<PAGE>
As filed with the Securities and Exchange Commission on December 22, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POCAHONTAS BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 6712 (To be applied for)
(State or other jurisdiction (Primary standard (I.R.S. Employer
of incorporation industrial classification) identification number)
or organization)
203 West Broadway Street
Pocahontas, Arkansas 72455
(870) 892-4595
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Skip Martin
President and Chief Executive Officer
203 West Broadway Street
Pocahontas, Arkansas 72455
(870) 892-4595
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Robert B. Pomerenk, Esq.
Richard A. Gashler, Esq.
Luse Lehman Gorman Pomerenk & Schick
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
check the following box: |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the 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, check
the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================
Title of each Proposed Proposed maximum
class of securities Amount to be maximum offering aggregate Amount of
to be registered registered price per share offering price(1) registration fee
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01
par value per share 6,257,625 shares $10.00 $62,576,250 $18,500
=============================================================================================
</TABLE>
- ----------
(1) Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration 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
Pocahontas Bancorp, Inc.
(Proposed Holding Company for Pocahontas Federal Savings and Loan Association)
Up to 2,875,000 Shares of Common Stock
(Anticipated Maximum)
Pocahontas Bancorp, Inc., a Delaware corporation (the "Company"), is
offering up to 2,875,000 shares (subject to adjustment to up to 3,306,250
shares as described herein) of its common stock, par value $.01 per share
(the "Common Stock"), in connection with the conversion of Pocahontas Federal
Mutual Holding Company (the "Mutual Holding Company"), from a federally
chartered mutual holding company to a Delaware stock corporation pursuant to
a Plan of Conversion and Reorganization (the "Plan of Conversion"). As of
October 31, 1997, the Mutual Holding Company held no material assets except
for $461,000 in cash or cash equivalents and 862,500 shares, or 52.8%, of the
common stock ("Bank Common Stock") of Pocahontas Federal Savings and Loan
Association (the "Bank"), a federal stock savings association. The remaining
769,924 shares, or 47.2% (the "Minority Ownership Percentage"), of the Bank
Common Stock (the "Minority Shares") were publicly owned by stockholders
including the Bank's employees, directors, and stock benefit plans (together,
the "Minority Stockholders"). After the Conversion (as defined herein), the
Company will be the sole stockholder of the Bank.
FOR INFORMATION ON HOW TO SUBSCRIBE,
CALL THE STOCK CENTER AT ( )
---------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" BEGINNING ON PAGE .
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, OR ANY
OTHER FEDERAL AGENCY OR ANY STATE SECURITIES COMMISSION, NOR
HAS SUCH COMMISSION, OFFICE OR OTHER AGENCY OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
ESTIMATED UNDERWRITING ESTIMATED
COMMISSIONS AND OTHER NET CASH
SUBSCRIPTION PRICE (1) FEES AND EXPENSES(2) PROCEEDS (3)
-------------------- --------------------------- --------------------
<S> <C> <C> <C>
Minimum Per Share......................... $ 10.00 $ .29 $ 9.71
Midpoint Per Share........................ 10.00 .26 9.74
Maximum Per Share......................... 10.00 .24 9.76
Maximum Per Share (as adjusted)........... 10.00 .22 9.78
Minimum Total............................. $ 21,250,000 $ 618,000 $ 20,632,000
Midpoint Total............................ 25,000,000 652,500 24,347,500
Maximum Total............................. 28,750,000 687,000 28,063,000
Maximum Total, as adjusted (4)............ 33,062,500 726,675 32,335,825
</TABLE>
- ------------------------
(1) Based on (i) the independent appraisal prepared by RP Financial, Inc. ("RP
Financial") dated December 12, 1997, which states that the estimated pro
forma market value of the Common Stock ranged from $40,219,142 to
$54,414,133 (subject to adjustment to $62,576,253), and (ii) the Minority
Ownership Percentage pursuant to which 52.8% of the to-be outstanding
shares of Common Stock will be offered as Subscription Shares in the
Offering. See "The Conversion--Share Exchange Ratio," and "--Stock Pricing
and Number of Shares to be Issued."
(2) Consists of the estimated costs of the Conversion, including estimated
fixed expenses of $422,500 and marketing fees to be paid to Friedman,
Billings, Ramsey & Co., Inc. Actual expenses may vary from these
estimates. See "Pro Forma Data" for the assumptions used in arriving at
these estimates.
(3) Includes proceeds from the sale of shares of Common Stock in the Offering
to the Bank's 401(k) savings and employee stock ownership plan and trust
(the "KSOP"). The KSOP intends to purchase 8% of the shares sold in the
Offering. Funds to purchase such shares will be loaned to the KSOP by the
Company, which may fund such loan with offering proceeds. The Bank
intends to repay the KSOP loan with funds from future operations. See
"The Conversion--Plan of Distribution and Selling Commissions" and
"Management of the Bank--Benefit Plans."
(4) As adjusted to give effect to the sale of up to an additional 15% of the
shares that may be offered without a resolicitation of subscribers or any
right of cancellation. See "The Conversion--Stock Pricing and Number of
Shares to be Issued."
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
The date of this Prospectus is February , 1998
<PAGE>
Of the shares of Common Stock offered hereby, (i) up to 2,875,000 shares
(subject to adjustment to up to 3,306,250 shares) of Common Stock (the
"Subscription Shares") are being offered for a subscription price of
$10.00 per share (the "Subscription Price") in a subscription and
community offering as described below, and (ii) up to 2,566,413 shares
(subject to adjustment to up to 2,951,375 shares) of Common Stock (the
"Exchange Shares") will be issued to Minority Stockholders pursuant to an
Agreement of Merger, whereby Minority Shares shall automatically, without
further action by the holder thereof, be converted into and become a
right to receive shares of Common Stock (the "Share Exchange"). See "The
Conversion--Share Exchange Ratio." The simultaneous conversion of the
Mutual Holding Company to stock form pursuant to the Plan of Conversion,
the exchange of all of the Minority Shares for Common Stock, and the
offer and sale of Subscription Shares pursuant to the Plan of Conversion
are herein referred to collectively as the "Conversion."
Non-transferable rights to subscribe for Common Stock in a subscription
offering (the "Subscription Offering") have been granted, in order of
priority, to the following: (i) depositors of the Bank with account
balances of $50 or more as of September 30, 1996 (the "Eligibility Record
Date," and such account holders "Eligible Account Holders"); (ii) the
Bank's 401(k) savings and employee stock ownership plan and related trust
(the "KSOP") in an amount up to 8% of the shares sold in the Offering;
(iii) depositors with aggregate account balances of $50 or more as of
December 31, 1997 (the "Supplemental Eligibility Record Date") who are
not Eligible Account Holders ("Supplemental Eligible Account Holders");
(iv) members of the Mutual Holding Company as of January 21, 1998 (the
"Voting Record Date") who are not Eligible Account Holders or
Supplemental Eligible Account Holders ("Other Members"); and (v) to the
extent shares of Common Stock remain available after satisfying the
subscription rights of Eligible Account Holders, the KSOP, Supplemental
Eligible Account Holders and Other Members, to Minority Stockholders.
Subscription rights are nontransferable; persons found to be transferring
subscription rights will be subject to the forfeiture of such rights and
possible further sanctions and penalties imposed by the OTS. Subject to
the prior rights of holders of subscription rights, the Company is
offering the shares of Common Stock not subscribed for in the
Subscription Offering for sale in a concurrent community offering (the
"Community Offering") to certain members of the general public with
preference given to natural persons residing in counties in which the
Bank has its home office or a branch office (the "Community"). The
Company retains the right, in its discretion, to accept or reject any
order in the Community Offering. The Subscription Offering and Community
Offering are referred to collectively as the "Offering." Unless otherwise
specifically provided, the term "Offering" does not include the shares of
Common Stock that will be issued in the Share Exchange.
The minimum number of shares that may be purchased is 25 shares. Except
for the KSOP, no Eligible Account Holder, Supplemental Eligible Account
Holder, Other Member or Minority Stockholder may in their capacities as
such purchase in the Subscription Offering more than 15,000 Subscription
Shares; no person, together with associates of and persons acting in
concert with such person, may purchase in the Offering more than 30,000
Subscription Shares; and no person together with associates of and
persons acting in concert with such person may purchase in the aggregate
more than the number of Subscription Shares that when combined with
Exchange Shares received by such person together with associates of and
persons acting in concert with such person exceeds 5.0% of the shares of
Common Stock issued and outstanding upon consummation of the Conversion
and the Offering, provided, however, that the maximum purchase limitation
may be increased or decreased at the sole discretion of the Company and
the Bank. See "The Conversion--Subscription Offering and Subscription
Rights," "--Community Offering" and "--Limitations on Common Stock
Purchases."
The Subscription Offering and Community Offering will terminate at noon,
Central time, on March , 1998 (the "Expiration Date") unless
extended by the Bank and the Company, with the approval of the OTS, if
necessary. The Bank and the Company may determine to extend the Subscription
Offering and/or the Community Offering for any reason, whether or not
subscriptions have been received for shares at the minimum, midpoint, or
maximum of the Offering Range, and are not required to give subscribers
notice of any such extension. The Community Offering must be completed within
45 days after the expiration of the Subscription Offering unless extended by
the Bank and the Company with the approval of the OTS, if necessary. Orders
submitted are irrevocable until the completion of the Conversion; provided
that all subscribers will have their funds returned promptly, with interest,
and all withdrawal authorizations will be canceled if the Conversion is not
completed within 45 days after the expiration of the Subscription Offering,
unless such period has been extended with the consent of the OTS, if
necessary. See "The Conversion--Subscription Offering and Subscription
Rights" and "--Procedure for Purchasing Shares in Subscription and Community
Offerings."
The Bank Common Stock is currently traded on the Nasdaq "SmallCap"
Market. The Company has received conditional approval to have its Common
Stock listed on the Nasdaq National Market under the Bank's previous symbol
"PFSL." Friedman, Billings, Ramsey & Co., Inc. ("FBR") has advised the
Company that upon completion of the Conversion, it intends to act as a market
maker in the Common Stock, depending upon the volume of trading and subject
to compliance with applicable laws and regulatory requirements. FBR will
assist the Company in obtaining additional
2
<PAGE>
market makers, but there can be no assurance that additional market makers
will be identified. See "Market for Common Stock."
3
<PAGE>
[INSERT MAP]
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC"), THE BANK INSURANCE FUND ("BIF"), THE SAVINGS ASSOCIATION INSURANCE
FUND ("SAIF") OR ANY OTHER GOVERNMENT AGENCY.
4
<PAGE>
SUMMARY
The following summary does not purport to be complete, and is qualified
in its entirety by the more detailed information including the "Recent
Developments" section and Consolidated Financial Statements and Notes thereto
of the Bank appearing elsewhere in this Prospectus.
THE COMPANY
The Company was organized in December 1997 by the Bank for the purpose of
owning all of the capital stock of the Bank upon completion of the
Conversion. Immediately following the Conversion, the only significant assets
of the Company will be the capital stock of the Bank and that percentage of
the Offering proceeds retained by the Company. See "The Company" and
"Regulation--Holding Company Regulation."
THE MUTUAL HOLDING COMPANY
The Mutual Holding Company is a federal mutual holding company that was
organized on December 31, 1991 in connection with the mutual holding company
reorganization of the Bank's mutual savings association predecessor. The
Mutual Holding Company has no material assets other than $461,000 in cash or
cash equivalents, and the Bank Common Stock. Accordingly, all financial and
other information contained in this Prospectus relates to the business,
financial condition, and results of operations of the Bank. Upon consummation
of the Conversion, the Mutual Holding Company will convert from mutual to
stock form and simultaneously merge with and into the Bank. See "The
Conversion."
THE BANK
The Bank is a community-oriented savings institution headquartered in
Pocahontas, Arkansas that operates nine full-service offices in its market
area consisting of the Arkansas counties of Randolph, Lawrence, Craighead,
Sharp and Clay. The Bank is primarily engaged in the business of originating
single-family residential mortgage loans funded with deposits, FHLB advances
and securities sold under agreements to repurchase. The Bank's $383.4 million
of total assets at September 30, 1997 included $159.7 million of loans
receivable, net, or 41.7% of total assets, and $200.6 million of investment
securities, or 52.3% of total assets. The Bank's net loan portfolio consists
primarily of first mortgage loans collateralized by single-family residential
real estate and, to a lesser extent, multifamily residential real estate,
commercial real estate and agricultural real estate loans. At September 30,
1997, the Bank's net loan portfolio totaled $159.7 million, of which $138.5
million, or 86.8% were single-family residential real estate mortgage loans,
$1.6 million, or 1.0%, were multifamily residential real estate loans, $9.6
million, or 6.0%, were commercial real estate loans (including land loans),
and $4.7 million, or 2.9%, were agricultural real estate loans. The remainder
of the Bank's loans at September 30, 1997 included commercial business loans
(i.e., crop production, equipment and livestock loans) which totaled $6.5
million, or 4.1%, of the Bank's total net loan portfolio as of September 30,
1997. Other loans, including automobile loans and loans collateralized by
deposit accounts, totaled $3.8 million, or 2.3%, of the Bank's net loan
portfolio as of September 30, 1997. The Bank also maintains a significant
portion of its assets in mortgage-backed securities. At September 30, 1997,
mortgage-backed securities aggregated $168.8 million, or 44.0%, of the Bank's
total assets. The Bank's investment portfolio also includes obligations of
the United States Government and agencies, municipal bonds and interest
earning deposits in other institutions. The carrying value of this portion of
the Bank's investment portfolio totaled $31.7 million at September 30, 1997.
In January 1998, the Bank purchased three full-service branch offices,
which increased the number of the Bank's branch offices to nine. The purchase
included an aggregate of $ in deposits, as well as the buildings and
land at each branch location. The newly acquired branches are located in
Walnut Ridge, Hardy and Lake City in Arkansas and supplement the Bank's
existing branches in Lawrence, Sharp and Craighead Counties.
5
<PAGE>
Financial highlights of the Bank include the following:
- Profitability. The Bank had net income of $2.4 million, $2.0 million
and $1.9 million for the fiscal years ended September 30, 1997, 1996
and 1995, respectively. The Bank's return on average equity ratios for
the fiscal years ended September 30, 1997, 1996 and 1995 were 10.07%,
8.98% and 9.58%, respectively. The earnings of the Bank depend
primarily on its level of net interest income, which is a function of
the Bank's interest rate spread as well as a function of the average
balance of interest-earning assets as compared to the average balance
of interest-bearing liabilities. For the fiscal year ended September
30, 1997, the Bank's ratio of average interest-earning assets to
average interest-bearing liabilities was 104.09%.
- Net Interest Margin. The Bank's net income is affected by its net
interest margin (net interest income as a percent of average
interest-earning assets) which was 2.04%, 1.89% and 1.85% for the
fiscal years ended September 30, 1997, 1996 and 1995, respectively.
- Asset Quality. The Bank's ratio of nonperforming loans to net loans was
0.28%, 0.74% and 0.43% at September 30, 1997, 1996 and 1995,
respectively.
- Retail Deposit Base. The Bank draws retail deposits from nine
full-service branch offices in its market area. The Bank does not
solicit or accept brokered deposits. As a result of the purchase by the
Bank in January 1998 of three full-service branch offices, the Bank's
deposits increased by $ million, of which $ consisted
of certificates of deposit.
- Interest Rate Risk Management. The Bank has sought to manage its
interest rate risk exposure by emphasizing the origination of ARM loans
and by generally selling into the secondary mortgage market fixed rate
mortgage loans with maturities greater than 15 years. At September 30,
1997, ARM loans constituted 73.8% of the Bank's total net loan
portfolio. In addition, the Bank invests in floating rate
mortgage-backed securities, which comprised 89.9% of the Bank's total
portfolio of mortgage-backed securities as of September 30, 1997.
Finally, the Bank purchases interest rate caps in an effort to mitigate
the effects of interest rate fluctuations.
The Bank's executive offices are located at 203 West Broadway, Pocahontas,
Arkansas, and its telephone number at that location is (870) 892-4595.
THE CONVERSION
GENERAL. On October 14, 1997, the Board of Directors of the Mutual
Holding Company unanimously adopted the Plan of Conversion and
Reorganization, which plan was subsequently amended on January , 1998
(the "Plan of Conversion"), pursuant to which the Mutual Holding Company is
converting from a federally chartered mutual holding company to a
Delaware-chartered stock corporation. As part of the Conversion each of the
issued and outstanding Minority Shares shall automatically, without further
action by the holder thereof, be converted into and become a right to receive
a number of shares of Common Stock determined pursuant to the Exchange Ratio.
See "The Conversion--Share Exchange Ratio."
REASONS FOR THE CONVERSION. The Board of Directors unanimously
determined to conduct the Conversion because it believed that the market for
equity securities in financial services companies was at an unprecedented
level and that the Bank (together with the Company, the "Converted
Institution") could raise substantial funds from such a transaction. The
Board of Directors believed that maximizing such proceeds is in the best
interests of the Converted Institution because such proceeds can be used to
increase the net income of the Converted Institution though investment and
eventual deployment of the proceeds, and support the possible expansion of
the Bank's existing franchise through internal growth or the acquisition of
branch offices or other financial institutions. Management believed that
acquisition opportunities would increase as a result of the Conversion
because the Converted Institution would have
6
<PAGE>
substantially more capital following the Conversion. The Bank acquired three
branch offices in January 1998, and intends to actively explore additional
acquisitions, although neither the Company nor the Bank has any specific
plans, arrangements or understandings regarding any additional expansions or
acquisitions at this time, nor have criteria been established to identify
potential candidates for acquisition. In addition, the Board considered that
there was no assurance that the pricing for financial services stocks would
continue at such favorable levels, and that if the market were to become less
favorable, the amount of capital that could be raised in the Conversion might
be substantially reduced. See "Risk Factors-- Potential Low Return on Equity"
and " Uncertainty as to Future Growth Opportunities." See "The
Conversion--Purposes of Conversion."
APPROVALS REQUIRED. The affirmative vote of a majority of the total
eligible votes of the members of the Mutual Holding Company at the Special
Meeting of Members to be held on March , 1998 (the "Special Meeting of
Members") is required to approve the Plan of Conversion and the transactions
incident to the Conversion. The affirmative vote of the holders of at least
(i) two-thirds of the outstanding common stock of the Bank, and (ii) a
majority of the Minority Shares at a special meeting of stockholders of the
Bank to be held on March , 1998 (the "Special Meeting of Stockholders")
is required to approve the Plan of Conversion. Consummation of the Conversion
is also subject to the approval of the OTS.
EFFECTIVE DATE. The date upon which the Conversion is consummated.
Share Exchange Ratio. OTS regulations and policy provide that in a
conversion of a mutual holding company to stock form, stockholders other than
the mutual holding company will be entitled to exchange their shares of
subsidiary savings bank common stock for common stock of the converted
holding company, provided that the bank and the mutual holding company
demonstrate to the satisfaction of the OTS that the basis for the exchange is
fair and reasonable. The Boards of Directors of the Bank and the Company have
determined that each Minority Share will on the Effective Date be
automatically converted into and become the right to receive a number of
Exchange Shares determined pursuant an exchange ratio (the "Exchange Ratio")
which was established as the ratio that ensures that after the Conversion,
subject to a slight adjustment to reflect the receipt of cash in lieu of
fractional shares, the percentage of the to-be outstanding shares of Common
Stock issued to Minority Stockholders in exchange for their Minority Shares
will be equal to the percentage of the Bank Common Stock held by Minority
Stockholders immediately prior to the Conversion. The total number of shares
held by Minority Stockholders after the Conversion would also be affected by
any purchases by such persons in the Offering.
The following table sets forth, at the minimum, midpoint, maximum, and
adjusted maximum of the Offering Range, the following: (i) the total number
of Subscription Shares and Exchange Shares to be issued in the Conversion,
(ii) the percentage of Common Stock outstanding after the Conversion that
will be sold in the Offering and issued in the Share Exchange, and (iii) the
Exchange Ratio.
<TABLE>
<CAPTION>
SUBSCRIPTION SHARES EXCHANGE SHARES TOTAL SHARES
TO BE ISSUED TO BE ISSUED OF COMMON
-------------------- --------------------- STOCK TO BE EXCHANGE
AMOUNT PERCENT AMOUNT PERCENT OUTSTANDING RATIO
------------------ ----------------- ----------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Minimum.............................. 2,125,000 52.836 1,896,914 47.164 4,021,914 2.4638
Midpoint............................. 2,500,000 52.836 2,231,663 47.164 4,731,663 2.8983
Maximum.............................. 2,875,000 52.836 2,566,413 47.164 5,441,413 3.3333
Adjusted maximum..................... 3,306,250 52.836 2,951,375 47.164 6,257,625 3.8333
</TABLE>
The Bank will pay cash to Minority Stockholders for fractional shares.
Options to purchase Minority Shares will also be converted into and become
options to purchase Common Stock. The number of shares of Common Stock to be
received upon exercise of such options will be determined pursuant to the
Exchange Ratio. The aggregate
7
<PAGE>
exercise price, duration, and vesting schedule of such options will not be
affected. See "The Conversion--Share Exchange Ratio."
EFFECT ON STOCKHOLDERS' EQUITY PER SHARE OF THE SHARES EXCHANGED. The
Conversion will increase the stockholders' equity of Minority Stockholders.
At September 30, 1997, the stockholders' equity per share was $14.85 for each
share of Bank Common Stock outstanding, including shares held by the Mutual
Holding Company. Based on the pro forma information set forth in "Pro Forma
Data," assuming the sale of 2,500,000 shares of Common Stock at the midpoint
of the Offering Range, the pro forma stockholders' equity per share of Common
Stock was $9.73 and the aggregate pro forma stockholders' equity for the
number of Exchange Shares to be received for each Minority Share was $28.20.
The pro forma stockholders' equity for the aggregate number of Exchange
Shares to be received for each Minority Share was $26.21, $30.20, and $32.51
at the minimum, maximum, and maximum, as adjusted, of the Offering Range.
EFFECT ON EARNINGS PER SHARE OF THE SHARES EXCHANGED. The Conversion
will also affect Minority Stockholders' pro forma earnings per share. For the
fiscal year ended September 30, 1997, the earnings per share was $1.46 for
each share of Bank Common Stock outstanding, including shares held by the
Mutual Holding Company. Based on the pro forma information set forth in "Pro
Forma Data," assuming the sale of 2,500,000 shares of Common Stock at the
midpoint of the Offering Range, the pro forma earnings per share of Common
Stock was $0.63 for such period, and the aggregate pro forma earnings for the
number of Exchange Shares to be received for each Minority Share was $1.83.
For the fiscal year ended September 30, 1997, the aggregate pro forma
earnings for the number of Exchange Shares to be received for each Minority
Share was $1.77, $1.83, and $1.92 at the minimum, maximum, and maximum, as
adjusted, of the Offering Range.
EFFECT ON DIVIDENDS PER SHARE. The Company's Board of Directors
anticipates declaring and paying quarterly cash dividends on the Common Stock
equal to $1.5 million, or $0.373, $0.317, $0.276 and $0.240 per share of
Common Stock on an annual basis, at the minimum, midpoint, maximum and
maximum, as adjusted, of the Offering Range, respectively. Dividends, when
and if paid, will be subject to determination and declaration by the Board of
Directors in its discretion, which will take into account the Company's
consolidated financial condition and results of operations, tax
considerations, industry standards, economic conditions, regulatory
restrictions on dividend payments by the Bank to the Company, general
business practices and other factors. See "Dividend Policy." The Bank has
paid a quarterly cash dividend to Minority Stockholders for each of the full
fiscal quarters since the Minority Stock Offering in April 1994. See "Market
for Common Stock" and "Regulation and Supervision--Federal Regulation of
Savings Institutions--Limitation on Capital Distributions." The Bank intends
to continue to pay a quarterly cash dividend of $0.225 per share through the
fiscal quarter ending March 31, 1998. The Mutual Holding Company intends to
waive the receipt of such dividends.
EFFECT ON THE MARKET AND APPRAISED VALUE OF THE SHARES EXCHANGED. The
aggregate Subscription Price of the shares of Common Stock received in
exchange for the Minority Shares is $19.0 million, $22.3 million, $25.7
million, and $30.0 million at the minimum, midpoint, maximum and adjusted
maximum of the Offering Range. The last trade of Bank Common Stock on
September 17, 1997, the day preceding the announcement of the Conversion, was
$28.00 per share, and the price at which Bank Common Stock last traded on
February , 1998, was $ per share.
DISSENTERS' AND APPRAISAL RIGHTS. Under OTS regulations, Minority
Stockholders will not have dissenters' rights or appraisal rights in
connection with the exchange of Minority Shares for shares of Common Stock of
the Company.
TAX CONSEQUENCES OF CONVERSION. The Bank will receive an opinion of
counsel with regard to federal income taxation and will receive an opinion of
counsel or tax advisor with regard to Arkansas taxation, which will indicate
that the adoption and implementation of the Plan of Conversion will not be
taxable for federal or Arkansas income tax purposes to the Bank, the Mutual
Holding Company, the Minority Stockholders, members of the Mutual Holding
Company or the Company. Consummation of the Conversion is conditioned upon
prior receipt by the Bank of such opinions. See "The Conversion--Tax Aspects."
