement a management recognition plan
("MRP") under which officers will be entitled to receive awards of restricted
stock and a stock option and incentive plan (the "Option Plan"), which will
benefit our officers and directors. However, the MRP and Option Plan may not be
adopted until at least six
(v)
<PAGE>
months after the Conversion and are subject to stockholder approval and
compliance with OTS regulations if adopted within the first year following our
Conversion. See pages ___to ___.
USE OF THE PROCEEDS FROM THE SALE OF COMMON STOCK
The Company will use a portion of the net proceeds from the stock
offering to make a loan to our ESOP to fund its purchase of 8% of the Common
Stock issued in the Conversion. The Company will use approximately 50% of the
net proceeds to purchase all the capital stock to be issued by us in the
Conversion. The Company will retain the balance of the funds as its initial
capitalization. These funds will serve as a possible source of funds for the
payment of dividends to stockholders or to repurchase shares of Common Stock in
the future and for general corporate purposes. See page __.
DIVIDENDS
Management of the Company has not yet made a decision regarding the
payment of dividends. The Company will consider a policy of paying cash
dividends on its Common Stock following the Conversion.
See page __.
MARKET FOR THE COMMON STOCK
The Company intends to list the Common Stock over-the-counter through
the OTC "Electronic Bulletin Board" under the symbol "_____." Since the size of
the offering is small, it is unlikely that an active and liquid trading market
for the shares will develop and be maintained. Investors should have a long-term
investment intent. Persons purchasing shares may not be able to sell their
shares when they desire or to sell them at a price equal to or above $10.00. See
page __.
IMPORTANT RISKS IN OWNING THE COMPANY'S COMMON STOCK
Before you decide to purchase stock in the offering, you should read
the "Risk Factors" section on pages ____ of this document.
(vi)
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
We are providing the following summary financial information about us
for your benefit. This information is derived from our audited financial
statements for each of the fiscal years shown below. The following information
is only a summary and you should read it in conjunction with our financial
statements and notes to our financial statements which you can find beginning on
page F-___ of this Prospectus.
SELECTED FINANCIAL DATA
The following table sets forth certain information concerning our
financial position at the dates indicated.
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------
1997 1996
-------- ------
(IN THOUSANDS)
<S> <C> <C>
Total assets............................................ $ 34,379 $ 32,446
Cash.................................................... 884 1,167
Certificates of deposit with other financial institutions 691 890
Securities held to maturity............................. 5,923 6,310
Loans receivable, net................................... 24,794 21,982
Deposits................................................ 31,073 29,657
Retained earnings substantially restricted 2,266 2,465
</TABLE>
SUMMARY OF OPERATIONS
The following table sets forth certain information concerning our
results of operations for the periods shown.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------
1997 1996
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest income........................................ $ 2,493 $ 2,328
Interest expense....................................... 1,597 1,525
-------- ---------
Net interest income ................................... 896 803
-------- ---------
Provision for loan losses.............................. 90 10
-------- ---------
Net interest income after provision
for loan losses...................................... 806 793
Noninterest income..................................... 19 11
Noninterest expense (1)................................ 1,157 726
-------- ---------
Income (loss) before taxes............................. (332) 78
Income tax expense..................................... (133) 6
-------- ---------
Net income (loss)...................................... $ (199) $ 72
======== ==========
</TABLE>
- --------------
(1) Includes approximately $465,000 in nonrecurring expenses. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Comparison of Results of Operations for the
Years Ended June 30, 1997 and 1996."
(vii)
<PAGE>
KEY OPERATING RATIOS
The table below sets forth certain performance ratios for us for the
periods indicated.
<TABLE>
<CAPTION>
AT OR FOR THE
YEAR ENDED JUNE 30,
--------------------------
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
PERFORMANCE RATIOS:
Return on assets (ratio of net earnings (loss)
to average total assets).......................... (.60)% .23% .71%
Return on equity (ratio of net earnings (loss)
to average equity)................................ (8.41) 2.96 9.35
Ratio of average interest-earning assets to
average interest-bearing liabilities.............. 102.60 104.12 105.15
Ratio of net interest income, after provision
for loan losses, to noninterest expense............. 69.66 109.23 156.93
Net interest rate spread............................. 2.54 2.49 2.78
Net yield on average interest-earning assets......... 2.77 2.70 3.01
ASSET QUALITY RATIOS:
Nonperforming loans to total loans
at end of period.................................. .30 .14 1.60
Nonperforming loans to total assets.................. .21 .09 1.06
Nonperforming assets to total assets
at end of period.................................. .21 .47 1.40
Allowance for loan losses to nonperforming
loans at end of period............................ 202.70 243.33 19.50
Allowance for loan losses to total loans, net........ .60 .33 .31
CAPITAL RATIOS:
Equity to total assets at end of period.............. 6.59 7.60 7.85
Average equity to average assets..................... 7.08 7.72 7.57
REGULATORY CAPITAL RATIOS:
Tangible capital..................................... 6.59 7.59 7.85
Core capital......................................... 6.59 7.59 7.85
Total risk-based capital............................. 13.18 15.67 17.84
OTHER DATA:
Number of full service offices....................... 1 1 1
</TABLE>
(viii)
<PAGE>
RISK FACTORS
In addition to the other information in this document, you should
consider carefully the following risk factors in deciding whether to invest in
the Common Stock.
LACK OF ACTIVE MARKET FOR COMMON STOCK
Due to the small size of the offering, it is highly unlikely that an
active trading market will develop and be maintained. If an active market does
not develop, you may not be able to sell your shares promptly or perhaps at all,
or sell your shares at a price equal to or above the price you paid for the
shares. The Common Stock may not be appropriate as a short-term investment. See
"Market for the Common Stock."
BELOW AVERAGE RETURN ON AVERAGE EQUITY AND INCREASED EXPENSES IMMEDIATELY AFTER
CONVERSION
Return on average equity (net income divided by average equity) is a
ratio used by many investors to compare the performance of a savings institution
to its peers. As a result of the Conversion, our equity will increase
substantially. Our expenses also will increase because of the costs associated
with our ESOP, MRP, and the costs of being a public company. Because of the
increases in our equity and expenses, our return on equity may decrease as
compared to our performance in previous years. Initially, we intend to invest
the net proceeds in short term investments which generally have lower yields
than residential mortgage loans. At June 30, 1996 and 1997 our return on average
equity was (8.41)% and 2.96%, respectively. A lower return on equity could
reduce the trading price of our shares.
RECENT OPERATING RESULTS
Our net interest income and net income in recent years have been below
what other institutions of a similar size to us have earned. During the year
ended June 30, 1997, we incurred certain nonrecurring expenses as a result of a
special assessment imposed on all institutions whose deposits are insured by the
Savings Association Insurance Fund ("SAIF") of the FDIC and the adoption of a
director retirement plan. In addition, our net interest income was below our
peers since we have a higher percentage of our assets in fixed assets rather
than interest-earning assets and we have a higher cost of funds than do other
similarly-sized thrift institutions not operating in the same market as well.
While the net proceeds we receive from the Conversion will result in an increase
in our interest-earning assets and thereby interest income, we will also incur
additional expenses as a result of the implementation of the ESOP and MRP and
the costs associated with being a public company. We cannot guarantee that our
profitability will improve after the Conversion. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Subsequent to June 30, 1997, our largest loan became delinquent. This
loan, which had a balance of $625,000 at June 30, 1997, is a participation in a
larger loan which had a total principal
1
<PAGE>
balance of $5.8 million and is secured by a 625-room hotel located in Oklahoma
City. The loan payment was not made due to deteriorating cash flow from
operations. The lead lender has demanded payment on the loan. There can be no
assurance that this delinquency will be cured or, if the lead lender proceeds to
foreclosure that the underlying property can be sold at a price sufficient to
repay us in full. Our net interest income may be further depressed if the loan
remains a nonearning asset.
NONRESIDENTIAL LENDING
Although our primary lending activity is the origination of one- to
four-family mortgage loans, approximately $7.5 million, or 29.94% of our gross
loan portfolio at June 30, 1997 consisted of loans other than single-family
mortgage loans. Such loans included $3.7 million in loans secured by commercial
and multi-family real estate, $3.6 million in consumer loans and $93,000 in
commercial business loans. Following the Conversion, we intend to continue to
grow our nonresidential lending portfolio. 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. These risks
can be significantly affected by supply and demand conditions in the market for
commercial space, and, as such, may be subject to a greater extent to adverse
conditions in the economy generally. 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.
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.
POTENTIAL IMPACT OF CHANGES IN INTEREST RATES AND THE CURRENT INTEREST RATE
ENVIRONMENT
Our ability to make a profit, like that of most financial institutions,
is substantially dependent on our net interest income, which is the difference
between the interest income we earn on our interest-earning assets (such as
mortgage loans) and the interest expense we pay on our interest-bearing
liabilities (such as deposits). Because a portion of the loans we originate have
fixed rates and have longer effective maturities than our interest-bearing
liabilities, the yield on our interest-earning assets generally will adjust more
slowly to changes in interest rates than the cost of our interest-bearing
liabilities. As a result, our net interest income could be adversely affected by
material and prolonged increases in interest rates. Our earnings may also be
adversely affected by rising interest rates due to decreased customer demand.
Although we attempt to reduce this risk by primarily originating adjustable-rate
loans ("ARMs"), the rates on such loans are fixed for set periods of time (e.g.,
one, three or five years). In addition, the terms of such loans do not permit us
to increase the rate more than 2.0% at each rate adjustment or above a fixed
"ceiling rate." In addition,
2
<PAGE>
we may experience an increase in delinquencies on our ARMs when interest rates
rise since the payments that borrowers are then required to pay will increase.
The average life of loans and mortgage-backed securities can also be
affected by changes in interest rates. As interest rates decline, borrowers tend
to refinance higher-rate, fixed rate loans to a lower rate. We also experience
an increase in prepayments on mortgage-backed securities as the loans underlying
such securities are prepaid. Under these circumstances, we are subject to
reinvestment risk to the extent that we are not able to reinvest such
prepayments at rates that are comparable to the rates on the prepaid loans or
mortgage-backed securities.
Our investment portfolio is also affected by changes in interest rates
since a substantial portion of our investments carry fixed rates. Generally, the
value of a fixed rate investment will decrease as interest rates rise. As of
June 30, 1997, the market value of our investment portfolio exceeded the
carrying value of such investments by $28,000.
DEPENDENCE ON PRESIDENT
Our successful operations depend to a considerable degree on our
President, Brad Snider and the loss of his services could adversely affect us.
We have attempted to provide for his continued employment with us by entering
into a three-year employment agreement with Mr. Snider. Mr. Snider could
terminate his employment at any time, however. See "Management of Newport
Federal Savings Bank" and " -- Executive Compensation -- Employment Agreement."
ANTI-TAKEOVER PROVISIONS AND STATUTORY PROVISIONS THAT COULD DISCOURAGE HOSTILE
ACQUISITIONS OF CONTROL
Provisions in the Company's charter and bylaws, the General Corporation
Law of the state of Tennessee, and certain federal regulations may make it
difficult, and expensive, to pursue a tender offer, change in control or
takeover attempt which we oppose. 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. In addition, these provisions may
reduce the trading price of our stock. These provisions include: restrictions on
the acquisition of the Company's equity securities and limitations on voting
rights; the classification of the terms of the members of the board of
directors; certain provisions relating to the meeting of stockholders; denial of
cumulative voting by stockholders in the election of directors; the issuance of
preferred stock and additional shares of Common Stock without shareholder
approval; and super majority provisions for the approval of certain business
combinations. See "Restrictions on Acquisitions of the Company"
POSSIBLE VOTING CONTROL BY DIRECTORS AND OFFICERS
The proposed purchases of the Common Stock by our directors, officers
and ESOP, as well as the potential acquisition of Common Stock through the
Option Plan and MRP, could make it
3
<PAGE>
difficult to obtain majority support for stockholder proposals which are opposed
by us. In addition, the voting of those shares could enable us to block the
approval of transactions (i.e., business combinations and amendment to our
charter and bylaws) requiring the approval of 80% of the stockholders under the
Company's charter. See "Management of Newport Federal Savings Bank -- Executive
Compensation -- Employee Stock Ownership Plan," " -- Proposed Future Stock
Benefit Plans -- Stock Option Plan," " -- Management Recognition Plan,"
"Description of Capital Stock," and "Restrictions on Acquisitions of the
Company."
POSSIBLE DILUTIVE EFFECT OF MRP AND STOCK OPTIONS
If the Conversion is completed and stockholders subsequently approve
the MRP and Option Plan, we will issue stock to our officers and directors
through these plans. If the shares for the MRP and stock options are issued from
our authorized but unissued stock, your ownership percentage could be diluted by
up to approximately __% and the trading price of our stock may be reduced. See
"Pro Forma Data," "Management of Newport Federal Savings Bank -- Proposed Future
Stock Benefit Plans -- Stock Option Plan," and "-- Management Recognition Plan."
FINANCIAL INSTITUTION REGULATION OF THE THRIFT INDUSTRY
We are subject to extensive regulation, supervision, and examination by
the OTS and FDIC. A bill has been introduced to the House Banking Committee that
would consolidate the OTS with the Office of the Comptroller of the Currency
("OCC"). If this regulation is approved, we could be forced to become a state or
national commercial bank. If we become a commercial bank, our investment
authority, branching authority and the ability of the Company to engage in,
diversified activities may be limited, which could affect our profitability. See
"Regulation."
ARKANSAS USURY LAW
In 1982, Arkansas adopted an amendment to its Constitution which
provides, in part, that the maximum rate of interest we can charge on consumer
loans is 5% over the Federal Reserve Discount Rate in effect at the time the
loan is made up to a maximum of 17%. Loans secured by a first mortgage on
residential real estate and all commercial loans are not subject to this maximum
limitation. If we charged an interest rate on consumer loans in excess of these
limits, we could be required to forfeit both the amount of the loan as well as
any interest we have collected.
POSSIBLE ADVERSE TAX CONSEQUENCES OF THE SUBSCRIPTION RIGHTS
We have received the opinion of Ferguson that the subscription rights
granted to eligible members in connection with the Conversion have no value.
This opinion is not binding on the Internal Revenue Service ("IRS"), however.
Should the IRS determine that the subscription rights do have ascertainable
value, you could be taxed as a result of your exercise of such rights in an
amount equal to such value.
4
<PAGE>
BRANCH ACQUISITION
On August 20, 1997, we entered into a Purchase and Assumption Agreement
with NationsBank, N.A. pursuant to which we agreed to purchase the deposits of
the Newport branch of NationsBank and to purchase the real estate on which the
office is located and certain loans and other assets. We expect to assume
approximately $6 million in deposits based on the balance of deposits at the
branch as of June 30, 1997. We must obtain regulatory approval before we can
close this transaction. We cannot assure you that we will receive regulatory
approval to purchase the branch nor can we assure of the impact on our net
interest income of the additional deposits.
RESTRICTIONS ON REPURCHASE OF SHARES
Generally, during the first year following the Conversion, the Company
may not repurchase its shares. During each of the second and third years
following the Conversion, the Company may repurchase up to 5% of its outstanding
shares. During those periods, if we decide that additional repurchases would be
a good use of funds, we would not be able to do so, without obtaining OTS
approval. There is no assurance that OTS approval would be given. See "The
Conversion -- Restrictions on Repurchase of Shares."
PROPOSED PURCHASES BY DIRECTORS AND OFFICERS
The following table sets forth the approximate purchases of Common
Stock by each director and executive officer and their associates in the
Conversion. The table assumes that 280,000 shares (the midpoint of the Estimated
Valuation Range) of the Common Stock will be sold at $10.00 per share and that
sufficient shares will be available to satisfy their subscriptions.
<TABLE>
<CAPTION>
AGGREGATE
TOTAL PRICE OF PERCENT
SHARES SHARES OF SHARES
NAME POSITION PURCHASED PURCHASED PURCHASED
- ---- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
O. E. Guinn, Jr. Director
Kaneaster Hodges, Jr. Director
Paul K. Holmes Director
John Minor Director
Brad Snider Director;
President and
Chief Executive
Officer
</TABLE>
All directors and executive
officers as a group (5 persons)
ESOP
MRP
5
<PAGE>
THE COMPANY
The Company was formed as a Tennessee corporation in September 1997 at
our direction for the purpose of serving as our holding company after the
Conversion. Prior to the Conversion, it has not engaged and is not expected to
engage in any material operations. The Company has received the approval of the
OTS to acquire control of us upon completion of the Conversion. Upon
consummation of the Conversion, the only assets the Company is expected to own
are the capital stock we will issue in the Conversion, a note receivable from
our ESOP and any proceeds from the offering it retains.
As a holding company, the Company will have greater flexibility than we
would have to diversify its business activities through the formation of
subsidiaries or through acquisition. The Company will be classified as a unitary
savings and loan holding company after the Conversion and will be required to
comply with OTS regulations and be subject to examination.
The Company's executive offices are located at 200 Olivia Drive,
Newport, Arkansas 72112 and its main telephone number is (870) 523-3611.
NEWPORT FEDERAL SAVINGS BANK
We are a federal mutual savings bank operating through one office in
Newport, Arkansas. We were founded in 1934 as a federally chartered institution
and a member of the FHLB System. Our deposits are insured up to applicable
limits by the Federal Deposit Insurance Corporation ("FDIC") under the Savings
Association Insurance Fund ("SAIF"). At June 30, 1997, we had total assets of
$34.4 million, total deposits of $31.1 million and total retained earnings of
$2.3 million.
On August 20, 1997, we entered into a Purchase and Assumption Agreement
with NationsBank, N.A. pursuant to which we agreed to purchase the deposits of
the Newport branch of NationsBank and to purchase the real estate on which the
office is located and certain loans and other assets. We expect to assume
approximately $6 million in deposits based on the balance of deposits at the
branch as of June 30, 1997. We must obtain regulatory approval before we can
close this transaction. Assuming we obtain such approval, we expect that this
transaction will close in January 1998.
Our principal business consists of attracting deposits from the general
public and originating residential mortgage loans. We also offer various types
of consumer loans and commercial business loans.
Our executive offices are located at 200 Olivia Drive, Newport,
Arkansas 72112 and its main telephone number is (870) 523-3611.
6
<PAGE>
USE OF PROCEEDS
The Company will retain 50% of the net proceeds from the offering and
will use the balance to purchase all of the capital stock we will issue in
connection with the Conversion. A portion of the net proceeds to be retained by
the Company will be lent to our employee stock plan to fund its purchase of 8%
of the shares sold in the Conversion. On a short-term basis, the balance of the
net proceeds retained by the Company initially will be invested in short-term
investments. The net proceeds subsequently may be used to fund acquisitions of
other financial services institutions or to diversify into non banking
activities, although we have no current plans or agreements to do so. Subject to
applicable regulatory restrictions, the net proceeds may also serve as a source
of funds for the repurchase of shares or for the payment of dividends to
stockholders, although the Company has not yet adopted a dividend policy. A
portion of the net proceeds may also be used to fund the purchase of 4.0% of the
shares for the MRP which is anticipated to be adopted following the Conversion.
See "Pro Forma Data."
The funds we receive from the sale of our capital stock to the Company
will be added to our general funds and be used for general corporate purposes
including: (i) investment in mortgages and other loans, (ii) U.S. Government and
federal agency securities, (iii) mortgage-backed securities, (iv) funding loan
commitments or (v) repaying FHLB advances. However, initially, we intend to
invest the net proceeds in short-term investments until we can deploy the
proceeds into higher yielding loans. The funds added to our capital will further
strengthen our capital position.
The net proceeds may vary because the total expenses of the Conversion
may be more or less than those estimated. We expect our estimated expenses to be
$400,000. Our estimated net proceeds will range from $2.0 million to $2.8
million (or up to $3.3 million in the event the maximum of the Estimated
Valuation Range is increased to $3.7 million). See "Pro Forma Data." The net
proceeds will also vary if the number of shares to be issued in the Conversion
is adjusted to reflect a change in our estimated pro forma market value.
Payments for shares made through withdrawals from existing deposit accounts with
us will not result in the receipt of new funds for investment by us but will
result in a reduction of our liabilities and interest expense as funds are
transferred from interest-bearing certificates or accounts.
DIVIDENDS
Although no decision has been made yet regarding the payment of
dividends, the Company may consider a policy of paying cash dividends on the
Common Stock following the Conversion. However, declarations of dividends by the
board of directors will depend upon a number of factors, including: (i) the
amount of the net proceeds retained by the Company in the Conversion, (ii)
investment opportunities available, (iii) capital requirements, (iv) regulatory
limitations, (v) results of operations and financial condition, (vi) tax
considerations, and (vii) general economic conditions. Upon review of such
considerations, the board may authorize future dividends if it deems such
payment appropriate and in compliance with applicable law and regulation. In
addition, from time to time in an effort to manage capital at a desirable level,
the board may determine to pay special
7
<PAGE>
cash dividends. Special cash dividends may be paid in addition to, or in lieu
of, regular cash dividends. For a period of one year following the completion of
the Conversion, we will not pay any dividends that would be construed as a
return of capital nor take any actions to pursue or propose such dividends. In
addition, there can be no assurance that regular or special dividends will be
paid, or, if paid, will continue to be paid. See "Historical and Pro Forma
Capital Compliance," "The Conversion -- Effects of Conversion to Stock Form on
Savers and Borrowers of Newport Federal Savings Bank-- Liquidation Account" and
"Regulation -- Dividend and Other Capital Distribution Limitations."
The Company is not subject to OTS regulatory restrictions on the
payment of dividends to its stockholders although the source of such dividends
will be dependent in part upon the receipt of dividends from us. The Company is
subject, however, to the requirements of Tennessee law. Under Tennessee law, the
Company may pay a dividend as long as it will not affect the ability of the
Company, after the dividend has been distributed, to pay its debts in the
ordinary course of business or result in its assets being less than the sum of
its liabilities plus the amount that would be needed (if any) to satisfy any
preferential rights upon a dissolution of the Company of any stockholders with
rights ahead of those receiving the dividend.
In addition to the foregoing, the portion of our earnings which have
been appropriated for bad debt reserves and deducted for federal income tax
purposes cannot be used by us to pay cash dividends to the Company without the
payment of federal income taxes by us at the then current income tax rate on the
amount deemed distributed, which would include the amount of any federal income
taxes attributable to the distribution. See "Taxation -- Federal Taxation" and
Note 9 to the Financial Statements. The Company does not contemplate any
distribution by us that would result in a recapture of our bad debt reserve or
otherwise create federal tax liabilities.
MARKET FOR THE COMMON STOCK
The Company has never issued Common Stock to the public. Consequently,
there is no established market for the Common Stock. Following completion of the
Offering, the Company intends to list the Common Stock over-the-counter through
the OTC "Electronic Bulletin Board" under the symbol "________" and the Company
intends to request that Trident Securities Inc. ("Trident Securities") undertake
to match offers to buy and offers to sell the Common Stock. Trident Securities
has no obligation to match offers to buy and offers to sell and may cease doing
so at any time. There can be no assurance that timely or accurate quotations
will be available on the OTC "Electronic Bulletin Board." In addition, the
existence of a public trading market will depend upon the presence in the market
of both willing buyers and willing sellers at any given time. The presence of a
sufficient number of buyers and sellers at any given time is a factor over which
neither the Company nor any broker or dealer has control. Due to the relatively
small number of shares of Common Stock being offered in the Conversion and the
concentration of ownership, it is unlikely that an active or liquid trading
market will develop or be maintained. Further, the absence of an active and
liquid trading market may make it difficult to sell the Common Stock and may
have an
8
<PAGE>
adverse effect on the price of the Common Stock. Purchasers should consider the
potentially illiquid and long-term nature of their investment in the shares
offered hereby.
The aggregate price of the Common Stock is based upon an independent
appraisal of the pro forma market value of the Common Stock. However, there can
be no assurance that an investor will be able to sell the Common Stock purchased
in the Conversion at or above the Purchase Price.
9
<PAGE>
CAPITALIZATION
The following table presents our historical capitalization as of June
30, 1997 and the pro forma consolidated capitalization of Company after giving
effect to the Conversion, based upon the sale of the number of shares shown
below and the other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED CAPITALIZATION OF
CAPITALIZATION THE COMPANY AT JUNE 30, 1997 BASED ON THE SALE OF
OF THE --------------------------------------------------------
BANK AT 238,000 SHARES 280,000 SHARES 322,000 SHARES 370,300 SHARES
JUNE 30, AT $10.00 AT $10.00 AT $10.00 AT $10.00
1997 PER SHARE PER SHARE PER SHARE PER SHARE
-------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits (1).............................................. $ 31,073 $ 31,073 $ 31,073 $ 31,073 $ 31,073
FHLB advances............................................. 618 618 618 618 618
---------- ---------- ---------- ---------- ----------
Total deposits and borrowed funds....................... $ 31,691 $ 31,691 $ 31,691 $ 31,691 $ 31,691
========== ========== ========== ========== ==========
Capital stock
Preferred stock, $0.01 par value per share:
authorized - 3,000,000 shares;
assumed outstanding - none............................. -- -- -- -- --
Common Stock, $0.01 par value per share
authorized - 9,000,000 shares;
shares to be outstanding - as shown.................... -- 2 3 3 4
Paid-in capital (2)..................................... -- 1,978 2,397 2,817 3,229
Less: Common Stock acquired by ESOP.................... -- (190) (224) (258) (296)
Common stock acquired by MRP..................... -- (95) (112) (129) (148)
Retained earnings -- substantially restricted........... 2,266 2,266 2,266 2,266 2,266
---------- ---------- ---------- ----------- ----------
Total stockholders' equity.............................. $ 2,266 $ 3,960 $ 4,330 $ 4,700 $ 5,125
========== ========== =========== ========== ==========
</TABLE>
- --------------------
(1) Withdrawals from savings accounts for the purchase of stock have not
been reflected in these adjustments. Any withdrawals will reduce pro
forma capitalization by the amount of such withdrawals.
(2) Based upon the estimated net proceeds from the sale of capital stock
less the par value of shares sold.
10
<PAGE>
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
The following table shows our historical capital position relative to
our regulatory capital requirements as of June 30, 1997 and on a pro forma basis
after giving effect to the Conversion and based upon the sale of the number of
shares shown below and the other assumptions set forth under "Pro Forma Data."
The definitions of the terms used in the table are those provided in the capital
regulations issued by the OTS. For a discussion of the capital standards
applicable to us, see "Regulation -- Regulation of the Bank -- Regulatory
Capital Requirements."
<TABLE>
<CAPTION>
PRO FORMA AT JUNE 30, 1997 BASED ON THE SALE OF /(1)/:
------------------------------------------------------
MINIMUM OF MIDPOINT OF
238,000 SHARES 280,000 SHARES
HISTORICAL AT AT $10.00 AT $10.00
JUNE 30, 1997 PER SHARE 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................ $ 2,266 6.6% $ 2,971 8.4% $ 3,130 8.8%
======= ====== ======== ===== ========= ======
Tangible capital........................ $ 2,266 6.6% $ 2,971 8.4% $ 3,130 8.8%
Tangible capital requirement............ 516 1.5 529 1.5 532 1.5
------- ------- -------- ------- --------- -------
Excess............................... $ 1,750 5.1% $ 2,442 6.9% $ 2,598 7.3%
======= ======= ======== ======= ========= =======
Core capital............................ $ 2,266 6.6% $ 2,971 8.4% $ 3,130 8.8%
Core capital requirement................ 1,031 3.0 1,058 3.0 1,064 3.0
------- ------ -------- ------- ------------------
Excess............................... $ 1,235 3.6% $ 1,913 5.4% $ 2,066 5.8%
======= ====== ======== ======= ========= ========
Total regulatory capital................ $ 2,411 13.2% $ 3,119 16.8% $ 3,278 17.5%
Risk-based capital requirement.......... 1,463 8.0 1,489 8.0 1,497 8.0
------- ------- -------- ------- --------- -------
Excess............................... $ 948 5.2% $ 1,630 8.8% $ 1,781 9.5%
======= ====== ======== ======= ========= =======
<CAPTION>
PRO FORMA AT JUNE 30, 1997 BASED ON THE SALE OF /(1)/:
------------------------------------------------------
MAXIMUM OF MAXIMUM, AS ADJUSTED
322,000 SHARES 370,300 SHARES
AT $10.00 AT $10.00
PER SHARE PER SHARE
----------------------------------------------
PERCENT OF PERCENT OF
AMOUNT ASSETS (2) AMOUNT ASSETS (2)
------ ---------- ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Capital under generally accepted
accounting principles................ $ 3,289 9.2% $ 3,473 9.7%
======== ====== ======= ======
Tangible capital........................ $ 3,289 9.2% $ 3,473 9.7%
Tangible capital requirement............ 535 1.5 538 1.5
-------- ------- ------- -------
Excess............................... $ 2,754 7.7% $ 2,935 8.2%
======== ======= ======= =======
Core capital............................ $ 3,289 9.2% $ 3,473 9.7%
Core capital requirement................ 1,070 3.0 1,076 3.0
-------- ------- ------- ------
Excess............................... $ 2,219 6.2% $ 2,397 6.7%
======== ======= ======= ======
Total regulatory capital................ $ 3,437 18.3% $ 3,621 19.1%
Risk-based capital requirement.......... 1,505 8.0 1,514 8.0
-------- ------- ------- -------
Excess............................... $ 1,932 10.3% $ 2,107 11.1%
======== ====== ======= =====
</TABLE>
- ---------------------
(1) Assumes that the Company will purchase all of our capital stock to be
issued upon Conversion in exchange for 50% the net proceeds from the
Company offering. Assumes net proceeds distributed to the Company or to us
initially are invested in short-term securities that carry a risk-weight
equal to the ratio of risk-weighted assets to total assets at June 30,
1997. Assumes the ESOP purchases 8% of the shares to be sold in the
Conversion and borrows the funds needed to purchase such shares from
the Company. Although repayment of such debt will be secured solely by the
shares purchased by the ESOP, we expect 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. Assumes a number of issued and
outstanding shares of Common Stock equal to 4% of the Common Stock to be
sold in the Conversion will be purchased by the MRP after the Conversion.
The dollar amount of the Common Stock possibly to be purchased by the MRP
is based on the price per share in the Conversion and represents unearned
compensation and is reflected as a reduction of capital. Such amounts do
not reflect possible increases or decreases in the value of such stock
relative to the price per share in the Conversion. As we accrue
compensation expense to reflect the vesting of such shares pursuant to the
MRP, the charge against capital will be reduced accordingly. Does not
reflect a possible increase in capital upon the exercise of options by
participants in the Option Plan, 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
(28,000 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. Under the MRP and the Option Plan, shares issued to participants
could be newly issued shares or, subject to regulatory restrictions,
shares repurchased in the market. The MRP and the Option Plan are required
to be approved by the Company's stockholders and will not be implemented
until at least six months after the Conversion. See "Management of Newport
Federal Savings Bank -- Proposed Future Stock Benefit Plans."
(2) Based on our total assets determined under generally accepted accounting
principles for equity purposes, adjusted total assets for the purposes of
the tangible and core capital requirements and risk-weighted assets for
the purpose of the risk-based capital requirement.
11
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $2.0 million and $3.3 million at the minimum
and maximum, as adjusted, of the Estimated Valuation Range, based upon the
following assumptions: (i) all of the shares will be sold in the Subscription or
Community Offering; (ii) expenses, including the marketing fee to be paid to
Trident Securities, will amount to $400,000.
The following table sets forth our historical net earnings and
stockholders' equity prior to the Conversion and the pro forma consolidated net
income (loss) and stockholders' equity of the Company following the Conversion.
Pro forma consolidated net earnings and stockholders' equity have been
calculated as if the Common Stock to be issued in the Conversion had been sold
at July 1, 1996, and the estimated net proceeds had been invested at 5.65%,
which was approximately equal to the one-year U.S. Treasury bill rate at June
30, 1997. The one-year U.S. Treasury bill rate, rather than an arithmetic
average of the average yield on interest-earning assets and average rate paid on
deposits, has been used to estimate income on net proceeds because it is
believed that it is a more accurate estimate of the rate that would be obtained
on an investment of net proceeds from the offering. In calculating pro forma
income, an effective state and federal income tax rate of 36% has been assumed,
resulting in an after tax yield of 3.62%. Withdrawals from deposit accounts for
the purchase of shares are not reflected in the pro forma adjustments. As
discussed under "Use of Proceeds," the Company expects to retain 50% of the net
Conversion proceeds, part of which will be lent to the ESOP to fund its purchase
of 8.0% of the shares issued in the Conversion. No effect has been given in the
pro forma stockholders' equity calculation for the assumed earnings on the net
proceeds. Historical and pro forma per share amounts have been calculated by
dividing historical and pro forma amounts by the indicated number of shares.
THE STOCKHOLDERS' EQUITY INFORMATION IS NOT INTENDED TO REPRESENT THE FAIR
MARKET VALUE OF THE COMMON STOCK, OR THE CURRENT VALUE OF OUR 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 -- EFFECTS OF CONVERSION TO STOCK
FORM ON DEPOSITORS AND BORROWERS OF NEWPORT FEDERAL SAVINGS BANK -- LIQUIDATION
ACCOUNT" AND NOTE 15 TO THE FINANCIAL STATEMENTS. THE PRO FORMA INCOME DERIVED
FROM THE ASSUMPTIONS SET FORTH ABOVE SHOULD NOT BE CONSIDERED INDICATIVE OF THE
ACTUAL RESULTS OF OUR OPERATIONS FOR ANY PERIOD. SUCH PRO FORMA DATA MAY BE
MATERIALLY AFFECTED BY A CHANGE IN THE PRICE PER SHARE OR NUMBER OF SHARES TO BE
ISSUED IN THE CONVERSION AND BY OTHER FACTORS.
12
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED JUNE 30, 1997
-----------------------------------------------------------
MAXIMUM, AS
MINIMUM OF MIDPOINT OF MAXIMUM OF ADJUSTED, OF
238,000 280,000 322,000 370,300
SHARES SHARES SHARES SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross offering proceeds................................ $ 2,380 $ 2,800 $ 3,220 $ 3,703
Less estimated offering expenses....................... (400) (400) (400) (400)
---------- --------- ---------- ----------
Estimated net offering proceeds..................... $ 1,980 $ 2,400 $ 2,820 $ 3,303
========== ========= ========== ==========
Less: Common Stock acquired by ESOP.................. $ (190) $ (224) $ (258) $ (296)
Common Stock acquired by MRP................... (95) (112) (129) (148)
---------- --------- ---------- ----------
Estimated investable net proceeds................... $ 1,694 $ 2,064 $ 2,434 $ 2,859
========== ========= ========== ==========
Net income (loss):
Historical net income (loss)........................ $ (199) $ (199) $ (199) $ (199)
Pro forma income on net proceeds.................... 61 75 88 103
Pro forma ESOP adjustment (1)....................... (12) (14) (16) (19)
Pro forma MRP adjustment (2)........................ (12) (14) (16) (19)
---------- --------- ---------- ----------
Total (3)....................................... $ (162) $ (153) $ (144) $ (134)
========== ========= ========== ==========
Net income (loss) per share:(4)
Historical net income (loss)........................ $ (0.90) $ (0.77) $ (0.67) $ (0.58)
Pro forma income on net proceeds.................... 0.28 0.29 0.29 0.30
Pro forma ESOP adjustment (1)....................... (0.06) (0.06) (0.06) (0.06)
Pro forma MRP adjustment (2)........................ (0.06) (0.06) (0.06) (0.06)
---------- --------- ---------- ----------
Total (3)....................................... $ (0.73) $ (0.59) $ (0.48) $ (0.39)
========== ========= ========== ==========
Number of shares used in calculating earnings
per share............................................ 220,864 259,840 298,816 343,638
========== ========= ========== ==========
Stockholders' equity: (5)
Historical......................................... $ 2,266 $ 2,266 $ 2,266 $ 2,266
Estimated net offering proceeds (2)................ 1,980 2,400 2,820 3,303
Less: Common Stock acquired by ESOP (1).......... (190) (224) (258) (296)
Common Stock acquired by MRP (2)........... (95) (112) (129) (148)
---------- --------- ---------- ----------
Total........................................... $ 3,960 $ 4,330 $ 4,700 $ 5,125
========== ========= ========== ==========
Stockholders' equity per share:(4)(5)
Historical.......................................... $ 9.52 $ 8.09 $ 7.04 $ 6.12
Estimated net offering proceeds (2)................. 8.32 8.57 8.76 8.92
Less: Common Stock acquired by ESOP (1).......... (0.80) (0.80) (0.80) (0.80)
Common Stock acquired by MRP (2)........... (0.40) (0.40) (0.40) (0.40)
---------- --------- ---------- ----------
Total........................................... $ 16.64 $ 15.46 $ 14.60 $ 13.84
========== ========= ========== ==========
Offering price as a percentage of pro forma
stockholders' equity per share(4)(5)................ 60.1% 64.7% 68.5% 72.3%
========== ========= ========== ==========
Ratio of offering price to pro forma
annualized net income per share(4).................. NA NA NA NA
========== ========= ========== ==========
</TABLE>
(Footnotes on succeeding page)
13
<PAGE>
(footnotes continued from preceding page)
- -------------------------
(1) Assumes the ESOP purchases 8% of the shares sold in the Conversion
and the Company lends the ESOP the funds to do so. The approximate amount
expected to be borrowed by the ESOP is reflected as a reduction of
capital. We intend to make annual contributions to the ESOP over a 10 year
period in an amount at least equal to the principal and interest
requirement of the debt. The pro forma net income assumes: (i) the ESOP
loan is payable over 10 years, (ii) the average fair value of the ESOP
shares is $10.00 per share in accordance with Statement of Position
("SOP') 93-6 of the American Institute of Certified Public Accountants
("AICPA"), and (iii) the effective tax rate was 36% for such period. The
pro forma stockholders' equity per share calculation assumes all ESOP
shares were outstanding, regardless of whether such shares would have been
released. Because the Company will be providing the ESOP loan, only
principal payments on the ESOP loan are reflected as employee compensation
and benefits expense.
(2) Assumes the Company issues 4.0% of the shares sold in the offering
to the MRP and the purchase price for the shares purchased by the MRP was
equal to the purchase price of $10 per share and 20% of the amount
contributed was an amortized expense during such period. As we accrue
compensation expense to reflect the five-year vesting period of such
shares pursuant to the MRP, the charge against capital will be reduced
accordingly. Implementation of the MRP within one year of Conversion would
require regulatory and stockholder approval at a meeting of our
stockholders to be held no earlier than six months after the Conversion.
For purposes of this table, it is assumed that the MRP will be adopted by
the board of directors, reviewed by the OTS, and approved by the
stockholders, and that the MRP will purchase the shares in the open market
within the year following the Conversion. If the shares to be purchased by
the MRP are assumed at July 1, 1996, to be newly issued shares purchased
from the Company at the minimum, midpoint, maximum and maximum, as
adjusted, of the Estimated Valuation Range, pro forma stockholders' equity
per share would have been $16.38, $15.25, $14.42, and $13.69 at June 30,
1997, respectively. As a result of the MRP, stockholders' interests will
be diluted by approximately 3.8%. See "Management of Newport Federal
Savings Bank - Proposed Future Stock Benefit Plans - Management
Recognition Plan."
(3) Per share data has been computed based on the assumed numbers of
shares sold in the Conversion. This treatment is in accordance with SOP
93-6. No effect has been given to shares to be reserved for issuance
pursuant to the Option Plan.
(4) Consolidated stockholders' equity represents the excess of the
carrying value of the assets of the over its liabilities. The calculations
are based upon the number of shares issued in the Conversion, without
giving effect to SOP 93-6. The amounts shown do not reflect the federal
income tax consequences of the potential restoration to income of the tax
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 shares, the
current value of our 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.
(5) Pro forma net income per share calculations include the number of
shares assumed to be sold in the Conversion and, in accordance with SOP
93-6, exclude ESOP shares which would not have been released during the
period. Accordingly, 17,136, 20,160, 23,184 and 26,662 shares have been
subtracted from the shares assumed to be sold at the minimum, midpoint,
maximum, and maximum, as adjusted, of the Estimated Valuation Range,
respectively, and 220,864, 259,840, 298,816 and 343,638 shares are assumed
to be outstanding at the minimum, midpoint, maximum, and maximum, as
adjusted of the Estimated Valuation Range. See Note 1 above.
14
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
STATEMENTS OF INCOME
Our Statements of Income for each of the years in the two year
period ended June 30, 1997 have been audited by KPMG Peat Marwick LLP, our
independent certified public accountants, whose report thereon appears elsewhere
in this Prospectus. The Statements of Income should be used in conjunction with
our Financial Statements and Notes thereto which are included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Interest income:
Loans receivable............................................... $ 2,011 $ 1,814
Mortgage-backed securities..................................... 339 280
Investment securities.......................................... 71 105
Deposits in other financial institutions....................... 72 129
-------- ---------
Total interest income....................................... 2,493 2,328
Interest expense:
Deposits....................................................... 1,541 1,517
Federal Home Loan Bank advances................................ 56 8
-------- ---------
Total interest expense...................................... 1,597 1,525
Net interest income............................................ 896 803
Provision for loan losses...................................... 90 10
Net interest income after provision
for loan losses................................... 806 793
-------- ---------
Noninterest income............................................... 19 11
Noninterest expenses:
Salaries and employee benefits................................. 647 347
Legal and professional fees.................................... 12 15
Data processing fees........................................... 62 60
Federal insurance expense...................................... 217 63
Furniture and equipment expense................................ 33 21
Occupancy expense.............................................. 59 39
Other expense.................................................. 127 180
-------- ---------
Total noninterest expenses.................................. 1,157 725
-------- ---------
Income (loss) before income taxes................................ (332) 79
Income tax expense (benefit)..................................... (133) 6
-------- ---------
Net income (loss)........................................... $ (199) $ 73
======== =========
</TABLE>
15
<PAGE>
MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results
of operations is intended to assist you in understanding our financial condition
and results of operations. The information in this section should also be read
with our Financial Statements and Notes to the Financial Statements elsewhere in
this document.
The Company has recently been formed and accordingly, has no results of
operations. The following discussion relates only to our financial condition and
results of operations
Our results of operations depend primarily on net interest income, which
is determined by (i) the difference between rates of interest we earn on our
interest-earning assets and the rates we pay on interest-bearing liabilities
(interest rate spread), and (ii) the relative amounts of interest -earning
assets and interest-bearing liabilities. Our results of operations are also
affected by non-interest expense, including primarily compensation and employee
benefits, federal deposit insurance premiums and office occupancy costs. Our
results of operations also are affected significantly by general and economic
and competitive conditions, particularly changes in market interest rates,
government policies and actions of regulatory authorities, all of which are
beyond our control.
Following the Conversion, we believe there will be sufficient demand in
our market area to continue our policy of emphasizing lending in the one- to
four-family real estate loan area. In addition, we hope to experience continued
growth in our non-residential mortgage, consumer and commercial loan portfolios
by modest amounts; however, there is no assurance that we will be able to do so.
See "Risk Factors -- Nonresidential Lending" and "Business of Newport Federal
Savings Bank-- Lending Activities."
ASSET/LIABILITY MANAGEMENT
Our assets and liabilities may be analyzed by examining the extent to
which our assets and liabilities are interest-rate sensitive and by monitoring
the expected effects of interest rate changes on our net portfolio value.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If our assets
mature or reprice more quickly or to a greater extent than our liabilities, our
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. Conversely, if our assets mature or reprice more slowly or to a lesser
extent than our liabilities, our 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. Our policy has been to mitigate the
interest rate risk inherent in the historical savings institution business of
originating long-term loans funded by short-term deposits by pursuing certain
strategies designed to decrease the vulnerability of our earnings to material
and prolonged changes in interest rates.
16
<PAGE>
To manage the interest rate risk of this type of loan portfolio, we
limit maturities of fixed-rate loans to no more than five years and emphasize
the origination of ARM loans. At June 30, 1997, the average weighted term to
maturity of our mortgage loan portfolio was approximately 14 years and the
average weighted term of our deposits was slightly less than two years.
NET PORTFOLIO VALUE
In recent years, we have measured our interest rate sensitivity by
computing the "gap" between the assets and liabilities which were expected to
mature or reprice within certain time periods, based on assumptions regarding
loan prepayment and deposit decay rates formerly provided by the OTS. However,
the OTS now measures an institution's interest rate risk by computing the amount
by which the net present value of cash flow 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% (100 to 400 basis points) increases and
decreases in market interest rates. The following table presents the interest
rate sensitivity of our NPV at June 30, 1997, as calculated by the OTS, which is
based upon quarterly information that we voluntarily provided to the OTS.
<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 2,403 (669) (22)% 7.26% (151) bp
+ 300 bp 2,663 (408) (13) 7.91 (86) bp
+ 200 bp 2,873 (199) (6) 8.40 (37) bp
+ 100 bp 3,012 (59) (2) 8.70 (7) bp
0 bp 3,072 -- -- 8.77 --
- 100 bp 3,051 (21) (1) 8.63 (14) bp
- 200 bp 3,002 (69) (2) 8.42 (35) bp
- 300 bp 2,993 (78) (3) 8.32 (45) bp
- 400 bp 3,054 (18) (1) 8.38 (39) bp
</TABLE>
While we cannot predict future interest rates or their effects on our
NPV or net interest income, we do not expect current interest rates to have a
material adverse effect on our NPV or net interest income in the near future.
Computations of prospective effects of hypothetical interest rate changes are
based on numerous assumptions, including relative levels of market interest
rates, prepayments and deposit runoff and should not be relied upon as
indicative of actual results. Certain shortcomings are inherent in such
computations. Although certain assets and liabilities may have similar maturity
or periods of repricing, they may react at different times and in different
degrees to changes in the market interest rates. The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while rates on other types of assets and
17
<PAGE>
liabilities may lag behind changes in market interest rates. Certain assets,
such as ARM loans, generally have features which restrict changes in interest
rates on a short-term basis and over the life of the loan. In the event of a
change in interest rates, prepayments and early withdrawal levels could deviate
significantly from those assumed in making calculations set forth above.
Additionally, an increased credit risk may result as the ability of many
borrowers to service their debt may decrease in the event of an interest rate
increase.
The board of directors reviews our asset and liability policies. The
board of directors meets regularly to review interest rate risk and trends, as
well as liquidity and capital ratios and requirements. Management administers
the policies and determinations of the board of directors with respect to our
asset and liability goals and strategies. We expect that our asset and liability
policies and strategies will continue as described so long as competitive and
regulatory conditions in the financial institution industry and market interest
rates continue as they have in recent years.
18
<PAGE>
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS
The following table sets forth certain information relating to our
average balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid at the date and for the periods 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. Average balances are
derived from quarter-end balances. We do not believe that the use of quarter-end
balances instead of daily balances has caused any material difference in the
information presented.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
AT JUNE 30, 1997
1997 ----------------------------------
------------------- AVERAGE
YIELD/ AVERAGE YIELD/
BALANCE COST BALANCE INTEREST COST
------- ------ ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Interest-bearing deposits................ $ 1,295 5.56% $ 1,767 $ 72 4.07%
Mortgage-backed securities............... 5,077 6.68 5,374 339 6.30
Investment securities.................... 846 8.39 976 71 7.28
Loans.................................... 24,794 8.11 24,249 2,011 8.20
---------- ---------- ----------
Total interest-earning assets.............. 32,012 7.79 32,366 2,493 7.70
----------
Non-interest-earning assets................ 2,367 1,745
---------- ----------
Total assets............................... $ 34,379 $ 34,111
========== ==========
INTEREST-BEARING LIABILITIES:
Savings deposits......................... $ 30,090 5.12% $ 29,684 $ 1,541 5.19%
FHLB advances............................ 618 5.55 1,238 56 4.52
---------- ---------- ----------
Total interest-bearing liabilities......... 30,708 5.20 30,922 1,597 5.16
----------
Non-interest bearing liabilities........... 1,405 789
---------- ----------
Total liabilities.......................... 32,113 31,711
Retained earnings.......................... 2,266 2,400
---------- ----------
Total liabilities and retained earnings.... $ 34,379 $ 34,111
========== ==========
Net interest income........................ $ 896
==========
Net interest rate spread (1)............... 2.59% 2.54%
==== ====
Net interest-earning assets................ $ 1,444
==========
Net interest margin (2).................... 2.77%
====
Ratio of average interest-earning assets to
average interest-bearing liabilities..... 104.66%
======
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------
1996
---------------------------------
AVERAGE
AVERAGE YIELD/
BALANCE INTEREST COST
------- -------- -------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Interest-bearing deposits................ $ 2,519 $ 129 5.12%
Mortgage-backed securities............... 4,442 280 6.30
Investment securities.................... 1,266 105 8.29
Loans.................................... 21,470 1,814 8.45
--------- ----------
Total interest-earning assets.............. 29,697 2,328 7.84
----------
Non-interest-earning assets................ 1,644
---------
Total assets............................... $ 31,341
=========
INTEREST-BEARING LIABILITIES:
Savings deposits......................... $ 28,383 $ 1,517 5.34%
FHLB advances............................ 140 8 5.71
--------- ----------
Total interest-bearing liabilities......... 28,523 1,525 5.35
----------
Non-interest bearing liabilities........... 351
---------
Total liabilities.......................... 28,874
Retained earnings.......................... 2,467
---------
Total liabilities and retained earnings.... $ 31,341
=========
Net interest income........................ $ 803
==========
Net interest rate spread (1)............... 2.49%
====
Net interest-earning assets................ $ 1,174
=========
Net interest margin (2).................... 2.70%
====
Ratio of average interest-earning assets to
average interest-bearing liabilities..... 104.12%
======
</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.
19
<PAGE>
RATE/VOLUME ANALYSIS
The table shows certain information regarding changes in our interest
income and interest expense of the Bank 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); and (ii) changes in rates (change in rate multiplied by
old volume). Changes in rate-volume (changes in rate multiplied by the changes
in volume) are allocated between changes in rate and 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 ........................ $ (39) $ (26) $ 8 $ (57) $ (14) $ 26 $ (3) $ 9
Mortgage-backed securities ....................... 59 -- -- 59 (22) 51 (4) 25
Investment securities ............................ (24) (13) 3 (34) (11) 16 (2) 3
Loans ............................................ 235 (34) (4) 197 126 10 1 137
----- ----- ----- ----- ----- ----- ----- -----
Total interest-earning assets .................. 231 (73) 7 165 79 103 (8) 174
----- ----- ----- ----- ----- ----- ----- -----
INTEREST-BEARING LIABILITIES:
Deposits ......................................... 69 (43) (2) 24 44 195 7 246
FHLB advances .................................... 63 (2) (13) 48 (1) (1) -- (2)
----- ----- ----- ----- ----- ----- ----- -----
Total interest-bearing liabilities ............... 132 (45) (15) 72 43 194 7 244
Increase (decrease) in net interest
income ......................................... $ 99 $ (28) $ 22 $ 93 $ 36 $ (91) $ (15) $ (70)
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
20
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1997 AND JUNE 30, 1996
Total assets increased by $1.9 million or 5.96% from $32.4 million at
June 30, 1996 to $34.4 million at June 30, 1997. Total liabilities increased
$2.1 million or 7.1%, from $30.0 million at June 30, 1996 to $32.1 million at
June 30, 1997. The increase in assets for the period was primarily attributable
to the growth in our loan portfolio of $2.8 million which was the result of
increased loan demand generally. Loan growth was funded from a net increase in
deposits of $1.4 million, an increase in FHLB advances of $484,000, a net
reduction in cash and interest-earning deposits of $482,000 and net maturities
and repayments on investment and mortgage-backed securities of $387,000.
COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
NET INCOME. We incurred a net loss of $199,000 for the fiscal year
ended June 30, 1997 as compared to a net profit of $73,000 for the fiscal year
ended June 30, 1996. Our loss in the current fiscal year was primarily due to a
special assessment that all thrift institutions were required to pay in order to
recapitalize the SAIF, the FDIC fund that insures our deposits. The special
assessment amounted to $179,000 which we paid during the quarter ended December
31, 1996. In addition, we incurred an expense of $286,000 in connection with our
adoption of a Director Retirement Plan. We also increased our provision for loan
losses from $10,000 for fiscal year 1996 to $90,000 for fiscal year 1997.
NET INTEREST INCOME. Our net interest income, which is the difference
between our interest income and our interest expense, increased from $803,000
for fiscal year 1996 to $896,000 for fiscal year 1997. The $93,000 increase was
due to an increase in the level of interest income we received on our loan and
mortgage backed securities portfolios. Although the average yield on these
portfolios actually declined, the average balance of these assets rose which
accounted for the income growth. Total interest expense also increased during
the fiscal year by $72,000 due to an increase in our deposits and our FHLB
borrowings, our two main categories of interest-bearing liabilities. As with the
interest-earning assets, however, the average cost of these borrowings decreased
from fiscal year 1996 to fiscal year 1997.
PROVISION FOR LOAN LOSSES. Financial institutions are required to
establish an allowance for potential loan losses. The balance of such allowance
depends on the risk in the institution's loan portfolio, its level of problem
loans and general economic conditions, among other factors. Loans which cannot
be collected are charged against the allowance and thereby reduce its balance.
An institution adds to the allowance by making a provision for loan losses which
is an expense item. During fiscal year 1997, we made a provision for loan losses
of $90,000 as compared to a $10,000 provision during the previous fiscal year.
Although at June 30, 1997 we had not experienced any increase in the level of
our problem loans, we determined that the higher provision was necessary based
on the increased risks associated with consumer loans and other non-mortgage
loans during the year, as well as the growth in our total loan portfolio.
21
<PAGE>
NONINTEREST INCOME. Noninterest income (e.g, loan and deposit account
fees) does not represent a significant portion of our revenues. For fiscal year
1997, we earned $19,000 in noninterest income as compared to $11,000 in fiscal
year 1996.
NONINTEREST EXPENSE. Our noninterest expenses consist mainly of
salaries and employee benefits, federal deposit insurance premiums and the
expenses associated with our building and equipment. For fiscal year 1997, total
noninterest expenses were $1.2 million as compared to $726,000 for the prior
fiscal year 1996. The increased expense level was due mainly to the special SAIF
assessment of $179,000 and the costs associated with the adoption of the
director retirement plan of $286,000.
We anticipate our deposit insurance premium expense to be reduced going
forward as the rate we have to pay for such insurance was significantly reduced
effective January 1, 1997. See "Regulation--Regulation of the Bank--Deposit
Insurance."
INCOME TAX EXPENSE. Our income tax expense for fiscal year 1997 was
significantly reduced due to the net loss for the year. We recognized a net
benefit of $133,000 for the year as compared to a net expense of $6,000 for the
prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
We are required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which varies from time to time depending
upon economic conditions and deposit flows, is based upon a percentage of our
deposits and short-term borrowings. The required ratio currently is 5% and our
liquidity ratio for the month ended June 30, 1997 was 5.14%. It is our belief
that upon completion of the Conversion our liquidity ratio will increase due to
the additional funds we will receive.
Our primary sources of funds are deposits, repayment of loans and
mortgage-backed securities, maturities of investments and interest-bearing
deposits, funds provided from operations and advances from the FHLB of Dallas.
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. We use our 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.
Liquidity may be adversely affected by unexpected deposit outflows,
higher interest rates paid by competitors, adverse publicity relating to the
savings and loan industry, and similar matters. Further, the disparity in Fico
Bond interest payments as described herein could result in us losing deposits to
BIF members that have lower costs of funds and therefore are able to pay higher
rates of interest on deposits. Management monitors projected liquidity needs and
determines the level
22
<PAGE>
desirable, based in part on our commitments to make loans and management's
assessment of our ability to generate funds.
We are subject to federal regulations that impose certain minimum
capital requirements. For a discussion on such capital levels, see "Historical
and Pro Forma Capital Compliance" and "Regulation -- Regulation of the Bank --
Regulatory Capital Requirements."
IMPACT OF INFLATION AND CHANGING PRICES
Our financial statements and the accompanying notes presented elsewhere
in this document, have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars without considering the change
in the relative purchasing power of money over time and due to inflation. The
impact of inflation is reflected in the increased cost of our operations. As a
result, interest rates have a greater impact on our performance than do the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or to the same extent as the prices of goods and services.
RECENT PRONOUNCEMENTS
FASB STATEMENT ON ACCOUNTING FOR STOCK-BASED COMPENSATION. In October
1995, the FASB issued SFAS No. 123. SFAS No. 123 defines a "fair value based
method" of accounting for an employee stock option whereby compensation cost is
measured at the grant date based on the value of the award and is recognized
over the service period. FASB has encouraged all entities to adopt the fair
value based method, however, it will allow entities to continue the use of the
"intrinsic value based method" prescribed by Accounting Principles Board ("APB")
Opinion No. 25. Under the intrinsic value based method, compensation cost is the
excess of the market price of the stock at the grant date over the amount an
employee must pay to acquire the stock. However, most stock option plans have no
intrinsic value at the grant date and, as such, no compensation cost is
recognized under APB Opinion No. 25. Entities electing to continue use of the
accounting treatment of APB Opinion No. 25 must make certain pro forma
disclosures as if the fair value based method had been applied. The accounting
requirements of SFAS No. 123 are effective for transactions entered into in
fiscal years beginning after December 15, 1995. Pro forma disclosures must
include the effects of all awards granted in fiscal years beginnings after
December 15, 1994. If the proposed Option Plan is adopted we will use the
intrinsic value method. Accordingly, there will be no impact as a result of our
adoption of SFAS No. 123.
FASB STATEMENT ON ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL
ASSETS AND EXTINGUISHMENTS OF LIABILITIES. In June 1996, FASB issued SFAS No.
125, which will be effective, on a prospective basis, for transfers and
servicing of financial assets and extinguishment of liabilities occurring after
December 31, 1996. SFAS No. 125 supersedes SFAS No. 122, Accounting for Mortgage
Servicing Rights. SFAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of liabilities
based on consistent application of a financial-components approach that focuses
on control. SFAS
23
<PAGE>
No. 125 extends the "available for sale" and "trading" approach of SFAS No. 115
to non-security financial assets that can be contractually prepaid or otherwise
settled in such a way that the holder of the asset would not recover
substantially all of its recorded investment. In addition, SFAS No. 125 amends
SFAS No. 115 to prevent a security from being classified as held to maturity if
the security can be prepaid or settled in such a manner that the holder of the
security would not recover substantially all of its recorded investment. The
extension of the SFAS No. 115 approach to certain non-security financial assets
and the amendment to SFAS No. 115 are effective for financial assets held on or
acquired after January 1, 1997. The FASB has proposed to defer the effective
date of SFAS No. 125 until January 1, 1998 for certain transactions including
repurchase agreements, dollar- roll, securities lending and similar
transactions. We adopted SFAS No. 125 on July 1, 1997. There was no impact on
our financial statements of such adoption.
FASB STATEMENT ON EARNINGS PER SHARE. In February 1997, the FASB issued
SFAS No. 128, "Earnings Per Share." SFAS 128 supersedes APB Opinion No. 15,
"Earnings Per Share" and specifies the computation, presentation and disclosure
requirements for earnings per share for entities with publicly held common stock
or potential common stock. SFAS No. 128 replaces the presentation of primary
earnings per share with a presentation of basic earnings per share and fully
diluted earnings per share with diluted earnings per share. It also requires
dual presentation of basis and diluted earning per share on the fact of the
income statement for all entities with complex capital structures and requires
the reconciliation of the numerator and denominator of the basic earnings per
share computation to the numerator and denominator of the diluted earnings per
share computation. This statement is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods. SFAS No.
128 will be adopted by us in the initial period after December 15, 1997. We do
not believe the impact of adopting SFAS No. 128 will be material to our
financial statements.
FASB STATEMENT ON DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE. In
February 1997, the FASB issued SFAS 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. The statement continues the previous
requirements to disclose certain information about an entity's capital structure
found in APB Opinion 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 15 as provided by Statement No. 21, Suspension of the
Reporting of Earnings per Share and Segment Information for Nonpublic
Enterprises. It supersedes specific disclosure requirements of Opinion 10 and 15
and Statement 47 and consolidates them in this Statement for ease of retrieval
and for greater visibility to nonpublic entities. This Statement is effective
for financial statements for periods ending after December 15, 1997. SFAS No.
129 will be adopted by us in the initial period after December 15, 1997. We do
not believe the impact of adopting SFAS No. 129 will be material to our
financial statements.
24
<PAGE>
FASB STATEMENT ON REPORTING COMPREHENSIVE INCOME. In June 1997, the
FASB issued SFAS No. 130, "Reporting Comprehensive Income," which requires
entities presenting a complete set of financial statements to include details of
comprehensive income that arise in the reporting period. Comprehensive income
consists of net income or loss for the current period and other comprehensive
income, expense, gains and losses that bypass the income statement and are
reported in a separate component of equity, i.e., unrealized gains and losses on
certain investment securities. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. We do not believe that adoption of SFAS No.
130 will have a material adverse effect on our financial position or results of
operations.
FASB STATEMENT ON DISCLOSURES REGARDING SEGMENTS. In June 1997, the
FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." Statement 131 establishes standards for the way public
enterprises are to report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Statement 131
supersedes FASB Statement No. 14, "Financial Reporting for Segments of a
Business Enterprise" but retains the requirement to report information about
major customers. It amends Statement No. 94, "Consolidation of all
Majority-Owned Subsidiaries" to remove the special disclosure requirements for
previously unconsolidated subsidiaries. Statement 131 is effective for financial
statements for periods beginning after December 15, 1997. We do not believe the
impact of adopting SFAS No. 131 will be material to our financial statements.
BUSINESS OF NORTH ARKANSAS BANCSHARES, INC.
The Company is not an operating company and has not engaged in any
significant business to date. It was formed in September 1997 as a
Tennessee-chartered corporation to be the holding company for Newport Federal
Savings Bank. The holding company structure and retention of proceeds will
facilitate: (i) diversification into non-banking activities, (ii) acquisitions
of other financial institutions, such as savings institutions, (iii) expansion
within existing and into new market areas and (iv) stock repurchases without
adverse tax consequences. There are no present plans regarding diversification,
acquisitions or expansion.
Newport Federal have operated as an independent community oriented
savings institution since 1934. It is our intention to continue to operate as an
independent community oriented savings association following the Conversion.
Since the Company will own only one savings association, it generally
will not be restricted in the types of business activities in which it may
engage, provided that we retain a specified amount of our assets in
housing-related investments. The Company initially will not conduct any active
business and does not intend to employ any persons other than officers but will
utilize our support staff from time to time.
25
<PAGE>
BUSINESS OF NEWPORT FEDERAL SAVINGS BANK
The principal sources of funds for our activities are deposits,
payments on loans and borrowings from the FHLB of Dallas. Our deposits totaled
$31.1 million at June 30, 1997. Funds are used principally for the origination
of loans secured by first mortgages on one- to four-family residences which are
located in our market area. Such loans totaled $17.5 million, or 70.06%, of our
total loans receivable portfolio at June 30, 1997. We also originate other types
of loans including loans secured by commercial real estate and consumer loans
and purchase investment and mortgage-backed securities. Our principal source of
revenue is interest received on loans and investments and our principal expense
is interest paid on deposits.
MARKET AREA
We consider our primary market area to be Jackson County in Northern
Arkansas. The City of Newport, where we are located, is the County Seat of
Jackson County. Jackson County is primarily rural in nature. According to 1990
Census data, approximately 26.6% of the households in Jackson County had incomes
below the poverty line. Median household income was estimated to be $16,641. The
unemployment rate calculated based on the 1990 Census data was 5.40%, slightly
below the average for all of Arkansas of 5.98% and the U.S. average of 6.24%.
Major employers in our market area are Arkansas State University-Beebe/Newport,
which is located in Newport, two hospitals, also based in Newport, Arkansas
Steel and the Norandal Aluminum Rolling Plant. Two privately-owned prisons are
also scheduled to open shortly which are expected to add approximately 284 new
jobs to the market area according to the companies that own the prisons.
BUSINESS STRATEGY
Historically, our principal business, like that of most other savings
institutions, has been that of accepting deposits from the general public and
investing those funds in one- to four-family mortgage loans. Our loans have
typically been secured by properties located within Jackson County.
During 1995, we decided to move our offices to our current location at
200 Olivia Drive. We believed that this location would give us more exposure to
our potential customer base because of the proximity of a number of
recently-built retail establishments and other businesses. Since we completed
construction and moved to the new location, our deposit base has grown from
$27.8 million at June 30, 1995 to $31.1 million at June 30, 1997. We also
decided to expand the types of loans we offered and have since significantly
increased our nonresidential loan portfolio.
While our new location has contributed to this growth and expansion,
the costs associated with its construction have caused us to experience
decreased earnings as compared to our peer institutions since we have a greater
percentage of our assets invested in non-earning fixed assets than do our peers.
This also limited our ability to grow in the future since our growth would have
to be financed to a large extent by deposits rather than capital. This factor
contributed to our decision to
26
<PAGE>
convert from mutual to stock form. We believe that the proceeds we will receive
from the offering will allow us to continue our growth and diversification.
LENDING ACTIVITIES
Most of our loans are mortgage loans which are secured by one- to
four-family residences. We also make consumer, residential construction and
commercial real estate and commercial business loans. Following the Conversion,
we believe there will be sufficient demand in our market area to continue our
policy of emphasizing lending in the one- to four-family real estate loan area.
In addition, we hope to continue our growth in our non-residential mortgage, and
consumer and commercial loan portfolios; however, there is no assurance that we
will be able to do so.
At June 30, 1997, our gross loans totaled $24.9 million of which $17.5
million were mortgage loans secured by one- to four-family residences. We
originate both fixed rate mortgage and ARM loans. Generally, all of the consumer
loans we originate have fixed rates.
The following table sets forth information concerning the types of
loans held by us at the dates indicated.
<TABLE>
<CAPTION>
AT JUNE 30,
-----------------------------------------------
1997 1996
-------------------- -------------------
AMOUNT % AMOUNT %
------ --- ------ ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate loans:
One- to four-family..................................... $ 17,479 70.06% $ 17,486 79.25%
Multi-family............................................ 136 .55 145 .66
Non-residential......................................... 3,613 14.48 2,628 11.91
---------- ------- --------- -------
Total real estate loans.............................. 21,228 85.09 20,259 91.82
Consumer loans:
Loans secured by deposits............................... 443 1.78 256 1.16
Home improvement........................................ 666 2.67 763 3.46
Automobile.............................................. 2,010 8.05 649 2.94
Other consumer.......................................... 510 2.04 138 .62
Commercial................................................ 93 .37 -- --
---------- --------- --------- ----------
Total loans........................................ 24,950 100.00% 22,065 100.00%
---------- ====== --------- ======
Less:
Deferred fees and discounts............................. 6 10
Allowance for losses.................................... 150 73
---------- ---------
Loan portfolio, net................................ $ 24,794 $ 21,982
========== =========
</TABLE>
27
<PAGE>
The following table sets forth the estimated maturity of our loan
portfolio at June 30, 1997. The table does not include the effects of possible
prepayments or scheduled repayments. All mortgage loans are shown as maturing
based on the date of the last payment required by the loan agreement.
<TABLE>
<CAPTION>
DUE DURING THE YEAR ENDING DUE AFTER
JUNE 30, 3 THROUGH
------------------------------- 5 YEARS AFTER
1998 1999 2000 JUNE 30, 1997
------ ------ ------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate loans:
One- to four-family .............. $ 816 $ 91 $ 923 $ 2,390
Multi-family ..................... -- -- -- --
Non-residential .................. 838 24 836 764
Consumer loans:
Loans secured by
deposits ....................... 414 6 -- 23
Home improvement ................. 5 11 24 84
Automobile ....................... 103 57 195 1,618
Other consumer ................... 188 100 39 148
Commercial ......................... 93 -- -- --
------- ------- ------- -------
Total ......................... $ 2,457 $ 289 $ 2,017 $ 5,027
======= ======= ======= =======
<CAPTION>
DUE AFTER DUE AFTER
5 THROUGH 10 THROUGH DUE AFTER 15
10 YEARS AFTER 15 YEARS AFTER YEARS AFTER
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1997 TOTAL
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Real estate loans:
One- to four-family .............. $ 3,192 $ 4,432 $ 5,635 $17,479
Multi-family ..................... -- 136 -- 136
Non-residential .................. 275 798 78 3,613
Consumer loans:
Loans secured by
deposits ....................... -- -- -- 443
Home improvement ................. 396 138 8 666
Automobile ....................... 37 -- -- 2,010
Other consumer ................... 35 -- -- 510
Commercial ......................... -- -- -- 93
------- ------- ------- -------
Total ......................... $ 3,935 $ 5,504 $ 5,721 $24,950
======= ======= ======= =======
</TABLE>
28
<PAGE>
The next table shows at June 30, 1997, the dollar amount of all our loans
due one year or more after June 30, 1997 which have fixed interest rates and
have floating or adjustable interest rates.
<TABLE>
<CAPTION>
FLOATING OR
FIXED RATE ADJUSTABLE RATES
---------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Real estate loans
One- to four-family...................... $ 4,285 $ 12,378
Multi-family............................. -- 136
Non-residential.......................... 1,195 1,580
Consumer loans:
Loans secured by deposits................. 29 --
Home improvement.......................... 661 --
Automobile................................ 1,907 --
Other consumer ........................... 322 --
Commercial................................... -- --
----------- -----------
Total................................ $ 8,399 $ 14,094
=========== ===========
</TABLE>
ONE- TO FOUR-FAMILY RESIDENTIAL LOANS. Our primary lending activity
consists of the origination of one- to four-family residential mortgage loans
secured by property located in our primary market area. We generally originate
one- to four-family residential mortgage loans in amounts up to 80% of the
lesser of the appraised value or purchase price, with private mortgage insurance
or additional collateral required on loans with a loan to-value ratio in excess
of 80%. The maximum loan-to-value ratio on mortgage loans secured by nonowner
occupied properties generally is limited to 80%. We primarily originate and
retain fixed-rate balloon loans having terms of up to five years, with principal
and interest payments calculated using up to a 25-year amortization period.
We also offer ARM loans. The interest rate on ARM loans is based on an
index plus a stated margin. ARM loans provide for periodic interest rate
adjustments upward or downward of up to 2% per year. The interest rate may not
increase above a "ceiling rate" established at the time the loan is originated
and may not decrease below the original interest rate. ARM loans typically
reprice every one, three or five years and provide for terms of up to 30 years
with most loans having terms of between 15 and 30 years.
ARM loans decrease the risk associated with changes in interest rates
by periodically repricing, but involve other risks because as interest rates
increase, the underlying payments by the borrower increase, thus increasing the
potential for default by the borrower. At the same time, the marketability of
the underlying collateral may be adversely affected by higher interest rates.
Upward adjustment of the contractual interest rate is also limited by the
maximum periodic and lifetime interest rate adjustment permitted by the loan
documents, and, therefore is potentially limited in effectiveness during periods
of rapidly rising interest rates. At June 30, 1997, approximately 71% of the
one- to four-family residential loans we hold had adjustable rates of interest.
29
<PAGE>
Mortgage loans originated and held by us generally include due-on-sale
clauses. This gives us the right to deem the loan immediately due and payable in
the event the borrower transfers ownership of the property securing the mortgage
loan without our consent.
RESIDENTIAL CONSTRUCTION LOANS. We make a limited number of residential
construction loans on one- to four-family residential property to the
individuals who will be the owners and occupants upon completion of
construction. Borrowers are required to pay interest during the construction
period. Loan proceeds are disbursed according to a draw schedule and we inspect
the progress of the construction before additional funds are disbursed. We
charge a fixed rate of interest on our construction loans. While we occasionally
agree to convert the balance of construction loans to a permanent mortgage upon
completion of the construction phase, we will not commit to do so at the same
time as the construction loan is granted. Any permanent mortgage would be
granted on the same terms as other one-to four-family mortgage loans we
originate.
Construction lending is generally considered to involve a higher degree
of credit risk than long term financing of residential properties. Our 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 and the
estimated cost of construction. If the estimate of construction cost and the
marketability of the property upon completion of the project prove to be
inaccurate, we may be compelled to advance additional funds to complete the
construction. Furthermore, if the final value of the completed property is less
than the estimated amount, the value of the property might not be sufficient to
assure the repayment of the loan.
COMMERCIAL AND MULTI-FAMILY LOANS. Our commercial real estate loans are
secured by churches, office buildings, and other commercial properties.
Multi-family loans are secured by apartment and condominium buildings. At June
30, 1997, our three largest commercial real estate loans consisted of a loan to
a hotel which had a balance of $625,000 at June 30, 1997, a loan to a nursing
home which had a balance of $491,000 at June 30, 1997 and a loan to a funeral
home which had a balance of $282,000. At June 30, 1997, all three of these loans
were performing in accordance with their terms. Subsequent to fiscal year end,
the hotel loan has become delinquent. See "-- Nonperforming Assets."
Commercial and multifamily 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 repayment of these loans typically is dependent on the successful operation
of the real estate project securing the loan. These risks can be significantly
affected by supply and demand conditions in the market for office and retail
space and may also be subject to adverse conditions in the economy. To minimize
these risks, we generally limit this type of lending to our market area and to
borrowers who are otherwise well known to us.
COMMERCIAL BUSINESS LOANS. We offer commercial business loans to
benefit from the higher fees and interest rates and the shorter term to
maturity. Our commercial business loans consist of
30
<PAGE>
equipment, lines of credit and other business purpose loans, which generally are
secured by either the underlying properties or by the personal guarantees of the
borrower.
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income and which are secured by real property whose value tends to be more
easily ascertainable, commercial business loans typically are made on the basis
of the borrower's ability to make repayment from the cash flow of the borrower's
business. As a result, the availability of funds for the repayment of commercial
business loans may be substantially dependent on the success of the business
itself and the general economic environment.
CONSUMER LOANS. We offer consumer loans in order to provide a wider
range of financial services to our customers. Consumer loans totaled $3.6
million, or 14.55% of our total loans at June 30, 1997. Our consumer loans
consist of automobile, home improvement, share account and personal loans. Our
home improvement loans are primarily originated under a program whereby the U.S.
Government guarantees 90% of the principal balance of such loans. We have just
begun to offer personal lines of credit. We offer both unsecured lines of credit
that are granted based upon the borrower's financial strength and home equity
lines of credit.
Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans that are unsecured or secured by
assets that depreciate rapidly. Repossessed collateral for a defaulted consumer
loan may not be sufficient for repayment of the outstanding loan, and the
remaining deficiency may not be collectible.
LOAN APPROVAL AUTHORITY AND UNDERWRITING. Our President may approve all
one-to four-family mortgage loans that conform to all of our policy requirements
up to $50,000 and may approve all consumer loans. The Executive Committee of our
board which consists of three directors may approve loans with principal
balances of up to $100,000. All other loans require the approval of our board of
directors.
Upon receipt of a completed loan application from a prospective
borrower, a credit report is ordered. Income and certain other information is
verified. If necessary, additional financial information may be requested. An
appraisal or other estimate of value of the real estate intended to be used as
security for the proposed loan is obtained. Appraisals are prepared by outside
fee appraisers who are approved by the board of directors.
Either title insurance or a title opinion is generally required on all
real estate loans. Borrowers also must obtain fire and casualty insurance. Flood
insurance is also required on loans secured by property which is located in a
flood zone.
31
<PAGE>
LOAN ORIGINATIONS, PURCHASES AND SALES. The following table sets forth
certain information with respect to our loan originations and purchases for the
periods indicated. We did not sell any loans during the periods.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
1997 1996
-------- ------
(IN THOUSANDS)
<S> <C> <C>
Net loans, beginning of period................................. $ 21,982 $ 20,152
Origination by type:
- -------------------
Real estate loans:
One- to four-family......................................... $ 4,515 $ 3,714
Multi-family................................................ 55 43
Non-residential............................................. 936 561
--------- ---------
5,506 4,318
Consumer loans:
Loan secured by deposits.................................... 577 398
Home improvement............................................ 115 148
Automobile.................................................. 1,840 689
Other consumer.............................................. 699 221
Commercial..................................................... 93 --
--------- ---------
Total loans originated.................................... 8,830 5,774
--------- ---------
Purchases...................................................... 500 1,005
--------- ---------
Total loans originated and purchased...................... 9,330 6,779
--------- ---------
Repayments..................................................... 6,445 4,943
--------- ---------
Decrease (increase) in other items, net........................ (73) (6)
--------- ---------
Net increase (decrease) in loans receivable, net.......... 2,812 1,830
--------- ---------
Net loans, end of period....................................... $ 24,794 $ 21,982
========= =========
</TABLE>
Most of the loans we originate are intended to be held in our portfolio
rather than sold in the secondary mortgage market. We occasionally purchase loan
participations from other financial institutions. These participation interest
purchases are reflected in the above table. Generally, the purchase of
participation interests involves the same risks as would the origination of the
same types of loans as well as the additional risk that results from the fact
that we have less control over the origination and subsequent administration of
such loans. At June 30, 1997, all of our participation loans were performing in
accordance with their terms.