8
<PAGE>
EXCHANGE OF COMPANY STOCK CERTIFICATES. Until the Effective Date, the
Minority Shares will continue to be available for trading on the Nasdaq
"SmallCap" Market. The exchange and conversion of Minority Shares for shares
of the Common Stock will occur automatically on the Effective Date. After the
Effective Date, former holders of the Bank Common Stock will have no further
equity interest in the Bank (other than as stockholders of the Company) and
there will be no further transfers of the Bank Common Stock on its stock
transfer records. For persons holding Minority Shares in street name, the
conversion of Minority Shares to shares of Common Stock will occur without
any action on the part of such stockholder. For persons holding certificated
shares, as soon as practicable after the Effective Date, the Company, or a
transfer agent, bank or trust company designated by the Company, in the
capacity of exchange agent (the "Exchange Agent"), will send a transmittal
form to each Minority Stockholder of record as of the Effective Date. The
transmittal forms are expected to be mailed within five business days after
the Effective Date and will contain instructions with respect to the
surrender of certificates representing the Bank Common Stock ("Converted Bank
Common Stock Certificates"). It is expected that certificates for shares of
the Company's Common Stock will be distributed within five business days
after the receipt of properly executed transmittal forms and other required
documents. See "The Conversion--Exchange of Certificates." BANK STOCKHOLDERS
SHOULD NOT FORWARD STOCK CERTIFICATES TO THE BANK OR THE EXCHANGE AGENT
UNTIL THEY HAVE RECEIVED TRANSMITTAL FORMS.
THE SUBSCRIPTION AND COMMUNITY OFFERINGS
Up to 2,875,000 Subscription Shares (subject to adjustment to up to
3,306,250 shares) will be offered for a subscription price of $10.00 per
share (the "Subscription Price") in the Subscription Offering and, to the
extent shares remain available for sale, in the Community Offering which is
being conducted concurrently with the Subscription Offering (together, the
"Offering"). Common Stock offered in the Subscription Offering shall be
offered in the following order of priority to: (i) Eligible Account Holders;
(ii) the Bank's KSOP in an amount up to 8% of the shares sold in the
Offering; (iii) Supplemental Eligible Account Holders; (iv) Other Members;
and (v) Minority Stockholders.
Common Stock not subscribed for in the Subscription Offering will be
offered in the Community Offering to certain members of the general public,
with preference given, in the Bank's discretion, to natural persons residing
in the Community. The Company and the Bank reserve the absolute right to
reject or accept any orders in the Community Offering, in whole or in part,
either at the time of receipt of an order or as soon as practicable following
the Expiration Date. The Bank and the Company have hired FBR as consultant
and advisor in the Conversion and to assist in soliciting subscriptions in
the Offering. See "The Conversion--Subscription Offering and Subscription
Rights" and "--Community Offering."
The Subscription Offering and Community Offering will terminate at noon,
Central time, on March , 1998 (the "Expiration Date") unless extended
by the Bank and the Company, with the approval of the OTS, if necessary. The
Bank and the Company may determine to extend the Subscription Offering and/or
the Community Offering for any reason, whether or not subscriptions have been
received for shares at the minimum, midpoint, or maximum of the Offering
Range, and are not required to give subscribers notice of any such extension.
The Community Offering must be completed within 45 days after the expiration
of the Subscription Offering unless extended by the Bank and the Company with
the approval of the OTS, if necessary.
PROSPECTUS DELIVERY AND PROCEDURE FOR PURCHASING SHARES
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the Expiration Date, Prospectuses may not be mailed later than five
days prior to such date or be hand delivered later than two days prior to
such date. Order forms and certification forms may only be distributed with a
Prospectus. Execution of a stock order form will confirm receipt or delivery
of the Prospectus. The Bank will accept for processing only properly
completed stock order forms including a signed certification. The Bank will
not be required to accept orders submitted on photocopied or facsimilied
stock order forms. Payment by check, bank draft, certified or teller's check,
money
9
<PAGE>
order, or debit authorization to an existing passbook or certificate of
deposit account at the Bank must accompany each stock order form. See "The
Conversion-- Procedure for Purchasing Shares."
To ensure that each prospective purchaser is properly identified as to
his stock purchase priority, depositors as of the Eligibility Record Date and
Supplemental Eligibility Record Date must list all accounts on the stock
order form giving all names in each account and the account number. In
addition, shareholders of the Bank should list the number of shares held as
of January 21, 1998. Failure to list all accounts or shares may result in a
subscriber's loss of subscription rights. Individuals qualifying for a stock
purchase priority who add individuals with a lower, or no, stock purchase
priority as subscribers on an order form will have their stock purchase
priority reduced or eliminated, based on the priority, if any, of the added
name(s).
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES
No person may transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the subscription rights issued
under the Plan of Conversion or the shares of Common Stock to be issued upon
their exercise. Each person exercising subscription rights will be required
to certify that a purchase of Common Stock is solely for the purchaser's own
account and that there is no agreement or understanding regarding the sale or
transfer of such shares. See "The Conversion-- Restrictions on Transfer of
Subscription Rights and Shares." The Company and the Bank will pursue any and
all legal and equitable remedies in the event they become aware of the
transfer of subscription rights and will not honor orders known by them to
involve the transfer of such rights.
PURCHASE LIMITATIONS
The minimum number of shares that may be purchased is 25 shares. Except
for the KSOP, no Eligible Account Holder, Supplemental Eligible Account
Holder, Other Member or Minority Stockholder may in their capacities as such
purchase in the Subscription Offering more than 15,000 Subscription Shares;
no person, together with associates of and persons acting in concert with
such person, may purchase in the Offering more than 30,000 Subscription
Shares; and no person together with associates of and persons acting in
concert with such person may purchase in the aggregate more than the number
of Subscription Shares that when combined with Exchange Shares received by
such person together with associates of and persons acting in concert with
such person exceeds 5.0% of the shares of Common Stock issued and outstanding
upon consummation of the Conversion and the Offering, provided, however, that
at any time during the Offering and without further approval by the members
of the Mutual Holding Company or stockholders of the Bank and without further
notice to subscribers, the Company and the Bank, in their sole discretion,
may increase the maximum purchase limitation to up to 5% of the aggregate
number of shares of Common Stock issued in the Conversion. Such limitation
may be further increased to up to 9.99%, provided that orders for
Subscription Shares exceeding 5% of the Common Stock issued in the Conversion
do not exceed in the aggregate 10.0% of the Common Stock issued in the
Conversion. Under certain circumstances, subscribers for the maximum number
of shares will, and certain large subscribers may, be resolicited to increase
their subscriptions in the event of any such increase. The Company and the
Bank may determine to increase the maximum purchase limitation in their sole
discretion whether or not subscriptions have been received for shares at the
minimum, midpoint or maximum of the Offering Range, subject to any necessary
regulatory approval, for any reason, including to sell the minimum number of
shares offered, and to raise more capital. See "The Conversion--Limitations
on Common Stock Purchases." In the event of an oversubscription, shares will
be allocated as described in "The Conversion-- Subscription Offering and
Subscription Rights" and "--Community Offering," and in accordance with the
Plan of Conversion. In the event of a 15% increase in the total number of
shares to be offered, the additional shares will be distributed and allocated
as described herein without the resolicitation of subscribers as described in
"The Conversion--Subscription Offering and Subscription Rights" and "--
Limitation on Common Stock Purchases."
10
<PAGE>
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
The Plan of Conversion and federal regulations require that the aggregate
purchase price of the Common Stock in the Offering must be based on the
appraised pro forma market value of the Common Stock, as determined by an
independent valuation. The Bank and the Company have retained RP Financial,
Inc. ("RP Financial") to make such valuation (the "Independent Valuation").
The Independent Valuation was prepared based on the assumption that the
aggregate amount of Common Stock sold in the Offering would be equal to the
estimated pro forma market value of the Company multiplied by the percentage
of the Bank Common Stock owned by the Mutual Holding Company at the Effective
Date (the "Majority Ownership Percentage"). The Independent Valuation states
that as of December 12, 1997, the estimated pro forma market value of the
Company ranged from a minimum of $40,219,142 to a maximum of $54,414,133 with
a midpoint of $47,316,638 (the "Valuation Range"). The aggregate offering
price of the Subscription Shares offered in the Offering will be equal to the
Valuation Range multiplied by the Majority Ownership Percentage. The number
of Subscription Shares offered in the Offering will be equal to the aggregate
offering price of the Subscription Shares divided by the Subscription Price.
The number of Subscription Shares offered in the Offering and/or the
aggregate of the offering price of the Subscription Shares are referred to
herein as the "Offering Range." Based on the Valuation Range, the Majority
Ownership Percentage and the Subscription Price, the minimum of the Offering
Range will be 2,125,000 Subscription Shares, the midpoint of the Offering
Range will be 2,500,000 Subscription Shares, and the maximum of the Offering
Range will be 2,875,000 Subscription Shares.
The Board of Directors reviewed the Independent Valuation and, in
particular, considered (i) the Bank's financial condition and results of
operations, (ii) financial comparisons of the Bank in relation to financial
institutions of similar size and asset quality, (iii) stock market conditions
generally and in particular for financial institutions, and (iv) the
historical trading price of the Minority Shares, all of which are set forth
in the Independent Valuation. The Board also reviewed the methodology and the
assumptions used by RP Financial in preparing its appraisal. The Independent
Valuation of the Common Stock is not intended and should not be construed as
a recommendation of any kind as to the advisability of purchasing the Common
Stock in the Offering, nor can any assurance be given that those who purchase
or receive Common Stock in the Conversion will be able to sell such shares
after the Conversion at or above the Subscription Price. Further, the pro
forma stockholders' equity is not intended to represent the fair market value
of the Common Stock and may be greater than amounts that would be available
for distribution to stockholders in the event of liquidation. See "Pro Forma
Data" and "The Conversion--Stock Pricing and Number of Shares to be Issued."
The total number of shares to be issued in the Offering may be increased
or decreased without a resolicitation of subscribers, provided that the total
number of shares to be issued in the Offering is not less than 2,125,000 or
greater than 3,306,250. There is no obligation or understanding on the part
of management or the Board of Directors to take and/or pay for any shares in
order to complete the Conversion. Following commencement of the Subscription
Offering, the maximum of the Valuation Range may be increased by up to 15% to
up to $62,576,253, which will result in a corresponding increase of up to 15%
in the maximum of the Offering Range to 3,306,250 shares, to reflect changes
in the market and financial conditions, without the resolicitation of
subscribers. The minimum of the Valuation Range and the minimum of the
Offering Range may not be decreased without a resolicitation of subscribers.
The Subscription Price of $10.00 per share will remain fixed. See
"--Limitations on Common Stock Purchases" as to the method of distribution
and allocation of additional shares that may be issued in the event of an
increase in the Offering Range to fill unfilled orders in the Subscription
and Community Offerings. See "The Conversion--Stock Pricing" and --Number of
Shares to be Issued."
USE OF PROCEEDS
Estimated net proceeds from the sale of the Common Stock are between
$20.6 million and $28.1 million. Actual net cash proceeds cannot be
determined until the Conversion is completed, and will depend on the number
of shares sold in the Offering and the expenses of the Conversion. The
Company will contribute at least 50% of the estimated adjusted net Offering
proceeds to the Bank. See "Pro Forma Data."
11
<PAGE> The Company will be unable to utilize any of the net proceeds of
the Offering until the Effective Date. The Company and the Bank may use funds
from the Offering, for general business purposes, including partial repayment
of FHLB advances, investment in one- to four-family residential mortgage
loans and other loans, and investment in short-term and intermediate-term
securities and mortgage-backed securities. In addition, the Bank and the
Company may utilize net proceeds to expand current operations through
internal growth or acquisitions, or for diversification into other
banking-related businesses and for other business and investment purposes.
The Bank acquired three branch offices in January 1998 and intends to
actively explore additional acquisitions, although neither the Company nor
the Bank has any specific plans, arrangements or understandings regarding any
additional expansions or acquisitions at this time, nor have criteria been
established to identify potential candidates for acquisition. Net proceeds
retained by the Company may be used for general business activities
including, subject to applicable limitations, the possible payment of
dividends and repurchases of Common Stock. See "Use of Proceeds."
DIVIDENDS
The Company intends to pay a quarterly cash dividend of $1.5 million, or
$0.373, $0.317, $0.276 and $0.240 per share of Common Stock on an annual
basis at the minimum, midpoint, maximum and maximum, as adjusted, of the
Offering Range, respectively. The first dividend is expected to be declared
for the fiscal quarter ending June 30, 1998. Dividends, when and if paid,
will be subject to determination and declaration by the Board of Directors in
its discretion, which will take into account the Company's consolidated
financial condition and results of operations, tax considerations, industry
standards, economic conditions, regulatory restrictions on dividend payments
by the Bank to the Company, general business practices and other factors. See
"Dividend Policy."
MARKET FOR COMMON STOCK
There is an established market for the Bank Common Stock which is
currently listed on the Nasdaq "SmallCap" Market under the symbol "PFSL," and
the Bank had three market makers as of January 31, 1998. As a newly formed
company, however, the Company has never issued capital stock and consequently
there is no established market for its Common Stock. It is expected that the
Company's Common Stock may be more liquid than the Minority Shares because
there will be significantly more outstanding shares owned by the public.
However, there can be no assurance that an active and liquid trading market
for the Common Stock will develop, or if developed, will be maintained. The
Minority Shares will automatically on the Effective Date, without further
action by the holder thereof, be converted into and become a right to receive
shares of Common Stock based on the Exchange Ratio.
The Company has received conditional approval to have its Common Stock
listed on the Nasdaq National Market under the Bank's previous symbol "PFSL."
FBR has advised the Company that upon completion of the Conversion, it
intends to act as a market maker in the Common Stock, depending upon the
volume of trading and subject to compliance with applicable laws and
regulatory requirements. FBR will assist the Company in obtaining additional
market makers, but there can be no assurance that additional market makers
will be identified.
BENEFIT PLANS
The Bank's KSOP is expected to purchase up to 8% of the shares sold in
the Offering, or 200,000 shares assuming the sale of 2,500,000 shares, after
satisfaction of purchase orders of Eligible Account Holders. The shares
purchased by the KSOP will be allocated to the accounts of employees without
payment by such persons of additional cash consideration. In addition,
subject to stockholder approval, the Bank or the Company intends to adopt (i)
a recognition and retention plan (the "1998 Recognition Plan") pursuant to
which the Bank or the Company intends to award to employees and directors of
the Bank a number of shares of Common Stock equal to up to 4% of the number
of shares sold in the Offering, and (ii) a stock option plan (the "1998 Stock
Option Plan") pursuant to which the Company intends to award options to
purchase a number of shares of Common Stock equal to up to 10% of the number
of shares sold in the Offering at an exercise price equal to the fair market
value of the Common Stock at the time of the award. Shares awarded pursuant
to the 1998 Recognition Plan or the 1998 Stock Option Plan may be authorized
but unissued shares, or shares of Common Stock acquired by the Bank, the
Company, or such plans in the
12
<PAGE>
open market. The exercise of such options may, and such awards of Recognition
Plan shares and KSOP shares from authorized but unissued shares of the
Company would, dilute the interest of existing stockholders. The Company
intends to submit the 1998 Recognition Plan and 1998 Stock Option Plan to
stockholders for approval. See "Management of the Bank--Benefit Plans."
RISK FACTORS
Attention should be given to the matters discussed under "Risk Factors"
which include discussions of the potential impact of changes in interest
rates, tax and accounting consequences of the Conversion, certain
anti-takeover provisions in the Company's and Bank's corporate documents and
compensation plans, the possible increase in the Valuation Range and the
Offering Range and number of shares to be issued.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL
AND OTHER DATA OF THE BANK AND SUBSIDIARIES
The following tables set forth selected consolidated historical financial
and other data of the Bank (including its subsidiaries) for the periods and
at the dates indicated. The information is derived in part from and should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto of the Bank contained elsewhere herein.
SELECTED FINANCIAL CONDITION DATA
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Total assets......................................... $ 383,417 $ 381,562 $ 348,554 $ 311,416 $ 169,787
Cash and cash equivalents............................ 2,805 2,046 1,860 2,318 2,116
Cash surrender value of life insurance............... 5,639 5,439 -- -- --
Investment securities................................ 200,553 219,690 214,425 197,668 60,648
Loans receivable, net (1)............................ 159,690 136,872 116,447 104,083 100,695
Federal Home Loan Bank Stock......................... 10,053 11,608 10,549 2,496 1,831
Deposits............................................. 143,354 116,283 112,458 113,407 119,115
FHLB advances........................................ 190,601 227,221 210,987 49,222 36,366
Securities sold under agreements to repurchase....... 20,685 10,100 -- 119,430 1,300
Stockholders' equity (2)............................. 24,246 22,689 21,008 19,420 11,287
</TABLE>
- ------------------------
(1) Includes loans held for sale.
(2) Retained earnings for fiscal years prior to 1994.
SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Interest income............................................ $ 26,093 $ 25,417 $ 23,300 $ 14,964 $ 12,210
Interest expense........................................... 18,699 18,628 17,241 8,354 5,995
--------- --------- --------- --------- ---------
Net interest income before provision for loan losses..... 7,394 6,789 6,059 6,610 6,215
Provision for loan losses.................................. 60 411 -- -- 193
--------- --------- --------- --------- ---------
Net interest income after provision for loan losses...... 7,334 6,378 6,059 6,610 6,022
Noninterest income......................................... 1,351 1,526 911 574 561
Noninterest expense:
Compensation and benefits................................ 2,954 2,704 2,624 2,478 1,844
Occupancy and equipment.................................. 566 439 377 410 343
Federal deposit insurance premiums(1).................... 108 1,198 279 277 265
Other.................................................... 1,337 1,210 746 743 1,087
--------- --------- --------- --------- ---------
Total noninterest expense.............................. 4,965 5,551 4,026 3,908 3,539
--------- --------- --------- --------- ---------
Income before income taxes................................. 3,720 2,353 2,944 3,276 3,044
Income tax provision....................................... 1,344 386 1,001 1,339 1,151
--------- --------- --------- --------- ---------
Net income............................................... $ 2,376 $ 1,967 $ 1,943 $ 1,937 $ 1,893
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Includes nonrecurring SAIF premium assessment of approximately $937,000 in
the fiscal year ended September 30, 1996.
14
<PAGE>
Selected Operating Ratios and Other Data (2)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Performance Ratios:(6) Return on average equity ratio................ 10.07% 8.98% 9.58% 12.63% 18.36%
Return on average assets............................................. 0.63 0.54 0.58 0.85 1.16
Interest rate spread (3)............................................. 1.83 1.65 1.57 2.73 3.78
Net interest margin (3).............................................. 2.04 1.89 1.85 2.95 3.95
Noninterest expense to average assets ratio.......................... 1.32 1.55 1.20 1.77 2.17
Net interest income after provision for loan losses to noninterest
expense ratio...................................................... 147.68 114.89 150.49 163.94 170.16
Efficiency ratio(7).................................................. 57.17 70.23 57.77 54.40 52.68
Asset Quality Ratios: Average interest-earning assets to average
interest-bearing liabilities....................................... 104.09 104.61 105.49 106.21 104.46
Nonperforming loans to net loans (4)(5).............................. 0.28 0.74 0.43 0.48 0.71
Nonperforming assets to total assets (4)(5).......................... 0.12 0.30 0.20 0.20 1.09
Allowance for loan losses to nonperforming loans (4)(5).............. 373.45 169.50 273.59 267.60 189.73
Allowance for loan losses to nonperforming assets (4)(5)............. 359.79 152.91 197.81 212.12 73.20
Allowance for loan losses to total loans (4)......................... 1.03 1.21 1.13 1.24 1.30
Capital, Equity and Dividend Ratios: Tangible capital(4)............. 6.32 5.97 6.02 6.20 6.65
Core capital (4)..................................................... 6.32 5.97 6.02 6.20 6.65
Risk-based capital (4)............................................... 16.22 16.75 18.80 18.50 14.89
Average equity to average assets ratio............................... 6.26 5.98 6.06 6.72 6.33
Dividend payout ratio (1)............................................ 60.74 63.40 48.90 -- --
Per Share Data: Book value per share (8)............................. $ 14.85 $ 13.97 $ 13.05 $ 12.06 --
Earnings per share (9)............................................... $ 1.46 $ 1.22 $ 1.21 $ 1.57 --
Other Data: Full-service offices (10)................................ 6 5 5 5 5
</TABLE>
- ------------------------
(1) The fiscal year ended September 30, 1995 was the first full fiscal year that
the Bank was a publicly traded company. Dividend payout ratio is the total
dividends declared divided by net income.
(2) With the exception of period end ratios, ratios are based on average monthly
balances.
(3) Interest rate spread represents the difference between the weighted average
yield on average interest earning assets and the weighted average cost of
average interest bearing liabilities, and net interest margin represents net
interest income as a percent of average interest earning assets.
(4) End of period ratio.
(5) Nonperforming assets consist of nonperforming loans and real estate owned
("REO"). Nonperforming loans consist of non-accrual loans while REO consists
of real estate acquired in settlement of loans.
(6) Excluding the impact of the $937,000 special SAIF assessment in the fiscal
year ended September 30, 1996, the return on average assets ratio, the
return on average equity ratio, the noninterest expense to average assets
ratio and the efficiency ratio would have been 0.7%, 11.8%, 1.3% and 58.37%,
respectively.
(7) The efficiency ratio is the ratio of noninterest expense to the sum of net
interest income and noninterest income.
(8) This calculation is based on 1,632,424, 1,624,594, 1,610,000 and 1,610,000
shares outstanding at September 30, 1997, 1996, 1995 and 1994, respectively.
(9) This calculation is based on weighted average shares outstanding of
1,629,011, 1,617,690, 1,610,000 and 1,236,250 for the fiscal years ended
September 30, 1997, 1996, 1995 and 1994, respectively.
(10) The Bank completed the acquisition in January 1998 of three additional
full-service branch offices.
15
<PAGE>
RISK FACTORS
The following risk factors, in addition to the other information presented
in this Prospectus, should be considered by prospective investors in deciding
whether to purchase the Common Stock offered hereby.
Potential Effects of Changes in Interest Rates and the Current Interest Rate
Environment
The operations of the Bank are substantially dependent on its net interest
income, which is the difference between the interest income earned on its
interest-earning assets and the interest expense paid on its interest-bearing
liabilities. Like most savings institutions, the Bank's earnings are affected by
changes in market interest rates and other economic factors beyond its control.
The Bank's average interest rate spread for the fiscal years ended September 30,
1997, 1996 and 1995 was 1.83%, 1.65% and 1.57%, respectively, although no
assurance can be given that the Bank's average interest rate spread will not
decrease in future periods. Any such decrease in the Bank's average interest
rate spread could adversely affect the Bank's net interest income. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Asset and Liability Management."
If an institution's interest-earning assets have longer duration than its
interest-bearing liabilities, the yield on the institution's interest-earning
assets generally will adjust more slowly than the cost of its
interest-bearing liabilities and, as a result, the institution's net interest
income generally would be adversely affected by material and prolonged
increases in interest rates and positively affected by comparable declines in
interest rates. Based upon certain repricing assumptions, the Bank's
interest-earning liabilities repricing or maturing within one year exceeded
its interest-bearing assets with similar characteristics by $78.0 million or
17.0% of total assets at September 30, 1997. Accordingly, an increase in
interest rates generally would result in a decrease in the Bank's average
interest rate spread and net interest income. In addition, at September 30,
1997, the Bank's mortgage-backed securities portfolio included $153.0 million
of collateralized mortgage obligations with adjustable interest rates but
with lifetime caps on such interest rate adjustments ranging from 9% to 9.5%.
Accordingly, in an environment of material and prolonged interest rate
increases, the yield on these assets could be capped. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Assets and Liability Management."
The value of the Bank's portfolio will change as interest rates change.
Rising interest rates will generally decrease the Bank's net portfolio value,
while falling interest rates will generally increase the value of that
portfolio. As of September 30, 1997, if interest rates increased instantaneously
by 200 basis points, the Bank's net portfolio value would decrease by $14.6
million, or 41% of the estimated market value of the Bank's net portfolio value,
as calculated by the OTS. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Asset and Liability Management."
At September 30, 1997, ARM loans constituted 73.8% of the Bank's total net
loan portfolio. ARM loans generally pose a risk that as interest rates rise, the
amount of a borrower's monthly loan payment also rises, thereby increasing the
potential for delinquencies and loan losses. At the same time, the marketability
of the underlying property may be adversely affected by higher interest rates.
At September 30, 1997, mortgage-backed securities constituted 44.0% of total
assets. Mortgage-backed and related securities are particularly subject to
reinvestment risk. For example, during periods of falling interest rates, higher
coupon mortgage-backed and related securities are more likely to prepay, and the
Bank may not be able to reinvest the proceeds from prepayments in securities or
other assets with yields similar to those of the prepaying mortgage-backed and
related securities.
DECREASED RETURN ON EQUITY AND INCREASED EXPENSES FOLLOWING THE CONVERSION
At September 30, 1997, the Bank's ratio of equity to assets was 6.32%. The
Company's equity position will be significantly increased as a result of the
Conversion. On a pro forma basis as of September 30, 1997, assuming the sale of
Common Stock at the midpoint of the Offering Range, the Company's ratio of
equity to assets would be
16
<PAGE>
11.38% and, assuming the sale of Common Stock at the adjusted maximum of the
Offering Range, the Company's ratio of equity to assets would be 12.89%. The
Company's ability to leverage this capital will be significantly affected by
industry competition for loans and deposits. The Company currently
anticipates that it will take time to prudently deploy such capital.
In addition, the Company's expenses also are expected to increase because of
(i) the costs associated with the KSOP, (ii) the restricted stock ownership plan
and stock option plan expected to be implemented following the Conversion, and
(iii) certain increases in executive compensation related to the
responsibilities associated with managing the Company as a fully converted
company, the deployment of the net proceeds of the Offering and the successful
integration of the operations associated with the three branch offices expected
to be acquired in January 1998. Because of the expected increases in both equity
and expenses, return on equity is expected to decrease as compared to
performance in recent years. A lower return on equity could reduce the trading
price of the Company's shares of Common Stock.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
In an effort to fully deploy post-Conversion capital, in addition to
attempting to increase its loan and deposit growth, the Company may seek to
expand its banking franchise by acquiring other financial institutions or
branches. The Company's ability to grow through selective acquisitions of
other financial institutions or branches of such institutions will be
dependent on successfully identifying, acquiring and integrating such
institutions or branches. There can be no assurance the Company will be able
to generate internal growth or to identify attractive acquisition candidates,
acquire such candidates on favorable terms or successfully integrate any
acquired institutions or branches into the Company. The Bank acquired three
branch offices in January 1998 and intends to actively explore additional
acquisitions, although neither the Company nor the Bank has any specific
plans, arrangements or understandings regarding any additional expansions or
acquisitions at this time, nor have criteria been established to identify
potential candidates for acquisition.