LOAN COMMITMENTS. Written commitments are given to prospective
borrowers on all approved real estate loans. Generally, the commitment requires
acceptance within 30 days of the date of issuance. At June 30, 1997, commitments
to cover originations of mortgage loans were $253,000. We believe that virtually
all of our commitments will be funded.
32
<PAGE>
LOANS TO ONE BORROWER. The maximum amount of loans which we may make to
any one borrower may not exceed the greater of $500,000 or 15% of our unimpaired
capital and unimpaired surplus. We may lend an additional 10% of our unimpaired
capital and unimpaired surplus if the loan is fully secured by readily
marketable collateral. Our maximum loan-to-one borrower limit was approximately
$500,000 at June 30, 1997. At June 30, 1997, our largest loan outstanding had a
balance of $625,000. This loan was originated prior to 1989 when we first became
subject to the limitation on loans to one borrower described above. Subsequent
to June 30, 1997, payments on this loan have become delinquent. See "--
Nonperforming Assets." As of its origination, this loan was within lending
limits then in effect.
NONPERFORMING AND PROBLEM ASSETS
LOAN DELINQUENCIES. Generally when a mortgage loan becomes 15 days past
due, a notice of nonpayment is sent to the borrower. If, after 20-30 days,
payment is still delinquent, the borrower will receive a letter and/or telephone
call from us and may receive a visit from one of our representatives. If the
loan continues in a delinquent status for 90 days past due and no repayment plan
is in effect, a notice of right to cure default is sent to the borrower giving
30 additional days to bring the loan current before foreclosure is commenced.
Our loan committee meets regularly to determine when foreclosure proceedings
should be initiated. The customer will be notified when foreclosure is
commenced. At June 30, 1997, our loans past due between 30 and 89 days totaled
$156,000.
Loans are reviewed on a monthly basis and are generally placed on a
non-accrual status when the loan becomes more than 90 days' delinquent or when,
in our opinion, the collection of additional interest is doubtful. Interest
accrued and unpaid at the time a loan is placed on nonaccrual status is charged
against interest income. Subsequent interest payments, if any, are either
applied to the outstanding principal balance or recorded as interest income,
depending on the assessment of the ultimate collectibility of the loan.
33
<PAGE>
NONPERFORMING ASSETS. The following table sets forth information
regarding nonaccrual loans and real estate owned. As of the dates indicated, we
had no loans categorized as troubled debt restructurings within the meaning of
SFAS 15 and no loans which were 90 days or more past due and still accruing
interest.
<TABLE>
<CAPTION>
AT JUNE 30,
-----------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Loans accounted for on a non-accrual basis:
Real estate:
One- to four-family........................................ $ 67 $ 30
Multi-family............................................... -- --
Non-residential............................................ -- --
-------- --------
Total real estate loans................................... 67 30
Consumer loans:
Loans secured by deposits................................... 7 --
Home improvement............................................ -- --
Automobile.................................................. -- --
Other consumer.............................................. -- --
Commercial..................................................... -- --
-------- --------
Total nonperforming loans.............................. 74 30
-------- --------
Foreclosed real estate......................................... -- 124
-------- --------
Total nonperforming assets..................................... 74 154
======== ========
Total nonperforming loans as a
percentage of total net loans................................ .30% .14%
======== ========
Total nonperforming assets as a
percentage of total assets................................... .21% .47%
======== ========
</TABLE>
During the year ended June 30, 1997, we would have recorded additional
interest income of approximately $3,000 on nonaccrual loans if such loans had
been current throughout the period. We did not include any income on nonaccrual
loans during the year. In addition, we had $721,000 (which includes the $625,000
commercial real estate loan described below) in loans which were not classified
as nonaccrual, 90 days past due or restructured, but where known information
causes us to have serious concerns as to the ability of these borrowers to
comply with their current loan terms.
Subsequent to June 30, 1997, our largest loan went into delinquent
status. This loan is a participation interest in a $5.8 million loan which is
secured by 625-room a hotel located in Oklahoma City. Our participation interest
had a balance of $625,000 at June 30, 1997. The lead lender has demanded payment
on the loan. There can be no assurance that this delinquency will be covered or,
if the lead lender proceeds to foreclose, that the underlying property can be
sold at a price sufficient to repay us in full. The loan is secured by the hotel
which had an appraised value of $_______ as of ___________.
CLASSIFIED ASSETS. OTS regulations provide for a classification system
for problem assets of savings associations which covers all problem assets.
Under this classification system, problem assets of savings associations such as
ours are classified as "substandard," "doubtful," or "loss." An asset is
considered substandard if it is inadequately protected by the current net worth
and paying
34
<PAGE>
capacity of the borrower or of the collateral pledged, if any. Substandard
assets include those characterized by the "distinct possibility" that the
savings association will sustain "some loss" if the deficiencies are not
corrected. Assets classified as doubtful have all of the weaknesses inherent in
those classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full, on the basis of currently
existing facts, conditions, and, values, "highly questionable and improbable."
Assets classified as loss are those considered "uncollectible" and of such
little value that their continuance as assets without the establishment of a
specific loss reserve is not warranted. Assets may be designated "special
mention" because of potential weakness that do not currently warrant
classification in one of the aforementioned categories.
When a savings association classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When a savings association classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. A savings association's determination as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the OTS, which may order the establishment of additional general or specific
loss allowances. A portion of general loss allowances established to cover
possible losses related to assets classified as substandard or doubtful may be
included in determining a savings association's regulatory capital. Specific
valuation allowances for loan losses generally do not qualify as regulatory
capital.
At June 30, 1997, none of our assets were classified as special mention
or doubtful but we had loans classified as substandard and loss in amounts equal
to $91,000 and $5,000, respectively.
FORECLOSED REAL ESTATE. Real estate acquired by us as a result of
foreclosure is recorded as "real estate owned" until such time as it is sold.
When real estate owned is acquired, it is recorded at the lower of the unpaid
principal balance of the related loan or its fair value less disposal costs. Any
write down of real estate owned is charged to operations. At June 30, 1997, we
did not have any real estate owned.
ALLOWANCE FOR LOAN LOSSES. Our policy is to provide for losses on
unidentified loans in our loan portfolio. A provision for loan losses is charged
to operations based on management's evaluation of the potential losses that may
be incurred in our loan portfolio. The evaluation, including a review of all
loans on which full collectibility of interest and principal may not be
reasonably assured, considers: (i) our past loan loss experience, (ii) known and
inherent risks in our portfolio, (iii) adverse situations that may affect the
borrower's ability to repay, (iv) the estimated value of any underlying
collateral, and (v) current economic conditions.
We monitor our allowance for loan losses and make additions to the
allowance as economic conditions dictate. Although we maintain our allowance for
loan losses at a level that we consider adequate for the inherent risk of loss
in our loan portfolio, future losses could exceed estimated
35
<PAGE>
amounts and additional provisions for loan losses could be required. In
addition, our determination as to the amount of its allowance for loan losses is
subject to review by the OTS, as part of its examination process. After a review
of the information available, the OTS might require the establishment of an
additional allowance.
The following table sets forth an analysis of our allowance for
possible 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................................. $ 73 $ 63
-------- ---------
Charge-offs:
One- to four-family.......................................... (13) --
Multi-family................................................. -- --
Non-residential.............................................. -- --
-------- ---------
Total real estate loans................................... (13) --
Net recoveries (charge-offs)................................... (13) --
-------- ---------
Additions charged to operations................................ 90 10
-------- ---------
Balance at end of period....................................... 150 73
-------- ---------
Allowance for loan losses to total
Nonperforming loans at end of period......................... 202.70% 243.33%
======== =========
Allowance for loan losses to net loans
at end of period............................................. .60% .33%
======== =========
Ratio of net charge-offs to average
loans outstanding during the period.......................... .05% -- %
======== =========
</TABLE>
The following table illustrates the allocation of the allowance for
loan losses for each category of loan. The allocation of the allowance to each
category is not necessarily indicative of future loss in any particular category
and does not restrict our use of the allowance to absorb losses in other loan
categories.
<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>
Real estate loans:
One- to four-family.............................. $ 105 70.06% $ 58 79.25%
Multi-family..................................... 1 .55 -- .66
Non-residential.................................. 22 14.48 9 11.91
------- -------- ------- --------
Total real estate loans....................... 128 85.09 67 91.82
Consumer loans:
Loans secured by deposits....................... 3 1.78 1 1.16
Home improvement................................ 4 2.67 3 3.46
Automobile...................................... 12 8.05 2 2.94
Other consumer.................................. 3 2.04 -- .62
Commercial......................................... -- .37 -- --
------- --------- ------- --------
Total allowance for loan losses................ $ 150 100.00% $ 73 100.00%
======= ========= ======= ========
</TABLE>
36
<PAGE>
INVESTMENT ACTIVITIES
INVESTMENT SECURITIES. We are required under federal regulations to
maintain a minimum amount of liquid assets which may be invested in specified
short-term securities and certain other investments. See "Regulation --
Regulation of the Bank -- Federal Home Loan Bank System" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." The level of liquid assets varies depending
upon several factors, including: (i) the yields on investment alternatives, (ii)
our judgment as to the attractiveness of the yields then available in relation
to other opportunities, (iii) expectation of future yield levels, and (iv) our
projections as to the short-term demand for funds to be used in loan origination
and other activities. We classify all our investment securities as "held to
maturity" in accordance with SFAS No. 115. At June 30, 1997, our investment
portfolio policy allowed investments in instruments such as: (i) U.S. Treasury
obligations, (ii) U.S. federal agency or federally sponsored agency obligations,
(iii) local municipal obligations, (iv) mortgage backed securities, (v) bankers'
acceptances, (vi) certificates of deposit, (vii) federal funds, including FHLB
overnight and term deposits (up to six months), and (viii) investment grade
corporate bonds, commercial paper and mortgage derivative products. See "--
Mortgage-backed Securities." The board of directors may authorize additional
investments.
Our investment securities at June 30, 1997 did not contain securities of
any issuer with an aggregate book value in excess of 10% of our equity,
excluding those issued by the United States Government or its agencies.
MORTGAGE BACKED SECURITIES. To supplement lending activities, we have
invested in residential mortgage-backed securities. Mortgage backed securities
can serve as collateral for borrowings and, through repayments, as a source of
liquidity. Mortgage backed securities represent a participation interest in a
pool of single-family or other type of mortgages. Principal and interest
payments are passed from the mortgage originators, through intermediaries
(generally quasi-governmental agencies) that pool and repackage the
participation interests in the form of securities, to investors such as us. Our
mortgage backed securities portfolio consists of participations or pass-through
certificates issued by the Federal Home Loan Mortgage Corporation (the "FHLMC"),
the Federal National Mortgage Association ("FNMA") and the Government National
Mortgage Association ("GNMA"). GNMA certificates are guaranteed as to principal
and interest by the full faith and credit of the United States, while FHLMC and
FNMA certificates are guaranteed by those agencies only. Our mortgage backed
securities portfolio was classified as "held to maturity" at June 30, 1997.
Expected maturities will differ from contractual maturities due to
scheduled repayments and because borrowers may have the right to call or prepay
obligations with or without prepayment penalties.
Mortgage backed securities typically are issued with stated principal
amounts. The securities are backed by pools of mortgages that have loans with
interest rates that are within a set range and
37
<PAGE>
have varying maturities. The underlying pool of mortgages can be composed of
either fixed-rate or adjustable mortgage loans. Mortgage backed securities are
generally referred to as mortgage participation certificates or pass-through
certificates. The interest rate risk characteristics of the underlying pool of
mortgages (i.e., fixed-rate or adjustable-rate) and the 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 following table sets forth the carrying (i.e., amortized cost)
value of our investment securities and mortgage backed securities, at the dates
indicated. At June 30, 1997, the market value of our investment securities, held
to maturity, was $6.0 million.
The following table sets forth the carrying value of our investment
securities and mortgage-backed portfolio at the dates indicated.
<TABLE>
<CAPTION>
AT JUNE 30,
1997 1996
------ -----
(IN THOUSANDS)
<S> <C> <C>
Investments held to maturity:
U.S. Government agencies.............................. $ 500 $ 1,000
Mortgage-backed securities............................ 5,077 4,963
Federal Home Loan Bank stock.......................... 283 267
Municipal securities.................................. 63 80
-------- --------
Total............................................. $ 5,923 $ 6,310
======== ========
</TABLE>
38
<PAGE>
The following table sets forth the scheduled maturities, carrying
values, market values and average yields for our 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>
Securities held to maturity:
U.S. government and agencies.......... $ -- -- $ 500 6.46% $ -- --%
Mortgage-backed securities (1)........ -- -- 53 12.15 5,024 6.83
FHLB stock............................ 283 5.84 -- -- -- --
Municipal securities.................. -- -- 9 9.46 13 9.46
-------- -------- -------
$ 283 $ 562 $ 5,037
======== ======== =======
<CAPTION>
MORE THAN TEN YEARS TOTAL INVESTMENT PORTFOLIO
--------------------- ---------------------------
WEIGHTED WEIGHTED
BOOK AVERAGE BOOK AVERAGE
VALUE YIELD VALUE YIELD
----- ----- ----- -----
<S> <C> <C> <C> <C>
Securities held to maturity:
U.S. government and agencies.......... $ -- --% $ 500 6.46%
Mortgage-backed securities (1)........ -- -- 5,077 6.75
FHLB stock............................ -- -- 283 5.84
Municipal securities.................. 41 9.46 63 9.46
-------- -------
$ 41 $ 5,923
======== =======
</TABLE>
- --------------
(1) For purposes of the maturity table, mortgage backed securities, which
are not due at a single maturity date, have been allocated to maturity
groups based on the weighted average estimated life of the underlying
collateral.
39
<PAGE>
SOURCES OF FUNDS
Deposits are our major external source of funds for lending and other
investment purposes. Funds are also derived from the receipt of payments on
loans and prepayment of loans and, to a much lesser extent, maturities of
investment securities and mortgage-backed securities, borrowings and operations.
Scheduled loan principal repayments are a relatively stable source of funds,
while deposit inflows and outflows and loan prepayments are significantly
influenced by general interest rates and market conditions.
Deposits. Consumer and commercial deposits are attracted principally
from within our primary market area through the offering of a selection of
deposit instruments including regular savings accounts, money market accounts,
and term certificate accounts. IRA accounts are also offered. Deposit account
terms vary according to the minimum balance required, the time period the funds
must remain on deposit, and the interest rate. The interest rates paid by us on
deposits are set weekly at the direction of our senior management. Interest
rates are determined based on our liquidity requirements, interest rates paid by
our competitors, and our growth goals and applicable regulatory restrictions and
requirements.
Certificates of deposit in amounts of $100,000 or more constituted $3.4
million or 10.82% of the deposit portfolio. The majority of these certificates
represent deposits from long-standing customers. As of June 30, 1997, we had no
brokered deposits.
At June 30, 1997, our deposits were represented by the various types of
savings programs described below.
<TABLE>
<CAPTION>
INTEREST MINIMUM MINIMUM BALANCES IN PERCENTAGE OF
RATE(1) TERM CATEGORY AMOUNT THOUSANDS TOTAL SAVINGS
- ------- ------- -------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
2.95% None Passbook accounts $ 500 $ 1,893 6.09%
-- None NOW accounts 500 1,670 5.37
-- None Super NOW accounts -- -- --
2.41 None Money market accounts 2,500 325 1.05
-- None Other non-interest bearing 100 983 3.16
<CAPTION>
CERTIFICATES OF DEPOSIT
-----------------------
<S> <C> <C> <C> <C> <C>
4.00 31 days Fixed-Term, Fixed-Rate 500 49 .16
4.43 91 days Fixed-Term, Fixed-Rate 500 34 .11
5.47 6 months Fixed-Term, Fixed-Rate 500 5,204 16.75
5.67 12 months Fixed-Term, Fixed-Rate 500 6,106 19.65
5.60 15 months Fixed-Term, Fixed-Rate 500 3,013 9.69
5.77 18 months Fixed-Term, Fixed-Rate 500 1,282 4.13
5.82 24 months Fixed-Term, Fixed-Rate 500 979 3.15
5.93 36 months Fixed-Term, Fixed-Rate 500 942 3.03
6.08 60 months Fixed-Term, Fixed-Rate 500 8,593 27.66
-------- -------
Total certificates of deposit 26,202 84.33
-------- -------
Total savings deposits $ 31,073 100.00%
======== ======
</TABLE>
- -----------------
(1) Indicates weighted average interest rate at June 30, 1997.
40
<PAGE>
The following table sets forth our time deposits classified by interest
rate at the dates indicated.
<TABLE>
<CAPTION>
AT JUNE 30,
----------------------------
1997 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
2 - 3.99%................................ $ -- $ 49
4 - 5.99%................................ 26,202 16,666
6 - 7.99%................................ -- 9,259
---------- ----------
$ 26,202 $ 25,974
========== ==========
</TABLE>
The following table sets forth the amount and maturities of our time
deposits at June 30, 1997.
<TABLE>
<CAPTION>
AMOUNT DUE
-----------------------------------------------------------------------
LESS THAN ONE TO TWO TO AFTER
RATE ONE YEAR TWO YEARS THREE YEARS THREE YEARS TOTAL
- ---- -------- --------- ----------- ----------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
2 - 3.99%..................... $ -- $ -- $ -- $ -- $ --
4 - 5.99%..................... 10,787 9,962 1,135 4,318 26,202
--------- ---------- ---------- ---------- ----------
$ 10,787 $ 9,962 $ 1,135 $ 4,318 $ 26,202
========= ========== ========== ========== ==========
</TABLE>
The following table sets forth our savings activity for the periods
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........................... $ 1,670 5.37% $ 222 $ 1,448 4.88%
Money market deposit................... 325 1.05 (200) 525 1.77
Savings deposits -- passbook........... 1,893 6.09 532 1,361 4.59
Certificates of deposit................ 22,841 73.51 121 22,720 76.61
Jumbo certificates..................... 3,361 10.82 107 3,254 10.97
Other.................................. 983 3.16 634 349 1.18
-------- -------- --------- --------- --------
$ 31,073 100.00% $ 1,416 $ 29,657 100.00%
======== ====== ========= ========= ======
</TABLE>
41
<PAGE>
The following table indicates the amount of our certificates of deposit
of $100,000 or more by time remaining until maturity as of June 30, 1997.
<TABLE>
<CAPTION>
CERTIFICATES
MATURITY PERIOD OF DEPOSIT
--------------- --------------
(IN THOUSANDS)
<S> <C>
Three months or less....................... $ 575
Over three through six months.............. 351
Over six through 12 months................. 1,058
Over 12 months............................. 1,377
----------
Total.................................. $ 3,361
==========
</TABLE>
BORROWINGS. Advances (borrowing) may be obtained from the FHLB of
Dallas to supplement our supply of lendable funds. Advances from the FHLB of
Dallas are typically secured by a pledge of our stock in the FHLB of Dallas, a
portion of our first mortgage loans and other assets. Each FHLB credit program
has its own interest rate, which may be fixed or adjustable, and range of
maturities. At June 30, 1997, borrowings from the FHLB of Dallas totaled
$618,000 and consisted of a short term advance of $500,000 which matured in July
1997 and a long term obligation of $118,000 which is due in August 2003.
<TABLE>
<CAPTION>
AT OR FOR THE
YEAR ENDED JUNE 30,
--------------------------
1997 1996
------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Amounts outstanding at end of period:
FHLB advances........................................... $ 618 $ 134
Weighted average rate paid on:
FHLB advances............................................. 5.58% 5.70%
Maximum amount of borrowings outstanding
at any month end:
FHLB advances........................................... 2,175 147
Approximate average short-term borrowings
outstanding with respect to:
FHLB advances........................................... 889 --
Approximate weighted average rate paid on: ............... 5.49% 5.70%
</TABLE>
42
<PAGE>
COMPETITION
We compete for deposits with other insured financial institutions such
as commercial banks, thrift institutions, credit unions, finance companies, and
multi-state regional banks in our market area. We also compete for funds with
insurance products sold by local agents and investment products such as mutual
funds and other securities sold by local and regional brokers. Loan competition
varies depending upon market conditions and comes from commercial banks, thrift
institutions, credit unions and mortgage bankers, many of whom have greater
resources than we have.
PROPERTIES
The following table sets forth certain information regarding our main
office which is our only branch location.
<TABLE>
<CAPTION>
BOOK VALUE AT DEPOSITS AT
YEAR OWNED OR JUNE 30, APPROXIMATE JUNE 30,
OPENED LEASED 1997 (1) SQUARE FOOTAGE 1997
------ ------ -------------- -------------- ---------
(DEPOSITS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Main Office: 1995 Owned $ 1,257 6,000 31,073
</TABLE>
- ------------
(1) Cost less accumulated depreciation and amortization.
We also own the property which used to serve as our main office. Such
location is currently rented. The book value of such property at June 30, 1997
was $230,000.
PERSONNEL
At June 30, 1997, we had 10 full-time and three part-time employees.
None of our employees are represented by a collective bargaining group. We
believe that our relationship with our employees is good.
LEGAL PROCEEDINGS
We are, from time to time, a party to legal proceedings arising in the
ordinary course of our business, including legal proceedings to enforce our
rights against borrowers. We are not currently a party to any legal proceedings
which are expected to have a material adverse effect on our financial
statements.
43
<PAGE>
REGULATION
Set forth below is a brief description of certain laws which relate to
us. The description is not complete and is qualified in its entirety by
references to applicable laws and regulations.
GENERAL
As a federally chartered, SAIF-insured savings institution, we are
subject to extensive regulation by the OTS and the FDIC. Our lending activities
and other investments must comply with various federal and state statutory and
regulatory requirements, and the OTS periodically examines us for compliance
with various regulatory requirements. The FDIC also has authority to conduct
periodic examinations of us. We must file reports with the OTS describing our
activities and our financial condition and we must obtain approvals from
regulatory authorities before entering into certain transactions such as the
Conversion or mergers with other financial institutions. We are also subject to
certain reserve requirements promulgated by the Board of Governors of the
Federal Reserve System ("Federal Reserve System"). Our relationship with our
depositors and borrowers is also regulated to a great extent by federal and
state law, especially in such matters as the ownership of savings accounts and
the form and content of our mortgage documents. This supervision and regulation
are primarily intended to protect depositors. The regulatory structure also
gives the regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes. Any change in regulations,
whether by the OTS, the FDIC or any other government agency, could have a
material adverse impact on our operations.
REGULATION OF THE BANK
INSURANCE OF DEPOSIT ACCOUNTS. The FDIC maintains two separate funds
for the insurance of deposits up to prescribed statutory limits. The Bank
Insurance Fund ("BIF") insures the deposits of commercial banks and the Savings
Association Insurance Fund ("SAIF") insures the deposits of savings
associations. We are a member of the SAIF , although the deposits we will
acquire through our purchase of the Newport branch of NationsBank, N.A.,
assuming we obtain the requisite regulatory approval, will continue to be
insured by the BIF. The FDIC is authorized to establish separate annual
assessment rates for deposit insurance for members of the BIF and the SAIF. The
FDIC may increase assessment rates for either fund if necessary to restore the
fund's ratio of reserves to insured deposits to its target level within a
reasonable time and may decrease such assessment rates if such target level has
been met. The FDIC has established a risk-based assessment system for both SAIF
and BIF members. Under this system, assessments are set within a range, based on
the risk the institution poses to its deposit insurance fund. This risk level is
determined based on the institution's capital level and the FDIC's level of
supervisory concern about the institution.
Because a significant portion of the assessments paid into the SAIF by
savings institutions were used to pay the cost of prior savings institution
failures, the reserves of the SAIF were below
44
<PAGE>
the level required by law. The BIF, however, met its required reserve level
during the third calendar quarter of 1995. As a result, deposit insurance
premiums for deposits insured by the BIF were substantially less than premiums
for deposits such as ours which are insured by the SAIF. On September 30, 1996,
President Clinton signed into law legislation which included provisions designed
to recapitalize the SAIF and to eliminate the significant premium disparity
between the BIF and the SAIF. Under this law, institutions with deposits insured
by the SAIF were required to pay a special assessment equal to $0.657 per $100
of SAIF-assessable deposits held at March 31, 1995. We recognized this special
assessment of $179,000 during the quarter ended September 30, 1996 and were
required to pay the assessment on November 27, 1996.
Beginning January 1, 1997, our annual deposit insurance premium was
reduced from 0.23% to 0.0644% of total assessable deposits. BIF institutions
still pay lower assessments than comparable SAIF institutions because BIF
institutions pay only 20% of the rate being paid by SAIF institutions on their
deposits with respect to obligations issued by the Financing Corp., a federally
chartered corporation which provided some of the financing required to resolve
the thrift crisis in the 1980s. Assuming we complete the acquisition of the
Newport branch of NationsBank, our overall deposit insurance expense will be
somewhat less than the minimum SAIF rate since the approximately $6 million in
deposits we expect to acquire will continue to be insured by the BIF.
The recapitalization plan also provides for the merger of the SAIF and
BIF effective January 1, 1999, assuming there are no savings institutions under
federal law. Under separate proposed legislation, Congress is considering the
elimination of the federal thrift charter and the separate federal regulation of
thrifts. As a result, we might have to convert to a different financial
institution charter and be regulated under federal law as a national bank or
under Arkansas law as a state chartered commercial bank, including being subject
to the more restrictive activity limitations imposed on national banks. We
cannot predict the impact of our conversion to, or regulation as, a bank until
the legislation requiring such change is enacted.
REGULATORY CAPITAL REQUIREMENTS. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to at least 1.5 % of total adjusted assets, (2) core capital equal to at least
3.0% of total adjusted assets, and (3) risk-based capital equal to at least 8.0%
of total risk-weighted assets. In addition, the OTS may require that a savings
institution that has a risk-based capital ratio 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% (3.0% if the institution has received
the highest rating on its most recent examination) take certain actions to
increase its capital ratios. If the institution's capital is significantly below
the minimum required levels or if it is unsuccessful in increasing its capital
ratios, the OTS may significantly restrict its activities.
Tangible capital is defined as core capital less all intangible assets
(including supervisory goodwill), less certain mortgage servicing rights and
less certain investments. Core capital is defined as common stockholders' equity
(including retained earnings), non-cumulative perpetual preferred stock and
minority interests in the equity accounts of consolidated subsidiaries, certain
non-withdrawable accounts and pledged deposits of mutual savings associations
and qualifying
45
<PAGE>
supervisory goodwill, less non-qualifying intangible assets, certain mortgage
servicing rights and certain investments. Tier 1 has the same definition as core
capital.
Risk-based capital equals the sum of core capital plus supplementary
capital. The components of supplementary capital include, among other items,
cumulative perpetual preferred stock, perpetual subordinated debt, mandatory
convertible subordinated debt, intermediate-term preferred stock, and the
portion of the allowance for loan losses not designated for specific loan
losses. Overall, supplementary capital is limited to 100% of core capital. A
savings institution must calculate its risk-weighted assets by multiplying each
asset and off-balance sheet item by various risk factors as determined by the
OTS, which range from 0% for cash to 100% for delinquent loans, property
acquired through foreclosure, commercial loans, and other assets. At June 30,
1997, we were in compliance with all regulatory capital requirements as is shown
on the table below.
<TABLE>
<CAPTION>
PERCENT
AMOUNT OF ASSETS
------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Tangible capital................................... $ 2,266 6.59%
Tangible capital requirement....................... 516 1.50
---------- ------
Excess (deficit)................................. $ 1,750 5.09%
========== ======
Core capital....................................... $ 2,266 6.59%
Core capital requirement........................... 1,375 3.00
---------- ------
Excess (deficit)................................. $ 891 3.59%
========== ======
Risk-based capital................................. $ 2,411 13.18%
Risk-based capital requirement..................... 1,463 8.00
---------- ------
Excess (deficit)................................. $ 948 5.18%
========== ======
</TABLE>
The risk-based capital standards of the OTS generally require savings
institutions with more than a "normal" level of interest rate risk to maintain
additional total capital. An institution's interest rate risk will be 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 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. An institution with a greater than normal interest rate
risk will be 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.
46
<PAGE>
The OTS calculates the sensitivity of an 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 an institution's total capital will be 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 may require any exempt
institution that it determines may have a high level of interest rate risk
exposure to file such schedule on a quarterly basis and may be subject to an
additional capital requirement based upon its level of interest rate risk as
compared to its peers. Due to our size and risk-based capital level, we are
exempt from the interest rate risk component.
DIVIDEND AND OTHER CAPITAL DISTRIBUTION LIMITATIONS. OTS regulations
require us to give the OTS 30 days advance notice of any proposed declaration of
dividends to the Company. The OTS may prohibit the payment of dividends by us to
the Company. In addition, we may not declare or pay a cash dividend on our
capital stock if the effect would be to reduce our regulatory capital below the
amount required for the liquidation account to be established at the time of the
Conversion. See "The Conversion -- Effects of Conversion to Stock Form on
Depositors and Borrowers of Newport Federal Savings Bank -- Liquidation
Account."
OTS regulations limit upon all capital distributions by savings
institutions, such as cash dividends, payments to repurchase or otherwise
acquire its shares, payments to stockholders of another institution in a
cash-out merger, and other distributions charged against capital. The rule
establishes three tiers of institutions based primarily on an institution's
capital level. An institution that exceeds all of its fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100.0% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory notice. As of June
30, 1997, we qualified as a Tier 1 institution.
In the event our capital falls below our fully phased-in requirement or
the OTS notifies us that we are in need of more than normal supervision, we
would become a Tier 2 or Tier 3 institution and as a result, our ability to make
capital distributions could be restricted. Tier 2 institutions, which are
institutions that before and after the proposed distribution meet their current
minimum capital requirements, may only make capital distributions of up to 75%
of net income over the most recent four quarter period. Tier 3 institutions,
which are institutions that do not meet current minimum capital requirements and
propose to make a capital distribution, and Tier 2 institutions that propose to
make a capital distribution in excess of the noted safe harbor level, must
obtain OTS approval prior to making such distribution. In addition, the OTS
could prohibit a proposed capital distribution by any institution, which would
otherwise be permitted by the regulation, if the OTS determines that
47
<PAGE>
such distribution would constitute an unsafe or unsound practice. The OTS has
proposed rules relaxing certain approval and notice requirements for
well-capitalized institutions.
A savings institution is prohibited from making a capital distribution
if, after making the distribution, the savings institution would be
undercapitalized (i.e., not meet any one of its minimum regulatory capital
requirements). Further, a savings institution cannot distribute regulatory
capital that is needed for its liquidation account.
QUALIFIED THRIFT LENDER TEST. Savings institutions must meet a
Qualified Thrift Lender test. We must maintain at least 65.0% of our portfolio
assets (total assets less intangible assets, property we use in conducting our
business and liquid assets in an amount not exceeding 20.0% of total assets) in
Qualified Thrift Investments to satisfy the test. Qualified Thrift Investments
consist primarily of residential mortgage loans and mortgage-backed and other
securities related to domestic, residential real estate or manufactured housing.
The shares of stock we own in the FHLB of Dallas also qualify as Qualified
Thrift Investments. Subject to an aggregate limit of 20.0% of portfolio assets,
we may also count the following as Qualified Thrift Investments: (i) 50.0% of
the dollar amount of residential mortgage loans originated for sale, (ii)
investments in the capital stock or obligations of any service corporation or
operating subsidiary as long as such subsidiary derives at least 80% of its
revenues from domestic housing related activities, (iii) 200% of the dollar
amount of loans and investments to purchase, construct or develop "starter
homes," subject to certain other restrictions, (iv) 200% of the dollar amount of
loans for the purchase, construction or development of domestic residential
housing or community centers in "credit needy" areas or loans for small
businesses located in such areas, (v) loans for the purchase, construction or
development of community centers, (vi) loans for personal, family, household or
educational purposes, subject to a maximum of 10% of portfolio assets, and (vii)
shares of FHLMC or FNMA stock.
If we satisfy the test, we will continue to enjoy full borrowing
privileges from the FHLB of Dallas. If we do not satisfy the test we may lose
our borrowing restrictions and be subject to activities and branching
restrictions applicable to national banks. Compliance with the Qualified Thrift
Lender test is determined on a monthly basis in nine out of every 12 months. As
of June 30, 1997, we were in compliance with our Qualified Thrift Lender
requirement with approximately 75.45% of our assets invested in Qualified Thrift
Investments.
TRANSACTIONS WITH AFFILIATES. Generally, transactions between a savings
institution and its with affiliates are subject to certain limitations. Such
transactions must be on terms as favorable to the savings institution as
comparable transactions with non-affiliates. In addition, certain of these
transactions are restricted to an aggregate percentage of the savings
institution's capital. Collateral in specified amounts must usually be provided
by affiliates in order to receive loans from the savings institution. Our
affiliates include the Company and any company which would be under common
control with us. In addition, a savings institution may not extend credit to any
affiliate engaged in activities not permissible for a bank holding company or
acquire the securities of any affiliate that is not a subsidiary. The OTS has
the discretion to treat subsidiaries of savings institution as affiliates on a
case-by-case basis.
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<PAGE>
LOANS TO DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS.
Loans from us to our directors, executive officers and, subsequent to the
Conversion, our principal stockholders may not be made on terms more favorable
than those afforded to other borrowers. In addition, we cannot make loans in
excess of certain levels to directors, executive officers or 10% or greater
stockholders (or any of their affiliates) unless the loan is approved in advance
by a majority of our board of directors with any "interested" director not
voting. We are also prohibited from paying any overdraft of any of our executive
officers or directors. We are also subject to certain other restrictions on the
amount and type of loans to executive officers and directors and must annually
report such loans to our regulators.
LIQUIDITY REQUIREMENTS. All savings institutions are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. At June 30, 1997, our required liquid asset
ratio was 5.0% and our actual ratio was 5.14%. Monetary penalties may be imposed
upon institution for violations of liquidity requirements.
FEDERAL HOME LOAN BANK SYSTEM. We are a member of the FHLB of Dallas,
which is one of 12 regional FHLBs. Each FHLB serves as a reserve or central bank
for its members within its assigned region. It is funded primarily from funds
deposited by savings institutions and proceeds derived from the sale of
consolidated obligations of the FHLB System. It makes loans to members (i.e.,
advances) in accordance with policies and procedures established by the board of
directors of the FHLB.
As a member, we are required to purchase and maintain stock in the FHLB
of Dallas in an amount equal to at least 1% of our aggregate unpaid residential
mortgage loans, home purchase contracts or similar obligations at the beginning
of each year, or 1/20 of our advances from the FHLB of Dallas, whichever is
greater. At June 30, 1997, we had $283,000 in FHLB stock, at cost, which was in
compliance with this requirement.
FEDERAL RESERVE SYSTEM. The Federal Reserve System requires all
depository institutions to maintain non-interest bearing reserves at specified
levels against their transaction accounts (primarily checking, NOW and Super NOW
checking accounts) and non-personal time deposits. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve System may be used
to satisfy the liquidity requirements that are imposed by the OTS. At June 30,
1997, our reserve met the minimum level required by the Federal Reserve System.
HOLDING COMPANY REGULATION
GENERAL. The Company will be required to register and file reports with
the OTS and will be subject to regulation and examination by the OTS. In
addition, the OTS will have enforcement
49
<PAGE>
authority over the Company and any non-savings institution subsidiaries. This
will permit the OTS to restrict or prohibit activities that it determines to be
a serious risk to us. This regulation is intended primarily for the protection
of our depositors and not for the benefit of you, as stockholders of the
Company.
The Company will also be required to file certain reports with, and
comply with the rules and regulations of the SEC under the federal securities
laws.
ACTIVITIES RESTRICTIONS. Since the Company will only own one savings
institution, it will be able to diversify its operations into activities not
related to banking, but only so long as we satisfy the Qualified Thrift Lender
test. If the Company controls more than one savings institution, it would lose
the ability to diversify its operations into non-banking related activities,
unless such other savings institutions each also qualify as a Qualified Thrift
Lender and were acquired in a supervised acquisition. See "-- Qualified Thrift
Lender Test."
RESTRICTIONS ON ACQUISITIONS. The Company must obtain approval from the
OTS before acquiring control of any other savings institution or savings and
loan holding company, substantially all the assets thereof or in excess of 5% of
the outstanding shares of another savings institution or savings and loan
holding company. The Company's directors and officers or persons owning or
controlling more than 25% of the Company's stock, must also obtain approval of
the OTS before acquiring control of any savings institution or savings and loan
holding company.
The OTS may only approve acquisitions that will result 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).
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. 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 generally be resold without
registration. Shares purchased by an affiliate of the Company will be subject to
certain resale restrictions. As long as the Company meets the current
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<PAGE>
public information requirements, each affiliate of the Company who complies with
the other conditions would be able to sell a limited number of shares based upon
the number of shares outstanding and the average trading volume for the Common
Stock.
TAXATION
FEDERAL TAXATION
We are subject to the provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), in the same general manner as other corporations.
However, prior to August 1996, savings institutions such as us, which met
certain definitional tests and certain other conditions prescribed by the Code
could benefit from certain favorable provisions regarding their deductions from
taxable income for annual additions to their bad debt reserve. The amount of the
bad debt deduction that a qualifying savings institution could claim for tax
purposes with respect to additions to its reserve for bad debts for "qualifying
real property loans" could be based upon our actual loss experience (the
"experience method" or as a percentage of our taxable income (the "percentage of
taxable income method"). Historically, we used the method that would allow us to
take the largest deduction.
In August 1996, the Code was revised to equalize the taxation of
savings institutions and banks. Savings institutions, such as us, no longer have
a choice between the percentage of taxable income method and the experience
method in determining additions to bad debt reserves. Thrifts with $500 million
of assets or less may still use the experience method, which is generally
available to small banks currently. Larger thrifts may only take a tax deduction
when a loan is actually charged off. Any reserve amounts added after 1987 will
be taxed over a six year period beginning in 1996; however, bad debt reserves
set aside through 1987 are generally not taxed. A savings institution may delay
recapturing into income its post-1987 bad debt reserves for an additional two
years if it meets a residential-lending test. This law is not expected to have a
material impact on us. At June 30, 1997, we had $550,000 of post-1987 bad-debt
reserves.
Earnings appropriated to our bad debt reserve and claimed as a tax
deduction including our supplemental reserves for losses will not be available
for the payment of cash dividends or for distribution (including distributions
made on dissolution or liquidation), unless we include the amount in income,
along with the amount deemed necessary to pay the resulting federal income tax.
If such amount is used for any purpose other than bad debt losses, including a
dividend distribution or a distribution in liquidation, it will be subject to
federal income tax at the then current rate.
The Code imposes a tax ("AMT") on alternative minimum taxable income
("AMTI") at a rate of 20 %. AMTI is increased by certain preference items,
including the excess of the tax bad debt reserve deduction using the percentage
of taxable income method over the deduction that would have been allowable under
the experience method. Only 90% of AMTI can be offset by net operating loss
carryovers of which we currently have none. AMTI is also adjusted by determining
the tax treatment of certain items in a manner that negates the deferral of
income resulting from the regular tax treatment of those items. Thus, our AMTI
is increased by an amount equal to 75% of the amount by which our adjusted
current earnings exceeds our AMTI (determined without regard to this
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<PAGE>
adjustment and prior to reduction for net operating losses). In addition, for
taxable years beginning after December 31, 1986 and before January 1, 1996, an
environmental tax of 0.12% of the excess of AMTI (with certain modifications)
over $2 million is imposed on corporations, including us, whether or not an AMT
is paid. Under pending legislation, the AMT rate would be reduced to zero for
taxable years beginning after December 31, 1994, but this rate reduction would
be suspended for taxable years beginning in 1995 and 1996 and the suspended
amounts would be refunded as tax credits in subsequent years.
The Company may exclude from its income 100% of dividends received
from us as a member of the same affiliated group of corporations. A 70%
dividends received deduction generally applies with respect to dividends
received from corporations that are not members of such affiliated group, except
that an 80% dividends received deduction applies if the Company owns more than
20% of the stock of a corporation paying a dividend. The above exclusion
amounts, with the exception of the affiliated group figure, were reduced in
years in which we availed our self of the percentage of taxable income bad debt
deduction method.
Our federal income tax returns have not been audited by the IRS.
STATE TAXATION
We will continue to be subject to Arkansas corporation income tax which
is 6.5% of all taxable earnings when income exceeds $100,000. The Company is
incorporated under Tennessee law and qualified to do business in Arkansas as a
foreign corporation.
MANAGEMENT OF THE COMPANY
Our board of directors consists of the same individuals who serve as
directors of Newport Federal Savings Bank. Our charter and bylaws require that
directors be divided into three classes, as nearly equal in number as possible.
Each class of directors serves for a three-year period, with approximately
one-third of the directors elected each year. Our officers will be elected
annually by the board and serve at the board's discretion.
The following individuals will serve as executive officers of the
Company.
<TABLE>
<CAPTION>
NAME POSITION(S) WITH THE COMPANY
---- ----------------------------
<S> <C>
Paul K. Holmes Chairman
Brad Snider President and Chief Executive Officer
Pam Decker Secretary/Treasurer
</TABLE>
52
<PAGE>
MANAGEMENT OF NEWPORT FEDERAL SAVINGS BANK
DIRECTORS AND EXECUTIVE OFFICERS
Our board of directors is composed of five members, each of whom serves
for a term of three years. Our proposed stock charter and bylaws require that
directors be divided into three classes, as nearly equal in number as possible.
Each class of directors serves for a three-year period, with approximately
one-third of the directors elected each year. Our officers are elected annually
by our board and serve at the board's discretion.
The following table sets forth information with respect to our directors
and executive officers, all of whom will continue to serve in the same
capacities after the Conversion. We have no other executive officers.
<TABLE>
<CAPTION>
POSITION(S)
AGE AS OF WITH DIRECTOR TERM
NAME JUNE 30, 1997 THE BANK SINCE EXPIRES
- ---- ------------- -------- ----- -------
<S> <C> <C> <C> <C>
Paul K. Holmes, Jr. 82 Chairman 1947 1998
O.E. Guinn, Jr. 68 Director 1971 1999
Kaneaster Hodges, Jr. 58 Director 1979 1999
John Minor 63 Director 1971 1997
Brad Snider 37 President and Chief 1991 1997
Executive Officer; Director
</TABLE>
All of the directors and executive officers live in Newport. The
business experience for the past five years of each of the directors and
executive officers is as follows:
PAUL K. HOLMES, JR. serves as our Chairman of the Board. He is currently
retired. Prior to his retirement, he was the owner of retain men's clothing
store. He is currently a Director of the Newport Chamber of Commerce and serves
as President of the Newport Industrial Development Association.
O.E. GUINN, JR. has been retired since 1994. Prior to his retirement, he
was self-employed as an insurance salesman specializing in fire and casualty
insurance. He is a member of the Chamber of Commerce and the Newport Lions Club.
KANEASTER HODGES, JR. is an attorney in private practice in Newport. He
is also involved in farming and real estate investments and operates a
Newport-based energy conservation firm, PSE, LLC. He is a member of the Newport
Relief Society, the Newport Levee District and the Walton Family Charitable
Support Foundation. He also serves on the White River Basin Study Commission and
the Arkansas State University-Beebe Charitable Foundation, Inc.
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<PAGE>
JOHN MINOR is an insurance and real estate salesman in Newport. He is
Past President of the Arkansas Professional Insurance Agents' [League/Society?],
Past President of the Lions Club, the Newport Booster Club and the Jackson
County Wildlife Federation. He is a former member of the Newport School Board.
BRAD SNIDER has served as our President and Chief Executive Officer and
Director since 1991. He currently serves as President of the Newport Area
Chamber of Commerce and serves on the boards of the United Way of Jackson
County, the Arkansas League of Savings, the Newport Industrial Development
Association and the Arkansas State University/Newport Foundation. He is also a
Commissioner of the Newport Housing Authority of the City of Newport and is a
member of the Rotary Club.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors conducts its business through meetings of the
board and through activities of its committees. During the year ended June 30,
1997, the board of directors held 16 regular meetings and two special meetings.
No director attended fewer than 75% of the total meetings of the board of
directors and committees on which such director served during the year ended
June 30, 1997.
DIRECTOR COMPENSATION
Each of the directors is paid an annual fee of $10,500. Total aggregate
fees paid to the current directors for the year ended June 30, 1997 were
$52,500.
DIRECTOR RETIREMENT PLAN. The Bank adopted the Newport Federal Savings
Bank Retirement Plan for Directors, effective May 29, 1997. On the effective
date, we established a bookkeeping account in the name of each non-employee
director, and credited each account with an amount equal to the product of (i)
$2,898, and (ii) the director's full years of service as a director, up to 20
years. On each fiscal year end, each participant who is then a director and has
20 or fewer years of service shall have his account credited with an amount
equal to the product of $2,898 and the safe performance factor, which is
determined based on our actual performance as compared to budgeted goals for
return on average equity, non-performing assets and composite regulatory rating,
provided that the safe performance factor may not exceed 1.2. Also on the
effective date, the account of Brad Snider was credited for $60,000. On each
June 30 during each of the years from 1998 until 2006, his account will be
credited with an additional amount equal to the product of $19,600 and the safe
performance factor. In the event Mr. Snider should die or become disabled, 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 us to age 65, and (ii) the
benefits which are actually credited to his account at the time of his death or
disability. If his employment terminates in connection with or following a
"change in control" of us, 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
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<PAGE>
remained employed by us 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 federal income tax laws. All amounts
credited to participants' accounts are fully vested at all times. Until
distributed in accordance with the terms of the plan, each participant's account
will be credited with a rate of return equal to our highest rate of interest
paid on certificates of deposit having a term of one year. Following the
Conversion, each participant may prospectively elect to have the dividend-
adjusted rate of return on the Common Stock measure future appreciation.
Each participant may elect to receive plan benefits in a lump sum cash
payment or over a period shorter than ten years, and in the absence of an
election will receive payments in ten substantially equal installments. In the
event of a participant's death, the balance of his plan 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 compensation accrued under the plan will be paid from our general
assets. We have established a trust in order to hold assets with which to pay
compensation. Trust assets would be subject to claims of our general creditors.
In the event a participant prevails over us in a legal dispute as to the terms
or interpretation of the plan, he would be reimbursed for his legal and other
expenses. Upon the implementation of the plan, we recognized compensation
expense totaling $286,000 to provide for participants' initial account balances.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the cash and
non-cash compensation awarded to or earned by our chief executive officer at
June 30, 1997. No other employee earned in excess of $100,000 for the year ended
June 30, 1997.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
OTHER ANNUAL ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)
- ---- ---- ------ ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Brad Snider 1997 $ 71,662 $ -- $ 10,500 $ 4,085
</TABLE>
- -----------
(1) Consists of director fees.
(2) Consists of premiums paid on behalf of Mr. Snider for split-dollar life
insurance ($2,465) and disability insurance ($1,620).
55
<PAGE>
PENSION PLAN TABLE. The following table indicates the annual retirement
benefit that would be payable under the plan upon retirement at age 65 to a
participant electing to receive his retirement benefit in the standard form of
benefit, assuming various specified levels of plan compensation and various
specified years of credited service. Mr. Snider's credited years of service
under the plan are 5.5 years.
<TABLE>
<CAPTION>
CAREER YEARS OF SERVICE
AVERAGE ----------------------------------------------
COMPENSATION 15 20 25 30 35
------------ ----- ------ ------ ------ ----
<S> <C> <C> <C> <C> <C>
$ 20,000 $ 4,500 $ 6,000 $ 7,500 $ 9,000 $10,500
40,000 9,000 12,000 15,000 18,000 21,000
60,000 13,500 18,000 22,500 27,000 31,500
80,000 18,000 24,000 30,000 36,000 42,000
100,000 22,500 30,000 27,500 45,000 52,500
</TABLE>
EMPLOYMENT AGREEMENT. We have entered into an employment agreement with
our President, Brad Snider. Mr. Snider's base salary under the employment
agreement is $________. The employment agreement has a term of three years. The
agreement is terminable by us for "just cause" as defined in the agreement. If
we terminate Mr. Snider without just cause or if Mr. Snider terminates his
employment for "good reason", Mr. Snider will be entitled to a continuation of
his salary from the date of termination through the remaining term of the
agreement, plus an additional 12 months. The employment agreement also contains
a provision stating that in the event of the termination of employment in
connection with any change in control of the Company or us, Mr. Snider will be
paid a lump sum amount equal to 2.99 times his five year average annual taxable
cash compensation. If such payments had been made under the agreement as of June
30, 1997, such payments would have equaled approximately $220,000. The aggregate
payments that would have been made to Mr. Snider would be an expense to us,
thereby reducing our net income and our capital by that amount. The agreement
may be renewed annually by our board of directors upon a determination of
satisfactory performance within the board's sole discretion. If Mr. Snider shall
become disabled during the term of the agreement, he shall continue to receive
payment of 100% of the base salary for a period of up to 180 days. Such payments
shall not be reduced by any other benefit payments made under other disability
program in effect for our employees. If Mr. Snider's employment terminates for a
reason other than just cause, he will be entitled to purchase from us family
medical insurance through any group health plan maintained by us.
EMPLOYEE STOCK OWNERSHIP PLAN. We have established an ESOP, the ESOP,
for the exclusive benefit of participating employee of ours, to be implemented
upon the completion of the Conversion. Participating employees are employees who
have completed one year of service with us (including at least 1,000 hours of
service) and have attained the age of 21. An application for a letter of
determination as to the tax-qualified status of the ESOP will be submitted to
the IRS. Although no assurances can be given, we expect that the ESOP will
receive a favorable letter of determination from the IRS.
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<PAGE>
The ESOP is to be funded by contributions made by us in cash or common
stock. Benefits may be paid either in shares of the common stock or in cash. In
accordance with the Plan, the ESOP may borrow funds with which to acquire up to
8.0% of the Common Stock to be issued in the Conversion. The ESOP intends to
borrow funds from the Company. The loan is expected to be for a term of ten
years at an annual interest rate equal to the prime rate as published in The
---
Wall Street Journal. Presently it is anticipated that the ESOP will purchase up
- -------------------
to 8.0% of the Common Stock to be issued in the offering (22,400 shares based on
the midpoint of the Estimated Valuation Range). The loan will be secured by the
shares purchased and earnings of ESOP assets. Shares purchased with such loan
proceeds will be held in a suspense account for allocation among participants as
the loan is repaid. We anticipate contributing approximately $22,400 annually
(based on a 22,400 purchase) to the ESOP to meet principal obligations under the
ESOP loan, as proposed. it is anticipated that all such contributions will be
tax-deductible. This loan is expected to be fully repaid in approximately 10
years.
Shares sold above the maximum of the Estimated Valuation Range (i.e.,
more than 330,000 shares) may be sold to the ESOP before satisfying remaining
unfilled orders of Eligible Account Holders to fill the ESOP's subscription or
the ESOP may purchase some or all of the shares covered by its subscription
after the Conversion in the open market.
Contributions to the ESOP and shares released from the suspense account
will be allocated among participants on the basis of total compensation,
excluding bonuses. All participants must be employed at least 500 hours in a
plan year in order to receive an allocation. Participants will become 20% vested
in their ESOP account balances for each year of service beginning with the
second year of service, up to a maximum of 100% for six years of service. Up to
five years of service prior to the adoption of the ESOP shall be credited for
the purposes of vesting. Vesting will be accelerated upon retirement, death,
disability, change in control of the Company, or termination of the ESOP.
Forfeitures will be reallocated to participants on the same basis as other
contributions in the plan year. Benefits may be payable in the form of a lump
sum upon retirement, death, disability or separation from service. Our
contributions to the ESOP are discretionary and may cause a reduction in other
forms of compensation. Therefore, benefits payable under the ESOP cannot be
estimated.
In the event of a change in control of us, the outstanding balance of
any loans used to finance the purchase of shares by the ESOP will be payed off
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, 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.
The board of directors has appointed non-employee directors to the ESOP
Committee to administer the ESOP and to serve as the initial ESOP Trustees. The
board of directors or the ESOP
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<PAGE>
Committee may instruct the ESOP Trustees regarding investments of funds
contributed to the ESOP. The ESOP Trustees must vote all allocated shares held
in the ESOP in accordance with the instructions of the participating employees.
Unallocated shares and allocated shares for which no timely direction is
received will be voted by the ESOP Trustees as directed by the board of
directors or the ESOP Committee, subject to the Trustees' fiduciary duties.
PROPOSED FUTURE STOCK BENEFIT PLANS
STOCK OPTION PLAN. We intend to adopt a stock option plan (the Option
Plan) following the Conversion, subject to approval by you and the Company's
stockholders, at a stockholders' meeting to be held no sooner than six months
after the Conversion. If the Option Plan is adopted during the first year
following the Conversion, the Option Plan would be in compliance with the OTS
conversion regulations in effect. See "-- Restrictions on Benefit Plans." If the
Option Plan is implemented more than one year after the Conversion, the Option
Plan will comply with OTS regulations and policies that are applicable at such
time. If the Option Plan is implemented within one year after the Conversion, in
accordance with OTS regulations, a number of shares equal to 10% of the
aggregate shares of Common Stock to be issued in the offering (i.e., 28,000
shares based upon the sale of 280,000 shares at the midpoint of the Estimated
Valuation Range) would be reserved for issuance by the Company upon exercise of
stock options or stock appreciation rights ("SARs") to be granted to our
officers, directors and employees from time to time under the Option Plan. The
purpose of the Option Plan would be to provide additional performance and
retention incentives to certain officers, directors and employees by
facilitating their purchase of a stock interest in the Company. Under the OTS
conversion regulations, the Option Plan, would provide for a term of 10 years,
after which no awards could be made, unless earlier terminated by the board of
directors pursuant to the Option Plan and the options would vest over a five
year period (i.e., 20% per year), beginning one year after the date of grant of
the option. Options would expire no later than 10 years from the date granted
and would expire earlier if the Option Committee so determines or in the event
of termination of employment. Options would be granted based upon several
factors, including seniority, job duties and responsibilities, job performance,
our financial performance and a comparison of awards given by other savings
institutions converting from mutual to stock form.
The Company would receive no monetary consideration for the granting of
stock options or SARs under the Option Plan. It would receive the option price
for each share issued to optionees upon the exercise of such options. Shares
issued as a result of the exercise of options will be either authorized but
unissued shares or shares purchased in the open market by the Company. However,
no purchases in the open market will be made that would violate applicable
regulations restricting purchases by the Company. The exercise of options and
payment for the shares received would contribute to the equity of the Company.
MANAGEMENT RECOGNITION PLAN. We intend to adopt the MRP following the
Conversion, the objective of which is to enable us to retain personnel and
directors of experience and ability in key positions of responsibility. The
Company expects to hold a stockholders' meeting no sooner than six months after
the Conversion in order for stockholders to vote to approve the MRP. If the
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<PAGE>
MRP is implemented within one year after the Conversion, in accordance with
applicable OTS regulations, the shares granted under the MRP will be in the form
of restricted stock vesting over a five year period (i.e., 20% per year)
beginning one year after the date of grant of the award. If the MRP is
implemented more than one year after the Conversion, the MRP will comply with
such OTS regulations and policies that are applicable at such time. Compensation
expense in the amount of the fair market value of the common stock granted will
be recognized pro rata over the years during which the shares are payable. Until
they have vested, such shares may not be sold, pledged or otherwise disposed of
and are required to be held in escrow. Any shares not so allocated would be
voted by the MRP Trustees. Awards would be granted based upon a number of
factors, including seniority, job duties and responsibilities, job performance,
our performance and a comparison of awards given by other institutions
converting from mutual to stock form. The MRP would be managed by a committee of
non-employee directors (the "MRP Trustees"). The MRP Trustees would have the
responsibility to invest all funds contributed by us to the trust created for
the MRP (the "MRP Trust").
We expect to contribute sufficient funds to the MRP so that the MRP
Trust can purchase, in the aggregate, up to 4% of the amount of Common Stock
that is sold in the Conversion. The shares purchased by the MRP would be
authorized but unissued shares or would be purchased in the open market. In the
event the market price of the Common Stock is greater than $10.00 per share, our
contribution of funds will be increased. Likewise, in the event the market price
is lower than $10.00 per share, our contribution will be decreased. In
recognition of their prior and expected services to us and the Company, as the
case may be, the officers, other employees and directors responsible for
implementation of the policies adopted by the board of directors and our
profitable operation will, without cost to them, be awarded stock under the MRP.
Based upon the sale of 280,000 shares of Common Stock in the offering at the
midpoint of the Estimated Valuation Range, the MRP Trust is expected to purchase
up to 11,200 shares of common stock.
RESTRICTIONS ON STOCK BENEFIT PLANS. OTS regulations provide that in the
event we implement stock option or management and/or employee stock benefit
plans within one year from the date of Conversion, such plans must comply with
the following restrictions: (1) the plans must be fully disclosed in the
prospectus, (2) for stock option plans, the total number of shares for which
options may be granted may not exceed 10% of the shares issued in the
Conversion, (3) for restricted stock plans, the shares may not exceed 3% of the
shares issued in the Conversion (4% for institutions with 10% or greater
tangible capital), (4) the aggregate amount of stock purchased by the ESOP in
the Conversion may not exceed 10% (12% for well-capitalized institutions
utilizing a 4% management recognition plan), (5) no individual employee may
receive more than 25% of the available awards under the Option Plan or the MRP,
(6) directors who are not employees may not receive more than 5% individually or
30% in the aggregate of the awards under any plan, (7) all plans must be
approved by a majority of the total votes eligible to be cast at any duly called
meeting of the Company's stockholders held no earlier than six months following
the Conversion, (8) for stock option plans, the exercise price must be at least
equal to the market price of the stock at the time of grant, (9) for restricted
stock plans such as the MRP, no stock issued in a conversion may be used to fund
the plan, (10) neither stock option awards nor restricted stock awards may vest
earlier than
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20% as of one year after the date of stockholder approval and 20% per year
thereafter, and vesting may be accelerated only in the case of disability or
death (or if not inconsistent with applicable OTS regulations in effect at such
time, in the event of a change in control), (11) the proxy material must clearly
state that the OTS in no way endorses or approves of the plans, and (12) prior
to implementing the plans, all plans must be submitted to the Regional Director
of the OTS within five days after stockholder approval with a certification that
the plans approved by the stockholders are the same plans that were filed with
and disclosed in the proxy materials relating to the meeting at which
stockholder approval was received.
We have not yet decided whether the Option Plan or the MRP will be
implemented during the first year after the Conversion. If they are implemented
after the first anniversary of the Conversion, the above-described limitations
and provisions will not apply.
CERTAIN RELATED TRANSACTIONS
During the year ended June 30, 1997, certain of our officers and directors
had loans from us in amounts exceeding $60,000. All of such loans were made in
the ordinary course of business, were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable features.
THE CONVERSION
THE OTS HAS APPROVED THE PLAN SUBJECT TO THE PLAN'S APPROVAL BY OUR MEMBERS
AT A SPECIAL MEETING OF MEMBERS, AND SUBJECT TO THE SATISFACTION OF CERTAIN
OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS APPROVAL, HOWEVER, DOES
NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE PLAN BY THE OTS.
General
On May 29, 1997, our board of directors adopted a Plan of Conversion,
pursuant to which we will convert from a federally chartered mutual savings bank
to a federally chartered stock savings bank and become a wholly owned subsidiary
of the Company. The Conversion will include adoption of the proposed Federal
Stock Charter and Bylaws which will authorize the issuance of capital stock by
us. Under the Plan, our capital stock is being sold to the Company and the
Common Stock of the Company is being offered to our customers and then to the
public.
The OTS has approved the Company's application to become a savings and loan
holding company and to acquire all of our capital stock to be issued in the
Conversion. Pursuant to such OTS approval, the Company plans to retain 50% of
the net proceeds from the sale of shares of Common Stock and to use the
remaining 50% to purchase all of the capital stock we will issue in the
Conversion.
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The shares are first being offered in a Subscription Offering to holders of
subscription rights. To the extent shares of Common Stock remain available after
the Subscription Offering, we may offer shares of Common Stock in a Community
Offering. The Community Offering, if any, may begin anytime subsequent to the
beginning of the Subscription Offering. Shares not subscribed for in the
Subscription and Community Offerings may be offered for sale by the Company in a
Syndicated Community Offering. We have the right, in our sole discretion, to
accept or reject, in whole or in part, any orders to purchase shares of Common
Stock received in the Community and Syndicated Community Offering. See "--
Community Offering" and "-- Syndicated Community Offering."
We must sell Common Stock in an amount equal to our pro forma market value
as a stock savings institution in order for the Conversion to become effective.
We must complete the Community Offering within 45 days after the last day of the
Subscription Offering, unless we extend such period and obtain the approval of
the OTS to do so. The Plan provides that the Conversion must be completed within
24 months after the date of the approval of the Plan by our members.
In the event that we are unable to complete the sale of Common Stock and
effect the Conversion within 45 days after the end of the Subscription Offering,
we may request an extension of the period by the OTS. We cannot assure you that
the extension would be granted if requested, nor can we assure you that our
valuation would not substantially change during any such extension. If the
Estimated Valuation Range of the shares must be amended, we cannot assure that
the OTS would approve such amended Estimated Valuation Range. Therefore, it is
possible that if the Conversion cannot be completed within the requisite period
of time, we may not be permitted to complete the Conversion. A substantial delay
caused by an extension of the period may also significantly increase the expense
of the Conversion. We cannot sell any shares of Common Stock unless the Plan is
approved by our members.
The completion of the offering is subject to market conditions and other
factors beyond our control. We cannot give you any assurances as to the length
of time following approval of the Plan at the meeting of our members that will
be required to complete the Community Offering or other sale of the shares being
offered in the Conversion. If we experience delays, our estimated pro forma
market value upon Conversion could change significantly, together with
corresponding changes in the offering price and the net proceeds to be realized
by us from the sale of the shares. In the event we terminate the Conversion, we
would be required to charge all Conversion expenses against current income and
promptly return any funds collected by us in the offering to each potential
investor, plus interest at the prescribed rate.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF NEWPORT
FEDERAL SAVINGS BANK
VOTING RIGHTS. Currently in our mutual form, our depositor and borrower
members have voting rights and may vote for the election of directors. Following
the Conversion, depositors and borrower members will cease to have voting
rights.
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SAVINGS ACCOUNTS AND LOANS. The Conversion will not affect the balances,
terms and FDIC insurance coverage of savings accounts, nor will the amounts and
terms of loans and obligations of the borrowers under their individual
contractual arrangements with us be affected.
TAX EFFECTS. We have received an opinion from our counsel, Housley
Kantarian & Bronstein, P.C. on the federal tax consequences of the Conversion.
We have filed the opinion as an exhibit to the registration statement of which
this prospectus is a part. The opinion provides, in part, that,: (i) the
Conversion will qualify as a reorganization under Section 368(a)(1)(F) of the
Code, and we will not recognize any taxable gain in either our mutual form or
our stock form as a result of the proposed Conversion; (ii) we will not
recognize any taxable gain upon the receipt of money from the Company for our
stock, nor will the Company recognize any gain upon the receipt of money for the
Common Stock; (iii) our assets in either our mutual or our stock form will have
the same basis before and after the Conversion; (iv) the holding period of our
assets will include the period during which the assets were held by us in our
mutual form prior to Conversion; (v) no gain or loss will be recognized by the
Eligible Account Holders, Supplemental Eligible Account Holders, and Other
Members upon the issuance to them of withdrawable savings accounts in us in the
stock form in the same dollar amount as their savings accounts in us in the
mutual form plus an interest in the liquidation account of us in the stock form
in exchange for their savings accounts in us in the mutual form; (vi) depositors
will recognize gain or loss upon the receipt of liquidation rights and the
receipt of subscription rights in the Conversion, to the extent such liquidation
rights and subscription rights are deemed to have value, as discussed below;
(vii) the basis of each account holder's savings accounts in us after the
Conversion will be the same as the basis of his savings accounts in us prior to
the Conversion, decreased by the fair market value of the nontransferable
subscription rights received and increased by the amount, if any, of gain
recognized on the exchange; (viii) the basis of each account holder's interest
in the liquidation account will be zero; and (ix) the holding period of the
Common Stock acquired through the exercise of subscription rights shall begin on
the date on which the subscription rights are exercised.
With respect to the subscription rights, we have received an opinion of
Ferguson which, based on certain assumptions, concludes that the subscription
rights to be received by Eligible Account Holders and other eligible subscribers
do not have any economic value at the time of distribution or at the time the
subscription rights are exercised, whether or not a public offering takes place.
Such opinion is based on the fact that such rights are: (i) acquired by the
recipients without payment therefor, (ii) non-transferable, (iii) of short
duration, and (iv) afford the recipients the right only to purchase shares at a
price equal to their estimated fair market value, which will be the same price
at which shares for which no subscription right is received in the Subscription
Offering will be offered in the Community Offering. If the subscription rights
granted to Eligible Account Holders or other eligible subscribers are deemed to
have an ascertainable value, receipt of such rights would be taxable only to
those Eligible Account Holders or other eligible subscribers who exercise the
subscription rights in an amount equal to such value (either as a capital gain
or ordinary income), and we could recognize gain on such distribution.
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We are also subject to Arkansas income taxes and have received an opinion
from KPMG Peat Marwick LLP that the Conversion will be treated for Arkansas
state tax purposes similar to the Conversion's treatment for federal tax
purposes.
Unlike a private letter ruling, the opinions of Housley Kantarian &
Bronstein, P.C., Ferguson and KPMG Peat Marwick LLP have no binding effect or
official status, and we cannot give you any assurance that a court would sustain
the conclusions reached in any of those opinions if contested by the IRS or the
Arkansas tax authorities. WE ENCOURAGE ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL
ELIGIBLE ACCOUNT HOLDERS, AND OTHER MEMBERS TO CONSULT WITH THEIR OWN TAX
ADVISERS AS TO THE TAX CONSEQUENCES IN THE EVENT THE SUBSCRIPTION RIGHTS ARE
DEEMED TO HAVE AN ASCERTAINABLE VALUE.
Liquidation Account. In the unlikely event of our complete liquidation in
our present mutual form, each depositor is entitled to equal distribution of any
of our assets, pro rata to the value of his accounts, remaining after payment of
claims of all creditors (including the claims of all depositors to the
withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
accounts was to the total value of all deposit accounts in us at the time of
liquidation.
Upon a complete liquidation after the Conversion, each depositor would have
a claim, as a creditor, of the same general priority as the claims of all other
general creditors of ours. Therefore, except as described below, a depositor's
claim would be solely in the amount of the balance in his deposit account plus
accrued interest. A depositor would not have an interest in the residual value
of our assets above that amount, if any.
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
$_________. Each Eligible Account Holder and Supplemental Eligible Account
Holder, if he continues to maintain his deposit account with us, would be
entitled on a complete liquidation of us after Conversion, to an interest in the
liquidation account prior to any payment to stockholders. Each Eligible Account
Holder would have an initial interest in such liquidation account for each
deposit account held in us on the qualifying date, December 31, 1995. Each
Supplemental Eligible Account Holder would have a similar interest as of the
qualifying date, ___________, 1997. The interest as to each deposit account
would be in the same proportion of the total liquidation account as the balance
of the deposit account on the qualifying dates was to the aggregate balance in
all the deposit accounts of Eligible Account Holders and Supplemental Eligible
Account Holders on such qualifying dates. However, if the amount in the deposit
account on any annual closing date of ours is less than the amount in such
account on the respective qualifying dates, then the interest in this special
liquidation account would be reduced from time to time by an amount
proportionate to any such reduction, and the interest would cease to exist if
such deposit account were closed. The interest in the special liquidation
account will never be increased despite any increase in the related deposit
account after the respective qualifying dates.
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No merger, consolidation, purchase of bulk assets with assumptions of
savings accounts and other liabilities, or similar transactions with another
insured institution in which transaction we in our converted form are not the
surviving institution shall be considered a complete liquidation. In such
transactions, the liquidation account shall be assumed by the surviving
institution.
SUBSCRIPTION RIGHTS AND THE SUBSCRIPTION OFFERING
In accordance with OTS regulations, non-transferable subscription rights to
purchase shares of the Common Stock have been granted to all persons and
entities entitled to purchase shares in the Subscription Offering under the
Plan. The number of shares which these parties may purchase will be determined,
in part, by the total number of shares to be issued and by the availability of
the shares for purchase under the categories set forth in the Plan. If the
Community Offering, as described below, extends beyond 45 days following the
completion of the Subscription Offering, we will resolicit subscribers and
permit them to increase, decrease or rescind their orders. Subscription
priorities have been established for the allocation of stock to the extent that
shares are available after satisfaction of all subscriptions of all persons
having prior rights and subject to the maximum and minimum purchase limitations
set forth in the Plan and as described below under " -- Limitations on Purchases
of Shares." The following priorities have been established:
CATEGORY 1: ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder (which
collectively encompasses all names on a joint account) will receive non-
transferable subscription rights on a priority basis to purchase that number of
shares of Common Stock which is equal to 5,000 shares ($50,000) or 5.0% of the
shares to be sold in the Conversion (i.e., 14,000 shares if a total of 280,000
shares are sold) in the event the Eligible Account Holder had more than one
deposit account with a balance of at least $50.00 with us on December 31, 1995.
If there are insufficient shares to satisfy the orders of all Eligible Account
Holders, shares shall be allocated among subscribing Eligible Account Holders so
as to permit each such account holder, to the extent possible, to purchase the
lesser of 100 shares or the total amount of his subscription. Any shares
remaining 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. Subscription rights received by officers and directors
in this category based on their increased deposits in us in the one-year period
preceding December 31, 1995, are subordinated to the subscription rights of
other Eligible Account Holders. See " -- Limitations on Purchases and Transfer
of Shares."
CATEGORY 2: ESOP. The ESOP has been granted subscription rights to purchase
up to 10% of the total shares issued in the Conversion.
Although the right of the ESOP to subscribe for shares is subordinate to
the right of the Eligible Account Holders, in the event the offering results in
the issuance of shares above the maximum of the Estimated Valuation Range (i.e.,
more than 322,000 shares), the ESOP has a priority right to fill its
subscription. The ESOP currently intends to purchase up to 8.0% of the Common
Stock issued in the Conversion. The ESOP may, however, determine to purchase
some
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or all of the shares covered by its subscription after the Conversion in the
open market or, if approved by the OTS, out of authorized but unissued shares in
the event of an over subscription.
CATEGORY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each Supplemental
Eligible Account Holder (which collectively encompasses all names on a joint
account) who is not an Eligible Account Holder will receive non-transferable
subscription rights to purchase that number of shares which is equal to 5,000
shares ($50,000) or 5.0% of the shares sold in the offering (i.e., 14,000 shares
if a total of 280,000 shares are sold) if the Supplemental Eligible Account
Holder had more than one deposit account with a balance of at least $50.00 with
us on ____________, 1997. If the allocation made in this paragraph results in an
over subscription, shares shall be allocated among subscribing Supplemental
Eligible Account Holders so as to permit each such account holder, to the extent
possible, to purchase the lesser of 100 shares or the total amount of his
subscription. 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.
See "-- Limitations on Purchases and Transfer of Shares."
The right of Supplemental Eligible Account Holders to subscribe for shares
is subordinate to the rights of the Eligible Account Holders and the ESOP to
subscribe for shares.
CATEGORY 4: OTHER MEMBERS. Each Other Member (which collectively
encompasses all names on a joint account) who is not an Eligible Account Holder
or Supplemental Eligible Account Holder, will receive non-transferable
subscription rights to purchase up to 5,000 shares ($50,000) or 5.0% of the
total number of shares sold in the offering (i.e., 14,000 shares if a total of
280,000 shares are sold) if the Other Member had more than one deposit account
or loan with us on _____________, 1997 to the extent such shares are available
following subscriptions by Eligible Account Holders, Employee Plans, and
Supplemental Eligible Account Holders. In the event there are not enough shares
to fill the orders of the Other Members, the subscriptions of the Other Members
will be allocated so that each subscribing Other Member will be entitled to
purchase the lesser of 100 shares or the number of shares ordered. Any remaining
shares will be allocated among Other Members whose subscriptions remain
unsatisfied on a reasonable basis. See "-- Limitations on Purchases and Transfer
of Shares."
MEMBERS IN NON-QUALIFIED STATES. We 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 shares pursuant to the Plan reside. However, no
person will be offered or allowed to purchase any shares under the Plan if he
resides in a foreign country or in a state with respect to which any of the
following apply: (i) a small number of persons otherwise eligible to subscribe
for shares under the Plan reside in that state or foreign country; (ii) the
granting of subscription rights or offer or sale of shares of common stock to
those persons would require either us, or our employees to register, under the
securities laws of that state or foreign country, as a broker or dealer or to
register or otherwise qualify our securities for sale in that state or foreign
country; or (iii) such registration or qualification
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would be impracticable for reasons of cost or otherwise. We will not make any
payment in lieu of the granting of subscription rights to any person.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES. Persons are
prohibited from transferring or entering into any agreement or understanding to
transfer the legal or beneficial ownership of their subscription rights. Only
the person to whom they are granted may exercise subscription rights and only
for his account. Each person subscribing for shares will be required to certify
that he is purchasing shares solely for his own account and has not entered into
an agreement or understanding regarding the sale or transfer of those shares.
The regulations also prohibit any person from offering or making an announcement
of an offer or intent to make an offer to purchase subscription rights or shares
of common stock prior to the completion of the Conversion.
We will pursue any and all legal and equitable remedies in the event we
become aware of the transfer of subscription rights and will not honor orders
believed by us to involve the transfer of subscription rights.
EXPIRATION DATE. The Subscription Offering will expire at 12:00 p.m.,
Central Time, on ________, 1997, (Expiration Date). Subscription rights will
become void if not exercised prior to the Expiration Date.
COMMUNITY OFFERING
To the extent that shares remain available for purchase after filling all
orders received in the Subscription Offering, we may offer shares of Common
Stock to certain members of the general public residing in Arkansas and certain
other states with a preference to natural persons residing in Jackson County,
Arkansas under such terms and conditions as may be established by the board of
directors. In the Community Offering, the minimum purchase is 25 shares, and no
person, together with associates of and persons acting in concert with such
persons, may purchase more than 5.0% of the shares sold in the offering.
WE MAY BEGIN THE COMMUNITY OFFERING AT ANY TIME AFTER THE SUBSCRIPTION
OFFERING HAS BEGUN. THE COMMUNITY OFFERING ONCE COMMENCED, MAY EXPIRE AT ANY
TIME WITHOUT NOTICE BUT NO LATER THAN 12:00 P.M., CENTRAL TIME, ON __________,
1997 UNLESS WE EXTEND IT WITH THE PERMISSION OF THE OTS. PURCHASES OF SHARES IN
THE COMMUNITY OFFERING ARE SUBJECT TO OUR RIGHT IN OUR SOLE DISCRETION, TO
ACCEPT OR REJECT SUCH PURCHASES IN WHOLE OR IN PART EITHER AT THE TIME AND
RECEIPT OF AN ORDER, OR AS SOON AS PRACTICABLE FOLLOWING THE COMPLETION OF THE
COMMUNITY OFFERING.
In the event Community Offering orders are not filled, we will promptly
refund funds received by us with interest at our passbook rate. In the event an
insufficient number of shares are available to fill all orders in the Community
Offering, the available shares will be allocated on an equitable basis
determined by the board of directors, provided however that a preference will be
given to natural persons residing in Jackson County, Arkansas. If regulatory
approval is received
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to extend the Community Offering beyond 45 days following the completion of the
Subscription Offering, subscribers will be resolicited. Shares sold in the
Community Offering will be sold at $10.00 per share.
SYNDICATED COMMUNITY OFFERING
The Plan provides that, if necessary, we may offer shares of Common Stock
not purchased in the Subscription and Community Offerings for sale to the
general public in a Syndicated Community Offering through a syndicate of
selected dealers to be formed and managed by Trident Securities. No individual
purchaser together with any associate or group of persons acting in concert may
purchase more than 5.0% of the shares. Neither Trident Securities nor any
registered broker-dealer will be obligated to take or purchase any shares in the
Syndicated Community Offering, although Trident Securities has agreed to use its
best efforts in the sales of shares in any Syndicated Community Offering. Shares
sold in the Syndicated Community Offering will be sold at the Purchase Price.
See "-- Stock Pricing,"
The Syndicated Community Offering will terminate no more than 45 days
following the Expiration Date, unless the Company extends it with the approval
of the OTS.
LIMITATIONS ON PURCHASES AND TRANSFER OF SHARES
The Plan provides for certain additional limitations to be placed upon the
purchase of the shares in the Conversion. The minimum purchase is 25 shares. No
persons, together with associates, or group of persons acting in concert, may
purchase more than 5.0% of the shares except for the ESOP which may purchase up
to 10% of the shares sold. The OTS regulations governing the Conversion provide
that officers and directors and their associates may not purchase, in the
aggregate, more than 35% of the shares issued pursuant to the Conversion.
Depending on market conditions and the results of the offering, the board
of directors may increase or decrease any of the purchase limitations without
the approval of our members and without resoliciting subscribers. If the maximum
purchase limitation is increased, persons who ordered the maximum amount will be
given the first opportunity to increase their orders. In doing so the preference
categories in the offerings will be followed.
In the event of an increase in the total number of shares offered in the
Conversion due to an increase in the Estimated Valuation Range of up to 15% (the
"Adjusted Maximum"), the additional shares will be allocated in the following
order of priority: (i) to fill the ESOP's subscription of up to 8% of the
Adjusted Maximum number of shares (the ESOP currently intends to subscribe for
8%); (ii) in the event that there is an over subscription by Eligible Account
Holders, to fill unfulfilled subscriptions of Eligible Account Holders exclusive
of the Adjusted Maximum; (iii) in the event that there is an over subscription
by Supplemental Eligible Account Holders, to fill unfulfilled subscriptions to
Supplemental Eligible Account Holders exclusive of the Adjusted Maximum; (iv) in
the event that there is an over subscription by Other Members, to fill
unfulfilled subscriptions of
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Other Members exclusive of the Adjusted Maximum; and (v) to fill unfulfilled
subscriptions in the Community Offering to the extent possible, exclusive of the
Adjusted Maximum.
The term "associate" of a person means (i) any corporation or organization
(other than us or a majority-owned subsidiary of ours) 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 director or in a similar fiduciary capacity (excluding tax-
qualified employee stock benefit plans), and (iii) any relative or spouse of
such person or any relative of such spouse, who has the same home as such person
or who is a director or officer of us, or any of our subsidiaries. For example,
a corporation of which a person serves as an officer would be an associate of
that person, and therefore all shares purchased by that corporation would be
included with the number of shares which that person individually could purchase
under the above limitations.
The term "officer" may include our chairman of the board, president, vice
presidents in charge of principal business functions, Secretary and Treasurer
and any other person performing similar functions. All references herein to an
officer have the same meaning as used for an officer in the Plan.
The term "residing," as used in relation to the preference afforded natural
persons in Jackson County, Arkansas, means any natural person who occupies a
dwelling within Jackson County, has an intention to remain within Jackson County
(manifested by establishing a physical, on-going, non- transitory presence
within Jackson County), and continues to reside in Jackson County at the time of
the offering. We may utilize deposit or loan records or such other evidence
provided to us to make the determination whether a person is residing in Jackson
County. Such determination will be in our sole discretion.
TO ORDER SHARES IN THE CONVERSION, PERSONS MUST CERTIFY THAT THEIR PURCHASE
DOES NOT CONFLICT WITH THE PURCHASE LIMITATIONS. IN THE EVENT THAT THE PURCHASE
LIMITATIONS ARE VIOLATED BY ANY PERSON (INCLUDING ANY ASSOCIATE OR GROUP OF
PERSONS AFFILIATED OR OTHERWISE ACTING IN CONCERT WITH SUCH PERSONS), WE WILL
HAVE THE RIGHT TO PURCHASE FROM THAT PERSON AT $10.00 PER SHARE ALL SHARES
ACQUIRED BY THAT PERSON IN EXCESS OF THE PURCHASE LIMITATIONS. IF THE EXCESS
SHARES HAVE BEEN SOLD BY THAT PERSON, WE MAY RECOVER THE PROFIT FROM THE SALE OF
THE SHARES BY THAT PERSON. WE MAY ASSIGN OUR RIGHT EITHER TO PURCHASE THE EXCESS
SHARES OR TO RECOVER THE PROFITS FROM THEIR SALE.
Shares of Common Stock purchased pursuant to the Conversion will be freely
transferable, except for shares purchased by our directors and officers. For
certain restrictions on the shares purchased by directors and officers, see " --
Restrictions on Sales and Purchases of Shares by Directors and Officers." 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.
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ORDERING AND RECEIVING SHARES
USE OF ORDER FORMS. Subscription rights to subscribe may only be exercised
by completion of an original order form. Persons ordering shares in the
Subscription Offering must deliver by mail or in person a properly completed and
executed original order form to us prior to the Expiration Date. Order forms
must be accompanied by full payment for all shares ordered. See "-- Payment for
Shares." Subscription rights under the Plan will expire on the Expiration Date,
whether or not we have been able to locate each person entitled to subscription
rights. ONCE SUBMITTED, SUBSCRIPTION ORDERS CANNOT BE REVOKED WITHOUT OUR
CONSENT UNLESS THE CONVERSION IS NOT COMPLETED WITHIN 45 DAYS OF THE EXPIRATION
DATE.
Persons and entities not purchasing shares in the Subscription Offering
may, subject to availability, purchase shares in the Community Offering by
returning to us a completed and properly executed order form along with full
payment for the shares ordered.
In the event an order form (i) is not delivered and is returned to us by
the United States Postal Service or we are unable to locate the addressee, (ii)
is not received or is received after the Expiration Date, (iii) is defectively
completed or executed, or (iv) is not accompanied by full 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 for the person to whom such
rights have been granted will lapse as though that person failed to return the
completed order form within the time period specified. We may, but will not be
required to, waive any irregularity on any order form or require the submission
of corrected order forms or the remittance of full payment for subscribed shares
by such date as we specify. The waiver of an irregularity on an order form in no
way obligates us to waive any other irregularity on that, or any irregularity on
any other, order form. Waivers will be considered on a case by case basis.
Photocopies of order forms, payments from private third parties, or electronic
transfers of funds will not be accepted. Our interpretation of the terms and
conditions of the Plan and of the acceptability of the order forms will be
final. We have the right to investigate any irregularity on any order form.
To ensure that each purchaser receives a prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of the order
form will confirm receipt or delivery in accordance with Rule 15c2-8. Order
forms will only be distributed with a prospectus.
PAYMENT FOR SHARES. Payment for shares of Common Stock may be made (i) in
cash, if delivered in person, (ii) by check or money order, or (iii) by
authorization of withdrawal from savings accounts (including certificates of
deposit) maintained with us or (iv) by an IRA not held by us. Appropriate means
by which such withdrawals may be authorized are provided in the order form. Once
such a withdrawal has been authorized, none of the designated withdrawal amount
may be used by the subscriber for any purpose other than to purchase the shares.
Where payment has
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been authorized to be made through withdrawal from a savings account, the sum
authorized for withdrawal will continue to earn interest at the contract rate
until the Conversion has been 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 passbook savings account rate subsequent to
the withdrawal. Payments made in cash or by check or money order, will be placed
in a segregated saving account and interest will be paid by us at our passbook
savings account rate from the date payment is received until the Conversion is
completed or terminated. An executed order form, once received by us, may not be
modified, amended, or rescinded without our consent, unless the Conversion is
not completed within 45 days after the conclusion of the Subscription Offering,
in which case subscribers may be given an opportunity to increase, decrease, or
rescind their order. In the event that the Conversion is not consummated, all
funds submitted pursuant to the offering will be refunded promptly with
interest.
Owners of self-directed IRAs may use the assets of such IRAs to purchase
shares in the offering, provided that such IRSs are not maintained on deposit
with us Persons with IRAs maintained with us must have their accounts
transferred to an unaffiliated institution or broker to purchase shares in the
offering. The Stock Information Center can assist you in transferring your self-
directed IRA. Because of the paperwork involved, persons owning IRAs with us who
wish to use their IRA account to purchase stock in the Offering, must contact
the Stock Information Center no later than __________, 1997.
DELIVERY OF STOCK CERTIFICATES. Certificates representing shares of Common
Stock issued in the Conversion will be mailed to the person(s) at the address
noted on the order form, as soon as practicable following consummation of the
Conversion. Any certificates returned as undeliverable will be held until
properly claimed or otherwise disposed. Persons ordering shares might not be
able to sell their shares until they receive their stock certificates.
FEDERAL REGULATIONS PROHIBIT US FROM LENDING FUNDS OR EXTENDING CREDIT TO
ANY PERSON TO PURCHASE SHARES IN THE CONVERSION.
MARKETING ARRANGEMENTS
We have engaged Trident Securities as our financial advisor in connection
with the offering. Trident Securities has agreed to exercise its best efforts to
assist us in the sale of the shares in the offering. As compensation, Trident
Securities will receive a fee in the amount of $105,000. If shares are offered
for sale in a Syndicated Community Offering, Trident Securities will organize
and manage the syndicate of selected broker-dealers. The commission to be paid
to any such selected broker-dealers will be at a rate to be agreed to jointly by
Trident Securities and us. Fees paid to Trident Securities and to any other
broker-dealer may be deemed to be underwriting fees, and Trident Securities and
such broker-dealers may be deemed to be underwriters. We have agreed to
indemnify Trident Securities for reasonable costs and expenses in connection
with certain claims or
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liabilities which might be asserted against Trident Securities. This
indemnification covers the investigation, preparation of defense and defense of
any action, proceeding or claim relating to misrepresentation or breach of
warranty of the written agreement among Trident Securities and us or the
omission or alleged omission of a material fact required to be stated or
necessary in the prospectus or other documents.
The shares will be offered principally by the distribution of this document
and through activities conducted at a Stock Information Center located at our
office. The Stock Information Center is expected to operate during our normal
business hours throughout the offering. A registered representative employed by
Trident Securities will be working at, and supervising the operation of, the
Stock Information Center. Trident Securities will assist us in responding to
questions regarding the Conversion and the offering and processing order forms.
Our personnel will be present in the Stock Information Center to assist Trident
Securities with clerical matters and to answer questions related solely to our
business.
STOCK PRICING
We have retained Ferguson, an independent economic consulting and appraisal
firm, which is experienced in the evaluation and appraisal of business entities,
including savings institutions involved in the conversion process to prepare an
appraisal of our estimated pro forma market value. We will pay Ferguson a fee of
$15,000 for preparing the appraisal and will reimburse Ferguson up to $3,000 for
reasonable out-of-pocket expenses. We have agreed to indemnify Ferguson under
certain circumstances against liabilities and expenses arising out of or based
on any misstatement or untrue statement of a material fact contained in the
information supplied by us to Ferguson.
Ferguson prepared the appraisal in reliance upon the information contained
herein, including the financial statements. The appraisal contains an analysis
of a number of factors including, but not limited to, our financial condition
and operating trends, the competitive environment within which we operate,
operating trends of certain savings institutions and savings and loan holding
companies, relevant economic conditions, both nationally and in the state of
Arkansas which affect the operations of savings institutions, and stock market
values of certain savings institutions. In addition, Ferguson has advised us
that it has considered the effect of the additional capital raised by the sale
of the shares on our estimated aggregate pro forma market value.
On the basis of the above, Ferguson has determined, in its opinion, that as
of September 2, 1997 our estimated aggregate pro forma market value was
$2,800,000. OTS regulations require, however, that the appraiser establish a
range of value for the stock to allow for fluctuations in the aggregate value of
the stock due to changing market conditions and other factors. Accordingly,
Ferguson has established the Estimated Valuation Range from $2,380,000 to
$3,220,000 for the offering. The Estimated Valuation Range will be updated prior
to consummation of the Conversion and the Estimated Valuation Range may increase
to $3,703,000.
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The board of directors has reviewed the independent appraisal, including
the stated methodology of the independent appraiser and the assumptions used in
the preparation of the independent appraisal. The board of directors is relying
upon the expertise, experience and independence of the appraiser and is not
qualified to determine the appropriateness of the assumptions.
In order for stock sales to take place, Ferguson must confirm to the OTS
that, to the best of Ferguson's knowledge and judgment, nothing of a material
nature has occurred which would cause Ferguson to conclude that the Purchase
Price on an aggregate basis was incompatible with Ferguson's estimate of our pro
forma market value of us in converted form at the time of the sale. If, however,
facts do not justify such a statement, an amended Estimated Valuation Range may
be established.
THE APPRAISAL IS NOT A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF
PURCHASING THESE SHARES. IN PREPARING THE APPRAISAL, FERGUSON HAS RELIED UPON
AND ASSUMED THE ACCURACY AND COMPLETENESS OF FINANCIAL AND STATISTICAL
INFORMATION PROVIDED BY US. FERGUSON DID NOT INDEPENDENTLY VERIFY THE FINANCIAL
STATEMENTS AND OTHER INFORMATION PROVIDED BY US, NOR DID FERGUSON VALUE
INDEPENDENTLY OUR ASSETS AND LIABILITIES. THE APPRAISAL CONSIDERS US ONLY AS A
GOING CONCERN AND SHOULD NOT BE CONSIDERED AS OUR LIQUIDATION VALUE. MOREOVER,
BECAUSE THE APPRAISAL IS BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER OF
MATTERS WHICH ARE SUBJECT TO CHANGE, THE MARKET PRICE OF THE COMMON STOCK COULD
DECLINE BELOW $10.00.
CHANGE IN NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION
Depending on market and financial conditions at the time of the completion
of the Subscription and Community Offerings, we may significantly increase or
decrease the number of shares to be issued in the Conversion. In the event of an
increase in the valuation, we may increase the total number of shares to be
issued in the Conversion. An increase in the total number of shares to be issued
in the Conversion would decrease a subscriber's percentage ownership interest
and the pro forma net worth (book value) per share and increase the pro forma
net income and net worth (book value) on an aggregate basis. In the event of a
material reduction in the valuation, we may decrease the number of shares to be
issued to reflect the reduced valuation. A decrease in the number of shares to
be issued in the Conversion would increase a subscriber's percentage ownership
interest and the pro forma net worth (book value) per share and decrease pro
forma net income and net worth on an aggregate basis.
Persons ordering shares will not be permitted to modify or cancel their
orders unless the change in the number of shares to be issued in the Conversion
results in an offering which is either less than $2,380,000 or more than
$3,703,000.
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RESTRICTIONS ON REPURCHASE OF SHARES
Generally, during the first year following the Conversion, the Company
may not repurchase its shares and during each of the second and third years
following the Conversion, the Company may repurchase five percent of the
outstanding shares provided they are purchased in open-market transactions.
Repurchases must not cause us to become undercapitalized and at least 10 days
prior notice of the repurchase must be provided to the OTS. The OTS may
disapprove a repurchase program upon a determination that (1) the repurchase
program would adversely affect our financial condition, (2) the information
submitted is insufficient upon which to base a conclusion as to whether the
financial condition would be adversely affected, or (3) a valid business purpose
was not demonstrated. In addition, SEC rules also govern the method, time,
price, and number of shares of common stock that may be repurchased by the
Company and affiliated purchasers. If, in the future, the rules and regulations
regarding the repurchase of stock are liberalized, the Company may utilize the
rules and regulations then in effect.
RESTRICTIONS ON SALES AND PURCHASES OF SHARES BY DIRECTORS AND OFFICERS
Shares purchased by directors and officers of the Company may not be
sold for one year following completion of the Conversion. An exception to this
rule is a disposition of shares in the event of the death of the director or
officer. 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.
For three years following the Conversion, directors and officers may
purchase shares only through a registered broker or dealer. Exceptions are
available only if the OTS has approved the purchase or the purchase is an arm's
length transaction and involves more than one percent of the outstanding shares.
INTERPRETATION AND AMENDMENT OF THE PLAN
We are authorized to interpret and amend the Plan. Our interpretations
are final. Amendments to the Plan after the receipt of member approval will not
need further member approval unless required by the OTS.
CONDITIONS AND TERMINATION
Completion of the Conversion requires (i) the approval of the Plan by
the affirmative vote of not less than a majority of the total number of votes
eligible to be cast by our members; and (ii) completion of the sale of shares
within 24 months following approval of the Plan by our members. If these
conditions are not satisfied, the Plan will be terminated and we will continue
our business in the mutual form of organization. We may terminate the Plan at
any time prior to the meeting of members to vote on the Plan or at any time
thereafter with the approval of the OTS.
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OTHER
ALL STATEMENTS MADE IN THIS DOCUMENT ARE HEREBY QUALIFIED BY THE
CONTENTS OF THE PLAN OF CONVERSION, THE MATERIAL TERMS OF WHICH ARE SET FORTH
HEREIN. THE PLAN OF CONVERSION IS ATTACHED TO THE PROXY STATEMENT. COPIES OF THE
PLAN ARE AVAILABLE FROM US AND WE SHOULD BE CONSULTED FOR FURTHER INFORMATION.
ADOPTION OF THE PLAN BY OUR MEMBERS AUTHORIZES US TO INTERPRET, AMEND OR
TERMINATE THE PLAN.
RESTRICTIONS ON ACQUISITIONS OF THE COMPANY
The following discussion is a general summary of the material provisions
of the charter and bylaws of the Company and certain other Tennessee corporate
law and regulatory provisions, which may be deemed to have such an anti-takeover
effect. The description of these provisions is necessarily general and we refer
you to in each case to the charter and bylaws of the Company which are
incorporated herein by reference. See "Available Information" as to how to
obtain a copy of these documents.
While the board of directors is not aware of any effort that might be
made to obtain control of the Company after Conversion, the board of directors
believes that it is appropriate to include certain provisions as part of the
Company's charter and bylaws to protect the interests of the Company and its
stockholders from hostile takeovers ("anti-takeover"provisions) which the board
of directors might conclude are not in the best interests of us or our
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 the 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.
PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS
RESTRICTION ON ACQUISITION OF COMMON STOCK; LIMITATIONS ON VOTING
RIGHTS. The charter of the Company provides that, for a period of five years
after completion of the Conversion, no person may directly or indirectly,
acquire or offer to acquire beneficial ownership of more than 10% of any class
of equity security outstanding of the Company (the "Limit"), unless the
"continuing" board of directors has first approved by a two-thirds vote the
offer or acquisition. Any shares acquired in violation of this restriction will
not be counted as shares outstanding for voting purposes, nor will the holder be
entitled to vote such shares. After five years from the date of Conversion,
should any party acquire the beneficial ownership of shares in excess of 10%,
the record holders of more than 10% of any outstanding class of equity security
of the Company who obtained such shares without the requisite approval would be
entitled to cast only one-hundredth (1/100) of a vote for each share owned in
excess of 10%, and the aggregate voting power of such holders shall be allocated
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proportionately among such record holders. A person is a beneficial owner of a
security if he has the power to vote or direct the voting of all or part of the
voting rights of the security, or has the power to dispose of or direct the
disposition of the security . The charter of the Company further provide that
this provision limiting voting rights may only be amended upon the vote of 80%
of the outstanding shares of voting stock.
ELECTION OF DIRECTORS. The Company's charter provides that the board of
directors of the Company will be divided into three staggered classes, with
directors in each class elected for three-year terms. As a result of this
provision, it would take two annual elections to replace a majority of the
Company's board. The Company's charter provides that the size of the board of
directors may be increased or decreased only if two-thirds of the directors then
in office concur in such action. The charter also 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 majority vote of the directors then in office. Finally, the charter
and the bylaws impose certain notice and information requirements in connection
with the nomination by stockholders of candidates for election to the board of
directors or the proposal by stockholders of business to be acted upon at an
annual meeting of stockholders.
The charter provides that a director may only be removed for cause by
the affirmative vote of at least 80% of the shares of the Company entitled to
vote generally in an election of directors cast at a meeting of stockholders
called for that purpose.
RESTRICTIONS ON CALL OF SPECIAL MEETING. The charter of the Company
provides that a special meeting of stockholders may be called only pursuant to a
resolution adopted by a majority of the board of directors, or a Committee of
the board.
ABSENCE OF CUMULATIVE VOTING. The Company's charter provides that
stockholders may not cumulate their votes in the election of directors.
AUTHORIZED SHARES. The charter authorizes the issuance of 9,000,000
shares of Common Stock and 3,000,000 shares of Preferred Stock. The shares of
Common Stock and Preferred Stock were authorized in an amount greater than that
to be issued in the Conversion to provide the Company's board of directors with
as much flexibility as possible to effect, among other transactions, financings,
acquisitions, stock dividends, stock splits and the exercise of stock options.
However, these additional authorized shares may also be used by the board of
directors consistent with its fiduciary duty to deter future attempts to gain
control of the Company. The board of directors also has sole authority to
determine the terms of any one or more series of Preferred Stock, including
voting rights, conversion rates, and liquidation preferences. As a result of the
ability to fix voting rights for a series of Preferred Stock, the board has the
power, to the extent consistent with its fiduciary duty, to issue a series of
Preferred Stock to persons friendly to management in order to attempt to block a
post-tender offer merger or other transaction by which a third party seeks
control, and thereby assist management to retain its position. The Company's
board currently has no plans
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for the issuance of additional shares, other than the possible issuance of
additional shares pursuant to stock benefit plans .
PROCEDURES FOR CERTAIN BUSINESS COMBINATIONS. The charter requires the
affirmative vote of at least 80% of the outstanding shares of the Company
entitled to vote in the election of director in order for the Company to engage
in or enter into certain "Business Combinations," as defined therein, with any
"Related Party" (as defined below) or any affiliates of the "Related Party",
unless the proposed transaction has been approved in advance by the Company's
board of directors, excluding those who were not directors prior to the time the
"Related Party" became the "Related Party." Absent this provision, only the
approval of a majority of the shares outstanding would be required.
The term "Related Party" is defined to include any person and the
affiliates and associates of the person (other than the Company or its
subsidiary) who beneficially owns, directly or indirectly, 10% or more of the
outstanding shares of voting stock of the Company. Any amendment to this
provision requires the affirmative vote of at least 80% of the shares of the
Company entitled to vote generally in an election of directors.
AMENDMENT TO CHARTER AND BYLAWS. Amendments to the Company's charter
must be approved by the Company's board of directors and also by a majority of
the outstanding shares of the Company's voting stock, provided, however, that
approval by at least 80% of the outstanding voting stock is generally required
for certain provisions (i.e., provisions relating to restrictions on the
acquisition and voting of greater than 10% of the Common Stock; number,
classification, election and removal of directors; amendment of Bylaws; call of
special stockholder meetings; director liability; certain business combinations;
power of indemnification; and amendments to provisions relating to the foregoing
in the charter).
The bylaws may be amended by a majority vote of the board of directors
or the affirmative vote of the holders of at least 80% of the outstanding shares
of the Company entitled to vote in the election of Directors cast at a meeting
called for that purpose.
TENNESSEE BUSINESS CORPORATION ACT
THE TENNESSEE BUSINESS CORPORATION ACT contains several provisions
described below which may be applicable to the Company upon completion of the
Conversion.
The Tennessee Control Share Acquisition Act prohibits a person who
acquires over specified limits of shares of our holding company (that is, 20%,
331/3% or 50% of its outstanding shares) from voting those shares in excess of
each specified limit unless a majority of our holding company's disinterested
stockholders vote to approve voting rights for the excess shares. Pursuant to
the Control Share Acquisition Act, the provisions of such Act will only apply to
a Tennessee corporation if its charter or bylaws so provides and which has: (i)
100 or more stockholders; (ii) its principal place of business, its principal
office or substantial assets within Tennessee; and (iii) either
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(A) more than 10% of its stockholders resident in Tennessee, (B) more than 10%
of its shares owned by stockholders resident in Tennessee, or (C) 10,000 or more
stockholders resident in Tennessee. Neither the Company's charter nor its bylaws
contains a provision declaring that the Company will be subject to the
provisions of the Control Share Acquisition Act, although the Company could
amend its Charter or Bylaws in the future to include such a provision. The
Company cannot determine at this time whether it would otherwise meet the
requirements to be subject to the provisions of the Control Share Acquisition
Act.
THE TENNESSEE BUSINESS COMBINATION ACT imposes conditions on a person
owning more than 10% of a "resident domestic corporation's outstanding voting
stock (an "interested stockholder") in connection with business combinations
with the Company for a period of five years following the date such person
became an interested stockholder, unless such business combination is otherwise
approved in accordance with the terms of the statute. For purposes of the
Business Combination Act, the term "resident domestic corporation" is defined as
an issuer of voting stock which, as of the share acquisition date in question,
is organized under the laws of Tennessee and meets two or more of the following
requirements: (i) the corporation has more than 10,000 or 10% of its
stockholders resident in Tennessee or more than 10% of its shares held by
stockholders who are Tennessee residents; (ii) the corporation has its principal
office or place of business located in Tennessee; (iii) the corporation has the
principal office or place of business of a significant subsidiary, representing
not less than 25% of the corporation's consolidated net sales located in
Tennessee; (iv) the corporation employs more than 250 individuals in Tennessee
or has a combined annual payroll paid to Tennessee residents which is in excess
of $5.0 million; (v) the corporation produces goods and services in Tennessee
which result in annual gross receipts in excess of $10.0 million; or (vi) the
corporation has physical assets and/or deposits, including those of any
subsidiary located within Tennessee which exceed $10.0 million in value. The
Company does not expect that it will initially meet the definition of a resident
domestic corporation although it is possible that it will meet the definition in
the future and will be entitled to the anti-takeover protection afforded by the
Business Combination Act.
THE TENNESSEE GREENMAIL ACT makes it unlawful, under certain specified
circumstances, for the Company to purchase any of its outstanding shares of a
certain class at a price above the market value of the shares from a stockholder
owning more than 3% of the shares to be purchased, if such person has held his
shares for less than two years, unless the purchase is approved by a majority of
the outstanding shares of that class or the Company makes a similar offer to all
stockholders of that class of securities.
THE TENNESSEE INVESTOR PROTECTION ACT imposes conditions on offerors
making a tender offer for an "offeree company" and requires such offeror file
with the Tennessee Commissioner of Insurance a registration statement containing
information similar to that required by federal law, including any plans which
the offeror has in acquiring control of the company. For purposes of the
Investor Protection Act, an "offeree company" is defined as a corporation or
other issuer of equity securities which is incorporated or organized under the
laws of Tennessee or has its principal office
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in Tennessee, has substantial assets located in Tennessee and which is or may be
involved in a takeover offer relating to any class of its equity securities.
The Investor Protection Act also prohibits any offeror from making a
takeover offer which is not made to the holders of record or beneficial owners
of the equity securities of an offeree company who reside in Tennessee on
substantially the same terms as the offer is made to holders residing elsewhere.
The Investor Protection Act also imposes certain other restrictions on takeover
offers involving offeree companies. Although the Company is a Tennessee
corporation, it is not anticipated at this time that the Company would satisfy
the requirement of having substantial assets located in Tennessee and therefore
would not be deemed an offeree company and entitled to the protections of the
Investor Protection Act. It is possible that the Company could satisfy this
requirement in the future and parties seeking to make a takeover offer would be
subject to the requirements of the Investor Protection Act.
BENEFIT PLANS
In addition to the provisions of the Company's charter and bylaws
described above, certain benefit plans of ours adopted in connection with the
Conversion contain provisions which also may discourage hostile takeover
attempts which the boards of directors might conclude are not in the best
interests for us or our stockholders. For a description of the benefit plans and
the provisions of such plans relating to changes in control, see "Management of
Newport Federal Savings Bank - Proposed Future Stock Benefit Plans."
REGULATORY RESTRICTIONS
For three years following conversion, OTS regulations prohibit any
person, without the prior approval of the OTS, from acquiring or making an offer
to acquire more than 10% of the stock of any converted savings institution if
such person is, or after consummation of such acquisition would be, the
beneficial owner of more than 10% of such stock. In the event that any person,
directly or indirectly, violates this regulation, the securities 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 a vote of stockholders.
Federal law provides that no company, "directly or indirectly or acting
in concert with one or more persons, or through one or more subsidiaries, or
through one or more transactions," may acquire "control" of a savings
association at any time without the prior approval of the OTS. In addition, any
company that acquires such control becomes a "savings and loan holding company"
subject to registration, examination and regulation as a savings and loan
holding company. Control in this context means ownership of, control of, or
holding proxies representing more than 25% of the voting shares of a savings
association or the power to control in any manner the election of a majority of
the directors of such institution.
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Federal law also provides that no "person," acting directly or
indirectly or through or in concert with one or more other persons, may acquire
control of a savings association unless at least 60 days prior written notice
has been given to the OTS and the OTS has not objected to the proposed
acquisition. Control is defined for this purpose as the power, directly or
indirectly, to direct the management or policies of a savings association or to
vote more than 25% of any class of voting securities of a savings association.
Under federal law (as well as the regulations referred to below) the term
"savings association" includes state-chartered and federally chartered SAIF-
insured institutions, federally chartered savings and loans and savings banks
whose accounts are insured by the FDIC and holding companies thereof.
Federal regulations require that, prior to obtaining control of an
insured institution, a person, other than a company, must give 60 days notice to
the OTS and have received no OTS objection to such acquisition of control, and a
company must apply for and receive OTS approval of the acquisition. Control,
involves a 25% voting stock test, control in any manner of the election of a
majority of the institution's directors, or a determination by the OTS that the
acquiror has the power to direct, or directly or indirectly to exercise a
controlling influence over, the management or policies of the institution.
Acquisition of more than 10% of an institution's voting stock, if the acquiror
also is subject to any one of either "control factors," constitutes a rebuttable
determination of control under the regulations. The determination of control may
be rebutted by submission to the OTS, prior to the acquisition of stock or the
occurrence of any other circumstances giving rise to such determination, of a
statement setting forth facts and circumstances which would support a finding
that no control relationship will exist and containing certain undertakings. The
regulations provide that persons or companies which acquire beneficial ownership
exceeding 10% or more of any class of a savings association's stock after the
effective date of the regulations must file with the OTS a certification that
the holder is not in control of such institution, is not subject to a rebuttable
determination of control and will take no action which would result in a
determination or rebuttable determination of control without prior notice to or
approval of the OTS, as applicable.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 9,000,000 shares of the Common Stock,
$0.01 par value per share, and 3,000,000 shares of Preferred Stock, $0.01 par
value per share. The Company currently expects to issue up to 370,300 shares of
Common Stock in the Conversion. The Company does not intend to issue any shares
of Preferred Stock in the Conversion, nor are there any present plans to issue
such Preferred Stock following the Conversion. Each share of Common Stock will
have the same relative rights as, and will be identical in all respects with,
each other share of Common Stock. THE COMMON STOCK OF THE COMPANY WILL REPRESENT
NONWITHDRAWABLE CAPITAL AND WILL NOT BE INSURED BY US, THE FDIC, OR ANY OTHER
GOVERNMENT 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
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Common Stock will possess exclusive voting rights in the Company, except to the
extent that shares of Preferred Stock issued in the future may have voting
rights, if any. Each holder of the Common Stock will be entitled to only one
vote for each share held of record on all matters submitted to a vote of holders
of the Common Stock and will not be permitted to cumulate their votes in the
election of the Company's directors.
LIQUIDATION. In the unlikely event of the complete liquidation or
dissolution of the Company, the holders of the Common Stock will be entitled to
receive all assets of the Company available for distribution in cash or in kind,
after payment or provision for payment of (i) all debts and liabilities of the
Company (including all deposits with us and accrued interest thereon); (ii) any
accrued dividend claims; (iii) liquidation preferences of any Preferred Stock
which may be issued in the future; and (iv) any interests in the liquidation
account established upon the Conversion for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders who continue to have their
deposits with us.
RESTRICTIONS ON ACQUISITION OF THE COMMON STOCK. See "Certain
Restrictions on Acquisition of the Company" for a discussion of the limitations
on acquisition of shares 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. Therefore, the board of directors may sell shares of
capital stock of the Company without first offering such shares to existing
stockholders of the Company. The Common Stock is not subject to call for
redemption, and the outstanding shares of Common Stock when issued and upon
receipt by the Company of the full purchase price therefor will be fully paid
and non-assessable.
Serial Preferred Stock
None of the 3,000,000 authorized shares of 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, subject to regulatory approval but without stockholder
approval. If and when issued, the serial preferred stock is likely to rank prior
to the Common Stock as to dividend rights, liquidation preferences, or both, and
may have full or limited voting rights. The board of directors, without
stockholder approval, can issue serial preferred stock with voting and
conversion rights which could adversely affect the voting power of the holders
of the Common Stock. The board of directors has no present intention to issue
any of the serial preferred stock.
LEGAL AND TAX MATTERS
The legality of the common stock has been passed upon for us by Housley
Kantarian & Bronstein, P.C., Washington, D.C. Certain legal matters for Trident
Securities may be passed upon by Silver Freedman & Taff, L.L.P., Washington,
D.C. The federal income tax consequences of the
80
<PAGE>
Conversion have been passed upon for us by Housley Kantarian & Bronstein, P.C.,
Washington, D.C. The Arkansas income tax consequences of the Conversion have
been passed upon for us by KPMG Peat Marwick LLP.
EXPERTS
Our financial statements as of and for the years ended June 30, 1995,
1996 and 1997 appearing in this document have been audited by KPMG Peat Marwick
LLP, independent certified public accountants, as set forth in their report
which appears elsewhere in this document, and is included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
Ferguson has consented to the publication herein of a summary of its
letters to us setting forth its opinion as to the estimated pro forma market
value of us in the converted form and its opinion setting forth the value of
subscription rights and to the use of its name and statements with respect to it
appearing in this document.
ADDITIONAL INFORMATION
The Company has filed with the SEC a registration statement on Form SB-2
under the Securities Act of 1933, as amended, with respect to the common stock
offered in this document. As permitted by the rules and regulations of the SEC,
this document does not contain all the information set forth in the registration
statement. Such information can be examined without charge at the public
reference facilities of the SEC located at 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of such material can be obtained from the SEC at
prescribed rates. 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 statements
contained in this document as to the contents of any contract or other document
filed as an exhibit to the Form SB-2 are, of necessity, brief descriptions and
are not necessarily complete; each such statement is qualified by reference to
such contract or document.
Newport Federal Savings Bank has filed an Application for Conversion
with the OTS with respect to the Conversion. Pursuant to the rules and
regulations of the OTS, this document omits certain information contained in
that Application. The Application may be examined at the principal office of the
OTS, 1700 G Street, N.W., Washington, D.C. 20552 and at the Midwest Regional
Office of the OTS, 122 W. John Carpenter Freeway, Suite 600, Irving, Texas 75039
without charge.
A copy of the Charter and the Bylaws of the Company are available
without charge from Newport Federal Savings Bank.
81
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report F-1
Balance Sheets as of June 30, 1997 and 1996 F-2
Statements of Operations and Retained Earnings for the Years Ended
June 30, 1997 and 1996 F-3
Statements of Cash Flows for the Years Ended June 30, 1997, 1996 and 1995 F-5
Notes to Financial Statements F-7
</TABLE>
All schedules are omitted because the required information is either not
applicable or is included in the consolidated financial statements or related
notes.
Separate financial statements for the Company have not been included since it
will not engage in material transactions until after the Conversion. The
Company, which has been inactive to date, has no significant assets,
liabilities, revenues, expenses or contingent liabilities.
82
<PAGE>
GLOSSARY
ARM Loan Adjustable-rate mortgage loan.
BIF Bank Insurance Fund of the FDIC
Common Stock The common stock, $.01 par value per share, of North
Arkansas Bancshares, Inc.
Community Offering Offering for sale to certain
members of the general public of any shares
of common stock not subscribed for in the
Subscription Offering, including the
possible offering of common stock in a
Syndicated Community Offering
Company North Arkansas Bancshares, Inc.
Conversion Simultaneous conversion of Newport Federal
Savings Bank, to stock form, the issuance of
the Newport Federal Savings Bank's
outstanding capital stock to the Company and
the Company's offer and sale of Common Stock
Eligible Account
Holders Savings account holders of Newport Federal
Savings Bank with account balances of at
least $50 as of the close of business on
December 31, 1995
ERISA Employee Retirement Income Security of 1974, as amended
ESOP Employee Stock Ownership Plan
Estimated
Valuation Range Estimated pro forma market value of the Common Stock
ranging from $2,380,000 to $3,220,000
Exchange Act Securities Exchange Act of 1934, as amended
Expiration Date 12:00 p.m., Central time, on ________, 1997
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
<PAGE>
<TABLE>
<S> <C>
Federal Reserve System The Board of Governors of the Federal Reserve System
Ferguson Ferguson & Company
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
IRA Individual retirement account or arrangement
IRS Internal Revenue Service
MRP Management recognition plan to be adopted no earlier
than six months after the Conversion
NASD National Association of Securities Dealers, Inc.
NOW account Negotiable order of withdrawal account
NPV Net portfolio value
Offering Subscription, Community and Syndicated Community
offerings, collectively
Option Plan Stock option plan to be adopted within one year of the
Conversion
Order Form Form for ordering stock accompanied by a certification
concerning certain matters
Other Members Savings account holders (other than eligible account
holders and supplemental eligible account holders) and
certain borrowers (borrowers whose loans were
outstanding on _________, 1997 and continue to be
outstanding) who are entitled to vote at the Special
Meeting due to the existence of a savings account or a
borrowing, respectively, on the Voting Record Date for
the Special Meeting
OTC Bulletin Board An electronic stock data system operated by Nasdaq
OTS Office of Thrift Supervision
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Plan of Conversion Plan of Newport Federal Savings Bank to convert from a
federally chartered mutual savings bank to a federally
chartered stock savings bank and the issuance of all
of Newport Federal Savings Bank's outstanding capital
stock to the Company and the issuance of the Company's
stock to the public
Purchase Price $10.00 per share price of the Common Stock
SAIF Savings Association Insurance Fund of the FDIC
SEC Securities and Exchange Commission
Securities Act Securities Act of 1933, as amended
SFAS Statement of Financial Accounting Standards adopted by
FASB
Special Meeting Special Meeting of members of Newport Federal Savings
Bank called for the purpose of approving the Plan
Subscription Offering Offering of non-transferable rights to subscribe for
the common stock, in order of priority, to Eligible
Account Holders, tax-qualified employee plans,
Supplemental Eligible Account Holders and Other
Members
Supplemental Eligible Depositors, who are not Eligible Account Holders of
Account Holders Newport Federal Savings Bank, with account balances of
at least $50 on September 30, 1997.
Syndicated Community Offering of shares of common stock remaining after
Offering the Subscription Offering and undertaken prior to the
end and as part of the Community Offering, and which
may, at our discretion be made to the general public
on a best efforts basis by a selling group of broker-
dealers.
Trident Securities Trident Securities, Inc.
Voting Record Date The close of business on _____________, 1997, the date
for determining members entitled to vote at the
Special Meeting.
</TABLE>
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Newport Federal Savings Bank:
We have audited the accompanying statements of financial condition of Newport
Federal Savings Bank as of June 30, 1997 and 1996, and the related statements of
operations and retained earnings, and cash flows for each of the years in the
three-year period ended June 30, 1997. These financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Newport Federal Savings Bank as
of June 30, 1997 and 1996, and the results of its operations and its cash flows
for each of the years in the three-year period ended June 30, 1997, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
August 8, 1997
F-1
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Statements of Financial Condition
June 30, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
Cash and amounts due from banks, includes interest
bearing deposits of $603,729 and $917,745 in 1997
and 1996, respectively $ 884,002 1,167,202
Certificates of deposit with other financial institutions 691,000 890,000
Investment securities held-to-maturity, at cost (notes 2 and 8) 5,922,956 6,310,348
Loans receivable, net (notes 3, 4 and 8) 24,794,194 21,982,108
Real estate acquired in settlement of loans, net - 123,830
Office properties and equipment, net (note 5) 1,651,298 1,666,980
Accrued interest receivable (note 6) 227,356 226,995
Other assets (note 9) 207,760 78,332
------------ ------------
Total assets $ 34,378,566 32,445,795
============ =============
LIABILITIES AND RETAINED EARNINGS
---------------------------------
Deposits (notes 2 and 7) $ 31,072,533 29,657,098
Federal Home Loan Bank advances (note 8) 618,389 133,916
Advances from borrowers for taxes and insurance 57,459 58,719
Other liabilities (notes 9 and 11) 363,916 131,020
------------ ------------
Total liabilities 32,112,297 29,980,753
Retained earnings - substantially restricted (notes 9, 12 and 15) 2,266,269 2,465,042
Commitments and contingencies (notes 3, 10, 11, 12, 14 and 15)
------------ ------------
Total liabilities and retained earnings $ 34,378,566 32,445,795
============ =============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Statements of Operations and Retained Earnings
Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans receivable $ 2,011,121 1,814,100 1,677,931
Deposits in other financial institutions 72,337 128,764 119,400
Mortgage-backed securities 338,621 280,201 255,870
Investment securities 71,261 105,499 101,605
--------- --------- ---------
Total interest income 2,493,340 2,328,564 2,154,806
--------- --------- ---------
Interest expense:
Deposits 1,540,820 1,517,090 1,269,071
Federal Home Loan advances 56,074 8,081 10,073
--------- --------- ---------
Total interest expense 1,596,894 1,525,171 1,279,144
--------- --------- ---------
Net interest income 896,446 803,393 875,662
Provision for loan losses (note 4) 90,000 10,000 5,000
--------- --------- ---------
Net interest income after provision
for loan losses 806,446 793,393 870,662
--------- --------- ---------
Non-interest income - other 19,156 10,758 17,421
--------- --------- ---------
Non-interest expenses:
Salaries and employee benefits (note 11) 647,478 346,550 267,892
Legal and professional fees 12,032 16,050 24,586
Data processing fees 62,313 59,685 46,676
Federal insurance expense (note 12) 217,054 62,739 62,731
Furniture and equipment expense 32,953 20,783 21,168
Occupancy expense 58,516 39,456 23,211
Other expense 127,020 180,469 108,529
--------- --------- ---------
1,157,366 725,732 554,793
--------- --------- ---------
Income (loss) before income taxes (331,764) 78,419 333,290
Income tax expense (benefit) (note 9) (132,991) 5,571 119,578
--------- --------- ---------
Net income (loss) (198,773) 72,848 213,712
Retained earnings at beginning of year 2,465,042 2,392,194 2,178,482
--------- --------- ---------
Retained earnings at end of year $ 2,266,269 2,465,042 2,392,194
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Statements of Cash Flows
Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (198,773) 72,848 213,712
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 57,395 15,916 21,168
Loss on sale of real estate owned 23,208 - -
FHLB stock dividends (15,800) (15,792) (14,000)
Net premium amortization on investments 10,752 23,256 36,877
Provision for loan losses 90,000 10,000 5,000
Increase in interest receivable (361) (13,992) (4,430)
Increase in other assets (109,428) (28,164) (31,854)
Increase (decrease) in other liabilities 232,896 16,902 (26,457)
--------- --------- ---------
Net cash provided by operating
Activities 89,889 80,974 200,016
--------- --------- ---------
Cash flows from investing activities:
Purchase of held to maturity ("HTM") securities (850,310) (2,020,830) (1,594,025)
Proceeds from maturities/principal repayments
of HTM securities 1,242,750 2,245,363 1,121,913
Net increase in loans receivable (2,927,390) (1,860,164) (501,012)
Net decrease in certificates of deposit with
other financial institutions 199,000 196,000 1,970,000
Purchase of office properties and equipment (41,713) (758,676) (535,397)
Proceeds from sale of real estate owned 105,926 - 51,231
--------- --------- ---------
Net cash provided (used) by investing
Activities (2,271,737) (2,198,307) 512,710
--------- --------- ---------
Cash flows from financing activities:
Net increase in deposits and advances from
Borrowers 1,414,175 1,913,688 400,171
Net increase (decrease) in Federal Home Loan
advances 484,473 (14,670) (13,452)
--------- --------- ---------
Net cash provided by financing
Activities 1,898,648 1,899,018 386,719
--------- --------- ---------
Net increase (decrease) in cash and amounts due
from banks (283,200) (218,315) 1,099,445
Cash and amounts due from banks at beginning of year 1,167,202 1,385,517 286,072
--------- --------- ---------
Cash and amounts due from banks at end of year $ 884,002 1,167,202 1,385,517
========= ========= =========
Supplemental disclosures of cash flow information: Noncash
investing and financing activities:
Transfers from loans to real estate acquired
through foreclosure $ 25,304 20,224 141,760
Transfers from real estate acquired through
foreclosure to other assets 20,000 - -
Cash paid during the year:
Interest on deposits 1,544,363 1,525,446 1,253,201
Income taxes 10,860 17,660 114,668
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
June 30, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies
------------------------------------------
Newport Federal Savings Bank ("Bank") is a federally-chartered mutual
savings bank. The accounting principles used and methods of applying
them conform with generally accepted accounting principles and
practices within the savings and loan industry. The following are
descriptions of the more significant of the accounting and reporting
policies.
(a) Basis of Financial Statement Presentation
-----------------------------------------
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities as of the date of the statement of financial
condition and revenues and expenses for the period. Material
estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan
losses. Actual results could differ significantly from those
estimates.
Management believes that the allowance for losses on loans is adequate.
While management uses available information to recognize losses on
loans and real estate owned, future additions to the allowance may be
necessary based on changes in economic conditions. In addition,
regulatory agencies, as an integral part of their examination
process, periodically review the Bank's allowance for losses on
loans. Such agencies may require the Bank to recognize additions to
the allowance based on their judgments about information available to
them at the time of their examination.
The Bank adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF," in
fiscal 1997. This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to
be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. Adoption of this Statement had no
impact on the Bank's financial condition or results of operations.
(b) Investment Securities
---------------------
Investment securities consist of mortgage-backed, U.S. Government
agency and state and political subdivision securities. The Bank
classifies its investment securities into one of three categories:
trading, available-for-sale, or held-to-maturity. Trading securities
are bought and held principally for the purpose of selling them in
the near term. Held-to-maturity securities are those securities in
which the Bank has the ability and intent to hold the security until
maturity. All other securities not included in trading or held-to-
maturity are classified as available-for-sale. All investment
securities were classified as held-to-maturity at June 30, 1997 and
1996.
(Continued)
F-5
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
Trading and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted
for the amortization or accretion of premiums or discounts.
Unrealized holding gains and losses on trading securities are
included in earnings. Unrealized holding gains and losses, net of the
related tax effect, on available-for-sale securities are excluded
from earnings and are reported as a separate component of equity
until realized. Realized gains and losses from the sale of
available-for-sale securities are determined on a specific
identification basis.
A decline in the market value of any available-for-sale or
held-to-maturity security below cost that is deemed to be other than
temporary results in a reduction in carrying amount to fair value.
The impairment is charged to earnings and a new cost basis for the
security is established. Premiums and discounts are amortized or
accreted over the life of the related held-to-maturity security as an
adjustment to yield using the effective interest method. Dividend and
interest income are recognized when earned.
(c) Allowance for Losses
--------------------
Effective July 1, 1995, the Bank adopted SFAS No. 114, "ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN," as amended by SFAS No. 118
(collectively, "Statement 114"). Statement 114 addresses the
accounting treatment of certain impaired loans and amends SFAS No.'s
5 and 15. Statement 114 does not apply to large groups of
smaller-balance homogeneous loans unless they have been involved in a
restructuring. The adoption of Statement 114 had no effect on 1996
earnings.
Management, considering current information and events regarding the
borrowers ability to repay their obligations, considers a note to be
impaired when it is probable that the Bank will be unable to collect
all amounts due according to the contractual terms of the note
agreement. When a loan is considered to be impaired, the amount of
the impairment is measured using discounted cash flows, except when
it is determined that the sole (remaining) source of repayment for
the loans is the operation or liquidation of the underlying
collateral. In such case, the current fair value of the collateral,
reduced by costs to sell, will be used in place of discounted cash
flows. If the measurement of the impaired loan is less than the
recorded investment in the loan (including accrued interest),
impairment is recognized by creating or adjusting an existing
allocation of the allowance for loan losses. Statement 114 does not
change the timing of charge-offs of loans to reflect the amount
ultimately expected to be collected.
The accrual of interest on a loan is discontinued when, in management's
judgment, the interest will not be collectible in the normal course
of business. Also, in accordance with regulatory guidelines, a loan
is placed on nonaccrual status when it becomes 90 days past due
(although said loan would not necessarily be considered impaired).
When interest is discontinued, all interest previously accrued in the
current year, but not collected, is reversed against interest income.
Any interest accrued in prior years is charged against the allowance
for loan losses. Subsequent cash receipts are generally applied to
reduce the unpaid principal balance. A loan is returned to accrual
status and is no longer considered to be impaired when it becomes
current as to principal and interest or demonstrates a period of
performance under the contractual terms. The Bank did not change its
method of recognizing interest income on impaired loans upon adoption
of Statement 114.
(Continued)
F-6
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based upon the Bank's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may effect the borrower's ability to repay,
the estimated value of any underlying collateral, and current
economic conditions.
(d) Real Estate Acquired in Settlement of Loans
-------------------------------------------
Real estate properties acquired through loan foreclosure are initially
recorded at the lower of the related loan balance, less any specific
allowance for loss, or fair value at the date of foreclosure less
estimated costs to sell. Costs relating to development and
improvement of property are capitalized, whereas costs relating to
holding property are expensed.
Valuations are periodically performed by management and an allowance for
losses is established by a charge to operations if the carrying value
of a property exceeds its estimated net realizable value.
(e) Loan Origination Fees and Related Cost
--------------------------------------
Loan fees are accounted for in accordance with SFAS No. 91. Loan fees
and certain direct loan origination costs are deferred, and the net
fee or cost is recognized in income over the contractual life of the
loan, adjusted for estimated prepayments, using a method materially
the same as the level-yield method.
(f) Interest Income
---------------
Discounts and premiums on investment securities and loans are
accreted/amortized over the estimated remaining lives of the
securities and loans using a method which approximates the level
yield method.
(g) Office Properties and Equipment
-------------------------------
Office properties and equipment are carried at cost less accumulated
depreciation. Depreciation is computed under the straight-line method
over the estimated useful life. Maintenance and repairs are charged
to expense as incurred.
(h) Income Taxes
------------
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date.
(Continued)
F-7
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
(i) Cash and Cash Equivalents
-------------------------
For purposes of reporting cash flows, cash and cash equivalents are
defined as those amounts included in the statement of financial
condition caption "cash and amounts due from banks."
(j) Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to current
year presentation.
(2) Investment Securities
---------------------
The carrying value, unrealized gains, unrealized losses and estimated fair
value of held to maturity investment securities are as follows:
<TABLE>
<CAPTION>
Obligations
U.S. of states Mortgage-
Government And backed Other
political
Agencies Subdivisions securities securities Total
-------- ------------ ---------- ---------- -----
<S> <C> <C> <C> <C> <C>
Investments held to maturity:
June 30, 1997:
Carrying value $ 500,000 62,500 5,076,965 283,491 5,922,956
Unrealized gains - - 82,837 - 82,837
Unrealized losses (289) - (54,494) - (54,783)
----------- ------- ----------- --------- -----------
Fair value $ 499,711 62,500 5,105,308 283,491 5,951,010
=========== ======= =========== ========= ===========
Investments held to maturity:
June 30, 1996:
Carrying value $ 1,000,000 80,000 4,962,656 267,692 6,310,348
Unrealized gains - - 39,016 - 39,016
Unrealized losses (7,650) - (61,225) - (68,875)
----------- ------- ----------- --------- -----------
Fair value $ 992,350 80,000 4,940,447 267,692 6,280,489
=========== ======= =========== ========= ===========
</TABLE>
As a member of the Federal Home Loan Bank System, the Bank is required to
maintain an investment ($282,892 and $267,092 at June 30, 1997 and 1996,
respectively, and included in other held to maturity securities) in the
capital stock of the Federal Home Loan Bank in an amount equal to 1% of
its outstanding home loans. No ready market exists for such stock and it
has no quoted market value.
(Continued)
F-8
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
The amortized cost and estimated fair value of debt securities held to
maturity at June 30, 1997 by contractual maturity are shown below.
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 Estimated
cost fair value
---- ----------
<S> <C> <C>
Due in one year or less $ - -
Due after one year through five years 508,750 508,461
Due after five years through ten years 12,500 12,500
Due after ten years 41,250 41,250
--------- ---------
562,500 562,211
Mortgage-backed securities 5,076,965 5,105,308
Other 283,491 283,491
--------- ---------
$ 5,922,956 5,951,010
========= =========
</TABLE>
Investment securities with a par value of approximately $1,640,300 and
$394,700 at June 30, 1997 and 1996, respectively, were pledged to secure
public deposits.
(3) Loans Receivable
----------------
Loans receivable consist of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
First mortgage loans $ 21,227,604 20,259,315
Loans to depositors, secured by savings 443,472 256,208
Property improvement loans 666,078 762,789
Consumer loans 2,520,014 786,531
Commercial loans 92,938 -
---------- ----------
24,950,106 22,064,843
Less:
Unearned discounts on loans purchased 5,780 9,266
Net deferred loan fees 337 469
Allowance for losses (note 4) 149,795 73,000
---------- ----------
$ 24,794,194 21,982,108
========== ==========
</TABLE>
Loans serviced for others at June 30, 1997 and 1996, were $291,699 and
$423,231, respectively.
Approximately 65% of the Bank's loans are first mortgage loans on 1-to-4
family residences located in Jackson County, Arkansas, which is the Bank's
primary operating territory. These loans are expected to be repaid from the
borrower's personal income or proceeds from the sale of the residence. The
Bank's normal collateral policy is to require an initial loan to collateral
value ratio of 80% or less.
(Continued)
F-9
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
Loans to executive officers and directors are, in the opinion of management,
made in the ordinary course of business and at substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable loans of like qualities and risk of collectibility. At
June 30, 1997 and 1996, the aggregate indebtedness of these individuals to
the Bank was approximately $725,000 and $663,000, respectively.
(4) Allowance for Losses on Loans
-----------------------------
The following summarizes the activity in the allowance for losses on loans:
<TABLE>
<S> <C>
Balance at June 30, 1994 $ 73,000
Provision for losses 5,000
Charge offs (15000)
-------
Balance at June 30, 1995 63,000
Provision for losses 10,000
-------
Balance at June 30, 1996 73,000
Provision for losses 90,000
Charge-offs (13,205)
-------
Balance at June 30, 1997 $ 149,795
=======
</TABLE>
(5) Office Properties and Equipment
-------------------------------
Office properties and equipment consist of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land $ 320,866 320,866
Buildings and improvements 1,375,257 1,375,040
Furniture and equipment 501,694 460,198
--------- ---------
2,197,817 2,156,104
Less accumulated depreciation (546,519) (489,124)
--------- ---------
$ 1,651,298 1,666,980
========= =========
</TABLE>
Included in office properties is land and a building with a book value of
approximately $230,000 that is being leased on a month-to-month basis.
(Continued)
F-10
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
(6) Accrued Interest Receivable
---------------------------
Accrued interest receivable consists of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Loans $ 180,934 168,572
Mortgage-backed securities 33,711 34,786
Investment securities 11,295 21,585
Certificates of deposit 1,416 2,052
------- -------
$ 227,356 226,995
======= =======
</TABLE>
(7) Deposits
--------
Deposits consist of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C>
Money market $ 325,336 524,861
NOW accounts (2.40% in 1997 and 1996) 1,669,713 1,447,854
Passbook accounts (3.00% in 1997 and 1996) 1,892,596 1,360,861
Other noninterest bearing/checking 982,720 349,016
---------- ----------
4,870,365 3,682,592
Certificates:
3.00% to 3.99% - 49,647
4.00% to 4.99% 83,631 -
5.00% to 5.99% 26,118,537 16,666,108
6.00% to 6.99% - 9,258,751
---------- ----------
26,202,168 25,974,506
---------- ----------
Total $ 31,072,533 29,657,098
========== ==========
Weighted average cost of deposits 5.19% 5.24%
==== ====
</TABLE>
The aggregate amount of certificates of deposit, each with a minimum
denomination of $100,000, was approximately $3,360,700 and $3,254,400 at
June 30, 1997 and 1996, respectively.
A summary of certificates by maturity at June 30, 1997 is approximately as
follows:
<TABLE>
<S> <C>
Less than one year $ 10,787,000
One to two years 9,962,000
Two to three years 1,135,000
Three to four years 2,684,000
Four to five years 1,634,000
----------
$ 26,202,000
==========
</TABLE>
(Continued)
F-11
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
Some of the directors, officers, and employees of the Bank are also
customers. As such customers, at June 30, 1997 and 1996, the aggregate
deposits of those individuals were approximately $439,000 and $243,000,
respectively.
(8) Federal Home Loan Bank Advances
-------------------------------
Federal Home Loan Bank (FHLB) advances at June 30, 1997 and 1996 consist of
a long-term obligation of $118,389 and $133,916, respectively, which has
a maturity date of August, 2003 and is payable in monthly installments
of approximately $1,900, including interest at 5.7%. In addition, at
June 30, 1997 advances include a short-term obligation of $500,000 with
interest of 5.53% due July 1997. There were no short-term obligations of
FHLB advances at June 30, 1996. Pursuant to a collateral agreement with
the FHLB, advances are secured by certain investment securities and
qualifying first mortgage loans.
(9) Income Taxes
------------
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current Federal income tax $ (87,342) 1,406 92,872
Current state income tax - (1,866) 10,578
Deferred (45,649) 6,031 16,128
-------- ----- -------
Total $ (132,991) 5,571 119,578
======= ===== =======
</TABLE>
The actual tax expense (benefit) for 1997, 1996 and 1995 differs from the
"expected" tax expense (benefit) for those years (computed by applying
the U.S. Federal corporate tax rate of 34% to income (loss) before
income taxes) as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income tax expense (benefit) "expected" rate $ (112,800) 26,662 113,319
Increase (decrease) in taxes resulting from:
State income taxes, net of Federal
income tax benefit (12,587) (988) 8,664
Adjustment for graduated rates - (14,900) -
Other, net (7,604) (5,203) (2,405)
------- ------ -------
$ (132,991) 5,571 119,578
======= ====== =======
</TABLE>
(Continued)
F-12
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
Included in other assets are refundable Federal taxes of $115,771 and
$26,189 at June 30, 1997 and 1996, respectively. Included in other
liabilities are net deferred tax liabilities of $4,903 and $50,552 at
June 30, 1997 and 1996, respectively.
The tax effect of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at June 30, 1997 and
1996 are presented below:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 16,698 -
Contribution carryforwards 11,502 6,343
Allowance for losses on loans 35,239 806
Other 903 903
------ ------
Total gross deferred tax assets 64,342 8,052
------ ------
Deferred tax liabilities:
Property and equipment, due to
differences in depreciation (33,109) (25,180)
Prepaid insurance, expensed as
incurred for tax purposes (8,000) (11,453)
FHLBB stock, primarily due to stock
dividends not recognized for tax
Purposes (27,867) (21,721)
Other (269) (250)
------ --------
Total gross deferred tax liabilities (69,245) (58,604)
Net deferred tax liability (included
in other liabilities) $ (4,903) (50,552)
====== ======
</TABLE>
Based on the Bank's historical ability to generate future taxable income
exclusive of reversing temporary differences, management believes it is
more likely than not that the Company will realize the benefits of the
deferred tax assets at June 30, 1997 in future periods.
At June 30, 1997 the Bank has net operating loss carryforwards for state
income tax purposes of $256,888, which are available to offset future
state taxable income, if any, through 2002.
(Continued)
F-13
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
(10) Commitments and Contingencies
-----------------------------
The Bank is a participant in a trusteed multi-employer retirement plan.
The defined-benefit plan has noncontributory and contributory features
and covers substantially all employees. Because this plan is a multi-
employer plan, separate actuarial valuations are not available for each
employer. The retirement plan's actuarial value is such that no
contributions were required in 1997, 1996 or 1995.
The Bank, from time to time, is involved in various legal actions arising
in the ordinary course of business. In the opinion of management the
ultimate disposition of these matters will not have a material adverse
effect on the Bank's financial statements.
(11) Director's Retirement Plan
--------------------------
Effective May 29, 1997 the Bank adopted a retirement plan for directors.
Participants in the plan are individuals who serve on the Bank's board
on or after the effective date. The plan awarded benefits for past
services rendered by each participant who was a director on the
effective date. The funding for past services totaled $286,047 and are
included in other liabilities at June 30, 1997. The Bank will contribute
additional amounts to the plan each year based on a defined performance
factor.
(12) Regulatory Matters
------------------
The Bank is subject to various regulatory capital requirements
administered by the federal agencies. Failure to meet minimum
requirements can initiate certain mandatory, and possibly additional
discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-statement of financial condition items as calculated under
regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 and
tangible capital (as defined) to adjusted total assets (as defined).
Management believes, as of June 30, 1997, that the Bank meets all
capital adequacy requirements to which it is subject.
As of June 30, 1997 and 1996, the most recent notification from the Office
of Thrift Supervision ("OTS") categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum total
capital (to risk weighted assets), Tier I capital (to risk weighted
assets), Tier I capital (to adjusted total assets) and tangible capital
(to adjusted total assets) ratios as set forth in the table. There are
no conditions or events since that notification that management believes
have changed the Bank's regulatory capital category.
(Continued)
F-14
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
The Bank's actual capital amounts and ratios are presented in the
following table.
<TABLE>
<CAPTION>
Minimum required
to be well
Minimum required capitalized under
for capital prompt corrective
Actual adequacy purposes action provisions
----------------- ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1997:
Total capital (to Risk
Weighted Assets) $ 2,411,064 13.2% $ 1,463,360 8.0% $ 1,829,200 10.0%
Tier I Capital (to Risk
Weighted Assets) 2,266,269 12.4 731,880 4.0 1,097,820 6.0
Tier I Capital (to Adjusted
Total Assets) 2,266,269 6.6 1,375,143 4.0 1,718,928 5.0
Tangible Capital (to
Adjusted Total Assets) 2,266,269 6.6 515,678 1.5 515,678 1.5
As of June 30, 1996:
Total capital (to Risk
Weighted Assets) 2,523,042 15.7 1,288,400 8.0 1,610,500 10.0
Tier I Capital (to Risk
Weighted Assets) 2,465,042 15.3 644,800 4.0 967,200 6.0
Tier I Capital (to Adjusted
Total Assets) 2,465,042 7.6 1,297,832 4.0 1,622,290 5.0
Tangible Capital (to
Adjusted total Assets) 2,465,042 7.6 486,687 1.5 486,687 1.5
</TABLE>
The Bank pays annual assessments to the Savings Association Insurance Fund
(SAIF). A one time SAIF assessment of $179,129 was recorded in
September, 1996 and is included as Federal insurance expense in the
accompanying 1997 statement of operations.
(13) Financial Instruments
---------------------
SFAS No. 107, "DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS"
("SFAS 107"), requires disclosure of fair value information about
financial instruments, whether or not recognized in the statement of
financial condition, for which it is practicable to estimate that value.
The following methods and assumptions were used by the Bank in
estimating its fair value disclosures for financial instruments:
CASH AND AMOUNTS DUE FROM BANKS - The carrying amount of such
-------------------------------
instruments is deemed to be a reasonable estimate of fair value.
(Continued)
F-15
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
CERTIFICATES OF DEPOSIT WITH OTHER FINANCIAL INSTITUTIONS - The estimated
---------------------------------------------------------
fair value of such instruments is based on discounted amounts receivable
using current market rates for certificates with similar maturities.
INVESTMENT SECURITIES - Fair values for investment securities are based on
---------------------
quoted market prices.
LOANS RECEIVABLE - Fair values are estimated for portfolios of loans with
----------------
similar financial characteristics. Loans are segregated by type such as
real estate, commercial and consumer which are also segmented into fixed
and adjustable rate interest terms and by performing and nonperforming
loans.
The fair value of performing loans is calculated by discounting scheduled
cash flows through the estimated maturity using estimated market discount
rates that reflect the credit and interest rate risk inherent in the loan.
The estimate of maturity is based on the Bank's historical experience with
repayments for each loan classification, modified, as required, by an
estimate of the effect of current economic and lending conditions.
Fair value for any significant nonperforming secured loans is based on
recent external appraisals. If appraisals are not available or the loan is
unsecured, estimated cash flows are discounted using a rate commensurate
with the risk associated with the estimated cash flows. Assumptions
regarding credit risk, cash flows, and discount rates are judgmentally
determined using available market information and specific borrower
information.
ACCRUED INTEREST RECEIVABLE - The carrying amounts of accrued interest
---------------------------
approximate their fair values.
DEPOSITS - The fair values disclosed for demand deposits are, as required
--------
by SFAS 107, equal to the amounts payable on demand at the reporting date
(i.e., their stated amounts). The fair value of certificates of deposit are
estimated by discounting the amounts payable at the certificate rates using
the rates currently offered for deposits of similar remaining maturities.
FEDERAL HOME LOAN BANK ADVANCES - The estimated fair value of advances from
-------------------------------
the FHLB is based on discounting amounts payable at contractual rates using
current market rates for advances with similar maturities.
(Continued)
F-16
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
The approximate stated and estimated fair value of financial instruments
are summarized below (in thousands of dollars):
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------
1997 1996
---------------------------- ---------------------------
Stated Estimated Stated Estimated
Amount fair value amount fair value
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and amounts due from banks $ 884,002 884,002 1,167,202 1,167,202
Certificates of deposit with other
financial institutions 691,000 691,000 890,000 890,000
Investment securities 5,922,956 5,951,010 6,310,348 6,280,489
Loans receivable, net 24,794,194 25,178,798 21,982,108 22,350,256
Accrued interest receivable 227,356 227,356 226,995 226,995
Financial liabilities:
Deposits:
Demand accounts 4,870,365 4,870,365 3,682,592 3,682,592
Certificate accounts 26,202,168 26,272,622 25,974,506 25,956,816
Federal Home Loan Bank advances 618,389 613,921 133,916 127,146
</TABLE>
The Bank had off-statement of financial condition financial commitments at
June 30, 1997 and 1996, which include approximately $253,000 and
$11,000, respectively of commitments to originate and fund loans. Since
these commitments are based on current market rates, the commitment
amount is considered to be a reasonable estimate of fair market value.
(14) Pending Acquisition
-------------------
In August 1997, the Bank entered into an agreement to purchase
deposits of approximately $6,000,000 from another institution. The
transaction is expected to close in January 1998.
(15) Plan of Conversion
------------------
On May 29, 1997, the Bank's Board of Directors formally approved a plan
("Plan") to convert from a federally-chartered mutual savings bank to a
federally-chartered stock savings bank subject to approval by the Bank's
members as of a still-to-be determined future voting record date. The
Plan, which includes formation of a holding company, is subject to
approval by the OTS and includes the filing of a registration statement
with the Securities and Exchange Commission. As of June 30, 1997, the
Bank had incurred conversion costs of approximately $14,000 which have
been deferred. If the conversion is ultimately successful, actual
conversion costs will be accounted for as a reduction in gross proceeds.
If the conversion is unsuccessful, the conversion costs will be
expensed.
(Continued)
F-17
<PAGE>
NEWPORT FEDERAL SAVINGS BANK
Notes to Financial Statements
The Plan calls for the common stock of the Bank to be purchased by a
holding company and for the common stock of the holding company to be
offered to various parties in a subscription offering at a price based
on an independent appraisal. It is anticipated that any shares not
purchased in the subscription offering will be offered in a direct
community offering, and then any remaining shares offered to the general
public in a solicited offering.
The stockholders of the holding company will be asked to approve a proposed
stock option plan and a proposed restricted stock plan at a meeting of
the stockholders after the conversion. Shares issued to directors and
employees under these plans may be from authorized but unissued shares
of common stock or they may be purchased in the open market. In the
event that options or shares are issued under these plans, such
issuances will be included in the earnings per share calculation; thus,
the interests of existing stockholders would be diluted.
The Bank may not declare or pay a cash dividend if the effect thereof would
cause its net worth to be reduced below either the amounts required for
the liquidation account discussed below or the regulatory capital
requirements imposed by federal regulations.
At the time of conversion, the Bank will establish a liquidation account,
which will be a memorandum account that does not appear on the statement
of financial condition, in an amount equal to its retained earnings as
reflected in the latest statement of financial condition used in the
final conversion prospectus. The liquidation account will be maintained
for the benefit of eligible account holders who continue to maintain
their deposit accounts in the Bank after conversion. In the event of a
complete liquidation of the Bank (and only in such an event), eligible
depositors who continue to maintain accounts shall be entitled to
receive a distribution from the liquidation account before any
liquidation may be made with respect to common stock.
F-18
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this document In connection with
the offering made hereby, and, ff given or made, such information or
representations must not be relied upon as having been authorized by Newport
Federal Savings Bank, the Company, or Trident Securities. This document does not
constitute an offer to sell, or the solicitation of an offer to buy, any of the
securities offered hereby to any person in any jurisdiction In which such offer
or solicitation would be unlawful. Neither the delivery of this document by
Newport Federal Savings Bank, the Company, or Trident Securities nor any sale
made hereunder shall in any circumstances create an implication that there has
been no change in the of Newport Federal Savings Bank or the Company, since any
of the dates as of which information is furnished herein or since the date
hereof.
NORTH ARKANSAS BANCSHARES, INC.
UP TO 322,000 SHARES
(ANTICIPATED MAXIMUM)
COMMON STOCK
PROSPECTUS
TRIDENT SECURITIES, INC.
DATED __________, 1997
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED.
UNTIL THE LATER OF _________, 1997, OR 25 DAYS AFTER COMMENCEMENT OF THE
OFFERING OF COMMON STOCK, ALL DEALERS THAT BUY, SELL OR TRADE THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REWARDED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING M UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
* Legal Fees and Expenses............................ $ 105,000
* Printing, Word Processing, Postage and Mailing..... 55,000
* Appraisal Fees and Expenses........................ 17,000
* Business Plan Fee and Expenses..................... 12,000
* Accounting Fees and Expenses....................... 75,000
* Blue Sky Filing Fees and Expenses
(including counsel fees)......................... 8,000
* Transfer Agent Fees................................ 4,000
* Conversion Agent Fees.............................. 7,000
* Federal Filing Fees (OTS and SEC).................. 11,000
* Other Expenses..................................... 1,000
-----
Total.............................................. $ 295,000
==========
</TABLE>
- -------
* Estimated
** Does not include $105,000 in estimated underwriting fees and expenses.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF NEWPORT FEDERAL SAVINGS
Bank
Federal Regulations clearly define areas for indemnity coverage by Newport
Federal Savings Bank (the "Bank"), as follows:
(a) Any person against whom any action is brought by reason of the fact
that such person is or was a director or officer of the Bank shall be
indemnified by the Bank for:
(i) Reasonable costs and expenses, including reasonable
attorney's fees, actually paid or incurred by such person in
connection with proceedings related to the defense or
settlement of such action;
(ii) Any amount for which such person becomes liable by reason
of any judgment in such action;
(iii) Reasonable costs and expenses, including reasonable
attorney's fees, actually paid or incurred in any action to
enforce his rights under this section, if the person attains a
final judgment in favor of such person in such enforcement
action.
(b) Indemnification provided for in subparagraph (a) shall be made to
such officer or director only if the requirements of this subparagraph are met:
(i) The Bank shall make the indemnification provided by
subparagraph (a) in connection with any such action which
results in a final judgment on the merits in favor of such
officer or director.
(ii) The Bank shall make the indemnification provided by
subparagraph (a) in case of settlement of such action, final
judgment against such director or officer or final judgment in
favor of such director or officer other than on the merits
except in relation to matters as to which he shall be adjudged
to be liable for negligence or misconduct in the performance
of his duty, only if a majority of the directors of the Bank
determines that such a director or officer was acting in good
faith within what he was reasonably entitled to believe under
the circumstances was the scope of his employment or authority
and for a purpose which he was reasonably entitled to believe
under the circumstances was in the best interest of the Bank
or their members or stockholders.
II-1
<PAGE>
(c) As used in this paragraph:
(i) "Action" means any action, suit or other judicial or
administrative proceeding, or threatened proceeding, whether
civil, criminal, or otherwise, including any appeal or other
proceeding for review;
(ii) "Court" includes, without limitation, any court to which
or in which any appeal or any proceeding for review is
brought;
(iii) "Final Judgment" means a judgment, decree, or order
which is appealable and as to which the period for appeal has
expired and no appeal has been taken;
(iv) "Settlement" includes the entry of a judgment by consent
or by confession or upon a plea of guilty or of nolo
contendere.
First Federal has a directors and officers liability policy providing
for insurance against certain liabilities incurred by directors and officers of
First Federal while serving in their capacities as such.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF NORTH ARKANSAS BANCSHARES, INC.
The Tennessee Business Corporation Act requires Tennessee corporations
such as the Company to indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to which he was a party
because he is or was a directors of the corporation against reasonable expenses
incurred by him, unless the corporation's charter provides otherwise. The
Tennessee Business Corporation Act also generally permits Tennessee corporations
to indemnify directors and officers in the same manner as Article XIII of the
Company's Charter provides. In no event, however, may a Tennessee corporation
indemnify a director if a judgment or other final adjudication adverse to the
director establishes his liability: (i) for any breach of the duty of loyalty to
the corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law; or
(iii) for the approval of unlawful distributions.
DIRECTORS AND OFFICERS LIABILITY INSURANCE
Pursuant to its Charter and Tennessee law, the Company is permitted to
purchase and maintain insurance on behalf of an individual who is or was a
director, officer, employee, or agent of the Company. The Bank currently
maintains such a policy and it is intended that the Company will become a party
to such policy.
ARTICLE XIII
INDEMNIFICATION
(A) (1) Except as provided in Section (B) of this Article XIII, the
Corporation shall indemnify any director who is made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative ("proceeding"), because he is or was a director
against liability incurred in such proceeding if: (a) he conducted himself in
good faith; (b) he reasonably believed, (i) in the case of conduct in his
official capacity with the Corporation, that his conduct was in the
Corporation's best interests and (ii) in all other cases, that his conduct was
at least not opposed to its best interests; and (c) in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
(2) The Corporation shall further indemnify any director and any
officer who is not a director who was wholly successful, on the merits or
otherwise, in the defense of any proceedings to which he was a party
II-2
<PAGE>
because he is or was a director or officer of the Corporation against reasonable
expenses incurred by him in connection with the proceeding.
(B) The Corporation shall not indemnify a director in connection with a
proceeding by or in the right of the Corporation in which the director was
adjudged liable to the Corporation or in connection with any other proceeding
charging improper personal benefit to him, whether or not involving action in
his official capacity, in which he was adjudged liable on the basis that
personal benefit was improperly received by him.
(C) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if: (1) the director furnishes the Corporation a
written affirmation of his good faith belief that he has met the standard of
conduct set forth in Subsection (A)(1) of this Article XIII; (2) he provides the
Corporation a written undertaking, executed personally or on his behalf, to
repay the advance if it is ultimately determined that he is not entitled to
indemnification; and (3) a determination is made that the facts then known to
those making the determination would not preclude indemnification under this
Article XIII.
(D) The Corporation may not indemnify a director under Subsection
(A)(1) of this Article XIII unless authorized in the specific case after a
determination has been made that indemnification of the director is permissible
in the circumstances because he has met the standard set forth in Subsection
(A)(1) of this Article XIII. The determination shall be made:
(1) By the board of directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under Subsection (1) of
this Section (D), by majority vote of a committee duly designated by
the board of directors (in which designation directors who are parties
may participate), consisting solely of two or more directors not at the
time parties to the proceeding;
(3) By independent special legal counsel;
(a) Selected by the board of directors or its committee in the
manner prescribed in Subsections (1) or (2) of this Section (D);
(b) If a quorum of the board of directors cannot be obtained
under Subsection (1) of this Section (D) and a committee cannot be
designated under Subsection (2) of this Section (D), selected by
majority vote of the full board of directors (in which selection
directors who are parties may participate); or
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may
not be voted on the determination.