INDEPENDENT VALUATION OF THE COMPANY
The offering price as a percentage of pro forma tangible book value of the
Common Stock sold in the Offering ranges from 93.98% at the minimum of the
Offering Range to 117.92% at the adjusted maximum of the Offering Range. For the
fiscal year ended September 30, 1997 the price to pro forma earnings per share
of the Common Stock sold in the Offering ranges from 13.89x at the minimum of
the Offering Range to 20.00x at the adjusted maximum of the Offering Range. The
price to pro forma tangible book value at which the Common Stock is being sold
in the Offering substantially exceeds the price to pro forma tangible book value
of common stock sold in most mutual-to-stock conversions that do not involve a
mutual holding company conversion or reorganization. Prospective investors
should be aware that as a result of the relatively high valuation, the
after-market performance of the Common Stock is likely to be less favorable
during the period immediately following the Conversion than the price
performance of common stock sold in recent mutual-to-stock conversions that do
not involve a mutual-to-stock conversion of a mutual holding company.
POSSIBLE INCREASE IN OFFERING RANGE AND NUMBER OF SHARES ISSUED
The number of Subscription Shares to be sold in the Conversion may be
increased as a result of an increase in the Offering Range of up to 15% to
reflect changes in market and financial conditions following the commencement of
the Subscription and Community Offerings. In the event that the Offering Range
is so increased, it is expected that the Company will issue up to 3,306,250
shares of Common Stock at the Subscription Price. Such an increase in the number
of shares issued in the Offering will decrease a subscriber's pro forma
annualized net earnings per share and pro forma stockholders' equity per share,
but will increase the Company's consolidated pro forma stockholders' equity and
pro forma net income. See "Pro Forma Data."
17
<PAGE>
RISKS RELATED TO COMMERCIAL REAL ESTATE LOANS AND COMMERCIAL BUSINESS LOANS
The Bank has increased its originations of commercial real estate loans and
commercial business loans. Commercial real estate loans and commercial business
loans amounted to $9.6 million and $6.5 million, or 6.0% and 4.1%, respectively,
of the Bank's net loans at September 30, 1997.
Commercial real estate and commercial business lending involves a higher
degree of risk than single-family residential lending due to a variety of
factors, including generally larger loan balances to single borrowers or groups
of related borrowers, the dependency for repayment on successful development and
operation of the project or business and income stream of the borrower, and loan
terms which often do not require full amortization of the loan over its term. In
addition, commercial business loans involve a higher degree of risk because the
collateral may be in the form of intangible assets and/or inventory subject to
market obsolescence. Such risks also can be significantly affected by economic
conditions. In addition, commercial real estate and commercial business lending
requires substantially greater oversight efforts compared to other lending. See
"Business--Lending Activities." As of September 30, 1997, the Bank had $422,000
of non-performing real estate loans, and $31,000 of other non-performing loans.
See "Business-- Asset Quality--Non-Performing Assets."
GEOGRAPHIC CONCENTRATION
The primary market area of the Bank is the Arkansas counties of Randolph,
Lawrence, Craighead, Sharp and Clay, all of which are located in northeast
Arkansas. As a result, economic conditions in this area will significantly
affect the deposit and loan activities of the Bank, and an economic downturn
in this area could negatively impact the operations of the Bank. Moreover,
the area is rural in nature, and a large portion of the industry in the area
is concentrated in the agriculture and agriculture-related industries.
CERTAIN ANTI-TAKEOVER CONSIDERATIONS
Provisions in the Company's and the Bank's Governing Documents. Provisions
in the Company's Certificate of Incorporation and the Bank's Charter and their
respective Bylaws provide for limitations on stockholder voting rights. In
addition, the Bank's Federal Stock Charter and Bylaws, as well as certain
federal regulations, assist the Company in maintaining its status as an
independent publicly owned corporation. These provisions may prevent a change of
control of the Company even if desired by a majority of stockholders. These
provisions provide for, among other things, supermajority voting, staggered
boards of directors, noncumulative voting for directors, limits on the calling
of special meetings, and certain uniform price provisions for certain business
combinations. In particular, the Company's Certificate of Incorporation provides
that beneficial owners of more than 10% of the Company's outstanding Common
Stock may not vote the shares owned in excess of the 10% limit. The Bank's
Charter also prohibits, until [April 1999], the acquisition of, or offer to,
acquire, directly or indirectly, the beneficial ownership of more than 10% of
the Bank's voting securities. Any person violating this restriction, except for
the Company, may not vote any of the Bank's securities held in excess of the 10%
limitation. In the event that holders of revocable proxies for more than 10% of
the shares of Common Stock of the Company acting as a group or in concert with
other proxy holders attempt actions that could indirectly result in a change in
control of the Bank, management of the Bank will be able to assert this
provision of the Bank's Charter against such holders if it deems such assertion
to be in the best interests of the Bank, the Company and its stockholders. It is
uncertain, however, whether the Bank would be successful in asserting such
provision against such persons.
VOTING CONTROL OF EXECUTIVE OFFICERS AND DIRECTORS. In addition,
assuming executive officers and directors (i) purchase 63,800 Subscription
Shares in the Offering, (ii) receive Exchange Shares in the Share Exchange as
described herein, (iii) receive a number of shares of Common Stock equal to
4% and 10% of the number of Subscription Shares sold in the Offering pursuant
to the 1998 Recognition Plan and 1998 Stock Option Plan, respectively
(assuming such plans are approved by stockholders, that all awards are vested
and all options exercised, and the 1998 Recognition Plan shares are purchased
in the open market); and (iv) receive all stock benefits that were not vested
as of October 31, 1997, and exercised all such stock options; then executive
officers and directors will own
18
<PAGE>
between % and % of the Common Stock at the minimum and adjusted maximum
of the Offering Range, respectively. Such amount does not include the 56,790
shares, or 3.5% of the Company's Common Stock that will be owned by the KSOP
at the conclusion of the Conversion, assuming it purchases 8.0% of the
Subscription Shares sold in the Offering. The Certificate of Incorporation of
the Company provides for a supermajority vote of 80% of the outstanding
shares of voting stock for: (i) the removal of a director for cause prior to
the expiration of his term; (ii) certain business combinations, including
mergers, consolidations and sales of 25% or more of the assets of the Company
and its subsidiaries with "Interested Stockholders" as defined in
"Restrictions on the Acquisition of the Company and the Bank--Restrictions in
the Company's Certificate of Incorporation and Bylaws--Shareholder Vote
Required to Approve Business Combinations with Principal Stockholders"; (iii)
amendment of certain provisions of the Certificate of Incorporation; and (iv)
amendment of the Bylaws. The potential voting control by directors and
officers could, together with additional stockholder support or upon exercise
of their options, defeat stockholder proposals requiring an 80% supermajority
vote. As a result, these provisions may preclude takeover attempts that
certain stockholders deem to be in their best interest and may tend to
perpetuate existing management. See "Restrictions on the Acquisition of the
Company and the Bank."
PROVISIONS OF COMPENSATION PLANS AND EMPLOYMENT AGREEMENTS. Moreover,
the Bank's current employment agreements provide for benefits and cash
payments in the event of a change in control of the Company or the Bank.
Additionally, the Bank's current stock benefit plans, and the 1998
Recognition Plan and 1998 Stock Option Plan may provide for accelerated
vesting in the event of a change in control. These provisions may have the
effect of increasing the cost of acquiring the Company, thereby discouraging
future attempts to acquire control of the Company or the Bank. See
"Restrictions on the Acquisition of the Company and the Bank--Restrictions in
the Company's Certificate of Incorporation and Bylaws," "Management of the
Bank--Benefits."
POSSIBLE DILUTIVE EFFECT OF ISSUANCE OF ADDITIONAL SHARES
If the 1998 Recognition Plan is approved by stockholders of the Company, the
1998 Recognition Plan intends to acquire an amount of Common Stock equal to 4%
of the shares of Common Stock sold in the Conversion. If such shares are
acquired at a per share price equal to the Purchase Price, the cost of such
shares would be $1.15 million, assuming the Common Stock sold in the Conversion
at the maximum of the Offering Range. Such shares of Common Stock may be
acquired in the open market with funds provided by the Company, or from
authorized but unissued shares of Common Stock. In the event that the 1998
Recognition Plan acquires authorized but unissued shares of Common Stock from
the Company, the interests of existing stockholders will be diluted and net
income per share and stockholders' equity per share would be decreased.
If the 1998 Stock Option Plan is approved by stockholders of the Company,
the Company intends to reserve for future issuance pursuant to such plan a
number of shares of Common Stock equal to 10% of the Common Stock sold in the
Offering (250,000 shares, based on the issuance of 2,500,000 shares at the
midpoint of the Offering Range). Such shares may be authorized but previously
unissued shares, treasury shares or shares purchased by the Company in the open
market or from private sources. If only authorized but previously unissued
shares are used under such plan, the issuance of the total number of shares
available under such plan would dilute the voting interests of stockholders at
the time of such award and decrease net income per share and stockholders'
equity per share.
As of October 31, 1997, there were options outstanding to purchase 48,052
Minority Shares at an average exercise price of $10.00 per share, 33,102 of
which were exercisable within 60 days of such date. On the Effective Date these
options will be converted into and become options to purchase Common Stock of
the Company. The number of shares of Common Stock to be received upon exercise
of such options will be determined pursuant to the Exchange Ratio. The exercise
of such currently existing stock options will result in dilution of the Common
Stock holdings of the existing stockholders.
19
<PAGE>
ESOP COMPENSATION EXPENSE
In November 1993, the American Institute of Certified Public Accountants
("AICPA") Accounting Standards Executive Committee issued Statement of Position
93-6 Employers' Accounting for Employee Stock Ownership Plans ("SOP 93-6"). SOP
93-6 requires an employer to record compensation expense in an amount equal to
the fair value of shares committed to be released to employees from an employee
stock ownership plan ("ESOP") or in the present case, the ESOP portion of the
KSOP. Accordingly, future increases and decreases in fair value of Common Stock
committed to be released will have a corresponding effect on compensation
expense related to the ESOP portion of the KSOP. The annual compensation expense
of the ESOP portion of the KSOP will be $123,000 at the midpoint of the Offering
Range, assuming the fair value of shares of Common Stock is equal to the
Subscription Price. To the extent that the fair value of the Bank's KSOP shares
differ from the cost of such shares, the differential will be charged or
credited to equity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Impact of New Accounting Standards."
REGULATORY OVERSIGHT AND LEGISLATION
The Bank is subject to extensive regulation, supervision and examination
by the OTS, as its chartering authority, and by the FDIC as insurer of its
deposits up to applicable limits. The Bank is a member of the FHLB system. As
the holding company of the Bank, the Company also will be subject to
regulation and oversight by the OTS. Such regulation and supervision govern
the activities in which an institution can engage and are intended primarily
for the protection of the insurance fund and depositors. Regulatory
authorities have been granted extensive discretion in connection with their
supervisory and enforcement activities which are intended to strengthen the
financial condition of the banking and thrift industries, including the
imposition of restrictions on the operation of an institution, the
classification of assets by the institution and the adequacy of an
institution's allowance for loan losses. Any change in such regulation and
oversight, whether by the OTS, the FDIC or Congress, could have a material
impact on the Company, the Bank and their respective operations. See
"Regulation."
On September 30, 1996, the Deposit Insurance funds ("DIF") Act of 1996 was
enacted into law. The DIF Act contemplates the development of a common charter
for all federally chartered depository institutions and the abolition of
separate charters for national banks and federal savings associations. It is not
known what form the common charter may take and what effect, if any, the
adoption of a new charter would have on the financial condition or results of
operations of the Bank. See "Regulation--Federal Regulation of Savings
Institutions."
Legislation is proposed periodically providing for a comprehensive reform of
the banking and thrift industries, and has included provisions that would (i)
require federal savings associations to convert to a national bank or a
state-chartered bank or thrift, (ii) require all savings and loan holding
companies to become bank holding companies, and (iii) abolish the OTS. It is
uncertain when or if any of this type of legislation will be passed, and, if
passed, in what form the legislation would be passed. As a result, management
cannot accurately predict the possible impact of such legislation on the Bank.
Possible Year 2000 Computer Program Problems
A great deal of information has been disseminated about the global computer
crash that may occur in the year 2000. Many computer programs that can only
distinguish the final two digits of the year entered (a common programming
practice in earlier years) are expected to read entries for the year 2000 as the
year 1900 and compute payment, interest or delinquency based on the wrong date
or are expected to be unable to compute payment, interest or delinquency. Rapid
and accurate data processing is essential to the operations of the Bank.
All of the material data processing of the Bank that could be affected by
this problem is provided by a third party service bureau. The service bureau of
the Bank has advised the Bank that it expects to resolve this potential problem
before the year 2000. However, if this service bureau is unable to resolve this
potential problem in time,
20
<PAGE>
the Bank would likely experience significant data processing delays, mistake
or failures, which could have a significant adverse impact on the financial
condition and results of operations of the Bank.
THE COMPANY
The Company was organized in December 1997 for the purpose of acquiring
all of the outstanding shares of capital stock of the Bank. The Company has
applied to the OTS to become a savings and loan holding company and as such
will be subject to regulation by the OTS. After completion of the Conversion,
the Company will conduct business initially as a unitary savings and loan
holding company. See "Regulation--Company Regulation." Upon consummation of
the Conversion, the Company's assets will be primarily the shares of the
Bank's capital stock acquired in the Conversion and that portion of the net
proceeds of the Conversion permitted by the OTS to be retained by the
Company. The Company initially will have no significant liabilities. See "Use
of Proceeds." The management of the Company is set forth under "Management of
the Company." Initially, the Company will neither own nor lease any property,
but instead will use the premises, equipment and furniture of the Bank. At
the present time, the Company does not intend to employ any persons other
than officers but will utilize the support staff of the Bank from time to
time. Additional employees will be hired as appropriate to the extent the
Company expands its business.
The Conversion will provide the Bank with additional capital to support
future growth and enhance results of operations. Management believes that the
holding company structure will provide the Company with additional flexibility
to diversify its business activities through existing or newly formed
subsidiaries, or through acquisitions of or mergers with other financial
institutions and financial services related companies or for other business or
investment purposes, including the possible repurchase of Common Stock as
permitted by the OTS. Although there are no current arrangements, understandings
or agreements, written or oral, regarding any such opportunities or
transactions, the Company will be in a position after the Conversion, subject to
regulatory limitations and the Company's financial position, to take advantage
of any such acquisition and expansion opportunities that may arise. The initial
activities of the Company are anticipated to be funded by the proceeds permitted
to be retained by the Company and earnings thereon or, alternatively, through
dividends received from the Bank.
The Company's executive office is located at 203 West Broadway, Pocahontas,
Arkansas, and its telephone number is (870) 892-4595.
THE BANK
Pocahontas Federal Savings and Loan Association is a federally chartered
savings and loan association headquartered in Pocahontas, Arkansas. The Bank's
deposits are insured by the FDIC under the SAIF. The Bank has been a member of
the FHLB since 1935. At September 30, 1997, the Bank had total assets of $383.4
million, total deposits of $143.4 million, and stockholders' equity of $24.2
million.
The Bank was originally organized in 1935 as a federally chartered mutual
savings and loan association. The Bank was reorganized as a stock savings and
loan association on December 31, 1991, pursuant to a plan of reorganization that
was approved by the OTS. As part of that reorganization, the Mutual Holding
Company was formed as the mutual holding company of the Bank. In April 1994, the
Bank issued 747,500 shares of its common stock in a subscription and community
offering, with the remaining shares of its common stock (862,500 shares, or
53.6% of all outstanding shares) issued to the Mutual Holding Company.
In January 1998, the Bank purchased three full-service branch offices, which
increased the Bank's branches to nine. The purchase included an aggregate of
$ in deposits, as well as the buildings and land at each branch
location. The newly acquired branches are located in Walnut Ridge, Hardy and
Lake City in Arkansas and supplement the Bank's existing branches in Lawrence,
Sharp and Craighead Counties.
The Bank is a community-oriented savings institution that, with the
consummation of the branch acquisition referred to above, operates nine
full-service offices in its market area consisting of the Arkansas counties of
Randolph,
21
<PAGE>
Lawrence, Craighead, Sharp and Clay. The Bank's market area has a diverse
economic base, although it is significantly influenced by agriculture, light
manufacturing, services and wholesale and retail trade. Increasingly, the
economy of the Bank's market area has been influenced by the service sector
and, to a lesser extent, by tourism and by the retirement sector. The Bank is
primarily engaged in the business of attracting deposits from the general
public in its market area, and investing such deposits, together with
borrowed funds, in loans collateralized by single-family residential real
estate, multifamily loans, agricultural loans and commercial real estate
loans, generally secured by property located in its market area. The Bank
also originates commercial business loans and, to a lesser extent, consumer
loans. The Bank also invests in mortgage-backed and related securities and
other investment securities, including CMOs. See "Business of the
Bank--Lending Activities; "--Investment Activities." During the fiscal year
ended September 30, 1997, 74.6% of the loans originated by the Bank were
single-family residential real estate loans. At September 30, 1997, such
loans totaled 86.8% of the Bank's total net loan portfolio. At September 30,
1997, agricultural loans, commercial real estate loans (including land
loans), and commercial business loans comprised 2.9%, 6.0% and 4.1%,
respectively, of the Bank's total net loan portfolio.
The Bank's executive offices are located at 203 West Broadway, Pocahontas,
Arkansas, and its telephone number at that location is (870) 892-4595.
22
<PAGE>
HISTORICAL AND PRO FORMA CAPITAL COMPLIANCE
At September 30, 1997, the Bank exceeded all OTS regulatory capital
requirements. Set forth below is a summary of the Bank's compliance with the OTS
capital standards as of September 30, 1997, on a historical and pro forma basis
assuming that the indicated number of shares were sold as of such date, and that
the Company contributes to the Bank a portion of the estimated net proceeds of
the Offering sufficient to increase the Bank's tangible capital to at least 10%
of its adjusted total assets. Accordingly, it has been assumed that 1%, 14%, 23%
and 31% of the net proceeds of the Offering have been retained by the Company
based on the sale of 2,250,000, 2,500,000, 2,875,000 and 3,306,250 shares at the
minimum, midpoint, maximum and maximum, as adjusted, of the Offering Range,
respectively. See "Pro Forma Data" for the assumptions used to determine the net
proceeds of the Offering. For purposes of the table below, the amount expected
to be borrowed by the ESOP portion of the KSOP and the cost of the shares
expected to be acquired by the 1998 Recognition Plan are deducted from pro forma
regulatory capital.
<TABLE>
<CAPTION>
PRO FORMA AT SEPTEMBER 30, 1997, BASED UPON THE SALE OF
---------------------------------------------------------------------------------------
HISTORICAL AT
SEPTEMBER 30, 1997 2,125,000 SHARES 2,500,000 SHARES 2,875,000 SHARES 3,306,250 SHARES
------------------- ------------------- ------------------- ------------------- ---------------------
PERCENT PERCENT PERCENT PERCENT PERCENT
OF OF OF OF OF
AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS(2)(3)
------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
GAAP capital...... $24,246 6.32% $40,107 10.00% $40,147 10.00% $40,182 10.00% $40,214 10.00%
Tangible capital:
Capital level... $24,246 6.32% $40,106 10.00% $40,146 10.00% $40,181 10.00% $40,213 10.00%
Requirement..... 5,754 1.50% 6,018 1.50% 6,023 1.50% 6,028 1.50% 6,033 1.50%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess........ $18,492 4.82% $34,088 8.50% $34,123 8.50% $34,153 8.50% $34,180 8.50%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Core capital:
Capital level... $24,246 6.32% $40,106 10.00% $40,146 10.00% $40,181 10.00% $40,213 10.00%
Requirement
(3)........... 11,509 3.00% 12,035 3.00% 12,046 3.00% 12,056 3.00% 12,067 3.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess........ $12,737 3.32% $28,071 7.00% $28,100 7.00% $28,125 7.00% $28,146 7.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Risk-based
capital:
Capital level
(4)........... $25,913 16.22% $41,774 24.79% $41,814 24.78% $41,849 24.78% $41,881 24.77%
Requirement..... 12,781 8.00% 13,483 8.00% 13,497 8.00% 13,510 8.00% 13,525 8.00%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess........ $13,132 8.22% $28,291 16.79% $28,317 16.78% $28,339 16.78% $28,356 16.77%
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
</TABLE>
- ------------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to a 15% increase in the Offering Range to reflect changes
in market or general financial conditions following the commencement of the
Offering.
(2) Tangible and core capital levels are shown as a percentage of total adjusted
assets. Risk-based capital levels are shown as a percentage of risk-weighted
assets. Pro forma total adjusted and risk-weighted assets used for the
capital calculations include the proceeds of the KSOP's purchase of 8% of
the Subscription Shares.
(3) The current OTS core capital requirement for savings banks is 3% of total
adjusted assets. The OTS has proposed core capital requirements which would
require a core capital ratio of 3% of total adjusted assets for savings
banks that receive the highest supervisory rating for safety and soundness,
and a 4% to 5% core capital ratio requirement for all other savings banks.
See "Regulation--Federal Regulation of Savings Institution--Capital
Requirements."
(4) Pro forma amounts and percentages assume net proceeds are invested in assets
that carry a 50% risk-weighting.
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<PAGE>
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Subscription Shares
cannot be determined until the Offering is completed, it is presently
anticipated that the net proceeds will be between $20.6 million and $28.1
million (or $32.3 million if the Offering Range is increased by 15%). See "Pro
Forma Data" and "The Conversion --Exchange Ratio" and "--Stock Pricing and
Number of Shares to be Issued" as to the assumptions used to arrive at such
amounts. The Company will be unable to utilize any of the net proceeds of the
Offering until the consummation of the Conversion.
The Company is expected to contribute to the Bank a portion of the net
proceeds of the Offering sufficient to increase the Bank's tangible capital to
at least 10% of its adjusted total assets. Such portion of the net proceeds will
be added to the Bank's general funds which the Bank currently intends to utilize
for general corporate purposes, including the partial repayment of FHLB
advances, investment in one-to-four family residential real estate loans and
other loans and investment in short-term and intermediate-term securities and
mortgage-backed securities. The Bank may also use such funds to expand
operations through the establishment or acquisition of branch offices, and the
acquisition of other financial institutions or other financial services
companies. To the extent the 1998 Recognition Plan is not funded with authorized
but unissued common stock of the Company, the Company or Bank may use net
proceeds from the Offering to fund the purchase of stock to be awarded under
such plan. See "Management of the Bank--Benefit Plans".
The Company intends to use a portion of the net proceeds to loan funds to
the KSOP to enable the KSOP to purchase 8% of the Subscription Shares issued in
the Offering. The Company and Bank may alternatively choose to fund the KSOP's
stock purchases through a loan by a third party financial institution. See
"Management of the Bank--Benefit Plans." The net proceeds retained by the
Company may also be used to support the future expansion of operations through
branch acquisitions, the establishment of new branch offices, and the
acquisition of other financial institutions or diversification into other
banking related businesses. The Bank entered into an agreement in August 1997
for the acquisition of three branch offices, and the Company and the Bank intend
to actively explore additional acquisitions, although neither the Company nor
the Bank has any specific plans, arrangements or understandings regarding any
additional expansions or acquisitions at this time, nor have criteria been
established to identify potential candidates for acquisition.
Upon completion of the Conversion, the Board of Directors of the Company
will have the authority to repurchase stock, subject to statutory and
regulatory requirements. Unless approved by the OTS, the Company, pursuant to
OTS policy, will be prohibited from repurchasing any shares of the Common
Stock for three years except (i) for an offer to all stockholders on a pro
rata basis, or (ii) for the repurchase of qualifying shares of a director.
Notwithstanding the foregoing and except as provided below, beginning one
year following completion of the Conversion, the Company may repurchase its
Common Stock so long as: (i) the repurchases within the following two years
are part of an open-market program not involving greater than 5% of its
outstanding capital stock during a twelve-month period; (ii) the repurchases
do not cause the Bank to become "undercapitalized" within the meaning of the
OTS prompt corrective action regulation; and (iii) the Company provides to
the Regional Director of the OTS no later than ten days prior to the
commencement of a repurchase program written notice containing a full
description of the program to be undertaken and such program is not
disapproved by the Regional Director.
Based upon facts and circumstances following the Conversion and subject to
applicable regulatory requirements, the Board of Directors may determine to
repurchase stock in the future. Such facts and circumstances may include but not
be limited to (i) market and economic factors such as the price at which the
stock is trading in the market, the volume of trading, the attractiveness of
other investment alternatives in terms of the rate of return and risk involved
in the investment, the ability to increase the book value and/ or earnings per
share of the remaining outstanding shares, and the opportunity to improve the
Company's return on equity; (ii) the avoidance of dilution to stockholders by
not having to issue additional shares to cover the exercise of stock options or
to fund employee stock benefit plans; and (iii) any other circumstances in which
repurchases would be in the best interests of the Company and its shareholders.
In the event the Company determines to repurchases stock, such repurchases may
be made at
24
<PAGE>
market prices which may be in excess of the Subscription Price in the
Offering. To the extent that the Company repurchases stock at market prices
in excess of the per share book value, such repurchases may have a dilutive
effect upon the interests of existing stockholders.