(E) Authorization of indemnification under Subsection (A)(1) of this
Article XIII and evaluation that indemnification is permissible under Subsection
(A)(1) of this Article XIII shall be made in the same manner as the
determination that indemnification is permissible, except that, if the
determination is made by special legal counsel, authorization of indemnification
and evaluation as to reasonableness of expenses shall be made by those entitled
under Subsection (D)(3) of this Article XIII to select counsel.
(F) The Corporation may indemnify and advance expenses to an officer,
employee or agent of the Corporation who is not a director to the same extent as
a director hereunder.
(G) The Corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
Corporation, or who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan or other
enterprise, against
II-3
<PAGE>
liability asserted against or incurred by him in that capacity or arising from
his status as a director, officer, employee or agent, whether or not the
Corporation would have power to indemnify him against the same liability
hereunder.
(H) It is the intention of this Article XIII to provide for
indemnification of directors and officers to the fullest extent permitted by the
Tennessee Business Corporation Act, and this Article XIII shall be interpreted
accordingly. If this Article XIII 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 proceeding,
including an action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article XIII that shall not have
been invalidated and to the full extent permitted by applicable law. If the
Tennessee Business Corporation Act is amended or other Tennessee law is enacted
to permit further or additional indemnification of a director, officer, employee
or agent of the Corporation, then the indemnification of such director, officer,
employee or agent shall be to the fullest extent permitted by the Tennessee
Business Corporation Act, as so amended, or by such other Tennessee law.
(I) The indemnification and advance payment of expenses provided by
this Article XIII 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) The indemnification provided by this Article XIII 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 this Article XIII
shall continue as to a person who has ceased to be a director or officer of the
Corporation and shall inure to his heirs, executors and administrators.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
The exhibits and financial statement schedules filed as a part of this
registration statement are as follows:
(a) LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
* 1 Agency Agreement with Trident Securities, Inc.
2 Plan of Conversion (Exhibit A to Proxy Statement filed as Exhibit 99.2)
3.1 Charter of North Arkansas Bancshares, Inc.
3.2 Bylaws of North Arkansas Bancshares, Inc.
4 Form of Common Stock Certificate of North Arkansas Bancshares, Inc.
5 Opinion of Housley Kantarian & Bronstein, P.C. regarding legality of securities
being registered
8.1 Form of Federal Tax Opinion of Housley Kantarian & Bronstein, P.C.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
* 8.2 State Tax Opinion of KPMG Peat Marwick, LLP
8.3 Opinion of Ferguson & Company as to the value of subscription rights for tax
purposes
10.1 Proposed North Arkansas Bancshares, Inc. 1998 Stock Option and Incentive Plan
10.2 Proposed North Arkansas Bancshares, Inc. Management Recognition Plan and
Trust Agreement
10.3 Newport Federal Savings Bank Retirement Plan for Directors
10.4 Employment Agreement between Newport Federal Savings Bank and Brad Snider
10.5 Guaranty Agreement between North Arkansas Bancshares, Inc. and Brad Snider
23.1 Consent of Housley Kantarian & Bronstein, P.C. (in opinions filed as Exhibits 5
and 8.1)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Ferguson & Company
24 Power of Attorney (reference is made to the signature
page of the Form SB-2)
27 Financial Data Schedule
* 99.1 Proposed Stock Order Form and Form of Certification
99.2 Proxy Statement for Special Meeting of Members of Newport Federal Savings
Bank; Form of Proxy
* 99.3 Form of Miscellaneous Solicitation and Marketing Materials
99.4 Appraisal Report
</TABLE>
- ------------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES.
No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or related notes.
Item 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
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<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any additional or changed material information on
the plan of distribution.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be a
new registration statement of the securities offered, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To file a post-effective amendment or remove from registration any
of the securities that remain unsold at the end of the offering.
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 registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<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 City of Newport,
State of Arkansas, on September 10, 1997.
NORTH ARKANSAS BANCSHARES, INC.
By: /s/ Brad Snider
-------------------------------------
Brad Snider
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of North Arkansas Bancshares, Inc.,
hereby severally constitute and appoint Brad Snider, 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 Brad Snider who
may act, may deem necessary or advisable to enable North Arkansas Bancshares,
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 North Arkansas Bancshares, 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 Brad Snider 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/ Brad Snider President, Chief Executive September 10, 1997
- ---------------------------- Officer and Director
Brad Snider (Principal Executive, Accounting
and Financial Officer)
/s/ Paul K. Holmes Chairman of the Board September 10, 1997
- ----------------------------
Paul K. Holmes
/s/ O.E. Guinn, Jr. Director September 10, 1997
- ----------------------------
O.E. Guinn, Jr.
/s/ Kaneaster Hodges, Jr. Director September 10, 1997
- ----------------------------
Kaneaster Hodges, Jr.
/s/ John Minor Director September 10, 1997
- ----------------------------
John Minor
</TABLE>
<PAGE>
CHARTER
OF
NORTH ARKANSAS BANCSHARES, INC.
ARTICLE I
Corporate Name
The name of the corporation is North Arkansas Bancshares, Inc. (the
"Corporation").
ARTICLE II
Registered Office and Agent
The street address and zip code of the Corporation's registered office are
530 Gay Street, Knoxville, Tennessee 37902. The Corporation's registered office
is located in Knox County. The name of the Corporation's initial registered
agent at its registered office is CT Corporation System.
ARTICLE III
Principal Office
The street address and zip code of the Corporation's principal office are
200 Olivia Drive, Newport, Arkansas 72112.
ARTICLE IV
Purpose and Powers
The purpose or purposes for which the Corporation is organized are to
engage in any lawful business for which corporations may be incorporated
pursuant to the laws of Tennessee. The Corporation shall have all the powers of
a corporation organized under such laws. The Corporation is for profit.
ARTICLE V
Capital Stock
The total number of shares of all classes of capital stock which the
Corporation has authority to issue is 12,000,000, of which 9,000,000 shares
shall be common stock, par value $.01 per share, and of which 3,000,000 shares
shall be preferred stock, par value $.01 per share. The shares may be issued
from time to time as authorized
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<PAGE>
by the board of directors without the approval of the Corporation's shareholders
except as otherwise provided in this Article V. 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 per share. The consideration for the shares, other
than cash, shall be determined by the board of directors in accordance with the
provisions of the Tennessee Business Corporation Act. 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, that part of the surplus of the Corporation 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.
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 of and series
(if any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
(A) Except as provided in this Article V (or in any amendments 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, but only when and as declared by
the board of directors.
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
preferences 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.
(B) The board of directors of the Corporation is authorized to amend this
Charter, by adoption of articles of amendment effective without shareholder
approval, to provide for the issuance of serial preferred stock in series and to
fix the preferences, limitations and relative rights of each such series,
including, but not limited to, determination of any of the following:
(1) the distinctive designation for each series and the number of shares
constituting such series;
(2) the voting rights, full, conditional or limited, of shares of such
series;
(3) 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;
(4) 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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<PAGE>
(5) the amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(6) 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;
(7) whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation and, if so convertible or exchangeable, the conversion price(s)
or the rate(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;
(8) the price or other consideration for which the shares of such
series shall be issued;
(9) whether the shares of such series that 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; and
(10) any other designations, preferences, limitations or rights that are
now or hereafter permitted by applicable law and are not inconsistent with
the provisions of this Charter.
Each share of each series of serial preferred stock shall have the same
preferences and relative rights as, and be identical in all respects with, all
other shares of the same series.
ARTICLE VI
Preemptive Rights
No shareholder of the Corporation shall have, as a matter of right, the
preemptive right to purchase or subscribe for shares of any class, now or
hereafter authorized, or to purchase or subscribe for securities or other
obligations convertible into or exchangeable for such shares or which by
warrants or otherwise entitle the holders thereof to subscribe for or purchase
any such shares.
ARTICLE VII
Acquisition of Shares
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the shareholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine, subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law.
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<PAGE>
ARTICLE VIII
Shareholder Meetings; Cumulative Voting
(A) A majority of the outstanding shares of the Corporation entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of shareholders. Where voting is by voting group, a majority of the votes
entitled to be cast on any matter by each voting group constitutes a quorum of
each such voting group for action on that matter. If less than a majority of
such 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.
(B) Special meetings of shareholders may be called at any time, but only by
the board of directors or a committee of the board of directors that has been
duly designated by the board of directors.
(C) There shall be no cumulative voting by shareholders of any class or
series in the election of directors of the Corporation.
ARTICLE IX
Directors
The number of directors of the Corporation shall be such number, neither
fewer than four nor more than eleven (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 or in accordance with the
bylaws, provided 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
only by a vote of at least 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 next meeting of shareholders at which directors are elected.
At the first meeting of shareholders of the Corporation, the board of
directors of the Corporation shall be divided into three classes as nearly equal
in number as the then total number of directors constituting the entire board of
directors shall permit, which classes shall be designated Class I, Class II and
Class III. At such meeting of shareholders, directors assigned to Class I shall
be elected to hold office for a term expiring at the first succeeding annual
meeting of shareholders thereafter, directors assigned to Class II shall be
elected to hold office for a term expiring at the second succeeding annual
meeting thereafter, and directors assigned to Class III shall be elected to hold
office for a term expiring at the third succeeding annual meeting thereafter.
Thereafter, at each annual meeting of shareholders of the Corporation, directors
of classes the terms of which expire at such annual meeting shall be elected for
terms of three years. Notwithstanding the foregoing, a 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
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<PAGE>
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
above in this Article IX. Notwithstanding the foregoing, and except as otherwise
may be required by law, 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 shareholders.
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 meeting of shareholders may be made by the
board of directors of the Corporation or by any shareholder of the Corporation
entitled to vote generally in the election of directors. Only business within
the purpose or purposes described in the notice of a special meeting may be
conducted at the special meeting. In order for a shareholder of the Corporation
to make any such nominations and/or proposals, he shall give notice thereof in
writing, delivered or mailed by first class United States mail, postage prepaid,
to the secretary of the Corporation not fewer than 30 days nor more than 60 days
prior to any such meeting; provided, however, that if notice or public
disclosure of the meeting is effected fewer than 40 days before the meeting,
such written notice shall be delivered or mailed, as prescribed, to the
secretary of the Corporation not later than the close of the 10th day following
the day on which notice of the meeting was mailed to shareholders. Each such
notice given by a shareholder with respect to nominations for the election of
directors shall set forth (1) the name, age, business address and, if known,
residence address of each nominee proposed in such notice; (2) the principal
occupation or employment of each such nominee; (3) the number of shares of stock
of the Corporation which are beneficially owned by each such nominee; (4) such
other information as would be required to be included in a proxy statement
soliciting proxies for the election of the proposed nominee pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended, including,
without limitation, such person's written consent to being named in the proxy
statement as a nominee and to serving as a director, if elected; and, (5) as to
the shareholder giving such notice, (a) his name and address as they appear on
the Corporation's books and (b) the class and number of shares of the
Corporation which are beneficially owned by such shareholder. In addition, the
shareholder making such nomination shall promptly provide any other information
reasonably requested by the Corporation.
(B) Each such notice given by a shareholder to the secretary with respect
to business proposals to bring before a meeting shall set forth in writing as to
each matter: (1) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting;
(2) the name and address, as they appear on the Corporation's books, of the
shareholder proposing such business; (3) the class and number of shares of the
Corporation which are beneficially owned by the shareholder; and (4) any
material interest of the shareholder in such business. Notwithstanding anything
in this Charter to the contrary, no business shall be conducted at the meeting
except in accordance with the procedures set forth in this Article X.
(C) The chairman of the annual meeting of shareholders 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 or
annual meeting of the shareholders taking place thirty days or more
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<PAGE>
thereafter. This provision shall not require the holding of any adjourned or
special meeting of shareholders for the purpose of considering such defective
nomination or proposal.
ARTICLE XI
Removal of Directors
Notwithstanding any other provision of this Charter or the bylaws of the
Corporation, no director of the Corporation may be removed at any time unless
for cause and upon 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 shareholders called for that purpose, except as
otherwise required by law.
ARTICLE XII
Elimination of Directors' Liability
Directors of the Corporation shall have no liability to the Corporation or
its shareholders for monetary damages for breach of fiduciary duty as a
director, provided that this Article XII shall not eliminate liability of a
director for: (A) any breach of the director's duty of loyalty to the
Corporation or its shareholders; (B) acts or omissions that are not in good
faith or that involve intentional misconduct or a knowing violation of law; or
(C) unlawful distributions under Section 48-18-304 of the Tennessee Business
Corporation Act.
If the Tennessee Business Corporation Act is amended or other Tennessee law
is enacted to permit further elimination or limitation of the personal liability
of directors, then the liability of directors of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Tennessee Business
Corporation Act, as so amended, or by such other Tennessee law, as so enacted.
Any repeal or modification of this Article XII or subsequent amendment of the
Tennessee Business Corporation Act or enactment of other applicable Tennessee
law shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal, modification, amendment or
enactment.
ARTICLE XIII
Indemnification
(A) (1) Except as provided in Section (B) of this Article XIII, the
Corporation shall indemnify any director who is made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative ("proceeding"), because he is or was a director
against liability incurred in such proceeding if: (a) he conducted himself in
good faith; (b) he reasonably believed, (i) in the case of conduct in his
official capacity with the Corporation, that his conduct was in the
Corporation's best interests and (ii) in all other cases, that his conduct was
at least not opposed to its best interests; and (c) in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
(2) The Corporation shall further indemnify any director and any
officer who is not a director who was wholly successful, on the merits or
otherwise, in the defense of any proceedings to which he was a party because he
is or was a director or officer of the Corporation against reasonable expenses
incurred by him in connection with the proceeding.
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<PAGE>
(B) The Corporation shall not indemnify a director in connection with a
proceeding by or in the right of the Corporation in which the director was
adjudged liable to the Corporation or in connection with any other proceeding
charging improper personal benefit to him, whether or not involving action in
his official capacity, in which he was adjudged liable on the basis that
personal benefit was improperly received by him.
(C) The Corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if: (1) the director furnishes the Corporation a
written affirmation of his good faith belief that he has met the standard of
conduct set forth in Subsection (A)(1) of this Article XIII; (2) he provides the
Corporation a written undertaking, executed personally or on his behalf, to
repay the advance if it is ultimately determined that he is not entitled to
indemnification; and (3) a determination is made that the facts then known to
those making the determination would not preclude indemnification under this
Article XIII.
(D) The Corporation may not indemnify a director under Subsection (A)(1) of
this Article XIII unless authorized in the specific case after a determination
has been made that indemnification of the director is permissible in the
circumstances because he has met the standard set forth in Subsection (A)(1) of
this Article XIII. The determination shall be made:
(1) By the board of directors by majority vote of a quorum consisting
of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under Subsection (1) of this
Section (D), by majority vote of a committee duly designated by the board
of directors (in which designation directors who are parties may
participate), consisting solely of two or more directors not at the time
parties to the proceeding;
(3) By independent special legal counsel;
(a) Selected by the board of directors or its committee in the
manner prescribed in Subsections (1) or (2) of this Section (D);
(b) If a quorum of the board of directors cannot be obtained under
Subsection (1) of this Section (D) and a committee cannot be designated
under Subsection (2) of this Section (D), selected by majority vote of the
full board of directors (in which selection directors who are parties may
participate); or
(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may not
be voted on the determination.
(E) Authorization of indemnification under Subsection (A)(1) of this
Article XIII and evaluation that indemnification is permissible under Subsection
(A)(1) of this Article XIII shall be made in the same manner as the
determination that indemnification is permissible, except that, if the
determination is made by special legal counsel, authorization of indemnification
and evaluation as to reasonableness of expenses shall be made by those entitled
under Subsection (D)(3) of this Article XIII to select counsel.
(F) The Corporation may indemnify and advance expenses to an officer,
employee or agent of the Corporation who is not a director to the same extent as
a director hereunder.
(G) The Corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
Corporation, or who, while a director, officer, employee, or agent of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, employee benefit plan or other
enterprise,
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<PAGE>
against liability asserted against or incurred by him in that capacity or
arising from his status as a director, officer, employee or agent, whether or
not the Corporation would have power to indemnify him against the same liability
hereunder.
(H) It is the intention of this Article XIII to provide for indemnification
of directors and officers to the fullest extent permitted by the Tennessee
Business Corporation Act, and this Article XIII shall be interpreted
accordingly. If this Article XIII 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 proceeding,
including an action by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article XIII that shall not have
been invalidated and to the full extent permitted by applicable law. If the
Tennessee Business Corporation Act is amended or other Tennessee law is enacted
to permit further or additional indemnification of a director, officer, employee
or agent of the Corporation, then the indemnification of such director, officer,
employee or agent shall be to the fullest extent permitted by the Tennessee
Business Corporation Act, as so amended, or by such other Tennessee law.
(I) The indemnification and advance payment of expenses provided by this
Article XIII 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) The indemnification provided by this Article XIII 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 this Article XIII shall continue
as to a person who has ceased to be a director or officer of the Corporation and
shall inure to his heirs, executors and administrators.
ARTICLE XIV
Acquisition of Capital Stock; Restrictions on Voting Rights of Certain Holders
(A) Five Year Prohibition. For a period of five years from the effective
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date of the completion of the conversion of Newport Federal Savings Bank 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
such term is defined in Article XV hereof. In addition, for a period of five
years from the completion of the conversion of Newport Federal Savings Bank from
mutual to stock form, and notwithstanding any provision to the contrary in this
Charter or 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 XIV, 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 shareholders 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 shareholders for a vote.
(B) Prohibition After Five Years. If, at any time after five years from
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the effective date of the completion of the conversion of Newport Federal
Savings Bank from mutual to stock form, 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 XV of this Charter, then the record
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holders of voting stock of the Corporation beneficially owned by such acquiring
person shall have only the voting rights set forth in this Section (A) 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 Section (A), such record holders in the aggregate
shall be entitled to cast only one-hundredth (1/100th) 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, as so limited, of the outstanding shares of voting stock
of the Corporation beneficially owned by such acquiring person by a fraction
whose numerator is the number of votes represented by the shares of voting stock
of the Corporation owned of record by such record holder (and which are
beneficially owned by such acquiring person) 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. 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 Section (B) by virtue of such shares being so beneficially
owned by any of such acquiring persons.
(B) 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 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 "offer" includes every offer to buy or otherwise acquire,
solicitation of an offer to sell, tender offer for or request for invitation for
tenders of, a security or interest in a security for value. The term "acting in
concert" includes: (1) knowing participation in a joint activity or conscious
parallel action towards a common goal whether or not pursuant to an express
agreement; and (2) a combination or pooling of voting or other interests 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 Exchange
Act of 1934.
(C) Exclusion for Underwriters, Employee Benefit Plans and Certain Proxies.
----------------------------------------------------------------------
The restrictions contained in this Article XIV shall not apply to: (1) 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; (2)
any proxy granted to one or more Continuing Directors, as defined in Article XV
of this Charter, by a shareholder of the Corporation; or (3) any employee
benefit plans of the Corporation or a subsidiary thereof. In addition, the
Continuing Directors, as defined in Article XV of this Charter, 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 XV of this Charter, 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 XIV should any such person or group become a
beneficial owner of more than 10% of any class of equity security of the
Corporation.
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(D) Determinations. A majority of the Continuing Directors, as defined in
--------------
Article XV of this Charter, shall have the power to construe and apply the
provisions of this Article XIV and to make all determinations necessary or
desirable to implement such provisions, including but not limited to matters
with respect to: (1) the number of shares beneficially owned by any person; (2)
whether a person has an agreement, arrangement or understanding with another as
to the matters referred to in the definition of beneficial ownership; (3) the
application of any other definition or operative provision of this Article XIV
to the given facts; or (4) any other matter relating to the applicability or
effect of this Article XIV. Any constructions, applications or determinations
made by the Continuing Directors, as defined in Article XV of this Charter,
pursuant to this Article XIV in good faith and on the basis of such information
and assistance as was then reasonably available for such purpose shall be
conclusive and binding upon the Corporation and its shareholders.
ARTICLE XV
Approval of Business Combinations
The shareholder vote required to approve a Business Combination (as
hereinafter defined) shall be as set forth in this Article XV, in addition to
any other requirements under applicable law.
(A) (1) Except as otherwise expressly provided in this Article XV, 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 two-thirds of the outstanding shares of each such class or series)
and (ii) 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, share exchange or consolidation of the Corporation
or any subsidiary thereof with or into a Related Person;
(b) any sale, lease, exchange, transfer or other disposition of
(including, without limitation, the granting of any mortgage, pledge or
other security interest in) all or any Substantial Part (as hereinafter
defined) of the assets (in one transaction or in a series of
transactions) of the Corporation (including, without limitation, any
voting securities of a subsidiary) or of a subsidiary thereof to a
Related Person or proposed by or on behalf of a Related Person;
(c) any sale, lease, exchange, transfer or other disposition of
including, without limitation, any granting of a mortgage, pledge or any
other security interest in, all or any Substantial Part of the assets
(in one transaction or in a series of transactions) of a Related Person
to the Corporation or a subsidiary thereof;
(d) the issuance or transfer (in one transaction or in a series of
transactions) by the Corporation or any subsidiary thereof of any
securities of the Corporation or of a subsidiary thereof to a Related
Person other than pursuant to a dividend or distribution made pro rata
to all shareholders of the Corporation;
(e) the acquisition by the Corporation or a subsidiary thereof of
any securities of a Related Person or of any securities convertible into
securities of a Related Person;
(f) any transaction proposed by or on behalf of a Related Person or
pursuant to any agreement, arrangement or understanding with a Related
Person which has the effect, directly or indirectly, of increasing the
Related Person's proportionate ownership of voting securities of the
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Corporation or of a subsidiary thereof (or of securities that are
convertible to, exchangeable for or carry the right to acquire such
voting securities);
(g) the adoption of any plan or proposal of liquidation or
dissolution of the Corporation, any reincorporation of the Corporation
in another state or jurisdiction, any reclassification of the common
stock of the Corporation, or any recapitalization involving the common
stock of the Corporation proposed by or on behalf of a Related Person;
(h) any loans, advances, guarantees, pledges, financial assistance,
security arrangements, restrictive covenants or any tax credits or other
tax advantages provided by, through or to the Corporation or any
subsidiary thereof as a result of which a Related Person receives a
benefit, directly or indirectly, other than proportionately as a
shareholder; and
(i) any agreement, contract or other arrangement providing for any
of the transactions described in this Section (A).
(2) Such affirmative vote shall be required notwithstanding any other
provision of this Charter, any provision of law, or any agreement with any
national securities exchange or automated quotation system which might
otherwise permit a lesser vote or no vote.
(3) The term "Business Combination" as used in this Article XV shall
mean any transaction which is referred to in any one or more of Subsections
(1)(a) through (1)(i) of this Section A.
(B) The provisions of Section (A) of this Article XV 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 this Charter, any provisions of law or any agreement with any federal
regulatory agency, national securities exchange or automated quotation system,
if either the Business Combination or the transaction in which the Related
Person became a Related Person shall have been approved in advance by at least
two-thirds of the Continuing Directors (as hereinafter defined); provided,
however, that such approval shall be effective only if obtained at a meeting at
which a Continuing Director Quorum (as hereinafter defined) is present.
(C) For the purpose of this Article XV the following definitions apply:
(1) The term "Related Person" shall mean: (a) any individual,
corporation, partnership or other person or entity which together with its
"affiliates" (as that term is defined in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934) "beneficially
owns" (as that term is defined in Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934) in the aggregate 10%
or more of the outstanding shares of the common stock of the Corporation;
(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; or (c) any corporation which would
be an "affiliate" (as that term is defined in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934) of any
such individual, corporation, partnership or other person or entity
following a Business Combination. Without limitation, any shares of the
common stock of the Corporation which any Related Person has the right to
acquire pursuant to any agreement, upon exercise of conversion rights,
warrants or options or otherwise shall be deemed "beneficially owned" by
such Related Person.
(2) The term "Substantial Part" shall mean more than 10 percent of the
total assets of the Corporation or the Related Person, as the case may be,
as of the end of its most recent fiscal year ending prior to the time the
determination is made.
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(3) The term "Continuing Director" shall mean any member of the board of
directors of the Corporation who is unaffiliated with a Related Person and
was a member of the board of directors prior to the time that the Related
Person became a Related Person, and any successor of a Continuing Director
who is recommended to succeed a Continuing Director by a majority of
Continuing Directors then on the board of directors.
(4) The term "Continuing Director Quorum" shall mean at least two-thirds
of the Continuing Directors capable of exercising the powers conferred on
them.
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 XV of this Charter) 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: (A) the social and economic effects of the transaction on
the Corporation, its subsidiaries, employees, depositors, loan and other
customers and creditors and the other elements of the communities in which the
Corporation and its subsidiaries operate or are located; (B) 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 (C) the competence, experience
and integrity of the acquiring person or entity and its or their management.
ARTICLE XVII
Incorporator
The name, address and zip code of the Corporation's incorporator are Brad
Snider, 200 Olivia Drive, Newport, Arkansas 72112.
ARTICLE XVIII
Initial Directors
The names of the individuals who are to serve as initial directors of the
Corporation until the first meeting of shareholders are O. E. Guinn, Jr.,
Kaneaster Hodges, Jr., Paul K. Holmes, John Minor and Brad Snider. The address
of each initial director is 200 Olivia Drive, Newport, Arkansas 72112.
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ARTICLE XIX
Amendment of Bylaws
To the extent permitted by the Tennessee Business Corporation Act, the
board of directors of the Corporation is expressly authorized to repeal, alter,
amend or rescind the bylaws of the Corporation by vote of a majority of the
board of directors at a legal meeting held in accordance with the bylaws.
Notwithstanding any other provision of this Charter or the bylaws of the
Corporation (and notwithstanding the fact that some lesser percentage may be
specified by law), the bylaws shall be repealed, altered, amended or rescinded
by the shareholders of the Corporation only by vote 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 shareholders called for that purpose (provided
that notice of such proposed repeal, alteration, amendment or rescission is
included in the notice of such meeting).
ARTICLE XX
Amendment of Charter
The Corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Charter in the manner now or hereafter prescribed by
law, and all rights conferred on shareholders herein are granted subject to this
reservation. Notwithstanding the foregoing, the provisions set forth in
Articles VIII, IX, X, XI, XII, XIII, XIV, XV, XVI and XIX of this Charter 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 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 a
single class) cast at a meeting of the shareholders called for that purpose
(provided that notice of such proposed repeal, alteration, amendment or
rescission is included in the notice of such meeting); except that such repeal,
alteration, 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 XV of this Charter.
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THE UNDERSIGNED, being the incorporator herein before named, for the
purpose of forming a corporation pursuant to the Tennessee Business Corporation
Act, does make this Charter, hereby declaring and certifying that this is his
act and deed and the facts herein stated are true, and accordingly has hereunto
set his hand as of September 2, 1997.
/s/ Brad Snider
------------------------------------
Brad Snider
Incorporator
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Exhibit 3.2
BYLAWS
OF
NORTH ARKANSAS BANCSHARES, INC.
ARTICLE I - Home Office
The home office of North Arkansas Bancshares, Inc. (the "Corporation")
shall be at 200 Olivia Drive, Newport, Arkansas.
ARTICLE II - Shareholders
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the Corporation or at such
other place as the board of directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the
Corporation for the election of directors and for the transaction of any other
business of the Corporation shall be held annually at such date and time as
determined by the board of directors.
Section 3. Special Meetings. Special meetings of the shareholders for any
purpose or purposes may be called at any time by a majority of the board of
directors or by a committee of the board of directors that has been duly
designated by the board of directors.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with rules and procedures adopted by the board of
directors. The board of directors shall designate, when present, either the
chairman of the board or 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 days nor more than two (2) months before the date of
the meeting, either personally or by mail, by or at the direction of the
chairman of the board, the president, the secretary or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting;
provided, however, that with respect to meetings at which a plan of merger,
share exchange, sale of all or substantially all of the Corporation's assets or
dissolution of the Corporation is proposed to be considered, such notice shall
be provided to each shareholder of the Corporation whether or not entitled to
vote. If mailed, such notice shall be deemed to be delivered when deposited in
the mail, addressed to the shareholder at the address as it appears on the stock
transfer books or records of the Corporation as of the record date prescribed in
Section 6 of this Article II with postage prepaid. When any shareholders'
meeting, either annual or special, is adjourned for more than four months,
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 fewer 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. If a meeting is adjourned to a date more than four (4)
months after the date fixed for the original meeting, a new record date for the
adjourned meeting must be fixed, and notice of the adjourned meeting must be
given to shareholders as of the new record date.
A shareholder may waive any notice required hereunder provided the waiver
is in writing, signed by him and delivered to the Corporation for inclusion in
the minutes or filing with the corporate records. A shareholder's
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attendance at a meeting (i) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the meeting
(or promptly upon his arrival) objects to holding the meeting or transacting
business at the meeting, and (ii) waives objection to consideration of a
particular matter at a meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.
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 70 days and, in case of a meeting of shareholders, not fewer than 10 days
prior to the date on which the particular action 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, except adjournment to a date
more than four (4) months after the date fixed for the original meeting, in
which case a new record date shall be set.
Section 7. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make a complete list of the
shareholders entitled to notice of such meeting, or any adjournment, arranged in
alphabetical order, with the address and the number of shares held by each.
Such list of shareholders shall be kept on file at the home office of the
Corporation and shall be subject to inspection by any shareholder, upon written
demand by such shareholder, his agent or his attorney, beginning two (2)
business days after notice of the meeting is given for which the list was
prepared and continuing through the meeting. If the right to vote at any
meeting is challenged, the person presiding thereat may rely on such list as
evidence of the right of the person challenged to vote at such meeting. A
shareholder or his agent or attorney is entitled on written demand to copy such
list, during regular business hours and at his expense, during the period it is
available for inspection, provided (i) his demand is made in good faith and for
a proper purpose, (ii) he describes with reasonable particularity his purpose
and the records he desires to inspect, and (iii) the records are directly
connected with his purpose.
Section 8. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. 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 share holders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
appoint a proxy by executing a writing which authorizes another person or
persons to vote or otherwise act on the shareholder's behalf. Execution may be
accomplished by any reasonable means, including facsimile transmission, either
personally or by an attorney-in-fact in the case of an individual shareholder or
by an authorized officer, director, employee, agent or attorney-in-fact in the
case of another shareholder. Any copy, facsimile transmission or other reliable
reproduction of such writing or transmission may be substituted or used in lieu
of the original writing or transmission for any and all purposes for which the
original writing or transmission could be used; provided, that such copy,
facsimile transmission or other reproduction shall be a complete reproduction of
the entire original writing or transmission. 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. A proxy
shall be valid for eleven months from the date of its execution unless another
period is expressly provided in the appointment form.
Section 10. Voting. At each election for directors every shareholder
entitled to vote at such election shall be entitled to one (1) vote for each
share of stock held by him. Unless otherwise provided in the Corporation's
Charter or by applicable law, a majority of those votes cast by shareholders
entitled to vote at a lawful meeting shall
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be sufficient to pass on a transaction or matter, except in the election of
directors. Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote at a meeting at which a quorum is present. Where voting
is by voting group, action on a matter (other than the election of directors) by
a voting group is approved if the votes cast within the voting group favoring
the action exceed the votes cast opposing the action, unless the Corporation's
Charter or applicable law requires a greater number of affirmative votes.
Section 11. 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 Corporation to the contrary, at any meeting of the
shareholders of the Corporation, any one (1) 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 shares 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 of Certain Holders. Shares standing in the
name of another corporation may be voted by an 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, 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 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 into his name
if authority to do so is contained in an appropriate order to 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.
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, unless such
shares are held in a fiduciary capacity.
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 (1) or three (3). 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 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 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 applicable law, 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 performing such other 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. Provided such committee makes such nomina-
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tions, 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
Corporation in accordance with the provisions of the Corporation's Charter.
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 Charter. 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 Charter.
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 all
shareholders entitled to vote on the action consent to taking such action
without a meeting, the affirmative vote of the number of shares that would be
necessary to authorize or take such action at a meeting is the act of the
shareholders. The action must be evidenced by one (1) or more written consents
describing the action taken, signed by each shareholder entitled to vote on the
action, in one (1) or more counterparts, indicating each signing shareholder's
vote or abstention on the action, and delivered to the Corporation for inclusion
in the minutes for filing with the corporate records.
A consent signed under this section has the effect of a meeting vote and
may be described as such in any document.
If the Tennessee Business Corporation Act or the Charter requires that
notice of the proposed action by given to nonvoting shareholders and the action
is to be taken by consent of the voting shareholders, then the Corporation must
give its nonvoting shareholders written notice of the proposed action at least
ten (10) days before the action is taken. The notice must contain or be
accompanied by the same materials that would have been required by law to be
sent to nonvoting shareholders in a notice of meeting at which the proposed
action would have been submitted to the shareholders for action.
Section 17. Shareholder Meetings Through Special Communication.
Shareholders may not participate in any annual or special meeting and no annual
or special meeting of shareholders may be conducted by means of conference
telephone or similar communications equipment by which all persons participating
in the meeting can hear each other.
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 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 five
(5) members. In accordance with the provisions of the Corporation's Charter, at
the first meeting of shareholders of the Corporation the board of directors
shall be divided into three classes as nearly equal in number as possible. At
succeeding annual meetings of shareholders, the members of each class shall be
elected for a term of three (3) years and until their successors are elected and
qualified. One (1) class shall be elected by ballot annually. The board of
directors may increase or decrease the number of directors, but in no event
shall such number be increased or decreased beyond the range established in the
Corporation's Charter.
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 or at such other
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<PAGE>
time and place as the board of directors shall determine. The board of
directors may provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than such resolution.
Section 4. 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 Arkansas 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 of Special Meeting. Written notice of any special
meeting shall be given to each director at least two (2) days previous thereto
delivered personally, by telegram, by telecopy, or 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, 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. Except as otherwise provided by the Corporation's
Charter, 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; however, 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
Corporation's Charter or applicable law.
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 all directors consent to taking such action without a meeting, the
affirmative vote of the number of directors that would be necessary to authorize
or take such action at a meeting is the act of the board. The action must be
evidenced by one (1) or more written consents describing the action taken,
signed by each director in one (1) or more counterparts, indicating each signing
director's vote or abstention on the action, and shall be included in the
minutes or filed with the corporate records reflecting the action taken. Action
taken under this section is effective when the last director signs the consent,
unless the consent specifies a different effective date.
A consent signed under this section has the effect of a meeting vote and
may be described as such in any document.
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 board of directors, the chairman of the board or the president.
Unless otherwise specified, such resignation shall take effect upon delivery.
More than three (3) 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.
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<PAGE>
Section 10. Vacancies. Any vacancy occurring on the board of directors
shall be filled in accordance with the provisions of the Corporation's Charter.
Section 11. 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 12. Presumption of Assent. A director of the Corporation who is
present at a meeting of the board of directors at which action on any
Corporation matter is taken shall be presumed to have assented to the action
taken unless (i) he objects at the beginning of the meeting (or promptly upon
his arrival) to holding the meeting or transacting business at the meeting; (ii)
his dissent or abstention from the action taken is entered in the minutes of the
meeting; or (iii) he delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or to the Corporation
immediately after adjournment of the meeting. The right of dissent or
abstention is not available to a director who votes in favor of the action
taken.
Section 13. Removal of Directors. Any director or the entire board of
directors may be removed only in accordance with the provisions of the
Corporation's Charter.
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 (1) 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 (1) or more directors of the Corporation. The board may
designate one (1) 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 of directors shall have power, by the affirmative vote of a
majority of the authorized number of directors, 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 (1) 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 Corporation. The offices of the secretary and treasurer may be
held by the same person, and a vice president may also be either the secretary
or treasurer. The board of directors may designate one (1) 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
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<PAGE>
respective offices. The secretary of the Corporation shall be responsible for
preparing minutes of the directors' and shareholders' meetings and for
authenticating records of the Corporation.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually at the first meeting of the board of directors held
after each annual meeting of shareholders. If the election of officers is not
held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly
elected and qualified or until the officer's death, resignation or removal.
Election or appointment of an officer, employee or agent shall not of itself
create contractual rights. The board of directors may authorize the Corporation
to enter into an employment contract with any officer in accordance with
applicable law; however, 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 Corporation will be served
thereby, but such removal, other than for cause, shall be without prejudice to
any contractual rights 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 by employment contracts or
otherwise.
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 Charter or these bylaws with
respect to certificates for shares, the board of directors 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. The Corporation shall not lend money to, or guarantee
the obligation of, any officer or director unless the board of directors
determines that the loan or guarantee benefits the Corporation and either
approves the specific loan or guarantee or a general plan authorizing loans and
guarantees.
Section 3. Checks, Drafts, etc. All checks, drafts, 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 (1) or more officers, employees or agents
of the Corporation in such manner as shall from time to time be determined by
the board of directors.
Section 4. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in any
duly authorized depositories as the board of directors may select.
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<PAGE>
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 chief executive officer or by any
other officer of the Corporation authorized by the board of directors, attested
by the secretary or an assistant secretary and sealed with the corporate seal or
a facsimile thereof. The signature of such officers upon a certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer agent
or a registrar other than the Corporation itself or one (1) 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 Corporation. All certificates surrendered to the
Corporation for transfer shall be cancelled, and no new certificates shall be
issued until the form certificate for a like number of shares has been
surrendered and cancelled, except that in the case of a lost or destroyed
certificate a new certificate may be issued upon such terms and indemnity to the
Corporation as the board of directors may prescribe.
Section 2. Form of Certificate. Each certificate representing shares
issued by the Corporation shall state on its face the name of the Corporation,
that the Corporation is organized under the laws of Tennessee, the name of the
person to whom it is issued, the number and class of shares and the designation
of the series, if any, the certificate represents. Each certificate shall set
forth upon its face or back, or shall state conspicuously, that the Corporation
will furnish to any shareholder upon request, and without charge, a full
statement of the designations, preferences, limitations and relative rights of
each class authorized to be issued, the variations in the relative rights and
preferences between the shares of each series 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. Other matters in
regard to the form of the certificates shall be determined by the board of
directors.
Any restrictions imposed on the transfer or registration of transfer of
shares of the Corporation shall be noted conspicuously on the front or back of
each certificate representing such shares.
Section 3. Transfer of Shares. Transfer of shares of capital stock of the
Corporation shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record, by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney authorized by a duly executed power of attorney and filed with 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 for all purposes.
Section 4. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the shareholders entitled to examine the stock
ledger, the list required by Section 7 of Article II hereof or the books of the
Corporation or to vote in person or by proxy at any meeting of shareholders.
Section 5. 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.
Section 6. Record Owners. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends, and to vote as such owner, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not the Corporation shall have express or other
notice thereof, except as otherwise provided by law.
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<PAGE>
ARTICLE VIII -- Fiscal Year; Annual Audit
The fiscal year of the Corporation shall end on the 30th 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.
ARTICLE IX -- Dividends
Subject only to the terms of the Corporation's Charter and applicable law,
the board of directors may from time to time declare, and the Corporation may
pay, dividends on the outstanding classes of the Corporation's capital stock
which are eligible for dividends. Dividends may be paid in cash, in property or
in the Corporation's own stock.
ARTICLE X -- Corporate Seal
The corporate seal of the Corporation shall be in such form as the board of
directors may provide.
ARTICLE XI -- Amendments
In accordance with the Corporation's Charter, these bylaws may be repealed,
altered, amended or rescinded by the shareholders of the Corporation only by the
affirmative vote 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 (1) class) cast at a meeting of the
shareholders called for that purpose (provided that notice of such proposed
repeal, alteration, amendment or rescission is included in the notice of such
meeting). In addition, these bylaws may be repealed, altered, amended or
rescinded by the board of directors by the affirmative vote of a majority of the
board of directors at a legal meeting held in accordance with the provisions of
these bylaws; provided, however, that an amendment to the first sentence of this
Article XI may be made only by the shareholders of the Corporation.
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<PAGE>
Exhibit 4
COMMON STOCK
NUMBER _____ _____ SHARES
NORTH ARKANSAS BANCSHARES, INC.
NEWPORT, ARKANSAS
This certifies that
is the owner of
fully paid and non-assessable shares of common stock, par value $0.01 per share,
of
North Arkansas Bancshares, Inc. (the "Corporation"), a Tennessee 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.
IN WITNESS WHEREOF, the Corporation has caused this
signature of its duly authorized officers and has
be hereunto affixed.
- -----------------------------------
Pam Decker
Secretary
this certificate to be executed by the facsimile
caused a facsimile of its corporate seal to
- -----------------------------------
Brad Snider
President
Countersigned and Registered:
(SEAL)
-------------------------------
Transfer Agent and Registrar
BY:
-------------------------------
Authorized Signature
SEE REVERSE FOR CERTAIN RESTRICTIONS ON TRANSFER
<PAGE>
FORM OF STOCK CERTIFICATE - BACK SIDE
The shares represented by this certificate are issued subject to all the
provisions of the Charter 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, 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 request may be made in writing to the Secretary of the Corporation.
The Corporation's Charter includes a provision which prohibits any person
from directly or indirectly acquiring 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 of the Corporation, as defined in Article XV of the
Charter. This provision does not apply to the purchase of shares by underwriters
in connection with a public offering, the granting of proxies to certain
directors of the Corporation by stockholders of the Corporation or the
acquisition of shares by an employee benefit plan of the Corporation or a
subsidiary. 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 Newport Federal Savings Bank, Newport,
Arkansas (the "Bank") from mutual to stock form. The Charter also imposes
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 Bank from mutual to stock form.
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 TRANSFER MIN ACT - ...Custodian...under Uniform Transfers to Minors Act....
(Cust) (Minor) (State)
Additional abbreviations may also be used though not in the above list.
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.
For value received, _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------
/ /
- -----------------------------------
- -------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING 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:
---------------------------
<PAGE>
Exhibit 5
[LETTERHEAD OF HOUSLEY KANTARIAN & BRONSTEIN, P.C.]
September 19, 1997
Board of Directors
North Arkansas Bancshares, Inc.
200 Olivia Drive
Newport, Arkansas 72112
RE: Registration Statement on Form SB-2
Gentlemen:
You have requested our opinion as special counsel to North Arkansas
Bancshares, Inc. (the "Company"), 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 Company (the
"Common Stock") to be issued in connection with the simultaneous conversion of
Newport Federal Savings Bank (the "Bank") from a federal mutual savings bank to
a federal capital stock savings bank and reorganization into the holding company
form of ownership as a wholly owned subsidiary of the Company.
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 and Tax Matters."
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By: /s/ Gary R. Bronstein
--------------------------------
Gary R. Bronstein
<PAGE>
Exhibit 8.1
__________, 1997
Board of Directors
Newport Federal Savings Bank
200 Olivia Drive
Newport, Arkansas 72112
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 Newport Federal Savings Bank (the "Bank") from a federally
chartered mutual savings bank to a federally chartered capital stock savings
bank (the "Converted Bank") and the concurrent acquisition of 100% of the
outstanding capital stock of the Converted Bank by North Arkansas Bancshares,
Inc. (the "Company"), a Tennessee corporation formed at the direction of the
Board of Directors of the Bank to become the parent holding company of the
Converted Bank (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 on May 29, 1997 by the Board of
Directors of the Bank (the "Plan"); the federal mutual charter and bylaws of the
Bank, as amended; the charter and bylaws of the Company; the Affidavit of
representations dated September __,1997 provided to us by the Bank (the
"Affidavit"), and the Prospectus (the "Prospectus") included in the Company's
Registration Statement on Form SB-2
<PAGE>
Board of Directors
Newport Federal Savings Bank
____________, 1997
Page 2
being filed with the Securities and Exchange Commission ("SEC") in connection
with the Conversion, on or about September __, 1997 (the "Registration
Statement"). 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.
BACKGROUND
----------
Based solely upon our review of such documents, and upon such
information as the Bank 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 Bank is a federally chartered mutual savings bank, which is in the
process of converting to a federally chartered capital stock savings bank. The
Bank was organized as a federally chartered mutual savings and loan association
under the name "Newport Federal Savings and Loan Association" in 1934 and became
a member of the Federal Home Loan Bank ("FHLB") System and obtained federal
deposit insurance. In 1995 the Bank changed its name to Newport Federal Savings
Bank.
The Bank is a member of the FHLB System, and the deposits of the Bank
are insured by the Federal Deposit Insurance Corporation ("FDIC") up to
applicable limits. The Bank is subject to comprehensive regulation and
supervision by the Office of Thrift Supervision ("OTS") and to examination by
the OTS. The Bank operates one office in Newport, Arkansas.
The Bank's principal business consists of attracting deposits from the
general public and investing those funds in loans secured by first mortgages on
existing owner-occupied single-family residences in the Bank's market area and,
to a lesser but growing extent, commercial and multi-family real estate loans
and consumer and commercial business loans. [Confirm] At June 30, 1997, the Bank
had total assets of $_____ million, deposits of $_____ million and retained
earnings of $____ million.
<PAGE>
Board of Directors
Newport Federal Savings Bank
____________, 1997
Page 3
As a federally chartered mutual savings bank, the Bank has no
authorized capital stock. Instead, the Bank, in mutual form, has a unique equity
structure. A savings depositor of the Bank is entitled to payment of interest on
his account balance as declared and paid by the Bank, but has no right to a
distribution of any earnings of the Bank except for interest paid on his
deposit. Rather, such earnings become retained income of the Bank.
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 Bank is ever liquidated. Further,
savings depositors and borrowers are members of the Bank and thereby have voting
rights in the Bank. Under the Bank's federal mutual charter, as amended, each
depositor is entitled to cast one vote for each $100 or fraction thereof held in
a withdrawable deposit account of the Bank, and each borrower member
(hereinafter "borrower") is entitled to one vote in addition to the votes (if
any) to which such person is entitled in such borrower's capacity as a savings
depositor of the Bank. 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 Bank cease when such depositor closes his accounts with the
Bank.
The Company was incorporated in September, 1997 under the laws of the
State of Tennessee to act as the savings and loan holding company of the
Converted Bank upon consummation of the Conversion. Prior to consummation of the
Conversion, the Company has not been engaged in and is not expected to engage in
any material operations. After the Conversion, the Company's principal business
will be overseeing the business of the Converted Bank. The Company has an
authorized capital structure of 9,000,000 shares of common stock (the "Common
Stock"), par value $.01 per share, and 3,000,000 shares of serial preferred
stock, par value $.01 per share.
PROPOSED TRANSACTION
--------------------
The Board of Directors of the Bank has decided that in order to attract
new capital to the Converted Bank to increase its net worth, to support future
savings growth, to increase the amount of funds available for lending and
investment, to provide greater resources for the expansion of customer services,
and to facilitate future expansion, it would be advantageous for the Bank to
convert from a federally chartered mutual savings bank to a federally chartered
capital stock savings bank. In addition, the Board of Directors intends to
implement stock option plans and
<PAGE>
Board of Directors
Newport Federal Savings Bank
____________, 1997
Page 4
other stock benefit plans following the Conversion in order to better attract
and retain qualified directors and officers. It is the further desire of the
Board of Directors to reorganize the Converted Bank as the wholly owned
subsidiary of the Company to enhance flexibility of operations, diversification
of business opportunities and financial capability for business and regulatory
purposes and to enable the Converted Bank to compete more effectively with other
financial service organizations.
Accordingly, pursuant to the Plan, the Bank will undergo the Conversion
whereby it will be converted from a federally chartered mutual savings bank to a
federally chartered capital stock savings bank. The Converted Bank will then
issue to the Company 100,000 shares of the Converted Bank's common stock,
representing all of the shares of capital stock to be issued by the Converted
Bank in the Conversion, and the Company will make payment to the Converted Bank
in an amount equal to at least 50% of the aggregate net proceeds realized by the
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.
Pursuant to the Prospectus, the Company currently anticipates making such
payment to the Converted Bank of an amount equal to 50% of the aggregate net
proceeds from the sale of the Common Stock.
Also pursuant to the Plan, the 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 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 Bank and the Company, on the basis of the estimated pro forma
--- -----
market value of the Converted Bank, as a subsidiary of the 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
<PAGE>
Board of Directors
Newport Federal Savings Bank
____________, 1997
Page 5
the stock of the Converted Bank to the 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:
(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 first be 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 (including
individual retirement and Keogh retirement accounts and
personal trusts in which such natural persons have substantial
interests) who are permanent Residents of the Bank'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.
<PAGE>
Board of Directors
Newport Federal Savings Bank
____________, 1997
Page 6
The Plan also provides for the establishment of a Liquidation Account
by the Converted Bank for the benefit of all Eligible Account Holders and
Supplemental Eligible Account Holders in an amount equal to the regulatory
capital of the Bank 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
Converted Bank, except that the Converted Bank may not declare or pay cash
dividends on or repurchase any of its stock if the result thereof would be to
reduce its regulatory capital 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 Converted Bank 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
Bank for purposes of distribution of the Liquidation Account. Instead, upon
consummation of the Conversion, the Liquidation Account, together with the
related rights and obligations of the Converted Bank, shall be assumed by the
Converted Bank.
The Conversion will not interrupt the business of the Bank. The
Converted Bank will, after the Conversion, engage in the same business as that
of the Bank 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 Converted Bank 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 Bank
will remain unchanged and retain their same characteristics in the Converted
Bank immediately following the Conversion.
Following the Conversion, voting rights in the Converted Bank will rest
exclusively with the sole holder of stock in the Converted Bank, which will be
the Company. Voting rights in the Company will rest exclusively in the holders
of the Common Stock.
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
Bank's members called to vote on the Plan. Immediately prior to the Conversion,
the Bank will have a positive net worth determined in accordance with generally
accepted accounting principles.
<PAGE>
Board of Directors
Newport Federal Savings Bank
____________, 1997
Page 7
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 Bank or the Converted Bank as a
result of the Conversion (see Rev. Rul. 80-105, 1980-1 C.B.
---
78).
2. The assets of the Bank will have the same basis in the hands
of the Converted Bank as in the hands of the Bank immediately
prior to the Conversion (Section 362(b) of the Code).
3. The holding period of the assets of the Bank to be received by
the Converted Bank will include the period during which the
assets were held by the Bank prior to the Conversion (Section
1223(2) of the Code).
4. No gain or loss will be recognized by the Converted Bank upon
its receipt of money from the Company in exchange for shares
of common stock of the Converted Bank (Section 1032(a) of the
Code). The Company will be transferring solely cash to the
Converted Bank in exchange for all the outstanding capital
stock of the Converted Bank 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 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 Bank upon the issuance to them of deposit
accounts in the Converted Bank in the same dollar amount and
on the same terms and conditions in exchange for their deposit
accounts in the Bank
<PAGE>
Board of Directors
Newport Federal Savings Bank
____________, 1997
Page 8
held immediately prior to the Conversion. (Section 1001(a) of
the Code; Treas. Reg. (S).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 Converted Bank received as part of the
Conversion will equal the tax basis of such account holders'
corresponding deposit accounts in the Bank surrendered in
exchange therefor (Section 1012 of the Code).
8. Each depositor of the Bank will recognize gain upon the
receipt of his or her respective interest in the Liquidation
Account established by the Converted Bank 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 Bank other than deposit accounts. Persons who
subscribe in the Conversion but who are not depositors of the
Bank 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 Bank, if any. 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 Converted Bank 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).
<PAGE>
Board of Directors
Newport Federal Savings Bank
____________, 1997
Page 9
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
Bank'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 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
<PAGE>
Board of Directors
Newport Federal Savings Bank
____________, 1997
Page 10
Prospectus, which is a part of the Registration Statement and Form AC, under the
headings "The Conversion -- Effect of Conversion to Stock Form on Depositors and
Borrowers of Newport Federal Savings Bank -- Tax Effects" and "Legal and Tax
Matters."
Very truly yours,
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By:
-----------------------------------
Gary R. Bronstein
<PAGE>
Exhibit 8.3
[FERGUSON & COMPANY LETTERHEAD]
September 8, 1997
Board of Directors
Newport Federal Savings Bank
200 Olivia Drive
Newport, Arkansas 72112
Plan of Conversion, Subscription Rights
---------------------------------------
Dear Directors:
Terms used in this letter not otherwise defined herein have the same
meaning for such terms in the Plan of Conversion adopted by the Board of
Directors of Newport Federal Savings Bank ("Newport Federal" or the "Bank"),
under which the Bank will convert from a mutual savings bank to a stock savings
bank and issue all of the Bank's stock to North Arkansas Bancshares, 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 Bank'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 nontransferable and of short
duration, and will afford 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,
/s/ Robin L. Fussell
Robin L. Fussell
Principal
<PAGE>
10.1
NORTH ARKANSAS BANCSHARES, INC.
1998 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 Bank, 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) "Awards" shall mean, collectively, Options and SARs, unless the
context clearly indicates a different meaning.
(d) "Bank" shall mean Newport Federal Savings Bank.
(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 North Arkansas Bancshares, 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.
(n) "Employee" shall mean any person employed by the Company, the Bank, or
an Affiliate.
<PAGE>
(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 North Arkansas Bancshares, Inc. 1998 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 Paragraph 11, the
aggregate number of Shares deliverable pursuant to Awards shall not exceed
________ Shares, which equals 10% of the Shares issued by the Company in
connection with the Bank's conversion from mutual to stock form ("Conversion").
Such Shares may either be authorized but unissued Shares, Shares held in
treasury, or Shares held in a grantor trust. If any Awards
-2-
<PAGE>
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 to the full extent provided for under the Company's
governing instruments with respect to the indemnification of Directors.
-3-
<PAGE>
6. Grant of Options.
(a) General Rule. Employees and Directors shall be eligible to receive
Awards. In selecting those Employees and Directors 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 individuals,
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 Paragraphs 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). [Not applicable if Plan is implemented
more than one year after 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>
Brad Snider 25%
</TABLE>
[Formula and limits may change if Plan is adopted more than one year after
Conversion.]
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 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
-4-
<PAGE>
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 Bank'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, in the discretion of the Committee, 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,
and the Participant must exercise an ISO within three months after termination
of Continuous Service in order to preserve the Option as an ISO), 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 Bank 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;
(3) Disability, then to the extent that the Participant would have
been entitled to exercise the Option immediately prior to his or her
Disability, such Option may be exercised within one year from the date of
termination of employment due to Disability, but not later than the date on
which the Option would otherwise expire.
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(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.
(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).
[Formula and limits may change if Plan is adopted more than one year after
Conversion.]
Such Non-ISOs shall have an Exercise Price per Share equal to the Market
Value of a Share on the date of grant.
(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, in the discretion of
the Committee (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
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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.
(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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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.
(f) Certain Special Dividends. The Exercise Price of shares subject to
outstanding Awards shall be proportionately adjusted upon the payment of a
special large and nonrecurring dividend that has the effect of a return of
capital to the stockholders, except that this subparagraph (f) shall not apply
to any dividend which is paid to the Participant pursuant to Paragraph 8(b) or
9(b) hereof.
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.
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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.
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 Bank completes
its 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.
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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,
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 Bank, 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 Arkansas, except to the extent that federal law shall be deemed to
apply.
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Exhibit 10.2
NORTH ARKANSAS BANCSHARES, 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 Bank, and their Affiliates with a proprietary
interest in the Company, and as compensation for their past contributions to the
Bank, 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 "Bank" means Newport Federal Savings Bank.
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 North Arkansas Bancshares, 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 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.
<PAGE>
3.09 "Date of Conversion" means the date of the conversion of the
Bank 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 North Arkansas Bancshares, 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.
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
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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 Bank 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.
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. The Committee may make Plan Share Awards to Employees
and Directors. In selecting those individuals to whom Plan Share Awards will be
granted and the number of shares covered by such Awards, the
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Committee shall consider the position, duties and responsibilities of the
eligible individuals, 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. [Not applicable if Plan is implemented more than
one year after Date of Conversion.]
6.02 Allocations. The Committee will determine which Employees and
Directors 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 Bank 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 individuals 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) thirty 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.
[Formula and limit may change if Plan is adopted more than one year
after the Date of Conversion.]
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.
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:
Employee Shares Subject to Plan Share Award
-------- ----------------------------------
Brad Snider 25%
[Formula and limit may change if Plan is adopted more than one year
after the Date of Conversion.]
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Directors 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 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 nonforfeitable 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
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.
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<PAGE>
(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 Trustee 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.
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
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<PAGE>
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.
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.
(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
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<PAGE>
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 Bank, 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 Arkansas to the extent not preempted by
Federal law.
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 DATE OF CONVERSION.] In no event shall Plan Share Awards be
made prior to the Effective Date.
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<PAGE>
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).
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<PAGE>
TRUST AGREEMENT
UNDER THE NORTH ARKANSAS BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
---------------
Trust Agreement
---------------
This Agreement made this _____ day of _________, 1997 by and between
North Arkansas Bancshares, Inc. (the "Company") and Non-Employee Directors Paul
K. Holmes, John Minor, Kaneaster Hodges, Jr., and O.E. Guinn, Jr. (acting by
majority, the "Trustee").
WHEREAS, the Company maintains the North Arkansas Bancshares, 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; and
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;
and
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 Newport Federal
Savings Bank (the "Bank") 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.
(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
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<PAGE>
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 Bank'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 Bank; third, directors of the Bank; fourth, officers of the
Bank; fifth, members of the general public.
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.
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<PAGE>
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 fiscal
year of the Company 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.
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.
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<PAGE>
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 Arkansas, 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___________ , 1997.
ATTEST: NORTH ARKANSAS BANCSHARES, INC.
- --------------------
By
----------------------------------
Its President
ATTEST:
- -------------------- ------------------------------------
Paul K. Holmes, Trustee
- -------------------- ------------------------------------
John Minor, Trustee
- -------------------- ------------------------------------
Kancaster Hodges, Jr., Trustee
- -------------------- ------------------------------------
O.E. Guinn, Jr., Trustee
-6-
<PAGE>
Exhibit 10.3
NEWPORT FEDERAL SAVINGS BANK
RETIREMENT PLAN FOR DIRECTORS
The Board of Directors of Newport Federal Savings Bank has adopted this
Retirement Plan for Directors, effective May 29, 1997, in order to provide
competitive compensation for its Directors, to attract, retain, and motivate its
Directors, and to encourage the long-term financial success of the Bank through
a performance-based benefit formula.
ARTICLE I
Definitions
-----------
The following words and phrases, when used in the Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise.
"Account" shall mean a bookkeeping account maintained by the Bank in the
name of the Participant.
"Affiliate" shall mean any "parent corporation" or "subsidiary corporation"
of the Bank, as the terms are defined in Section 424(e) and (f), respectively,
of the Code.
"Bank" shall mean Newport Federal Savings Bank, 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 Bank 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 Bank.
"Change in Control" shall mean any of the following events:
(a) When the Bank 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 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 Bank before
such transaction cease to constitute a majority of the Board of Directors of the
Bank or any successor to the Bank, (ii) the Bank transfers substantially all of
its assets to another corporation
<PAGE>
which is not an Affiliate of the Bank, (iii) the Bank 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 Bank or any committee
thereof, is or becomes the "beneficial owner", directly or indirectly, of
proxies of the Bank representing twenty-five percent (25%) or more of the
combined voting power of the Bank's members, or (v) the Bank 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 Bank.
(b) If the Bank 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
Bank or the Company, (ii) the acquisition of the ability to control the election
of a majority of the Bank's or the Company's directors, (iii) the acquisition of
a controlling influence over the management or policies of the Bank 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 Bank 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 Bank 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 Bank 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.
"Election Form" shall mean the form attached hereto as Exhibit "A".
"Employee" shall mean any person who is employed by the Bank.
"Participant" shall mean an individual who serves on the Board at some time
on or after the Effective Date.
2
<PAGE>
"Plan" shall mean this Newport Federal Savings Bank Directors' Retirement
Plan.
"Safe Performance Factor" shall be 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 expects to follow (and
shall be entitled to rely upon) in making this determination.
"Employee Director" shall mean Brad Snider, President of the Bank.
"Trust Agreement" shall mean that agreement entered into pursuant to the
terms hereof between the Bank and the Trustee, and "Trust" means the trust
created thereunder.
"Trustee" shall mean 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.
ARTICLE II
Credits to Accounts
-------------------
Non-Employee Directors. Each Participant who is a Director on the
Effective Date shall have his Account credited with an amount equal to the
product of $2,898 and his full years of service as a Director, up to 20 years,
prior to the Effective Date.
On each June 30 following the Effective Date, each Participant who is a
Non-Employee Director on such date and has 20 or fewer years of service shall
have his Account credited with an amount equal to the product of $2,898 and the
Safe Performance Factor.
Employee Director. The Account of the Employee Director shall be credited
on the Effective Date with an amount equal to $60,000, and his Account will be
credited with the product of $19,600 and the Safe Performance Factor on each
June 30 through June 30, 2006, that he continues to be employed by the Bank
thereafter.
Investment Return. Until distributed in accordance with 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
Bank on certificates of deposit having a term of one year. Notwithstanding the
foregoing, if the Bank converts to stock form, Participants may prospectively
elect between the return associated with such certificates of deposit and the
dividend-adjusted rate of return on the Bank's common stock (or that of its
holding company, if one exists).
Vesting. Amount credited to Participants' Accounts on the Effective Date
and thereafter shall be fully vested at all times.
Final Year Adjustments. In the event of the 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
3
<PAGE>
present value of all benefits which would have been credited to his Account if
he had otherwise remained employed by the Bank 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 Bank 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 subsequent payments being made by the last day of the first
quarter of each subsequent calendar year until the Participant has collected the
entire value 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 Bank to liability under
Section 280G of the Internal Revenue Code of 1986, as amended.
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 begun).
Elections. In order 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 collect 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.
4
<PAGE>
ARTICLE IV
Source of Benefits
------------------
General Rule. Benefits shall constitute an unfunded, unsecured
promise by the Bank to provide such payments in the future, as and to the extent
such Benefits become payable. Benefits shall be paid from the general assets of
the Bank, and no person shall, by virtue of this Plan, have any interest in such
assets (other than as an unsecured creditor of the Bank). 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 Bank, provide the Trustee
with a schedule specifying the amounts payable to each Participant, and the time
for making such payments.
Change in Control. In the event of a Change in Control, the Bank
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.
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 Bank to a Participant,
whether in the form of fees, bonus, retirement income under employee benefit
plans sponsored or maintained by the Bank or otherwise. This Plan shall not be
deemed to constitute a contract of employment between the Bank and any
Participant.
ARTICLE VII
Rights of Directors;
--------------------
Termination or Suspension under Federal Law
-------------------------------------------
The rights of the Participants under this Plan and of their
Beneficiaries (if any) shall be solely those of unsecured creditors of the Bank.
If the Participant is removed and/or permanently prohibited from participating
in the conduct of the Bank'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 Bank under this Plan shall terminate, as of
the effective date of the order, but
5
<PAGE>
vested rights of the parties shall not be affected. If the Bank 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, 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
Bank: (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 the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of 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 Bank or when
the Bank 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 Bank's affairs, the Bank'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 Bank 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.
ARTICLE VIII
Reorganization
--------------
The Bank 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 Bank herein set forth. The Bank 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.
6
<PAGE>
ARTICLE X
State Law
---------
This Plan shall be construed and governed in all respects under and by
the laws of the State of Arkansas, 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).
ARTICLE XIII
Legal Fees
----------
In the event any dispute shall arise between a Participant and the
Bank 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 Bank, the Bank 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 Bank 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 Bank 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.
7
<PAGE>
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 10.4
NEWPORT FEDERAL SAVINGS BANK
--------------------------
Employment Agreement with
Brad Snider
--------------------------
AGREEMENT entered into and effective this ____ day of_________, 1997, by
and between Newport Federal Savings Bank (the "Bank") and Brad Snider (the
"Employee").
WHEREAS, the Employee has heretofore been employed by the Bank as its
President and is experienced in all phases of the business of the Bank; and
WHEREAS, the Board of Directors (the "Board") of the Bank believes it is in
the best interests of the Bank to enter into this Agreement with the Employee in
order to assure continuity of management of the Bank 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 Bank 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 Bank or the Company, (ii) the acquisition of the ability to
control the election of a majority of the Bank's or the Company's directors,
(iii) the acquisition of a controlling influence over the management or policies
of the Bank 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 Bank 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 North Arkansas Bancshares, 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) "Code (S)280G Maximum" shall mean the product of 2.99 and the
Employee's "base amount" as defined in Code (S)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 Bank's long-term disability plan (or, if the Bank
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 thirty (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 Bank 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 Bank 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 Bank 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 Bank.
(h) "Just Cause" shall mean, in the good faith determination of the
Bank'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
-2-
<PAGE>
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 Bank 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
Bank and the Company.
2. Employment. The Employee is employed as the President of the Bank.
----------
The Employee shall render such administrative and management services for the
Bank 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 Bank. 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
Bank.
3. Base Compensation. The Bank 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 Bank in discretionary
bonuses that the Board may award from time to time to the Bank'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 Bank 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 plans provided
by the Bank, 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 Bank's senior management
employees, including for example: any stock option or incentive compensation
plans, and any other benefits which are
-3-
<PAGE>
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 Bank.
6. Term. The Bank hereby employs the Employee, and the Employee hereby
----
accepts such employment under this Agreement, for the period commencing on the
Effective Date and ending thirty-six (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 that either the Bank or the Company's 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 Bank 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 Bank.
(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 Bank, 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 Bank will provide Employee with the working facilities and
staff customary for similar executives and necessary for him to perform his
duties.
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:
-4-
<PAGE>
(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 Bank.
(b) The Employee shall not receive any additional compensation from
the Bank 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 Bank 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 Bank 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
Bank'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 such information, assistance and documents so as
to assist in the continued ongoing business of the Bank and, if able, shall make
himself available to the Bank to undertake reasonable assignments consistent
with his prior position and his physical and mental health. The Bank shall pay
all reasonable expenses incident to the performance of any assignment given to
the Employee during the disability period.
-5-
<PAGE>
(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 Bank provided for the Employee at the date
of termination of employment or (B) continued participation under such Bank
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 Bank'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 Bank 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 Bank 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.
(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 Bank's affairs, the Bank'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 Bank 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.
-6-
<PAGE>
(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 Bank 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 pursuant to 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 Bank or the Company for any reason other than Just Cause,
the Employee shall be entitled to purchase from the Bank, at the Employee's own
expense which shall not exceed applicable COBRA rates, family medical insurance
under any group health plan that the Bank 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 Bank 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.
(b) Amount of Severance Benefit. If the Employee becomes entitled
to collect severance benefits pursuant to Section 12(a) hereof, the Bank shall
pay the Employee a severance benefit equal to the difference between the Code
(S)280G Maximum and the sum of any other "parachute payments" as defined under
Code (S)280G(b)(2) that the Employee receives on account of the Change in
Control.
-7-
<PAGE>
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 Bank 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 Bank, and the Company jointly agree
that the Employee has collected an amount exceeding the Code (S)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 Bank, 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 (S)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 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
-8-
<PAGE>
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 Bank and the Company agree that their respective
---------------
Bylaws shall continue to provide for indemnification of directors, officers,
employees and agents of the Bank 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 Bank 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 Bank 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 Bank 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 Bank 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) Bank. This Agreement shall not be assignable by the Bank,
provided that this Agreement shall inure to the benefit of and be binding upon
any corporate or other successor of the Bank which shall acquire, directly or
indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Bank.
(b) Employee. Since the Bank 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 Bank; 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.
(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.
-9-
<PAGE>
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 Arkansas 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: NEWPORT FEDERAL SAVINGS BANK
By
- ----------------------- --------------------------------
Secretary Its Chairman of the Board
WITNESS:
- ----------------------- ----------------------------------
Brad Snider
-10-
<PAGE>
Exhibit 10.5
NORTH ARKANSAS BANCSHARES, INC.
--------------------------
Guaranty Agreement with
Brad Snider
--------------------------
THIS AGREEMENT is entered into this ___________ day of __________, 1997
(the "Effective Date"), by and between North Arkansas Bancshares, Inc. (the
"Company") and Brad Snider (the "Employee").
WHEREAS, the Employee has heretofore been employed by Newport Federal
Savings Bank (the "Bank") as its President, and has entered into an agreement
(the "Bank 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 Bank 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 Bank's obligations under the Bank 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 Bank for the payment of all amounts due under the Bank
Agreement, provided that Section 10(f) of the Bank Agreement shall be
inapplicable 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 Arkansas 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: NORTH ARKANSAS BANCSHARES, INC.
By
- ---------------------------- ---------------------------
Secretary Its Chairman of the Board
WITNESS:
- ---------------------------- ---------------------------
Brad Snider
-3-
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
Newport Federal Savings Bank:
We consent to the use of our report included herein and to the reference to our
Firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Little Rock, Arkansas
September 18, 1997
<PAGE>
Exhibit 23.3
[Ferguson & Company Letterhead]
September 19, 1997
Board of Directors
Newport Federal Savings Bank
200 Olivia Drive
Newport, Arkansas 72112
Directors:
We hereby consent to the use of our firm's name in the Form AC Application
for Conversion of Newport Federal Savings Bank, Newport, Arkansas, and any
amendments thereto, and in the Form SB-2 Registration Statement of North
Arkansas Bancshares, 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 North Arkansas Bancshares, Inc.
/s/ Robin L. Fussell
Robin L. Fussell
Principal
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 884,002
<INT-BEARING-DEPOSITS> 691,000
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 5,922,956
<INVESTMENTS-MARKET> 5,951,010
<LOANS> 24,794,194
<ALLOWANCE> 0
<TOTAL-ASSETS> 34,378,556
<DEPOSITS> 31,072,533
<SHORT-TERM> 500,000
<LIABILITIES-OTHER> 421,375
<LONG-TERM> 118,389
0
0
<COMMON> 0
<OTHER-SE> 2,266,269
<TOTAL-LIABILITIES-AND-EQUITY> 34,378,566
<INTEREST-LOAN> 2,011,121
<INTEREST-INVEST> 409,882
<INTEREST-OTHER> 72,337
<INTEREST-TOTAL> 2,493,340
<INTEREST-DEPOSIT> 1,540,820
<INTEREST-EXPENSE> 1,596,894
<INTEREST-INCOME-NET> 896,446
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,157,366
<INCOME-PRETAX> (331,764)
<INCOME-PRE-EXTRAORDINARY> (198,773)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (198,773)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2.77
<LOANS-NON> 74,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 721,000
<ALLOWANCE-OPEN> 73,000
<CHARGE-OFFS> 13,205
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 149,795
<ALLOWANCE-DOMESTIC> 5,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 144,795
</TABLE>
<PAGE>
Exhibit 99.2
NEWPORT FEDERAL SAVINGS BANK
200 Olivia Drive
Newport, Arkansas 72112
(870) 523-3611
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Newport Federal Savings Bank (the "Bank") will be held at
__________________________, _______________________, Newport, Arkansas, on
___________, 1997 at __:__ _.m. Central Time. The business to be taken up at the
Special Meeting shall be:
(1) To consider and vote upon a Plan of Conversion providing for the
conversion of the Bank from a federally chartered mutual savings
bank to a federally chartered stock savings bank as a wholly
owned subsidiary of North Arkansas Bancshares, Inc., a newly
organized Tennessee corporation formed by the Bank for the
purpose of becoming the holding company for the Bank and the
related transactions provided for in such Plan of Conversion,
including the amendment of the Bank's existing Federal Mutual
Charter and Bylaws to read in the form of a Federal Stock
Charter and Bylaws for the Bank, 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 Bank 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
Pam Decker
Secretary
, 1997
- --------------
Newport, Arkansas
----------
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>
GLOSSARY
Bank Newport Federal Savings Bank converting from
mutual to stock form, in its mutual form and
the federally chartered stock savings bank
resulting from the Bank's conversion from
mutual to stock form
Company The corporation named North Arkansas
Bancshares, Inc. formed by the Bank to serve
as its holding company after the Conversion
Community Offering The offering of shares of the Common Stock to
the general public 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 Bank's
Local Community
Conversion Conversion of the Bank from mutual to stock
form, the issuance of the Bank's outstanding
common stock to the Company and the issuance
of the Company's outstanding common stock to
purchasers in the Subscription Offering and,
if any, the Community Offering and/or
Syndicated Offering
Eligible Account Holders Holders of savings accounts at the Bank with
balances of at least $50 as of December 31,
1995
ESOP Employee Stock Ownership Plan to be
implemented by the Company in the Conversion
Estimated Valuation Range Range of valuation from 15% below to 15% above
the independent appraisal of our estimated pro
forma market value, which was $2,800,000 as of
September 2, 1997
FDIC Federal Deposit Insurance Corporation
Ferguson Ferguson & Company, the firm we engaged to
prepare the appraisal of our estimated pro
forma market value in the Conversion
Local Community The county where our offices are located --
Jackson County, Arkansas
Other Members Depositor and borrower members of the Bank as
of _____________, 1997
OTS Office of Thrift Supervision of the United
States Department of the Treasury
SEC Securities and Exchange Commission
Subscription Offering The offering of shares of the Common Stock to
Eligible Account Holders, the ESOP,
Supplemental Eligible Account Holders and
Other Members
Supplemental Eligible Account Holders of savings accounts at the Bank with
Holders balances of at least $50 as of September 30,
1997
Syndicated Offering If any, the offering of shares of the Common
Stock to the general public during or after
the Subscription Offering in a syndicated
offering by selected dealers
Trident Securities Trident Securities, Inc., the firm we engaged
to advise and assist us in the marketing of
the Common Stock and the conduct of the
Subscription Offering and, if any, the
Community Offering and/or Syndicated Offering
<PAGE>
QUESTIONS AND ANSWERS
Set forth below are answers to frequently asked questions about the
procedures for voting on the Plan of Conversion and related matters. For
additional information about the Conversion, please refer to the more detailed
information contained in this proxy statement and the accompanying prospectus.
For assistance, please contact the Stock Information Center at (870) 523-3340.
ABOUT VOTING "FOR" THE PLAN OF CONVERSION
1. Am I eligible to vote at the Special Meeting of Members to be held to
consider the Plan of Conversion?
You are eligible to vote at the Special Meeting of Members to be held on
_________, 1997 if you were a depositor or borrower of Newport Federal
Savings Bank at the close of business on the Voting Record Date (_______,
1997) 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.
2. How many votes do I have?
As an account holder of ours, you have one vote for each $100, or fraction
thereof, on deposit in your account(s) with us. Each borrower member may
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.
3. If I vote "against" the Plan of Conversion and it is approved, will I be
prohibited from buying stock during the Subscription Offering?
No. Voting against the Plan of Conversion in no way restricts you from
purchasing the common stock of our holding company in the Subscription
Offering.
4. Did the Board of Directors of Newport Federal Savings Bank unanimously
adopt the Plan of Conversion?
Yes. Our Board of Directors unanimously adopted the Plan of Conversion and
urges that all members vote "FOR" approval of the Plan of Conversion.
5. What happens if Newport Federal Savings Bank does not get enough votes to
approve the Plan of Conversion?
The Conversion would not take place, and we would remain a mutual savings
institution.
6. As a qualifying depositor or borrower of Newport Federal Savings Bank, am I
required to vote?
No. However, failure to return your proxy card or otherwise vote will have
the same effect as a vote AGAINST the Plan of Conversion.
7. What is a Proxy Card?
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(s) is (are)
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 related to the Conversion which were sent to you, will not be
used to vote for approval of the Plan of Conversion, even if you do not
execute another proxy or attend the Special Meeting and vote in person.
<PAGE>
8. How can I get further information concerning the stock offering?
You may call the Stock Information Center at (870) 523-3340 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 NORTH ARKANSAS BANCSHARES, 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 (870)
523-3340.
THE SHARES OF NORTH ARKANSAS BANCSHARES, INC. COMMON STOCK BEING OFFERED
ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS BANK
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
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NEWPORT FEDERAL SAVINGS BANK
200 OLIVIA DRIVE
NEWPORT, ARKANSAS 72112
(870) 523-3611
PROXY STATEMENT
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY OUR BOARD FOR USE AT
A SPECIAL MEETING OF OUR MEMBERS TO BE HELD ON __________________, 1997 AND ANY
ADJOURNMENT OF THAT MEETING, FOR THE PURPOSES SET FORTH IN THE FOREGOING NOTICE
OF SPECIAL MEETING. OUR 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 Newport Federal
Savings Bank (the "Bank") will be held at _____________________________________,
Newport, Arkansas on _________________, _____________, 1997, at __:__ _.m.,
Central Time, for the purpose of considering and voting upon a Plan of
Conversion, which was unanimously adopted by our Board of Directors and which,
if approved by a majority of the total votes eligible to be cast by the members,
will permit us to convert from a federal mutual savings bank to a federal stock
savings bank as a wholly owned subsidiary of North Arkansas Bancshares, Inc.
(the "Company"), a Tennessee corporation which we formed for the purpose of
becoming our holding company. Our Conversion and the acquisition of us by the
Company is referred to in this Proxy Statement as the "Conversion". The
Conversion is contingent upon our members' approval of the Plan of Conversion at
the Special Meeting or any adjournment of the Special Meeting.
The Plan of Conversion 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, par value $.01 per share (the "Common
Stock"), through the issuance of nontransferable subscription rights, first to
our depositors as of December 31, 1995 with $50.00 or more on deposit with us on
that date ("Eligible Account Holders"), second to the Company's Employee Stock
Ownership Plan of Conversion (the "ESOP") (a tax-qualified employee stock
benefit plan of the Company, as defined in the Plan of Conversion), third to our
depositors, with $50.00 or more on deposit with us on September 30, 1997, who
are not Eligible Account Holders ("Supplemental Eligible Account Holders"), and
fourth to other members, i.e., our depositors and borrower members, other than
Eligible Account Holders and Supplemental Eligible Account Holders, on
___________, 1997 ("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. During or after the Subscription Offering, the Company
may offer shares of the Common Stock not sold in the Subscription Offering to
the general public, in a community offering (the "Community Offering"). In the
Community Offering, preference may be given to natural persons and trusts of
natural persons who are permanent residents of our local community, Jackson
County, Arkansas. Any shares of Common Stock not purchased in the Subscription
and Community Offerings may be sold to a syndicate of underwriters to be managed
by Trident Securities, Inc. ("Trident Securities"). The aggregate price of the
Common Stock to be issued by the Company under the Plan of Conversion is
currently estimated to be between $2,380,000 and $3,220,000, subject to
adjustment, as determined by an independent appraisal of our 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 our proposed Stock Charter and Bylaws is an integral part
of the Plan of Conversion. Copies of the Plan of Conversion and the proposed
Stock Charter and Bylaws are attached to this Proxy Statement. These documents
provide, among other things, for the termination of voting rights of members and
their rights to receive any surplus remaining in the event of our liquidation.
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 our outstanding capital stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
YOUR BOARD OF DIRECTORS 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 our issuance of capital stock to the Company. Under the
Plan of Conversion, 280,000 shares of the Common Stock, subject to adjustment,
are being offered for sale by the Company. Upon completion of the Conversion, we
will issue all of our newly issued shares of capital stock (100,000 shares) to
the Company in exchange for at least 50% of the net proceeds in the Conversion.
None of our assets will be distributed in order to effect the Conversion other
than to pay expenses incurred as a result of the Conversion.
The net proceeds from the sale of Common Stock in the Conversion will
substantially increase our capital, which will increase the amount of funds
available for lending and investment, and support current operations and the
continued growth of our business. The holding company structure will provide
greater flexibility than we alone would have for diversification of business
activities and geographic operations. We believe that this increased capital and
operating flexibility will enable us to compete more effectively with other
savings institutions and other types of financial service organizations. We also
believe that the Conversion will enhance the future access of both ourselves and
the Company to the capital markets.
NORTH ARKANSAS BANCSHARES, INC.
The Company was formed as a Tennessee corporation in September 1997 at
our direction for the purpose of serving as our holding company after the
Conversion. Prior to the Conversion, the Company has not engaged and is not
expected to engage in any material operations. The Company has received the
approval of the OTS to acquire control of us upon completion of the Conversion.
Upon consummation of the Conversion, the only assets the Company is expected to
own are the capital stock we will issue in the Conversion, a note receivable
from our ESOP and any proceeds from the offering the Company retains.
As a holding company, the Company will have greater flexibility than we
would have to diversify its business activities through the formation of
subsidiaries or through acquisition. The Company will be classified as a unitary
savings and loan holding company after the Conversion and will be required to
comply with OTS regulations and be subject to examination.
The Company's executive offices are located at 200 Olivia Drive,
Newport, Arkansas 72112 and its main telephone number is (870) 523-3611.
NEWPORT FEDERAL SAVINGS BANK
We are a federal mutual savings bank operating through one office in
Newport, Arkansas. We were founded in 1934 as a federally chartered institution
and a member of the FHLB System. Our deposits are insured up to applicable
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limits by the Federal Deposit Insurance Corporation ("FDIC") under the Savings
Association Insurance Fund. At June 30, 1997, we had total assets of $34.4
million, total deposits of $31.1 million and total retained earnings of $2.3
million.
On August 20, 1997, we entered into a Purchase and Assumption Agreement
with NationsBank, N.A. pursuant to which we agreed to purchase the deposits of
the Newport branch of NationsBank and to purchase the real estate on which the
office is located and certain loans and other assets. We expect to assume
approximately $6 million in deposits based on the balance of deposits at the
branch as of June 30, 1997. We must obtain regulatory approval before we can
close this transaction. Assuming we obtain such approval, we expect that this
transaction will close in January 1998.
Our principal business consists of attracting deposits from the general
public and originating residential mortgage loans. We also offer various types
of consumer loans and commercial business loans.
Our executive offices are located at 200 Olivia Drive, Newport,
Arkansas 72112 and our main telephone number is (870) 523-3611.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
Our Board of Directors 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. Under our
current mutual charter, our members include all holders of deposit or other
authorized accounts and certain of our borrowers. All members of record as of
the close of business on the Voting Record Date who remain members until the
date of the Special Meeting will be entitled to vote at the Special Meeting or
any adjournment thereof.
At the Special Meeting each depositor member may cast one vote for each
$100, or fraction thereof, of the aggregate withdrawal value of all of his or
her savings accounts with us as of the Voting Record Date. Each borrower member
will be entitled to one vote in addition to the number of votes to which he or
she is entitled as a depositor. No member may cast more than 1,000 votes.
Approval of the Plan of Conversion to be presented at the Special
Meeting will require the affirmative vote of at least a majority of the total
outstanding votes of our 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.
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. All properly executed proxies received by us will be voted
in accordance with the instructions indicated on the proxies by the members
giving such proxies. If no contrary instructions are given, proxies will be
voted in favor of the Plan of Conversion. 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 our Board of Directors. Valid, previously executed
general proxies, which typically are obtained from members when they open their
accounts with us, 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. You have the right to revoke your
proxy at any time before the voting at the Special Meeting by delivering either
written notice or a duly executed proxy bearing a later date to the Secretary of
Newport Federal Savings Bank. The Secretary must receive this written notice or
the later-dated proxy prior to the Special Meeting or any adjournment thereof.
You may also revoke your proxy by attending the Special Meeting and voting in
person.
FAILURE TO RETURN AN EXECUTED PROXY FOR THE SPECIAL MEETING OR TO
ATTEND THE SPECIAL MEETING IN ORDER TO VOTE IN PERSON WOULD HAVE THE SAME EFFECT
AS VOTING AGAINST THE CONVERSION.
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Proxies may be solicited by our officers, directors or other employees,
in person, by telephone or through other forms of communication. These persons
will be reimbursed by us 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 OUR PLAN OF CONVERSION, SUBJECT TO THE APPROVAL OF
THE PLAN OF CONVERSION BY OUR MEMBERS AT A SPECIAL MEETING, AND SUBJECT TO THE
SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL. OTS
APPROVAL, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR ENDORSEMENT OF THE
PLAN OF CONVERSION BY THE OTS.
General
On May 29, 1997, our board of directors adopted a Plan of Conversion,
pursuant to which we will convert from a federally chartered mutual savings bank
to a federally chartered stock savings bank and become a wholly owned subsidiary
of the Company. The Conversion will include adoption of the proposed Federal
Stock Charter and Bylaws which will authorize the issuance of capital stock by
us. Under the Plan, our capital stock is being sold to the Company and the
Common Stock of the Company is being offered to our customers and then to the
public.
The OTS has approved the Company's application to become a savings and
loan holding company and to acquire all of our capital stock to be issued in the
Conversion. Pursuant to such OTS approval, the Company plans to retain 50% of
the net proceeds from the sale of shares of Common Stock and to use the
remaining 50% to purchase all of the capital stock we will issue in the
Conversion.
The shares are first being offered in a Subscription Offering to
holders of subscription rights. To the extent shares of Common Stock remain
available after the Subscription Offering, we may offer shares of Common Stock
in a Community Offering. The Community Offering, if any, may begin anytime
subsequent to the beginning of the Subscription Offering. Shares not subscribed
for in the Subscription and Community Offerings may be offered for sale by the
Company in a Syndicated Community Offering. We have the right, in our sole
discretion, to accept or reject, in whole or in part, any orders to purchase
shares of Common Stock received in the Community and Syndicated Community
Offering.
We must sell Common Stock in an amount equal to our pro forma market
value as a stock savings institution in order for the Conversion to become
effective. We must complete the Community Offering within 45 days after the last
day of the Subscription Offering, unless we extend such period and obtain the
approval of the OTS to do so. The Plan provides that the Conversion must be
completed within 24 months after the date of the approval of the Plan by our
members.
In the event that we are unable to complete the sale of Common Stock
and effect the Conversion within 45 days after the end of the Subscription
Offering, we may request an extension of the period by the OTS. We cannot assure
you that the extension would be granted if requested, nor can we assure you that
our valuation would not substantially change during any such extension. If the
Estimated Valuation Range of the shares must be amended, we cannot assure that
the OTS would approve such amended Estimated Valuation Range. Therefore, it is
possible that if the Conversion cannot be completed within the requisite period
of time, we may not be permitted to complete the Conversion. A substantial delay
caused by an extension of the period may also significantly increase the expense
of the Conversion. We cannot sell any shares of Common Stock unless the Plan is
approved by our members.
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The completion of the offering is subject to market conditions and other
factors beyond our control. We cannot give you any assurances as to the length
of time following approval of the Plan at the meeting of our members that will
be required to complete the Community Offering or other sale of the shares being
offered in the Conversion. If we experience delays, our estimated pro forma
market value upon Conversion could change significantly, together with
corresponding changes in the offering price and the net proceeds to be realized
by us from the sale of the shares. In the event we terminate the Conversion, we
would be required to charge all Conversion expenses against current income and
promptly return any funds collected by us in the offering to each potential
investor, plus interest at the prescribed rate.
EFFECTS OF CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF NEWPORT
FEDERAL SAVINGS BANK
VOTING RIGHTS. Currently in our mutual form, our depositor and borrower
members have voting rights and may vote for the election of directors. Following
the Conversion, depositors and borrower members will cease to have voting
rights.
SAVINGS ACCOUNTS AND LOANS. The Conversion will not affect the
balances, terms and FDIC insurance coverage of savings accounts, nor will the
Conversion affect the amounts and terms of loans and obligations of the
borrowers under their individual contractual arrangements with us.
TAX EFFECTS. We have received an opinion from our counsel, Housley
Kantarian & Bronstein, P.C. on the federal tax consequences of the Conversion.
The opinion is an exhibit to the registration statement of which the
accompanying prospectus is a part. The opinion provides, in part, that,: (i) the
Conversion will qualify as a reorganization under Section 368(a)(1)(F) of the
Code, and we will not recognize any taxable gain in either our mutual form or
our stock form as a result of the proposed Conversion; (ii) we will not
recognize any taxable gain upon the receipt of money from the Company for our
stock, nor will the Company recognize any gain upon the receipt of money for the
Common Stock; (iii) our assets in either our mutual or our stock form will have
the same basis before and after the Conversion; (iv) the holding period of our
assets will include the period during which the assets were held by us in our
mutual form prior to Conversion; (v) no gain or loss will be recognized by the
Eligible Account Holders, Supplemental Eligible Account Holders, and Other
Members upon the issuance to them of withdrawable savings accounts in us in the
stock form in the same dollar amount as their savings accounts in us in the
mutual form plus an interest in the liquidation account of us in the stock form
in exchange for their savings accounts in us in the mutual form; (vi) depositors
will recognize gain or loss upon the receipt of liquidation rights and the
receipt of subscription rights in the Conversion, to the extent such liquidation
rights and subscription rights are deemed to have value, as discussed below;
(vii) the basis of each account holder's savings accounts in us after the
Conversion will be the same as the basis of his savings accounts in us prior to
the Conversion, decreased by the fair market value of the nontransferable
subscription rights received and increased by the amount, if any, of gain
recognized on the exchange; (viii) the basis of each account holder's interest
in the liquidation account will be zero; and (ix) the holding period of the
Common Stock acquired through the exercise of subscription rights shall begin on
the date on which the subscription rights are exercised.
With respect to the subscription rights, we have received an opinion of
Ferguson which, based on certain assumptions, concludes that the subscription
rights to be received by Eligible Account Holders and other eligible subscribers
do not have any economic value at the time of distribution or at the time the
subscription rights are exercised, whether or not a public offering takes place.
Such opinion is based on the fact that such rights are: (i) acquired by the
recipients without payment therefor, (ii) non-transferable, (iii) of short
duration, and (iv) afford the recipients the right only to purchase shares at a
price equal to their estimated fair market value, which will be the same price
at which shares for which no subscription right is received in the Subscription
Offering will be offered in the Community Offering. If the subscription rights
granted to Eligible Account Holders or other eligible subscribers are deemed to
have an ascertainable value, receipt of such rights would be taxable only to
those Eligible Account Holders or other eligible subscribers who exercise the
subscription rights in an amount equal to such value (either as a capital gain
or ordinary income), and we could recognize gain on such distribution.
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We are also subject to Arkansas income taxes and have received an
opinion from KPMG Peat Marwick LLP that the Conversion will be treated for
Arkansas state tax purposes similar to the Conversion's treatment for federal
tax purposes.
Unlike a private letter ruling, the opinions of Housley Kantarian &
Bronstein, P.C., Ferguson and KPMG Peat Marwick LLP have no binding effect or
official status, and we cannot give you any assurance that a court would sustain
the conclusions reached in any of those opinions if contested by the IRS or the
Arkansas tax authorities. WE ENCOURAGE ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL
ELIGIBLE ACCOUNT HOLDERS, AND OTHER MEMBERS TO CONSULT WITH THEIR OWN TAX
ADVISERS AS TO THE TAX CONSEQUENCES IN THE EVENT THE SUBSCRIPTION RIGHTS ARE
DEEMED TO HAVE AN ASCERTAINABLE VALUE.
LIQUIDATION ACCOUNT. In the unlikely event of our complete liquidation
in our present mutual form, each depositor is entitled to equal distribution of
any of our assets, pro rata to the value of his accounts, remaining after
payment of claims of all creditors (including the claims of all depositors to
the withdrawal value of their accounts). Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
accounts was to the total value of all deposit accounts in us at the time of
liquidation.
Upon a complete liquidation after the Conversion, each depositor would
have a claim, as a creditor, of the same general priority as the claims of all
other general creditors of ours. Therefore, except as described below, a
depositor's claim would be solely in the amount of the balance in his deposit
account plus accrued interest. A depositor would not have an interest in the
residual value of our assets above that amount if any.
The Plan of Conversion 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 $_________. Each Eligible Account Holder and Supplemental
Eligible Account Holder, if he continues to maintain his deposit account with
us, would be entitled on a complete liquidation of us after Conversion, to an
interest in the liquidation account prior to any payment to stockholders. Each
Eligible Account Holder would have an initial interest in such liquidation
account for each deposit account held in us on the qualifying date, December 31,
1995. Each Supplemental Eligible Account Holder would have a similar interest as
of the qualifying date, September 30, 1997. The interest as to each deposit
account would be in the same proportion of the total liquidation account as the
balance of the deposit account on the qualifying dates was to the aggregate
balance in all the deposit accounts of Eligible Account Holders and Supplemental
Eligible Account Holders on such qualifying dates. However, if the amount in the
deposit account on any annual closing date of ours is less than the amount in
such account on the respective qualifying dates, then the interest in this
special liquidation account would be reduced from time to time by an amount
proportionate to any such reduction, and the interest would cease to exist if
such deposit account were closed. The interest in the special liquidation
account will never be increased despite any increase in the related deposit
account after the respective qualifying dates.
No merger, consolidation, purchase of bulk assets with assumptions of
savings accounts and other liabilities, or similar transactions with another
insured institution in which transaction we in our converted form are not the
surviving institution shall be considered a complete liquidation. In such
transactions, the liquidation account shall be assumed by the surviving
institution.
RESTRICTIONS ON SALES AND PURCHASES OF SHARES BY DIRECTORS AND OFFICERS
Shares purchased by directors and officers of the Company may not be
sold for one year following completion of the Conversion. An exception to this
rule is a disposition of shares in the event of the death of the director or
officer. 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.
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For three years following the Conversion, directors and officers may
purchase shares only through a registered broker or dealer. Exceptions are
available only if the OTS has approved the purchase or the purchase is an arm's
length transaction and involves more than one percent of the outstanding shares.
INTERPRETATION AND AMENDMENT OF THE PLAN OF CONVERSION
We are authorized to interpret and amend the Plan of Conversion. Our
interpretations are final. Amendments to the Plan of Conversion after the
receipt of member approval will not need further member approval unless required
by the OTS.
CONDITIONS AND TERMINATION
Completion of the Conversion requires (i) the approval of the Plan of
Conversion by the affirmative vote of not less than a majority of the total
number of votes eligible to be cast by our members; and (ii) completion of the
sale of shares within 24 months following approval of the Plan of Conversion by
our members. If these conditions are not satisfied, the Plan of Conversion will
be terminated and we will continue our business in the mutual form of
organization. We may terminate the Plan of Conversion at any time prior to the
meeting of members to vote on the Plan or at any time thereafter with the
approval of the OTS.
OTHER
All statements made in this Proxy Statement are hereby qualified by the
contents of the Plan of Conversion which is attached as Exhibit A to this Proxy
Statement. Please consult the Plan of Conversion for further information. In
addition, please refer to the section entitled "The Conversion" in the
accompanying prospectus for a more detailed discussion of various aspects of the
Plan of Conversion.
CHARTER AND BYLAWS
The following is a summary of certain provisions of the Charter and
Bylaws which will become effective upon our conversion into a federally
chartered stock savings bank. Complete copies of the Stock Charter and Bylaws
are attached as Exhibits B and C to this Proxy Statement.
In stock form, we will be authorized to issue 9,000,000 shares of
common stock, $1.00 par value per share. Our common stock will not be insured by
the FDIC. All of our outstanding common stock will be owned by the Company.
Accordingly, exclusive voting rights with respect to our affairs after the
Conversion will be vested in the Company's Board of Directors.
Our Charter provides that the number of directors shall be not fewer
than five or more than 15, with the exact number to be fixed in the Bylaws. The
proposed Stock Bylaws provide that the number directors shall be five. Directors
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, we will be authorized to issue
3,000,000 shares of serial preferred stock, $1.00 par value 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 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.
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Neither the Stock Charter nor the Bylaws provide for indemnification of
officers and directors. However, we will be required by OTS regulations (as we
currently are) 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 favor or, in
case of (i) settlement, (ii) final judgment against him or (iii) final judgment
in his favor, other than on the merits, if a majority of our directors
determines that he was acting in good faith within the scope of his employment
or authority as he could reasonably have perceived it under the circumstances
and for a purpose he could have reasonably believed under the circumstances was
in our best interest or the best interest of our stockholders. If a majority of
our directors 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 our business and
financial condition of the and additional information about the Conversion and
the Subscription Offering and the Community Offering. Enclosed is a Stock Order
Form you must use to purchase for stock. You are not obligated to purchase stock
and voting to approve the Conversion will not obligate you to purchase 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 with us) for all shares for which subscription is made to the Company by
__:__ _.m., Central Time, on ________ ___, 1997, unless extended by us. A
postage-paid reply envelope is provided for this purpose. If not all of the
shares are subscribed for in the Subscription Offering by our members, the
remaining shares may be offered to the general public in the Community Offering
with preference given to natural persons and trusts of natural persons who
reside in Jackson County, Arkansas.
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 ACCOMPANYING PROSPECTUS.
ADDITIONAL INFORMATION
The information contained in the accompanying prospectus includes a
more detailed description of the Plan of Conversion and is intended to help you
evaluate the Conversion.
All persons eligible to vote at the Special Meeting should review both
this Proxy Statement and the accompanying prospectus carefully.
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. YOU MAY REVOKE YOUR
PROXY BY WRITTEN INSTRUMENT DELIVERED TO THE SECRETARY OF NEWPORT FEDERAL
SAVINGS BANK AT ANY TIME PRIOR TO OR AT THE SPECIAL MEETING OR BY ATTENDING THE
SPECIAL MEETING AND VOTING IN PERSON.
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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 ACCOMPANYING
PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
Pam Decker
Secretary
, 1997
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Newport, Arkansas
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EXHIBIT A
NEWPORT FEDERAL SAVINGS BANK
NEWPORT, ARKANSAS
PLAN OF CONVERSION
FROM MUTUAL TO STOCK ORGANIZATION
I. GENERAL.
On May 29, 1997, the Board of Directors of Newport Federal Savings Bank,
Newport, Arkansas (the "Bank"), after careful study and consideration, adopted
this Plan of Conversion from Mutual to Stock Organization (the "Plan"), whereby
the Bank will convert from a federal mutual savings Bank to a federal capital
stock savings Bank (the "Converted Bank") as a wholly owned subsidiary of a
Holding Company to be formed at the direction of the Bank (the "Conversion").
The Conversion is subject to regulations of the Director 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 Bank. 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 Bank's Eligible Account Holders of record as of December 31, 1995,
second to the Bank'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 Bank's application to convert to
stock form and fourth to Other Members of the Bank. Concurrently with the
Subscription Offering, shares not subscribed for in the Subscription Offering
may be offered by the Bank 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 Bank and will reflect
the estimated pro forma market value of the Converted Bank, as a subsidiary of
the Holding Company.
It is the desire of the Board of Directors to attract new capital to the
Converted Bank 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
Bank 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 Bank to compete more effectively with other financial service
organizations.
No change will be made in the Board of Directors or management of the Bank
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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<PAGE>
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 Bank, the
Holding Company or a majority-owned subsidiary of the Bank 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 Bank or the Holding
Company, or any of their subsidiaries.
Bank: The term "Bank" means Newport Federal Savings Bank, either in its
----
present form as a federal mutual savings bank or in its future form as a federal
mutual savings bank in the event of the amendment of its federal mutual charter
and bylaws to substantially conform with the current regulatory model federal
mutual savings bank charter and bylaws.
Capital Stock: The term "Capital Stock" means any and all authorized shares
-------------
of stock of the Converted Bank.
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 Bank's Local Community.
Conversion: The term "Conversion" means (i) the amendment of the Bank's
----------
federal mutual charter and bylaws to authorize issuance of shares of Capital
Stock by the Converted Bank 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 Bank 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 Bank: The term "Converted Bank" means Newport Federal Savings
--------------
Bank in its form as a federal capital stock savings bank resulting from the
conversion of the Bank 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 Bank on the Eligibility Record
Date.
Holding Company: The term "Holding Company" means a corporation to be
---------------
incorporated by the Bank under state law for the purpose of becoming a holding
company for the Converted Bank through the issuance and sale of
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<PAGE>
Conversion Stock under the Plan and the concurrent acquisition of 100% of the
Capital Stock to be issued and sold pursuant to the Plan.
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 Bank, experienced and expert in the area of corporate
appraisal, and acceptable to the OTS, retained by the Bank to prepare an
appraisal of the pro forma market value of the Converted Bank, as a subsidiary
of the Holding Company.
Local Community: The term "Local Community" means the county or counties in
---------------
which the Bank's office or offices are located.
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 Bank 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 Bank (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 Bank
----
will convert from a federal mutual savings Bank 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 Bank 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, 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, includes 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
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<PAGE>
a physical, ongoing, non-transitory presence within the Local Community) and
continues to reside therein at the time of the Community Offering. The Bank may
utilize deposit or loan records or such other 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 should 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 Bank.
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 Bank.
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.
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 Bank
(other than Officers and directors of the Bank 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 Bank 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 Bank to determine Members of the Bank 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 Bank 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
Bank 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 Bank 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 Bank.
E. The Bank shall cause the Holding Company to be incorporated under
state law, and the Board of Directors of the Holding Company shall concur
in the Plan by at least a two-thirds vote.
F. The Bank 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 Bank shall publish a "Notice of Filing of an Application for
Conversion to a Stock Savings Bank" in a newspaper of general circulation,
as referred to in Paragraph III.B. herein. The Bank 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 Bank 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 Bank. 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 Bank'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 Bank 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 Bank'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 Bank 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 he or she
wishes to receive the Subscription and
A-5
<PAGE>
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 Bank's proxy solicitation materials may require Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members to return to
the Bank 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 Bank 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 Bank
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 Bank'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 Bank'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 and
sold by the
A-6
<PAGE>
Holding Company, the Capital Stock to be issued in the Conversion will be issued
and sold to the Holding Company, and the Converted Bank will become a wholly
owned subsidiary of the Holding Company. The Converted Bank 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 Bank in the Conversion,
and the Holding Company will make payment to the Converted Bank 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 Bank, 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 Bank 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 Bank 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 Bank, as a
subsidiary of the Holding Company, at such time. The estimated pro forma
market value of the Converted Bank, 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 Bank 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 Bank.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Bank 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
Bank, as a subsidiary of the Holding Company. If such confirmation is not
received, the Bank may cancel the Subscription and Community Offerings
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.
A-7
<PAGE>
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
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 $50,000 (or 5% of the total offering of shares of
Conversion Stock for Eligible Account Holders with more than one Qualifying
Deposit), one-tenth of one percent of the total offering of shares of
Conversion Stock or 15 times the product (rounded down to the next whole
number) obtained by multiplying the total number of shares of Conversion
Stock to be issued by a fraction of which the numerator is the amount of
the Qualifying Deposit of the Eligible Account Holder and the denominator
is the total amount of Qualifying Deposits of all Eligible Account Holders
in the Converted Bank in each case on the Eligibility Record Date.
b. Non-transferable Subscription Rights to purchase Conversion Stock
received by Officers and directors of the Bank and their Associates based
on their increased deposits in the Bank 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 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 Bank
shall receive, without payment, non-transferable Subscription Rights to
purchase up to 10% of the shares of Conversion Stock issued in the
Conversion.
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.
A-8
<PAGE>
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 $50,000 (or 5% of the
total offering of shares of Conversion Stock for Supplemental Eligible
Account Holders with more than one Qualifying Deposit), one-tenth of one
percent of the total offering of shares of Conversion Stock or 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 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 Subscription Rights to purchase
Conversion Stock in an amount equal to the greater of $50,000 (or 5% of the
total offering of shares of Conversion Stock for Other Members with more
than one deposit account in, or loan from, the Bank on the Voting Record
Date) or one-tenth of one percent of the total offering of shares of
Conversion Stock.
A-9
<PAGE>
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 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 a
reasonable 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 Bank 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.
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 Bank
will immediately consult with the OTS to determine the most viable
alternative available to effect the completion of
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the Conversion. Should no viable alternative exist, the Bank 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 5% of the total
offering of shares of 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 Bank and the Holding Company, and
Associates thereof, may not purchase in the aggregate more than 35% 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 Bank 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 Bank 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 5% of the total
offering of shares of 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 Bank may increase
or decrease any of the purchase limitations set forth herein at any time. Under
current regulatory authority, the Boards of Directors of the Holding Company and
the Bank may, in their discretion, increase the maximum purchase limitations in
the Subscription Offering and/or, if applicable, the Community Offering or other
offering up to 9.99%, provided that orders for shares exceeding 5% of the shares
to be issued in the Conversion shall not exceed, in the aggregate, 10% of the
shares to be issued in the Conversion. In the event that the individual purchase
limitation is increased after commencement of the Subscription and Community
Offerings, the Holding Company and the Bank 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 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.
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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 Bank 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 Bank. Upon
10 days' written notification to the OTS Regional Director for
the Converted Bank and the Chief Counsel of the Corporate and
Securities Division of the OTS, however, the Holding Company
may make open market repurchases 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 Bank, (b) the information
submitted by the Converted Bank is insufficient upon which to
base a conclusion as to whether the Converted Bank's financial
condition would be materially
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<PAGE>
adversely affected, or (c) the Converted Bank 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 Bank 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
Bank may not declare or pay a cash dividend on or repurchase
any of its Capital Stock if the result thereof would be to
reduce the regulatory capital of the Converted Bank 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
Bank. 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 Bank and Officers and directors of
the Holding Company, and their Associates, shall be prohibited
for a period of three years following completion of the
Conversion from purchasing outstanding shares of Holding
Company Stock, except from a broker or dealer registered with
the SEC. Notwithstanding this restric tion, 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.
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 Bank. Self-addressed, postage paid return
envelopes will accompany these forms when mailed. The Bank 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
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<PAGE>
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 Bank 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 Bank 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 Bank; provided,
however, that payments by Tax-Qualified Employee Stock Benefit Plans
for Conversion Stock may be made to the Bank 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 Bank (including a certificate
of deposit), the subscriber may authorize the Bank to charge the
subscriber's Savings Account for the purchase amount. The Bank shall
pay interest at not less than the passbook rate on all amounts paid in
cash or by check or money order to purchase shares of Conversion Stock
in the Subscription and Community Offerings from the date payment is
received until the Conversion is completed or terminated. The Bank
shall not knowingly loan funds or otherwise extend credit to any person
for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Bank 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 Bank 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.
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 Bank by the United States Postal
Service (or the Holding Company or the Bank is unable to locate the
addressee); (ii) is not received by the Holding Company or the Bank, or
is received by the Holding Company or the Bank 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
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<PAGE>
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 Bank 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 Bank may specify. Subscription orders, once
tendered, cannot be revoked. The Holding Company's and the Bank'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 Bank 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 Bank 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 Bank to operate as a federal capital stock
savings Bank. By approving the Plan, the Members of the Bank will thereby
approve amending the Bank'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 Bank'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.
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
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<PAGE>
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 Bank 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 Bank shall retain,
without payment, a withdrawable Savings Account or Savings Accounts in the
Converted Bank, 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 Bank
will not have voting rights in the Converted Bank. 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 Bank'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 Bank.
However, pursuant to applicable regulations, the Bank 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 Bank.
The Liquidation Account shall be maintained by the Converted Bank
subsequent to Conversion for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who retain their Savings Accounts in the
Converted Bank. Each Eligible Account Holder and Supplemental Eligible Account
Holder shall, with respect to each Savings Account held, have a related inchoate
interest in a portion of the Liquidation Account ("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 Bank. 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 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 Bank (and only
in such event), each Eligible Account Holder and Supplemental Eligible Account
Holder shall be entitled to receive a liquidation distribution from the
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<PAGE>
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 Bank, 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 Bank. 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 Bank'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 Bank'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 Bank and its members
and subscribers in the Subscription and Community Offerings, subject to the
authority of the OTS.
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 Bank'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 Bank'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.
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<PAGE>
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 Bank'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 Bank 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 Bank may make scheduled
discretionary contributions to their Tax-Qualified Employee Stock Benefit Plans,
provided such contributions do not cause the Converted Bank to fail to meet its
then-applicable regulatory capital requirements.
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<PAGE>
EXHIBIT B
NEWPORT FEDERAL SAVINGS BANK
FEDERAL STOCK CHARTER
SECTION 1. CORPORATE TITLE. The full corporate title of the savings bank is
Newport Federal Savings Bank (the "savings bank").
SECTION 2. OFFICE. The home office shall be located at 200 Olivia Drive, in the
City of Newport, in the State of Arkansas.
SECTION 3. DURATION. The duration of the savings bank is perpetual.
SECTION 4. PURPOSE AND POWERS. The purpose of the savings bank is to pursue any
or all of the lawful objectives of a Federal savings bank 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 savings bank has authority to issue is 12,000,000 of
which 9,000,000 shares shall be common stock, of par value of $1.00 per share
and of which 3,000,000 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 savings bank. 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 savings bank, 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
savings bank, 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 savings bank 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
savings bank 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 savings bank 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 savings bank with another corporation or the sale, lease, or conveyance
(other than
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by mortgage or pledge) of properties or business in exchange for securities of a
corporation other than the savings bank 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 savings bank in a merger
or consolidation for the savings bank, shall not be considered to be such an
adverse change.
A description of the different classes and series (if any) of the
savings bank'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
savings bank, 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 savings bank available for distribution remaining after: (i)
payment or provision for payment of the savings bank'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 savings bank. 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 savings bank 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
savings bank;
(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 savings
bank 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
savings bank 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 savings bank
shall not be entitled to preemptive rights with respect to any shares of the
savings bank which may be issued.
SECTION 7. DIRECTORS. The savings bank shall be under the direction of a board
of directors. The authorized number of directors, as stated in the savings
bank's bylaws, shall not be fewer than five or more than fifteen except when a
greater or lesser number is approved by the Director of the Office.
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SECTION 8. 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 proposed by the board of directors of the savings bank, approved by the
shareholders by a majority of the votes eligible to be cast at a legal meeting,
unless a higher vote is otherwise required, and approved or preapproved by the
Office.
SECTION 9. LIQUIDATION ACCOUNT. Pursuant to the requirements of the Office's
regulations (12 C.F.R. Subchapter D), the savings bank 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 savings bank, it shall comply with such
regulations with respect to the amount and the priorities on liquidation of each
of the savings bank's eligible savers' inchoate interest in the liquidation
account, to the extent it is still in existence; provided, that an eligible
savers' inchoate interest in the liquidation account shall not entitle such
eligible saver to any voting rights at meetings of the savings bank's
stockholders.
Attest: By:
---------------------------- -------------------------------------
Brad Snider
Secretary President and Chief Executive Officer
Newport Federal Savings Bank Newport Federal Savings Bank
Attest: By:
---------------------------- -------------------------------------
Secretary Director of the Office of Thrift
Office of Thrift Supervision Supervision
Effective Date: .
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EXHIBIT C
BYLAWS
NEWPORT FEDERAL SAVINGS BANK
ARTICLE I - HOME OFFICES
The home office of the savings bank shall be 200 Olivia Drive, in the City
of Newport in the State of Arkansas.
ARTICLE II - SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. All annual and special meetings of
shareholders shall be held at the home office of the savings bank or at such
other place in the State of Arkansas in which the principal place of business of
the savings bank is located as the board of directors may determine.
SECTION 2. ANNUAL MEETING. A meeting of the shareholders of the savings
bank for the election of directors and for the transaction of any other business
of the savings bank shall be held annually within 150 days after the end of the
savings bank's fiscal year.
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 savings bank 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 savings bank 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 rules and procedures adopted by the board of
directors. The board of directors shall designate, when present, either the
chairman of the board or 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 20 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 savings bank 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, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at
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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 savings bank 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 savings bank 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
perform such acts as required by paragraphs (a) and (b) of Rule 14a-7 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as may
be duly requested in writing, with respect to any matter which may be properly
considered at a meeting of stockholders, by any stockholder who is entitled to
vote on such matter and who shall defray the reasonable expenses to be incurred
by the savings bank in performance of the act or acts required.
SECTION 8. QUORUM. A majority of the outstanding shares of the savings bank
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. If a quorum is present, the
affirmative vote of a majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of stockholders, unless
the vote of a greater number of stockholders voting together or voting by
classes is required by law or the charter. Directors, however, are elected by a
plurality of the votes cast at an election of directors.
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 may be given telephonically or electronically as long
as the holder uses a procedure for verifying the identity of the stockholder.
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 savings bank to the contrary, at any meeting of the
shareholders of the savings bank, 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.
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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.
Neither treasury shares of its own stock held by the savings bank 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 savings
bank, 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 savings
bank'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 savings bank. 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 savings bank 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 savings bank. 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 savings
bank 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
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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.
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 savings bank
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 five
(5) 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 savings bank's normal
lending territory, for the holding of additional regular meetings without other
notice than such resolution.
SECTION 4. QUALIFICATION. Directors need not be the beneficial owners of
capital stock of the savings bank.
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 savings bank'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.
SECTION 6. NOTICE. Written notice of any special meeting shall be given to
each director at least 24 hours 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, when delivered to the telegraph company if sent by telegram,
or when the savings bank receives notice of delivery if electronically
transmitted. 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. 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 of 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
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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.
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 savings bank
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 savings bank who is
present at a meeting of the board of directors at which action on any savings
bank 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 savings
bank 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
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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 authority of the board of directors with
reference to: the declaration of dividends; the amendment of the charter or
bylaws of the savings bank, 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 savings bank
otherwise than in the usual and regular course of its business; a voluntary
dissolution of the savings bank; 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 savings bank. 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
savings bank and may prescribe the duties, constitution, and procedures thereof.
C-6
<PAGE>
ARTICLE V - OFFICERS
SECTION 1. POSITIONS. The officers of the savings bank 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 savings bank. 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 savings bank 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 savings bank
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 savings bank 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 savings bank 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 savings bank to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the savings bank. Such authority may
be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the savings
bank 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 savings bank shall be signed by one or more officers, employees, or
agents of the savings bank in such manner as shall from time to time be
determined by the board of directors.
SECTION 4. DEPOSITS. All funds of the savings bank not otherwise employed
shall be deposited from time to time to the credit of the savings bank 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 savings bank 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 savings
bank 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 savings bank 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 savings bank. All certificates surrendered to the savings bank for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and
cancelled, except that in the case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the savings bank as
the board of directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of capital stock of the
savings bank 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 savings bank. 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 savings bank shall be deemed by the savings bank
to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR
The fiscal year of the savings bank shall end on the 30th day of June of
each year. The appointment of such independent accountants shall be subject to
annual ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the savings bank's charter and the regulations and
orders of the Office, the board of directors may, from time to time, declare,
and the savings bank may pay, dividends on its outstanding shares of capital
stock.
ARTICLE X - CORPORATE SEAL
The board of directors shall provide a savings bank seal which shall be two
concentric circles between which shall be the name of the savings bank. 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 savings bank at any legal meeting.
C-8
<PAGE>
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
NEWPORT FEDERAL SAVINGS BANK
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON ____________, 1997)
The undersigned member of Newport Federal Savings Bank (the "Bank")
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 of the Bank to be held at
__________________, ____________________, Newport, Arkansas, on
________________, _____________, 1997, at __:__ _.m., Central Time, and at any
adjournments thereof. They are authorized to cast all votes to which the
undersigned is entitled, as follows:
FOR AGAINST
--- -------
Approval of the Plan of Conversion providing
for the conversion of the Bank from a federally
chartered mutual savings bank to a federally
chartered stock savings bank as a wholly owned
subsidiary of North Arkansas Bancshares, Inc.,
including the amendment of the Bank's Federal
Mutual Charter and Bylaws to read in the form
of a Federal Stock Charter and Bylaws for the Bank.
[_] [_]
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 matters that may come
before the Meeting.
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PLAN OF CONVERSION 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 Newport
Federal Savings Bank 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 Newport Federal Savings Bank 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>
Conversion Valuation Report
-------------------------------------
---------------------------
Valued as of September 2, 1997
NEWPORT FEDERAL SAVINGS BANK
Newport, Arkansas
Prepared By:
Ferguson & Company
Suite 550
122 W. John Carpenter Freeway
Irving, TX 75039
972/869-1177
<PAGE>
STATEMENT OF APPRAISER'S INDEPENDENCE
Newport Federal Savings Bank
Newport, Arkansas
-----------------
We are the appraiser for Newport Federal Savings Bank ("Newport Federal"
or "Bank") in connection with its mutual to stock conversion. We are submitting
our independent estimate of the pro forma market value of the Bank's stock to be
issued in the conversion. In connection with our appraisal of the Bank'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 Bank, its conversion counsel,
its selling agent, or any other party connected with the conversion.
Newport Federal 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
September 8, 1997
<PAGE>
September 8, 1997
Board of Directors
Newport Federal Savings Bank
200 Olivia Drive
Newport, Arkansas 72112
Dear Directors:
We have completed and hereby provide, as of September 2, 1997, an
independent appraisal of the estimated pro forma market value of Newport Federal
Savings Bank ("Newport Federal" or the "Bank"), Newport, Arkansas, in connection
with the conversion of Newport Federal from the mutual to stock form of
organization ("Conversion"). This appraisal report is furnished pursuant to the
regulatory filing of the Bank'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,
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 Newport Federal's Application
for Approval of Conversion, including the Proxy Statement as filed with the OTS.
We conducted an analysis of Newport Federal that included discussions with KPMG
Peat Marwick LLP, the Bank's independent auditors, and with Housley Kantarian &
Bronstein, P.C., the Bank'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 Newport Federal's primary market area and
compared the Bank'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 Newport Federal's representation that the
information contained in the Form AC and additional evidence furnished to us by
the Bank and its independent auditors are truthful, accurate, and complete. We
did not independently verify the financial statements and other information
provided by Newport Federal and its auditors, nor did we independently value the
Bank's assets or liabilities. The valuation considers Newport Federal only as a
going concern and should not be considered an indication of its liquidation
value.
It is our opinion that, as of September 2, 1997, the estimated pro forma
market value of Newport Federal was $2,800,000, or 280,000 shares at $10.00 per
share. The resultant valuation range was $2,380,000 at the minimum (238,000
shares at $10.00 per share) to $3,220,000 at the maximum (322,000 shares at
$10.00 per share), based on a range of 15 percent below and above the midpoint
valuation. The supermaximum was $3,703,000 (370,300 shares at $10.00 per share).
<PAGE>
Board of Directors
September 8, 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 Bank'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 Newport
Federal, 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 Newport Federal'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
Newport Federal Savings Bank
Newport, Arkansas
<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 2
Lending 2
Nonperforming Assets 3
Classified Assets 3
Loan Loss Allowance 3
Mortgage-Backed Securities and Investments 3
Savings Deposits 3
Borrowings 3
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
Newport Federal Savings Bank
Newport, Arkansas
<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
ARKANSAS 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
Newport Federal Savings Bank
Newport, Arkansas
<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 Regulatory Capital Compliance 9
5 Loan Portfolio Composition 10
6 Loan Maturities 11
7 Loan Origination, Purchase, and Repayment Activity 12
8 Average Balances, Rates, and Yields 13
9 Rate/Volume Analysis 14
10 Non-Performing Assets 15
11 Analysis of the Allowance for Loan Losses 16
12 Allocation of Allowance for Loan Losses 17
13 Investment Securities 18
14 Investments at June 30, 1997 19
15 Deposit Portfolio 20
16 Savings Deposits Detail 21
17 Certificate of Deposit Maturities 22
18 Large CD Maturities 23
19 Offices 24
SECTION II - MARKET AREA
1 Demographic Trends 3
2 Percent Employment by Industry 4
3 Market Area Deposits 5
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
Newport Federal Savings Bank
Newport, Arkansas
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
- ------ ----------- ----
<S> <C> <C>
SECTION IV - CORRELATION OF MARKET VALUE
1 Appraisal Earnings Adjustments 2
2 Arkansas Acquisitions 8
3 Recent Conversions 11
4 Recent Pink Sheet Conversions 14
4 Comparison of Pricing Ratios 17
<CAPTION>
FIGURE
NUMBER LIST OF FIGURES
- ------ --------------- PAGE
----
<S> <C> <C>
SECTION IV - CORRELATION OF MARKET VALUE
1 SNL Index 18
2 Interest Rates 19
</TABLE>
EXHIBIT TITLE
-------------
Exhibit I - Ferguson & Company Qualifications
Exhibit II - Selected Region, State, and Comparatives Information
Exhibit III - Newport Federal Savings Bank 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 I
- ------------------ ---------
INTRODUCTION
Newport Federal Savings Bank ("Newport Federal" or "Bank") is a
federally chartered, federally insured mutual savings bank located in Newport
(Jackson County), Arkansas. It received its federal charter and insurance of
accounts and joined the Federal Home Loan Bank system in 1934. It adopted its
current name in 1995. In May 1997, the Board of Directors adopted a plan to
convert the Bank from the mutual to stock form of organization. In connection
with the conversion, the Bank will form a parent holding company to be known as
North Arkansas Bancshares, Inc. ("North Arkansas" or the "Holding Company").
North Arkansas will sell stock to the public and invest part of the proceeds in
exchange for all of the shares of stock issued by Newport Federal.
At June 30, 1997, Newport Federal had total assets of $34.4 million,
loans of $24.8 million, securities of $5.9 million, cash and time deposits in
other banks of $1.6 million, deposits of $31.1 million, borrowings of $.6
million, and net worth of $2.3 million, or 6.6% of assets.
The bank has one office, which is located in Newport (Jackson
County), Arkansas. Arkansas is in the southeastern portion of the United States.
Jackson County is located in the northeastern section of the State.
Newport Federal is a traditional thrift. It invests primarily in (1)
1-4 family loans, (2) investment securities (principally mortgage-backed
securities), and (3) temporary cash investments. It is funded principally by
savings deposits and existing net worth. It has utilized minor amounts of
borrowings recently.
The Bank offers a full spectrum of real estate loan products to
accommodate its customer base and single family loans dominate the Bank's loan
portfolio. At June 30, 1997, loans on 1-4 family dwellings made up 50.8% of
total assets and 70.1% of the loan portfolio. Consumer loans were 14.6% of the
loan portfolio and non-residential real estate loans were 14.5% of the loan
portfolio. Investment securities made up 17.2% of total assets. Cash and cash
equivalents made up 4.6% of Newport Federal's assets at June 30, 1997.
Newport Federal had $74,000 in non-performing assets at June 30,
1997, as compared to $154,000 at June 30, 1996.
Savings deposits increased $3.383 million during the period from June
30, 1993, to June 30, 1997, a compound annual growth rate of 2.92%. Savings
increased $1.885 million (6.79%) from June 30, 1995, to June 30, 1996, and
increased $1.416 million (4.77%) from June 30, 1996, to June 30, 1997. Newport
Federal has not relied extensively on borrowings during recent years. It had
$618 thousand in borrowings at June 30, 1997, $134 thousand at June 30, 1996,
and $149 thousand at June 30, 1995.
The Bank'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 6.66% at June 30, 1993, to 6.59% at June 30, 1997.
The compound annual asset growth rate was 3.62% during the period, while the
compound annual rate of growth for equity was 3.35%.
Newport Federal's profitability, as measured by return on average
assets ("ROAA"), has been up and down as compared to its peer group average of
thrifts filing TFR's with the OTS, consisting of OTS supervised thrifts with
assets between $25 million and $50 million. For the years ending December 31,
1994, 1995, and 1996, and the three months ending March 31, 1997, Newport
Federal ranked in the 50th, 36th, 14th, and 67th 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, Newport Federal ranked in the 73rd, 55th, 13th, and
88th percentile, respectively. However, the results for the three months ending
March 31, 1997 appear distorted because pretax income was $79,000 and there was
no income tax expense recorded.
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
1
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
while the general trends in the thrift industry have been improving as interest
rates declined. Interest rates began a 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. Newport Federal's spread was 2.49% for the year ended June 30,
1996. It increased to 2.54% 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. Newport Federal has a much lower exposure to interest
rate risk than the thrift industry in general.
FINANCIAL CONDITION OF INSTITUTION
Balance Sheet Trends
As Table I.1 shows, Newport Federal experienced moderate growth in
assets during the period of two years ending June 30, 1997. Assets increased
$3.922 million during the period (12.9%). Loans increased $4.642 million, or
23.0%. Investment securities, cash, and time deposits combined decreased $1.516
million, or 16.8% during the period. Savings deposits increased by $3.301
million, or 11.9%. Equity decreased $126 thousand, or 5.3%.
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 savings deposits, and (4) seeking to
employ any combination of the aforementioned techniques artificially through the
use of synthetic hedge instruments. Table I.3 provides rate shock information at
varying levels of interest rate change. The Bank has limited exposure to
interest rate increases, and its exposure will be further reduced through the
equity raised in the conversion.
Newport Federal's basic approach to interest rate risk management has
been to emphasize shorter term fixed rate mortgage loans, adjustable mortgage
loans, and short and intermediate term consumer loans, coupled with extending
deposit maturities. Newport Federal currently is not utilizing synthetic hedge
instruments and has not used borrowings extensively in recent years. Newport
Federal's business plan calls for emphasis on shorter term consumer and
commercial loans.
Income and Expense Trends
Newport Federal was profitable for the fiscal year ended June 30,
1996, but recorded a loss for the fiscal year 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 $179,000
in 1997; and (2) prior service costs of $286,000 in 1997 related to a directors'
retirement plan; and (3) additional loan loss provisions recorded in 1997, e.g.,
$90,000 in 1997 versus $10,000 in 1996.
Net interest income increased in the year ended June 30, 1997,
principally as a result of growth, as interest margins remained relatively
constant during the periods.
Regulatory Capital Requirements
As Table I.4 demonstrates, Newport Federal 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.5 provides an analysis of the Bank's loan portfolio by type
of loan and security. This analysis shows that, at June 30, 1996 and 1997,
Newport Federal's loan composition was dominated by 1-4 family dwelling loans.
2
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Both non-residential real estate loans and consumer loans experienced healthy
growth from 1996 to 1997, while 1-4 dwelling loans remained constant in dollar
value but shrunk relative to the entire portfolio. Table I.6 provides
information on loan maturities and repricing opportunities at June 30, 1997. The
schedule shows that, at that date, approximately 61% of the portfolio was
scheduled to mature in more than five years and 45% was scheduled to mature in
more than ten years. The table also shows that 56% of total loans were
adjustable rate loans and 15% of total loans were consumer and commercial
non-real estate loans.
Table I.7 provides information with respect to loan originations.
It indicates that loan origination activity increased 53% from 1996 to 1997.
Table I.8 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 7.84% in 1996 to 7.70% in 1997. Interest rates paid on
interest-bearing liabilities decreased from 5.35% in 1996 to 5.16% 1997. Newport
Federal's spread increased from 2.49% in 1996 to 2.54% in 1997.
Table I.9 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, 1996 versus 1997. The table shows that
most of the decrease in net interest income from the year ended June 30, 1995 to
1996 resulted from rates, while most of the increase from June 30, 1996 to 1997
resulted from volume.
Non-performing Assets
As shown in Table I.10, the Bank had $74,000 in loans that were over
90 days delinquent at June 30, 1997. The Bank had ceased to accrue interest on
these loans. The Bank had $154 thousand in nonperforming assets at June 30,
1996.
Classified Assets
Newport Federal had $91 thousand in classified assets at June 30,
1997. All of the classified assets were classified as substandard. The Bank had
a loan loss allowance of $150,000, or 164.8% of classified assets at June 30,
1997.
Loan Loss Allowance
Table I.11 provides an analysis of Newport Federal's loan loss
allowance. Table I.12 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.13 provides a breakdown of investments as of June 30, 1996,
and 1997. Table I.14 provides maturity and yield information for investments as
of June 30, 1997.
Savings Deposits
At June 30, 1997, Newport Federal's deposit portfolio was composed as
follows: Checking accounts--$2.978 million or 9.59%; passbook accounts--$1.893
million or 6.09%; and certificate accounts--$26.202 million or 84.32% (see Table
I.15). Table I.16 provides a break down of time deposits by rate ranges as of
June 30, 1995, 1996, and 1997. Table I.17 provides maturity information by rate
ranges for time deposits as of June 30, 1997. It shows that 41.17% of all time
deposits mature within one year and 79.19% mature within two years.
Newport Federal is not overly dependent on large certificates of
deposit. At June 30, 1997, the Bank had $3.361 million in certificates that were
issued for $100 thousand or more, or 10.82% of its total deposits (see Table
I.18).
Borrowings
Newport Federal has had only minor borrowings in recent years.
3
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Subsidiaries
Newport Federal has no subsidiary.
Legal Proceedings
From time to time, Newport Federal 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 Bank, no legal
proceedings are in process or pending that would have a material effect on
Newport Federal's financial position, results of operations, or liquidity.
EARNINGS CAPACITY OF THE INSTITUTION
As in any interest sensitive industry, the future earnings capacity
of Newport Federal 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.
Newport Federal is no exception to the aforementioned phenomenon.
With its current asset and liability structure, however, its exposure to rising
interest rates is minimal.
The addition of capital through the conversion will encourage Newport
Federal to grow. The business plan projects asset growth over the three year
period ending June 30, 2000 between 7% and 29% annually. Growth for the first
year is projected at 29% because of (1) the conversion and (2) a pending branch
purchase that will add approximately $6.0 million in assets. 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, Newport
Federal is a moderately efficient operation. With total assets of approximately
$34.4 million at June 30, 1997, Newport Federal has approximately 9 full time
equivalent employees. The business plan projects that operating expense levels
as a percentage of average assets will stay in line with pre-conversion rates.
Intangible Values
Newport Federal's greatest intangible value lies in its loyal deposit
base. Newport Federal has a 63 year history of operations and independence. At
June 30, 1996, the Bank had 15.81% of the deposit market in its area (down from
16.08% at June 30, 1994), and it has the ability to increase market share.
Completion of the NationsBank branch purchase will give Newport Federal
approximately 19% of its market. Newport Federal has maintained its market share
in recent years without making any significant efforts. Its turn around in
strategic direction is expected to help Newport Federal increase its market
share significantly.
Newport Federal has no significant intangible values that could be
attributed to unrecognized asset gains on investments and real estate.
Effect of Government Regulations
Newport Federal's business plan calls for changes in its strategies.
The changes will involve the types of loans sought and the efforts expended to
acquire deposits. 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 Bank.
4
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Office Facilities
Newport Federal's office is a modern facility that was built in 1995.
It has excellent amenities to service the Bank's customer base. Table I.19
provides information on Newport Federal's office. The Bank's former office is
fully leased.
5
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.1 - Selected Financial Data
<TABLE>
<CAPTION>
At June 30 Compound
-------------------------------------------------------------------- Growth
1997 1996 1995 1994 1993 Rate
---- ---- ---- ---- ---- ---------------
($000's)
Selected Financial Condition Data:
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $ 34,379 $ 32,446 $ 30,457 $ 29,883 $ 29,818 3.62%
Cash 884 1,167 1,386 286 962 -2.10%
Time deposits with other banks 691 890 1,086 3,056 3,941 -31.18%
Securities held to maturity 5,923 6,310 6,542 6,093 5,956 NM
Loans receivable, net 24,794 21,982 20,152 19,798 18,442 7.68%
Savings deposits 31,073 29,657 27,772 27,336 27,690 2.92%
Borrowings 618 134 149 162 - NM
Equity substantially restricted 2,266 2,465 2,392 2,178 1,986 3.35%
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
($000's)
Selected Operations Data:
- -------------------------
<S> <C> <C> <C> <C> <C>
Interest income $ 2,493 $ 2,328 $ 2,155 $ 2,033 $ 2,236
Interest expense 1,597 1,525 1,279 1,181 1,309
---------------------------------------------------------
Net interest income 896 803 876 852 927
Provision for loan losses 90 10 5 5 25
---------------------------------------------------------
Net interest income after
provision for loan losses 806 793 871 847 902
---------------------------------------------------------
Noninterest income 19 11 17 45 29
---------------------------------------------------------
Sub-total 825 804 888 892 931
---------------------------------------------------------
Noninterest expense 1,157 726 555 569 533
---------------------------------------------------------
Income (loss) before taxes and cumulative effect (332) 78 333 323 398
Income tax expense (benefit) (133) 6 119 121 127
---------------------------------------------------------
Net income (loss) before cumulative effect (199) 72 214 202 271
---------------------------------------------------------
Cumulative effect adjustment - - - (10)
=========================================================
Net income (loss) $ (199) $ 72 $ 214 $ 192 $ 271
=========================================================
</TABLE>
Source: Offering circular, audited financial
statements, & F&C calculations
6
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.2 - Operating Ratios
<TABLE>
<CAPTION>
At or for the
Year Ended June 30,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Performance Ratios:
- ------------------
Return on assets (ratio of net earnings
to average total assets) -0.60% 0.23%
Return on equity (ratio of net earnings
to average equity) -8.41% 2.92%
Ratio of average interest-earning assets to
average interest-bearing liabilities 104.67% 104.12%
Ratio of net interest income, after provision
for loan losses, to noninterest expense 69.66% 109.23%
Net interest rate spread 2.54% 2.49%
Net yield on average interest-earning assets 2.77% 2.70%
Quality Ratios:
- --------------
Non-performing loans to total loans
at end of period 0.30% 0.14%
Non-performing loans to total assets 0.21% 0.09%
Non-performing assets to total assets
at end of period 0.21% 0.47%
Allowance for loan losses to non-performing
loans at end of period 202.70% 243.33%
Allowance for loan losses to total loans, net 0.60% 0.33%
Capital Ratios:
- --------------
Equity to total assets at end of period 6.59% 7.60%
Average equity to average assets 7.08% 7.72%
Other Data:
- ----------
Number of full service offices 1 1
</TABLE>
Source: Offering circular 7
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.3 - Interest Rate Shock
<TABLE>
<CAPTION>
Net Portfolio Value
June 30, 1997
------------------------------------------------------------------------------------
Estimated
NPV as a
Change Estimated Percent
in Rates NPV of Assets $ Change % Change
- --------------------------------------- ------------------- ------------------- -------- -------------------
($000's)
<S> <C> <C> <C> <C>
+400 bp $ 2,403 7.26% (669) -22%
+300 bp 2,663 7.91% (409) -13%
+200 bp 2,873 8.40% (199) -6%
+100 bp 3,012 8.70% (60) -2%
0 bp 3,072 8.77% - -
--100 bp 3,051 8.63% (21) -1%
--200 bp 3,002 8.42% (70) -2%
--300 bp 2,993 8.32% (79) -3%
--400 bp 3,054 8.38% (18) -1%
</TABLE>
Source: Office of Thrift Supervision, Risk Management Division
8
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.4 - Regulatory Capital Compliance
<TABLE>
<CAPTION>
Percent of
Amount Assets
---------------------------
($000's)
<S> <C> <C>
Tangible capital $2,266 6.59%
Tangible capital reqirement 516 1.50%
---------------------------
Excess (deficit) $1,750 5.09%
===========================
Core capital $2,266 6.59%
Core capital requirement 1,031 3.00%
---------------------------
Excess (deficit) $1,235 3.59%
===========================
Risk-based capital $2,414 13.31%
Risk-based capital requirement 1,451 8.00%
---------------------------
Excess (deficit) $963 5.31%
===========================
</TABLE>
Source: Offering circular 9
<PAGE>
Ferguson & Company Section I
- ------------------ ---------
Table I.5 - Loan Portfolio Composition
<TABLE>
<CAPTION>
At June 30,
-----------------------------------------------------------
1997 1996
----------------------------- --------------------------
Amount Percent Amount Percent
($000's)
<S> <C> <C> <C> <C>
Mortgage Loans:
1-4 family 17,479 70.06% 17,486 79.25%
Multi-family 136 0.55% 145 0.66%
Non-residential 3,613 14.48% 2,628 11.91%
------------------------- ------------------------------
Total mortgage loans 21,228 85.08% 20,259 91.82%
------------------------- ------------------------------
Consumer Loans:
Loans on savings accounts 443 1.78% 256 1.16%
Home improvement loans 666 2.67% 763 3.46%
Automobile loans 2,010 8.06% 649 2.94%
Other consumer loans 510 2.04% 138 0.63%
------------------------- ------------------------------
Total consumer loans 3,629 14.55% 1,806 8.18%
------------------------- ------------------------------
Commercial loans 93 0.37% - 0.00%
------------------------- ------------------------------
Total loans 24,950 100.00% 22,065 100.00%
-------------============ --------------------==========
Less:
Deferred fees and discounts 6 10
Allowance for losses 150 73
---------- ---------------
Loan portfolio, net 24,794 21,982
========== ===============
</TABLE>
Source: Offering circular 10
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.6 - Loan Maturities
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>
Due During the Year Ending June 30,
----------------------------------- 3 to 5 5 to 10 Over
1998 1999 2000 Years Years 10 Years Total
--------- -------- --------- ---------- ---------------------- ----------
($000,s)
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans $ 1,654 $ 115 $ 1,759 $ 3,154 $ 3,467 $ 11,079 $ 21,228
Commercial loans 93 - - - - - 93
Consumer loans 710 174 258 1,873 468 146 3,629
--------- -------- --------- ---------- ---------------------- ----------
Total $ 2,457 $ 289 $ 2,017 $ 5,027 $ 3,935 $ 11,225 $ 24,950
========= ======== ========= ========== ====================== ==========
</TABLE>
Set forth below is a break down of loans between fixed and adjustable rates:
<TABLE>
<CAPTION>
Fixed Adjustable
Rate Rate
---------- ----------
($000's)
<S> <C> <C>
Real estate:
1-4 family 5,101 12,378
Multi-family - 136
Non-residential 2,033 1,580
Consumer:
Deposit account loans 443
Home improvement 666
Automobile 2,010
Other 510
Commercial 93
---------- ----------
10,856 14,094
========== ==========
</TABLE>
Source: Offering circular 11
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.7 - 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 $ 21,982 $ 20,152
Originations by type:
- ---------------------
Mortgage loans:
1-4 family 4,515 3,714
Multi-family 55 43
Commercial 936 561
Consumer loans 3,231 1,456
Commercial loans 93 -
----------- ----------
Total loans originated 8,830 5,774
----------- ----------
Purchases 500 1,005
- --------- ----------- ----------
Total loans originated and purchased 9,330 6,779
----------- ----------
Loans sold - -
- ---------- ----------- ----------
Repayments: 6,445 4,943
- ----------- ----------- ----------
Decrease (increase) in other items, net: (73) (6)
- ---------------------------------------- ----------- ----------
Net increase (decrease) in loans receivable, net 2,812 1,830
----------- ----------
Net loans, end of period $ 24,794 $ 21,982
=========== ===========
</TABLE>
Source: Offering circular 12
<PAGE>
FERGUSON & COMPANY
- ------------------
Table I.8 - Average Balances, Rates, and Yields
<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 $ 1,767 $ 72 4.07% $ 2,519 $ 129 5.12%
Mortgage-backed securities 5,374 339 6.31% 4,442 280 6.30%
Investment securities 976 71 7.27% 1,266 105 8.29%
Loans 24,249 2,011 8.29% 21,470 1,814 8.45%
------------------------------------ --------------------------------------
Total interest\dividend-earning assets 32,366 $ 2,493 7.70% 29,697 $ 2,328 7.84%
=================== ======================
Non-interest earning assets 1,745 1,644
------------- ----------
Total assets $ 34,111 $ 31,341
============= ==========
Interest-bearing liabilities:
- -----------------------------
Savings deposits $ 29,684 1,541 5.19% $ 28,383 $ 1,517 5.34%
FHLB advances 1,238 56 4.52% 140 8 5.71%
------------------------------------ --------------------------------------
Total interest-bearing liabilities 30,922 $ 1,597 5.16% 28,523 $ 1,525 5.35%
================== ======================
Non-interest bearing liabilities 789 351
------------- ----------
Total liabilities 31,711 28,874
------------- ----------
Equity 2,400 2,467
------------- ----------
Total liabilities and equity $ 34,111 $ 31,341
============= ==========
Net interest\dividend income $ 896 $ 803
========= ========
Net interest\dividend rate spread (1) 2.54% 2.49%
===== ==========
Net interest\dividend earnings assets $ 1,444 $ 1,174
============= ==========
Net interest\dividend margin (2) 2.77% 2.70%
===== ==========
Average interest\dividend-earning assets to
average interest-bearing liabilities 104.67% 104.12%
========== =========
</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 13
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.9 - Rate/Volume Analysis
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
----------------------------------------- ---------------------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Due to
----------------------------- Total ----------------------------- 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 $ (39) $ (26) $ 8 $ (57) $ (14) $ 26 $ (3) $ 9
Mortgage-backed securities 59 - - 59 (22) 51 (4) 25
Investments (24) (13) 3 (34) (11) 16 (2) 3
Loans 235 (34) (4) 197 126 10 1 137
----------------------------------------- ---------------------------------------------
Total interest-earning assets 231 (73) 7 165 79 103 (8) 174
----------------------------------------- ---------------------------------------------
Interest-bearing liabilities:
Deposits 69 (43) (2) 24 44 195 7 246
FHLB advances 63 (2) (13) 48 (1) (1) - (2)
----------------------------------------- ---------------------------------------------
Total interest - bearing liabilities 132 (45) (15) 72 43 194 7 244
----------------------------------------- ---------------------------------------------
Increase (decrease) in net
interest income $ 99 $ (28) $ 22 $ 93 $ 36 $ (91) $ (15) $ (70)
========================================= =============================================
</TABLE>
Source: Offering circular 14
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.10 - 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 67 30
Multi-family - -
Non-residential - -
Consumer 7 -
Commercial - -
--------------------------------------------
Total 74 30
--------------------------------------------
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 74 30
--------------------------------------------
Repossessed assets - 124
--------------------------------------------
Total non-performing assets 74 154
============================================
Total non-performing loans as a
percentage of total net loans 0.30% 0.14%
============================================
Total non-performing assets as a
percentage of total assets 0.21% 0.47%
============================================
</TABLE>
15
Source: Offering Circular
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.11 - 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 $ 73 $ 63
---------------- --------------------
Charge-offs:
One- to four-family (13) -
Multi-family - -
Non-residential - -
Consumer - -
Commercial - -
---------------- --------------------
(13) -
---------------- --------------------
Recoveries: - -
---------------- --------------------
Net (charge-offs) (13) $ -
---------------- --------------------
Additions charged to operations 90 10
---------------- --------------------
Balance at end of period $ 150 $ 73
================ ====================
Allowance for loan losses to total
non-performing loans at end of period 202.70% 243.33%
================ ====================
Allowance for loan losses to net
loans at end of period 0.60% 0.33%
================ ====================
Ratio of net charge-offs to average
loans outstanding during the period 0.05% 0.00%
================ ====================
</TABLE>
16
Source: Offering Circular
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.12 - 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
1-4 family 105 70.06% 58 79.25%
Multi-family 1 0.55% - 0.66%
Non-residential 22 14.48% 9 11.91%
Consumer Loans
Loans secured by deposits 3 1.78% 1 1.16%
Home improvement 4 2.67% 3 3.46%
Automobile 12 8.06% 2 2.94%
Other consumer 3 2.04% - 0.63%
Commercial Loans - 0.37% - 0.00%
------------------------------- ---------------------------
150 100.00% 73 100.00%
=============================== ===========================
</TABLE>
17
Source: Offering Circular
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.13 - Investment Securities
<TABLE>
<CAPTION>
At June 30,
----------------------------------
1997 1996
--------------- ----------------
($000's)
<S> <C> <C>
U.S. government agency securities $ 500 $ 1,000
Mortgage-backed securities 5,077 4,963
Federal Home Loan Bank stock 283 267
Obligations of states and political subdivisions 63 80
--------------- ----------------
Total $ 5,923 $ 6,310
=============== ================
</TABLE>
18
Source: Offering Circular
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.14 - Investments at June 30, 1997
<TABLE>
<CAPTION>
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>
U.S. government agencies
and tax exempt securities $ - 0.00% $ 509 6.46% $ 54 9.46% $ 563 6.75%
Mortgage-backed securities - 0.00% 53 12.15% 5,024 6.83% 5,077 6.75%
FHLB stock and other 283 5.84% - 0.00% - 0.00% 283 5.84%
----- ----- ----- ------ ------- ----- ------- -----
Total investment securities $ 283 5.84% $ 562 7.00% $ 5,078 6.86% $ 5,923 6.71%
===== ===== ===== ====== ======= ===== ======= =====
</TABLE>
19
Source: Offering Circular
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.15 - 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 2.40% $ 1,670 5.37%
Passbook accounts None 3.00% 1,893 6.09%
Demand None 0.00% 983 3.16%
Money market accounts None 2.41% 325 1.05%
------- ----------
4,871 15.68%
------- ----------
Certificates of deposit
- ---------------------------------
Fixed term, fixed rate 6 months 5.47% 5,204 16.75%
Fixed term, fixed rate 12 months 5.67% 6,106 19.65%
Fixed term, fixed rate 15 months 5.60% 3,013 9.70%
Fixed term, fixed rate 18 months 5.77% 1,282 4.13%
Fixed term, fixed rate 24 months 5.82% 979 3.15%
Fixed term, fixed rate 36 months 5.93% 942 3.03%
Fixed term, fixed rate 60 months 6.08% 8,593 27.65%
Other 4.18% 83 0.27%
------- ----------
Total certificates of deposit 26,202 84.32%
------- ----------
Total savings deposits $31,073 100.00%
======= ==========
</TABLE>
(1) Indicates weighted average interest rate at June 30, 1997.
20
Source: Offering Circular
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.16 - 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 $ 2,978 9.58% $ 2,322 7.83% $ 1,943 7.00%
Passbook accounts 1,893 6.09% 1,361 4.59% 1,145 4.12%
----------------------- -------------------------- --------------------------
Total transaction accounts 4,871 15.68% 3,683 12.42% 3,088 11.12%
----------------------- -------------------------- --------------------------
Certificates:
- ------------
2.00 to 3.99% - 0.00% 49 0.17% 1,081 3.89%
4.00 to 5.99% 26,202 84.32% 16,666 56.20% 14,212 51.17%
Over 6.00% - 0.00% 9,259 31.22% 9,391 33.81%
----------------------- -------------------------- --------------------------
Total certificates 26,202 84.32% 25,974 87.58% 24,684 88.88%
----------------------- -------------------------- --------------------------
Total deposits $31,073 100.00% $29,657 100.00% $27,772 100.00%
======================= ========================== ==========================
</TABLE>
21
Source: Offering Circular
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.17 - Certificate of Deposit Maturities
The table below provides CD maturities at June 30, 1997, by year in rate ranges.
<TABLE>
<CAPTION>
Less Than One to Two to After Percent
One Year Two Years Three Years Three Years Total of Total
-------- --------- ----------- ----------- ----- --------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Certificates maturing in:
2.00% to 3.99% $ - $ - $ - $ - $ - 0.00%
4.00% to 5.99% 10,787 9,962 1,135 4,318 26,202 100.00%
------------------------------------------------------------------------------------------
Total $ 10,787 $ 9,962 $ 1,135 $ 4,318 $ 26,202 100.00%
==========================================================================================
Percent of total 41.17% 38.02% 4.33% 16.48% 100.00%
=========================================================================
</TABLE>
22
Source: Offering Circular
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.18 - Large CD Maturities
<TABLE>
<CAPTION>
Certificates of deposit over $100,000
maturing in period ending: Amount
- ------------------------------------- --------
($000's)
<S> <C>
Within three months or less $ 575
Three through six months 351
Six through twelve months 1,058
Over 12 months 1,377
-------
Total $ 3,361
=======
</TABLE>
23
Source: Offering Circular
<PAGE>
FERGUSON & COMPANY Section I
- ------------------ ---------
Table I.19 - Offices
<TABLE>
<CAPTION>
Net Book Year Owned or Square
Physical address Value (1) Occupied Leased Footage
- ---------------- --------- -------- ------ -------
($000's)
<S> <C> <C> <C> <C>
200 Olivia Drive $ 1,238 1995 Owned 6,800
Newport, Arkansas 72112
Main Office
522 Third Street $ 248 1956 Owned 7,400
Newport, Arkansas 72112
Former Main Office
</TABLE>
(1) Cost less accumulated depreciation and amortization.
24
Source: Offering Circular
<PAGE>
SECTION II
MARKET AREA
<PAGE>
FERGUSON & COMPANY SECTION II
- ------------------ ----------
II. MARKET AREA
DEMOGRAPHICS
Newport Federal Savings Bank ("Newport Federal" or "Bank") conducts
its operations through one office located in Newport, Jackson County, Arkansas.
Arkansas is in the southeastern region of the United States. Jackson County is
in the northeastern section of Arkansas.
Newport Federal has determined that its principal trade area is
Jackson County and parts of the contiguous counties. Table II.1 presents
historical and projected trends for the United States, Arkansas, Jackson County,
and zip code 72112, which includes the City of Newport. The information
addresses population, income, employment, and housing trends.
As indicated in Table II.1, population growth rates for Arkansas are
close but slightly above the United States growth rate. Growth rates for
Jackson County and zip code 72112 are well below both Arkansas and the United
States. Household income growth for Arkansas, Jackson County, and zip code
72112 is projected to be above that of the United States for the period 1996 to
2001.
In the period from 1990 until 1996, the population of the State of
Arkansas grew 6.94%. During the same period, the Jackson County population
decreased 2.37%, zip code 72112 decreased 2.86%, and the United States
population increased 6.67%. Projections of population growth from 1996 through
2001 indicate that the State of Arkansas will increase 5.48%, while Jackson
County is projected to decrease by 1.90%, zip code 72112 is projected to
decrease 2.00%, and the United States population is projected to increase by
5.09%.
Household income is projected to decrease by .64% for Jackson County
from 1996 to 2001. For the same period, household income is projected to
increase by 2.92% for the State of Arkansas, decrease by .80% for zip code
72112, and decline by 3.88% for the United States. Per capita and household
income levels for the State of Arkansas are well below those of the United
States, and per capita and household income levels for Jackson County and zip
code 72112 are well below the State of Arkansas.
The 2001 estimate shows that, for Jackson County, households with
incomes less than $15,000 are expected to be 36%; those with incomes between
$15,000 and $25,000 are estimated at 21%; those with incomes between $25,000 and
$50,000 are estimated at 29%; those with incomes between $50,000 and $100,000
are estimated at 12%; and households with incomes in excess of $100,000 are
projected to be 3%. The 2001 estimates for Arkansas are 27%, 20%, 34%, 16%, and
3%, respectively. The 2001 estimate for zip code 72112 is 37%, 20%, 29%, 12%,
and 3%, respectively.
The number of households in Jackson County is projected to decrease by
1.93% from 1996 to 2001, well below the projection for the State of Arkansas
which calls for an increase of 5.64% and in line with the projected decline for
zip code 72112 at 2.05%. While the household growth rate for Arkansas is
slightly higher than that of the United States (5.64% versus 5.14%), the
household growth rate for Jackson County and zip code 72112 are well below the
projected growth rate for the U.S. and Arkansas.
With projections of a slight decline in population and number of
households, combined with projections of a slightly declining household income,
the market for housing units will be flat. Zip code 72112 has approximately
5,800 housing units, of which 59.66% are owner occupied, and a vacancy rate of
8.81%. Jackson County has approximately 8,100 housing units, of which 62.42%
are owner occupied, and a vacancy rate of 8.97%.
The principal sources of employment in Jackson County are
manufacturing--23.3%; trade--23.0%; public administration--15.2%; and services--
22.6%.
Analysis of the data presented above presents a picture of limited
economic opportunity, suggesting that Newport Federal's growth opportunities
within its current market area will be limited.
1
<PAGE>
FERGUSON & COMPANY SECTION II
- ------------------ ----------
Based on information publicly available on deposits as of June 30, 1996
(see Table II.3), Jackson County had $187.6 million in deposits and Newport
Federal had 15.81% of the deposit market, down slightly from 16.08% of the
market at June 30, 1994. The Bank's recent deposit growth rate has been
moderate, in line with the overall market. Newport Federal's competition
consists of 9 commercial bank offices. The Bank's growth rate has accelerated
since the Bank moved into its new building in September 1995. Table II.3 shows
that from June 30, 1994 to 1996, Newport Federal's deposits increased by $2.321
million (8.5%), while the overall market increased $17.583 million in deposits
(10.3%). The Bank's deposits increased $1.416 million (4.8%) from June 30, 1996,
to June 30, 1997. In August 1997, Newport Federal agreed to buy NationsBank's
Newport office, with approximately $6.0 million in deposits. The Bank's business
plan projects that its deposits will continue to grow at a healthy pace in the
future. The Bank intends to market its services and products more aggressively.
Building permit information was not available. However, projected
population and household income growth rates in Newport Federal's market area
portend limited lending opportunities within the market.
Growth opportunities for Newport Federal 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 the Bank, 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 Bank.