DIVIDEND POLICY
The Company intends to pay a quarterly cash dividend of $1.5 million, or
$0.373, $0.317, $0.276 and $0.240 per share of Common Stock on an annual basis,
at the minimum, midpoint, maximum and maximum, as adjusted, of the Offering
Range, respectively. The first dividend is expected to be declared for the
fiscal quarter ending June 30, 1998. Declarations of dividends by the Company's
Board of Directors will depend upon a number of factors, including the amount of
the net proceeds from the Offering retained by the Company, investment
opportunities available to the Company or the Bank, capital requirements,
regulatory limitations, the Company's and the Bank's financial condition and
results of operation, tax considerations and general economic conditions.
Consequently, there can be no assurance that dividends will in fact be paid on
the Common Stock or that, if paid, such dividends will not be reduced or
eliminated in future periods. See "Market for the Common Stock."
The Bank will not be permitted to pay dividends to the Company on its
capital stock if its stockholders' equity would be reduced below the amount
required for the liquidation account. See "The Conversion and
Reorganization--Liquidation Rights." For information concerning federal and
state law and regulations which apply to the Bank in determining the amount of
proceeds which may be retained by the Company and regarding a savings
institution's ability to make capital distributions including payment of
dividends to its holding company, see "Federal and State Taxation--Federal
Taxation--Distributions" and "Regulation--Federal Regulation of Savings
Institutions--Limitation on Capital Distributions."
Unlike the Bank, 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 on the net proceeds retained by the Company and
earnings thereon and may be dependent, in part, upon dividends from the Bank.
The Company is subject, however, to the requirements of Delaware law, which
generally limit dividends to an amount equal to the excess of the net assets of
the Company (the amount by which total assets exceed total liabilities) over its
statutory capital (generally defined as the aggregate par value of the
outstanding shares of the Company's capital stock without par value) or, if
there is no such excess, to its net profits for the current and/or immediately
preceding fiscal year.
Additionally, in connection with the Conversion, the Company and the Bank
have committed to the OTS that during the one-year period following the
consummation of the Conversion and the Reorganization, the Company will not take
any action to declare an extraordinary dividend to stockholders which would be
treated by recipient stockholders as a tax-free return of capital for federal
income tax purposes without prior approval of the OTS.
Since the completion of the first full fiscal quarter following the initial
sale by the Bank of the Bank Common Stock in April 1994, the Bank has paid
average annual cash dividends on the Bank Common Stock of $.725 per share, which
amounts to a quarterly dividend of $.181 per share. The Bank's current quarterly
cash dividend is $0.225 per share, and the Bank intends to continue to pay
regular quarterly cash dividends through the fiscal quarter ending March 31,
1998.
MARKET FOR THE COMMON STOCK
There is an established market for the Bank Common Stock which is currently
listed on the Nasdaq "SmallCap" Market under the symbol, "PFSL," and the Bank
had three market makers as of September 30, 1997. As a newly formed company,
however, the Company has never issued capital stock and consequently there is no
established market for its Common Stock. It is expected that the Common Stock
will be more liquid than the Bank Common Stock since there will be significantly
more outstanding shares owned by the public. However, there can be no assurance
that an active and liquid trading market for the Common Stock will develop, or
if developed, will be maintained. Minority Shares will automatically, without
further action by the holders thereof, be converted into
25
<PAGE>
and become a right to receive a number of shares of Company Common Stock that
is determined pursuant to the Exchange Ratio. See "The Conversion and
Reorganization--Share Exchange Ratio."
The Company has received conditional approval to have its Common Stock
listed on the Nasdaq National Market under the Bank's previous symbol "PFSL."
One of the requirements for continued quotation of the Common Stock on the
Nasdaq National Market is that there be at least three market makers for the
Common Stock. The Company will seek to encourage and assist at least three
market makers to make a market in its Common Stock. Making a market involves
maintaining bid and ask quotations and being able, as principal, to effect
transactions in reasonable quantities at those quoted prices, subject to various
securities laws and other regulatory requirements. Although not legally or
contractually required to do so, FBR has advised the Company that upon
completion of the Conversion, it intends to act as a market maker in the Common
Stock, depending upon the volume of trading and subject to compliance with
applicable laws and regulatory requirements. While the Company has attempted to
obtain commitments from other broker-dealers to act as market makers, and
anticipates that prior to the completion of the Conversion it will be able to
obtain the commitment from at least two other broker-dealers to act as market
makers for the Common Stock, there can be no assurance there will be three or
more market makers for the Common Stock.
Additionally, the development of a public market having the desirable
characteristics of depth, liquidity and orderliness depends on the existence of
willing buyers and sellers, the presence of which is not within the control of
the Company, the Bank or any market maker. In the event that institutional
investors buy a relatively large proportion of the Offering, the number of
active buyers and sellers of the Common Stock at any particular time may be
limited. There can be no assurance that persons purchasing the Common Stock will
be able to sell their shares at or above the Subscription Price. Therefore,
purchasers of the Common Stock should have a long-term investment intent and
should recognize that a possibly limited trading market may make it difficult to
sell the Common Stock after the Conversion and may have an adverse effect on the
price of the Common Stock.
The following table sets forth the high and low bid quotes for the
Minority Shares since the completion of the Minority Stock Offering in which
the Minority Shares were sold for $10.00 per share, together with the cash
dividends declared subsequent thereto. These quotations represent prices
between dealers and do not include retail markups, markdowns, or commissions
and do not reflect actual transactions. This information has been obtained
from monthly statistical summaries provided by the Nasdaq Stock Market. As of
February 1, 1997 there were 769,924 Minority Shares outstanding.
<TABLE>
<CAPTION>
HIGH LOW
1997 BID BID
- ------------------------------- --------- ---------
<S> <C> <C>
1st Quarter Ended 12-31-96 $ 17.50 $ 14.25
2nd Quarter Ended 3-31-97 $ 20.00 $ 16.75
3rd Quarter Ended 6-30-97 $ 20.75 $ 17.75
4th Quarter Ended 9-30-97 $ 36.00 $ 20.00
</TABLE>
<TABLE>
<CAPTION>
HIGH LOW
1996 BID BID
- ------------------------------- --------- ---------
<S> <C> <C>
1st Quarter Ended 12-31-95 $ 16.75 $ 14.00
2nd Quarter Ended 3-31-96 $ 17.25 $ 15.75
3rd Quarter Ended 6-30-96 $ 15.75 $ 14.25
4th Quarter Ended 9-30-96 $ 15.63 $ 14.25
</TABLE>
26
<PAGE>
Cash Dividends Declared in Fiscal 1997:
<TABLE>
<CAPTION>
RECORD PAYMENT DIVIDEND
DATE DATE PER SHARE
- --------- --------- -----------
<S> <C> <C>
12/15/96 01/03/97 $ 0.210
03/15/97 04/03/97 $ 0.225
06/15/97 07/03/97 $ 0.225
09/15/97 10/03/97 $ 0.225
</TABLE>
Cash Dividends Declared in Fiscal 1996:
<TABLE>
<CAPTION>
RECORD PAYMENT DIVIDEND
DATE DATE PER SHARE
- --------- --------- -----------
<S> <C> <C>
12/15/95 01/03/96 $ 0.170
03/15/96 04/03/96 $ 0.190
06/15/96 07/03/96 $ 0.200
09/16/96 10/03/96 $ 0.210
</TABLE>
At September 17, 1997 (the day immediately preceding the public announcement
of the Conversion) and at February , 1997, the last sale of Minority
Shares as reported on the Nasdaq "SmallCap" Market was at a price of $28.00 per
share and $ per share, respectively. At October 31, 1997, the Bank had
291 stockholders of record. All Minority Shares, including shares held by the
Bank's officers and directors, will on the Effective Date be automatically
converted into and become the right to receive a number of shares of Common
Stock of the Company determined pursuant to the Exchange Ratio, and options to
purchase Minority Shares will be converted into options to purchase a number of
shares of Common Stock determined pursuant to the Exchange Ratio, for the same
aggregate exercise price. See "Beneficial Ownership of Common Stock.
CAPITALIZATION
The following table presents the historical consolidated capitalization of
the Bank at September 30, 1997, and the pro forma consolidated capitalization of
the Company after giving effect to the Conversion, based upon the assumptions
set forth in the "Pro Forma Data" section.
27
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED CAPITALIZATION
BASED UPON THE SALE FOR $10.00 PER SHARE OF
--------------------------------------------------
HISTORICAL 2,125,000 2,500,000 2,875,000 3,306,250
CAPITALIZATION SHARES SHARES SHARES SHARES (1)
------------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits (2)................................................... $ 143,354 $ 143,354 $ 143,354 $ 143,354 $ 143,354
Borrowed funds................................................. 211,286 211,286 211,286 211,286 211,286
------------- ----------- ----------- ----------- -----------
Total deposits and borrowed funds.............................. $ 354,640 $ 354,640 $ 354,640 $ 354,640 $ 354,640
------------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- -----------
Stockholders' equity:
Preferred Stock, 10,000,000 shares authorized; none to be
issued (3)................................................. -- -- -- -- --
Common Stock, $.01 par value, 30,000,000 shares authorized;
shares to be issued as reflected (3)....................... 163 40 47 54 63
Additional paid-in capital (4)............................... 14,914 35,669 39,377 43,086 47,350
Retained income (5).......................................... 9,273 9,734 9,734 9,734 9,734
Less:
Common Stock acquired by KSOP.............................. (104) (104) (104) (104) (104)
Additional Common Stock to be acquired by ESOP............. -- (1,700) (2,000) (2,300) (2,645)
Common Stock to be acquired by 1998 Recognition Plan (6) -- (850) (1,000) (1,150) (1,323)
------------- ----------- ----------- ----------- -----------
Total stockholders' equity............................... $ 24,246 $ 42,789 $ 46,054 $ 49,320 $ 53,075
------------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- -----------
Total stockholders' equity as a percentage of pro forma total
assets..................................................... 6.32% 10.66% 11.38% 12.09% 12.89%
------------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- -----------
</TABLE>
- ------------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to a 15% increase in the Offering Range to reflect changes
in market or general financial conditions following the commencement of the
Subscription and Community Offerings.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Common Stock in the Conversion. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(3) The Bank has 10,000,000 authorized shares of preferred stock.
(4) Does not include proceeds from the Offering that the Company intends to
lend to the KSOP to enable it to purchase shares of Common Stock in the
Offering. No effect has been given to the issuance of additional shares
of Common Stock pursuant to the 1998 Stock Option Plan and 1998
Recognition Plan expected to be adopted by the Company. If such plans are
approved by stockholders, an amount equal to 10% of the shares of Common
Stock issued in the Offering will be reserved for issuance upon the
exercise of options under the 1998 Stock Option Plan, and the 1998
Recognition Plan will acquire an amount of Common Stock equal to 4% of
the number of shares sold in the Offering, either through open market
purchases or from authorized but unissued shares. No effect has been
given to the exercise of options currently outstanding. See "Management
of the Bank-- Benefits." The Bank has 20,000,000 authorized shares of
Bank Common Stock, par value $.10 per share.
(5) Pro forma retained income reflects consolidation of $461,000 of Mutual
Holding Company assets in conjunction with the Offering. The retained income
of the Bank will be substantially restricted after the Conversion, see "The
Conversion--Liquidation Rights" and "Regulation and Supervision-- Federal
Regulations of Savings Institutions--Limitations on Capital Distributions."
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock in the Offering
cannot be determined until the Conversion is completed. However, net proceeds
are currently estimated to be between $20.6 million and $28.1 million based upon
the following assumptions: (i) 25,000 shares are sold in the Offering to the
Bank's directors, officers, employees and their families and remaining shares
are sold in the Subscription Offering; (ii) 8% of the shares sold in the
Offering are purchased by the KSOP; (iii) FBR receives no fee for the sale of
shares to the KSOP and the Bank's directors, officers, employees and their
families; and (iv) Conversion expenses, excluding marketing fees described
above, are $422,500.
Actual Conversion expenses may vary from those estimated, because the fees
paid will depend upon the percentages and total number of the shares sold in the
Offering and other factors. Under the Plan of Conversion, the Common Stock must
be sold in the Offering at an aggregate Subscription Price not less than nor
greater than the Offering Range, which is subject to adjustment. The Offering
Range, as established by the Board of Directors is
28
<PAGE>
between a minimum of $21.2 million and a maximum of $28.8 million, with a
midpoint of $25.0 million. This represents a range between a minimum of
2,125,000 shares and a maximum of 2,875,000 shares, based upon the
Subscription Price of $10.00 per share. If the Offering Range is increased by
up to 15% to reflect market or general financial conditions following the
commencement of the Offering, the adjusted maximum number of shares of Common
Stock to be issued would be 3,306,250 for estimated gross proceeds of $33.1
million.
Pro forma consolidated net income of the Company for the fiscal year ended
September 30, 1997 has been calculated as if the Company had been in existence
and estimated net proceeds received by the Company and the Bank had been
invested at an assumed interest rate of 5.44% for the fiscal year ended
September 30, 1997. The reinvestment rate was calculated based on the one year
U.S. Treasury bill rate. The effect of withdrawals from deposit accounts for the
purchase of Common Stock has not been reflected. The pro forma after-tax yield
on the estimated net proceeds is assumed to be 3.36% for the fiscal year ended
September 30, 1997, based on an effective tax rate of 38.3%. Historical and pro
forma per share amounts have been calculated by dividing historical and pro
forma amounts by the indicated number of shares of Common Stock. No effect has
been given in the pro forma stockholders' equity calculations for the assumed
earnings on the net proceeds. It has been assumed that the Company has
contributed to the Bank a portion of the net proceeds of the Offering sufficient
to increase the Bank's tangible capital to at least 10% of its adjusted total
assets.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma consolidated stockholders' equity represents
the difference between the stated amount of assets and liabilities of the
Company computed in accordance with generally accepted accounting principles
("GAAP"). The pro forma stockholders' equity is not intended to represent the
fair market value of the Common Stock and may be greater than amounts that
would be available for distribution to stockholders in the event of
liquidation.
29
<PAGE>
The following table summarizes historical data of the Bank and pro forma
data of the Company at or for the fiscal year ended September 30, 1997, based
on assumptions set forth above and in the table and should not be used as a
basis for projections of market value of the Common Stock following the
Conversion. No effect has been given in the tables to the possible issuance
of additional shares reserved for future issuance pursuant to currently
outstanding stock options or the 1998 Stock Option Plan, nor does book value
give any effect to the liquidation account to be established in the
Conversion or the bad debt reserve in liquidation. See "The
Conversion--Liquidation Rights," and "Management of the Bank-- Directors'
Compensation," and "--Executive Compensation."
<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
BASED UPON THE SALE FOR $10.00 OF
--------------------------------------------------
2,125,000 2,500,000 2,875,000 3,306,250
SHARES SHARES SHARES SHARES (1)
----------- ---------- ----------- -----------
(DOLLARS AND SHARES IN THOUSANDS)
<S> <C> <C> <C> <C>
Gross proceeds................................ $ 21,250 $ 25,000 $ 28,750 $ 33,063
Expenses...................................... 618 653 687 727
----------- ----------- ----------- ----------
Estimated net proceeds...................... $ 20,632 $ 24,347 $ 28,063 $ 32,336
Common stock purchased by KSOP (2).......... (1,700) (2,000) (2,300) (2,645)
Common stock purchased by 1998
Recognition Plan (3)....................... (850) (1,000) (1,150) (1,323)
----------- ----------- ----------- ----------
Estimated net proceeds, as adjusted...... $ 18,082 $ 21,347 $ 24,613 $ 28,368
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
For the fiscal year ended September 30, 1997:
Net income:
Historical.................................. $ 2,376 $ 2,376 $ 2,376 $ 2,376
Pro forma adjustments:
Income on adjusted net proceeds............. 607 717 826 952
KSOP (2).................................... (105) (123) (142) (163)
1998 Recognition Plan (3)................... (105) (123) (142) (163)
----------- ----------- ----------- -----------
Pro forma net income..................... $ 2,773 $ 2,847 $ 2,918 $ 3,002
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per share (4):
Historical (8).............................. $ 0.61 $ 0.52 $ 0.45 $ 0.39
Pro forma adjustments:
Income on net proceeds...................... 0.17 0.17 0.16 0.17
KSOP (2).................................... (0.03) (0.03) (0.03) (0.03)
1998 Recognition Plan (3)................... (0.03) (0.03) (0.03) (0.03)
----------- ----------- ----------- -----------
Pro forma net income per share (4) (5).. $ 0.72 $ 0.63 $ 0.55 $ 0.50
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Pro forma price to earnings................... 13.89x 15.87x 18.05x 20.00x
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Number of shares used in price to earnings
ratio calculations........................... 3,868,914 4,551,663 5,234,413 6,019,575
At September 30, 1997:
Stockholders' equity:
Historical (8).............................. $ 24,707 $ 24,707 $ 24,707 $ 24,707
Estimated net proceeds...................... 20,632 24,347 28,063 32,336
Less: Common stock acquired by KSOP (2)..... (1,700) (2,000) (2,300) (2,645)
Common Stock acquired by 1998
Recognition Plan (3)................. (850) (1,000) (1,150) (1,323)
----------- ----------- ----------- -----------
Pro forma stockholders' equity (6)............ $ 42,789 $ 46,054 $ 49,320 $ 53,075
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Stockholders' equity per share (7):
Historical.................................. $ 6.14 $ 5.22 $ 4.54 $ 3.95
Estimated net proceeds...................... 5.13 5.14 5.15 5.16
Less: Common stock acquired by KSOP (2)..... (0.42) (0.42) (0.42) (0.42)
Common Stock acquired by 1998
Recognition Plan (3).................. (0.21) (0.21) (0.21) (0.21)
----------- ----------- ----------- -----------
Pro forma stockholders' equity per
share (6)(7)............................... $ 10.64 $ 9.73 $ 9.06 $ 8.48
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Offering price as a percentage of pro forma
stockholders' equity per share.............. 93.98% 102.77% 110.38% 117.92%
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Number of shares used in book value per
share calculations.......................... 4,021,914 4,731,663 5,441,413 6,257,625
Pro forma equity as a percent
of pro forma assets......................... 10.66% 11.38% 12.09% 12.89%
</TABLE>
- ------------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to a 15% increase in the Offering Range to reflect changes
in market and financial conditions following the commencement of the
Offering.
30
<PAGE>
(footnotes continued)
(2) Assumes that 8% of shares of Common Stock sold in the Offering will be
purchased by the KSOP. For purposes of this table, the funds used to acquire
such shares are assumed to have been borrowed by the KSOP from the net
proceeds of the Offering retained by the Company. The Bank intends to make
annual contributions to the KSOP in an amount at least equal to the
principal of the debt. The Bank's total annual payments on the KSOP debt is
based upon ten equal annual installments of principal. Statement of Position
93-6 requires that an employer record compensation expense in an amount
equal to the fair value of the shares committed to be released to employees.
The pro forma adjustments assume that the KSOP shares are allocated in equal
annual installments based on the number of loan repayment installments
assumed to be paid by the Bank, and the fair value of the Common Stock
remains at the Subscription Price. The unallocated KSOP shares are reflected
as a reduction of stockholders' equity. No reinvestment is assumed on
proceeds contributed to fund the KSOP. The pro forma net income further
assumes (i) that 17,000, 20,000, 23,000 and 26,450 shares were committed to
be released with respect to the fiscal year ended September 30, 1997, in
each case at the minimum, midpoint, maximum, and adjusted maximum of the
Offering Range, respectively, and (ii) in accordance with SOP 93-6, only the
KSOP shares committed to be released during the respective period were
considered outstanding for purposes of net income per share calculations.
See "Management of the Bank--Benefit Plans--Employee Stock Ownership Plan
and Trust."
(3) Subject to the approval of the Company's stockholders, the 1998 Recognition
Plan intends to purchase an aggregate number of shares of Common Stock equal
to 4% of the shares to be issued in the Offering. The shares may be acquired
directly from the Company, or through open market purchases. The funds to be
used by the 1998 Recognition Plan to purchase the shares will be provided by
the Bank or the Company. See "Management of the Bank--Benefit Plans--1998
Recognition Plan." Assumes that the 1998 Recognition Plan acquires the
shares through open market purchases at the Subscription Price with funds
contributed by the Bank, and that 20% of the amount contributed to the 1998
Recognition Plan is amortized as an expense during the fiscal year ended
September 30, 1997.
(4) Per share figures include shares of Common Stock that will be exchanged for
Minority Shares in the Share Exchange. Net income per share computations are
determined by taking the number of subscription shares assumed to be sold in
the Offering and the number of Exchange Shares assumed to be issued in the
Share Exchange and, in accordance with SOP 93-6, subtracting the KSOP shares
which have not been committed for release during the respective period. See
Note 2 above. The number of shares of Common Stock actually sold and the
corresponding number of Exchange Shares may be more or less than the assumed
amounts.
(5) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the 1998 Stock Option Plan, which is expected to be
adopted by the Company following the Offering and presented to stockholders
for approval. If the 1998 Stock Option Plan is approved by stockholders, an
amount equal to 10% of the Common Stock sold in the Offerings will be
reserved for future issuance upon the exercise of options to be granted
under the 1998 Stock Option Plan. The issuance of authorized but previously
unissued shares of Common Stock pursuant to the exercise of options under
such plan would dilute existing stockholders' interests. Assuming
stockholder approval of the plan, that all the options were exercised at the
end of the period at an exercise price equal to the Subscription Price, and
that the 1998 Recognition Plan purchases shares in the open market at the
Subscription Price, (i) pro forma net income per share for the fiscal year
ended September 30, 1997 would be $0.70, $0.61, $0.55 and $0.49, and the pro
forma stockholders' equity per share at September 30, 1997 would be $10.60,
$9.75, $9.11 and $8.56, in each case at the minimum, midpoint, maximum and
adjusted maximum of the Offering Range, respectively.
(6) The retained income of the Bank will be substantially restricted after the
Conversion. See "Dividend Policy," "The Conversion--Liquidation Rights" and
"Regulation and Supervision--Federal Regulation of Savings
Institutions--Limitation on Capital Distributions."
(7) Per share figures include shares of Common Stock that will be exchanged for
Minority Shares in the Share Exchange. Stockholders' equity per share
calculations are based upon the sum of (i) the number of Subscription Shares
assumed to be sold in the Offering, and (ii) Exchange Shares equal to the
minimum, midpoint, maximum and adjusted maximum of the Offering Range,
respectively. The Exchange Shares reflect an Exchange Ratio of 2.4638,
2.8985, 3.3333 and 3.8333, respectively, at the minimum, midpoint, maximum,
and adjusted maximum of the Offering Range, respectively. The number of
Subscription Shares actually sold and the corresponding number of Exchange
Shares may be more or less than the assumed amounts.
(8) Includes $461,000 in Mutual Holding Company assets.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Bank's net income is primarily affected by its net interest income,
which is the difference between interest income earned on its loan,
mortgage-backed securities, and investment portfolios, and its cost of funds
consisting of interest paid on deposits and borrowed funds, including FHLB
advances. The Bank's net income also is affected by its provisions for losses
on loans and investments in real estate, as well as the amount of noninterest
income (including fees and service charges and gains or losses on sales of
loans), and noninterest expense, including salaries and employee benefits,
premises and equipment expense, data processing expense, federal deposit
insurance premiums and income taxes. Net income of the Bank also is affected
significantly by general economic and competitive conditions, particularly
changes in market interest rates, government policies, and actions of
regulatory authorities.
BUSINESS STRATEGY
The Bank's business objective is to operate as a profitable independent
community-oriented savings association dedicated primarily to financing home
ownership while maintaining capital in excess of regulatory requirements. To
achieve this objective, the Bank has adopted a business strategy designed to:
(1) emphasize the origination of single family residential mortgage loans and
commercial, commercial real estate, agricultural and multifamily residential
real estate loans, particularly in the area in and around the City of
Jonesboro, the fastest growing area within the Bank's market area; (2)
maintain or improve asset quality; (3) reduce interest rate risk exposure by
better matching asset and liability maturities and rates; (4) closely monitor
the needs of customers in order to provide personal, quality customer
service; and (5) utilize FHLB advances to fund the Bank's leverage strategy,
to help manage interest rate risk, and to reduce the overall cost of
interest-bearing liabilities. Management intends to continue this strategy
upon completion of the Offering.
Highlights of the principal elements of the Bank's business strategy are
as follows:
MANAGED GROWTH IN RETAIL BANKING. Following the initial issuance of Bank
Common Stock in 1994, management implemented a strategy of leveraging capital
by investing in mortgage-backed securities and other investment securities
for the purpose of increasing return on equity and earnings per share. More
recently, as the purchased mortgage-backed securities have matured and as
demand for higher yielding real estate and other loans in the Bank's market
area has increased, mortgage-backed securities and investment securities as a
percentage of the Bank's total assets have decreased. Management expects to
continue to emphasize the origination of higher-yielding single family
residential mortgage loans, and commercial, commercial real estate,
agricultural and multifamily residential real estate loans following the
Conversion. For this purpose, the Bank will seek to increase its loan
originations particularly in the Jonesboro area, which is the fastest growing
area within the Bank's market area. The City of Jonesboro, which recently was
designed a Metropolitan Statistical Area, has recently experienced an influx
of a number of small- and medium-sized manufacturing plants, accompanied by
steady population growth. The Bank has recently added a commercial loan
officer in Jonesboro and the Bank recently acquired another branch office
located in the Jonesboro area. The Bank will continue to invest in
mortgage-backed securities as needed to supplement local mortgage demand, as
well as to improve the Bank's interest rate sensitivity gap and to reduce the
overall credit risk of its assets.
ASSET QUALITY. The Bank has continued to focus on the origination of
single-family residential mortgage loans collateralized by properties in its
market area. At September 30, 1997, single family residential mortgage loans
constituted $138.5 million, or 86.8% of the Bank's total net loan portfolio.