A prison will be opening in the Newport area in early 1998. It is
expected to employ approximately 300. This will have a positive effect on the
immediate area. Within a 30 mile radius of Newport, there is a population base
of approximately 110,000. Therefore, if the Bank reaches a position of limited
opportunities within the immediate trade area, it is fairly simple to expand its
trade area by branching or opening loan production offices. Management if well
aware of this, and is prepared to expand if the economics justify it.
2
<PAGE>
Section II
----------
FERGUSON & COMPANY
- ------------------
Table II.1 - Demographic Trends
Key Economic Indicators
United States, Arkansas, Jackson County, Zip Code 72112
<TABLE>
<CAPTION>
=======================================================================================================================
United Jackson Zip Code
Key Economic Indicator States Arkansas County 72112
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Population, 2001 Est. 278,802,003 2,651,619 18,144 12,896
1996 - 2001 Percent Change, Est. 5.09 5.48 (1.90) (2.00)
Total Population, 1996 Est. 265,294,885 2,513,924 18,495 13,159
1990 - 96 Percent Change, Est. 6.67 6.94 (2.37) (2.86)
Total Population, 1990 248,709,873 2,350,725 18,944 13,546
-----------------------------------------------------------------------------------------------------------------------
Household Income, 2001 Est. 33,189 27,040 20,333 20,524
1996 - 2001 Percent Change, Est. (3.88) 2.92 (0.64) (0.80)
Household Income, 1996 Est. 34,530 26,272 20,464 20,689
-----------------------------------------------------------------------------------------------------------------------
Per Capita Income, 1990 16,738 13,087 11,200 11,606
-----------------------------------------------------------------------------------------------------------------------
Household Income Distribution-2001 Est. (%)
$15,000 and less 20 27 36 37
$15,000 - $25,000 16 20 21 20
$25,000 - $50,000 34 34 29 29
$50,000 - $100,000 24 16 12 12
$100,000 - $150,000 4 2 2 2
$150,000 and over 2 1 1 1
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Unemployment rate, 1990 6.24 5.98 5.40 5.41
-----------------------------------------------------------------------------------------------------------------------
Median Age of Population, 1996 Est. 34.3 35.3 37.9 37.7
Median Age of Population, 1990 32.9 33.8 36.7 36.6
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Average Housing Value, 1990 79,098 55,138 41,357 45,697
-----------------------------------------------------------------------------------------------------------------------
Total Households, 2001 Est. 103,293,062 1,008,845 7,051 4,979
1996 - 2001 Percent Change, Est. 5.14 5.64 (1.93) (2.05)
Total Households, 1996 98,239,161 955,003 7,190 5,083
1990 - 96 Percent Change, Est. 6.84 7.16 (2.32) (2.87)
Total Households, 1990 91,947,410 891,179 7,361 5,233
-----------------------------------------------------------------------------------------------------------------------
Total Housing Units, 1990 101,641,260 1,000,667 8,086 5,764
% Vacant 10.07 10.94 8.97 8.81
% Occupied 89.93 89.06 91.03 91.19
% By Owner 57.78 61.95 62.42 59.66
% By Renter 32.15 27.11 28.62 31.52
=======================================================================================================================
</TABLE>
3
Source: Scan/V.P.S. Inc.
<PAGE>
Section II
----------
FERGUSON & COMPANY
- ------------------
Table II.2-Percent Employment by Industry
<TABLE>
<CAPTION>
United Jackson
Industry States Arkansas County
========================================== ============ ============== =============
<S> <C> <C> <C>
Construction/Agriculture/Mining 9.5 6.3 7.9
Manufacturing 17.7 24.4 23.3
Transportation/Utilities 7.1 5.8 5.1
Trade 21.2 23.8 23.0
Finance/Insurance 6.9 4.0 2.9
Services 32.7 21.6 22.6
Public Administration 4.8 14.1 15.2
</TABLE>
4
Source: State of Arkansas Employee Division
<PAGE>
Section II
----------
FERGUSON & COMPANY
- ------------------
Table II.3 - Market Area Deposits
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
1996 1995 1994
------------ ------------ ------------
(in Thousands)
<S> <C> <C> <C>
Jackson County Deposits
Total Newport Federal Savings bank $ 29,657 $ 27,772 $ 27,336
------------ ------------ ------------
Number of Branches 1 1 1
Total Bank Deposits $ 157,895 $ 148,050 $ 142,633
------------ ------------ ------------
Number 5 4 5
Number of Branches 9 8 10
Total Deposits $ 187,552 $ 175,822 $ 169,969
============ ============ ============
Percent of Deposits Held by
Newport Federal SB 15.81% 15.80% 16.08%
============ ============ ============
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: In August 1997, the Bank agreed to buy NationsBank's
office in Newport. That office had approximately $6.0 million
in deposits. The deposits will be combined with the Bank's existing
office in Newport.
5
Source: BranchSource, a product of Sheshunoff Information Services, Inc.
<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 Newport Federal Savings Bank
("Newport Federal" or the "Bank") 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
Newport Federal'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 Newport Federal
to the comparative group. Exhibits III and IV contain selected financial
information on Newport Federal 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 up to $100 million. The Southeast Region, which includes Arkansas,
had 7 thrifts that met the size requirements. We found 57 thrifts that met the
asset size requirements in the entire country (we consider 10 to be the minimum
number), and we retained 12 and eliminated 45 for the following reasons: (a) One
was a mutual holding company; (b) Twenty-two did not have PE ratios for the last
twelve months; (c) Twenty-three had tangible equity over 20% of assets; (d) One
had agreed to be acquired; (e) Seven had non-performing assets in excess of 1.0%
of assets; (f) Three had loans to deposits ratios below 50%; (g) Twenty-three
had loans to deposits ratios over 100%; and (h) Four had loans serviced in
excess of 40% of assets. After eliminating the thrifts described above, there
were fourteen left. We then eliminated the two remaining with the most in
assets.
The principal source of data was SNL Securities, Charlottesville,
Virginia. There are approximately 400 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 257 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 others are located in the Southwest (1) and Mid-Atlantic
(2) Regions. With total assets of approximately $34.4 million, Newport Federal
is well below the group selected, which has average assets of $74.3 million and
median assets of
1
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
$82.5 million. Newport Federal's assets after conversion will continue to be
much smaller than the comparative group. Pro forma assets at the midpoint are
$36.4 million.
Profitability
Using the comparison of profitability components as a percentage of
average assets, Newport Federal was below the comparative group in net income,
.41% to .58%; net interest income, 2.63% to 3.51%; loss provisions, .26% to
.08%; noninterest income, .06% to .24%; efficiency ratio, 75.63% to 64.19%; and
core income, .41% to .82%. Newport Federal was above the comparative group in
operating expense, 2.03% to 2.42%. Newport Federal's operating expense minus
other income was 1.97% versus 2.18% for the comparative group. After conversion,
deployment of the proceeds will provide additional income, and Newport Federal
will compare more favorably with the comparative group in terms of return on
average assets, with a return of .52% at the midpoint of the appraisal range.
Pro forma return on average equity is 4.13% at the midpoint, versus a mean of
5.03% and median of 4.67% for the comparative group.
As compared with the comparative group, Newport Federal has a lower
level of operating expense. Newport Federal is below the comparative group in
all other areas of operations shown on Table III.2. Newport Federal has two
serious impediments to earnings relative to the comparative group--1) its
spread; and 2) its ratio of interest earning assets to interest bearing
liabilities. The proceeds from the stock sale will improve most of Newport
Federal's operating ratios. However, it will take some time and asset growth to
overcome the significant recent investment in non-earning assets--the new
building. In addition, improving the spread will require growth in higher
yielding loans and lower costing liabilities.
Balance Sheet Characteristics
The general asset composition of Newport Federal is similar to that of
the comparative group. Newport Federal has a lower level of passive investments
with 21.81% of its assets invested in cash, investments, and mortgage-backed
securities, versus 35.13% for the comparative group. Newport Federal has a
higher percentage of its assets in loans, at 72.12% versus 60.48% for the
comparative group. Newport Federal's percentage of earning assets to interest
costing liabilities is much lower than that of the group. Newport Federal has
104.25% and the comparative group averages 116.14%. After conversion, Newport
Federal's ratio will continue to be lower than that of the group of
comparatives.
The liability side differs mainly in that Newport Federal has a lower
percentage of borrowings, a higher percentage of deposits, and a lower
percentage of equity. Newport Federal has borrowings equal to 1.80% of assets
versus 13.20% for the comparative group and deposits equal to 90.38% of assets
versus 70.79% for the comparative group. Newport Federal`s equity is 6.59% of
assets versus 14.77% for the comparative group. Newport Federal's equity ratio
after conversion will be in line with that of the comparative group. Newport
Federal's pro forma equity ratio at the midpoint is 11.9% (13.8% at the
supermaximum).
Risk Factors
Newport Federal and the comparative group have similar levels of non-
performing assets. Newport Federal's loan loss allowance is .60% of net loans,
which is in line with the comparative group at .62%. Approximately 28.6% of
Newport Federal's loans are long-term, fixed rate, 56.5% of its loans are long-
term, adjustable, and 14.9% are fixed rate short to intermediate term loans.
Newport Federal does not prepare a gap table, relying instead on a rate shock
table. Its rate shock table indicates a 6% decline in net portfolio value at a
200 basis point increase in rates and a 22% decline in net portfolio value at a
400 basis point rate increase (see Table I.3). These levels of NPV decline
indicate minimal interest rate risk. The comparative group information indicates
a negative 10.38% one year gap to assets. However, only two of the twelve
members of the group reported their gap. Overall, we believe that Newport
Federal's interest rate risk management is superior to that of the comparative
group.
2
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
Summary of Financial Comparison
Based on the above discussion of operational, balance sheet, and risk
characteristics of Newport Federal compared with the group, we believe that
Newport Federal's performance is slightly below that of the comparative group.
Newport Federal is in a transition period. It recently completed a new building,
thereby increasing non-earning assets, decreasing earning assets, and increasing
operating expenses, i.e., occupancy costs. The conversion proceeds will improve
several of Newport Federal's financial aspects, but, after conversion, the Bank
will continue to lag the comparative group in most financial areas. Expansion of
the earnings base is needed to overcome the financial effect of the new
building. The conversion and the pending branch deposit purchase will both help.
FUTURE PLANS
Newport Federal's future plans are to be a well capitalized but
leveraged, profitable institution with good asset quality and a commitment to
serving the needs of its trade area. The business plan projects that the Bank
will grow, leveraging the capital as rapidly as practical.
In recent years, Newport Federal has experienced moderate growth. The
Bank's business plan projects that it will experience growth in loans, savings
deposits, and liquidity. The additional capital raised by the sale of Common
Stock will initially be used to purchase short term investment securities.
Increasing market penetration by increasing the number of services and
products available and the number of locations is the most likely method to be
employed to achieve growth on a long-term basis.
3
<PAGE>
FERGUSON & COMPANY Table III.1 - Comparatives General Characteristics
- ------------------
Section III
-----------
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
Type of ($000) Price Value
Ticker Short Name City State Thrift (1) Offices MRQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY Traditional 2 68,628 07/26/93 23.250 5.81
GUPB GFSB Bancorp Inc. Gallup NM Traditional 1 86,911 06/30/95 18.750 15.08
HBBI Home Building Bancorp Washington IN Traditional 2 45,064 02/08/95 20.500 6.39
HHFC Harvest Home Financial Corp. Cheviot OH Traditional 3 87,596 10/10/94 11.750 10.75
HZFS Horizon Financial Svcs Corp. Oskaloosa IA Traditional 3 85,969 06/30/94 18.875 8.03
KYF Kentucky First Bancorp Inc. Cynthiana KY Traditional 2 88,959 08/29/95 12.500 16.49
LOGN Logansport Financial Corp. Logansport IN Traditional 1 83,152 06/14/95 14.625 18.43
MIVI Mississippi View Holding Co. Little Falls MN Traditional 1 69,775 03/24/95 15.500 12.69
NSLB NS&L Bancorp Inc. Neosho MO Traditional 2 59,711 06/08/95 18.500 13.09
SFFC StateFed Financial Corp Des Moines IA Traditional 2 85,679 01/05/94 22.000 17.24
SOBI Sobieski Bancorp Inc. South Bend IN Traditional 3 81,754 03/31/95 16.438 12.74
USAB USABancshares, Inc. Philadelphia PA Traditional 1 48,303 NA 8.125 5.97
Maximum 3 88,959 23.250 18.43
Minimum 1 45,064 8.125 5.81
Average 2 74,292 16.734 11.89
Median 2 82,453 17.469 12.72
</TABLE>
(1) Made determination by reference to TAFS and BankSource reports. TAFS reports
are derived from quarterly reports filed with the OTS and BankSource reports are
derived from call reports filed with the FDIC. TAFS and BankSource are published
by Sheshunoff Information Services, Austin, Texas.
4
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Section III
- ------------------ -----------
Table III.2 - Key Financial Indicators
<TABLE>
<CAPTION>
Newport
Federal Comparative
Savings Bank Group
------------------------ ----------------------
<S> <C> <C>
Profitability
(% of average assets)
Net income (1) 0.41 0.58
Net interest income 2.63 3.51
Loss (recovery) provisions 0.26 0.08
Other operating income 0.06 0.24
Operating expense (2) 2.03 2.42
Efficiency ratio (2) 75.63 64.19
Core income (excluding gains
and losses on asset sales) (1) 0.41 0.82
Balance Sheet Factors
(% of assets)
Cash and investments 7.04 23.20
Mortgage-backed securities (including CMO's) 14.77 11.93
Loans 72.12 60.48
Savings deposits 90.38 70.79
Borrowings 1.80 13.20
Equity 6.59 14.77
Tangible equity 6.59 14.76
Risk Factors
(%)
Earning assets/costing liabilities 104.25 116.14
Non-performing assets/assets 0.21 0.37
Loss allowance/non performing assets 202.70 163.21
Loss allowance/loans 0.60 0.62
One year gap/assets (3) NA (10.38)
</TABLE>
(1) Used appraisal earnings.
(2) Excluded SAIF assessment and directors' benefit plan cost.
(3) Only two of the 12 in the group reported one year gap.
5
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Table III.3 - Pro Forma Comparisons Section III
- ------------------ -----------
Newport Federal Savings Bank
<TABLE>
<CAPTION>
As of September 2, 1997
Ticker Name Price Mk Value PE P/Book P/TBook P/Assets Div Yld Assets Eq/A
($) ($Mil) (X) (%) (%) (%) (%) ($000) (%)
Newport Federal SB
------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Before Conversion N/A N/A N/A N/A N/A N/A N/A 34,379 6.6
Pro Forma Supermaximum 10.000 3.70 18.3 72.3 72.3 9.9 N/A 37,238 13.8
Pro Forma Maximum 10.000 3.22 16.8 68.5 68.5 8.7 N/A 36,813 12.8
Pro Forma Midpoint 10.000 2.80 15.3 64.7 64.7 7.7 N/A 36,443 11.9
Pro Forma Minimum 10.000 2.38 13.7 60.1 60.1 6.6 N/A 36,073 11.0
Comparative Group
-----------------
Averages 16.734 11.89 22.2 106.6 106.8 15.9 2.03 74,292 14.8
Medians 17.469 12.72 22.2 107.5 107.5 16.8 1.88 82,453 15.7
Arkansas Thrifts
----------------
Averages 23.083 61.70 16.1 150.9 150.9 17.9 2.37 361,754 12.3
Medians 22.250 42.44 16.7 148.0 148.0 19.2 2.52 378,700 15.0
Southeast Region Thrifts
------------------------
Averages 23.186 89.72 17.7 152.1 159.9 17.7 2.13 621,931 12.2
Medians 21.125 72.23 18.0 145.1 145.1 15.8 2.15 367,709 10.8
All Public Thrifts
------------------
Averages 23.857 251.94 16.8 149.9 157.8 15.3 1.80 1,612,216 10.8
Medians 21.250 60.07 16.7 142.7 147.1 14.3 1.76 397,730 9.4
Comparative Group
-----------------
ALBC AlbionBancCorp-NY 23.250 5.81 24.0 97.0 97.0 8.5 1.38 68,628 8.7
GUPB GFSBBancorp-NM 18.750 15.08 22.3 111.1 111.1 18.1 2.13 86,911 16.3
HBBI HomeBldngBncrp-IN 20.500 6.39 25.6 101.7 101.7 14.2 1.46 45,064 12.8
HHFC HarvestHome-OH 11.750 10.75 22.2 103.9 103.9 12.3 3.40 87,596 11.8
HZFS HorizonFinSvcs-IA 18.875 8.03 17.5 95.5 95.5 9.3 1.70 85,969 9.8
KYF KYFirstBancorp-KY 12.500 16.49 16.0 112.0 112.0 18.5 4.00 88,959 16.6
LOGN LogansprtFinCrp-IN 14.625 18.43 15.6 115.5 115.5 22.2 2.74 83,152 19.2
MIVI MissViewHoldCo-MN 15.500 12.69 17.8 96.3 96.3 18.2 1.03 69,775 18.9
NSLB NS&LBancorp-MO 18.500 13.09 30.8 112.1 112.1 21.9 2.70 59,711 19.6
SFFC StateFedFinCorp-IA 22.000 17.24 15.2 113.2 113.2 20.1 1.82 85,679 17.8
SOBI SobieskiBancorp-IN 16.438 12.74 27.0 95.4 95.4 15.6 1.95 81,754 15.1
USAB USABancshares-PA 8.125 5.97 32.5 126.2 128.6 12.4 - 48,303 10.8
</TABLE>
6
<PAGE>
FERGUSON & COMPANY Table III.3 - Pro Forma Comparisons Section III
- ------------------ -----------
Newport Federal Savings Bank
As of September 2, 1997
<TABLE>
<CAPTION>
Ticker Name TEq/A EPS ROAA ROAE
(%) ($) (%) (%)
Newport Federal SB
------------------
<S> <C> <C> <C> <C> <C>
Before Conversion 6.6 N/A 0.41 5.79
Pro Forma Supermaximum 13.8 0.55 0.56 3.88
Pro Forma Maximum 12.8 0.60 0.54 4.00
Pro Forma Midpoint 11.9 0.65 0.52 4.13
Pro Forma Minimum 11.0 0.73 0.50 4.28
Comparative Group
-----------------
Averages 14.8 0.81 0.82 5.03
Medians 15.7 0.82 0.68 4.67
Arkansas Thrifts
----------------
Averages 12.3 1.46 1.16 9.42
Medians 15.0 1.56 1.06 10.43
Southeast Region Thrifts
------------------------
Averages 12.0 1.38 1.08 9.23
Medians 10.4 1.32 0.99 8.82
All Public Thrifts
------------------
Averages 10.5 1.52 1.02 10.09
Medians 8.9 1.32 0.93 8.92
Comparative Group
-----------------
ALBC AlbionBancCorp-NY 8.7 0.97 0.37 4.03
GUPB GFSBBancorp-NM 16.3 0.84 0.93 4.89
HBBI HomeBldngBncrp-IN 12.8 0.80 0.52 4.03
HHFC HarvestHome-OH 11.8 0.53 0.57 4.44
HZFS HorizonFinSvcs-IA 9.8 1.08 0.55 5.25
KYF KYFirstBancorp-KY 16.6 0.78 1.13 5.83
LOGN LogansprtFinCrp-IN 19.2 0.94 1.51 7.40
MIVI MissViewHoldCo-MN 18.9 0.87 1.03 5.77
NSLB NS&LBancorp-MO 19.6 0.60 0.77 3.72
SFFC StateFedFinCorp-IA 17.8 1.45 1.37 7.36
SOBI SobieskiBancorp-IN 15.1 0.61 0.59 3.57
USAB USABancshares-PA 10.6 0.25 0.55 4.05
</TABLE>
Note: Stock prices are closing prices or last trade. Pro forma
calculations for Newport FSB are based on sales at $10 a share
with a minimum of $2,380,000, midpoint of $2,800,000, maximum of
$3,220,000, and supermaximum of $3,703,000. Sources: Newport
FSB'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 Newport Federal'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 Bank 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 Newport
Federal'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, Newport Federal is
below its comparative group in core income as a percentage of average assets.
Newport Federal'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. Newport Federal's net interest income as a percent
of assets is 2.63% versus 3.51% for the comparatives. The difference is
attributable to 1) Newport Federal's lower ratio of interest-earning assets to
interest-bearing liabilities, which is caused by a combination of its lower
capital position and its higher investment in non-earning assets, i.e., its new
building; and 2) Newport Federal's deposit mix, which includes more certificate
accounts, which have higher rates. Exhibit III, page 2 indicates that Newport
Federal's cost of funds was in the 20th percentile for calendar years 1994,
1995, and 1996, and the 22nd percentile for the three months ending March 31,
1997. Generally, this means that Newport Federal's average cost of funds was
higher than approximately 80% of OTS supervised thrifts in its asset range. The
peer group that Newport Federal is compared to is all thrifts between $25
million and $50 million in assets filing quarterly reports with the Office of
Thrift Supervision.
Newport Federal's loan loss provisions are well above its comparative
group, with loss provisions of .26% of assets versus .08% of assets for the
comparative group. However, this is not indicative of higher levels of asset
problems at Newport Federal. This results simply from Newport Federal making a
significant addition to its loan loss allowance for this year. Newport Federal's
other operating income is .06% of average assets, versus .24% for the
comparative group. Newport Federal's lower ratio results from its business mix.
Newport Federal's operating expense ratio, at 2.03% of average assets,
is well below that of the comparative group, which is 2.42%. Newport Federal's
lower ratio results from its more traditional business mix.
After Newport Federal completes its stock conversion, its core income as
a percentage of average assets will increase. Table III.3 projects that Newport
Federal's return on assets will be .52% at the midpoint, versus a mean of .82%
and median of .68% for the comparative group.
Newport Federal's pro forma equity to assets ratio at the midpoint is
11.9%, versus a mean of 14.8% and median of 15.7% for the comparative group.
Newport Federal's pro forma return on equity is 4.13% at the midpoint versus a
mean of 5.03% and median of 4.67% for the comparative group.
Newport Federal's recorded earnings have been adjusted for appraisal
purposes. The Bank recorded higher than normal loan loss provisions, prior
service funding of a directors' retirement plan, and the SAIF resolution
assessment.
1
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Table IV.1 - Appraisal Earnings Adjustments
<TABLE>
<S> <C>
Net loss, year ended June 30, 1997 $-199,000
Plus SAIF assessment 179,000
Plus previous service cost of directors' benefit plan 286,000
Plus loan loss provisions in excess of normal amount--90,000 - 30,000 60,000
Less applicable taxes on above adjustments at 36% -189,000
--------------
Appraisal earnings, year ended June 30, 1997 $137,000
==============
</TABLE>
Newport Federal's asset composition is less passive than the comparative
group. Newport Federal has a higher ratio of loans to assets, lower ratio of
investments and mortgage-backed securities to assets, higher ratio of deposits
to assets, lower ratio of borrowings to assets, and lower ratio of equity to
assets. From the risk factor viewpoint, Newport Federal is on level the
comparative group. Newport Federal has a slightly lower level of non performing
assets. Newport Federal's loan loss allowance is .60% of net loans, compared
with the comparative group, which is .62%. Its ratio of interest earning assets
to interest bearing liabilities (104.25%) is well below the comparative group
(116.14%). Newport Federal's ratio will be closer to the comparative group after
conversion. At the midpoint, Newport Federal's ratio would be approximately
112%, and at the supermaximum, it would be approximately 114%. From an interest
rate risk factor, Newport Federal probably has much less exposure than the
comparative group.
We believe that a slight downward adjustment is necessary relative to
-------------------
financial aspects of Newport Federal.
Market Area
Section II describes Newport Federal's market area.
We believe that no adjustment is required for Newport Federal's market
-------------
area.
Management
The President, who functions as CEO, has been with Newport Federal 6
years, serving as CEO the entire time. He is a certified public accountant with
approximately five years in public accounting, specializing in banking, and
three years in the thrift industry prior to joining Newport Federal in 1991. At
the time Mr. Snider joined Newport Federal, it was not in capital compliance and
it was operating under a regulatory agreement. These problems were resolved
within one year. Mr. Snider is the Bank's only executive, which places quite a
burden on him. The Board recognizes this and the Bank is currently searching for
an executive with skills to complement Mr. Snider. Newport Federal has no
management succession plan.
We believe no adjustment is required for Newport Federal'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 2.03% and a median of 1.88%, while all public thrifts are
paying a mean of 1.80% and median of 1.76%. Newport Federal does not intend to
commit to a dividend initially.
2
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
We believe that a slight downward adjustment is required relative to
-------------------
Newport Federal's intention to pay dividends.
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 intends to list its Common Stock over the counter through the OTC
"Electronic Bulletin Board," 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 Bank 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 $5.81 million to $18.43 million, with a mean
value of $11.89 million. The midpoint of Newport Federal's valuation range is
$2.8 million at $10 a share, or 280,000 shares.
We believe that a downward adjustment is required relative to the
-------------------
liquidity of Newport Federal'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
September 2, 1997--increased 40.1% to 677.6. 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 September 2, 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 40.1% (to 677.6)
from December 31, 1996 to September 2, 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.
ARKANSAS ACQUISITIONS
Table IV.2 provides information relative to acquisitions of financial
institutions in Arkansas between January 1, 1996 and May 31, 1997. There were
one thrift acquisition and seven bank acquisitions announced during that time
frame. Currently, there are four publicly held thrifts in the State of Arkansas.
There are sixty publicly held thrifts in the southeast region of the country.
Bank acquisitions in Arkansas since January 1, 1996, have averaged 209.7% of
tangible book value and 17.4 times earnings. The median
3
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
price has been 210.6% of tangible book value and 14.6 times earnings. Thrifts
generally sell at lower price/book multiples than do banks. Thrifts in Arkansas
during that period have averaged 161.2% of tangible book value and 15.6 times
earnings.
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.
- --------------------
/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
- ------------------ ----------
The consumer seems happier now than in the past. Job markets are strong
and the unemployment rate was recently 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").
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 February 27,
1997. At that time, the yield curve was relatively flat, with only a 119 basis
point ("BP") difference between the one year treasury bill rate and the 30 year
treasury. Since that time, the yield curve has changed very little with a 106 BP
spread between the one year treasury bill rate and the 30 year treasury rate at
August 29, 1997.
At February 27, 1997, 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 46 BP. On August 29, 1997, the spreads were 64 and 42 BP, respectively.
From February 27, 1997 to August 29, 1997, the Fed Funds rate increased
40 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.
Newport Federal, with its minimal interest rate risk, is less vulnerable
to rising rates than most. However, Management of Newport Federal now must pay
more attention to spread management than gap management, to improve the Bank's
profitability. Its continuing growth in consumer and commercial loans will
produce a higher spread.
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
5
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
provides information on nine conversions completed since February 28, 1997 and
listed on major exchanges. The average change in price since conversion is a
gain of 57.8% and the median change is a gain of 55.0%. Within that group, all
have increased in value with a range of a low of 36.3% to a high of 80.0%. 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 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 information, albeit limited, to review the price to
book ratio. The average price-to-book ratio, as of September 2, 1997, is 99.2%
and the median is 96.3%. That compares to the offering price to pro forma book,
where the average was 71.2% and the median was 71.9%.
Table IV.4 provides information on eight pink sheet conversions
completed since August 31, 1996. The average change in price since conversion is
a gain of 42.2% and the median change is a gain of 39.4%. Within that group, all
have increased in value with a range of a low of 27.5% to a high of 65.0%. The
average increase in value at one day, one week, and one month after conversion
has been 30.5%, 33.1%, and 34.3%, respectively. The median increase in value at
one day, one week, and one month after conversion has been 33.8%, 36.3%, and
37.5%, 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 information to review the price to book ratio. The
average price-to-book ratio, as of September 2, 1997, is 91.3% and the median is
89.7%. That compares to the offering price to pro forma book, where the average
was 68.8% and the median was 69.2%.
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.
6
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Table III.3 presents Newport Federal's pro forma ratios and compares
them to the ratios of its comparative group and the publicly held thrift
industry as a whole. Newport Federal's net loss for the twelve months ended June
30, 1997, were approximately $199,000, with adjustments of $336,000 required to
determine appraisal earnings of $137,000. Management has indicated an intention,
through its plans for diversification of deposit and loan products, coupled with
its recent agreement to buy NationsBank's Newport office, to exhibit the
flexibility in operations needed to serve both the public and the institution.
The Bank is well positioned to manage reasonable interest rate variations. The
Bank projects healthy growth.
The comparative group traded at an average of 22.2 times earnings at
September 2, 1997, and at 106.6% of book value. The comparative group traded at
a median of 22.2 times earnings and a median of 107.5% of book value. At the
midpoint of the valuation range, Newport Federal is priced at 15.3 times
earnings and 64.7% of book value. At the maximum end of the range, Newport
Federal is priced at 16.8 times earnings and 68.5% of book value. At the
supermaximum, Newport Federal is priced at 18.3 times earnings and 72.3% of book
value.
The midpoint valuation of $2,800,000 represents a discount of 39.3% from
the average and a discount of 39.8% from the median of the comparative group on
a price/book basis. The price/earnings ratio for Newport Federal at the midpoint
represents a discount of 31.1% from the comparative group's mean and a discount
of 31.1% from the median price/earnings ratio.
The maximum valuation of $3,220,000 represents a discount of 35.7% from
the average and 36.3% from the median of the comparative group on a price/book
basis. The price/earnings ratio for Newport Federal at the maximum represents a
discount of 24.3% from the average and a discount of 24.3% from the median of
the comparative group.
As shown in Table IV.3, conversions closing since February 28, 1997,
have closed at an average price to book ratio of 71.2% and median of 71.9%.
Newport Federal's pro forma price to book ratio is 64.7% at the midpoint, 68.5%
at the maximum, and 72.3% at the supermaximum of the range. At the midpoint,
Newport Federal is 9.1% below the average and 10.0% below the median. At the
maximum of the range, Newport Federal is 3.8% below the average and 4.7% below
the median. At the supermaximum of the range, Newport Federal's pro forma price
to book ratio is 1.5% above the average and .6% above the median.
As shown in Table IV.4, pink sheet conversions closing since
August 31, 1996, have closed at an average price to book ratio of 68.8% and
median of 69.2%. Newport Federal's pro forma price to book ratio is 64.7% at the
midpoint, 68.5% at the maximum, and 72.3% at the supermaximum of the range. At
the midpoint, Newport Federal is 6.0% below the average and 6.5% below the
median. At the maximum of the range, Newport Federal is .4% below the average
and 1.0% below the median. At the supermaximum of the range, Newport Federal's
pro forma price to book ratio is 5.1% above the average and 4.5% above the
median.
Valuation Conclusion
We believe that as of September 2, 1997, the estimated pro forma market
value of Newport Federal was $2,800,000. The resulting valuation range was
$2,380,000 at the minimum to $3,220,000 at the maximum, based on a range of 15%
below and 15% above the midpoint valuation. The supermaximum is $3,703,000,
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 - Arkansas Acquisitions Section IV
- ------------------ ----------
<TABLE>
<CAPTION>
Bank/
Buyer City ST Thrift
- ----- ---- -- ------
<S> <C> <C> <C>
Arkansas Banking Company Jonesboro AR Bank
First Commercial Corporation Little Rock AR Bank
First Commercial Corporation Little Rock AR Bank
First Security Bancorp Searcy AR Bank
First United Bancshares, Inc El Dorado AR Bank
Simmons First National Corporation Pine Bluff AR Bank
Southeast Arkansas Bank Parkdale AR Bank
First Federal Savings & Loan Assoc. Camden AR Thrift
</TABLE>
<TABLE>
<CAPTION>
Bank/
Seller City ST Thrift
- ------ ---- -- ------
<S> <C> <C> <C>
Mercantile Bank of Batesville, NA Batesville AR Bank
First Central Corporation Searcy AR Bank
Southwest Bancshares, Inc. Jonesboro AR Bank
First Community Bank Conway AR Bank
Carlisle Bancshares Carlisle AR Bank
First Banks of Arkansas-Russellville, Searcy Russellville AR Bank
Wilmot State Bank Wilmot AR Bank
Heritage Banc Holding, Inc Little Rock AR Thrift
Maximun
Minimum
Average
Median
Average--banks
Median--banks
Average--thrifts
Median--thrifts
</TABLE>
8
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Table IV.2 - Arkansas Acquisitions Section IV
- ------------------ ----------
<TABLE>
<CAPTION>
Buyer Seller Ann'd
Total Total Completed/ Deal
Assets Assets Announce Terminated Value
Seller ($000) ($000) Date Status Date ($M)
- ------ ------ ------ ---- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C>
Mercantile Bank of Batesville, NA 219,199 42,168 4/18/96 Completed 8/11/96 4.50
First Central Corporation 5,530,783 252,226 2/5/97 Pending NA 62.30
Southwest Bancshares, Inc. 5,304,554 755,065 12/20/96 Completed 5/15/97 128.00
First Community Bank 466,584 83,499 7/31/96 Pending NA NA
Carlisle Bancshares 1,336,020 100,794 4/1/96 Completed 8/30/96 13.00
First Banks of Arkansas-Russellville, Searcy 881,332 343,426 3/24/97 Pending NA 53.00
Wilmot State Bank 35,439 11,384 2/20/96 Completed 7/1/96 NA
Heritage Banc Holding, Inc 141,188 28,006 2/22/96 Completed 5/3/96 3.30
Maximun 5,530,783 755,065 128.00
Minimum 35,439 11,384 3.30
Average 1,739,387 202,071 44.02
Median 673,958 92,147 33.00
Average--banks 1,967,702 226,937 52.16
Median--banks 881,332 100,794 53.00
Average--thrifts 141,188 28,006 3.30
Median--thrifts 141,188 28,006 3.30
</TABLE>
9
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Table IV.2 - Arkansas Acquisitions Section IV
- ------------------ ----------
<TABLE>
<CAPTION>
Ann'd Ann'd Ann'd Final Final Final Final
Deal Deal Pr/ Deal Pr/ Deal Deal Deal Pr/ Deal Pr/
Pr/Bk Tg Bk 4-Qtr Value Pr/Bk Tg Bk 4-Qtr
Seller (%) (%) EPS (x) ($M) (%) (%) EPS (x)
- ------ ----- ------ -------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Mercantile Bank of Batesville, NA 139.8 151.1 29.0 4.50 141.6 152.7 24.9
First Central Corporation 215.8 215.8 14.6 NA NA NA NA
Southwest Bancshares, Inc. 248.6 263.1 18.2 138.20 258.2 271.8 24.1
First Community Bank NA NA NA NA NA NA NA
Carlisle Bancshares 185.0 208.0 11.4 13.60 184.1 205.0 10.7
First Banks of Arkansas-Russellville, Searcy 195.1 210.6 13.7 NA NA NA NA
Wilmot State Bank NA NA NA NA NA NA NA
Heritage Banc Holding, Inc 161.2 161.2 15.6 3.30 161.2 161.2 15.6
Maximun 248.6 263.1 29.0 138.20 258.2 271.8 24.9
Minimum 139.8 151.1 11.4 3.30 141.6 152.7 10.7
Average 190.9 201.6 17.1 39.90 186.3 197.7 18.8
Median 190.0 209.3 15.1 9.05 172.6 183.1 19.9
Average--banks 196.9 209.7 17.4 52.10 194.6 209.9 19.9
Median--banks 195.1 210.6 14.6 13.60 184.1 205.0 24.1
Average--thrifts 161.2 161.2 15.6 3.30 161.2 161.2 15.6
Median--thrifts 161.2 161.2 15.6 3.30 161.2 161.2 15.6
</TABLE>
10
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Table IV.3 - Recent Conversions Section IV
- ------------------ ----------
(Completed since February 28, 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>
11
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Table IV.3 - Recent Conversions Section IV
- ------------------ ----------
(Completed since February 28, 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) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
FSPT 73.0 73.0 26.0 19.1 35.500 NA NA
GOSB 73.4 73.4 23.2 18.9 14.625 NA NA
FBNW 71.9 71.9 19.2 13.0 18.000 NA NA
CFBC 72.7 72.7 36.1 12.0 34.500 NA NA
HCBB 72.0 72.0 29.0 13.4 13.625 NA NA
PSFC 71.2 71.2 11.5 17.0 15.500 NA NA
HMLK 71.6 71.6 37.5 12.4 15.375 105.5 105.5
GSLA 63.8 63.8 38.7 28.4 15.750 96.3 96.3
MRKF 71.1 71.1 26.2 22.7 14.188 95.7 95.7
Maximum 73.4 73.4 38.7 28.4 35.500 105.5 105.5
Minimum 63.8 63.8 11.5 12.0 13.625 95.7 95.7
Average 71.2 71.2 27.5 17.4 19.674 99.2 99.2
Median 71.9 71.9 26.2 17.0 15.500 96.3 96.3
</TABLE>
12
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Table IV.3 - Recent Conversions Section IV
- ------------------ ----------
(Completed since February 28, 1997)
<TABLE>
<CAPTION>
Post Conversion Price Increase (Decrease)
Price One Price One Price One --------------------------------------------------
Day After Week After Month After One One One To
Conversion Conversion Conversion Day Week Month Date
Ticker ($) ($) ($) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
FSPT 36.688 37.000 35.625 83.4 85.0 78.1 77.5
GOSB 14.625 14.875 14.375 46.3 48.8 43.8 46.3
FBNW 15.813 15.563 17.750 58.1 55.6 77.5 80.0
CFBC 31.875 33.000 34.000 59.4 65.0 70.0 72.5
HCBB 12.625 12.750 12.875 26.3 27.5 28.8 36.3
PSFC 12.563 12.875 13.250 25.6 28.8 32.5 55.0
HMLK 12.875 12.875 13.000 28.8 28.8 30.0 53.8
GSLA 13.375 13.750 14.000 33.8 37.5 40.0 57.5
MRKF 12.938 12.250 12.625 29.4 22.5 26.3 41.9
Maximum 36.688 37.000 35.625 83.4 85.0 78.1 80.0
Minimum 12.563 12.250 12.625 25.6 22.5 26.3 36.3
Average 18.153 18.326 18.611 43.4 44.4 47.4 57.8
Median 13.375 13.750 14.000 33.8 37.5 40.0 55.0
</TABLE>
13
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Section IV
- ------------------ ----------
Table IV.4 - Recent Pink Sheet Conversions
(Completed since August 31, 1996)
<TABLE>
<CAPTION>
Conversion
Assets IPO Proceeds IPO Price
Ticker Short Name State IPO Date ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C>
WSBH WSB Holding Co. PA 08/29/97 33,139 3,306 10.000
SCYT Security Bancorp, Inc. TN 06/30/97 44,121 4,364 10.000
SVBC Sistersville Bancorp Inc. WV 06/26/97 26,258 6,614 10.000
SFBK SFB Bancorp Inc. TN 05/30/97 46,579 7,670 10.000
RFFC Rocky Ford Financial Inc. CO 05/22/97 20,388 4,232 10.000
VBAS Vermilion Bancorp Inc. IL 03/26/97 35,459 3,968 10.000
FALN First Allen Parish Bncp Inc. LA 09/30/96 29,605 2,645 10.000
MDWB Midwest Savings Bank IL 09/23/96 36,354 1,918 10.000
Maximum 46,579 7,670 10.000
Minimum 20,388 1,918 10.000
Average 33,988 4,340 10.000
Median 34,299 4,100 10.000
</TABLE>
14
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Table IV.4 - Recent Pink Sheet Conversions Section IV
- ------------------ ----------
(Completed since August 31, 1996)
<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) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
WSBH 71.4 71.4 NA 9.1 14.000 NA NA
SCYT 72.9 72.9 18.1 9.0 15.500 106.0 106.0
SVBC 65.4 65.4 26.7 20.1 13.875 86.0 86.0
SFBK 69.6 69.6 17.7 14.1 14.625 95.4 95.4
RFFC 68.8 68.8 17.7 17.2 13.500 89.7 89.7
VBAS 71.4 71.4 NA 10.1 12.750 80.0 80.0
FALN 65.5 65.5 8.8 8.2 16.500 97.8 97.8
MDWB 65.1 65.1 NA 5.0 13.000 84.2 84.2
Maximum 72.9 72.9 26.7 20.1 16.500 106.0 106.0
Minimum 65.1 65.1 8.8 5.0 12.750 80.0 80.0
Average 68.8 68.8 17.8 11.6 14.219 91.3 91.3
Median 69.2 69.2 17.7 9.6 13.938 89.7 89.7
</TABLE>
15
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Table IV.4 - Recent Pink Sheet Conversion Section IV
- ------------------ ----------
(Completed since August 31, 1996)
<TABLE>
<CAPTION>
Post Conversion Price Increase (Decrease)
Current Price One Price One Price One -------------------------------------------------
Price/ Day After Week After Month After One One One To
Earnings Conversion Conversion Conversion Day Week Month Date
Ticker (x) ($) ($) ($) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WSBH NA 13.500 14.000 NA 35.0 40.0 NA 40.0
SCYT NA 14.500 15.000 15.250 45.0 50.0 52.5 55.0
SVBC NA 13.750 13.875 14.250 37.5 38.8 42.5 38.8
SFBK NA 13.813 13.750 14.000 38.1 37.5 40.0 46.3
RFFC NA 13.000 13.125 13.500 30.0 31.3 35.0 35.0
VBAS 16.8 12.375 12.250 12.125 23.8 22.5 21.3 27.5
FALN 11.8 13.250 13.500 13.750 32.5 35.0 37.5 65.0
MDWB 10.2 10.250 11.000 11.125 2.5 10.0 11.3 30.0
Maximum 16.8 14.500 15.000 15.250 45.0 50.0 52.5 65.0
Minimum 10.2 10.250 11.000 11.125 2.5 10.0 11.3 27.5
Average 12.9 13.055 13.313 13.429 30.5 33.1 34.3 42.2
Median 11.8 13.375 13.625 13.750 33.8 36.3 37.5 39.4
</TABLE>
16
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Table IV.5 Section IV
- ------------------ ----------
Comparison of Pricing Ratios
<TABLE>
<CAPTION>
Group Percent Premium
Newport Compared to (Discount) Versus
----------------------------- -----------------------------
FSB Average Median Average Median
--------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Comparison of PE ratio at
midpoint to:
- ----------------------------------------
Comparative group 15.3 22.2 22.2 (31.1) (31.1)
Arkansas thrifts 15.3 16.1 16.7 (5.0) (8.4)
Southeast Region thrifts 15.3 17.7 18.0 (13.6) (15.0)
All public thrifts 15.3 16.8 16.7 (8.9) (8.4)
Recent conversions 15.3 27.5 26.2 (44.4) (41.6)
Recent pink sheet conversions 15.3 17.8 17.7 (14.0) (13.6)
Comparison of PE ratio at
maximum to:
- ----------------------------------------
Comparative group 16.8 22.2 22.2 (24.3) (24.3)
Arkansas thrifts 16.8 16.1 16.7 4.3 0.6
Southeast Region thrifts 16.8 17.7 18.0 (5.1) (6.7)
All public thrifts 16.8 16.8 16.7 - 0.6
Recent conversions 16.8 27.5 26.2 (38.9) (35.9)
Recent pink sheet conversions 16.8 17.8 17.7 (5.6) (5.1)
Comparison of PE ratio at
supermaximum to:
- ----------------------------------------
Comparative group 18.3 22.2 22.2 (17.6) (17.6)
Arkansas thrifts 18.3 16.1 16.7 13.7 9.6
Southeast Region thrifts 18.3 17.7 18.0 3.4 1.7
All public thrifts 18.3 16.8 16.7 8.9 9.6
Recent conversions 18.3 27.5 26.2 (33.5) (30.2)
Recent pink sheet conversions 18.3 17.8 17.7 2.8 3.4
Comparison of PB ratio at
midpoint to:
- ----------------------------------------
Comparative group 64.7 106.6 107.5 (39.3) (39.8)
Arkansas thrifts 64.7 150.9 148.0 (57.1) (56.3)
Southeast Region thrifts 64.7 152.1 145.1 (57.5) (55.4)
All public thrifts 64.7 149.9 142.7 (56.8) (54.7)
Recent conversions 64.7 71.2 71.9 (9.1) (10.0)
Recent pink sheet conversions 64.7 68.8 69.2 (6.0) (6.5)
Comparison of PB ratio at
maximum to:
- ----------------------------------------
Comparative group 68.5 106.6 107.5 (35.7) (36.3)
Arkansas thrifts 68.5 150.9 148.0 (54.6) (53.7)
Southeast Region thrifts 68.5 152.1 145.1 (55.0) (52.8)
All public thrifts 68.5 149.9 142.7 (54.3) (52.0)
Recent conversions 68.5 71.2 71.9 (3.8) (4.7)
Recent pink sheet conversions 68.5 68.8 69.2 (0.4) (1.0)
Comparison of PB ratio at
supermaximum to:
- ----------------------------------------
Comparative group 72.3 106.6 107.5 (32.2) (32.7)
Arkansas thrifts 72.3 150.9 148.0 (52.1) (51.1)
Southeast Region thrifts 72.3 152.1 145.1 (52.5) (50.2)
All public thrifts 72.3 149.9 142.7 (51.8) (49.3)
Recent conversions 72.3 71.2 71.9 1.5 0.6
Recent pink sheet conversions 72.3 68.8 69.2 5.1 4.5
</TABLE>
17
Source: SNL F&C Calculations
<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%
9/2/97 677.6 -1.0% 40.1%
</TABLE>
SNL INDEX
[LINE GRAPH APPEARS HERE]
18
Source: SNL F&C Calculations
<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>
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
- ------------------------------------------------------------------------------------------- ------------
22-Aug-97 5.59 5.53 6.12 6.27 6.57
29-Aug-97 5.56 5.60 6.24 6.38 6.66 1.06
- ------------------------------------------------------------------------------------------- ------------
</TABLE>
Rates February 27, 1997 through August 29, 1997
[LINE 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>
29-Aug-97 5.56 5.60 6.24 6.38 6.66 1.06
- ----------------------------------------------------------------------------------------------- -------------
</TABLE>
Current Yield Curve
[LINE GRAPH APPEARS HERE]
19
Source: SNL F&C Calculations
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT I
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit I - Firm Qualifications
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 Southeast 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>
BANC BankAtlantic Bancorp Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 12.750
BFSB Bedford Bancshares Inc. Bedford VA SE SAIF NASDAQ 08/22/94 24.125
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 12.125
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 21.750
CFTP Community Federal Bancorp Tupelo MS SE SAIF NASDAQ 03/26/96 17.375
CNIT CENIT Bancorp Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 50.500
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 16.500
FFBH First Federal Bancshares of AR Harrison AR SE SAIF NASDAQ 05/03/96 21.000
FFBS FFBS BanCorp Inc. Columbus MS SE SAIF NASDAQ 07/01/93 23.000
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 33.000
FFDB FirstFed Bancorp Inc. Bessemer AL SE SAIF NASDAQ 11/19/91 16.531
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 29.313
FFLC FFLC Bancorp Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 32.000
FGHC First Georgia Holding Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 7.750
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 22.500
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 20.000
FSTC First Citizens Corp. Newnan GA SE SAIF NASDAQ 03/01/86 32.000
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 22.250
HARB Harbor Florida Bancorp (MHC) Fort Pierce FL SE SAIF NASDAQ 01/06/94 54.500
HBS Haywood Bancshares Inc. Waynesville NC SE BIF AMSE 12/18/87 19.000
KSAV KS Bancorp Inc. Kenly NC SE SAIF NASDAQ 12/30/93 18.500
LIFB Life Bancorp Inc. Norfolk VA SE SAIF NASDAQ 10/11/94 24.625
PALM Palfed Inc. Aiken SC SE SAIF NASDAQ 12/15/85 16.125
PFSL Pocahontas FS&LA (MHC) Pocahontas AR SE SAIF NASDAQ 04/05/94 26.000
SOPN First Savings Bancorp Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 20.625
SSM Stone Street Bancorp Inc. Mocksville NC SE SAIF AMSE 04/01/96 21.250
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 20.000
VABF Virginia Beach Fed. Financial Virginia Beach VA SE SAIF NASDAQ 11/01/80 14.125
Maximum 54.500
Minimum 7.750
Average 23.186
Median 21.125
</TABLE>
1
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held Southeast 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 B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANC 289.47 18.8 186.7 227.3 10.5 0.91 2,730,474 5.6 4.7 0.68 0.64
BFSB 27.56 15.5 135.9 135.9 20.4 2.32 135,455 14.2 14.2 1.56 1.28
BKUNA 107.54 21.3 159.8 197.2 6.0 - 1,807,192 5.6 4.9 0.57 0.58
CFFC 27.74 12.9 115.3 115.3 15.8 2.58 175,414 13.7 13.7 1.69 1.28
CFTP 80.42 22.9 124.5 124.5 38.5 1.73 209,035 27.5 27.5 0.76 1.61
CNIT 83.48 16.5 162.3 176.7 11.7 1.98 709,550 7.2 6.7 3.06 0.75
EBSI 93.38 16.0 132.5 132.5 11.0 3.64 848,490 8.3 8.3 1.03 0.76
FFBH 102.82 18.4 128.4 128.4 19.2 1.14 535,204 15.0 15.0 1.14 1.06
FFBS 35.82 18.7 135.5 135.5 27.4 2.17 130,762 19.2 19.2 1.23 1.46
FFCH 209.77 15.9 205.9 205.9 12.6 2.18 1,667,178 6.1 6.1 2.08 0.84
FFDB 19.03 12.5 114.2 125.2 10.8 3.03 176,528 9.4 8.7 1.32 0.94
FFFC 132.51 19.5 168.4 172.0 23.7 1.64 558,886 13.2 12.9 1.50 1.34
FFLC 74.16 22.1 142.1 142.1 19.2 1.50 387,097 13.5 13.5 1.45 1.01
FGHC 23.66 21.0 184.1 200.8 15.1 0.69 156,383 8.2 7.6 0.37 0.78
FLFC 173.81 14.7 182.9 202.9 13.5 1.78 1,288,919 7.4 6.7 1.53 0.94
FOBC 47.48 14.5 115.9 121.6 13.3 2.90 356,718 11.1 10.6 1.38 0.97
FSTC 58.85 11.4 177.9 228.7 17.3 1.38 338,857 9.7 7.7 2.80 1.90
FTF 39.83 13.3 148.0 148.0 23.3 2.52 171,358 15.7 15.7 1.67 1.73
HARB 270.88 20.7 289.1 299.0 24.3 2.57 1,116,718 8.4 8.1 2.63 1.22
HBS 23.76 15.2 113.4 117.6 15.8 2.95 150,416 13.9 13.5 1.25 1.15
KSAV 16.38 12.0 114.1 114.2 15.4 3.24 106,121 13.5 13.5 1.54 1.24
LIFB 242.48 18.7 154.5 159.1 16.3 1.95 1,488,257 10.6 10.3 1.32 0.86
PALM 85.21 21.8 155.5 155.5 12.8 0.74 664,863 8.2 8.2 0.74 0.60
PFSL 42.44 16.7 176.2 176.2 11.2 3.46 378,700 6.4 6.4 1.56 0.69
SOPN 75.88 17.6 113.0 113.0 25.8 3.88 294,217 22.8 22.8 1.17 1.69
SSM 40.33 21.0 131.7 131.7 38.0 2.12 106,115 28.9 28.9 1.01 1.71
TWIN 17.07 20.6 123.7 123.7 15.9 3.20 107,345 12.9 12.9 0.97 0.75
VABF 70.29 24.8 166.2 166.2 11.4 1.42 617,818 6.9 6.9 0.57 0.46
Maximum 289.47 24.8 289.1 299.0 38.5 3.88 2,730,474 28.9 28.9 3.06 1.90
Minimum 16.38 11.4 113.0 113.0 6.0 - 106,115 5.6 4.7 0.37 0.46
Average 89.72 17.7 152.1 159.9 17.7 2.13 621,931 12.2 12.0 1.38 1.08
Median 72.23 18.0 145.1 145.1 15.8 2.15 367,709 10.8 10.4 1.32 0.99
</TABLE>
2
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.1 - Selected Publicly Held Southeast Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAA
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BANC 10.83 N 09/02/97 0.87 19.9 0.16 0.66 11.50
BFSB 8.90 N 09/02/97 - 15.9 0.38 1.22 8.52
BKUNA 8.04 N 09/02/97 0.60 21.7 0.14 0.48 8.00
CFFC 9.23 N 09/02/97 0.39 13.9 0.39 1.16 8.41
CFTP 4.97 N 09/02/97 0.30 29.0 0.15 1.27 4.30
CNIT 10.46 N 09/02/97 0.42 15.2 0.83 0.81 11.22
EBSI 8.78 N 09/02/97 1.07 15.3 0.27 0.76 8.92
FFBH 6.61 N 09/02/97 0.19 22.8 0.23 0.81 5.24
FFBS 7.50 N 09/02/97 0.03 23.0 0.25 1.17 6.06
FFCH 13.67 N 09/02/97 1.61 15.3 0.54 0.84 13.68
FFDB 9.54 N 09/02/97 0.72 12.2 0.34 0.98 10.05
FFFC 9.56 N 09/02/97 0.18 17.9 0.41 1.35 10.37
FFLC 6.56 N 09/02/97 0.19 20.5 0.39 0.96 6.91
FGHC 9.53 N 09/02/97 1.41 16.2 0.12 1.00 11.97
FLFC 12.81 N 09/02/97 0.81 13.7 0.41 1.02 13.61
FOBC 8.35 N 09/02/97 0.15 14.7 0.34 0.93 8.36
FSTC 19.95 N 09/02/97 NA 5.2 1.55 3.68 38.97
FTF 10.43 N 09/02/97 0.12 11.8 0.47 1.86 11.74
HARB 14.82 N 09/02/97 0.46 20.3 0.67 1.21 14.61
HBS 7.72 N 09/02/97 1.97 14.4 0.33 1.12 7.99
KSAV 8.86 N 09/02/97 0.35 12.2 0.38 1.39 10.15
LIFB 8.06 N 09/02/97 0.39 18.7 0.33 0.89 8.33
PALM 7.44 N 09/02/97 2.12 16.1 0.25 0.82 9.99
PFSL 11.23 N 09/02/97 0.10 17.1 0.38 0.66 10.39
SOPN 6.96 N 09/02/97 0.08 16.1 0.32 1.80 7.60
SSM 4.84 N 09/02/97 - 38.0 0.14 0.98 2.77
TWIN 5.88 N 09/02/97 0.08 16.7 0.30 0.91 7.08
VABF 6.82 N 09/02/97 0.68 20.8 0.17 0.54 7.98
Maximum 19.95 2.12 38.0 1.55 3.68 38.97
Minimum 4.84 - 5.2 0.12 0.48 2.77
Average 9.23 0.57 17.7 0.38 1.12 10.17
Median 8.82 0.39 16.1 0.34 0.98 8.72
</TABLE>
3
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.2 - Selected Publicly Held Arkansas 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>
FFBH First Federal Bancshares of AR Harrison AR SE SAIF NASDAQ 05/03/96 21.000
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 22.250
PFSL Pocahontas FS&LA (MHC) Pocahontas AR SE SAIF NASDAQ 04/05/94 26.000
Maximum 26.000
Minimum 21.000
Average 23.083
Median 22.250
</TABLE>
4
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.2 - Selected Publicly Held Arkansas 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 B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBH 102.82 18.4 128.4 128.4 19.2 1.14 535,204 15.0 15.0 1.14 1.06
FTF 39.83 13.3 148.0 148.0 23.3 2.52 171,358 15.7 15.7 1.67 1.73
PFSL 42.44 16.7 176.2 176.2 11.2 3.46 378,700 6.4 6.4 1.56 0.69
Maximum 102.82 18.4 176.2 176.2 23.3 3.46 535,204 15.7 15.7 1.67 1.73
Minimum 39.83 13.3 128.4 128.4 11.2 1.14 171,358 6.4 6.4 1.14 0.69
Average 61.70 16.1 150.9 150.9 17.9 2.37 361,754 12.3 12.3 1.46 1.16
Median 42.44 16.7 148.0 148.0 19.2 2.52 378,700 15.0 15.0 1.56 1.06
</TABLE>
5
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.2 - Selected Publicly Held Arkansas Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FFBH 6.61 N 09/02/97 0.19 22.8 0.23 0.81 5.24
FTF 10.43 N 09/02/97 0.12 11.8 0.47 1.86 11.74
PFSL 11.23 N 09/02/97 0.10 17.1 0.38 0.66 10.39
Maximum 11.23 0.19 22.8 0.47 1.86 11.74
Minimum 6.61 0.10 11.8 0.23 0.66 5.24
Average 9.42 0.14 17.3 0.36 1.11 9.12
Median 10.43 0.12 17.1 0.38 0.81 10.39
</TABLE>
6
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.3 - Comparative General Characterstics
- ------------------
<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>
ALBC Albion Banc Corp. Albion NY 2 68,628 07/26/93 23.250 5.81
GUPB GFSB Bancorp Inc. Gallup NM 1 86,911 06/30/95 18.750 15.08
HBBI Home Building Bancorp Washington IN 2 45,064 02/08/95 20.500 6.39
HHFC Harvest Home Financial Corp. Cheviot OH 3 87,596 10/10/94 11.750 10.75
HZFS Horizon Financial Svcs Corp. Oskaloosa IA 3 85,969 06/30/94 18.875 8.03
KYF Kentucky First Bancorp Inc. Cynthiana KY 2 88,959 08/29/95 12.500 16.49
LOGN Logansport Financial Corp. Logansport IN 1 83,152 06/14/95 14.625 18.43
MIVI Mississippi View Holding Co. Little Falls MN 1 69,775 03/24/95 15.500 12.69
NSLB NS&L Bancorp Inc. Neosho MO 2 59,711 06/08/95 18.500 13.09
SFFC StateFed Financial Corporation Des Moines IA 2 85,679 01/05/94 22.000 17.24
SOBI Sobieski Bancorp Inc. South Bend IN 3 81,754 03/31/95 16.438 12.74
USAB USABancshares, Inc. Philadelphia PA 1 48,303 NA 8.125 5.97
Maximum 3 88,959 23.250 18.43
Minimum 1 45,064 8.125 5.81
Average 2 74,292 16.734 11.89
Median 2 82,453 17.469 12.72
</TABLE>
7
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheets
- ------------------
<TABLE>
<CAPTION>
Total Mortgage- Investment & Loan
Total Cash and Backed Net Foreclosed Servicing Total Other Total
Assets Investments Securities Loans Real Estate Rights Intangibles Assets Deposits
($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 68,628 16,964 8,580 48,247 - - - 2,863 52,322
GFSB Bancorp Inc. 86,911 40,582 32,789 45,026 - - - 1,303 55,285
Home Building Bancorp 45,064 15,672 5,086 28,229 - - - 1,163 35,212
Harvest Home Financial Corp. 87,596 40,835 - 45,063 - - - 1,698 57,072
Horizon Financial Svcs Corp. 85,969 31,519 - 52,193 551 - - 1,706 57,641
Kentucky First Bancorp Inc. 88,959 37,041 21,140 48,920 - - - 2,998 55,443
Logansport Financial Corp. 83,152 19,871 8,032 59,490 8 - - 3,783 60,400
Mississippi View Holding Co. 69,775 23,617 4,449 44,147 - - - 1,800 55,352
NS&L Bancorp Inc. 59,711 24,788 4,750 33,238 - - - 1,685 44,018
StateFed Financial Corporation 85,679 12,496 - NA 2,703 - - 2,302 50,346
Sobieski Bancorp Inc. 81,754 18,091 13,709 61,135 11 - - 2,517 59,387
USABancshares, Inc. 48,303 26,327 8,260 20,765 - - 98 1,113 38,565
Maximum 88,959 40,835 32,789 61,135 2,703 - 98 3,783 60,400
Minimum 45,064 12,496 - 20,765 - - - 1,113 35,212
Average 74,292 25,650 8,900 44,223 273 - 8 2,078 51,754
Median 82,453 24,203 6,559 45,063 - - - 1,753 55,319
</TABLE>
8
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheets
- ------------------
<TABLE>
<CAPTION>
Regulatory Regulatory
Total Subordinated Other Total Preferred Common Total Tangible Core
Borrowings Debt Liabilities Liabilities Equity Equity Equity Capital Capital
($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 9,263 - 1,052 62,637 - 5,991 5,991 NA NA
GFSB Bancorp Inc. 16,450 - 1,010 72,745 - 14,166 14,166 - NA
Home Building Bancorp 3,700 - 378 39,290 - 5,774 5,774 4,458 4,458
Harvest Home Financial Corp. 19,650 - 525 77,247 - 10,349 10,349 NA NA
Horizon Financial Svcs Corp. 19,102 - 813 77,556 - 8,413 8,413 6,238 6,238
Kentucky First Bancorp Inc. 17,970 - 819 74,232 - 14,727 14,727 13,023 13,023
Logansport Financial Corp. 4,500 - 2,292 67,192 - 15,960 15,960 16,011 16,011
Mississippi View Holding Co. - - 1,252 56,604 - 13,171 13,171 10,647 10,647
NS&L Bancorp Inc. 3,000 - 1,014 48,032 - 11,679 11,679 8,650 8,650
StateFed Financial Corporation 19,000 - 1,100 70,446 - 15,233 15,233 NA NA
Sobieski Bancorp Inc. 9,500 - 506 69,393 - 12,361 12,361 NA NA
USABancshares, Inc. 4,205 - 337 43,107 - 5,196 5,196 NA 4,660
Maximum 19,650 - 2,292 77,556 - 15,960 15,960 16,011 16,011
Minimum - - 337 39,290 - 5,196 5,196 - 4,458
Average 10,528 - 925 63,207 - 11,085 11,085 8,432 9,098
Median 9,382 - 915 68,293 - 12,020 12,020 8,650 8,650
</TABLE>
9
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheets
- ------------------
<TABLE>
<CAPTION>
Regulatory
Total Tangible Core Risk-Based NPAs/
Capital Capital/ Capital/ Capital/ Assets
($000) Tangible Adj Tangible Risk-Weightd (%)
Short Name MRQ Assets (%) Assets (%) Assets (%) MRQ
<S> <C> <C> <C> <C> <C>
Albion Banc Corp. NA 8.22 8.22 16.67 0.72
GFSB Bancorp Inc. NA 14.54 14.54 36.76 0.18
Home Building Bancorp 4,541 10.07 10.07 20.95 0.38
Harvest Home Financial Corp. NA NA NA NA 0.11
Horizon Financial Svcs Corp. 6,494 7.78 7.78 14.59 0.96
Kentucky First Bancorp Inc. 13,395 18.20 18.20 34.80 -
Logansport Financial Corp. 16,239 21.82 21.82 41.64 0.61
Mississippi View Holding Co. 11,074 14.92 14.92 31.72 0.28
NS&L Bancorp Inc. 8,692 13.83 13.83 38.51 0.02
StateFed Financial Corporation NA 13.19 13.19 22.74 NA
Sobieski Bancorp Inc. NA 11.85 11.85 28.52 0.15
USABancshares, Inc. 4,867 NA NA NA 0.67
Maximum 16,239 21.82 21.82 41.64 0.96
Minimum 4,541 7.78 7.78 14.59 -
Average 9,329 13.44 13.44 28.69 0.37
Median 8,692 13.51 13.51 30.12 0.28
<CAPTION>
Loan Loss Publicly Tangible
Reserves/ Reserves/ Reported Publicly Rep
Assets NPLs B Value B Value
(%) (%) ($) ($)
Short Name MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C>
Albion Banc Corp. 0.39 53.94 23.96 23.96
GFSB Bancorp Inc. 0.36 199.36 16.88 16.88
Home Building Bancorp 0.18 47.98 20.16 20.16
Harvest Home Financial Corp. 0.13 117.00 11.31 11.31
Horizon Financial Svcs Corp. 0.32 57.78 19.77 19.77
Kentucky First Bancorp Inc. 0.42 NM 11.16 11.16
Logansport Financial Corp. 0.27 45.60 12.66 12.66
Mississippi View Holding Co. 1.24 447.15 16.09 16.09
NS&L Bancorp Inc. 0.07 466.67 16.51 16.51
StateFed Financial Corporation NA NA 19.44 19.44
Sobieski Bancorp Inc. 0.24 158.73 17.24 17.24
USABancshares, Inc. 0.43 63.50 6.44 6.32
Maximum 1.24 466.67 23.96 23.96
Minimum 0.07 45.60 6.44 6.32
Average 0.37 165.77 15.97 15.96
Median 0.32 90.25 16.70 16.70
</TABLE>
10
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.4 - Comparatives Balance Sheets
- ------------------
<TABLE>
<CAPTION>
Earn Assets/ Full-Time Loans Cash & Invest.
Int Bearing Equivalent Serviced (sans MBS)/ MBS/
Liabilities Employees For Others Assets Assets
(%) (Actual) ($000) (%) (%)
Short Name MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
Albion Banc Corp. 107.05 NA NA 12.22 12.50
GFSB Bancorp Inc. 120.83 16 - 8.97 37.73
Home Building Bancorp 109.24 15 - 23.49 11.29
Harvest Home Financial Corp. 112.43 NA NA 46.62 -
Horizon Financial Svcs Corp. 109.61 28 1,613 36.66 -
Kentucky First Bancorp Inc. 117.86 22 - 17.87 23.76
Logansport Financial Corp. 122.75 13 - 14.24 9.66
Mississippi View Holding Co. 123.70 21 - 27.47 6.38
NS&L Bancorp Inc. 123.52 NA - 33.56 7.95
StateFed Financial Corporation 116.34 NA NA 14.58 -
Sobieski Bancorp Inc. 115.64 22 - 5.36 16.77
USABancshares, Inc. 114.65 NA - 37.40 17.10
Maximum 123.70 28 1,613 46.62 37.73
Minimum 107.05 13 - 5.36 -
Average 116.14 20 179 23.20 11.93
Median 115.99 21 - 20.68 10.47
</TABLE>
11
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Net Income ROAA
Average Before Before Core
Assets Net Income Extra Items ROAA Extra ROAA
($000) ($000) ($000) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 63,492 67 67 0.11 0.11 0.37
GFSB Bancorp Inc. 78,351 578 578 0.74 0.74 0.93
Home Building Bancorp 44,091 90 90 0.20 0.20 0.52
Harvest Home Financial Corp. 81,870 243 243 0.30 0.30 0.57
Horizon Financial Svcs Corp. 79,717 278 278 0.35 0.35 0.55
Kentucky First Bancorp Inc. 87,628 762 762 0.87 0.87 1.13
Logansport Financial Corp. 79,217 931 931 1.18 1.18 1.51
Mississippi View Holding Co. 69,548 486 486 0.70 0.70 1.03
NS&L Bancorp Inc. 58,716 290 290 0.49 0.49 0.77
StateFed Financial Corporation 81,192 921 921 1.13 1.13 1.37
Sobieski Bancorp Inc. 80,309 247 247 0.31 0.31 0.59
USABancshares, Inc. 36,537 219 219 0.60 0.60 0.55
Maximum 87,628 931 931 1.18 1.18 1.51
Minimum 36,537 67 67 0.11 0.11 0.37
Average 70,056 426 426 0.58 0.58 0.82
Median 78,784 284 284 0.55 0.55 0.68
<CAPTION>
ROAE Loan Total
Before Core Loss Noninterest
ROAE Extra ROAE Provision Income
(%) (%) (%) ($000) ($000)
Short Name LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C>
Albion Banc Corp. 1.14 1.14 4.03 140 269
GFSB Bancorp Inc. 3.86 3.86 4.89 21 57
Home Building Bancorp 1.59 1.59 4.03 57 102
Harvest Home Financial Corp. 2.31 2.31 4.44 7 60
Horizon Financial Svcs Corp. 3.31 3.31 5.25 252 357
Kentucky First Bancorp Inc. 4.48 4.48 5.83 15 156
Logansport Financial Corp. 5.74 5.74 7.40 14 124
Mississippi View Holding Co. 3.93 3.93 5.77 - 166
NS&L Bancorp Inc. 2.39 2.39 3.72 (1) 197
StateFed Financial Corporation 6.11 6.11 7.36 36 108
Sobieski Bancorp Inc. 1.87 1.87 3.57 - 157
USABancshares, Inc. 4.44 4.44 4.05 75 135
Maximum 6.11 6.11 7.40 252 357
Minimum 1.14 1.14 3.57 (1) 57
Average 3.43 3.43 5.03 51 157
Median 3.59 3.59 4.67 18 146
</TABLE>
12
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Total Net Loan Common Dividend
Noninterest Chargeoffs/ LTM EPS Dividends Payout
Expense Avg Loans After Extra Per Share Ratio
($000) (%) ($) ($) (%)
Short Name LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C>
Albion Banc Corp. 1,964 0.24 0.27 0.31 114.81
GFSB Bancorp Inc. 1,505 0.05 0.67 0.75 111.94
Home Building Bancorp 1,048 0.09 0.34 0.30 88.24
Harvest Home Financial Corp. 1,680 - 0.26 3.40 NM
Horizon Financial Svcs Corp. 1,925 NA 0.68 0.32 47.06
Kentucky First Bancorp Inc. 1,761 0.02 0.60 3.50 583.33
Logansport Financial Corp. 1,252 0.03 0.73 3.40 465.75
Mississippi View Holding Co. 1,666 0.03 0.60 0.16 26.67
NS&L Bancorp Inc. 1,334 - 0.44 0.50 113.64
StateFed Financial Corporation 1,138 - 1.20 0.40 33.33
Sobieski Bancorp Inc. 1,953 NA 0.32 0.14 43.75
USABancshares, Inc. 1,642 0.02 0.27 - -
Maximum 1,964 0.24 1.20 3.50 583.33
Minimum 1,048 - 0.26 - -
Average 1,572 0.05 0.53 1.10 148.05
Median 1,654 0.03 0.52 0.36 88.24
<CAPTION>
Interest Interest Net Interest Gain on
Income/ Expense/ Income/ Sale/
Avg Assets Avg Assets Avg Assets Avg Assets
(%) (%) (%) (%)
Short Name LTM LTM LTM LTM
<S> <C> <C> <C> <C>
Albion Banc Corp. 7.51 4.06 3.46 0.02
GFSB Bancorp Inc. 7.30 4.01 3.29 0.02
Home Building Bancorp 7.52 4.16 3.36 0.03
Harvest Home Financial Corp. 7.08 4.25 2.83 0.01
Horizon Financial Svcs Corp. 7.39 4.27 3.13 0.10
Kentucky First Bancorp Inc. 7.18 3.67 3.50 -
Logansport Financial Corp. 7.46 3.68 3.78 (0.11)
Mississippi View Holding Co. 7.41 3.62 3.80 0.02
NS&L Bancorp Inc. 6.48 3.41 3.07 0.05
StateFed Financial Corporation 7.89 4.47 3.43 -
Sobieski Bancorp Inc. 7.10 3.90 3.20 0.08
USABancshares, Inc. 9.77 4.48 5.28 0.08
Maximum 9.77 4.48 5.28 0.10
Minimum 6.48 3.41 2.83 (0.11)
Average 7.51 4.00 3.51 0.03
Median 7.40 4.04 3.40 0.02
</TABLE>
13
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Real Noninterest G&A Noninterest Net Oper
Estate Income/ Expense/ Expense/ Expenses/
Expense Avg Assets Avg Assets Avg Assets Avg Assets
($000) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C>
Albion Banc Corp. (39) 0.42 3.15 3.09 2.73
GFSB Bancorp Inc. - 0.07 1.92 1.92 1.85
Home Building Bancorp - 0.23 2.38 2.38 2.15
Harvest Home Financial Corp. - 0.07 2.05 2.05 1.98
Horizon Financial Svcs Corp. 53 0.45 2.35 2.41 1.90
Kentucky First Bancorp Inc. - 0.18 2.01 2.01 1.83
Logansport Financial Corp. (2) 0.16 1.58 1.58 1.43
Mississippi View Holding Co. (18) 0.24 2.42 2.40 2.18
NS&L Bancorp Inc. - 0.34 2.27 2.27 1.94
StateFed Financial Corporation (562) 0.13 2.09 1.40 1.96
Sobieski Bancorp Inc. - 0.20 2.43 2.43 2.24
USABancshares, Inc. - 0.37 4.38 4.49 4.01
Maximum 53 0.45 4.38 4.49 4.01
Minimum (562) 0.07 1.58 1.40 1.43
Average (47) 0.24 2.42 2.37 2.18
Median - 0.22 2.31 2.33 1.97
<CAPTION>
Total Amortization Extra and
Nonrecurring of Tax After Tax
Expense Intangibles Provision Items
($000) ($000) ($000) ($000)
Short Name LTM LTM LTM LTM
<S> <C> <C> <C> <C>
Albion Banc Corp. 275 - 30 -
GFSB Bancorp Inc. 250 - 298 -
Home Building Bancorp 224 - 177 -
Harvest Home Financial Corp. 368 - 103 -
Horizon Financial Svcs Corp. 331 - 145 -
Kentucky First Bancorp Inc. 351 - 335 -
Logansport Financial Corp. 334 - 514 -
Mississippi View Holding Co. 363 - 305 -
NS&L Bancorp Inc. 281 - 128 -
StateFed Financial Corporation 291 - 503 -
Sobieski Bancorp Inc. 414 - 182 -
USABancshares, Inc. - 42 158 -
Maximum 414 42 514 -
Minimum - - 30 -
Average 290 4 240 -
Median 311 - 180 -
</TABLE>
14
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.5 - Comparatives Operations
- ------------------
<TABLE>
<CAPTION>
Yield on Cost of Interest Loan Loss
Efficiency Preferred Int Earning Int Bearing Effective Yield Provision/
Ratio Dividends Assets Liabilities Tax Rate Spread Avg Assets
(%) ($000) (%) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 81.32 - 7.88 4.60 30.93 3.28 0.22
GFSB Bancorp Inc. 57.05 - 7.37 5.03 34.02 2.34 0.03
Home Building Bancorp 66.16 - 7.82 4.70 66.29 3.12 0.13
Harvest Home Financial Corp. 70.65 - 7.22 4.91 29.77 2.31 0.01
Horizon Financial Svcs Corp. 65.68 - 8.06 4.94 34.28 3.12 0.32
Kentucky First Bancorp Inc. 54.62 - 7.48 4.60 30.54 2.88 0.02
Logansport Financial Corp. 40.17 - 7.68 4.79 35.57 2.89 0.02
Mississippi View Holding Co. 59.99 - 7.47 4.48 38.56 2.99 -
NS&L Bancorp Inc. 66.70 - 6.65 4.39 30.62 2.26 (0.00)
StateFed Financial Corporation 58.84 - 8.34 5.58 35.32 2.76 0.04
Sobieski Bancorp Inc. 71.59 - 7.56 4.71 42.42 2.85 -
USABancshares, Inc. 77.48 - 10.01 5.32 41.91 4.69 0.21
Maximum 81.32 - 10.01 5.58 66.29 4.69 0.32
Minimum 40.17 - 6.65 4.39 29.77 2.26 (0.00)
Average 64.19 - 7.80 4.84 37.52 2.96 0.08
Median 65.92 - 7.62 4.75 34.80 2.89 0.02
</TABLE>
15
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit II.6 - Comparatives Pricing Charactersitics
<TABLE>
<CAPTION>
Current Current Price/ Current
Stock Market LTM Price/
Abbreviated Price Value Core EPS Book V
Ticker Name City State ($) ($M) (x) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
ALBC AlbionBancCorp-NY Albion NY 23.250 5.81 24.0 97.0
GUPB GFSBBancorp-NM Gallup NM 18.750 15.08 22.3 111.1
HBBI HomeBldngBncrp-IN Washington IN 20.500 6.39 25.6 101.7
HHFC HarvestHome-OH Cheviot OH 11.750 10.75 22.2 103.9
HZFS HorizonFinSvcs-IA Oskaloosa IA 18.875 8.03 17.5 95.5
KYF KYFirstBancorp-KY Cynthiana KY 12.500 16.49 16.0 112.0
LOGN LogansprtFinCrp-IN Logansport IN 14.625 18.43 15.6 115.5
MIVI MissViewHoldCo-MN Little Falls MN 15.500 12.69 17.8 96.3
NSLB NS&LBancorp-MO Neosho MO 18.500 13.09 30.8 112.1
SFFC StateFedFinCorp-IA Des Moines IA 22.000 17.24 15.2 113.2
SOBI SobieskiBancorp-IN South Bend IN 16.438 12.74 27.0 95.4
USAB USABancshares-PA Philadelphia PA 8.125 5.97 32.5 126.2
Maximum 23.250 18.43 32.5 126.2
Minimum 8.125 5.81 15.2 95.4
Average 16.734 11.89 22.2 106.6
Median 17.469 12.72 22.2 107.5
</TABLE>
16
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit II.6 - Comparatives Pricing Charactersitics
<TABLE>
<CAPTION>
Tangible ROACE
Current Current Total Equity/ Equity/ Core Core Core Before
Price/ T Price/ Dividend Assets Assets T Assets EPS ROAA ROAE Extra
Book V Assets Yield ($000) (%) (%) ($) (%) (%) (%)
Ticker (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 97.0 8.5 1.38 68,628 8.7 8.7 0.97 0.37 4.03 1.14
GUPB 111.1 18.1 2.13 86,911 16.3 16.3 0.84 0.93 4.89 3.86
HBBI 101.7 14.2 1.46 45,064 12.8 12.8 0.80 0.52 4.03 1.59
HHFC 103.9 12.3 3.40 87,596 11.8 11.8 0.53 0.57 4.44 2.31
HZFS 95.5 9.3 1.70 85,969 9.8 9.8 1.08 0.55 5.25 3.31
KYF 112.0 18.5 4.00 88,959 16.6 16.6 0.78 1.13 5.83 4.48
LOGN 115.5 22.2 2.74 83,152 19.2 19.2 0.94 1.51 7.40 5.74
MIVI 96.3 18.2 1.03 69,775 18.9 18.9 0.87 1.03 5.77 3.93
NSLB 112.1 21.9 2.70 59,711 19.6 19.6 0.60 0.77 3.72 2.39
SFFC 113.2 20.1 1.82 85,679 17.8 17.8 1.45 1.37 7.36 6.11
SOBI 95.4 15.6 1.95 81,754 15.1 15.1 0.61 0.59 3.57 1.87
USAB 128.6 12.4 - 48,303 10.8 10.6 0.25 0.55 4.05 4.44
Maximum 128.6 22.2 4.00 88,959 19.6 19.6 1.45 1.51 7.40 6.11
Minimum 95.4 8.5 - 45,064 8.7 8.7 0.25 0.37 3.57 1.14
Average 106.8 15.9 2.03 74,292 14.8 14.8 0.81 0.82 5.03 3.43
Median 107.5 16.8 1.88 82,453 15.7 15.7 0.82 0.68 4.67 3.59
</TABLE>
17
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit II.6 - Comparatives Pricing Characteristics
<TABLE>
<CAPTION>
NPAs/ Price/ Core Core Core
Merger Current Assets Core EPS ROAA ROAE
Target? Pricing (%) EPS ($) (%) (%)
Ticker (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
ALBC N 09/02/97 0.72 32.3 0.18 0.27 3.03
GUPB N 09/02/97 0.18 22.3 0.21 0.81 4.74
HBBI N 09/02/97 0.38 18.3 0.28 0.72 5.67
HHFC N 09/02/97 0.11 15.5 0.19 0.80 6.56
HZFS N 09/02/97 0.96 22.5 0.21 0.43 4.23
KYF N 09/02/97 - 15.6 0.20 1.17 7.19
LOGN N 09/02/97 0.61 15.2 0.24 1.46 7.53
MIVI N 09/02/97 0.28 14.9 0.26 1.18 6.82
NSLB N 09/02/97 0.02 24.3 0.19 0.94 4.78
SFFC N 09/02/97 NA 12.8 0.43 1.55 8.78
SOBI N 09/02/97 0.15 29.4 0.14 0.57 3.72
USAB N 09/02/97 0.67 16.9 0.12 0.80 6.93
Maximum 0.96 32.3 0.43 1.55 8.78
Minimum - 12.8 0.12 0.27 3.03
Average 0.37 20.0 0.22 0.89 5.83
Median 0.28 17.6 0.21 0.81 6.12
</TABLE>
18
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit II.7 - Comparatives 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>
Albion Banc Corp. 0.72 0.72 8.26 0.54 53.94 0.47
GFSB Bancorp Inc. 0.18 0.18 1.10 0.69 199.36 0.44
Home Building Bancorp 0.38 0.38 3.00 0.29 47.98 0.01
Harvest Home Financial Corp. 0.11 0.11 0.97 0.26 117.00 -
Horizon Financial Svcs Corp. 0.96 1.22 9.81 0.52 32.85 0.60
Kentucky First Bancorp Inc. - 0.07 - 0.75 NM 0.07
Logansport Financial Corp. 0.61 0.61 3.18 0.38 44.88 0.11
Mississippi View Holding Co. 0.28 0.33 1.47 1.91 447.15 0.02
NS&L Bancorp Inc. 0.02 0.03 0.08 0.13 466.67 -
StateFed Financial Corporation NA NA NA NA NA -
Sobieski Bancorp Inc. 0.15 0.15 1.02 0.33 158.73 NA
USABancshares, Inc. 0.67 0.67 6.27 0.99 63.50 -
Maximum 0.96 1.22 9.81 1.91 466.67 0.60
Minimum - 0.03 - 0.13 32.85 -
Average 0.37 0.41 3.20 0.62 163.21 0.16
Median 0.28 0.33 1.47 0.52 90.25 0.02
</TABLE>
19
Source: SNL F&C Calculations
<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 Mst RctY MRQ MRQ
<S> <C> <C> <C> <C> <C>
Albion Banc Corp. 71.50 - NA 48,247 107.05
GFSB Bancorp Inc. 52.16 - NA 45,026 120.83
Home Building Bancorp 62.83 - NA 28,229 109.24
Harvest Home Financial Corp. 51.58 - (6.90) 45,063 112.43
Horizon Financial Svcs Corp. 61.03 - NA 52,193 109.61
Kentucky First Bancorp Inc. 55.41 - NA 48,920 117.86
Logansport Financial Corp. 71.82 - NA 59,490 122.75
Mississippi View Holding Co. 64.81 - NA 44,147 123.70
NS&L Bancorp Inc. 55.74 - NA 33,238 123.52
StateFed Financial Corporation NA - NA NA 116.34
Sobieski Bancorp Inc. 75.02 - NA 61,135 115.64
USABancshares, Inc. 43.42 1.89 (13.85) 20,765 114.65
Maximum 75.02 1.89 (6.90) 61,135 123.70
Minimum 43.42 - (13.85) 20,765 107.05
Average 60.48 0.16 (10.38) 44,223 116.14
Median 61.03 - (10.38) 45,063 115.99
</TABLE>
20
Source: SNL F&C Calculations
<PAGE>
EXHIBIT III
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
NEWPORT FEDERAL SAVINGS BANK
NEWPORT, AR
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 30,174 30,775 34,226 34,427
% Change in Assets (0.29) 1.99 11.21 0.59
Total Loans 20,234 21,718 24,589 24,782
Deposits 27,104 28,047 29,853 30,351
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 2,310 2,467 2,399 2,478
Tangible Capital 2,310 2,467 2,399 2,478
Core Capital 2,310 2,467 2,399 2,478
Risk-Based Capital 2,377 2,467 2,399 2,478
Equity Capital/Total Assets 7.66 8.02 7.01 7.20
Core Capital/Risk Based Assets 17.77 16.40 13.73 13.83
Core Capital/Adj Tang Assets 7.66 8.02 7.01 7.20
Tangible Cap/Tangible Assets 7.66 8.02 7.01 7.20
Risk-Based Cap/Risk-Wt Assets 18.28 16.40 13.73 13.83
PROFITABILITY:
Net Income(Loss) 244 157 (68) 79
Ret on Avg Assets Bef Ext Item 0.81 0.52 (0.21) 0.92
Return on Average Equity 11.08 6.57 (2.77) 12.96
Net Interest Income/Avg Assets 2.93 2.58 2.39 2.59
Noninterest Income/Avg Assets 0.25 0.23 0.35 0.44
Noninterest Expense/Avg Assets 1.97 2.12 2.96 2.11
Yield/Cost Spread 2.80 2.60 2.57 2.74
LIQUIDITY:
Int Earn Assets/Int Bear Liab 106.92 100.08 100.36 100.64
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.28 1.77 0.79 0.52
Nonaccrual Loans/Gross Loans 1.22 0.44 0.28 0.34
Nonaccrual Lns/Ln Loss Reserve 319.48 109.09 88.46 116.44
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - - 0.01 -
Nonmtg 1-4 Constr&Conv Lns/TA 7.51 8.54 8.81 10.99
</TABLE>
1
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
NEWPORT FEDERAL SAVINGS BANK
NEWPORT, AR
SELECTED PEER GROUP RATIOS & RANKINGS
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
Peer Group Category 2 2 2 2
<S> <C> <C> <C> <C>
CAPITAL:
Equity Capital/Total Assets 7.66 8.02 7.01 7.20
Peer Group Percentile 30 28 22 22
Core Cap/Adj Tangible Assets 7.66 8.02 7.01 7.20
Peer Group Percentile 32 31 24 24
Tangible Cap/Tangible Assets 7.66 8.02 7.01 7.20
Peer Group Percentile 32 31 24 24
Risk-Based Cap/Risk-Wt Assets 18.28 16.40 13.73 13.83
Peer Group Percentile 43 33 19 21
ASSET QUALITY:
Risk Assets/Total Assets 7.51 8.99 8.81 10.99
Peer Group Percentile 39 25 29 21
Risk Weighted Assts/Tot Assts 43.09 48.89 51.06 52.06
Peer Group Percentile 68 48 41 40
Nonaccrual Loans/Gross Loans 1.22 0.44 0.28 0.34
Peer Group Percentile 15 31 42 42
Repos Assets/Tot Assets - - - -
Peer Group Percentile 100 13 100 100
90+ Day Del Loans/Gross Loans - 0.15 0.48 0.15
Peer Group Percentile 100 50 32 52
90Day P Due+NonAccr-(1-4)/LLR - 17.05 76.92 63.01
Peer Group Percentile 100 39 17 23
LIQUIDITY:
Avg Reg Liquidity Ratio 13.73 9.32 5.56 5.93
Peer Group Percentile 43 20 5 5
PROFITABILITY:
Ret on Avg Assets Bef Ext Item 0.81 0.52 (0.21) 0.92
Peer Group Percentile 50 36 14 67
Return on Equity Capital 10.56 6.36 (2.83) 12.75
Peer Group Percentile 73 55 13 88
Int Earn Assets/Int Bear Liab 106.92 100.08 100.36 100.64
Peer Group Percentile 52 9 10 14
Yield on Earning Assts 6.95 7.78 7.78 7.80
Peer Group Percentile 38 55 54 59
Cost of Funds 4.15 5.18 5.21 5.05
Peer Group Percentile 20 20 20 22
Yield/Cost Spread 2.80 2.60 2.57 2.74
Peer Group Percentile 21 30 28 36
</TABLE>
2
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
NEWPORT FEDERAL SAVINGS BANK
NEWPORT, AR
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
6/30/96 9/30/96 12/31/96 3/31/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 32,470 33,596 34,226 34,427
% Change in Assets 1.27 3.47 1.88 0.59
Total Loans 22,136 23,341 24,589 24,782
Deposits 29,657 29,956 29,853 30,351
Broker Originated Deposits 47 - - -
CAPITAL:
Equity Capital 2,528 2,372 2,399 2,478
Tangible Capital 2,528 2,372 2,399 2,478
Core Capital 2,528 2,372 2,399 2,478
Risk-Based Capital 2,528 2,372 2,399 2,478
Equity Capital/Total Assets 7.79 7.06 7.01 7.20
Core Capital/Risk Based Assets 15.68 14.18 13.73 13.83
Core Capital/Adj Tang Assets 7.79 7.06 7.01 7.20
Tangible Cap/Tangible Assets 7.79 7.06 7.01 7.20
Risk-Based Cap/Risk-Wt Assets 15.68 14.18 13.73 13.83
PROFITABILITY:
Net Income(Loss) 39 (156) 27 79
Ret on Avg Assets Bef Ext Item 0.48 (1.89) 0.32 0.92
Return on Average Equity 6.22 (25.47) 4.53 12.96
Net Interest Income/Avg Assets 2.42 2.32 2.52 2.59
Noninterest Income/Avg Assets 0.48 0.31 0.24 0.44
Noninterest Expense/Avg Assets 2.40 4.78 2.26 2.11
Yield/Cost Spread 2.63 2.49 2.68 2.74
LIQUIDITY:
Int Earn Assets/Int Bear Liab 100.30 100.54 100.36 100.64
Brokered Deposits/Tot Deposits 0.16 - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.08 0.38 0.79 0.52
Nonaccrual Loans/Gross Loans 0.33 0.23 0.28 0.34
Nonaccrual Lns/Ln Loss Reserve 84.09 81.54 88.46 116.44
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - - 0.03 -
Nonmtg 1-4 Constr&Conv Lns/TA 8.54 8.44 8.81 10.99
</TABLE>
3
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit III
- ------------------
NEWPORT FEDERAL SAVINGS BANK
NEWPORT, AR
<TABLE>
<CAPTION>
SELECTED PEER GROUP RATIOS & RANKINGS
6/30/96 9/30/96 12/31/96 3/31/97
Peer Group Category 2 2 2 2
<S> <C> <C> <C> <C>
CAPITAL:
Equity Capital/Total Assets 7.79 7.06 7.01 7.20
Peer Group Percentile 27 21 22 22
Core Cap/Adj Tangible Assets 7.79 7.06 7.01 7.20
Peer Group Percentile 28 23 24 24
Tangible Cap/Tangible Assets 7.79 7.06 7.01 7.20
Peer Group Percentile 28 23 24 24
Risk-Based Cap/Risk-Wt Assets 15.68 14.18 13.73 13.83
Peer Group Percentile 26 22 19 21
ASSET QUALITY:
Risk Assets/Total Assets 8.97 8.44 8.81 10.99
Peer Group Percentile 30 32 29 21
Risk Weighted Assts/Tot Assts 49.65 49.78 51.06 52.06
Peer Group Percentile 45 45 41 40
Nonaccrual Loans/Gross Loans 0.33 0.23 0.28 0.34
Peer Group Percentile 39 41 42 42
Repos Assets/Tot Assets - - - -
Peer Group Percentile 16 100 100 100
90+ Day Del Loans/Gross Loans 0.13 0.13 0.48 0.15
Peer Group Percentile 49 50 32 52
90Day P Due+NonAccr-(1-4)/LLR 43.18 21.54 76.92 63.01
Peer Group Percentile 29 37 17 23
LIQUIDITY:
Avg Reg Liquidity Ratio 9.48 5.86 5.56 5.93
Peer Group Percentile 18 5 5 5
PROFITABILITY:
Ret on Avg Assets Bef Ext Item 0.48 (1.89) 0.32 0.92
Peer Group Percentile 29 11 21 67
Return on Equity Capital 6.17 (26.31) 4.50 12.75
Peer Group Percentile 46 8 27 88
Int Earn Assets/Int Bear Liab 100.30 100.54 100.36 100.64
Peer Group Percentile 10 9 10 14
Yield on Earning Assts 7.84 7.63 7.86 7.80
Peer Group Percentile 61 45 56 59
Cost of Funds 5.21 5.14 5.18 5.05
Peer Group Percentile 16 23 20 22
Yield/Cost Spread 2.63 2.49 2.68 2.74
Peer Group Percentile 34 23 31 36
</TABLE>
4
Source: TAFS, published by Sheshunoff
<PAGE>
EXHIBIT IV
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
ALBION FS&LA
ALBION, NY
TICKER ALBC FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 55,371 56,264 64,012 65,666
% Change in Assets 10.12 1.61 13.77 2.58
Total Loans 47,042 44,124 48,012 48,177
Deposits 38,494 46,432 48,493 50,279
Broker Originated Deposits -- -- -- --
CAPITAL:
Equity Capital 4,787 4,992 4,988 5,120
Tangible Capital 4,787 4,916 4,948 5,071
Core Capital 4,787 4,916 4,948 5,071
Risk-Based Capital 5,011 5,160 5,157 5,268
Equity Capital/Total Assets 8.65 8.87 7.79 7.80
Core Capital/Risk Based Assets 15.63 16.39 15.32 15.48
Core Capital/Adj Tang Assets 8.65 8.75 7.73 7.73
Tangible Cap/Tangible Assets 8.65 8.75 7.73 7.73
Risk-Based Cap/Risk-Wt Assets 16.36 17.20 15.96 16.08
PROFITABILITY:
Net Income(Loss) 357 169 (21) 113
Ret on Avg Assets Bef Ext Item 0.68 0.30 (0.04) 0.70
Return on Average Equity 7.78 3.46 (0.42) 8.94
Net Interest Income/Avg Assets 3.83 3.38 3.44 3.33
Noninterest Income/Avg Assets 0.32 0.38 0.44 0.64
Noninterest Expense/Avg Assets 2.90 3.23 3.68 2.86
Yield/Cost Spread 3.79 3.41 3.56 3.48
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108.07 105.09 103.30 102.39
Brokered Deposits/Tot Deposits -- -- -- --
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.64 0.82 1.47 1.08
Nonaccrual Loans/Gross Loans 0.46 0.73 0.52 0.63
Nonaccrual Lns/Ln Loss Reserve 99.11 131.97 120.10 153.30
Repos Assets/Tot Assets -- -- -- 0.18
Net Chrg-Off/Av Adj Lns 0.07 0.02 0.17 --
Nonmtg 1-4 Constr&Conv Lns/TA 4.70 4.51 3.63 3.43
</TABLE>
1
Source: TAFS, published by Sheshunoff
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
GALLUP FSB
GALLUP, NM
TICKER GUPB FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 44,032 66,826 82,321 87,380
% Change in Assets 7.25 51.77 23.19 6.15
Total Loans 30,224 34,104 42,920 45,292
Deposits 36,950 39,772 53,903 55,465
Broker Originated Deposits -- -- -- --
CAPITAL:
Equity Capital 6,676 12,290 11,945 11,917
Tangible Capital 6,676 12,078 11,614 11,614
Core Capital 6,676 12,078 11,614 11,614
Risk-Based Capital 6,894 11,926 11,150 11,084
Equity Capital/Total Assets 15.16 18.39 14.51 13.64
Core Capital/Risk Based Assets 31.08 48.98 36.52 29.31
Core Capital/Adj Tang Assets 15.16 18.19 14.17 13.34
Tangible Cap/Tangible Assets 15.16 18.19 14.17 13.34
Risk-Based Cap/Risk-Wt Assets 32.10 48.36 35.06 27.97
PROFITABILITY:
Net Income(Loss) 588 721 573 161
Ret on Avg Assets Bef Ext Item 1.38 1.30 0.77 0.76
Return on Average Equity 9.14 7.60 4.82 5.40
Net Interest Income/Avg Assets 4.19 3.75 3.15 2.91
Noninterest Income/Avg Assets 0.13 0.13 0.12 0.12
Noninterest Expense/Avg Assets 2.17 1.78 2.03 1.63
Yield/Cost Spread 3.76 3.14 2.59 2.50
LIQUIDITY:
Int Earn Assets/Int Bear Liab 115 120 113 112
Brokered Deposits/Tot Deposits -- -- -- --
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.30 0.09 0.29 0.34
Nonaccrual Loans/Gross Loans -- -- 0.28 0.34
Nonaccrual Lns/Ln Loss Reserve -- -- 36.63 46.02
Repos Assets/Tot Assets -- -- -- --
Net Chrg-Off/Av Adj Lns -- 0.11 (0.07) 0.19
Nonmtg 1-4 Constr&Conv Lns/TA 10.14 7.91 12.11 9.64
</TABLE>
2
Source: TAFS, published by Sheshunoff
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
HOME BUILDING SVGS BK FSB
WASHINGTON, IN
TICKER HBBI FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 42,107 42,796 44,337 46,469
% Change in Assets (1.66) 1.64 3.60 4.81
Total Loans 29,944 29,177 28,500 28,326
Deposits 36,629 33,283 35,589 37,833
Broker Originated Deposits -- -- -- --
CAPITAL:
Equity Capital 3,090 4,639 4,335 4,423
Tangible Capital 3,090 4,611 4,338 4,446
Core Capital 3,090 4,611 4,338 4,446
Risk-Based Capital 3,167 4,688 4,417 4,525
Equity Capital/Total Assets 7.34 10.84 9.78 9.52
Core Capital/Risk Based Assets 13.65 20.99 20.19 20.22
Core Capital/Adj Tang Assets 7.35 10.79 9.78 9.56
Tangible Cap/Tangible Assets 7.35 10.79 9.78 9.56
Risk-Based Cap/Risk-Wt Assets 13.99 21.35 20.56 20.58
PROFITABILITY:
Net Income(Loss) 327 421 (138) 107
Ret on Avg Assets Bef Ext Item 0.77 0.99 (0.32) 0.94
Return on Average Equity 11.11 10.89 (3.15) 9.77
Net Interest Income/Avg Assets 3.21 3.40 3.18 3.22
Noninterest Income/Avg Assets 0.24 0.38 0.34 0.39
Noninterest Expense/Avg Assets 2.10 2.22 2.86 2.09
Yield/Cost Spread 3.32 3.45 3.18 3.29
LIQUIDITY:
Int Earn Assets/Int Bear Liab 103 105 103 104
Brokered Deposits/Tot Deposits -- -- -- --
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.68 0.32 1.60 0.86
Nonaccrual Loans/Gross Loans 0.67 0.20 1.59 0.87
Nonaccrual Lns/Ln Loss Reserve 263.64 77.92 577.22 310.13
Repos Assets/Tot Assets -- -- -- --
Net Chrg-Off/Av Adj Lns 0.03 -- 1.44 --
Nonmtg 1-4 Constr&Conv Lns/TA 0.53 0.81 0.69 0.88
</TABLE>
3
Source: TAFS, published by Sheshunoff
<PAGE>
FERGUSON & COMPANY EXHIBIT IV
- ------------------
HARVEST HOME SVGS BK
CHEVIOT, OH
TICKER HHFC FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 65,431 66,135 81,666 81,208
% Change in Assets 1.81 1.08 23.48 (0.56)
Securities-Book Value 24,575 24,096 34,723 34,022
Securities-Fair Value 23,840 24,096 34,723 34,022
Total Loans & Leases 36,632 38,576 42,834 44,025
Total Deposits 56,134 56,758 57,923 57,672
Loan/Deposit Ratio 65.26 67.97 73.95 76.34
Provision for Loan Losses 12 9 -- 3
CAPITAL:
Equity Capital 8,262 8,275 8,069 8,146
Total Qualifying Capital(Est) 8,360 8,086 8,207 8,364
Equity Capital/Average Assets 12.74 12.58 11.04 10.00
Tot Qual Cap/Rk Bsd Asts(Est) 29.20 27.51 23.87 24.23
Tier 1 Cap/Rsk Bsed Asts(Est) 28.85 27.13 23.55 23.90
T1 Cap/Avg Assets(Lev Est) 12.05 12.09 10.33 10.13
Dividends Declared/Net Income -- 186.97 -- --
PROFITABILITY:
Net Income(Loss) 450 468 194 153
Return on Average Assets 0.69 0.71 0.27 0.75
Return on Average Equity Cap 7.18 5.66 2.47 7.55
Net Interest Margin 2.95 3.02 2.87 2.83
Net Int Income/Avg Assets 2.90 2.96 2.78 2.75
Noninterest Income/Avg Assets 0.07 0.07 0.09 0.06
Noninterest Exp/Avg Assets 1.96 1.92 2.48 1.66
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 0.27 0.33 0.51 0.29
NPA's/Equity + LLR 1.20 1.53 2.65 1.53
LLR/Nonperf & Restrcd Lns 140.00 86.72 51.15 90.48
Foreclosed RE/Total Assets 0.05 -- -- --
90+ Day Del Loans/Total Loans -- -- -- --
Loan Loss Reserves/Total Lns 0.27 0.29 0.26 0.26
Net Charge-Offs/Average Loans 0.02 -- -- --
Dom Risk R/E Lns/Tot Dom Lns 13.61 11.86 10.89 10.59
LIQUIDITY:
Brokered Dep/Total Dom Deps -- -- -- --
$100M+ Time Dep/Total Dom Dep 2.95 3.47 3.29 3.56
Int Earn Assets/Int Bear Liab 111.74 111.74 108.83 109.04
Pledged Sec/Total Sec -- -- -- --
Fair Value Sec/Amort Cost Sec 97.01 101.92 99.89 99.54
</TABLE>
4
Source: BankSource, published by Sheshunoff
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
HORIZON FSB
OSKALOOSA, IA
TICKER HZFS FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
BALANCE SHEET:
<S> <C> <C> <C> <C>
Total Assets 63,008 71,498 72,514 76,840
% Change in Assets 9.50 13.47 1.42 5.97
Total Loans 43,162 48,886 51,591 52,322
Deposits 50,378 53,947 55,861 56,839
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,496 6,562 5,838 5,989
Tangible Capital 6,725 6,535 5,703 6,146
Core Capital 6,725 6,535 5,703 6,146
Risk-Based Capital 6,968 6,781 5,953 6,401
Equity Capital/Total Assets 10.31 9.18 8.05 7.79
Core Capital/Risk Based Assets 19.97 16.39 13.70 14.21
Core Capital/Adj Tang Assets 10.64 9.14 7.88 7.98
Tangible Cap/Tangible Assets 10.64 9.14 7.88 7.98
Risk-Based Cap/Risk-Wt Assets 20.70 17.00 14.30 14.80
PROFITABILITY:
Net Income(Loss) 460 411 75 145
Ret on Avg Assets Bef Ext Item 0.76 0.61 0.10 0.78
Return on Average Equity 8.48 6.30 1.21 9.81
Net Interest Income/Avg Assets 3.43 3.07 2.99 3.11
Noninterest Income/Avg Assets 0.46 0.47 0.59 0.48
Noninterest Expense/Avg Assets 2.68 2.55 2.87 2.29
Yield/Cost Spread 3.35 2.86 2.84 3.03
LIQUIDITY:
Int Earn Assets/Int Bear Liab 107.83 107.16 104.89 104.80
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.81 2.53 2.57 2.17
Nonaccrual Loans/Gross Loans 0.87 2.49 1.27 0.85
Nonaccrual Lns/Ln Loss Reserve 130.58 427.34 225.17 167.80
Repos Assets/Tot Assets - - - 0.46
Net Chrg-Off/Av Adj Lns 0.22 0.03 0.78 0.05
Nonmtg 1-4 Constr&Conv Lns/TA 7.12 6.57 5.98 5.60
</TABLE>
Source: TAFS, published by Sheshunoff 5
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
FIRST FSB
CYNTHIANA, KY
TICKER KYF FINANCIAL HIGHLIGHTS
- ----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
BALANCE SHEET:
<S> <C> <C> <C> <C>
Total Assets 62,483 73,460 87,852 88,186
% Change in Assets 2.83 17.57 19.59 0.38
Total Loans 39,537 39,978 47,805 48,998
Deposits 55,158 50,483 54,632 54,667
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 7,006 16,783 15,909 12,462
Tangible Capital 7,006 16,799 15,913 12,485
Core Capital 7,006 16,799 15,913 12,485
Risk-Based Capital 7,158 17,167 16,287 12,863
Equity Capital/Total Assets 11.21 22.85 18.11 14.13
Core Capital/Risk Based Assets 19.54 43.66 33.63 26.02
Core Capital/Adj Tang Assets 11.21 22.86 18.11 14.15
Tangible Cap/Tangible Assets 11.21 22.86 18.11 14.15
Risk-Based Cap/Risk-Wt Assets 19.97 44.61 34.42 26.81
PROFITABILITY:
Net Income(Loss) 807 418 827 272
Ret on Avg Assets Bef Ext Item 1.31 0.62 0.99 1.24
Return on Average Equity 12.14 3.51 5.03 7.67
Net Interest Income/Avg Assets 3.57 3.07 3.45 3.29
Noninterest Income/Avg Assets 0.16 0.17 0.26 0.25
Noninterest Expense/Avg Assets 1.82 2.02 2.27 1.73
Yield/Cost Spread 3.48 2.59 2.82 2.78
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108 125 119 113
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.05 0.98 0.09 0.26
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - (0.00) - -
Nonmtg 1-4 Constr&Conv Lns/TA 20.24 17.85 20.03 20.35
</TABLE>
Source: TAFS, published by Sheshunoff 6
<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)
BALANCE SHEET:
<S> <C> <C> <C> <C>
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 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)
BALANCE SHEET:
<S> <C> <C> <C> <C>
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
- ------------------
NEOSHO S&LA, FA
NEOSHO, MO
TICKER NSLB FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 49,738 53,156 56,645 56,507
% Change in Assets (4.49) 6.87 6.56 (0.24)
Total Loans 25,095 28,013 31,762 32,145
Deposits 43,274 41,964 44,062 43,630
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,018 9,947 8,339 8,475
Tangible Capital 6,018 9,947 8,339 8,475
Core Capital 6,018 9,947 8,339 8,475
Risk-Based Capital 6,036 9,945 8,381 8,518
Equity Capital/Total Assets 12.10 18.71 14.72 15.00
Core Capital/Risk Based Assets 34.70 51.58 38.31 35.21
Core Capital/Adj Tang Assets 12.10 18.71 14.72 15.00
Tangible Cap/Tangible Assets 12.10 18.71 14.72 15.00
Risk-Based Cap/Risk-Wt Assets 34.81 51.57 38.50 35.39
PROFITABILITY:
Net Income(Loss) 471 471 186 93
Ret on Avg Assets Bef Ext Item 0.93 0.92 0.33 0.66
Return on Average Equity 8.16 5.90 1.97 4.42
Net Interest Income/Avg Assets 3.04 3.06 2.80 2.90
Noninterest Income/Avg Assets 0.59 0.54 0.43 0.36
Noninterest Expense/Avg Assets 2.17 2.32 2.79 2.24
Yield/Cost Spread 2.94 2.70 2.32 2.49
LIQUIDITY:
Int Earn Assets/Int Bear Liab 110 120 114 115
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.04 0.12 0.14 -
Nonaccrual Loans/Gross Loans - 0.12 0.14 -
Nonaccrual Lns/Ln Loss Reserve - 89.74 107.14 -
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - (0.02) - -
Nonmtg 1-4 Constr&Conv Lns/TA 0.42 0.33 0.20 1.03
</TABLE>
Source: TAFS, published by Sheshunoff 9
<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 Sheshunoff 10
<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 Sheshunoff 11
<PAGE>
FERGUSON & COMPANY Exhibit IV
- ------------------
PEOPLES-THRIFT SVGS BK
NORRISTOWN, PA
TICKER USAB FINANCIAL HIGHLIGHTS
- -----------
<TABLE>
<CAPTION>
1994 1995 1996 YTD 3/97
($000's)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 19,141 25,261 38,033 38,988
% Change in Assets (6.35) 31.97 50.56 2.51
Securities-Book Value 15,100 10,058 16,448 19,350
Securities-Fair Value 13,992 10,139 16,452 19,273
Total Loans & Leases 3,248 7,057 16,711 18,150
Total Deposits 17,051 20,943 27,974 30,960
Loan/Deposit Ratio 19.05 33.70 59.74 58.62
Provision for Loan Losses (16) 1 125 25
CAPITAL:
Equity Capital 1,507 4,076 4,785 4,675
Total Qualifying Capital(Est) 1,516 4,136 4,776 4,769
Equity Capital/Average Assets 7.62 18.36 16.16 12.15
Tot Qual Cap/Rk Bsd Asts(Est) 29.48 49.61 26.12 24.26
Tier 1 Cap/Rsk Bsed Asts(Est) 29.30 48.89 25.11 23.21
T1 Cap/Avg Assets(Lev Est) 7.91 16.01 13.33 11.90
Dividends Declared/Net Income (0.00) (0.00) -- --
PROFITABILITY:
Net Income(Loss) (44) (108) 297 86
Return on Average Assets (0.22) (0.49) 1.00 0.89
Return on Average Equity Cap (2.92) (3.87) 6.59 7.27
Net Interest Margin 2.33 2.00 5.98 5.06
Net Int Income/Avg Assets 2.30 1.98 5.83 4.94
Noninterest Income/Avg Assets 0.06 0.03 0.17 0.15
Noninterest Exp/Avg Assets 2.63 2.50 4.65 3.68
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE -- -- 2.18 1.34
NPA's/Equity + LLR -- -- 7.35 5.00
LLR/Nonperf & Restrcd Lns -- -- 49.86 84.84
Foreclosed RE/Total Assets -- -- -- --
90+ Day Del Loans/Total Loans -- -- 0.28 --
Loan Loss Reserves/Total Lns 0.28 0.85 1.09 1.14
Net Charge-Offs/Average Loans -- -- 0.02 --
Dom Risk R/E Lns/Tot Dom Lns -- 3.54 23.74 27.17
LIQUIDITY:
Brokered Dep/Total Dom Deps -- -- -- --
$100M+ Time Dep/Total Dom Dep 5.06 8.48 8.98 9.17
Int Earn Assets/Int Bear Liab 107.04 118.07 113.59 113.34
Pledged Sec/Total Sec -- -- -- --
Fair Value Sec/Amort Cost Sec 92.66 100.81 100.22 99.50
</TABLE>
12
Source: BankSource, published by Sheshunoff
<PAGE>
EXHIBIT V
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit V - Selected Publicly Held Thrifts
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 44.750
ABBK Abington Bancorp Inc. Abington MA NE BIF NASDAQ 06/10/86 30.500
ABCL Alliance Bancorp Inc. Hinsdale IL MW SAIF NASDAQ 07/07/92 31.125
ABCW Anchor BanCorp Wisconsin Madison WI MW SAIF NASDAQ 07/16/92 26.750
AFCB Affiliated Community Bancorp Waltham MA NE SAIF NASDAQ 10/19/95 26.250
AHM Ahmanson & Company (H.F.) Irwindale CA WE SAIF NYSE 10/25/72 51.938
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 23.250
ALBK ALBANK Financial Corp. Albany NY MA SAIF NASDAQ 04/01/92 39.000
AMFC AMB Financial Corp. Munster IN MW SAIF NASDAQ 04/01/96 14.500
ANDB Andover Bancorp Inc. Andover MA NE BIF NASDAQ 05/08/86 30.875
ASBI Ameriana Bancorp New Castle IN MW SAIF NASDAQ 03/02/87 20.875
ASBP ASB Financial Corp. Portsmouth OH MW SAIF NASDAQ 05/11/95 13.125
ASFC Astoria Financial Corp. Lake Success NY MA SAIF NASDAQ 11/18/93 48.000
BANC BankAtlantic Bancorp Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 12.750
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 19.000
BFSB Bedford Bancshares Inc. Bedford VA SE SAIF NASDAQ 08/22/94 24.125
BKC American Bank of Connecticut Waterbury CT NE BIF AMSE 12/01/81 37.750
BKCT Bancorp Connecticut Inc. Southington CT NE BIF NASDAQ 07/03/86 31.500
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 12.125
BVCC Bay View Capital Corp. San Mateo CA WE SAIF NASDAQ 05/09/86 25.938
CAFI Camco Financial Corp. Cambridge OH MW SAIF NASDAQ NA 18.250
CAPS Capital Savings Bancorp Inc. Jefferson City MO MW SAIF NASDAQ 12/29/93 15.625
CASB Cascade Financial Corp. Everett WA WE SAIF NASDAQ 09/16/92 13.250
CASH First Midwest Financial Inc. Storm Lake IA MW SAIF NASDAQ 09/20/93 18.000
CATB Catskill Financial Corp. Catskill NY MA BIF NASDAQ 04/18/96 16.375
CBCI Calumet Bancorp Inc. Dolton IL MW SAIF NASDAQ 02/20/92 43.000
CBSA Coastal Bancorp Inc. Houston TX SW SAIF NASDAQ NA 29.500
CBSB Charter Financial Inc. Sparta IL MW SAIF NASDAQ 12/29/95 20.375
CEBK Central Co-operative Bank Somerville MA NE BIF NASDAQ 10/24/86 19.750
CFB Commercial Federal Corp. Omaha NE MW SAIF NYSE 12/31/84 44.000
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 21.750
CFSB CFSB Bancorp Inc. Lansing MI MW SAIF NASDAQ 06/22/90 26.500
CFTP Community Federal Bancorp Tupelo MS SE SAIF NASDAQ 03/26/96 17.375
CFX CFX Corp. Keene NH NE BIF AMSE 02/12/87 20.563
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 15.500
CKFB CKF Bancorp Inc. Danville KY MW SAIF NASDAQ 01/04/95 19.000
CLAS Classic Bancshares Inc. Ashland KY MW SAIF NASDAQ 12/29/95 14.125
CMRN Cameron Financial Corp Cameron MO MW SAIF NASDAQ 04/03/95 17.375
CMSB Commonwealth Bancorp Inc. Norristown PA MA SAIF NASDAQ 06/17/96 16.875
CNIT CENIT Bancorp Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 50.500
COFI Charter One Financial Cleveland OH MW SAIF NASDAQ 01/22/88 55.313
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 14.625
CSA Coast Savings Financial Los Angeles CA WE SAIF NYSE 12/23/85 46.750
CTZN CitFed Bancorp Inc. Dayton OH MW SAIF NASDAQ 01/23/92 46.750
CVAL Chester Valley Bancorp Inc. Downingtown PA MA SAIF NASDAQ 03/27/87 21.000
DIBK Dime Financial Corp. Wallingford CT NE BIF NASDAQ 07/09/86 29.750
DIME Dime Community Bancorp Inc. Brooklyn NY MA BIF NASDAQ 06/26/96 19.250
DME Dime Bancorp Inc. New York NY MA BIF NYSE 08/19/86 19.500
DNFC D & N Financial Corp. Hancock MI MW SAIF NASDAQ 02/13/85 19.250
</TABLE>
1
Source: SNL & F&C calculations
<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>
DSL Downey Financial Corp. Newport Beach CA WE SAIF NYSE 01/01/71 22.250
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 16.500
EFBI Enterprise Federal Bancorp West Chester OH MW SAIF NASDAQ 10/17/94 20.000
EGFC Eagle Financial Corp. Bristol CT NE SAIF NASDAQ 02/03/87 36.250
EIRE Emerald Isle Bancorp Inc. Quincy MA NE BIF NASDAQ 09/08/86 21.750
EMLD Emerald Financial Corp. Strongsville OH MW SAIF NASDAQ NA 14.500
EQSB Equitable Federal Savings Bank Wheaton MD MA SAIF NASDAQ 09/10/93 37.938
ESBK Elmira Savings Bank (The) Elmira NY MA BIF NASDAQ 03/01/85 23.750
FBBC First Bell Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 06/29/95 15.875
FBCI Fidelity Bancorp Inc. Chicago IL MW SAIF NASDAQ 12/15/93 21.250
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93 34.250
FBSI First Bancshares Inc. Mountain Grove MO MW SAIF NASDAQ 12/22/93 24.250
FCBF FCB Financial Corp. Neenah WI MW SAIF NASDAQ 09/24/93 27.500
FCME First Coastal Corp. Westbrook ME NE BIF NASDAQ NA 10.875
FED FirstFed Financial Corp. Santa Monica CA WE SAIF NYSE 12/16/83 34.125
FESX First Essex Bancorp Inc. Andover MA NE BIF NASDAQ 08/04/87 17.000
FFBA First Colorado Bancorp Inc. Lakewood CO SW SAIF NASDAQ 01/02/96 18.875
FFBH First Federal Bancshares of AR Harrison AR SE SAIF NASDAQ 05/03/96 21.000
FFBI First Financial Bancorp Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 18.875
FFBS FFBS BanCorp Inc. Columbus MS SE SAIF NASDAQ 07/01/93 23.000
FFBZ First Federal Bancorp Inc. Zanesville OH MW SAIF NASDAQ 07/13/92 18.500
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 33.000
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 33.000
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 29.313
FFFD North Central Bancshares Inc. Fort Dodge IA MW SAIF NASDAQ 03/21/96 16.813
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 19.750
FFIC Flushing Financial Corp. Flushing NY MA BIF NASDAQ 11/21/95 20.250
FFKY First Federal Financial Corp. Elizabethtown KY MW SAIF NASDAQ 07/15/87 22.500
FFLC FFLC Bancorp Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 32.000
FFOH Fidelity Financial of Ohio Cincinnati OH MW SAIF NASDAQ 03/04/96 15.438
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/93 13.000
FFWC FFW Corp. Wabash IN MW SAIF NASDAQ 04/05/93 28.000
FFWD Wood Bancorp Inc. Bowling Green OH MW SAIF NASDAQ 08/31/93 16.625
FFYF FFY Financial Corp. Youngstown OH MW SAIF NASDAQ 06/28/93 27.625
FGHC First Georgia Holding Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 7.750
FIBC Financial Bancorp Inc. Long Island City NY MA SAIF NASDAQ 08/17/94 20.000
FKFS First Keystone Financial Media PA MA SAIF NASDAQ 01/26/95 28.500
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 22.500
FMCO FMS Financial Corporation Burlington NJ MA SAIF NASDAQ 12/14/88 25.250
FMSB First Mutual Savings Bank Bellevue WA WE BIF NASDAQ 12/17/85 21.000
FNGB First Northern Capital Corp. Green Bay WI MW SAIF NASDAQ 12/29/83 13.750
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 20.000
FRC First Republic Bancorp San Francisco CA WE BIF NYSE NA 23.375
FSBI Fidelity Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 06/24/88 21.250
FSPG First Home Bancorp Inc. Pennsville NJ MA SAIF NASDAQ 04/20/87 20.125
FSTC First Citizens Corp. Newnan GA SE SAIF NASDAQ 03/01/86 32.000
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 22.250
FTFC First Federal Capital Corp. La Crosse WI MW SAIF NASDAQ 11/02/89 24.500
</TABLE>
2
Source: SNL & F&C calculations
<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>
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 12.000
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 18.625
GBCI Glacier Bancorp Inc. Kalispell MT WE SAIF NASDAQ 03/30/84 18.875
GDW Golden West Financial Oakland CA WE SAIF NYSE 05/29/59 84.063
GFCO Glenway Financial Corp. Cincinnati OH MW SAIF NASDAQ 11/30/90 25.000
GFSB GFS Bancorp Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 14.250
GPT GreenPoint Financial Corp. New York NY MA BIF NYSE 01/28/94 62.563
GSB Golden State Bancorp Inc. Glendale CA WE SAIF NYSE 10/01/83 29.125
GSBC Great Southern Bancorp Inc. Springfield MO MW SAIF NASDAQ 12/14/89 17.000
GTFN Great Financial Corporation Louisville KY MW SAIF NASDAQ 03/31/94 34.250
GUPB GFSB Bancorp Inc. Gallup NM SW SAIF NASDAQ 06/30/95 18.750
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94 22.250
HARB Harbor Florida Bancorp (MHC) Fort Pierce FL SE SAIF NASDAQ 01/06/94 54.500
HARL Harleysville Savings Bank Harleysville PA MA SAIF NASDAQ 08/04/87 26.000
HAVN Haven Bancorp Inc. Woodhaven NY MA SAIF NASDAQ 09/23/93 38.875
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95 22.000
HBNK Highland Federal Bank FSB Burbank CA WE SAIF NASDAQ NA 30.250
HBS Haywood Bancshares Inc. Waynesville NC SE BIF AMSE 12/18/87 19.000
HFFB Harrodsburg First Fin Bancorp Harrodsburg KY MW SAIF NASDAQ 10/04/95 15.250
HFFC HF Financial Corp. Sioux Falls SD MW SAIF NASDAQ 04/08/92 22.000
HFGI Harrington Financial Group Richmond IN MW SAIF NASDAQ NA 12.000
HFSA Hardin Bancorp Inc. Hardin MO MW SAIF NASDAQ 09/29/95 16.875
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 11.750
HIFS Hingham Instit. for Savings Hingham MA NE BIF NASDAQ 12/20/88 24.250
HMCI HomeCorp Inc. Rockford IL MW SAIF NASDAQ 06/22/90 16.250
HMNF HMN Financial Inc. Spring Valley MN MW SAIF NASDAQ 06/30/94 25.250
HOMF Home Federal Bancorp Seymour IN MW SAIF NASDAQ 01/23/88 30.000
HPBC Home Port Bancorp Inc. Nantucket MA NE BIF NASDAQ 08/25/88 22.250
HRBF Harbor Federal Bancorp Inc. Baltimore MD MA SAIF NASDAQ 08/12/94 19.000
HRZB Horizon Financial Corp. Bellingham WA WE BIF NASDAQ 08/01/86 15.250
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 18.875
IFSB Independence Federal Svgs Bank Washington DC MA SAIF NASDAQ 06/06/85 13.000
INBI Industrial Bancorp Bellevue OH MW SAIF NASDAQ 08/01/95 15.250
IPSW Ipswich Savings Bank Ipswich MA NE BIF NASDAQ 05/26/93 13.000
ISBF ISB Financial Corporation New Iberia LA SW SAIF NASDAQ 04/07/95 25.000
ITLA ITLA Capital Corp. La Jolla CA WE BIF NASDAQ 10/24/95 17.750
IWBK InterWest Bancorp Inc. Oak Harbor WA WE SAIF NASDAQ NA 38.750
JSB JSB Financial Inc. Lynbrook NY MA BIF NYSE 06/27/90 46.063
JSBA Jefferson Savings Bancorp Ballwin MO MW SAIF NASDAQ 04/08/93 33.250
JXVL Jacksonville Bancorp Inc. Jacksonville TX SW SAIF NASDAQ 04/01/96 16.750
KFBI Klamath First Bancorp Klamath Falls OR WE SAIF NASDAQ 10/05/95 19.500
KNK Kankakee Bancorp Inc. Kankakee IL MW SAIF AMSE 01/06/93 29.000
KSAV KS Bancorp Inc. Kenly NC SE SAIF NASDAQ 12/30/93 18.500
KSBK KSB Bancorp Inc. Kingfield ME NE BIF NASDAQ 06/24/93 14.250
KYF Kentucky First Bancorp Inc. Cynthiana KY MW SAIF AMSE 08/29/95 12.500
LARK Landmark Bancshares Inc. Dodge City KS MW SAIF NASDAQ 03/28/94 24.313
LARL Laurel Capital Group Inc. Allison Park PA MA SAIF NASDAQ 02/20/87 22.500
LIFB Life Bancorp Inc. Norfolk VA SE SAIF NASDAQ 10/11/94 24.625
LISB Long Island Bancorp Inc. Melville NY MA SAIF NASDAQ 04/18/94 40.125
</TABLE>
3
Source: SNL & F&C calculations
<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>
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 14.625
LONF London Financial Corporation London OH MW SAIF NASDAQ 04/01/96 15.000
LSBI LSB Financial Corp. Lafayette IN MW BIF NASDAQ 02/03/95 21.500
LSBX Lawrence Savings Bank North Andover MA NE BIF NASDAQ 05/02/86 11.375
LVSB Lakeview Financial West Paterson NJ MA SAIF NASDAQ 12/22/93 33.000
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 16.000
MAFB MAF Bancorp Inc. Clarendon Hills IL MW SAIF NASDAQ 01/12/90 31.000
MARN Marion Capital Holdings Marion IN MW SAIF NASDAQ 03/18/93 23.500
MASB MASSBANK Corp. Reading MA NE BIF NASDAQ 05/28/86 52.000
MBB MSB Bancorp Inc. Goshen NY MA BIF AMSE 09/03/92 23.250
MBB MSB Bancorp, Inc. Goshen NY MA BIF AMSE NA 23.250
MBLF MBLA Financial Corp. Macon MO MW SAIF NASDAQ 06/24/93 23.750
MCBN Mid-Coast Bancorp Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 25.500
MDBK Medford Savings Bank Medford MA NE BIF NASDAQ 03/18/86 31.625
MECH Mechanics Savings Bank Hartford CT NE BIF NASDAQ 06/26/96 24.000
MERI Meritrust Federal SB Thibodaux LA SW SAIF NASDAQ NA 41.031
METF Metropolitan Financial Corp. Mayfield Heights OH MW SAIF NASDAQ NA 18.125
MFBC MFB Corp. Mishawaka IN MW SAIF NASDAQ 03/25/94 23.125
MFFC Milton Federal Financial Corp. West Milton OH MW SAIF NASDAQ 10/07/94 13.750
MFLR Mayflower Co-operative Bank Middleboro MA NE BIF NASDAQ 12/23/87 19.500
MFSL Maryland Federal Bancorp Hyattsville MD MA SAIF NASDAQ 06/02/87 43.000
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 15.500
MLBC ML Bancorp Inc. Villanova PA MA SAIF NASDAQ 08/11/94 20.750
MSBF MSB Financial Inc. Marshall MI MW SAIF NASDAQ 02/06/95 13.250
MWBI Midwest Bancshares Inc. Burlington IA MW SAIF NASDAQ 11/12/92 36.000
MWBX MetroWest Bank Framingham MA NE BIF NASDAQ 10/10/86 6.500
MWFD Midwest Federal Financial Baraboo WI MW SAIF NASDAQ 07/08/92 20.750
NASB North American Savings Bank Grandview MO MW SAIF NASDAQ 09/27/85 49.000
NBN Northeast Bancorp Portland ME NE BIF AMSE 08/19/87 14.625
NEIB Northeast Indiana Bancorp Huntington IN MW SAIF NASDAQ 06/28/95 17.500
NHTB New Hampshire Thrift Bncshrs New London NH NE SAIF NASDAQ 05/22/86 18.250
NMSB NewMil Bancorp Inc. New Milford CT NE BIF NASDAQ 02/01/86 12.875
NSSB Norwich Financial Corp. Norwich CT NE BIF NASDAQ 11/14/86 29.000
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 16.750
NYB New York Bancorp Inc. Douglaston NY MA SAIF NYSE 01/28/88 30.750
OFCP Ottawa Financial Corp. Holland MI MW SAIF NASDAQ 08/19/94 25.375
OHSL OHSL Financial Corp. Cincinnati OH MW SAIF NASDAQ 02/10/93 23.250
PALM Palfed Inc. Aiken SC SE SAIF NASDAQ 12/15/85 16.125
PAMM PacificAmerica Money Center Woodland Hills CA WE BIF NASDAQ 06/25/96 23.000
PBCI Pamrapo Bancorp Inc. Bayonne NJ MA SAIF NASDAQ 11/14/89 21.000
PBHC Oswego City Savings Bk (MHC) Oswego NY MA BIF NASDAQ 11/16/95 18.000
PBKB People's Bancshares Inc. New Bedford MA NE BIF NASDAQ 10/30/86 17.250
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 21.375
PCCI Pacific Crest Capital Agoura Hills CA WE BIF NASDAQ NA 15.250
PEEK Peekskill Financial Corp. Peekskill NY MA SAIF NASDAQ 12/29/95 16.375
PERM Permanent Bancorp Inc. Evansville IN MW SAIF NASDAQ 04/04/94 22.750
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87 25.625
PFNC Progress Financial Corp. Blue Bell PA MA SAIF NASDAQ 07/18/83 15.000
PFSB PennFed Financial Services Inc West Orange NJ MA SAIF NASDAQ 07/15/94 29.500
PFSL Pocahontas FS&LA (MHC) Pocahontas AR SE SAIF NASDAQ 04/05/94 26.000
</TABLE>
4
Source: SNL & F&C calculations
<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>
PHBK Peoples Heritage Finl Group Portland ME NE BIF NASDAQ 12/04/86 37.750
PHFC Pittsburgh Home Financial Corp Pittsburgh PA MA SAIF NASDAQ 04/01/96 18.750
PKPS Poughkeepsie Financial Corp. Poughkeepsie NY MA SAIF NASDAQ 11/19/85 7.281
PRBC Prestige Bancorp Inc. Pleasant Hills PA MA SAIF NASDAQ 06/27/96 17.125
PSBK Progressive Bank Inc. Fishkill NY MA BIF NASDAQ 08/01/84 33.000
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 24.000
PULS Pulse Bancorp South River NJ MA SAIF NASDAQ 09/18/86 21.250
PVFC PVF Capital Corp. Bedford Heights OH MW SAIF NASDAQ 12/30/92 20.250
PVSA Parkvale Financial Corporation Monroeville PA MA SAIF NASDAQ 07/16/87 29.625
PWBC PennFirst Bancorp Inc. Ellwood City PA MA SAIF NASDAQ 06/13/90 15.750
QCBC Quaker City Bancorp Inc. Whittier CA WE SAIF NASDAQ 12/30/93 21.250
QCFB QCF Bancorp Inc. Virginia MN MW SAIF NASDAQ 04/03/95 26.000
RARB Raritan Bancorp Inc. Raritan NJ MA BIF NASDAQ 03/01/87 24.000
REDF RedFed Bancorp Inc. Redlands CA WE SAIF NASDAQ 04/08/94 17.500
RELY Reliance Bancorp Inc. Garden City NY MA SAIF NASDAQ 03/31/94 31.500
ROSE TR Financial Corp. Garden City NY MA BIF NASDAQ 06/29/93 27.000
RVSB Riverview Savings Bank (MHC) Camas WA WE SAIF NASDAQ 10/26/93 27.000
SFED SFS Bancorp Inc. Schenectady NY MA SAIF NASDAQ 06/30/95 19.250
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 22.000
SFIN Statewide Financial Corp. Jersey City NJ MA SAIF NASDAQ 10/02/95 18.750
SFSB SuburbFed Financial Corp. Flossmoor IL MW SAIF NASDAQ 03/04/92 27.500
SFSL Security First Corp. Mayfield Heights OH MW SAIF NASDAQ 01/22/88 19.250
SISB SIS Bancorp Inc. Springfield MA NE BIF NASDAQ 02/08/95 29.750
SKAN Skaneateles Bancorp Inc. Skaneateles NY MA BIF NASDAQ 06/02/86 23.000
SMBC Southern Missouri Bancorp Inc. Poplar Bluff MO MW SAIF NASDAQ 04/13/94 17.000
SOPN First Savings Bancorp Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 20.625
SOSA Somerset Savings Bank Somerville MA NE BIF NASDAQ 07/09/86 3.969
SPBC St. Paul Bancorp Inc. Chicago IL MW SAIF NASDAQ 05/18/87 23.500
SSM Stone Street Bancorp Inc. Mocksville NC SE SAIF AMSE 04/01/96 21.250
STFR St. Francis Capital Corp. Milwaukee WI MW SAIF NASDAQ 06/21/93 34.500
STSA Sterling Financial Corp. Spokane WA WE SAIF NASDAQ NA 18.625
SWBI Southwest Bancshares Hometown IL MW SAIF NASDAQ 06/24/92 20.250
SWCB Sandwich Co-operative Bank Sandwich MA NE BIF NASDAQ 07/25/86 32.375
TBK Tolland Bank Tolland CT NE BIF AMSE 12/19/86 17.625
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 16.250
THRD TF Financial Corporation Newtown PA MA SAIF NASDAQ 07/13/94 19.625
TPNZ Tappan Zee Financial Inc. Tarrytown NY MA SAIF NASDAQ 10/05/95 17.250
TRIC Tri-County Bancorp Inc. Torrington WY WE SAIF NASDAQ 09/30/93 22.750
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95 18.500
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 20.000
UBMT United Financial Corp. Great Falls MT WE SAIF NASDAQ 09/23/86 23.625
VABF Virginia Beach Fed. Financial Virginia Beach VA SE SAIF NASDAQ 11/01/80 14.125
WAMU Washington Mutual Inc. Seattle WA WE BIF NASDAQ 03/11/83 63.000
WBST Webster Financial Corp. Waterbury CT NE SAIF NASDAQ 12/12/86 55.250
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92 26.500
WEFC Wells Financial Corp. Wells MN MW SAIF NASDAQ 04/11/95 16.500
WFI Winton Financial Corp. Cincinnati OH MW SAIF AMSE 08/04/88 16.250
WFSL Washington Federal Inc. Seattle WA WE SAIF NASDAQ 11/17/82 27.313
WRNB Warren Bancorp Inc. Peabody MA NE BIF NASDAQ 07/09/86 17.875
WSB Washington Savings Bank, FSB Waldorf MD MA SAIF AMSE NA 6.875
</TABLE>
5
Source: SNL & F&C calculations
<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>
WSFS WSFS Financial Corporation Wilmington DE MA BIF NASDAQ 11/26/86 15.125
WSTR WesterFed Financial Corp. Missoula MT WE SAIF NASDAQ 01/10/94 21.375
WVFC WVS Financial Corp. Pittsburgh PA MA SAIF NASDAQ 11/29/93 27.000
WWFC Westwood Financial Corporation Westwood NJ MA SAIF NASDAQ 06/07/96 24.250
WYNE Wayne Bancorp Inc. Wayne NJ MA SAIF NASDAQ 06/27/96 24.125
YFCB Yonkers Financial Corporation Yonkers NY MA SAIF NASDAQ 04/18/96 17.625
YFED York Financial Corp. York PA MA SAIF NASDAQ 02/01/84 24.250
Maximum 84.063
Minimum 3.969
Average 23.857
Median 21.250
</TABLE>
6
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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 B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 144.71 17.3 154.1 164.8 14.2 0.89 1,019,510 9.2 8.7 2.58 0.89
ABBK 56.13 17.0 162.8 180.8 11.3 1.31 501,256 6.9 6.3 1.79 0.73
ABCL 166.36 17.6 133.0 134.7 11.9 2.12 1,404,263 8.9 8.8 1.77 0.76
ABCW 242.05 7.8 101.0 102.9 6.3 1.20 1,925,866 6.2 6.1 3.44 0.96
AFCB 169.83 15.4 156.7 157.7 15.6 1.83 1,090,431 9.8 9.7 1.71 1.10
AHM 5,055.43 18.5 255.2 299.5 10.6 1.69 47,532,068 5.2 4.6 2.81 0.70
ALBC 5.81 24.0 97.0 97.0 8.5 1.38 68,628 8.7 8.7 0.97 0.37
ALBK 500.53 15.1 150.9 172.6 13.9 1.85 3,602,227 9.2 8.1 2.59 1.04
AMFC 13.98 21.3 99.2 99.2 14.8 1.66 94,179 15.0 15.0 0.68 0.80
ANDB 158.96 11.6 157.7 157.7 12.7 2.20 1,250,943 8.1 8.1 2.66 1.13
ASBI 67.43 20.5 154.7 154.9 17.0 3.07 397,730 11.0 11.0 1.02 0.84
ASBP 22.59 21.9 129.3 129.3 20.1 3.05 112,264 15.6 15.6 0.60 0.85
ASFC 999.79 17.0 167.9 199.9 13.1 1.25 7,664,495 7.8 6.7 2.83 0.79
BANC 289.47 18.8 186.7 227.3 10.5 0.91 2,730,474 5.6 4.7 0.68 0.64
BDJI 14.33 19.3 119.3 119.3 13.0 - 110,589 10.9 10.9 1.09 0.63
BFD 107.35 19.6 123.6 127.9 11.6 1.47 975,922 8.8 8.5 0.97 0.66
BFSB 27.56 15.5 135.9 135.9 20.4 2.32 135,455 14.2 14.2 1.56 1.28
BKC 87.04 14.4 173.4 180.6 14.4 3.82 605,857 8.3 8.0 2.63 1.10
BKCT 79.81 16.9 181.8 181.8 18.6 3.18 428,362 10.3 10.3 1.86 1.25
BKUNA 107.54 21.3 159.8 197.2 6.0 - 1,807,192 5.6 4.9 0.57 0.58
BVCC 336.66 17.4 171.6 204.4 10.9 1.23 3,096,213 6.3 5.4 1.49 0.63
CAFI 58.66 13.6 125.2 135.7 12.0 2.71 489,833 9.6 8.9 1.34 0.89
CAPS 29.56 14.1 138.5 138.5 12.2 1.54 242,518 8.8 8.8 1.11 0.92
CASB 34.06 21.0 150.9 150.9 9.3 - 368,126 6.1 6.1 0.63 0.52
CASH 49.21 13.0 115.2 130.1 13.1 2.00 374,824 11.4 10.2 1.38 0.93
CATB 80.21 20.2 108.6 108.6 27.2 1.71 284,238 25.0 25.0 0.81 1.41
CBCI 90.76 15.3 117.9 117.9 18.3 - 496,561 15.5 15.5 2.81 1.37
CBSA 146.66 12.8 150.3 180.8 5.0 1.63 2,964,082 3.3 2.8 2.31 0.41
CBSB 84.55 19.2 148.6 168.0 21.5 1.57 393,268 14.5 13.0 1.06 1.16
CEBK 38.81 13.4 113.5 126.9 11.3 1.62 344,420 9.9 9.0 1.47 0.88
CFB 948.32 15.5 222.6 251.0 13.4 0.64 7,096,665 6.0 5.4 2.84 0.91
CFFC 27.74 12.9 115.3 115.3 15.8 2.58 175,414 13.7 13.7 1.69 1.28
CFSB 135.06 16.7 209.5 209.5 16.0 2.26 845,438 7.6 7.6 1.59 1.07
CFTP 80.42 22.9 124.5 124.5 38.5 1.73 209,035 27.5 27.5 0.76 1.61
CFX 270.27 15.1 195.5 209.0 14.5 4.28 1,859,030 7.4 7.0 1.36 0.98
CIBI 14.41 15.7 129.6 129.6 15.6 2.07 92,304 12.0 12.0 0.99 0.92
CKFB 18.05 21.1 112.0 112.0 28.9 2.63 60,812 24.0 24.0 0.90 1.33
CLAS 18.43 19.4 95.0 112.4 14.1 1.98 130,525 14.9 12.9 0.73 0.72
CMRN 45.64 17.4 101.1 101.1 21.9 1.61 208,105 21.7 21.7 1.00 1.32
CMSB 288.49 20.3 130.9 167.4 12.6 1.66 2,288,986 9.6 7.7 0.83 0.64
CNIT 83.48 16.5 162.3 176.7 11.7 1.98 709,550 7.2 6.7 3.06 0.75
COFI 2,554.68 15.2 261.5 279.4 17.5 1.81 14,564,703 6.7 6.3 3.65 1.23
CRZY 13.96 20.9 99.6 99.6 25.7 2.74 54,275 25.8 25.8 0.70 1.30
CSA 870.29 19.6 194.3 196.8 9.6 - 9,102,743 4.9 4.9 2.38 0.52
CTZN 403.85 17.8 204.8 227.4 13.0 0.77 3,097,515 6.4 5.8 2.63 0.82
CVAL 45.40 15.9 159.7 159.7 13.4 2.00 323,673 8.4 8.4 1.32 0.91
DIBK 153.29 11.0 220.0 227.5 17.5 1.35 873,878 8.0 7.7 2.71 1.88
DIME 252.04 19.6 132.0 153.3 19.2 0.94 1,315,026 14.5 12.8 0.98 1.04
DME 2,022.52 15.1 191.0 200.2 10.1 0.82 20,087,176 5.3 5.0 1.29 0.70
DNFC 157.69 13.8 177.6 179.6 9.8 1.04 1,608,837 5.6 5.5 1.40 0.81
</TABLE>
7
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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 B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DSL 594.82 15.7 145.8 147.8 10.1 1.44 5,885,670 6.9 6.8 1.42 0.73
EBSI 93.38 16.0 132.5 132.5 11.0 3.64 848,490 8.3 8.3 1.03 0.76
EFBI 40.02 19.1 126.7 126.7 15.1 5.00 264,266 12.0 12.0 1.05 0.82
EGFC 228.11 23.4 164.6 210.9 11.3 2.76 2,013,359 6.9 5.4 1.55 0.45
EIRE 48.89 13.7 162.4 162.4 11.5 1.29 425,014 7.1 7.1 1.59 0.89
EMLD 73.44 14.5 160.6 163.1 12.2 1.66 603,080 7.6 7.5 1.00 0.90
EQSB 22.85 11.5 147.1 147.1 7.4 - 308,197 5.0 5.0 3.30 0.73
ESBK 16.78 21.4 114.6 119.5 7.4 2.70 227,828 6.3 6.1 1.11 0.35
FBBC 103.36 13.8 147.3 147.3 14.5 2.52 714,366 9.8 9.8 1.15 1.23
FBCI 59.33 16.2 116.6 116.9 12.1 1.51 489,843 10.4 10.4 1.31 0.77
FBHC 28.33 23.1 147.4 158.3 8.9 1.17 318,668 6.0 5.6 1.48 0.51
FBSI 26.57 16.2 119.6 119.8 16.2 0.83 163,973 13.5 13.5 1.50 1.10
FCBF 112.01 23.1 146.3 146.3 21.3 2.91 526,203 14.6 14.6 1.19 1.06
FCME 14.78 2.5 105.1 105.1 9.7 - 152,386 9.2 9.2 4.39 4.08
FED 361.07 16.8 178.3 180.3 8.6 - 4,193,203 4.8 4.8 2.03 0.52
FESX 127.56 13.4 146.9 169.2 10.2 2.82 1,245,415 7.0 6.1 1.27 0.85
FFBA 312.64 17.2 160.1 162.3 20.7 2.33 1,510,376 12.9 12.8 1.10 1.21
FFBH 102.82 18.4 128.4 128.4 19.2 1.14 535,204 15.0 15.0 1.14 1.06
FFBI 7.84 21.2 107.1 107.1 9.3 - 84,531 8.7 8.7 0.89 0.41
FFBS 35.82 18.7 135.5 135.5 27.4 2.17 130,762 19.2 19.2 1.23 1.46
FFBZ 29.08 17.5 210.0 210.2 14.5 1.30 201,262 7.6 7.5 1.06 0.96
FFCH 209.77 15.9 205.9 205.9 12.6 2.18 1,667,178 6.1 6.1 2.08 0.84
FFDB 19.03 12.5 114.2 125.2 10.8 3.03 176,528 9.4 8.7 1.32 0.94
FFES 88.31 13.4 139.7 139.7 9.0 1.82 983,594 6.4 6.4 2.46 0.70
FFFC 132.51 19.5 168.4 172.0 23.7 1.64 558,886 13.2 12.9 1.50 1.34
FFFD 54.78 15.2 113.5 113.5 25.7 1.49 212,869 22.7 22.7 1.11 1.91
FFHH 53.83 17.8 110.7 110.7 14.2 2.82 378,233 11.4 11.4 1.00 0.84
FFHS 23.54 16.7 115.0 115.8 10.4 1.62 226,944 9.0 9.0 1.18 0.64
FFIC 161.57 20.9 121.4 121.4 18.8 1.19 860,031 15.5 15.5 0.97 0.94
FFKY 93.83 16.7 181.5 192.8 24.9 2.49 377,380 13.7 13.0 1.35 1.53
FFLC 74.16 22.1 142.1 142.1 19.2 1.50 387,097 13.5 13.5 1.45 1.01
FFOH 86.14 18.6 126.9 143.7 16.4 1.81 524,743 12.9 11.6 0.83 0.95
FFSL 12.89 18.3 112.1 112.1 11.7 1.92 110,876 10.4 10.4 0.71 0.69
FFWC 19.91 11.8 116.1 128.9 11.1 2.57 180,056 9.5 8.7 2.37 1.06
FFWD 35.22 18.9 174.6 174.6 21.5 2.41 163,918 12.3 12.3 0.88 1.26
FFYF 113.68 16.5 139.3 139.3 19.1 2.53 599,249 13.7 13.7 1.67 1.27
FGHC 23.66 21.0 184.1 200.8 15.1 0.69 156,383 8.2 7.6 0.37 0.78
FIBC 34.44 12.7 130.3 131.0 12.2 2.00 282,485 9.4 9.3 1.58 1.00
FKFS 34.99 14.0 149.3 149.3 10.9 0.70 320,797 7.3 7.3 2.04 0.78
FLFC 173.81 14.7 182.9 202.9 13.5 1.78 1,288,919 7.4 6.7 1.53 0.94
FMCO 60.28 11.4 165.7 168.7 10.9 1.11 554,925 6.6 6.5 2.22 1.02