The Bank also invests in mortgage-backed securities, which are securities
collateralized by FNMA and FHLMC mortgage-backed securities. Mortgage-backed
securities increase the credit quality of the Bank's assets because of the
federal government or agency guarantees that back them. Single-family
residential mortgage loans typically have less credit risk than commercial,
commercial real
32
<PAGE>
estate, agricultural and multifamily residential real estate loans. In
addition, the Bank has sought to reduce its nonperforming assets by
restructuring or foreclosing upon and selling such assets. The Bank's ability
to reduce its real estate owned ("REO"), however, substantially depends on
market conditions in the Bank's market area. There can be no assurance that
the Bank will be able to dispose of REO properties promptly and at current
estimated fair values. At September 30, 1997, the Bank's nonperforming assets
constituted 0.12% of total assets. See "Business of the Bank--Lending
Activities--Delinquencies and Classified Assets-- Nonperforming Assets" and
"--Classification of Assets."
INTEREST RATE RISK MANAGEMENT. Deposit accounts typically react more
quickly to changes in market interest rates than mortgage loans because of
the shorter average maturities of deposits compared to mortgage loans. As a
result, sharp increases in interest rates may adversely affect the Bank's
earnings while decreases in interest rates may beneficially affect earnings.
However, this effect on earnings may be mitigated by interest rate risk
management strategies. In order to reduce the potential volatility of the
Bank's earnings in a rapidly changing interest rate environment, management
has implemented the following strategies to improve the match of asset and
liability maturities, repricing opportunities and rates, while maintaining an
acceptable interest rate spread. At September 30, 1997, the Bank's one-year
cumulative interest rate sensitivity gap was a negative 19.49%. After
including the impact of interest rate caps purchased by the Bank (and
described below), the Bank's one year cumulative interest rate sensitivity
gap would be reduced to a negative 9.26% at September 30, 1997. See "--Asset
and Liability Management--Interest Rate Sensitivity Analysis" for the
assumptions used in calculating this interest rate sensitivity gap.
- The Bank has made its loan portfolio more interest rate sensitive by
originating ARM loans for retention in its loan portfolio, and by
generally selling into the secondary mortgage market fixed rate mortgage
loans with maturities greater than 15 years. While the Bank's ability to
originate ARM loans depends to a great extent on market interest rates and
borrowers' preferences, the Bank has succeeded in increasing its ARM loan
originations in recent years. ARM loan originations totaled 85% of total
loan originations for the fiscal year ended September 30, 1997. At
September 30, 1997, ARM loans constituted 73.8% of the Bank's total net
loan portfolio. While the current low interest rate environment has
resulted in a decrease in the interest rates on newly originated loans,
management of the Bank has determined that this reduction in yield is
offset by the reduced interest rate risk in a rising market interest rate
environment offered by ARM loans. See "Risk Factors--Potential Effects of
Changes in Interest Rates and the Current Interest Rate Environment" for a
discussion of this and other considerations presented by the Bank's
portfolio of ARM loans. The amount of fixed rate loans retained in the
Bank's loan portfolio is monitored by predetermined interest rate risk
criteria administered by the Bank's Asset-Liability Management Committee.
- In addition, the Bank invests in floating-rate mortgage-backed securities.
As of September 30, 1997, floating rate mortgage-backed securities totaled
$151.8 million, or 89.9% of the Bank's total portfolio of mortgage-backed
securities and 39.6% of the Bank's total assets.
- The Bank's Asset-Liability Management Committee models the Bank's interest
rate risk quarterly and based upon the results of the model determines
whether additional interest rate risk protection is needed. If deemed
necessary, the Bank may purchase interest rate caps in an effort to
mitigate the effects of interest rate fluctuations. At September 30, 1997,
the Bank owned interest rate caps with a total notional amount of $40
million, with expiration dates ranging from December 1998 to December
1999.
CUSTOMER SERVICE. As a locally based financial institution, the Bank
traditionally has been able to offer customers personalized service.
Management believes that it can compete effectively against larger
institutions in its market area by continuing to offer personalized service,
including customer access to senior management. The Bank seeks to keep
informed of customer needs by surveying customers and monitoring overall
customer service on an ongoing basis.
33
<PAGE>
FHLB ADVANCES. Management has utilized FHLB advances to reduce the
overall cost of interest-bearing liabilities. FHLB advances, unlike deposit
accounts, do not require the Bank to incur the operating expenses associated
with attracting and servicing customer accounts, such as federal deposit
insurance premiums, employee salaries and benefits, and advertising. In
addition, FHLB advances can be accessed immediately and in specified amounts;
deposits must be attracted with higher deposit interest rates that must be
paid also to existing depositors, thereby increasing the average cost of
funds for the Bank's overall base of deposits. For the fiscal years ended
September 30, 1997, 1996 and 1995, the average balance of the Bank's FHLB
advances was $203.8 million, $224.7 million and $167.8 million, respectively.
The Bank intends to use the net proceeds of the Offering initially to reduce
the balance of its FHLB advances. See "Use of Proceeds."
ASSET AND LIABILITY MANAGEMENT
GENERAL. It is the objective of the Bank to minimize, to the degree
prudently possible, its exposure to interest rate risk, while maintaining an
acceptable interest rate spread. Interest rate spread is the difference
between the Bank's yield on its interest-earning assets and its cost of
interest-bearing liabilities. Interest rate risk is generally understood to
be the sensitivity of the Bank's earnings, net asset values, and
stockholders' equity to changes in market interest rates.
Changes in interest rates affect the Bank's earnings. The effect on
earnings of changes in interest rates generally depends on how quickly the
Bank's yield on interest-earning assets and cost of interest-bearing
liabilities react to the changes in market rates of interest. If the Bank's
cost of deposit accounts reacts more quickly to changes in market interest
rates than the yield on the Bank's mortgage loans and other interest-earnings
assets, then an increasing interest rate environment is likely to adversely
affect the Bank's earnings and a decreasing interest rate environment is
likely to favorably affect the Bank's earnings. On the other hand, if the
Bank's yield on its mortgage loans and other interest-earnings assets reacts
more quickly to changes in market interest rates than the Bank's cost of
deposit accounts, then an increasing interest rate environment is likely to
favorably affect the Bank's earnings and a decreasing interest rate
environment is likely to adversely affect the Bank's earnings.
34
<PAGE>
The following table presents the difference between the Bank's
interest-earning assets and interest-bearing liabilities at September 30,
1997 expected to reprice or mature, based on certain assumptions, in each of
the future time periods shown. This table does not necessarily indicate the
impact of general interest rate movements on the Bank's net interest income
because the repricing of certain assets and liabilities is subject to
competitive and other limitations. As a result, certain assets and
liabilities indicated as maturing or otherwise repricing within a stated
period may in fact mature or reprice at different times and at different
volumes. This table also does not reflect the impact of $40 million in
notional amount of interest rate caps purchased by the Bank with expiration
dates ranging from December 1998 to December 1999. The effect of such
interest rate caps would reduce the Bank's one year cumulative interest rate
sensitivity gap to a negative 9.26% at September 30, 1997.
<TABLE>
<CAPTION>
MORE THAN
MORE THAN THREE YEARS
WITHIN ONE YEAR TO TO FIVE OVER
ONE YEAR THREE YEARS YEARS FIVE YEARS TOTAL
---------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans:
Fixed-rate........................................ $ 6,001 $ 4,076 $ 2,110 $ 4,858 $ 17,045
Adjustable-rate................................... 53,178 51,173 17,153 -- 121,504
Non-mortgage loans:
Fixed-rate........................................ 10,429 15,685 -- -- 26,114
Adjustable rate................................... -- -- -- -- --
Securities held to maturity:
Investment securities............................. 512 26,373 5 4,823 31,713
Mortgage-backed securities........................ 154,672 7,442 3,789 2,937 168,840
Federal Home Loan Bank stock...................... 10,053 -- -- -- 10,053
--------- --------- ---------- --------- ---------
Total interest-earning assets....................... $ 234,845 $ 104,749 $ 23,057 $ 12,618 $ 375,269
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
Interest-bearing liabilities:
Deposits:
Demand accounts................................... $ -- $ -- $ -- $ 17,350 $ 17,350
Savings accounts.................................. 9,069 -- -- 8,655 17,724
Certificates of deposit........................... 89,363 18,064 853 -- 108,280
Other Liabilities
FHLB advances--Fixed Rate......................... $ 114,001 $ -- $ -- $ -- $ 114,001
FHLB advances--Variable Rate...................... 76,600 -- -- -- 76,600
Reverse repurchase agreements..................... 20,685 -- -- -- 20,685
ESOP Loan......................................... (104) -- -- -- (104)
--------- --------- ---------- --------- ---------
Total interest-bearing liabilities.................. $ 309,614 $ 18,064 $ 853 $ 26,005 $ 354,536
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
Excess (deficiency) of interest-earning assets
over interest-bearing liabilities................. (74,769) 86,685 22,204 (13,387) 20,733
Cumulative excess (deficiency) of interest-earning
assets over interest-bearing liabilities.......... (74,769) 11,916 34,120 20,733
Cumulative ratio of excess (deficiency) of
interest-earning assets as a percentage of total
assets............................................ (19.49)% 3.11% 8.89% 5.40%
</TABLE>
35
<PAGE>
In preparing the table above, it has been assumed, in assessing the
interest rate sensitivity of the Bank, that: (i) mortgage loans will prepay
at a rate of 12.0% per year, (ii) fixed maturity deposits will not be
withdrawn prior to maturity; and (iii) demand and savings accounts will decay
at the following rates:
OVER 1 OVER 3
1 YEAR THROUGH THROUGH OVER 5
OR LESS 3 YEARS 5 YEARS YEARS
--------- --------- --------- --------
Demand accounts.......... 37.0% 32.0% 17.0% 17.0%
Savings accounts......... 17.0% 17.0% 16.0% 14.0%
Certain shortcomings are inherent in the method of analysis presented in
the preceding table. For example, although certain assets and liabilities may
have similar maturities or periods to repricing, they may react in different
degrees to changes in market interest rates. In addition, the interest rates
on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag
behind changes in market rates. Certain assets, such as adjustable-rate
mortgage loans, have features which restrict changes in interest rates on a
short-term basis and over the life of the assets. Further, in the event of a
change in interest rates, prepayment and early withdrawal levels would likely
deviate significantly from those assumed in calculating the table. Finally,
the ability of many borrowers to make payments on their adjustable-rate debt
may decrease in the event of an interest rate increase.
NET PORTFOLIO VALUE. The value of the Bank's loan and investment
portfolio will change as interest rates change. Rising interest rates will
generally decrease the Bank's net portfolio value, while falling interest
rates will generally increase the value of that portfolio. The following
table sets forth, quantitatively, as of September 30, 1997 the OTS estimate
of the projected changes in net portfolio value ("NPV") in the event of a
100, 200, 300 and 400 basis point instantaneous and permanent increase and
decrease in market interest rates:
<TABLE>
<CAPTION>
CHANGE IN NPV
AS A PERCENTAGE OF
CHANGE IN ESTIMATED MARKET
INTEREST RATES NET PORTFOLIO VALUE VALUE OF ASSETS
IN BASIS POINTS ------------------------------------- ----------------------
(RATE SHOCK) AMOUNT $CHANGE % CHANGE NPV RATIO CHANGE
- --------------- ---------- ------------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
+400 $ 2,203 $ (33,549) (94)% 0.62% $ (844)
+300 11,914 (23,838) (67) 3.24 (582)
+200 21,171 (14,582) (41) 5.61 (345)
+100 29,115 (6,637) (19) 7.53 (153)
+0 35,752 -- -- 9.06 --
(100) 37,922 2,170 6 9.53 47
(200) 37,544 1,792 5 9.43 37
(300) 40,071 4,319 12 9.98 92
(400) 43,335 7,583 21 10.68 162
</TABLE>
Computations of prospective effects of hypothetical interest rate changes
are calculated by the OTS from data provided by the Bank and are based on
numerous assumptions, including relative levels of market interest rates,
loan repayments and deposit runoffs, and should not be relied upon as
indicative of actual results. Further, the computations do not contemplate
any actions the Bank may undertake in response to changes in interest rates.
Management cannot predict future interest rates or their effect on the
Bank's NPV in the future. Certain shortcomings are inherent in the method of
analysis presented in the computation of NPV. For example, although
36
<PAGE>
certain assets and liabilities may have similar maturities or periods to
repricing, they may react in differing degrees to changes in market interest
rates. Additionally, certain assets, such as adjustable rate loans, which
represent the Bank's primary loan product, have features which restrict
changes in interest rates during the initial term and over the remaining life
of the asset. In addition, the proportion of adjustable rate loans in the
Bank's portfolio could decrease in future periods due to refinancing activity
if market interest rates decrease. Further, in the event of a change in
interest rates, prepayment and early withdrawal levels could deviate
significantly from those assumed in the table. Finally, the ability of many
borrowers to service their adjustable-rate debt may decrease in the event of
an interest rate increase.
COMPARISON OF FINANCIAL CONDITION
GENERAL. The Bank's total assets increased $1.8 million, or 0.5%, from
$381.6 million at September 30, 1996 to $383.4 million at September 30, 1997.
Total assets increased $33.0 million, or 9.5%, from $348.6 million at
September 30, 1995 to $381.6 million at September 30, 1996.
LOANS RECEIVABLE, NET. The Bank's net loans receivable increased by $22.8
million, or 16.7%, and $20.4 million, or 17.5%, in fiscal years 1997 and
1996, respectively from the prior years. The increases in both periods were
due to significant increases in loan origination activity, reflecting
increased loan demand in the Bank's lending area during 1997 and 1996.
INVESTMENT SECURITIES. The investment securities portfolio decreased by
$19.1 million, or 8.7%, to $200.6 million at September 30, 1997 as principal
paydowns and maturities of investments were used to fund loan growth. The
investment securities portfolio increased $5.3 million, or 2.5%, to $219.7
million at September 30, 1996 compared to $214.4 million at September 30,
1995. The slowdown in growth in the investment securities portfolio during
fiscal 1996 was due to the increased loan demand and the utilization of
available funds to fund mortgage loan originations.
CASH SURRENDER VALUE OF LIFE INSURANCE. During the fiscal year ended
September 30, 1996, the Bank purchased life insurance on the lives of certain
executive officers and members of the board of directors. Such life insurance
had cash surrender value of approximately $5.6 million and $5.4 million at
September 30, 1997 and 1996, respectively. The increase in fiscal 1997 was
due to earnings on the cash surrender value, net of premiums.
DEPOSITS. Historically, deposits have provided the Bank with a stable
source of relatively low cost funding. The market for deposits is
competitive, which has caused the Bank to utilize primarily certificate
accounts that are more responsive to market interest rates rather than
passbook accounts. The Bank offers a traditional line of deposit products
that currently includes checking, interest-bearing checking, savings,
certificate of deposit, commercial checking and money market accounts. The
$27.1 million, or 23.3%, increase in deposits during the fiscal year ended
September 30, 1997 was primarily due to the Bank's initiation of a national
certificate of deposit marketing program. During the fiscal year ended
September 30, 1997, deposits represented by certificates of deposit increased
by $26.4 million, or 32.3%. The $3.8 million, or 3.4%, increase in deposits
during the fiscal year ended September 30, 1996 was due to regular deposit
inflow and marketing of the Bank's deposit products.
FHLB ADVANCES AND REVERSE REPURCHASE AGREEMENTS. The Bank also relies
upon FHLB advances and reverse repurchase agreements as a primary source of
funds to fund assets. Approximately 55.1% and 62.2% of the Bank's assets were
funded with FHLB advances and reverse repurchase agreements as of September
30, 1997 and 1996, respectively. At September 30, 1997, FHLB advances and
reverse repurchase agreements totaled $211.3 million, a decrease of $26.0
million, or 11.0%, from 1996, reflecting, in part, the increased deposits
resulting from the Bank's national certificate of deposit marketing program
in fiscal 1997. FHLB advances and reverse repurchase agreements totaled
$237.3 million at September 30, 1996, an increase of $26.3 million, or 12.5%,
from 1995.
STOCKHOLDERS' EQUITY. Stockholders' equity increased by $1.6 million, or
6.9%, to $24.2 million at September 30, 1997. The increase was attributable
to net income of $2.4 million for the fiscal year ended September
37
<PAGE>
30, 1997. Stockholders' equity increased by $1.7 million, or 8.1%, to $22.7
million at September 30, 1996. The increase reflected net income of $2.0
million for the fiscal year ended September 30, 1996. Stockholders' equity
includes no contributed capital from the issuance of 862,500 shares of common
stock to Pocahontas Federal Mutual Holding Company.
38
<PAGE>
Average Balance Sheet
The following table sets forth certain information relating to the Bank's
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. Such yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for
the periods presented. Average balances are derived from monthly average
balances.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
1997
----------------
ACTUAL YIELD/
BALANCE COST
-------- ------
<S> <C> <C>
Interest-earning
assets: (1)
Loans receivable,
net (6)............. $159,623 7.99%
Investment
securities.......... 217,696 6.86
-------- ------
Total
interest-earning
assets.......... 377,319 7.34
Noninterest-earning
cash.................. 1,186
Other
noninterest-earning
assets................ 5,203
--------
Total
assets.......... $383,708
--------
--------
Interest-bearing
liabilities:
Deposits.............. 143,805 4.85%
Borrowed funds
(5)................. 211,390 5.65
-------- ------
Total
interest-bearing
liabilities..... 355,195 5.33%
Noninterest-bearing
liabilities (2)....... 4,267
--------
Total
liabilities..... 359,462
Net worth............. 24,246
--------
Total
liabilities
and net
worth.......... $383,708
--------
--------
Net interest
income............... 6,663 2.01%
Net interest rate
spread (3)...........
Interest-earning
assets and net
interest margin
(4)...............
Ratio of average
interest-earning
assets to average
interest-bearing
liabilities.......
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ---------------------------- ----------------------------
AVERAGE AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST COST
-------- -------- ------- -------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning
assets: (1)
Loans receivable,
net (6)............. $147,317 $12,007 8.15% $124,609 $10,517 8.44% $109,658 $ 9,108 8.31%
Investment
securities.......... 214,953 14,086 6.55 232,291 14,900 6.41 217,814 14,192 6.53
-------- -------- ------- -------- -------- ------- -------- -------- -------
Total
interest-earning
assets.......... 362,270 26,093 7.20 356,900 25,417 7.11 327,472 23,300 7.12
Noninterest-earning
cash.................. 775 723 672
Other
noninterest-earning
assets................ 14,041 8,770 6,819
-------- -------- --------
Total
assets.......... $377,086 $366,393 $334,969
-------- -------- --------
-------- -------- --------
Interest-bearing
liabilities:
Deposits.............. $127,347 $ 5,939 4.66 $113,779 $ 5,380 4.73 $120,498 $ 5,589 4.64
Borrowed funds
(5)................. 220,690 12,760 5.78 227,403 13,248 5.83 189,921 11,652 6.14
-------- -------- ------- -------- -------- ------- -------- -------- -------
Total
interest-bearing
liabilities..... 348,038 18,699 5.37 341,182 18,628 5.46 310,419 17,241 5.55
-------- ------- -------- ------- -------- -------
Noninterest-bearing
liabilities (2)....... 5,447 3,302 4,266
-------- -------- --------
Total
liabilities....... 353,484 344,484 314,685
Net worth 23,602 21,909 20,284
-------- -------- --------
Total
liabilities
and net
worth........... $377,086 $366,393 $334,969
-------- -------- --------
-------- -------- --------
Net interest
income................ $ 7,394 $ 6,789 $ 6,059
-------- -------- --------
-------- -------- --------
Net interest rate
spread (3)............ 1.83% 1.65% 1.57%
------- ------- -------
------- ------- -------
Interest-earning
assets and net
interest margin
(4)................... $362,270 2.04% $356,900 1.89% $327,472 1.85%
-------- ------- -------- ------- -------- -------
-------- ------- -------- ------- -------- -------
Ratio of average
interest-earning
assets to average
interest-bearing
liabilities........... 104.09% 104.61% 105.49%
------- ------- -------
------- ------- -------
</TABLE>
- ------------------------
(1) All interest-earning assets are disclosed net of loans in process,
unamortized yield adjustments, and valuation allowances.
(2) Escrow accounts are noninterest-bearing and are included in
noninterest-bearing liabilities.
(3) Net interest spread represents the difference between te average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin represents net interest income as a percentage of
average interest-earning assets.
(5) Includes FHLB advances and securities sold under agreements to repurchase.
(6) Does not include interest on nonaccrual loans.
39
<PAGE>
RATE/VOLUME ANALYSIS. The following table describes the extent to which
changes in interest rates and changes in volume of interest-related assets
and liabilities have affected the Bank's interest income and expense during
the periods indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable
to (i) changes in volume (change in volume multiplied by prior year rate),
(ii) changes in rate (change in rate multiplied by prior year volume), and
(iii) total change in rate and volume. The combined effect of changes in both
rate and volume has been allocated to the change due to volume.
<TABLE>
<CAPTION>
1997 VS. 1996 1996 VS. 1995 1995 VS. 1994
---------------------------------- ---------------------------------- -----------------------------------
INCREASE/(DECREASE) INCREASE/(DECREASE) INCREASE/(DECREASE)
DUE TO DUE TO DUE TO
--------------------- TOTAL --------------------- TOTAL ----------------------- TOTAL
RATE/ INCREASE RATE/ INCREASE RATE/ INCREASE
VOLUME RATE VOLUME (DECREASE) VOLUME RATE VOLUME (DECREASE) VOLUME RATE VOLUME (DECREASE)
------ ----- ------ ---------- ------ ----- ------ ---------- ------ ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans
receivable...... $1,908 $(312) $(106) $1,490 $1,242 $ 143 $ 24 $1,409 $ 639 $ 82 $ 11 $ 732
Investment
securities...... (1,112) 325 (27) (814) 943 (218) (17) 708 5,209 1,338 1,057 7,604
------ ----- ------ ---------- ------ ----- ------ ---------- ------ ------- ------ ----------
Total
interest-earning
assets...... $ 796 $ 13 $(133) $ 676 $2,185 $ (75) $ 7 $2,117 $5,848 $ 1,420 $1,068 $8,336
------ ----- ------ ---------- ------ ----- ------ ---------- ------ ------- ------ ----------
------ ----- ------ ---------- ------ ----- ------ ---------- ------ ------- ------ ----------
Interest expense:
Deposits.......... $ 642 $ (80) $ (3) $ 559 $(312 ) $ 109 $ (6) $ (209) $ 69 $ 1,410 $ 22 $1,501
Borrowed funds.... (391 ) (114) 17 (488) 2,302 (589) (117) 1,596 4,546 1,379 1,461 7,386
------ ----- ------ ---------- ------ ----- ------ ---------- ------ ------- ------ ----------
Total
interest-bearing
liabilities... $ 251 $(194) $ 14 $ 71 $1,990 $(480) $(123) $1,387 $4,615 $ 2,789 $1,483 $8,887
------ ----- ------ ---------- ------ ----- ------ ---------- ------ ------- ------ ----------
------ ----- ------ ---------- ------ ----- ------ ---------- ------ ------- ------ ----------
Net change in net
interest income... $ 545 $ 207 $(147) $ 605 $ 195 $ 405 $ 130 $ 730 $1,233 $(1,369) $(413 ) $ (551)
------ ----- ------ ---------- ------ ----- ------ ---------- ------ ------- ------ ----------
------ ----- ------ ---------- ------ ----- ------ ---------- ------ ------- ------ ----------
</TABLE>
40
<PAGE>
COMPARISON OF RESULT OF OPERATIONS
OVERVIEW. Net income was $2.4 million for fiscal 1997, compared to $2.0
million and $1.9 million for fiscal 1996 and 1995, respectively. The Bank's
average interest earning assets have increased over the three year period
ended September 30, 1997 from $335.0 million to $377.1 million, which has
resulted in higher levels of interest income. The favorable results were
offset by a special Savings Association Insurance Fund ("SAIF") premium of
$937,000 which was assessed in fiscal 1996. The Deposit Insurance Funds Act
of 1996 required a special one-time assessment on Savings Association
Insurance Fund ("SAIF") assessable deposits of 65.7 basis points to
recapitalize the SAIF. The Bank's net interest rate spread increased to 1.83%
for the fiscal year ended September 30, 1997 from 1.65% for the fiscal year
ended September 30, 1996 and 1.57% for the fiscal year ended September 30,
1995. The increase in net interest rate spread is a result of an increase in
average loans outstanding, a decrease in average investments outstanding, a
decrease in the average cost of borrowed funds and, in fiscal 1997, an
increase in deposits and a decrease in borrowed funds. The Bank's strategy
has been to utilize the run-off and principal pay-downs from investment
securities to fund loan growth within the Bank's local market. Such loans
generally have higher yields than investment securities.
NET INTEREST INCOME. The Bank's results of operations depend primarily
on its net interest income, which is the difference between interest income
on interest-earning assets and interest expense on interest-bearing
liabilities. The Bank's net interest rate spread is impacted by changes in
general market interest rates, including changes in the relation between
short and long-term interest rates (the "yield curve"), and the Bank's
interest rate sensitivity position. While management seeks to manage its
business to limit the exposure of the Bank's net interest income to changes
in interest rates, different aspects of its business nevertheless remain
subject to risk from interest rate changes. Net interest income was $7.4
million for fiscal 1997 compared to $6.8 million and $6.1 million, for fiscal
1996 and 1995, respectively.
The Bank's interest-earning assets are primarily comprised of
single-family mortgage loans and investment securities, which are primarily
mortgage-backed securities. Interest-bearing liabilities primarily include
deposits and FHLB advances. The increases in average interest-earning assets
during fiscal 1997, 1996 and 1995 reflected increases in the loan portfolio,
funded primarily with deposits and FHLB advances. See "Discussion of Changes
in Financial Condition" for a discussion of the Bank's asset portfolio and
"Capital Resources and Liquidity" for discussion of borrowings.