FMSB 56.74 14.5 192.5 192.5 13.1 0.95 432,034 6.8 6.8 1.45 1.00
FNGB 121.47 12.9 168.9 168.9 19.1 2.33 637,725 11.3 11.3 1.07 0.90
FOBC 47.48 14.5 115.9 121.6 13.3 2.90 356,718 11.1 10.6 1.38 0.97
FRC 226.57 18.0 141.2 141.2 10.1 - 2,238,033 7.2 7.2 1.30 0.60
FSBI 32.93 12.7 134.2 134.2 9.1 1.69 363,302 6.8 6.8 1.67 0.83
FSPG 54.51 11.4 156.6 159.2 10.4 1.99 522,396 6.7 6.6 1.77 0.97
FSTC 58.85 11.4 177.9 228.7 17.3 1.38 338,857 9.7 7.7 2.80 1.90
FTF 39.83 13.3 148.0 148.0 23.3 2.52 171,358 15.7 15.7 1.67 1.73
FTFC 224.38 15.5 221.1 235.1 14.3 1.96 1,571,981 6.4 6.1 1.58 0.91
</TABLE>
8
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit V - Selected Publicly Held 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 B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FTSB 17.02 24.0 115.4 115.4 18.5 2.08 96,940 16.0 16.0 0.50 0.81
FWWB 258.34 21.4 157.1 170.1 24.1 1.14 1,074,166 14.2 13.3 1.15 1.16
GAF 148.72 20.9 130.7 132.1 19.8 2.58 749,748 15.2 15.0 0.89 1.12
GBCI 128.58 15.4 232.5 238.6 22.7 2.54 567,610 9.7 9.5 1.23 1.54
GDW 4,769.61 10.5 191.5 191.5 12.2 0.52 39,095,082 6.4 6.4 7.98 1.23
GFCO 28.50 14.1 104.7 106.1 9.9 3.20 287,088 9.5 9.4 1.77 0.71
GFSB 14.08 13.8 133.7 133.7 15.3 1.83 92,063 11.5 11.5 1.03 1.21
GPT 2,709.79 19.1 182.6 324.7 21.2 1.60 13,300,046 10.3 6.1 3.27 1.03
GSB 1,466.40 20.1 186.3 209.7 9.0 - 16,218,259 6.2 5.7 1.45 0.68
GSBC 137.79 13.6 228.2 228.2 19.5 2.35 707,841 8.5 8.5 1.25 1.54
GTFN 472.80 22.7 167.9 175.3 15.5 1.75 3,046,227 9.2 8.9 1.51 0.72
GUPB 15.08 22.3 111.1 111.1 18.1 2.13 86,911 16.3 16.3 0.84 0.93
HALL 32.11 13.2 108.2 108.2 7.8 - 409,820 7.2 7.2 1.68 0.61
HARB 270.88 20.7 289.1 299.0 24.3 2.57 1,116,718 8.4 8.1 2.63 1.22
HARL 42.96 13.3 195.3 195.3 12.8 1.54 336,666 6.5 6.5 1.95 1.02
HAVN 170.40 12.3 160.6 161.2 9.6 1.54 1,781,545 6.0 5.9 3.16 0.84
HBFW 55.55 18.8 124.9 124.9 16.6 0.91 334,862 13.3 13.3 1.17 0.89
HBNK 69.58 21.8 184.6 184.6 13.8 - 504,381 7.5 7.5 1.39 0.67
HBS 23.76 15.2 113.4 117.6 15.8 2.95 150,416 13.9 13.5 1.25 1.15
HFFB 30.88 20.3 97.3 97.3 28.3 2.62 108,950 26.9 26.9 0.75 1.35
HFFC 65.55 13.8 123.7 123.7 11.7 1.91 561,664 9.4 9.4 1.60 0.89
HFGI 39.08 17.7 156.5 156.5 8.8 1.00 446,797 5.6 5.6 0.68 0.44
HFSA 14.50 19.4 107.6 107.6 13.4 2.84 108,018 12.5 12.5 0.87 0.79
HHFC 10.75 22.2 103.9 103.9 12.3 3.40 87,596 11.8 11.8 0.53 0.57
HIFS 31.61 13.0 155.3 155.3 14.5 1.98 217,586 9.4 9.4 1.86 1.22
HMCI 27.51 20.6 126.9 126.9 8.3 - 331,608 6.5 6.5 0.79 0.42
HMNF 106.35 21.4 130.0 130.0 18.8 - 566,865 14.4 14.4 1.18 0.88
HOMF 101.89 13.2 176.0 181.6 14.9 1.67 682,796 8.5 8.2 2.28 1.22
HPBC 40.98 12.9 195.4 195.4 20.6 3.60 198,748 10.6 10.6 1.72 1.68
HRBF 32.17 20.4 115.3 115.3 14.9 2.11 216,370 12.9 12.9 0.93 0.70
HRZB 113.11 14.5 139.8 139.8 21.8 2.62 518,661 15.6 15.6 1.05 1.54
HZFS 8.03 17.5 95.5 95.5 9.3 1.70 85,969 9.8 9.8 1.08 0.55
IFSB 16.65 23.6 93.6 105.9 6.4 1.69 258,460 6.9 6.1 0.55 0.27
INBI 80.47 18.8 131.1 131.1 23.2 3.15 346,596 17.7 17.7 0.81 1.27
IPSW 30.89 10.2 142.7 142.7 8.2 0.92 189,379 5.7 5.7 1.27 0.97
ISBF 172.52 22.3 142.0 166.9 18.2 1.60 947,107 12.0 10.4 1.12 0.85
ITLA 139.26 12.5 148.9 149.5 16.4 - 850,201 11.0 11.0 1.42 1.48
IWBK 311.39 16.8 250.7 256.1 17.0 1.55 1,832,582 6.8 6.6 2.31 1.10
JSB 454.82 18.2 129.6 129.6 29.6 3.04 1,531,115 22.9 22.9 2.53 1.70
JSBA 166.42 15.5 138.8 178.9 12.9 1.20 1,292,021 8.5 6.8 2.14 0.77
JXVL 41.31 7.4 123.6 123.6 18.4 2.99 226,182 14.9 14.9 2.28 1.33
KFBI 195.36 22.9 125.2 125.2 26.8 1.54 727,903 19.6 19.6 0.85 1.19
KNK 41.33 14.8 109.1 116.1 12.1 1.66 341,678 11.1 10.5 1.96 0.82
KSAV 16.38 12.0 114.1 114.2 15.4 3.24 106,121 13.5 13.5 1.54 1.24
KSBK 17.64 11.2 168.4 178.1 12.1 0.56 145,888 7.2 6.8 1.27 1.08
KYF 16.49 16.0 112.0 112.0 18.5 4.00 88,959 16.6 16.6 0.78 1.13
LARK 41.59 19.0 132.2 132.2 18.2 1.65 228,100 13.8 13.8 1.28 1.04
LARL 32.46 12.0 152.7 152.7 15.3 2.31 211,987 10.0 10.0 1.87 1.43
LIFB 242.48 18.7 154.5 159.1 16.3 1.95 1,488,257 10.6 10.3 1.32 0.86
LISB 961.73 23.7 181.0 182.8 16.3 1.50 5,908,737 9.0 8.9 1.69 0.72
</TABLE>
9
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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 B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOGN 18.43 15.6 115.5 115.5 22.2 2.74 83,152 19.2 19.2 0.94 1.51
LONF 7.65 19.5 102.7 102.7 20.2 1.60 38,240 19.7 19.7 0.77 0.99
LSBI 19.70 15.1 108.6 108.6 10.3 1.58 194,117 8.9 8.9 1.42 0.68
LSBX 48.72 8.4 152.7 152.7 13.3 - 366,318 8.7 8.7 1.36 1.73
LVSB 74.83 18.9 165.8 207.3 15.8 0.76 481,646 9.5 7.8 1.75 0.95
LXMO 18.22 21.1 108.6 108.6 30.8 1.88 59,236 28.3 28.3 0.76 1.32
MAFB 477.39 13.6 184.6 211.3 14.4 0.90 3,321,464 7.8 6.9 2.28 1.16
MARN 41.55 15.2 106.4 106.4 24.0 3.75 173,304 22.5 22.5 1.55 1.67
MASB 139.66 15.3 144.8 144.8 15.4 2.46 905,417 10.6 10.6 3.39 1.04
MBB 66.13 21.7 109.9 224.0 8.1 2.58 813,902 8.9 5.4 1.07 0.51
MBB 66.13 21.7 109.9 224.0 8.1 2.58 813,902 8.9 5.4 1.07 0.51
MBLF 30.84 17.9 108.1 108.1 13.1 1.68 234,824 12.2 12.2 1.33 0.85
MCBN 5.93 15.3 115.4 115.4 9.9 2.04 59,739 8.6 8.6 1.67 0.67
MDBK 143.61 14.4 148.9 159.8 13.4 2.28 1,072,557 9.0 8.4 2.19 1.01
MECH 126.96 8.5 150.7 150.7 15.4 - 823,575 10.2 10.2 2.82 1.95
MERI 31.77 14.0 169.5 169.5 13.9 1.71 228,485 8.2 8.2 2.94 1.05
METF 63.90 15.0 196.6 217.3 7.8 - 821,280 4.0 3.6 1.21 0.54
MFBC 39.09 21.2 115.3 115.3 15.8 1.38 248,241 13.7 13.7 1.09 0.86
MFFC 31.69 24.6 112.2 112.2 15.9 4.36 199,886 13.1 13.1 0.56 0.69
MFLR 17.36 15.7 142.7 145.1 13.8 3.49 125,671 9.7 9.5 1.24 0.92
MFSL 138.03 13.6 142.3 144.1 11.9 1.86 1,157,445 8.4 8.3 3.17 0.89
MIVI 12.69 17.8 96.3 96.3 18.2 1.03 69,775 18.9 18.9 0.87 1.03
MLBC 219.25 18.4 151.7 154.4 10.6 1.93 2,071,285 7.0 6.9 1.13 0.68
MSBF 16.54 16.4 130.3 130.3 22.2 2.11 74,698 17.0 17.0 0.81 1.46
MWBI 12.25 12.8 123.9 123.9 8.6 1.67 146,542 6.9 6.9 2.81 0.75
MWBX 90.69 12.8 215.2 215.2 16.0 1.85 566,517 7.5 7.5 0.51 1.37
MWFD 33.77 16.7 185.1 192.0 16.3 1.64 207,050 8.8 8.5 1.24 1.09
NASB 109.58 12.8 193.1 199.8 14.8 1.63 736,585 7.7 7.4 3.82 1.20
NBN 18.90 22.2 108.4 125.4 7.5 2.19 247,525 7.8 6.9 0.66 0.50
NEIB 30.85 15.1 115.2 115.2 17.5 1.83 176,309 15.2 15.2 1.16 1.21
NHTB 37.68 22.0 154.9 182.0 11.9 2.74 315,280 7.7 6.6 0.83 0.61
NMSB 49.36 22.2 155.7 155.7 15.3 1.86 323,061 9.8 9.8 0.58 0.80
NSSB 156.98 22.3 197.3 218.5 22.0 1.93 712,699 11.2 10.2 1.30 1.05
NWEQ 14.05 15.7 117.7 117.7 14.5 3.10 96,891 11.5 11.5 1.07 0.98
NYB 663.93 15.9 397.8 397.8 20.2 1.95 3,283,653 5.1 5.1 1.93 1.45
OFCP 124.67 19.8 165.7 206.5 14.5 1.58 861,334 8.7 7.1 1.28 0.76
OHSL 27.81 15.6 109.6 109.6 12.1 3.79 230,035 11.0 11.0 1.49 0.85
PALM 85.21 21.8 155.5 155.5 12.8 0.74 664,863 8.2 8.2 0.74 0.60
PAMM 87.39 5.9 148.9 148.9 32.1 - 136,110 21.6 21.6 3.89 9.57
PBCI 59.70 14.4 126.4 127.4 16.1 4.76 370,987 12.7 12.7 1.46 1.24
PBHC 34.50 21.7 154.1 185.2 18.1 1.56 190,899 11.7 10.0 0.83 0.80
PBKB 56.02 21.6 185.3 192.5 10.6 2.55 585,678 5.7 5.5 0.80 0.53
PCBC 17.70 15.8 113.6 113.6 21.8 1.87 81,105 19.2 19.2 1.35 1.07
PCCI 44.81 15.3 170.4 170.4 12.1 - 371,126 7.1 7.1 1.00 0.98
PEEK 52.29 22.1 111.3 111.3 28.6 2.20 182,560 25.7 25.7 0.74 1.29
PERM 47.79 19.0 115.3 117.0 10.6 1.76 433,239 9.2 9.0 1.20 0.62
PFDC 58.27 13.8 133.3 133.3 20.3 2.34 287,564 15.2 15.2 1.86 1.46
PFNC 60.07 23.1 257.3 291.3 13.7 0.76 418,658 5.3 4.7 0.65 0.64
PFSB 142.25 14.1 135.1 161.6 10.8 0.95 1,321,751 7.4 6.2 2.09 0.84
PFSL 42.44 16.7 176.2 176.2 11.2 3.46 378,700 6.4 6.4 1.56 0.69
</TABLE>
10
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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 B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PHBK 1,036.51 15.4 239.4 284.1 18.5 2.01 5,591,180 7.7 6.6 2.46 1.31
PHFC 36.93 20.4 132.0 133.5 14.4 1.28 256,265 10.9 10.8 0.92 0.80
PKPS 91.70 20.2 124.5 124.5 10.4 1.37 880,196 8.4 8.4 0.36 0.54
PRBC 15.67 19.7 103.7 103.7 11.5 0.70 135,721 11.1 11.1 0.87 0.65
PSBK 126.09 14.7 167.8 187.8 14.4 2.06 878,823 8.6 7.7 2.24 0.97
PTRS 11.79 12.0 109.2 109.2 9.6 1.50 121,189 8.8 8.8 2.00 0.84
PULS 65.46 12.4 155.9 155.9 12.5 3.29 520,203 8.1 8.1 1.71 1.06
PVFC 51.75 8.5 206.8 206.8 14.5 - 356,251 7.0 7.0 2.39 1.35
PVSA 120.13 12.1 159.8 161.0 12.1 1.76 991,239 7.6 7.5 2.44 1.08
PWBC 83.56 14.6 126.6 135.4 10.2 2.08 816,954 8.1 7.6 1.08 0.66
QCBC 99.94 21.3 142.2 142.3 12.5 - 801,402 8.8 8.8 1.00 0.61
QCFB 37.08 14.5 137.0 137.0 24.8 - 149,637 18.1 18.1 1.79 1.66
RARB 57.88 15.9 192.3 195.4 15.3 2.00 379,428 7.9 7.8 1.51 1.03
REDF 125.55 23.7 162.8 163.4 13.8 - 912,237 8.5 8.4 0.74 0.64
RELY 276.45 17.6 169.9 235.8 14.0 2.03 1,976,764 8.2 6.1 1.79 0.87
ROSE 475.30 16.4 200.7 200.7 13.3 2.22 3,551,783 6.2 6.2 1.65 0.89
RVSB 65.30 24.6 253.1 277.2 28.4 0.89 229,652 11.2 10.4 1.10 1.20
SFED 23.70 17.5 110.4 110.4 13.8 1.46 172,849 12.5 12.5 1.10 0.79
SFFC 17.24 15.2 113.2 113.2 20.1 1.82 85,679 17.8 17.8 1.45 1.37
SFIN 88.32 13.7 134.9 135.2 13.1 2.35 673,214 9.7 9.7 1.37 0.90
SFSB 34.71 16.3 125.5 125.9 8.1 1.16 426,705 6.5 6.5 1.69 0.56
SFSL 145.95 14.9 237.1 240.9 22.3 1.66 653,226 9.4 9.3 1.29 1.34
SISB 165.91 9.0 162.5 162.5 11.6 1.88 1,434,545 7.2 7.2 3.30 1.38
SKAN 21.95 13.5 129.3 133.4 8.9 1.74 247,697 6.9 6.7 1.71 0.68
SMBC 27.84 16.7 107.3 107.3 16.8 - 165,688 15.7 15.7 1.02 1.01
SOPN 75.88 17.6 113.0 113.0 25.8 3.88 294,217 22.8 22.8 1.17 1.69
SOSA 66.09 15.9 202.5 202.5 12.8 - 514,502 6.3 6.3 0.25 0.79
SPBC 798.72 17.8 201.4 201.9 17.3 1.70 4,611,394 8.6 8.6 1.32 1.04
SSM 40.33 21.0 131.7 131.7 38.0 2.12 106,115 28.9 28.9 1.01 1.71
STFR 182.95 17.9 142.7 161.4 11.1 1.39 1,645,539 7.9 7.0 1.93 0.71
STSA 103.68 22.4 153.0 175.5 6.2 - 1,686,395 5.5 5.0 0.83 0.44
SWBI 53.67 14.8 129.2 129.2 14.2 3.75 378,325 11.0 11.0 1.37 1.01
SWCB 62.01 13.9 155.4 162.4 12.4 3.71 501,894 8.0 7.6 2.33 0.98
TBK 27.50 15.7 166.3 171.1 11.5 1.14 238,227 6.9 6.8 1.12 0.79
THR 13.38 17.5 106.7 107.1 14.7 2.46 91,165 13.8 13.7 0.93 0.83
THRD 80.13 17.4 104.1 118.7 12.5 2.04 640,746 11.1 9.9 1.13 0.73
TPNZ 25.82 20.8 122.3 122.3 20.8 1.62 124,150 17.0 17.0 0.83 1.00
TRIC 13.85 16.5 101.1 101.1 15.5 2.64 89,457 15.3 15.3 1.38 1.02
TSH 63.59 16.1 119.1 119.1 15.7 2.70 406,253 13.1 13.1 1.15 0.96
TWIN 17.07 20.6 123.7 123.7 15.9 3.20 107,345 12.9 12.9 0.97 0.75
UBMT 28.90 19.5 117.5 117.5 27.4 4.15 105,600 23.3 23.3 1.21 1.39
VABF 70.29 24.8 166.2 166.2 11.4 1.42 617,818 6.9 6.9 0.57 0.46
WAMU 15,876.83 24.6 305.8 322.3 16.3 1.71 48,763,153 5.2 5.0 2.56 0.71
WBST 749.26 17.5 221.8 259.6 11.1 1.45 5,943,766 5.0 4.3 3.15 0.71
WCBI 65.62 16.7 138.2 138.2 21.1 2.26 311,613 15.2 15.2 1.59 1.41
WEFC 32.33 15.1 112.8 112.8 16.0 2.91 202,035 14.2 14.2 1.09 1.06
WFI 32.27 12.9 143.1 146.1 10.2 2.83 317,392 7.1 7.0 1.26 0.88
WFSL 1,296.51 12.5 186.3 204.0 22.5 3.37 5,760,385 12.1 11.2 2.18 1.84
WRNB 67.71 10.9 182.0 182.0 18.9 2.91 358,021 10.4 10.4 1.64 1.83
WSB 29.20 16.8 136.1 136.1 11.3 1.46 258,330 8.3 8.3 0.41 0.73
</TABLE>
11
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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 B Value B Value Assets Yield ($000) (%) (%) ($) (%)
Ticker ($M) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WSFS 187.87 10.9 239.3 241.2 12.5 - 1,508,540 5.2 5.2 1.39 1.34
WSTR 118.95 17.7 114.1 142.6 12.5 2.06 955,639 10.9 8.9 1.21 0.82
WVFC 47.18 12.9 143.5 143.5 16.0 2.96 294,693 11.2 11.2 2.10 1.32
WWFC 15.65 18.2 153.9 172.7 14.1 0.83 111,394 9.1 8.2 1.33 0.85
WYNE 51.14 21.7 146.8 146.8 19.6 0.83 261,027 13.4 13.4 1.11 0.92
YFCB 53.24 17.1 124.7 124.7 18.6 1.36 288,089 14.9 14.9 1.03 1.15
YFED 169.95 19.3 169.8 169.8 14.6 2.47 1,162,393 8.6 8.6 1.26 0.77
Maximum 15,876.83 24.8 397.8 397.8 38.5 5.00 48,763,153 28.9 28.9 7.98 9.57
Minimum 5.81 2.5 93.6 95.5 5.0 - 38,240 3.3 2.8 0.25 0.27
Average 251.94 16.8 149.9 157.8 15.3 1.80 1,612,216 10.8 10.5 1.52 1.02
Median 60.07 16.7 142.7 147.1 14.3 1.76 397,730 9.4 8.9 1.32 0.93
</TABLE>
12
Source: SNL F&C Calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held Thrifts
- ------------------
<TABLE>
<CAPTION>
Core NPAs/ Price/ Core Core Core
ROAE Merger Current Assets Core EPS ROAA ROAE
(%) Target? Pricing (%) EPS ($) (%) (%)
Ticker LTM (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 9.89 N 09/02/97 0.44 15.5 0.72 0.98 10.77
ABBK 10.71 N 09/02/97 0.17 15.3 0.50 0.81 11.68
ABCL 8.48 N 09/02/97 0.15 17.3 0.45 0.77 8.35
ABCW 15.09 N 09/02/97 0.92 7.4 0.91 0.91 13.93
AFCB 11.14 N 09/02/97 0.39 14.9 0.44 1.10 11.18
AHM 13.79 N 09/02/97 1.90 17.3 0.75 0.73 14.74
ALBC 4.03 N 09/02/97 0.72 32.3 0.18 0.27 3.03
ALBK 11.23 N 09/02/97 0.71 14.6 0.67 1.05 11.37
AMFC 4.54 N 09/02/97 0.81 21.3 0.17 0.67 4.28
ANDB 14.33 N 09/02/97 1.01 12.9 0.60 1.00 12.54
ASBI 7.64 N 09/02/97 0.40 20.9 0.25 0.83 7.60
ASBP 4.45 N 09/02/97 0.88 17.3 0.19 1.06 6.78
ASFC 10.05 N 09/02/97 0.45 17.7 0.68 0.75 9.80
BANC 10.83 N 09/02/97 0.87 19.9 0.16 0.66 11.50
BDJI 5.48 N 09/02/97 0.23 15.9 0.33 0.69 6.37
BFD 6.48 N 09/02/97 0.52 17.6 0.27 0.65 7.14
BFSB 8.90 N 09/02/97 - 15.9 0.38 1.22 8.52
BKC 12.98 N 09/02/97 1.81 12.9 0.73 1.16 14.12
BKCT 12.07 N 09/02/97 1.19 15.8 0.50 1.29 12.72
BKUNA 8.04 N 09/02/97 0.60 21.7 0.14 0.48 8.00
BVCC 10.26 N 09/02/97 0.79 18.5 0.35 0.60 9.51
CAFI 9.59 N 09/02/97 0.34 12.0 0.38 1.02 10.59
CAPS 10.16 N 09/02/97 0.17 13.0 0.30 0.96 10.97
CASB 8.53 N 09/02/97 0.39 17.4 0.19 0.61 9.92
CASH 8.12 N 09/02/97 0.85 14.5 0.31 0.92 7.98
CATB 5.10 N 09/02/97 0.47 19.5 0.21 1.35 5.24
CBCI 8.66 N 09/02/97 1.16 12.4 0.87 1.60 10.40
CBSA 12.30 N 09/02/97 0.54 13.4 0.55 0.39 11.51
CBSB 7.78 N 09/02/97 0.56 20.4 0.25 1.08 7.67
CEBK 8.75 N 09/02/97 0.85 15.9 0.31 0.73 7.16
CFB 15.58 N 09/02/97 0.89 14.1 0.78 0.97 16.34
CFFC 9.23 N 09/02/97 0.39 13.9 0.39 1.16 8.41
CFSB 13.83 N 09/02/97 0.17 14.1 0.47 1.22 15.91
CFTP 4.97 N 09/02/97 0.30 29.0 0.15 1.27 4.30
CFX 11.60 N 09/02/97 0.72 16.1 0.32 0.96 12.20
CIBI 7.98 N 09/02/97 0.63 14.9 0.26 0.96 8.28
CKFB 5.37 N 09/02/97 0.63 19.0 0.25 1.47 6.16
CLAS 4.64 N 09/02/97 0.66 17.7 0.20 0.72 4.89
CMRN 5.51 N 09/02/97 0.24 17.4 0.25 1.26 5.63
CMSB 6.15 N 09/02/97 0.50 24.8 0.17 0.48 5.01
CNIT 10.46 N 09/02/97 0.42 15.2 0.83 0.81 11.22
COFI 18.22 N 09/02/97 0.22 14.4 0.96 1.27 18.76
CRZY 4.54 N 09/02/97 0.39 18.3 0.20 1.34 5.07
CSA 10.65 N 09/02/97 1.40 18.0 0.65 0.56 11.43
CTZN 12.75 N 09/02/97 0.41 15.6 0.75 0.89 13.88
CVAL 10.36 N 09/02/97 0.23 15.4 0.34 0.89 10.56
DIBK 23.00 N 09/02/97 0.38 9.7 0.77 1.97 25.24
DIME 6.20 N 09/02/97 0.73 28.3 0.17 0.70 47.43
DME 13.30 N 09/02/97 1.57 19.5 0.25 0.54 10.16
DNFC 14.10 N 09/02/97 0.34 13.4 0.36 0.79 13.96
</TABLE>
13
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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>
DSL 9.65 N 09/02/97 0.95 18.5 0.30 0.57 8.03
EBSI 8.78 N 09/02/97 1.07 15.3 0.27 0.76 8.92
EFBI 6.28 N 09/02/97 0.03 17.9 0.28 0.85 6.97
EGFC 6.26 N 09/02/97 0.52 NM (0.23) (0.30) (4.20)
EIRE 12.99 N 09/02/97 0.40 13.0 0.42 0.93 13.30
EMLD 11.63 N 09/02/97 0.14 12.5 0.29 0.98 13.07
EQSB 14.49 N 09/02/97 0.15 11.6 0.82 0.70 13.83
ESBK 5.53 N 09/02/97 0.65 17.0 0.35 0.43 6.85
FBBC 8.92 N 09/02/97 0.07 14.2 0.28 0.98 10.10
FBCI 7.37 N 09/02/97 0.80 14.4 0.37 0.84 8.12
FBHC 8.10 N 09/02/97 0.37 19.9 0.43 0.60 9.70
FBSI 7.54 N 09/02/97 0.10 17.3 0.35 0.97 7.02
FCBF 6.32 N 09/02/97 0.15 22.2 0.31 1.08 6.92
FCME 53.13 N 09/02/97 1.95 13.6 0.20 0.73 7.90
FED 11.28 N 09/02/97 1.39 17.1 0.50 0.51 10.73
FESX 11.63 N 09/02/97 0.56 15.2 0.28 0.72 10.19
FFBA 8.59 N 09/02/97 0.23 16.9 0.28 1.19 9.25
FFBH 6.61 N 09/02/97 0.19 22.8 0.23 0.81 5.24
FFBI 5.11 N 09/02/97 0.39 22.5 0.21 0.38 4.64
FFBS 7.50 N 09/02/97 0.03 23.0 0.25 1.17 6.06
FFBZ 12.66 N 09/02/97 0.47 14.5 0.32 1.11 14.72
FFCH 13.67 N 09/02/97 1.61 15.3 0.54 0.84 13.68
FFDB 9.54 N 09/02/97 0.72 12.2 0.34 0.98 10.05
FFES 11.12 N 09/02/97 0.31 14.7 0.56 0.64 10.10
FFFC 9.56 N 09/02/97 0.18 17.9 0.41 1.35 10.37
FFFD 7.44 N 09/02/97 0.12 14.0 0.30 1.86 7.86
FFHH 6.65 N 09/02/97 0.03 15.3 0.29 0.87 7.55
FFHS 7.08 N 09/02/97 0.41 14.5 0.34 0.73 8.16
FFIC 5.62 N 09/02/97 0.29 17.5 0.29 1.01 6.49
FFKY 11.20 N 09/02/97 0.23 14.8 0.38 1.68 12.28
FFLC 6.56 N 09/02/97 0.19 20.5 0.39 0.96 6.91
FFOH 6.61 N 09/02/97 0.08 16.8 0.23 0.94 7.17
FFSL 6.20 N 09/02/97 0.37 18.1 0.18 0.64 6.17
FFWC 10.49 N 09/02/97 0.16 13.0 0.54 0.93 9.35
FFWD 9.76 N 09/02/97 0.02 17.3 0.24 1.29 10.36
FFYF 8.06 N 09/02/97 0.67 13.8 0.50 1.33 9.62
FGHC 9.53 N 09/02/97 1.41 16.2 0.12 1.00 11.97
FIBC 10.16 N 09/02/97 1.71 12.5 0.40 0.96 10.04
FKFS 10.49 N 09/02/97 1.60 13.0 0.55 0.78 10.93
FLFC 12.81 N 09/02/97 0.81 13.7 0.41 1.02 13.61
FMCO 15.76 N 09/02/97 1.06 10.5 0.60 1.05 16.36
FMSB 15.01 N 09/02/97 - 13.8 0.38 0.99 14.73
FNGB 7.86 N 09/02/97 0.06 22.9 0.15 0.89 7.82
FOBC 8.35 N 09/02/97 0.15 14.7 0.34 0.93 8.36
FRC 9.49 N 09/02/97 1.01 17.2 0.34 0.65 8.73
FSBI 11.94 N 09/02/97 0.31 13.3 0.40 0.75 10.90
FSPG 14.79 N 09/02/97 0.64 12.6 0.40 0.86 12.91
FSTC 19.95 N 09/02/97 NA 5.2 1.55 3.68 38.97
FTF 10.43 N 09/02/97 0.12 11.8 0.47 1.86 11.74
FTFC 13.94 N 09/02/97 NA 17.0 0.36 0.94 14.41
</TABLE>
14
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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>
FTSB 4.47 N 09/02/97 1.42 13.0 0.23 1.38 8.60
FWWB 7.58 N 09/02/97 0.29 19.2 0.32 1.21 8.28
GAF 5.80 N 09/02/97 0.12 17.9 0.26 1.10 6.97
GBCI 16.25 N 09/02/97 0.12 13.9 0.34 1.64 17.10
GDW 19.73 N 09/02/97 1.31 14.0 1.50 0.88 13.91
GFCO 7.47 N 09/02/97 0.11 12.0 0.52 0.83 8.67
GFSB 10.35 N 09/02/97 NA 11.9 0.30 1.37 11.88
GPT 9.59 N 09/02/97 2.89 17.4 0.90 1.12 10.49
GSB 10.56 N 09/02/97 1.46 16.9 0.43 0.74 11.55
GSBC 17.00 N 09/02/97 1.91 11.8 0.36 1.66 19.65
GTFN 7.50 N 09/02/97 0.36 20.4 0.42 0.77 8.37
GUPB 4.89 N 09/02/97 0.18 22.3 0.21 0.81 4.74
HALL 8.62 N 09/02/97 0.15 11.8 0.47 0.67 9.40
HARB 14.82 N 09/02/97 0.46 20.3 0.67 1.21 14.61
HARL 16.03 N 09/02/97 - 12.3 0.53 1.09 16.89
HAVN 13.80 N 09/02/97 0.74 19.4 0.50 0.53 8.81
HBFW 6.29 N 09/02/97 - 17.7 0.31 0.89 6.61
HBNK 9.20 N 09/02/97 3.09 13.0 0.58 1.10 14.97
HBS 7.72 N 09/02/97 1.97 14.4 0.33 1.12 7.99
HFFB 4.99 N 09/02/97 - 19.1 0.20 1.39 5.23
HFFC 9.66 N 09/02/97 0.33 12.2 0.45 0.99 10.56
HFGI 9.25 N 09/02/97 0.25 27.3 0.11 0.30 5.89
HFSA 5.37 N 09/02/97 0.09 17.6 0.24 0.77 6.00
HHFC 4.44 N 09/02/97 0.11 15.5 0.19 0.80 6.56
HIFS 12.54 N 09/02/97 0.41 11.9 0.51 1.27 13.18
HMCI 6.80 N 09/02/97 2.91 17.7 0.23 0.51 7.88
HMNF 5.90 N 09/02/97 0.08 20.4 0.31 0.87 5.99
HOMF 14.67 N 09/02/97 0.45 13.9 0.54 1.13 13.40
HPBC 15.76 N 09/02/97 - 12.4 0.45 1.68 15.74
HRBF 5.41 N 09/02/97 0.05 19.0 0.25 0.74 5.80
HRZB 9.82 N 09/02/97 - 13.6 0.28 1.57 10.19
HZFS 5.25 N 09/02/97 0.96 22.5 0.21 0.43 4.23
IFSB 4.09 N 09/02/97 2.02 108.3 0.03 0.06 0.85
INBI 6.78 N 09/02/97 0.22 14.7 0.26 1.51 8.43
IPSW 16.21 N 09/02/97 1.52 8.8 0.37 1.03 17.52
ISBF 6.26 N 09/02/97 NA 22.3 0.28 0.76 6.27
ITLA 12.72 N 09/02/97 1.47 11.7 0.38 1.52 13.13
IWBK 16.39 N 09/02/97 0.64 15.9 0.61 1.10 16.36
JSB 7.77 N 09/02/97 NA 16.7 0.69 1.85 8.24
JSBA 9.84 N 09/02/97 0.46 15.1 0.55 0.81 9.67
JXVL 8.42 N 09/02/97 0.78 10.2 0.41 1.75 11.48
KFBI 5.37 N 09/02/97 0.08 22.2 0.22 1.16 5.77
KNK 7.89 N 09/02/97 0.61 14.5 0.50 0.88 8.12
KSAV 8.86 N 09/02/97 0.35 12.2 0.38 1.39 10.15
KSBK 15.21 N 09/02/97 1.75 11.9 0.30 0.98 13.70
KYF 5.83 N 09/02/97 - 15.6 0.20 1.17 7.19
LARK 7.02 N 09/02/97 0.04 19.6 0.31 0.97 6.90
LARL 13.65 N 09/02/97 0.43 11.7 0.48 1.39 13.70
LIFB 8.06 N 09/02/97 0.39 18.7 0.33 0.89 8.33
LISB 7.63 N 09/02/97 1.03 22.8 0.44 0.71 7.78
</TABLE>
15
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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>
LOGN 7.40 N 09/02/97 0.61 15.2 0.24 1.46 7.53
LONF 4.77 N 09/02/97 0.80 22.1 0.17 0.85 4.30
LSBI 7.38 N 09/02/97 1.17 14.1 0.38 0.70 7.88
LSBX 20.78 N 09/02/97 0.30 8.9 0.32 1.60 18.57
LVSB 9.52 N 09/02/97 0.98 15.0 0.55 1.14 11.56
LXMO 4.46 N 09/02/97 0.48 18.2 0.22 1.52 5.43
MAFB 14.83 N 09/02/97 0.43 12.1 0.64 1.24 15.73
MARN 7.28 N 09/02/97 0.81 14.7 0.40 1.72 7.53
MASB 10.20 N 09/02/97 0.16 14.1 0.92 1.13 10.85
MBB 5.95 N 09/02/97 0.71 19.4 0.30 0.56 6.37
MBB 5.95 N 09/02/97 0.71 19.4 0.30 0.56 6.37
MBLF 6.52 N 09/02/97 0.25 18.6 0.32 0.79 6.21
MCBN 7.57 N 09/02/97 0.73 13.0 0.49 0.75 8.76
MDBK 11.31 N 09/02/97 0.37 14.1 0.56 1.00 11.31
MECH 19.68 N 09/02/97 1.13 4.4 1.38 3.60 36.83
MERI 13.46 N 09/02/97 0.22 11.5 0.89 1.27 15.91
METF 13.86 N 09/02/97 0.49 13.3 0.34 0.59 15.15
MFBC 5.53 N 09/02/97 - 19.3 0.30 0.85 6.06
MFFC 4.30 N 09/02/97 0.15 22.9 0.15 0.70 5.11
MFLR 9.53 N 09/02/97 0.81 14.8 0.33 0.94 9.83
MFSL 10.76 N 09/02/97 0.44 15.1 0.71 0.80 9.60
MIVI 5.77 N 09/02/97 0.28 14.9 0.26 1.18 6.82
MLBC 9.23 N 09/02/97 0.46 22.6 0.23 0.52 7.41
MSBF 7.85 N 09/02/97 0.06 14.4 0.23 1.43 8.39
MWBI 10.82 N 09/02/97 0.77 11.5 0.78 0.81 11.75
MWBX 17.82 N 09/02/97 0.70 11.6 0.14 1.36 18.35
MWFD 12.59 N 09/02/97 0.12 15.7 0.33 1.11 12.75
NASB 16.21 N 09/02/97 3.11 12.5 0.98 1.24 15.90
NBN 6.24 N 09/02/97 1.37 14.1 0.26 0.66 8.48
NEIB 7.43 N 09/02/97 0.40 13.7 0.32 1.20 7.88
NHTB 8.22 N 09/02/97 0.70 15.2 0.30 0.87 11.73
NMSB 7.67 N 09/02/97 0.87 21.5 0.15 0.81 8.07
NSSB 9.60 N 09/02/97 1.29 22.0 0.33 1.06 9.55
NWEQ 8.16 N 09/02/97 1.25 13.1 0.32 1.02 8.96
NYB 27.70 N 09/02/97 1.09 13.3 0.58 1.63 32.18
OFCP 8.36 N 09/02/97 0.16 16.7 0.38 0.87 10.01
OHSL 7.42 N 09/02/97 0.01 14.5 0.40 0.86 7.92
PALM 7.44 N 09/02/97 2.12 16.1 0.25 0.82 9.99
PAMM 49.37 N 09/02/97 3.47 3.4 1.70 13.21 58.78
PBCI 8.63 N 09/02/97 2.14 11.9 0.44 1.37 10.69
PBHC 7.09 N 09/02/97 1.17 16.1 0.28 1.11 9.66
PBKB 9.27 N 09/02/97 0.82 22.7 0.19 0.50 8.86
PCBC 5.72 N 09/02/97 - 17.8 0.30 1.16 6.18
PCCI 12.40 N 09/02/97 1.29 12.7 0.30 1.04 14.25
PEEK 4.71 N 09/02/97 0.71 24.1 0.17 1.13 4.38
PERM 6.52 N 09/02/97 1.09 18.4 0.31 0.58 6.32
PFDC 9.55 N 09/02/97 0.34 13.4 0.48 1.53 10.08
PFNC 12.31 N 09/02/97 1.46 17.1 0.22 0.84 15.89
PFSB 10.78 N 09/02/97 0.59 13.4 0.55 0.83 11.06
PFSL 11.23 N 09/02/97 0.10 17.1 0.38 0.66 10.39
</TABLE>
16
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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>
PHBK 16.17 N 09/02/97 0.83 14.8 0.64 1.30 16.19
PHFC 6.03 N 09/02/97 1.60 18.8 0.25 0.73 6.50
PKPS 6.52 N 09/02/97 3.81 20.2 0.09 0.58 6.85
PRBC 4.97 N 09/02/97 0.30 15.9 0.27 0.68 5.98
PSBK 11.84 N 09/02/97 0.84 14.7 0.56 0.97 11.59
PTRS 9.48 N 09/02/97 0.50 9.2 0.65 1.06 11.83
PULS 13.51 N 09/02/97 0.57 11.8 0.45 1.10 13.79
PVFC 19.93 N 09/02/97 0.90 12.7 0.40 1.24 17.94
PVSA 14.91 N 09/02/97 0.27 12.0 0.62 1.07 14.75
PWBC 8.86 N 09/02/97 0.65 14.6 0.27 0.71 9.02
QCBC 6.72 N 09/02/97 1.31 17.7 0.30 0.70 7.87
QCFB 8.76 N 09/02/97 0.27 14.4 0.45 1.55 8.53
RARB 13.25 N 09/02/97 0.29 16.2 0.37 0.99 12.53
REDF 8.06 N 09/02/97 2.19 13.3 0.33 1.06 12.65
RELY 10.51 N 09/02/97 0.77 16.4 0.48 0.90 11.10
ROSE 14.28 N 09/02/97 0.45 15.3 0.44 0.88 14.63
RVSB 10.89 N 09/02/97 0.14 22.5 0.30 1.29 11.49
SFED 6.18 N 09/02/97 0.68 20.9 0.23 0.63 5.07
SFFC 7.36 N 09/02/97 NA 12.8 0.43 1.55 8.78
SFIN 9.33 N 09/02/97 0.38 14.2 0.33 0.82 8.78
SFSB 8.52 N 09/02/97 0.48 16.0 0.43 0.55 8.49
SFSL 14.39 N 09/02/97 0.28 18.5 0.26 1.35 14.52
SISB 18.99 N 09/02/97 0.43 14.3 0.52 0.83 11.63
SKAN 10.07 N 09/02/97 1.46 12.5 0.46 0.72 10.38
SMBC 6.29 N 09/02/97 1.10 17.0 0.25 0.96 6.06
SOPN 6.96 N 09/02/97 0.08 16.1 0.32 1.80 7.60
SOSA 13.61 N 09/02/97 6.28 9.9 0.10 1.33 21.58
SPBC 11.66 N 09/02/97 0.21 16.3 0.36 1.11 12.61
SSM 4.84 N 09/02/97 - 38.0 0.14 0.98 2.77
STFR 8.11 N 09/02/97 0.16 15.1 0.57 0.79 9.57
STSA 7.84 N 09/02/97 0.61 18.6 0.25 0.49 8.97
SWBI 9.54 N 09/02/97 0.30 14.5 0.35 1.02 9.50
SWCB 12.17 N 09/02/97 0.81 14.2 0.57 0.91 11.42
TBK 11.78 N 09/02/97 2.13 14.7 0.30 0.83 11.73
THR 5.71 N 09/02/97 1.21 18.5 0.22 0.77 5.49
THRD 6.42 N 09/02/97 0.33 16.9 0.29 0.73 6.60
TPNZ 5.63 N 09/02/97 1.28 24.0 0.18 0.84 4.85
TRIC 6.79 N 09/02/97 - 14.6 0.39 1.08 7.09
TSH 6.97 N 09/02/97 0.27 16.5 0.28 0.93 6.88
TWIN 5.88 N 09/02/97 0.08 16.7 0.30 0.91 7.08
UBMT 5.99 N 09/02/97 NA 19.1 0.31 1.41 6.14
VABF 6.82 N 09/02/97 0.68 20.8 0.17 0.54 7.98
WAMU 12.58 N 09/02/97 0.81 16.9 0.93 0.98 18.47
WBST 13.33 N 09/02/97 0.85 14.4 0.96 0.82 16.31
WCBI 9.13 N 09/02/97 0.60 16.2 0.41 1.43 9.40
WEFC 7.56 N 09/02/97 0.21 14.7 0.28 1.06 7.44
WFI 12.23 N 09/02/97 0.29 12.0 0.34 0.86 12.00
WFSL 15.84 N 09/02/97 0.73 12.2 0.56 1.87 15.71
WRNB 18.86 N 09/02/97 1.08 10.9 0.41 1.85 18.09
WSB 8.66 N 09/02/97 NA 17.2 0.10 0.72 8.67
</TABLE>
17
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit V - Selected Publicly Held 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>
WSFS 23.57 N 09/02/97 1.66 11.5 0.33 1.12 21.27
WSTR 6.48 N 09/02/97 0.17 15.3 0.35 0.83 7.53
WVFC 10.73 N 09/02/97 0.30 13.5 0.50 1.21 10.88
WWFC 8.78 N 09/02/97 - 16.4 0.37 0.88 9.45
WYNE 6.16 N 09/02/97 0.91 22.3 0.27 0.83 6.02
YFCB 6.81 N 09/02/97 0.57 16.3 0.27 1.13 7.48
YFED 9.46 N 09/02/97 1.24 17.8 0.34 0.84 9.96
Maximum 53.13 6.28 108.3 1.70 13.21 58.78
Minimum 4.03 - - (0.23) (0.30) (4.20)
Average 10.09 0.68 16.4 0.40 1.05 10.59
Median 8.92 0.46 15.3 0.34 0.96 9.57
</TABLE>
18
Source: SNL & F&C calculations
<PAGE>
EXHIBIT VI
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VI - Comparative Group Selection
To search for a comparative group for Newport, we selected all thrifts from the
entire U.S. with assets under $100 million that have sufficient trading volume
to produce meaningful market information. All of these thrifts are listed on
either AMEX, NYSE, or Nasdaq.
We found 57 thrifts in the asset size described above. We eliminated 45 and
retained a group of 12. Normally, we consider 10 to 12 to be the desired sample
size.
We eliminated thrifts for the following reasons: 1) Mutual holding company; 2)
No PE for last 12 months; 3) Merger agreement has been executed; 4) Tangible
equity more than 20% of assets; 5) Loans less than 50% of deposits; 6) Loans
over 100% of deposits; 7) Non-performing assets more than 1% of assets; and 8)
Loans serviced more than 40% of total assets. After eliminating thrifts for the
above reasons, there were 14 left. We then eliminated the two with the most
assets to reduce our group to 12.
The group of 57 from which the comparative group was selected is listed on
Exhibit VI.1 and the selected comparative group is listed on Exhibit VI.2. On
Exhibit VI.1, we have blocked the cells that indicate which ones were not
selected and why. Set forth below is a legend for the column summarizing reasons
individual thrifts were not selected.
A Mutual holding company.
B Has not reported as a stock for a full year.
C One of the two remaining with the most assets.
D Tangible equity more than 20% of assets.
E Merger agreement has been executed.
F 1% or more of assets are non-performing.
G Loans less than 50% of deposits.
H Loans more than 100% of deposits.
I Loans serviced exceeds 40% of assets.
1
<PAGE>
<TABLE>
<CAPTION>
Deposit Current
Insurance Stock
Agency Price
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($)
<S> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 24.250
- --------
AMFC AMB Financial Corp. Munster IN MW SAIF NASDAQ 04/01/96 15.000
- --------
ATSB AmTrust Capital Corp. Peru IN MW SAIF NASDAQ 03/28/95 12.625
- --------
CBES CBES Bancorp Inc. Excelsior Springs MO MW SAIF NASDAQ 09/30/96 17.875
- --------
CENB Century Bancorp Inc. Thomasville NC SE SAIF NASDAQ 12/23/96 79.000
- --------
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 15.000
- --------
CKFB CKF Bancorp Inc. Danville KY MW SAIF NASDAQ 01/04/95 20.000
- --------
CNSB CNS Bancorp Inc. Jefferson City MO MW SAIF NASDAQ 06/12/96 17.125
- --------
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 14.125
- --------
CSBF CSB Financial Group Inc. Centralia IL MW SAIF NASDAQ 10/09/95 12.500
- --------
FCB Falmouth Co-Operative Bank Falmouth MA NE BIF AMSE 03/28/96 17.000
- --------
FFBI First Financial Bancorp Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 18.250
- --------
FFDF FFD Financial Corp. Dover OH MW SAIF NASDAQ 04/03/96 15.500
- --------
FLKY First Lancaster Bancshares Lancaster KY MW SAIF NASDAQ 07/01/96 15.250
- --------
FTNB Fulton Bancorp Inc. Fulton MO MW SAIF NASDAQ 10/18/96 20.000
- --------
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 10.500
- --------
GFSB GFS Bancorp Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 13.375
- --------
GOSB GSB Financial Corp. Goshen NY MA BIF NASDAQ 07/09/97 14.656
- --------
GUPB GFSB Bancorp Inc. Gallup NM SW SAIF NASDAQ 06/30/95 19.000
- --------
GWBC Gateway Bancorp Inc. Catlettsburg KY MW SAIF NASDAQ 01/18/95 17.625
- --------
HBBI Home Building Bancorp Washington IN MW SAIF NASDAQ 02/08/95 21.000
- --------
HCFC Home City Financial Corp. Springfield OH MW SAIF NASDAQ 12/30/96 15.125
- --------
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 11.750
- --------
HWEN Home Financial Bancorp Spencer IN MW SAIF NASDAQ 07/02/96 15.125
- --------
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 18.875
- --------
INCB Indiana Community Bank SB Lebanon IN MW SAIF NASDAQ 12/15/94 15.250
- --------
JOAC Joachim Bancorp Inc. De Soto MO MW SAIF NASDAQ 12/28/95 15.000
- --------
KYF Kentucky First Bancorp Inc. Cynthiana KY MW SAIF AMSE 08/29/95 12.625
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 14.000
- --------
LONF London Financial Corporation London OH MW SAIF NASDAQ 04/01/96 15.250
- --------
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 16.625
- --------
MBSP Mitchell Bancorp Inc. Spruce Pine NC SE SAIF NASDAQ 07/12/96 16.750
- --------
MCBN Mid-Coast Bancorp Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 25.000
- --------
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 15.625
- --------
MONT Montgomery Financial Corp. Crawfordsville IN MW SAIF NASDAQ 07/01/97 11.750
- --------
MRKF Market Financial Corp. Mount Healthy OH MW SAIF NASDAQ 03/27/97 14.125
- --------
MSBF MSB Financial Inc. Marshall MI MW SAIF NASDAQ 02/06/95 15.000
- --------
NSLB NS&L Bancorp Inc. Neosho MO MW SAIF NASDAQ 06/08/95 18.500
- --------
NTMG Nutmeg Federal S&LA Danbury CT NE SAIF NASDAQ NA 11.000
- --------
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 15.750
- --------
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 20.500
- --------
PFFC Peoples Financial Corp. Massillon OH MW SAIF NASDAQ 09/13/96 17.250
- --------
PSFC Peoples-Sidney Financial Corp. Sidney OH MW SAIF NASDAQ 04/28/97 16.500
- --------
PSFI PS Financial Inc. Chicago IL MW SAIF NASDAQ 11/27/96 14.625
- --------
PWBK Pennwood Bancorp Inc. Pittsburgh PA MA SAIF NASDAQ 07/15/96 15.500
- --------
RELI Reliance Bancshares Inc. Milwaukee WI MW SAIF NASDAQ 04/19/96 8.500
- --------
SCBS Southern Community Bancshares Cullman AL SE SAIF NASDAQ 12/23/96 15.500
- --------
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 21.063
- --------
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 21.500
- --------
SFNB Security First Network Bank Atlanta GA SE SAIF NASDAQ NA 11.625
- --------
SOBI Sobieski Bancorp Inc. South Bend IN MW SAIF NASDAQ 03/31/95 16.250
- --------
SSB Scotland Bancorp Inc Laurinburg NC SE SAIF AMSE 04/01/96 17.000
- --------
SZB SouthFirst Bancshares Inc. Sylacauga AL SE SAIF AMSE 02/14/95 16.375
- --------
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 16.250
- --------
TRIC Tri-County Bancorp Inc. Torrington WY WE SAIF NASDAQ 09/30/93 22.750
- --------
USAB USABancshares, Inc. Philadelphia PA MA BIF NASDAQ NA 8.250
- --------------------------------------------
WCFB Webster City Federal SB (MHC) Webster City IA MW SAIF NASDAQ 08/15/94 16.500
- --------------------------------------------
Maximum 79.000
Minimum 8.250
Average 17.171
Median 15.625
</TABLE>
2
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit VI.1 - Comparatives Selection
- ------------------
<TABLE>
<CAPTION>
Current Price/ Price/ Current Current Current Total Equity/
Market LTM Core Price/ Price/ T Price/ Dividend Assets Assets
Value Core EPS EPS Book V Book V Assets Yield ($000) (%)
Ticker ($M) (x) (x) (%) (%) (%) (%) MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 6.38 25.80 13.47 102.67 102.67 9.14 1.32 66,316 8.90
- -------
AMFC 14.46 22.06 22.06 102.60 102.60 15.35 1.60 94,179 14.96
- -------
ATSB 6.65 46.76 28.69 92.02 93.04 9.36 1.58 71,031 10.17
- -------
CBES 18.32 NA 18.62 104.65 104.65 19.24 2.24 95,219 18.39
- ------- -------
CENB 32.18 NA 16.74 107.56 107.56 32.20 2.53 99,948 29.94
- ------- -------
CIBI 13.94 15.15 13.89 126.90 126.90 14.61 2.13 97,446 11.52
- -------
CKFB 18.51 22.22 20.00 117.86 117.86 30.43 2.50 60,812 23.96
- -------
CNSB 28.31 NA 28.54 116.26 116.26 28.86 1.17 98,104 24.81
- ------- -------
CRZY 13.49 20.18 17.66 96.22 96.22 24.85 2.83 54,275 25.82
- -------
CSBF 11.77 39.06 52.08 97.81 103.73 24.53 - 47,996 25.07
- -------
FCB 24.73 34.00 38.64 110.39 110.39 26.36 1.18 93,838 23.88
- -------
FFBI 7.58 20.51 21.73 103.58 103.58 8.96 - 84,531 8.65
- -------
FFDF 22.55 NA 24.22 106.82 106.82 26.44 1.94 85,286 24.74
- ------- -------
FLKY 14.62 NA 23.83 105.61 105.61 36.15 3.28 40,448 34.24
- ------- -------
FTNB 34.39 NA 35.71 138.22 138.22 34.57 1.00 99,464 25.01
- ------- -------
FTSB 15.70 21.00 11.41 100.96 100.96 16.19 2.38 96,940 16.04
- -------
GFSB 13.21 12.86 11.94 129.48 129.48 14.99 1.94 88,154 11.57
- -------
GOSB 32.95 NA NA NA NA NA - 95,617 12.68
- ------- -------
GUPB 15.28 22.62 22.62 112.56 112.56 18.35 2.11 86,911 16.30
- ------- -------
GWBC 18.96 NA 31.47 109.81 109.81 29.71 2.27 63,828 27.04
- ------- -------
HBBI 6.54 26.25 18.75 104.17 104.17 14.52 1.43 45,064 12.81
- ------- -------
HCFC 14.40 NA 18.01 94.24 94.24 21.11 2.12 68,235 20.61
- ------- -------
HHFC 10.75 23.50 16.32 105.76 105.76 13.22 3.40 83,103 12.50
- ------- -------
HWEN 7.10 NA 25.21 100.03 100.03 18.63 1.32 39,443 18.63
- ------- -------
HZFS 8.03 17.48 22.47 95.47 95.47 9.34 1.70 85,969 9.79
- -------
INCB 14.06 31.77 25.42 124.29 124.29 15.40 2.36 91,329 12.39
- ------- -----------
JOAC 10.84 38.46 53.57 110.38 110.38 31.99 3.33 35,656 28.98
- -------
KYF 16.65 18.30 15.78 116.25 116.25 18.73 3.96 88,923 16.11
LOGN 17.65 14.89 14.58 110.58 110.58 21.22 2.86 83,152 19.19
- -------
LONF 7.78 NA 22.43 104.24 104.24 20.71 1.57 37,937 19.87
- ------- -------
LXMO 18.93 21.88 18.89 112.86 112.86 31.95 1.81 59,236 28.32
- -------
MBSP 15.59 NA 27.92 108.84 108.84 47.20 - 33,038 43.36
- ------- -------
MCBN 5.81 14.97 12.76 113.12 113.12 9.73 2.08 59,739 8.60
- -------
MIVI 12.79 17.96 15.02 97.11 97.11 18.33 1.02 69,775 18.88
- -------
MONT 19.42 NA NA NA NA NA - 93,627 9.83
- ------- -------
MRKF 18.87 NA 27.16 95.25 95.25 33.35 1.98 56,578 35.00
- ------- -------
MSBF 18.73 18.52 16.30 147.49 147.49 25.08 1.87 74,698 16.99
- -------
NSLB 13.09 30.83 24.34 112.05 112.05 21.92 2.70 59,711 19.56
- -------
NTMG 7.98 32.35 25.00 149.66 149.66 8.52 - 93,645 6.17
- -------
NWEQ 13.21 14.72 12.30 110.68 110.68 13.63 3.30 96,891 11.45
- -------
PCBC 16.97 15.77 16.53 113.51 113.51 20.79 1.95 79,714 18.32
- -------
PFFC 25.28 NA 30.80 106.61 106.61 28.68 2.90 89,687 26.90
- ------- -------
PSFC 29.46 NA NA NA NA NA 1.21 93,734 10.15
- ------- -------
PSFI 31.91 NA 17.41 99.76 99.76 38.61 2.19 82,662 38.69
- ------- -------
PWBK 9.46 NA 17.61 101.31 101.31 19.73 2.07 47,929 19.47
- ------- -------
RELI 21.49 NA 30.36 95.61 95.61 45.90 - 46,836 47.98
- ------- -------
SCBS 17.63 NA 18.45 117.51 117.51 25.05 1.94 70,370 21.32
- ------- -------
SCCB 14.83 30.09 29.25 123.10 123.10 31.96 2.85 46,412 25.96
- -------
SFFC 16.85 14.83 12.50 110.60 110.60 19.67 1.86 85,679 17.78
- -------
SFNB 100.21 NM NM 306.73 311.66 123.15 - 79,581 42.48
- ------- -------
SOBI 12.34 28.51 22.57 92.75 92.75 15.61 1.72 79,080 15.40
- -------
SSB 32.53 24.29 28.33 126.39 126.39 46.82 1.77 69,479 37.03
- -------
SZB 13.88 96.32 31.49 103.51 103.51 14.47 3.05 92,910 13.98
- -------
THR 13.38 17.47 18.47 106.70 107.12 14.68 2.46 91,165 13.76
- -------
TRIC 13.85 16.49 14.58 101.07 101.07 15.48 2.64 89,457 15.32
- ------- -----------
USAB 6.06 39.29 34.38 132.42 135.91 15.19 - 39,301 12.62
- -------
WCFB 34.65 NA 25.78 156.55 156.55 36.59 4.85 94,699 23.35
- ------- -------
Maximum 100.21 96.32 53.57 306.73 311.66 123.15 4.85 99,948 47.98
Minimum 5.81 12.86 11.41 92.02 92.75 8.52 - 33,038 6.17
Average 18.12 25.92 22.91 114.60 114.90 24.58 1.86 74,645 20.41
Median 14.83 22.06 22.06 108.20 108.20 20.75 1.94 82,662 18.63
</TABLE>
3
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit VI.1 - Comparatives Selection
- ------------------
<TABLE>
<CAPTION>
Tangible ROAA ROAA ROACE ROACE
Equity/ Core Core Before Before Before Before NPAs/
T Assets EPS EPS Extra Extra Extra Extra Merger Current Assets
(%) ($) ($) (%) (%) (%) (%) Target? Pricing (%)
Ticker MRQ LTM MRQ LTM MRQ LTM MRQ (Y/N) Date MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 8.90 0.94 0.45 0.09 0.69 0.93 7.68 N 08/15/97 0.60
- -------
AMFC 14.96 0.68 0.17 0.73 1.04 4.14 6.68 N 08/15/97 0.81
- ------- ---------
ATSB 10.07 0.27 0.11 0.29 0.42 2.91 4.16 N 08/15/97 2.84
- ------- ---------
CBES 18.39 NA 0.24 0.77 1.10 NA 5.90 N 08/15/97 0.77
- -------------------
CENB 29.94 NA 1.18 NA 1.80 NA 9.12 N 08/15/97 0.39
- -------------------
CIBI 11.52 0.99 0.27 0.67 1.01 5.53 8.86 N 08/15/97 0.72
- -------------------
CKFB 23.96 0.90 0.25 1.80 3.28 7.25 13.77 N 08/15/97 0.63
- -------------------
CNSB 24.81 NA 0.15 0.54 0.94 NA 3.81 N 08/15/97 0.45
- -------------------
CRZY 25.82 0.70 0.20 1.06 1.31 3.69 4.92 N 08/15/97 0.39
- -------------------
CSBF 23.98 0.32 0.06 0.44 0.48 1.62 1.90 N 08/15/97 0.73
- -------------------
FCB 23.88 0.50 0.11 0.83 0.75 3.41 3.09 N 08/15/97 0.07
- -------------------
FFBI 8.65 0.89 0.21 (0.35) (0.76) (4.40) (9.28) N 08/15/97 0.39
- -------------------
FFDF 24.74 NA 0.16 0.77 0.90 3.22 3.61 N 08/15/97 -
- -------------------
FLKY 34.24 NA 0.16 1.15 1.48 3.52 4.15 N 08/15/97 0.45
- -------------------
FTNB 25.01 NA 0.14 NA 0.91 NA 3.65 N 08/15/97 0.81
- -------------------
FTSB 16.04 0.50 0.23 0.54 1.38 2.99 8.60 N 08/15/97 NA
- ------- ---------
GFSB 11.57 1.04 0.28 0.98 1.27 8.41 11.06 N 08/15/97 1.54
- ------- ---------
GOSB 12.68 NA NA NA 0.43 NA NA N 08/15/97 NA
- -------
GUPB 16.30 0.84 0.21 0.74 0.81 3.86 4.76 N 08/15/97 0.18
- ------------------- -------
GWBC 27.04 NA 0.14 0.80 0.96 3.11 3.60 Y 08/15/97 0.76
- ------------------- -------
HBBI 12.81 0.80 0.28 0.20 0.77 1.59 6.09 N 08/15/97 0.38
- -------------------
HCFC 20.61 NA 0.21 NA 1.04 NA 5.08 N 08/15/97 0.62
- -------------------
HHFC 12.50 0.50 0.18 0.27 0.78 1.89 6.27 N 08/15/97 0.15
- -------
HWEN 18.63 NA 0.15 0.57 0.81 NA 4.16 N 08/15/97 NA
- -------
HZFS 9.79 1.08 0.21 0.35 0.48 3.31 4.71 N 08/15/97 NA
- -------
INCB 12.39 0.48 0.15 0.17 0.60 1.29 4.77 N 08/15/97 NA
- -------------------
JOAC 28.98 0.39 0.07 0.51 0.63 1.74 2.13 N 08/15/97 0.68
- -------------------
KYF 16.11 0.69 0.20 0.80 1.17 3.95 7.02 N 08/15/97 -
LOGN 19.19 0.94 0.24 1.18 1.49 5.74 7.68 N 08/15/97 0.61
- -------
LONF 19.87 NA 0.17 0.74 0.86 3.51 4.17 N 08/15/97 0.79
- -------------------
LXMO 28.32 0.76 0.22 1.02 1.52 3.45 5.43 N 08/15/97 0.48
- -------------------
MBSP 43.36 NA 0.15 1.37 1.60 3.21 3.73 N 08/15/97 2.03
- -------------------
MCBN 8.60 1.67 0.49 0.43 0.76 4.89 8.85 N 08/15/97 0.73
- -------
MIVI 18.88 0.87 0.26 0.70 1.19 3.93 6.92 N 08/15/97 0.28
- -------
MONT 9.83 NA NA 0.31 0.62 NA NA N 08/15/97 0.91
- -------------------
MRKF 35.00 NA 0.13 NA 1.15 NA 3.30 N 08/15/97 -
- -------------------
MSBF 16.99 0.81 0.23 1.20 1.50 6.45 8.84 N 08/15/97 0.06
- -------
NSLB 19.56 0.60 0.19 0.49 0.94 2.39 4.78 N 08/15/97 0.02
- ------- ---------
NTMG 6.17 0.34 0.11 0.31 0.68 4.73 11.41 N 08/15/97 1.11
- ------- ---------
NWEQ 11.45 1.07 0.32 0.78 1.06 6.50 9.33 N 08/15/97 1.25
- ------- ---------
PCBC 18.32 1.30 0.31 0.78 1.18 4.14 6.34 N 08/15/97 0.05
- -------------------
PFFC 26.90 NA 0.14 0.48 0.88 NA 3.23 N 08/15/97 0.01
- -------------------
PSFC 10.15 NA NA NA 0.90 NA NA N 08/15/97 0.70
- -------------------
PSFI 38.69 NA 0.21 NA 2.09 NA 5.20 N 08/15/97 0.79
- -------------------
PWBK 19.47 NA 0.22 0.61 1.02 NA 5.15 N 08/15/97 0.83
- -------------------
RELI 47.98 NA 0.07 1.76 1.54 NA 3.14 N 08/15/97 -
- ------------------- ---------
SCBS 21.32 NA 0.21 0.55 1.20 NA 5.55 N 08/15/97 2.16
- ------------------- ---------
SCCB 25.96 0.70 0.18 0.82 1.05 3.01 4.04 N 08/15/97 1.78
- ------------------- ---------
SFFC 17.78 1.45 0.43 1.13 1.55 6.11 8.78 N 08/15/97 NA
- -------------------
SFNB 42.09 (4.48) (0.83) (27.53) (21.61) (71.40) (66.46) N 08/15/97 NA
- -------------------
SOBI 15.40 0.57 0.18 0.28 0.67 1.64 4.04 N 08/15/97 0.25
- -------------------
SSB 37.03 0.70 0.15 1.41 1.50 3.88 4.08 N 08/15/97 -
- -------------------
SZB 13.98 0.17 0.13 0.04 0.51 0.29 3.65 N 08/15/97 0.50
- ------- ---------
THR 13.71 0.93 0.22 0.57 0.80 3.91 5.68 N 08/15/97 1.21
- ------- ---------
TRIC 15.32 1.38 0.39 0.80 1.10 5.36 7.24 N 08/15/97 -
- -------
USAB 12.34 0.21 0.06 0.53 0.55 3.53 4.31 N 08/15/97 0.62
- -------------------
WCFB 23.35 NA 0.16 1.07 1.45 4.62 6.18 N 08/15/97 0.26
- -------------------
Maximum 47.98 1.67 1.18 1.80 3.28 8.41 13.77 2.84
Minimum 6.17 (4.48) (0.83) (27.53) (21.61) (71.40) (66.46) -
Average 20.37 0.63 0.20 0.13 0.64 1.76 4.16 0.64
Median 18.63 0.73 0.20 0.69 0.96 3.52 5.00 0.61
</TABLE>
4
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit VI.1 - Comparative Selection
- ------------------
<TABLE>
<CAPTION>
Loans Loans
Loans/ Loans/ Deposits/ Borrowings/ Serviced Serviced/
Deposits Assets Assets Assets For Others Assets
(%) (%) (%) (%) ($000) (%) Reasons for
Ticker MRQ MRQ MRQ MRQ MRQ MRQ Exclusion
----------------
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------
ALBC 96.00 72.82 75.86 13.98 10,947 16.51 Selected
- ------------------------- -----------------
AMFC 108.84 75.67 69.53 14.33 NA NA H
- ------------------------- --------------
ATSB 99.62 71.64 71.92 17.12 28,600 40.26 F, I
- ------------------------- --------------
CBES 120.99 90.20 74.55 5.25 30,779 32.32 B, H
- -------------------------
CENB 85.80 59.65 69.53 - - - B, D
- -------------------------
CIBI 103.55 76.52 73.90 13.99 NA NA H
- -------------------------
CKFB 131.25 91.11 69.42 5.32 - - D, H
- -------------------------
CNSB 84.97 63.45 74.68 - 21,613 22.03 B, D, H
- -----------
CRZY 97.48 51.47 52.80 20.41 78 0.14 D
- -----------
CSBF 77.10 57.40 74.45 - - - D
- -----------
FCB 72.70 54.43 74.87 0.81 435 0.46 D
- ----------- --------------
FFBI 79.68 64.59 81.07 9.11 70,537 83.45 I
- ----------- --------------
FFDF 97.24 62.33 64.10 10.06 - - B, D
- -------------------------
FLKY 159.08 86.38 54.30 10.34 - - B, D, H
- ------------------------- --------------
FTNB 127.14 85.77 67.46 6.54 88,991 89.47 B, D, H, I
- ------------------------- --------------
FTSB 124.04 90.05 72.60 9.95 - - H
- -------------------------
GFSB 131.52 87.02 66.16 21.53 19,961 22.64 F, H
- -------------------------
GOSB NA NA 86.28 - NA NA B
- ----------- -----------------
GUPB 82.01 52.16 63.61 18.93 - - Selected
- ------------------------- -----------------
GWBC 45.52 33.04 72.57 - - - B, D, E, G
- ------------------------- -----------------
HBBI 80.40 62.83 78.14 8.21 - - Selected
- ------------------------- -----------------
HCFC 108.24 78.99 72.98 5.87 2,351 3.45 B, D, H
- ------------------------- -----------------
HHFC 76.48 52.98 69.27 17.69 NA NA Selected
- ------------------------- -----------------
HWEN 136.75 83.14 60.80 20.28 - - B, H
- ------------------------- -----------------
HZFS NA NA 67.05 22.22 NA NA Selected
- ----------- -----------------
INCB 90.47 78.66 86.95 - 868 0.95 C
- -----------
JOAC 96.06 66.88 69.62 - - - D
- ----------- -----------------
KYF 90.20 55.35 61.36 21.45 - - Selected
-----------------
LOGN 98.87 71.82 72.64 5.41 - - Selected
- ----------- -----------------
LONF 99.44 76.82 77.26 2.11 - - B
- -------------------------
LXMO 107.94 76.69 71.05 - NA NA D, H
- -------------------------
MBSP 160.59 85.90 53.49 - - - B, D, H
- -------------------------
MCBN 117.77 83.57 70.96 19.99 NA NA H
- ------------------------- -----------------
MIVI 81.70 64.81 79.33 - - - Selected
- ------------------------- -----------------
MONT 115.47 89.62 77.61 11.14 - - B, H
- -------------------------
MRKF 72.14 45.80 63.48 - NA NA B, D
- ------------------------- --------------
MSBF 165.90 92.63 55.83 25.94 32,757 43.85 H, I
- ------------------------- -------------- -----------------
NSLB 75.61 55.74 73.72 5.02 - - Selected
- ------------------------- -------------- -----------------
NTMG 112.06 91.88 81.99 10.07 310,005 331.04 F, H, I
- ------------------------- --------------
NWEQ 124.23 81.05 65.24 22.59 25,279 26.09 F, H
- -------------------------
PCBC 19.97 15.58 78.03 3.14 - - G
- -------------------------
PFFC 74.65 53.79 72.06 - - - B, D
- -------------------------
PSFC 106.43 92.40 86.82 2.67 - - B, H
- -------------------------
PSFI 87.09 44.28 50.84 5.44 - - B, D
- -----------
PWBK 61.44 46.68 75.97 3.07 150 0.31 B
- -------------------------
RELI 151.52 58.38 38.53 12.81 - - B, D, H
- -------------------------
SCBS 75.43 58.98 78.19 - NA NA B, D, F
- -------------------------
SCCB 105.88 77.65 73.34 - - - D, F, H
- ------------------------- -----------------
SFFC NA NA 58.76 22.18 NA NA Selected
- ------------------------- -----------------
SFNB 14.03 6.82 48.59 1.41 NA NA B, D. G
- ------------------------- -----------------
SOBI 98.14 73.21 74.60 8.98 - - Selected
- ------------------------- -----------------
SSB 113.46 69.32 61.10 - - - D, H
- -------------------------
SZB 105.19 72.25 68.69 15.16 - - H
- -------------------------
THR 101.03 66.49 65.81 19.02 14,112 15.48 F, H
- -------------------------
TRIC 79.63 41.70 52.36 31.40 158 0.18 C
- ----------- -----------------
USAB 58.62 46.17 78.77 8.03 - - Selected
- ----------- -----------------
WCFB 76.73 57.85 75.40 0.29 - - A, B, D
- -----------
Maximum 165.90 92.63 86.95 31.40 310,005 331.04
Minimum 14.03 6.82 38.53 - - -
Average 97.48 66.71 69.41 8.93 14,296 15.84
Median 97.81 68.10 71.92 6.54 - -
</TABLE>
5
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit VI.2 - Comparatives Selected
- ------------------
<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>
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 24.250
GUPB GFSB Bancorp Inc. Gallup NM SW SAIF NASDAQ 06/30/95 19.000
HBBI Home Building Bancorp Washington IN MW SAIF NASDAQ 02/08/95 21.000
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 11.750
HZFS Horizon Financial Svcs Corp. Oskaloosa IA MW SAIF NASDAQ 06/30/94 18.875
KYF Kentucky First Bancorp Inc. Cynthiana KY MW SAIF AMSE 08/29/95 12.625
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 14.000
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 15.625
NSLB NS&L Bancorp Inc. Neosho MO MW SAIF NASDAQ 06/08/95 18.500
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 21.500
SOBI Sobieski Bancorp Inc. South Bend IN MW SAIF NASDAQ 03/31/95 16.250
USAB USABancshares, Inc. Philadelphia PA MA BIF NASDAQ NA 8.250
Maximum 24.250
Minimum 8.250
Average 16.802
Median 17.375
</TABLE>
6
Source: SNL & F&C calculations
<PAGE>
Exhibit VI.2 - Comparatives Selected
FERGUSON & COMPANY
- ------------------
<TABLE>
<CAPTION>
Current Price/ Price/ Current Current Current Total
Market LTM Core Price/ Price/ T Price/ Dividend Assets
Value Core EPS EPS Book V Book V Assets Yield ($000)
Ticker ($M) (x) (x) (%) (%) (%) (%) MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 6.38 25.80 13.47 102.67 102.67 9.14 1.32 66,316
GUPB 15.28 22.62 22.62 112.56 112.56 18.35 2.11 86,911
HBBI 6.54 26.25 18.75 104.17 104.17 14.52 1.43 45,064
HHFC 10.75 23.50 16.32 105.76 105.76 13.22 3.40 83,103
HZFS 8.03 17.48 22.47 95.47 95.47 9.34 1.70 85,969
KYF 16.65 18.30 15.78 116.25 116.25 18.73 3.96 88,923
LOGN 17.65 14.89 14.58 110.58 110.58 21.22 2.86 83,152
MIVI 12.79 17.96 15.02 97.11 97.11 18.33 1.02 69,775
NSLB 13.09 30.83 24.34 112.05 112.05 21.92 2.70 59,711
SFFC 16.85 14.83 12.50 110.60 110.60 19.67 1.86 85,679
SOBI 12.34 28.51 22.57 92.75 92.75 15.61 1.72 79,080
USAB 6.06 39.29 34.38 132.42 135.91 15.19 - 39,301
Maximum 17.65 39.29 34.38 132.42 135.91 21.92 3.96 88,923
Minimum 6.06 14.83 12.50 92.75 92.75 9.14 - 39,301
Average 11.87 23.36 19.40 107.70 107.99 16.27 2.01 72,749
Median 12.57 23.06 17.54 108.17 108.17 16.97 1.79 81,092
</TABLE>
7
Source: SNL & F&C calculations
<PAGE>
Exhibit VI.2 - Comparatives Selected
FERGUSON & COMPANY
- ------------------
<TABLE>
<CAPTION>
Tangible ROAA ROAA ROACE ROACE
Equity/ Equity/ Core Core Before Before Before Before
Assets T Assets EPS EPS Extra Extra Extra Extra Merger
(%) (%) ($) ($) (%) (%) (%) (%) Target?
Ticker MRQ MRQ LTM MRQ LTM MRQ LTM MRQ (Y/N)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 8.90 8.90 0.94 0.45 0.09 0.69 0.93 7.68 N
GUPB 16.30 16.30 0.84 0.21 0.74 0.81 3.86 4.76 N
HBBI 12.81 12.81 0.80 0.28 0.20 0.77 1.59 6.09 N
HHFC 12.50 12.50 0.50 0.18 0.27 0.78 1.89 6.27 N
HZFS 9.79 9.79 1.08 0.21 0.35 0.48 3.31 4.71 N
KYF 16.11 16.11 0.69 0.20 0.80 1.17 3.95 7.02 N
LOGN 19.19 19.19 0.94 0.24 1.18 1.49 5.74 7.68 N
MIVI 18.88 18.88 0.87 0.26 0.70 1.19 3.93 6.92 N
NSLB 19.56 19.56 0.60 0.19 0.49 0.94 2.39 4.78 N
SFFC 17.78 17.78 1.45 0.43 1.13 1.55 6.11 8.78 N
SOBI 15.40 15.40 0.57 0.18 0.28 0.67 1.64 4.04 N
USAB 12.62 12.34 0.21 0.06 0.53 0.55 3.53 4.31 N
Maximum 19.56 19.56 1.45 0.45 1.18 1.55 6.11 8.78
Minimum 8.90 8.90 0.21 0.06 0.09 0.48 0.93 4.04
Average 14.99 14.96 0.79 0.24 0.56 0.92 3.24 6.09
Median 15.76 15.76 0.82 0.21 0.51 0.80 3.42 6.18
</TABLE>
8
Source: SNL & F&C calculations
<PAGE>
FERGUSON & COMPANY Exhibit VI.2 - Comparatives Selected
- ------------------
<TABLE>
<CAPTION>
Loans Loans
NPAs/ Loans/ Loans/ Deposits/ Borrowings/ Serviced Serviced/
Current Assets Deposits Assets Assets Assets For Others Assets
Pricing (%) (%) (%) (%) (%) ($000) (%)
Ticker Date MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 08/15/97 0.60 96.00 72.82 75.86 13.98 10,947 16.51
GUPB 08/15/97 0.18 82.01 52.16 63.61 18.93 - -
HBBI 08/15/97 0.38 80.40 62.83 78.14 8.21 - -
HHFC 08/15/97 0.15 76.48 52.98 69.27 17.69 NA NA
HZFS 08/15/97 NA NA NA 67.05 22.22 NA NA
KYF 08/15/97 - 90.20 55.35 61.36 21.45 - -
LOGN 08/15/97 0.61 98.87 71.82 72.64 5.41 - -
MIVI 08/15/97 0.28 81.70 64.81 79.33 - - -
NSLB 08/15/97 0.02 75.61 55.74 73.72 5.02 - -
SFFC 08/15/97 NA NA NA 58.76 22.18 NA NA
SOBI 08/15/97 0.25 98.14 73.21 74.60 8.98 - -
USAB 08/15/97 0.62 58.62 46.17 78.77 8.03 - -
Maximum 0.62 98.87 73.21 79.33 22.22 10,947 16.51
Minimum - 58.62 46.17 58.76 - - -
Average 0.31 83.80 60.79 71.09 12.68 1,216 1.83
Median 0.27 81.86 59.29 73.18 11.48 - -
</TABLE>
9
Source: SNL & F&C calculations
<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 Bank is likely to earn.
2. Newport'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. Newport'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 36.0%.
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 $.79, $.70, $.64, and $.59, and price to earnings
ratios of 12.7, 14.2, 15.6, and 17.0, 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 September 2, 1997
<TABLE>
<CAPTION>
Newport Federal Savings Bank
- -----------------------------------------------------------------
<S> <C>
1. Conversion Proceeds
Pro Forma Market Value $ 2,380,000
Less: Estimated Expenses (400,000)
--------------------
Net Conversion Proceeds $ 1,980,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 1,980,000
Less: ESOP Contributions (190,400)
RP Contributions (95,200)
--------------------
Net Conversion Proceeds after ESOP & RP $ 1,694,400
Estimated Incremental Rate of Return(1) 3.62%
--------------------
Estimated Additional Income $ 61,270
Less: ESOP Expense (12,186)
RP Expense (12,186)
--------------------
$ 36,898
====================
<CAPTION>
3. Pro Forma Calculations
Before Conversion After
Period Conversion Results Conversion
----------------------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 137,000 $ 36,898 $ 173,898
b. Pro Forma Net Worth
June 30, 1997 $ 2,266,000 $ 1,694,400 $ 3,960,400
c. Pro Forma Net Assets
June 30, 1997 $ 34,379,000 $ 1,694,400 $ 36,073,400
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 36.0 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 September 2, 1997
<TABLE>
<CAPTION>
Newport Federal Savings Bank
- --------------------------------------------------------------------------------------
<S> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 2,800,000
Less: Estimated Expenses (400,000)
----------------------
Net Conversion Proceeds $ 2,400,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 2,400,000
Less: ESOP Contributions (224,000)
RP Contributions (112,000)
----------------------
Net Conversion Proceeds after ESOP & RP $ 2,064,000
Estimated Incremental Rate of Return(1) 3.62%
----------------------
Estimated Additional Income $ 74,634
Less: ESOP Expense (14,336)
RP Expense (14,336)
----------------------
$ 45,962
======================
</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 $ 137,000 $ 45,962 $ 182,962
b. Pro Forma Net Worth
June 30, 1997 $ 2,266,000 $ 2,064,000 $ 4,330,000
c. Pro Forma Net Assets
June 30, 1997 $ 34,379,000 $ 2,064,000 $ 36,443,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 36.0 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 September 2, 1997
<TABLE>
<CAPTION>
Newport Federal Savings Bank
- --------------------------------------------------------------------------------------
<S> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 3,220,000
Less: Estimated Expenses (400,000)
----------------------
Net Conversion Proceeds $ 2,820,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 2,820,000
Less: ESOP Contributions (257,600)
RP Contributions (128,800)
----------------------
Net Conversion Proceeds after ESOP & RP $ 2,433,600
Estimated Incremental Rate of Return(1) 3.62%
----------------------
Estimated Additional Income $ 87,999
Less: ESOP Expense (16,486)
RP Expense (16,486)
----------------------
$ 55,026
======================
</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 $ 137,000 $ 55,026 $ 192,026
b. Pro Forma Net Worth
June 30, 1997 $ 2,266,000 $ 2,433,600 $ 4,699,600
c. Pro Forma Net Assets
June 30, 1997 $ 34,379,000 $ 2,433,600 $ 36,812,600
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 36.0 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 September 2, 1997
<TABLE>
<CAPTION>
Newport Federal Savings Bank
- --------------------------------------------------------------------------------------
<S> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 3,703,000
Less: Estimated Expenses $ (400,000)
----------------------
Net Conversion Proceeds $ 3,303,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 3,303,000
Less: ESOP Contributions $ (296,240)
RP Contributions $ (148,120)
----------------------
Net Conversion Proceeds after ESOP & RP $ 2,858,640
Estimated Incremental Rate of Return(1) 3.62%
----------------------
Estimated Additional Income $ 103,368
Less: ESOP Expense $ (18,959)
RP Expense $ (18,959)
----------------------
$ 65,450
======================
3. Pro Forma Calculations
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
June 30, 1997 $ 137,000 $ 65,450 $ 202,450
b. Pro Forma Net Worth
June 30, 1997 $ 2,266,000 $ 2,858,640 $ 5,124,640
c. Pro Forma Net Assets
June 30, 1997 $ 34,379,000 $ 2,858,640 $ 37,237,640
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.65 percent and earnings taxed at a
rate of 36.0 percent.
5
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Analysis Sheet
<TABLE>
<CAPTION>
Name of Association: Newport Federal Savings Bank
Date of Market Prices: September 2, 1997 Arkansas 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 13.7
At Midpoint of Range 15.3 22.2 22.2 16.1 16.7 16.8 16.7
At Maximum of Range 16.8
At Supermax of Range 18.3
Price-Book Ratio P/B
- ----------------
At Minimum of Range 60.1%
At Midpoint of Range 64.7% 106.6 107.5 150.9 148.0 149.9 142.7
At Maximum of Range 68.5%
At Supermax of Range 72.3%
Price-Asset Ratio P/A
- -----------------
At Minimum of Range 6.6%
At Midpoint of Range 7.7% 15.9 16.8 17.9 19.2 15.3 14.3
At Maximum of Range 8.7%
At Supermax of Range 9.9%
Twelve Mo. Earnings Base Y $ 137,000
Period Ended June 30, 1997
Book Value B $ 2,266,000
As of June 30, 1997
Total Assets A $34,379,000
As of June 30, 1997
Return on Money (1) R 3.62%
Conversion Expense X $ 400,000
Underwriting Commission C 0.00%
Percentage Underwritten S 0.00%
Estimated Dividend
Dollar Amount DA $ -
Yield DY 0.00%
ESOP Contributions P $ 224,000
RP Contributions I $ 112,000
ESOP Annual Expense E $ 14,336
RP Annual Contributions M $ 14,336
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 36.0 percent.
6
<PAGE>
FERGUSON & COMPANY
- ------------------
Exhibit VII
Pro Forma Analysis Sheet
Calculation of Estimated Value (V) at Midpoint Value
<TABLE>
<S> <C> <C> <C>
1. V= P/A(A-X-P-I) $ 2,800,000
-------------------------
1-P/A(1-(CxS))
2. V= P/B(B-X-P-I) $ 2,800,000
-------------------------
1-P/B(1-(CxX))
3. V= P/E(Y-R(X+P+I)-(E+M)) $ 2,800,000
-------------------------
1-P/E(R(1-(CxX))
<CAPTION>
Value
Estimated Value Per Share Total Shares Date
-------------------------- ------------- ----------------- -------------------------
<S> <C> <C> <C>
$2,800,000 $10.00 280,000 September 2, 1997
</TABLE>
Range of Value
$2.8 million x 1.15 = $3.22 million or 322,000 shares at $10.00 per share
$2.8 million x 0.85 = $2.38 million or 238,000 shares at $10.00 per share
7