Increased net interest income resulted from higher average loans
outstanding and improved net interest rate spreads during fiscal 1997 and
1996. Increased net interest income in fiscal 1995 resulted primarily from
higher average loans outstanding. The average balance of interest earning
assets increased $5.4 million, $29.4 million and $106.8 million in fiscal
1997, 1996 and 1995, respectively. The net interest rate spread increased 18
basis points and 8 basis points in fiscal 1997 and 1996, respectively. The
net interest rate spread decreased 116 basis points in fiscal 1995 due to the
increase in the investment portfolio portion of total assets. Average loans
receivable increased to 40.7% of average total interest earning assets in
fiscal 1997 from 34.9% in fiscal 1996 and 33.5% in fiscal 1995.
The majority of the Bank's interest-earning assets are comprised of
adjustable-rate assets. The Bank's adjustable-rate loans and investment
securities are subject to periodic interest rate caps. Periodic caps limit
the amount by which the interest rate on a particular mortgage loan may
increase at its next interest rate reset date. In a rising rate environment,
the interest rate spread could be negatively impacted if the repricing of
interest-earning assets lags behind market interest rate movements, as a
result of periodic interest rate caps.
During fiscal 1997, market interest rates remained relatively flat and
loan demand remained relatively strong, resulting in an increase in mortgage
loans outstanding, an increase in the net interest rate spread and an
increase of $0.6 million, or 8.9%, in net interest income. The average yield
on interest earnings assets increased to 7.20% in fiscal 1997 compared to
7.11% and 7.12% in fiscal 1996 and 1995, respectively, while the average cost
of interest bearing liabilities decreased to 5.37% in fiscal 1997 from 5.46%
and 5.55% in fiscal 1996 and 1995, respectively. The increase in the average
yield on interest earning assets was largely due to an increase in average
loans receivable,
41
<PAGE>
net and a decrease in average investments receivable. The decrease in average
cost of interest bearing liabilities was primarily due to an increase in
average deposits and decrease in average borrowed funds.
PROVISION FOR LOAN LOSSES. The Bank made a provision for loan losses of
$60,000 and $411,200, respectively, in the fiscal years ended September 30,
1997 and 1996 and made no provision in the fiscal year ended September 30,
1995. Management considered several factors in determining the necessary
level of its allowance for loan losses and as a derivative of the process,
the necessary provision for loan losses. For the fiscal year ended September
30, 1996, the closing of a local plant by one of the largest employers in the
Bank's lending area, a 65% increase in nonperforming assets and a 20%
increase in commercial lending were among the reasons considered in
increasing the allowance for loan losses from $1,357,000 at September 30,
1996. For the fiscal year ended September 30, 1997, consideration was given
to the improvement in nonperforming assets, but this positive factor was
somewhat offset by management's concern that the full impact of the plant
closing by the large employer in the fiscal year ended September 30, 1996 had
not been fully felt in the local economy due to compensation continuation
plans and public support. Therefore, while the allowance for loan losses was
decreased to $1,691,000 at September 30, 1997, management determined that
this level should be maintained as long as the present economic factors
remain unimproved. The provision for loan losses and the adequacy of the
allowance for loan losses is generally evaluated periodically by management
of the Bank based on the Bank's past experience, known and inherent risks in
the loan portfolio, adverse situations which may affect the borrowers'
ability to repay, the estimated value of any underlying collateral and
current economic conditions.
NONINTEREST INCOME. Non-interest income totaled $1.4 million for the
fiscal year ended September 30, 1997, compared to $1.5 million for the fiscal
year ended September 30, 1996 and $0.9 million for the fiscal year ended
September 30, 1995. These fluctuations were due primarily to increases and
decreases in the amount of FHLB dividends received in the periods.
NONINTEREST EXPENSE. Non-interest expense consisting primarily of
salaries and employee benefits, premises and equipment, data processing and
federal deposit insurance premiums totaled $5.0 million for the fiscal year
ended September 30, 1997, compared to $5.6 million for the fiscal year ended
September 30, 1996, a decrease of 10.6%. The decrease was the result of the
$937,000 special SAIF assessment in fiscal 1996, net of general cost
increases in fiscal 1997. This assessment was the primary reason for the
increase from $4.0 million for the fiscal year ended September 30, 1995.
The Bank has contacted its major computer service vendors and has
received assurances that those computer services will properly function on
January 1, 2000, the date that computer problems are expected to develop
worldwide. Internally, the Bank has determined that certain computer programs
must be revised in advance of the year 2000. The Bank does not believe that
the costs associated with its actions and those of its vendors will be
material to the Bank. However, in the event a major vendor of the Bank is
unable to fulfill its contractual obligation to the Bank, the Company and the
Bank could experience material cost. See "Risk Factors--Possible Year 2000
Computer Program Problems."
INCOME TAXES. Income tax expense for the fiscal year ended September 30,
1997 was $1.3 million, an increase of $958,000, or 248.0%. The increase was
due primarily to an increase in net income before tax, a decrease in tax
exempt income and a change in an estimate in the fiscal year ended September
30, 1996. Income tax expense for the fiscal year ended September 30, 1996 was
$386,000 a decrease of $614,000, or 61.3%. The decrease in income tax expense
was due to change in estimate and removal of a valuation allowance on certain
deferred tax assets in the fiscal year ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Bank is 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 deposits and short-term borrowings. The required ratio is
currently 4%. The Bank adjusts liquidity
42
<PAGE>
as appropriate to meet its asset and liability management objectives. At
September 30, 1997, the Bank was in compliance with such liquidity
requirements.
The Bank's primary sources of funds are deposits, amortization and
prepayment of loans and mortgage-backed securities, maturities of investment
securities, FHLB advances, and earnings and funds provided from operations.
While scheduled principal repayments on loans, and mortgage-backed securities
are a relatively predictable source of funds, deposit flows, loan prepayments
and mortgage-backed securities prepayments are greatly influenced by general
interest rates, economic conditions, and competition. The Bank manages the
pricing of its deposits to maintain a desired deposit balance. For additional
information about cash flows from the Bank's operating, financing, and
investing activities, see Consolidated Statements of Cash Flows included in
the Consolidated Financial Statements.
At September 30, 1997, the Bank had contractual commitments to extend
credit (exclusive of undisbursed loans in process) of $8.4 million.
Certificates of deposit scheduled to mature in less than one year at
September 30, 1997, totaled $89.4 million, or 62.3% of total deposits. Based
on prior experience, management believes that a significant portion of such
deposits will remain with the Bank. Management also believes that it will
have sufficient liquidity to meet maturing certificates of deposit that do
not remain with the Bank.
At September 30, 1997, the Bank exceeded all of its regulatory capital
requirements.
IMPACT OF INFLATION AND CHANGING PRICES
The consolidated financial statements of the Bank and notes thereto,
presented elsewhere herein, 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
due to inflation. The impact of inflation is reflected in the increased cost
of the Bank's operations. Unlike most industrial companies, nearly all the
assets and liabilities of the Bank are monetary. As a result, interest rates
have a greater impact on the Bank's 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 price of goods and services.
FDIC INSURANCE PREMIUMS AND ASSESSMENT
In September of 1995, the FDIC announced that the Bank Insurance Fund
(the "BIF") was fully capitalized at the end of May 1995. The FDIC has
reduced the deposit insurance premiums paid by "well-capitalized"
institutions insured by the BIF. The Bank's deposits are insured by the
Savings Association Insurance Fund (the "SAIF").
In September 1996, Congress enacted legislation to recapitalize the SAIF
by a one-time assessment on all SAIF-insured deposits held as of March 31,
1995. The assessment was 65.7 basis points per $100 in deposits, payable on
November 30, 1996. For the Bank, the assessment amounted to $937,000 (or
$618,000 after consideration of tax benefits), based on the Bank's
SAIF-insured deposits of $142.6 million. In addition, beginning January 1,
1997, pursuant to the legislation, interest payments on FICO bonds issued in
the late 1980's by the Financing Corporation to recapitalize the now defunct
Federal Savings and Loan Insurance Corporation will be paid jointly by
BIF-insured institutions and SAIF-insured institutions. The FICO assessment
will be 1.29 basis points per $100 in BIF deposits and 6.44 basis points per
$100 in SAIF deposits. Beginning January 1, 2000, the FICO interest payments
will be paid pro-rata by banks and thrifts based on deposits (approximately
2.4 basis points per $100 in deposits). The BIF and SAIF will be merged on
January 1, 1999, provided the saving association charter is eliminated by
that date. In that event, pro-rata FICO sharing will begin on January 1, 1999.
43
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation ("SFAS 123"). SFAS 123 establishes financial
accounting and reporting standards for stock-based compensation plans. Those
plans include all arrangements by which employees receive shares of stock or
other equity instruments of the employer. SFAS No. 123 defines a fair value
based method of accounting for an employee stock option or similar equity
instrument. Under the fair value based method, compensation cost is measured
at the grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. Accounting Principles
Board ("APB") Opinion 25, requires compensation cost for stock-based employee
compensation plans to be recognized based on the difference, if any, between
the quoted market price of the stock and the amount an employee must pay to
acquire the stock. SFAS No. 123 permits an entity in determining its net
income to continue to apply the accounting provisions of APB Opinion 25 to
its stock-based employee compensation arrangements. An entity that continues
to apply APB Opinion 25 must comply with the disclosure requirements of SFAS
123. SFAS 123 is effective for fiscal years beginning after December 15,
1995. The Bank adopted SFAS 123 during the year ended September 30, 1997,
with no material effect on the Bank's consolidated financial statements.
The FASB has issued Statement of Financial Accounting Standards No. 125,
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, ("SFAS 125"), as amended by SFAS No. 127.
This statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. The
statement is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996. SFAS 127
delayed the effective date of certain provisions of SFAS 125 until December
31, 1997. The adoption of SFAS 125, as amended by SFAS 127, is not expected
to have a material effect on the Bank's financial position or results of
operations.
In February 1997, the FASB issued Statement No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 establishes standards for computing and presenting
earnings per share ("EPS"), simplifying the standards previously found in APB
Option No. 15, "Earnings Per Share." The current presentation of primary EPS
is replaced with a presentation of basic EPS. Dual presentation of basic and
diluted EPS will be required on the face of the income statement as well as a
reconciliation of the numerator and denominator of the basic EPS computation
to the numerator and denominator of the diluted EPS computation. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS is computed similarly to fully diluted EPS pursuant
to APB Opinion No. 15. Also in February 1997, the FASB issued Statement No.
129, "Disclosure of Information about Capital Structure" ("SFAS 129"),
establishing standards for disclosing information about an entity's capital
structure. SFAS 129 calls for summary form information regarding rights and
privileges of various securities outstanding and other capital instrument
information. SFAS 128 and 129 are effective for financial statements issued
for periods ending December 15, 1997, including interim periods. The adoption
of SFAS 128 and 129 is not expected to have a material effect on the Bank's
financial condition or results of operations.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for reporting and
display of comprehensive income and its components. SFAS 130 requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. The Bank
will be required to classify items of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section
of the statement of financial condition. Also in June 1997, the FASB issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"), establishing standards for the way public
enterprises report information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. SFAS 130 and 131 are effective for fiscal years beginning after
December 15, 1997, with reclassification of earlier periods. The adoption of
SFAS 130 and 131 is not expected to have a material effect on the Bank's
financial condition or results of operations.
44
<PAGE>
BUSINESS OF THE BANK
GENERAL
The profitability of the Bank depends primarily on its net interest
income, which is the difference between interest income on interest-earning
assets, principally loans, mortgage-backed securities and investment
securities and interest expense on interest-bearing deposits and borrowed
funds. The Bank's net income also is dependent, to a lesser extent, on the
level of its other operating income (including service charges) and operating
expenses, such as salaries and employee benefits, net occupancy expense,
deposit insurance premiums, professional fees, data processing and
miscellaneous other expenses, as well as federal and state income tax
expenses.
MARKET AREA
The Bank's market area is comprised of the Arkansas counties of Randolph,
Lawrence, Craighead, Sharp and Clay, all of which are located in northeast
Arkansas. The Bank has at least one branch office in each of these counties.
The northeastern section of Arkansas has an economy based on agriculture,
manufacturing, services and wholesale/retail trade. Agriculture and related
industries, which constitute the historical basis of the markets area
economy, continue to be prominent throughout the market area, particularly in
the eastern portions of the market area. Manufacturing employment in the
market area is fairly diverse and represents a relatively high portion of the
earnings in the market area. Notably, the largest manufacturer in the
Randolph County market area, Brown Shoe Company, went out of business in
1995, which resulted in the loss of more than 600 jobs. This loss of jobs is
gradually being absorbed by the local economy, which will be aided by the
opening of two factories in Pocahontas that will add approximately 250 jobs
to the local economy. The City of Jonesboro, a Metropolitan Statistical Area,
is located in Craighead county and is the economic center of the market area.
The Jonesboro economy is more diverse and vibrant compared to the other
markets served by the Bank, with the relative affluence of the Jonesboro
economy being supported by Arkansas State University, numerous small- to
medium-sized manufacturing plants, and the benefits derived from being a
regional medical center.
As of 1990, according to the latest available census data, the population
of the Bank's market area was approximately 150,000. The population in the
Bank's market area is estimated to have increased only slightly since 1990.
The median household income for Craighead county is estimated to be
approximately $28,000, while the median household income for the other
counties that comprise the Bank's market area is estimated to be
approximately $19,500. The unemployment rate in the Bank's market area varies
by county, with Craighead and Sharp counties having consistently lower levels
of unemployment than the other counties in the Bank's market area. As of
September 1997, according to the U.S. Bureau of Labor Statistics, the
unemployment rate in Randolph county was 8.4%, Lawrence county was 5.3%, Clay
county was 4.2%, Sharp county was 6.0% and Craighead county was 4.0%. This
compares to an unemployment rate of 4.7% for the nation generally.
LENDING ACTIVITIES
LOAN PORTFOLIO COMPOSITION. The Bank's net loan portfolio consists
primarily of first mortgage loans collateralized by single-family residential
real estate and, to a lesser extent, multifamily residential real estate,
commercial real estate and agricultural real estate loans. At September 30,
1997, the Bank's net loan portfolio totaled $159.7 million, of which $138.5
million, or 86.8% were single-family residential real estate mortgage loans,
$1.6 million, or 1.0%, were multifamily residential real estate loans, $9.6
million, or 6.0%, were commercial real estate loans (including land loans),
and $4.7 million, or 2.9%, were agricultural real estate loans. The remainder
of the Bank's loans at September 30, 1997 included commercial business loans
(i.e., crop production, equipment and livestock loans) which totaled $6.5
million, or 4.1%, of the Bank's total net loan portfolio as of September 30,
1997. Other loans, including automobile loans and loans collateralized by
deposit accounts, totaled $3.8 million, or 2.3%, of the Bank's net loan
portfolio as of September 30, 1997.
45
<PAGE>
ANALYSIS OF LOAN PORTFOLIO
Set forth below is selected data relating to the composition of the
Bank's loan portfolio, including loans held for sale, by type of loan as of
the dates indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994
----------------------- ----------------------- ----------------------- -----------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ----------- ---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single-family
residential............ $ 138,539 86.8% $ 118,291 86.4% $ 100,100 86.0% $ 88,725 86.0%
Multifamily residential.. 1,600 1.0 4,729 3.5 3,500 3.0 3,673 3.5
Agricultural............. 4,654 2.9 4,532 3.3 3,995 3.4 4,519 4.3
Commercial............... 9,606 6.0 6,703 4.9 5,246 4.5 4,781 4.6
---------- ----- ---------- ----- ---------- ----- ---------- -----
Total real estate
loans................ 154,399 96.7 134,275 98.1 112,841 96.9 101,698 97.6
Other loans:
Savings account loans.... 1,015 0.6 886 0.6 896 0.8 893 0.9
Commercial business
(1).................... 6,533 4.1 5,729 4.2 4,466 3.8 3,736 3.6
Other (2).............. 2,716 1.7 1,913 1.4 2,137 1.9 1,353 1.3
---------- ----- ---------- ----- ---------- ----- ---------- -----
Total other loans...... 10,264 6.4 8,528 6.2 7,499 6.5 5,982 5.8
---------- ----- ---------- ----- ---------- ----- ---------- -----
Total loans
receivable........... 164,663 103.1 142,803 104.3 120,340 103.4 107,680 103.4
Less:
Undisbursed loan
proceeds............... 2,815 1.8 3,715 2.7 1,942 1.7 1,611 1.5
Unearned discount and net
deferred loan fee...... 467 0.3 482 0.4 594 0.5 656 0.6
Allowance for loan
losses................. 1,691 1.0 1,734 1.3 1,357 1.2 1,330 1.3
---------- ----- ---------- ----- ---------- ----- ---------- -----
Total loans receivable
net.................. $ 159,690 100.0% $ 136,872 100.0% $ 116,447 100.0% $ 104,083 100.0%
---------- ----- ---------- ----- ---------- ----- ---------- -----
---------- ----- ---------- ----- ---------- ----- ---------- -----
<CAPTION>
AT SEPTEMBER 30,
-----------------------
1993
-----------------------
AMOUNT PERCENT
---------- -----------
<S> <C> <C>
Real estate loans:
Single-family
residential............ $ 83,662 83.1%
Multifamily residential.. 4,227 4.2
Agricultural............. 3,499 3.4
Commercial............... 5,738 5.7
---------- -----
Total real estate
loans................ 97,126 96.4
Other loans:
Savings account loans.... 1,003 1.0
Commercial business
(1).................... 4,109 4.1
Other (2)................ 1,308 1.3
---------- -----
Total other loans...... 6,420 6.4
---------- -----
Total loans
receivable........... 103,546 102.8
Less:
Undisbursed loan
proceeds............... 872 0.9
Unearned discount and net
deferred loan fee...... 630 0.6
Allowance for loan
losses................. 1,349 1.3
---------- -----
Total loans receivable
net.................. $ 100,695 100.0%
---------- -----
---------- -----
</TABLE>
- ------------------------
(1) Includes crop-production loans, livestock loans and equipment loans.
(2) Includes second mortgage loans, unsecured personal lines of credit and
automobile loans.
46
<PAGE>
LOAN MATURITY SCHEDULE. The following table sets forth certain
information as of September 30, 1997, regarding the dollar amount of gross
loans maturing in the Bank's portfolio based on their contractual terms to
maturity. Demand loans, loans having no stated schedule of repayments, and
overdrafts are reported as due in one year or less. Adjustable and floating
rate loans are included in the period in which interest rates are next
scheduled to adjust rather than in which they mature, and fixed rate loans
are included in the period in which the final contractual repayment is due.
<TABLE>
<CAPTION>
BEYOND
WITHIN 1-3 3-5 5-10 10-20 20
1 YEAR YEARS YEARS YEARS YEARS YEARS TOTAL
-------- --------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Fixed rate loans............ $ 9,037 $ 5,699 $ 14,121 $ 3,442 $ 6,625 $ 4,245 $ 43,169
Variable rate loans......... 32,815 42,756 43,057 2,876 -- -- 121,504
-------- --------- ---------- --------- --------- --------- ----------
Total..................... $41,852 $ 48,455 $ 57,178 $ 6,318 $ 6,625 $ 4,245 $ 164,673
-------- --------- ---------- --------- --------- --------- ----------
-------- --------- ---------- --------- --------- --------- ----------
</TABLE>
The following table sets forth at September 30, 1997, the dollar amount
of all fixed rate and adjustable rate loans due after September 30, 1998.
FIXED ADJUSTABLE TOTAL
--------- ----------- ----------
(IN THOUSANDS)
Real estate loans:
Single-family residential........ $ 15,847 $ 87,522 $ 103,369
Multifamily residential.......... 845 1,167 2,012
Agricultural....................... 1,533 -- 1,533
Commercial......................... 13,675 -- 13,675
Other.............................. 2,232 -- 2,232
--------- ----------- ----------
Total............................ $ 34,132 $ 88,689 $ 122,821
--------- ----------- ----------
--------- ----------- ----------
SINGLE-FAMILY RESIDENTIAL REAL ESTATE LOANS. The Bank's primary lending
activity is the origination of single-family, owner-occupied, residential
mortgage loans collateralized by properties located in the Bank's market
area. The Bank generally does not originate single-family residential loans
collateralized by properties outside of its market area. At September 30,
1997, the Bank had $138.5 million, or 86.8%, of its total net loan portfolio
invested in single-family residential mortgage loans, substantially all of
which were collateralized by properties located in the Bank's market area or
in counties contiguous with the Bank's market area.
The Bank's single-family, fixed rate, residential real estate loans
generally are originated and underwritten according to standards that qualify
such loans for resale in the secondary mortgage market. The Bank's fixed rate
loans are currently originated with terms ranging from 10 to 30 years and
amortize on a monthly basis with principal and interest due each month.
Generally, fixed rate loans with maturities in excess of 15 years are sold in
the secondary market. Conforming fixed rate loans with maturities of 15 years
are generally sold in the secondary market, while non-conforming 15 year
fixed rate loans are held in portfolio. The Bank generally retains in its
loan portfolio adjustable rate mortgage ("ARM") loans that it originates.
Whether the Bank can or will sell fixed rate loans, however, depends on a
number of factors including the yield and the term of the loan, market
conditions, and the Bank's current interest rate gap position. At September
30, 1997 and 1996, loans held for sale were insignificant. During the fiscal
years ended September 30, 1997, 1996 and 1995, the Bank sold into the
secondary market $2.2 million, $1.3 million and $0.8 million, respectively,
of single-family, fixed rate, residential mortgage loans, generally from
current period originations. The Bank generally does not retain the servicing
rights on loans it has sold.
The Bank currently offers single-family residential mortgage loans with
terms typically ranging from 10 to 30 years, and with adjustable or fixed
interest rates. Single-family residential real estate loans often remain
outstanding for significantly shorter periods than their contractual terms
because borrowers may refinance or prepay
47
<PAGE>
loans at their option. The average length of time that the Bank's
single-family residential mortgage loans remain outstanding varies
significantly depending upon trends in market interest rates and other
factors. Accordingly, estimates of the average length of single-family loans
that remain outstanding cannot be made with any degree of accuracy.
Originations of fixed-rate mortgage loans versus ARM loans are monitored
on an ongoing basis and are affected significantly by the level of market
interest rates, customer preference, the Bank's interest rate gap position,
and loan products offered by the Bank's competitors. Particularly in a
relatively low interest rate environment, borrowers may prefer fixed rate
loans to ARM loans. However, management's strategy is to emphasize ARM loans,
and the Bank has been successful in maintaining a level of ARM loan
originations acceptable to management.
The following table sets forth the Bank's portfolio of fixed rate
mortgage loans and adjustable rate mortgage loans as of the periods indicated:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------------------------------------------------
1997 1996 1995 1994 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Adjustable-rate mortgage loans....................... $ 121,504 $ 100,825 $ 86,205 $ 75,077 $ 67,960
Fixed-rate mortgage loans............................ 43,169 36,047 30,242 29,006 32,735
---------- ---------- ---------- ---------- ----------
Total mortgage loans................................. $ 164,673 $ 136,872 $ 116,447 $ 104,083 $ 100,695
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The Bank's ARM loans are generally originated for terms of 30 years, with
interest rates that adjust annually. The Bank establishes various annual and
life-of-the-loan caps on ARM loan interest rate adjustments. The Bank's
current index on its ARM loans is the one-year constant maturity treasury
("CMT") rate for one-year ARM loans, a three-year CMT rate for three-year ARM
loans, and a five-year CMT rate for five-year ARM loans, plus a range of
margin of 225 to 300 basis points, subject to change based on market
conditions. The Bank determines whether a borrower qualifies for an ARM loan
based on the fully indexed rate of the ARM loan at the time the loan is
originated.
The primary purpose of offering ARM loans is to make the Bank's loan
portfolio more interest rate sensitive. ARM loans carry increased credit risk
associated with potentially higher monthly payments by borrowers as general
market interest rates increase. It is possible, therefore, that during
periods of rising interest rates, the risk of default on ARM loans may
increase due to the upward adjustment of interest costs to the borrower.
Management believes that the Bank's credit risk associated with its ARM loans
is reduced because of the lifetime interest rate adjustment limitations on
such loans. However, interest rate caps and the changes in the CMT rate,
which is a lagging market index to which the Bank's ARM loans are indexed,
may reduce the Bank's net earnings in a period of rising market interest
rates.
The Bank's single-family residential first mortgage loans customarily
include due-on-sale clauses, which are provisions giving the Bank the right
to declare a loan immediately due and payable in the event, among other
things, that the borrower sells or otherwise disposes of the underlying real
property serving as security for the loan. Due-on-sale clauses are an
important means of adjusting the rates on the Bank's fixed rate mortgage loan
portfolio.
Regulations limit the amount that a savings association may lend relative
to the appraised value of the real estate securing the loan, as determined by
an appraisal at the time of loan origination. Such regulations permit a
maximum loan-to-value ratio of 100% for residential property and a lower
percentage for other real estate loans, depending on the type of loan. The
Bank's lending policies limit the maximum loan-to-value ratio on both fixed
rate and ARM loans without private mortgage insurance to 90% of the lesser of
the appraised value or the purchase price of the property to serve as
collateral for the loan. The Bank generally requires fire and casualty
insurance, as well as title insurance regarding good title, on all properties
securing real estate loans made by the Bank.
48
<PAGE>
MULTIFAMILY RESIDENTIAL REAL ESTATE LOANS. Although the Bank does not
emphasize multi family residential loans and has not been active in this
area, the Bank has originated loans collateralized by multifamily residential
real estate. Such loans constituted approximately $1.6 million, or 1.0%, of
the Bank's total net loan portfolio at September 30, 1997, compared to $4.7
million, or 3.5%, of the Bank's total net loan portfolio at September 30,
1996, $3.5 million, or 3.0%, of the total net loan portfolio at September 30,
1995, $3.7 million, or 3.5%, of the total net loan portfolio at September 30,
1994 and $4.2 million, or 4.2%, of the total net loan portfolio at September
30, 1993. The Bank's multifamily real estate loans are primarily
collateralized by multifamily residences, such as apartment buildings.
Multifamily residential real estate loans are offered with fixed and
adjustable interest rates and are structured in a number of different ways
depending upon the circumstances of the borrower and the type of multifamily
project. Fixed interest rate loans generally have five-to seven-year terms
with a balloon payment based on a 15 to 25 year amortization schedule.
Loans collateralized by multifamily real estate generally involve a
greater degree of credit risk than single-family residential mortgage loans
and carry individually larger loan balances. This increased credit risk is a
result of several factors, including the concentration of principal in a
limited number of loans and borrowers, the effects of general economic
conditions on income producing properties, and the increased difficulty of
evaluating and monitoring these types of loans. Furthermore, the repayment of
loans collateralized by multifamily real estate typically depends upon the
successful operation of the related real estate property. If the cash flow
from the project is reduced, the borrower's ability to repay the loan may be
impaired.
AGRICULTURAL REAL ESTATE LOANS. In recent years the Bank has increased
its originations of agricultural real estate loans for the purchase of
farmland in the Bank's market area. Loans collateralized by farmland
constituted approximately $4.7 million, or 2.9%, of the Bank's total net loan
portfolio at September 30, 1997, compared to $4.6 million, or 3.3%, $4.0
million, or 3.4%, $4.5 million, or 4.3%, and $3.5 million, or 3.4% of the
Bank's total net loan portfolio at September 30, 1996, 1995, 1994 and 1993,
respectively.
Agricultural mortgage loans have various terms up to 10 years with a
balloon payment based on a 20-year amortization schedule. Such loans are
originated with fixed rates and generally include personal guarantees. The
loan-to-value ratio on agricultural mortgage loans is generally limited to
75%. The Bank earns higher yields on agricultural mortgage loans than on
single-family residential mortgage loans. Agricultural related lending,
however, involves a greater degree of risk than single-family residential
mortgage loans because of the typically larger loan amounts and a somewhat
more volatile market. In addition, repayments on agricultural mortgage loans
are substantially dependent on the successful operation or management of the
farm property collateralizing the loan, which is affected by many factors,
such as weather and changing market prices, outside the control of the
borrower.
COMMERCIAL REAL ESTATE LOANS. Loans collateralized by commercial real
estate, including land loans, constituted approximately $9.6 million, or 6.0%
of the Bank's total net loan portfolio at September 30, 1997 compared to $6.7
million, or 4.9%, $5.2 million, or 4.5%, $4.8 million, or 4.6%, and $5.7
million, or 5.7% of the Bank's total net loan portfolio at September 30,
1996, 1995, 1994 and 1993, respectively. The Bank's commercial real estate
loans are collateralized by improved property such as office buildings,
churches and other nonresidential buildings. At September 30, 1997,
substantially all of the Bank's commercial real estate loans were
collateralized by properties located within the Bank's market area.
Commercial real estate loans currently are offered with fixed rates only
and are structured in a number of different ways depending upon the
circumstances of the borrower and the nature of the project. Fixed rate loans
generally have five- to seven-year terms with a balloon payment based on a 15
to 25 year amortization schedule. The loan-to-value ratio on commercial real
estate loans is generally limited to 75%. In addition, the Bank generally
requires personal guarantees on such loans.
Loans collateralized by commercial real estate generally involve a
greater degree of credit risk than single-family residential mortgage loans
and carry larger loan balances. This increased credit risk is a result of
several factors, including the concentration of principal in a limited number
of loans and borrowers, the effects of general
49
<PAGE>
economic conditions on income producing properties, and the increased
difficulty of evaluating and monitoring these types of loans. Furthermore,
the repayment of loans collateralized by commercial real estate is typically
dependent upon the successful operation of the related real estate property.
If the cash flow from the project is reduced, the borrower's ability to repay
the loan may be impaired.
OTHER LOANS. The Bank originates various consumer loans, including
automobile, deposit account loans and second mortgage loans, principally in
response to customer demand. At September 30, 1997, such loans totaled $3.7
million, or 2.3% of the Bank's total net loan portfolio as compared to $2.8
million, or 2.0%, $3.0 million, or 2.7%, $2.2 million, or 2.2%, and $2.3
million, or 2.3 % of the Bank's total net loan portfolio at September 30,
1996, 1995,1994 and 1993, respectively. Consumer loans are offered primarily
on a fixed rate basis with maturities generally of less than ten years.
In recent years, the Bank has emphasized the origination of commercial
business loans, which principally include agricultural-related commercial
loans to finance the purchase of livestock, cattle, farm machinery and
equipment, seed, fertilizer and other farm-related products. Such loans
comprised $6.5 million, or 4.1% of the Bank's total net loan portfolio at
September 30, 1997 as compared to $5.7 million, or 4.2%, $4.5 million, or
3.8%, $3.7 million, or 3.6%, and $4.1 million, or 4.1% of the Bank's total
net loan portfolio as of September 30, 1996, 1995, 1994 and 1993,
respectively.
As with agricultural real estate loans, agricultural operating loans
involve a greater degree of risk than residential mortgage loans because the
payments on such loans are dependent on the successful operation or
management of the farm property for which the operating loan is utilized. See
"--Agricultural Real Estate Loans" for the various risks associated with
agricultural operating loans.
ORIGINATION, PURCHASE AND SALE OF LOANS AND MORTGAGE-BACKED SECURITIES.
The table below shows the Bank's originations, purchases and sales of loans
and mortgage-backed securities for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total loans receivable, net at beginning of year..... $ 136,872 $ 116,447 $ 104,083 $ 100,695 $ 97,801
Loans originated:
Real estate:
Single-family residential........................ 49,215 48,568 28,295 21,046 23,139
Multifamily residential.......................... 93 -- -- -- 480
Commercial....................................... 3,467 299 552 667 344
Agricultural..................................... 2,863 1,596 1,654 1,648 918
Other:
Commercial business.............................. 6,697 5,743 4,510 3,254 2,998
Savings account loans............................ 926 826 682 688 776
Other............................................ 2,684 2,023 1,630 1,348 1,207
---------- ---------- ---------- ---------- ----------
Total loans originated........................... 65,945 59,055 37,323 28,651 29,862
Loans purchased...................................... -- -- 385 72 106
Loans to facilitate sale of REO...................... (349) (145) (205) (472) (119)
Loans sold........................................... (2,156) (1,321) (752) (311) (263)
Loans transferred to REO............................. (294) (233) (88) (468) (879)
Loan repayments...................................... (40,004) (36,470) (24,350) (23,961) (25,300)
Other loan activity (net)............................ (324) (461) 51 (123) (513)
---------- ---------- ---------- ---------- ----------
Total loans receivable, net at end of year....... $ 159,690 $ 136,872 $ 116,447 $ 104,083 $ 100,695
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Mortgage-backed securities, net at beginning of
year............................................... $ 179,359 $ 163,287 $ 121,925 $ 48,830 $ 34,116
Purchases............................................ -- 38,430 50,176 90,270 33,515
Sales................................................ -- (10,020) -- -- --
Repayments........................................... (10,669) (13,575) (8,978) (17,270) (18,827)
Discount (premium) amortization...................... 146 1,237 164 95 26
---------- ---------- ---------- ---------- ----------
Mortgage-backed and related securities, net at end of
year............................................... $ 168,836 $ 179,359 $ 163,287 $ 121,925 $ 48,830
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total loans receivable, net and mortgage-backed and
related securities, net at end of year............. $ 328,526 $ 316,231 $ 279,734 $ 226,008 $ 149,525
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
50
<PAGE>
LOANS TO ONE BORROWER. The maximum loans that a savings association may
make to one borrower or a related group of borrowers is 15% of the savings
association's unimpaired capital and unimpaired surplus, and an additional
amount equal to 10% of unimpaired capital and unimpaired surplus if the loan
is collateralized by readily marketable collateral (generally, financial
instruments and bullion, but not real estate). At September 30, 1997, the
Bank's largest real estate related borrower had an aggregate principal
outstanding balance of $1.5 million, or 6.2% of unimpaired capital.
ASSET QUALITY
When a borrower fails to make a required payment on a loan, the Bank
attempts to cure the deficiency by contacting the borrower and seeking the
payment. Depending upon the type of loan, late notices are sent and/or
personal contacts are made. In most cases, deficiencies are cured promptly.
While the Bank generally prefers to work with borrowers to resolve such
problems, when a mortgage loan becomes 90 days delinquent, the Bank generally
institutes foreclosure or other proceedings, as necessary, to minimize any
potential loss.
Loans are placed on non-accrual status when, in the judgement of
management, the probability of collection of interest is deemed to be
insufficient to warrant further accrual. When a loan is placed on non-accrual
status, previously accrued but unpaid interest is deducted from interest
income. The Bank generally does not accrue interest on loans past due 90 days
or more. Loans may be reinstated to accrual status when payments are made to
bring the loan under 90 days past due and, in the opinion of management,
collection of the remaining balance can be reasonably expected.
Real estate acquired by the Bank as a result of foreclosure or by deed in
lieu of foreclosure is classified as real estate owned ("REO") until such
time as it is sold. REO is initially recorded at its estimated fair value,
less estimated selling expenses. Valuations are periodically performed by
management, and any subsequent decline in fair value is charged to operations.
The following table sets forth information regarding loans delinquent for
90 days or more and real estate owned by the Bank at the dates indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Nonperforming loans:
Single-family residential real estate.................................. $ 422 $ 766 $ 409 $ 253 $ 635
All other mortgage loans............................................... -- 195 32 178 71
Other loans............................................................ 31 62 55 66 5
--- --------- --- --- ---------
Total delinquent loans............................................... 453 1,023 496 497 711
Total real estate owned.................................................. 17 111 190 130 1,132
--- --------- --- --- ---------
Total nonperforming assets........................................... $ 470 $ 1,134 $ 686 $ 627 $ 1,843
--- --------- --- --- ---------
--- --------- --- --- ---------
Total loan delinquent 90 days or more to net loans receivable............ 0.28% 0.74% 0.43% 0.48% 0.71%
Total loans delinquent 90 days or more to total assets................... 0.12% 0.27% 0.14% 0.16% 0.42%
Total nonperforming loans and REO to total assets........................ 0.12% 0.30% 0.20% 0.20% 1.09%
</TABLE>
CLASSIFICATION OF ASSETS. Federal regulations provide for the
classification of loans and other assets such as debt and equity securities
considered by the OTS to be of lesser quality as "substandard," "doubtful,"
or "loss" assets. An asset is considered "substandard" if it is inadequately
protected by the current net worth and paying capacity of the obligor or of
the collateral pledged, if any. "Substandard" assets include those
characterized by the "distinct possibility" that the savings institution 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
51
<PAGE>
warranted. Assets that do not expose the savings institution to risk
sufficient to warrant classification in one of the aforementioned categories,
but which possess some weaknesses, are required to be designated "special
mention" by management. Loans designated as special mention are generally
loans that, while current in required payments, have exhibited some potential
weaknesses that, if not corrected, could increase the level of risk in the
future.
A savings institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by
federal regulators, who can order the establishment of additional general or
specific loss allowances.
The following table sets forth the aggregate amount of the Bank's
classified assets at the dates indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Substandard assets............................................... $ 1,640 $ 3,515 $ 3,074 $ 3,991 $ 1,713
Doubtful assets.................................................. -- -- -- 26 2,448
Loss assets...................................................... 25 89 155 212 73
--------- --------- --------- --------- ---------
Total classified assets (1)...................................... $ 1,665 $ 3,604 $ 3,229 $ 4,229 $ 4,234
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) With respect to assets classified "doubtful" and "loss," the Bank has
established aggregate specific loan loss reserves of $25,000, $89,000,
$155,000, $212,000 and $73,000 (in actual dollars) for the years ended
September 30, 1997, 1996, 1995, 1994 and 1993, respectively.
ALLOWANCE FOR LOAN LOSSES. It is management's policy to provide for
estimated losses on the Bank's loan portfolio based on management's
evaluation of the potential losses that may be incurred. The Bank regularly
reviews its loan portfolio, including problem loans, to determine whether any
loans require classification or the establishment of appropriate reserves or
allowances for losses. Such evaluation, which includes a review of all loans
for which full collection of interest and principal may not be reasonably
assured, considers, among other matters, the estimated fair value of the
underlying collateral. Other factors considered by management include the
size and risk exposure of each segment of the loan portfolio, present
indicators such as delinquency rates and the borrower's current financial
condition, and the potential for losses in future periods. Management
calculates the general allowance for loan losses in part based on past
experience, and in part based on specified percentages of loan balances.
While both general and specific loss allowances are charged against earnings,
general loan loss allowances are added back to capital, subject to a
limitation of 1.25% of risk-based assets, in computing risk-based capital
under OTS regulations.
During the fiscal years ended September 30, 1997, 1996, 1995, 1994 and
1993, the Bank added $60,000, $411,200, $0, $0 and $193,299, respectively, to
its allowance for loan losses. The Bank's allowance for loan losses totaled
$1.7 million, $1.7 million, $1.4 million, $1.3 million and $1.3 million at
September 30, 1997, 1996, 1995, 1994 and 1993, respectively.
52
<PAGE>
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES. The following table sets forth
the analysis of the allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total loans outstanding.............................. $ 164,663 $ 142,802 $ 120,340 $ 107,680 $ 103,546
Average net loans outstanding........................ 147,316 124,609 109,658 102,368 98,127
Allowance balances (at beginning of year)............ $ 1,734 $ 1,357 $ 1,330 $ 1,349 $ 1,263
Provision for losses:
Real estate loans.................................. 30 -- -- -- 90
Other loans........................................ 30 411 -- -- 103
Charge-offs:
Real estate loans.................................. (11) (17) (19) (19) (98)
Other loans........................................ (93) (32) (4) -- (9)
Recoveries:
Real estate loans.................................. 1 15 50 -- --
Other loans........................................ -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Allowance balance (at end of year)................... $ 1,691 $ 1,734 $ 1,357 $ 1,330 $ 1,349
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Allowance for loan losses as a percent of total loans
receivable at end of year.......................... 1.03% 1.21% 1.13% 1.24% 1.30%
Net loans charged off as a percent of average net
loans outstanding.................................. 0.07% 0.04% (0.02)% 0.02% 0.11%
Ratio of allowance for loan losses to total
nonperforming loans at end of year................. 373.45% 169.50% 273.59% 267.60% 189.73%
Ratio of allowance for loan losses to total
nonperforming loans and REO at end of year......... 359.79% 152.91% 197.81% 212.12% 73.20%
</TABLE>
53
<PAGE>
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES. The following table sets forth the
allocation of allowance for loan losses by loan category for the periods
indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------------------------------------
1997 1996 1995 1994
------------------------ ------------------------ ------------------------ ------------------------
% OF LOANS % OF LOANS % OF LOANS % OF LOANS
IN EACH IN EACH IN EACH IN EACH
CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
--------- ------------- --------- ------------- --------- ------------- --------- -------------
(DOLLARS IN THOUSANDS)
Balance at end of
period applicable
to:
Mortgage loans.... $ 927 96.7% $ 903 93.9% $ 894 93.8% $ 863 94.4%
Non-mortgage
loans........... 764 3.3 831 6.1 463 6.2 467 5.6
--------- ----- --------- ----- --------- ----- --------- -----
Total allowance
for loan
losses........ $ 1,691 100.0% $ 1,734 100.0% $ 1,357 100.0% $ 1,330 100.0%
--------- ----- --------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- ----- --------- -----
<CAPTION>
Year Ended September 30,
------------------------
1993
------------------------
% OF LOANS
IN EACH
CATEGORY TO
AMOUNT TOTAL LOANS
--------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Balance at end of
period applicable
to:
Mortgage loans.... $ 957 93.8%
Non-mortgage
loans........... 392 6.2
--------- -----
Total allowance
for loan
losses...... $ 1,349 100.0%
--------- -----
--------- -----
</TABLE>
54
<PAGE>
INVESTMENT ACTIVITIES
Mortgage-Backed Securities. Mortgage-backed securities represent a
participation interest in a pool of single-family or multifamily mortgages, the
principal and interest payments on which are passed from the mortgagors, through
intermediaries that pool and repackage the participation interests in the form
of securities, to investors such as the Bank. 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 range
and have varying maturities. The underlying pool of mortgages can be composed of
either fixed-rate mortgages or ARM loans. As a result, the interest rate risk
characteristics of the underlying pool of mortgages, i.e., fixed-rate or
adjustable-rate, as well as the prepayment risk, are passed on to the
certificate holder. The Bank invests in mortgage-backed securities to supplement
local single-family loan originations as well as to reduce interest rate risk
exposure, because mortgage-backed securities are more liquid than mortgage
loans.
55
<PAGE>
Set forth below is selected data relating to the composition of the Bank's
mortgage-backed securities portfolio as of the dates indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------------------------------------------------------------
1997 1996 1995 1994
--------------------- --------------------- --------------------- ---------------------
$ % $ % $ % $ %
---------- --------- ---------- --------- ---------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed securities:
Adjustable................... $ 151,766 89.9% $ 155,949 86.9% $ 126,654 77.6% $ 80,380 65.9%
Fixed........................ 17,070 10.1 23,410 13.1 36,633 22.4 41,545 34.1
Total mortgage-backed
securities, net.......... $ 168,836 100.0% $ 179,359 100.0% $ 163,287 100.0% $ 121,925 100.0%
---------- --------- ---------- --------- ---------- --------- ---------- ---------
---------- --------- ---------- --------- ---------- --------- ---------- ---------
<CAPTION>
AT SEPTEMBER 30,
--------------------
1993
--------------------
$ %
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Mortgage-backed securities:
Adjustable................... $ 28,663 58.7%
Fixed........................ 20,167 41.3
Total mortgage-backed
securities, net.......... $ 48,830 100.0%
--------- ---------
--------- ---------
</TABLE>
56
<PAGE>
At September 30, 1997, mortgage-backed securities aggregated $168,836
million, or 44.0%, of the Bank's total assets. At September 30, 1997, all of the
Bank's mortgage-backed securities were classified as held-to-maturity.
OTHER INVESTMENT SECURITIES. The Bank's investment portfolio, excluding
mortgage-backed securities and FHLB stock, consists of obligations of the United
States Government and agencies thereof, municipal bonds, and interest-earning
deposits in other institutions. The carrying value of this portion of the Bank's
investment portfolio totaled $31.7 million, $40.3 million, $51.1 million, $75.7
million and $11.7 million at September 30, 1997, 1996, 1995, 1994 and 1993,
respectively. At September 30, 1997, $0.5 million, or 1.22%, of the Bank's
investment securities, excluding mortgage-backed securities, had a remaining
term to maturity of one year or less, and $19.3 million, or 9.6%, of the Bank's
investment securities portfolio had a remaining term to maturity of five years
or less.
The Bank is required under federal regulations to maintain a minimum amount
of liquid assets that may be invested in specified short-term securities and
certain other investments. See "Regulation Liquidity Requirements." The Bank
generally has maintained a portfolio of liquid assets that exceeds regulatory
requirements. Liquidity levels may be increased or decreased depending upon the
yields on investment alternatives and upon management's judgment as to the
attractiveness of the available yields in relation to other opportunities,
management's expectation of the level of yield that will be available in the
future, as well as management's projections of short term demand for funds in
the Bank's loan origination and other activities.
The following table sets forth the carrying value of the Bank's investment
portfolio and FHLB stock at the dates indicated. At September 30, 1997, the
market value of the Bank's investment portfolio was $213.0 million.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Investment securities:
Mortgage-backed securities.......................... $ 168,836 $ 179,359 $ 163,287 $ 121,925 $ 48,830
U.S. Government treasury obligations................ -- 1,000 2,948 3,148 8,352
U.S. Government agency obligations.................. 26,858 38,871 47,721 72,445 3,316
Municipal bonds..................................... 4,859 459 469 150 150
---------- ---------- ---------- ---------- ---------
Total investment securities....................... 200,553 219,689 214,425 197,668 60,648
FHLB stock............................................ 10,053 11,608 10,549 2,496 1,831
---------- ---------- ---------- ---------- ---------
Total investments................................. $ 210,606 $ 231,297 $ 224,974 $ 200,164 $ 62,479
---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------
</TABLE>
57
<PAGE>
INVESTMENT PORTFOLIO MATURITIES. The following table sets forth the
scheduled maturities, carrying values, market values and average yields for the
Bank's investment securities at September 30, 1997.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ONE YEAR ONE TO FIVE YEARS FIVE TO TEN YEARS OVER TEN YEARS
--------------------- --------------------- -------------------- ---------------------
<CAPTION>
ANNUALIZED ANNUALIZED ANNUALIZED ANNUALIZED
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
-------- ---------- -------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities:
U.S. Government agency
securities.................. $ 501 8.63% $ 19,264 6.32% $ 7,093 7.34% $ -- -%
State and municipal
obligations (1)............. 5 5.11 20 5.35 55 5.91 4,779 5.32
CMOs (2)...................... -- -- 924 6.86 315 8.60 136,598 6.81
Mortgage-backed securities.... 530 5.73 3,670 6.44 10,188 6.77 16,611 7.50
-------- ---------- -------- ---------- -------- ---------- -------- ---
Total investment securities... 1,036 7.12% 23,878 6.36% 17,651 7.03% 157,988 6.84%
---------- ---------- ---------- ---
---------- ---------- ---------- ---
FHLB stock.................... -- -- -- --
Accrued interest on
investments................. 11 209 128 590
-------- -------- -------- ----------
Total investment securities,
including accrued interest.. $1,047 $24,087 $ 17,779 $158,578
-------- -------- -------- --------
-------- -------- -------- --------
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL
----------------------------------------
ANNUALIZED
AVERAGE WEIGHTED
CARRYING MARKET LIFE IN AVERAGE
VALUE VALUE YEARS YIELD
-------- ------- ------- ----------
<S> <C> <C> <C> <C>
Investment securities:
U.S. Government agency
securities.................. $ 26,858 $27,076 2.59 6.63%
State and municipal
obligations (1)............. 4,859 4,948 16.39 5.33
CMOs (2)...................... 137,837 139,081 24.63 6.81
Mortgage-backed securities.... 30,999 31,792 12.69 7.10
-------- ------- ------- ---
Total investment securities... 200,553 202,897 6.80
-------
-------
FHLB stock.................... 10,053 10,053 5.96
Accrued interest on
investments................. 938 938
-------- -------
Total investment securities,
including accrued interest.. $211,544 $213,888
-------- -------
-------- -------
</TABLE>
- ------------------------
(1) The yield on these tax-exempt obligations has not been compiled on a
tax-equivalent basis.
(2) The average life in years is based on actual stated maturities; however,
management anticipates a shorter life on these securities.
58
<PAGE>
SOURCES OF FUNDS
GENERAL.
Deposits are a significant source of the Bank's funds for lending and other
investment purposes. In addition to deposits, the Bank derives funds from FHLB
advances, the amortization and prepayment of loans and mortgage-backed
securities, the sale or maturity of investment securities, and operations.
Scheduled loan principal repayments are a relatively stable source of funds,
while deposit inflows and outflows and loan prepayments are influenced
significantly by general interest rates and market conditions. Borrowings may be
used on a short-term basis to compensate for reductions in the availability of
funds from other sources or on a longer term basis for general business
purposes.
DEPOSITS. Consumer and commercial deposits are received principally from
within the Bank's market area through the offering of a broad selection of
deposit instruments including NOW accounts, passbook savings, money market
deposit accounts, term certificate accounts and individual retirement accounts.
The Bank also markets term certificate accounts nationally to attract deposits.
Deposit account terms vary according to the minimum balance required, the period
of time during which the funds must remain on deposit, and the interest rate,
among other factors. The maximum rate of interest the Bank must pay is not
established by regulatory authority. The Bank regularly evaluates its internal
cost of funds, surveys rates offered by competing institutions, reviews the
Bank's cash flow requirements for lending and liquidity, and executes rate
changes when deemed appropriate. As of September 30, 1997, the Bank did not have
any brokered deposits.
TIME DEPOSIT RATES. The following table sets forth the certificates of
deposit of the Bank classified by rates as of the dates indicated:
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Rate:
2.00-3.99%................................................ $ 16 $ 17 $ 126 $ 35,529 $ 72,268
4.00-5.99%................................................ 76,094 75,615 51,125 42,154 8,339
6.00-7.99%................................................ 32,170 6,205 32,916 817 1,989
8.00-9.99%................................................ -- 20 20 836 2,004
---------- --------- --------- --------- ---------
$ 108,280 $ 81,857 $ 84,187 $ 79,336 $ 84,600
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
</TABLE>
TIME DEPOSIT MATURITIES. The following table sets forth the amount and
maturities of certificates of deposit at September 30, 1997.
<TABLE>
<CAPTION>
MATURITY
--------------------------------------------------------
3 MONTHS 3 TO 6 6 TO 12 OVER 12
OR LESS MONTHS MONTHS MONTHS TOTAL
----------- --------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than $100,000................ $ 26,659 $ 28,726 $ 16,757 $ 15,727 $ 87,869
Certificates of deposit greater than $100,000............. 3,988 5,924 7,306 3,193 20,411
----------- --------- --------- --------- ----------
Total certificates of deposit............................. $ 30,647 $ 34,650 $ 24,063 $ 18,920 $ 108,280
----------- --------- --------- --------- ----------
----------- --------- --------- --------- ----------
</TABLE>
BORROWINGS
Deposits of the Bank are a significant source of funds as is short term and
long term advances from the FHLB. FHLB advances are collateralized by the Bank's
stock in the FHLB, investment securities and a blanket lien on the Bank's
mortgage portfolio. Such advances are made pursuant to different credit
programs, each of which has its own interest rate and range of maturities. The
maximum amount that the FHLB will advance to member institutions, including the
Bank, for purposes other than meeting withdrawals, fluctuates from time to time
in accordance with the policies of the FHLB. The maximum amount of FHLB advances
to a member institution generally is reduced by borrowings from any other
source. At September 30, 1997, the Bank's FHLB advances totaled $190.6 million.
59
<PAGE>
The Bank sells securities under agreements to repurchase with selected
dealers (reverse repurchase agreements) as a means of obtaining short-term funds
as market conditions permit. In a reverse repurchase agreement, the Bank sells a
fixed dollar amount of securities to a dealer under an agreement to repurchase
the securities at a specific price within a specific period of time, typically
not more than 180 days. Reverse repurchase agreements are treated as a liability
of the Bank. The dollar amount of securities underlying the agreements remain an
asset of the Bank. At September 30, 1997, the Bank's securities sold under
agreements to repurchase totaled $20.7 million.
The following table sets forth certain information regarding borrowings by
the Bank during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Weighted average rate paid on: (1)
FHLB advances....................................... 5.54% 5.64% 6.17% 3.78% 5.43%
Other borrowings (2)................................ 5.81% 5.59% 5.75% 4.48% 3.46%
FHLB advances:
Maximum balance..................................... $ 230,317 $ 239,686 $ 210,987 $ 49,369 $ 36,366
Average balance..................................... $ 203,835 $ 224,719 $ 167,766 $ 31,254 $ 26,109
Other borrowings: (2)
Maximum balance..................................... $ 21,060 $ 10,306 $ 131,500 $ 119,430 $ 1,450
Average balance..................................... $ 17,684 $ 2,940 $ 67,000 $ 53,784 $ 1,355
</TABLE>
- ------------------------
(1) Calculated using monthly weighted average interest rates.
(2) Includes borrowings under reverse repurchase agreements.
SUBSIDIARIES' ACTIVITIES
The Bank has two wholly owned subsidiaries, Sun Realty, Inc. ("Sun") and
P.F. Service, Inc. ("P.F. Service"). Both are Arkansas corporations and both are
substantially inactive.
At September 30, 1997, the Bank had a $18,723 equity investment in Sun, and
a $363,428 equity investment in P.F. Service. For the fiscal year ended
September 30, 1997, Sun had net loss of $1,117 and P.F. Service had net income
of $1,665. At September 30, 1997, Sun had $19,223 in total assets, $500 in total
liabilities and $18,723 in stockholder's equity. At September 30, 1997, P.F.
Service had $383,228 in total assets, $19,800 in total liabilities and $363,428
in stockholder's equity.
PERSONNEL
The Bank and its subsidiaries had 55 full-time employees and 9 part-time
employees at September 30, 1997. None of these employees is party to a
collective bargaining agreement, and the Bank believes that it enjoys good
relations with its personnel.
COMPETITION
The Bank faces strong competition both in attracting deposits and in
origination of loans. Competitors for deposits include thrift institutions,
commercial banks, credit unions, money market funds, and other investment
alternatives, such as mutual funds, full service and discount broker-dealers,
brokerage accounts, and savings bonds or other government securities. Primary
competitive factors include convenience of locations, variety of deposit or
investment options, rates or terms offered, and quality of customer service.
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The Bank competes for mortgage loan originations with thrift institutions,
banks and mortgage companies, including many large financial institutions, which
have greater financial and marketing resources available to them. Primary
competitive factors include service quality and speed, relationships with
builders and real estate brokers, and rates and fees.
The Bank believes that it has been able to compete effectively in its
principal markets, and that competitive pressures have not materially interfered
with the Bank's ongoing operations.
PROPERTIES
The Bank conducts its business through its main office and eight
full-service branch offices located in five counties in Northeast Arkansas. Each
office is owned by the Bank. The following table sets forth certain information
concerning the main office and each branch office of the Bank at September 30,
1997. The aggregate net book value of the Bank's premises and equipment at these
locations was $1.8 million at September 30, 1997.
Main Office:
203 W. Broadway
Pocahontas, Arkansas
(Opened 1935)
<TABLE>
<S> <C>
Branch Offices:
Walnut Ridge Branch Corning Branch
120 W. Main Street Walnut 309 Missouri Avenue
Ridge, AR Corning, Arkansas
(Opened 1968) (Opened 1983)
Jonesboro Branch Hardy Branch
700 S.W. Drive Highway 62
Jonesboro, Arkansas Hardy, Arkansas
(Opened 1976) (Opened 1983)
Jonesboro Branch
2213 Caraway Road
Jonesboro, Arkansas
(Opened 1996)
</TABLE>
In January 1998, the Bank completed it acquisition of three additional
full-service branch offices located in Lawrence, Sharp and Craighead Counties,
Arkansas. The addresses of these newly acquired branches are set forth below.
The aggregate net book value of the Bank's premises and equipment at these
branch offices was $ million as of January 22, 1998.
<TABLE>
<S> <C>
Lake City Hardy
100 Cobean Boulevard 522 Main
Lake City, Arkansas 72437 Hardy, Arkansas 72542
Walnut Ridge
300 W. Main Walnut
Ridge, Arkansas 72476
</TABLE>
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LEGAL PROCEEDINGS
There are various claims and lawsuits in which the Bank is periodically
involved incident to the Bank's business. In the opinion of management, no
material loss is expected from any of such pending claims or lawsuits.
REGULATION
As a federally chartered SAIF-insured savings association, the Bank is
subject to examination, supervision and extensive regulation by the OTS and
the FDIC. The Bank is a member of the Federal Home Loan Bank ("FHLB") system.
This regulation and supervision establishes a comprehensive framework of
activities in which an institution can engage and is intended primarily for
the protection of the insurance fund and depositors. The Bank also is subject
to regulation by the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") governing reserves to be maintained against deposits
and certain other matters. The OTS examines the Bank and prepares reports for
the consideration of the Bank's Board of Directors on any deficiencies that
they may find in the Bank's operations. The FDIC also examines the Bank in
its role as the administrator of the SAIF. The Bank's relationship with its
depositors and borrowers also is regulated to a great extent by both federal
and state laws especially in such matters as the ownership of savings
accounts and the form and content of the Bank's mortgage documents. Any
change in such regulation, whether by the FDIC, OTS, or Congress, could have
a material impact on the Company and the Bank and their operations.
FEDERAL REGULATION OF SAVINGS INSTITUTIONS
BUSINESS ACTIVITIES. The activities of savings institutions are governed
by the Home Owners' Loan Act, as amended (the "HOLA") and, in certain
respects, the Federal Deposit Insurance Act (the "FDI Act") and the
regulations issued by the agencies to implement these statutes. These laws
and regulations delineate the nature and extent of the activities in which
savings association may engage. The description of statutory provisions and
regulations applicable to savings associations set forth herein does not
purport to be a complete description of such statutes and regulations and
their effect on the Bank.
LOANS TO ONE BORROWER. Under the HOLA, savings institutions are generally
subject to the national bank limits on loans to a single or related group of
borrowers. Generally, this limit is 15% of the Bank's unimpaired capital and
surplus plans and an additional 10% of unimpaired capital and surplus, if such
loan is secured by readily-marketable collateral, which is defined to include
certain financial instruments and bullion. The OTS by regulation has amended the
loans to one borrower rule to permit savings associations meeting certain
requirement to extend loans to one borrower in additional amounts under
circumstances limited essentially to loans to develop or complete residential
housing units.
QUALIFIED THRIFT LENDER TEST. In general, savings associations are required
to maintain at least 65% of their portfolio assets in certain qualified thrift
investments (which consist primarily of loans and other investments related to
residential real estate and certain other assets). A savings association that
fails the qualified thrift lender test is subject to substantial restrictions on
activities and to other significant penalties. Recent legislation permits a
savings association to qualify as a qualified thrift lender not only by
maintaining 65% of portfolio assets in qualified thrift investments (the "QTL
test") but also, in the alternative, by qualifying under the Code as a "domestic
building and loan association." the Bank is a domestic building and loan
association as defined in the Code.
Recent legislation also expands the QTL test to provide savings associations
with greater authority to lend and diversify their portfolios. In particular,
credit card and education loans may now be made by savings associations without
regard to any percentage-of-assets limit, and commercial loans may be made in an
amount up to 10 percent of total assets, plus an additional 10 percent for small
business loans. Loans for personal, family and household purposes (other than
credit card, small business and educational loans) are now included without
limit with other assets
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that, in the aggregate, may account for up to 20% of total assets. At
September 30, 1997, under the expanded QTL test, approximately 85.5% of the
Bank's portfolio assets were qualified thrift investments.
LIMITATION ON CAPITAL DISTRIBUTIONS. OTS regulations impose limitations
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, which are based primarily on an institution's capital level. An
institution, such as the Bank, that exceeds all fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
Association") and has not been advised by the OTS that it is in need of more
than normal supervision, could, after prior notice but without the approval
of the OTS, make capital distributions during a calendar year equal to the
greater of: (i) 100% of its net earnings to date during the calendar year
plus the amount that would reduce by one-half its "surplus capital ratio"
(the excess capital over its fully phased-in capital requirements) at the
beginning of the calendar year; or (ii) 75% of its net earnings for the
previous four quarters; provided that the institution would not be
undercapitalized, as that term is defined in the OTS Prompt Corrective Action
regulations, following the capital distribution. Any additional capital
distributions would require prior regulatory approval. In the event the
Bank's capital fell below its fully-phased in requirement or the OTS notified
it that it was in need of more than normal supervision, the Bank's ability to
make capital distributions could be restricted. In addition, the OTS could
prohibit a proposed capital distribution by any institution, which would
otherwise be permitted by the regulation, if the OTS determines that such
distribution would constitute an unsafe or unsound practice.
LIQUIDITY. The Bank is required to maintain an average daily balance of
specified liquid assets equal to a monthly average of not less than a specified
percentage (currently 4%) of its net withdrawable deposit accounts plus
borrowings payable in one year or less. Monetary penalties may be imposed for
failure to meet these liquidity requirements. The Bank's average liquidity ratio
for the quarter ended September 30, 1997 was 10.01%, which exceeded the then
applicable requirements. The Bank has never been subject to monetary penalties
for failure to meet its liquidity requirements.
COMMUNITY REINVESTMENT ACT AND FAIR LENDING LAWS. Savings association share
a responsibility under the Community Reinvestment Act ("CRA") and related
regulations of the OTS to help meet the credit needs of their communities,
including low- and moderate-income neighborhoods. In addition, the Equal Credit
Opportunity Act and the Fair Housing Act (together, the "Fair Lending Laws")
prohibit lenders from discriminating in their lending practices on the basis of
characteristics specified in those statutes. An institution's failure to comply
with the provisions of CRA could, at a minimum, result in regulatory
restrictions on its activities, and failure to complete with the Fair Lending
Laws could result in enforcement actions by the OTS, as well as other federal
regulatory agencies and the Department of Justice. The Bank received a
"satisfactory" CRA rating under the current CRA regulations in its most recent
federal examination by the OTS.
TRANSACTIONS WITH RELATED PARTIES. The Bank's authority to engage in
transactions with related parties or "affiliates" (i.e., any company that
controls or is under common control with an institution, including the Company
and any non-savings institution subsidiaries) or to make loans to certain
insiders, is limited by Sections 23A and 23B of the Federal Reserve Act ("FRA").
Section 23A limits the aggregate amount of transactions with any individual
affiliate to 10% of the capital and surplus of the savings institution and also
limits the aggregate amount of transactions with all affiliates to 20% of the
savings institution's capital and surplus. Certain transactions with affiliates
are required to be secured by collateral in an amount and of a type described in
Section 23A and the purchase of low quality assets from affiliates is generally
prohibited. Section 23B provides that certain transactions with affiliates,
including loans and asset purchases, must be on terms and under circumstances,
including credit standards, that are substantially the same or at least as
favorable to the institution as those prevailing at the time for comparable
transactions with non-affiliated companies.
ENFORCEMENT. Under the FDI Act, the OTS has primary enforcement
responsibility over savings institutions and has the authority to bring
enforcement action against all "institution-related parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have
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an adverse effect on an insured institution. Formal enforcement action may
range from the issuance of a capital directive or cease and desist order to
removal of officers and/or directors of the institutions, receivership,
conservatorship or the termination of deposit insurance. Civil penalties
cover a wide range of violations and actions, and range up to $25,000 per
day, unless a finding of reckless disregard is made, in which case penalties
may be as high as $1 million per day. Under the FDI Act, the FDIC has the
authority to recommend to the Director of OTS that enforcement action be
taken with respect to a particular savings institution. If action is not
taken by the Director, the FDIC has authority to take such action under
certain circumstances.
STANDARDS FOR SAFETY AND SOUNDNESS. The FDI Act requires each federal
banking agency to prescribe for all insured depository institutions standards
relating to, among other things, internal controls, information systems and
audit systems, loan documentation, credit underwriting, interest rate risk
exposure, asset growth, and compensation fees and benefits and such other
operational and managerial standards as the agency deems appropriate. The
federal banking agencies adopted a final regulation and Interagency Guidelines
Prescribing Standards for Safety and Soundness ("Guidelines") to implement the
safety and soundness standards required under the FDI Act. The Guidelines set
forth the safety and soundness standards that the federal banking agencies use
to identify and address problems at insured depository institutions before
capital becomes impaired. The Guidelines address internal controls and
information systems; internal audit system; credit underwriting; loan
documentation; interest rate risk exposure; asset growth; and compensation, fees
and benefits. If the appropriate federal banking agency determines that an
institution fails to meet any standard prescribed by the Guidelines, the agency
may require the institution to submit to the agency an acceptable plan to
achieve compliance with the standard, as required by the FDI Act. The final
regulations establish deadlines for the submission and review of such safety and
soundness compliance plans.
CAPITAL REQUIREMENTS. The OTS capital regulations require savings
institutions to meet three capital standards: a 1.5% tangible capital standard,
a 3% leverage (core capital) ratio and an 8% risk based capital standard. Core
capital is defined as common stockholder's equity (including retained earnings),
certain non-cumulative perpetual preferred stock and related surplus, minority
interests in equity accounts of consolidated subsidiaries less intangibles other
than certain mortgage servicing rights ("MSRs") and credit card relationships.
The OTS regulations require that, in meeting the leverage ratio, tangible and
risk-based capital standards institutions generally must deduct investments in
and loans to subsidiaries engaged in activities not permissible for a national
bank. In addition, the OTS prompt corrective action regulation provides that a
savings institution that has a leverage capital ratio of less than 4% (3% for
institutions receiving the highest CAMEL examination rating) will be deemed to
be "undercapitalized" and may be subject to certain restrictions. See "--Prompt
Corrective Regulatory Action."
The risk-based capital standard for savings institutions requires the
maintenance of total capital (which is defined as core capital and supplementary
capital) to risk-weighted assets of 8%. In determining the amount of
risk-weighted assets, all assets, including certain off-balance sheet assets,
are multiplied by a risk-weight of 0% to 100%, as assigned by the OTS capital
regulation based on the risks OTS believes are inherent in the type of asset.
The components of core capital are equivalent to those discussed earlier under
the 3% leverage standard. The components of supplementary capital currently
include cumulative preferred stock, long-term perpetual preferred stock,
mandatory convertible securities, subordinated debt and intermediate preferred
stock and, within specified limits, the allowance for loan and lease losses.
Overall, the amount of supplementary capital included as part of total capital
cannot exceed 100% of core capital.
At September 30, 1997, the Bank met each of its capital requirements. See
"Historical and Pro Forma Capital Compliance" for a table which sets forth in
terms of dollars and percentages the OTS tangible, leverage and risk-based
capital requirements, the Bank's historical amounts and percentages at September
30, 1997, and pro forma amounts and percentages based upon the issuance of the
shares within the Offering Range and assuming that a portion of the net proceeds
are retained by the Company.
THRIFT CHARTER. Congress has been considering legislation in various forms
that would require federal thrifts, such as the Bank, to convert their charters
to national or state bank charters. Recent legislation required the Treasury
Department to prepare for Congress a comprehensive study on development of a
common charter for federal savings
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association and commercial banks; and, in the event that the thrift charter
was eliminated by January 1, 1999, would require the merger of the BIF and
the SAIF into a single deposit insurance fund on that date. The Bank cannot
determine whether, or in what form, such legislation may eventually be
enacted and there can be no assurance that any legislation that is enacted
would not adversely affect the Bank and the Company.
PROMPT CORRECTIVE REGULATORY ACTION
Under the OTS Prompt Corrective Action regulations, the OTS is required to
take certain supervisory actions against undercapitalized institutions, the
severity of which depends upon the institution's degree of capitalization.
Generally, a savings institution that has total risk-based capital of less than
8.0% or a leverage ratio or a Tier 1 core capital ratio that is less than 4.0%
is considered to be undercapitalized. A savings institution that has the total
risk-based capital less than 6.0%, a Tier 1 core risk-based capital ratio of
less than 3.0% or a leverage ratio that is less than 3.0% is considered to be
"significantly undercapitalized" and a savings institution that has a tangible
capital to assets ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." Subject to a narrow exception, the banking regulator is
required to appoint a receiver or conservator for an institution that is
"critically undercapitalized." The regulation also provides that a capital
restoration plan must be filed with the OTS within 45 days of the date an
institution receives notice that it is "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized." In addition, numerous
mandatory supervisory actions become immediately applicable to the institution,
including, but not limited to, restrictions on growth, investment activities,
capital distributions, and affiliate transactions. The OTS could also take any
one of a number of discretionary supervisory actions, including the issuance of
a capital directive and the replacement of senior executive officers and
directors.
INSURANCE OF DEPOSIT ACCOUNTS
The FDIC has adopted a risk-based insurance assessment system. The FDIC
assigns an institution to one of three capital categories based on the
institution's financial information, as of the reporting period ending seven
months before the assessment period, consisting of (1) well capitalized, (2)
adequately capitalized or (3) undercapitalized, and one of three supervisory
subcategories within each capital group. The supervisory subgroup to which an
institution is assigned is based on a supervisory evaluation provided to the
FDIC by the institution's primary federal regulator and information which the
FDIC determines to be relevant to the institution's financial condition and the
risk posed to the deposit insurance funds. An institution's assessment rate
depends on the capital category and supervisory category to which it is
assigned. The FDIC is authorized to raise the assessment rates in certain
circumstances. The FDIC has exercised this authority several times in the past
and may raise insurance premiums in the future. If such action is taken by the
FDIC, it could have an adverse effect on the earnings of the Bank.
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB System, which consists of 12 regional
FHLBs. The FHLB provides a central credit facility primarily for member
institutions. The Bank, as a member of the FHLB, is required to acquire and hold
shares of capital stock in that FHLB in an amount at least equal to 1% of the
aggregate principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its advances (borrowings)
from the FHLB, whichever is greater. As of September 30, 1997, the Bank was in
compliance with this requirement.
The FHLBs are required to provide funds for the resolution of insolvent
thrifts and to contribute funds for affordable housing programs. These
requirements could reduce the amount of dividends that the FHLBs pay to their
members and could also result in the FHLBs imposing a higher rate of interest on
advances to their members.
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FEDERAL RESERVE SYSTEM
The Federal Reserve Board regulations require savings institutions to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve Board
regulations generally require that reserves be maintained against aggregate
transaction accounts as follows: for accounts aggregating $49.3 million or
less (subject to adjustment by the Federal Reserve Board) the reserve
requirement is 3%; and for accounts greater than $49.3 million, the reserve
requirement is $1.5 million (subject to adjustment by the Federal Reserve
Board between 8% and 14%) against that portion of total transaction accounts
in excess of $49.3 million. The first $4.4 million of otherwise reservable
balances (subject to adjustments by the Federal Reserve Board) are exempted
from the reserve requirements. The Bank is in compliance with the foregoing
requirements. The balances maintained to meet the reserve requirements
imposed by the FRB may be used to satisfy liquidity requirements imposed by
the OTS.
HOLDING COMPANY REGULATION
THE COMPANY. The Company will be a non-diversified unitary savings and
loan holding company within the meaning of the HOLA. As such, the Company
will be required to register with the OTS and will be subject to OTS
regulations, examinations, supervision and reporting requirements. In
addition, the OTS has enforcement authority over the Company and its
non-savings institution subsidiaries. Among other things, this authority
permits the OTS to restrict or prohibit activities that are determined to be
a serious risk to the subsidiary savings institution. The Bank must notify
the OTS 30 days before declaring any dividend to the Company.
As a unitary savings and loan holding company, the Company generally will
not be restricted under existing laws as to the types of business activities
in which it may engage, provided that the Bank continues to be a QTL. See
"--Federal Regulation of Savings Institutions--Qualified Thrift Lender Test"
for a discussion of the QTL requirements. Upon any non-supervisory
acquisition by the Company of another savings association, the Company would
become a multiple savings and loan holding company (if the acquired
institution is held as a separate subsidiary) and would be subject to
extensive limitations on the types of business activities in which it could
engage. The HOLA limits the activities of a multiple savings and loan holding
company and its non-insured institution subsidiaries primarily to activities
permissible for bank holding companies under Section 4(c)(8) of the Bank
Holding Company ("BHC") Act, subject to the prior approval of the OTS, and to
other activities authorized by OTS regulation. Recently proposed legislation
would treat all savings and loan holding companies as bank holding companies
and limit the activities of such companies to those permissible for bank
holding companies. See "Risk Factors-- Regulatory Oversight and Possible
Legislation."
The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring another
savings institution or holding company thereof, without prior written
approval of the OTS. It also prohibits the acquisition or retention of, with
certain exceptions, more than 5% of a non-subsidiary savings institution, a
non-subsidiary holding company, or a non-subsidiary company engaged in
activities other than those permitted by the HOLA; or acquiring or retaining
control of an institution that is not federally insured. In evaluating
applications by holding companies to acquire savings institutions, the OTS
must consider the financial and managerial resources, future prospects of the
company and institution involved, the effect of the acquisition on the risk
to the insurance fund, the convenience and needs of the community and
competitive factors.
The OTS is prohibited from approving any acquisition that would result in
a multiple savings and loan holding company controlling savings institutions
in more than one state, subject to two exceptions: (i) the approval of
interstate supervisory acquisitions by savings and loan holding companies,
and (ii) the acquisition of a savings institution in another state if the
laws of the state of the target savings institution specifically permit such
acquisitions. The states vary in the extent to which they permit interstate
savings and loan holding company acquisitions.
THE MUTUAL HOLDING COMPANY. The Mutual Holding Company is a non-diversified
mutual savings and loan holding company within the meaning of the HOLA, as
amended. As such, the Mutual Holding Company is registered
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with the OTS and is subject to OTS regulations, examinations, supervision and
reporting requirements. In addition, the OTS has enforcement authority over
the Mutual Holding Company and any non-savings institution subsidiaries.
Among other things, this authority permits the OTS to restrict or prohibit
activities that are determined to be a serious risk to the subsidiary savings
institution.
Pursuant to Section 10(o) of the HOLA and OTS regulations and policy, a
mutual holding company may engage in the following activities: (i) investing
in the stock of a savings association; (ii) acquiring a mutual association
through the merger of such association into a savings association subsidiary
of such holding company or an interim savings association subsidiary of such
holding company; (iii) merging with or acquiring another holding company; one
of whose subsidiaries is a savings association; (iv) investing in a
corporation, the capital stock of which is available for purchase by a
savings association under federal law or under the law of any state where the
subsidiary savings association or associations share their home offices; (v)
furnishing or performing management services for a savings association
subsidiary of such company; (vi) holding, managing or liquidating assets
owned or acquired from a savings subsidiary of such company; (vii) holding or
managing properties used or occupied by a savings association subsidiary of
such company properties used or occupied by a savings association subsidiary
of such company; (viii) acting as trustee under deeds of trust; (ix) any
other activity (A) that the Federal Reserve Board, by regulation, has
determined to be permissible for bank holding companies under Section 4(c) of
the Bank Holding Company Act of 1956, unless the Director, by regulation,
prohibits or limits any such activity for savings and loan holding companies;
or (B) in which multiple savings and loan holding companies were authorized
(by regulation) to directly engage on March 5, 1987; and (x) purchasing,
holding, or disposing of stock acquired in connection with a qualified stock
issuance if the purchase of such stock by such savings and loan holding
company is approved by the Director. If a mutual holding company acquires or
merges with another holding company, the holding company acquired or the
holding company resulting from such merger or acquisition may only invest in
assets and engage in activities listed in (i) through (x) above, and has a
period of two years to cease any non-conforming activities and divest of any
non-conforming investments.
The HOLA prohibits a savings and loan holding company, including the
Mutual Holding Company, directly or indirectly, or through one or more
subsidiaries, from acquiring another savings institution or holding company
thereof, without prior written approval of the OTS. It also prohibits the
acquisition or retention of, with certain exceptions, more than 5% of a
non-subsidiary savings institution, a non-subsidiary holding company, or a
non-subsidiary company engaged in activities other than those permitted by
the HOLA; or acquiring or retaining control of an institution that is not
federally insured. In evaluating applications by holding companies to acquire
savings institutions, the OTS must consider the financial and managerial
resources, future prospects of the company and institution involved, the
effect of the acquisition on the risk to the insurance fund, the convenience
and needs of the community and competitive factors.
The OTS is prohibited from approving any acquisition that would result in
a multiple savings and loan holding company controlling savings institutions
in more than one state, subject to two exceptions: (i) the approval of
interstate supervisory acquisitions by savings and loan holding companies,
and (ii) the acquisition of a savings institution in another state if the
laws of the state of the target savings institution specifically permit such
acquisitions. The states vary in the extent to which they permit interstate
savings and loan holding company acquisitions.
In addition, OTS regulations require the Mutual Holding Company to notify
the OTS of any proposed waiver of its right to receive dividends. It is the
OTS' recent practice to review dividend waiver notices on a case-by-case
basis, and, in general, not object to any such waiver if: (i) the mutual
holding company's board of directors determines that such waiver is
consistent with such directors' fiduciary duties to the mutual holding
company's members; (ii) for as long as the savings association subsidiary is
controlled by the mutual holding company, the dollar amount of dividends
waived by the mutual holding company are considered as a restriction on the
retained earnings of the savings association, which restriction, if material,
is disclosed in the public financial statements of the savings association as
a note to the financial statements; (iii) the amount of any dividend waived
by the mutual holding company is available for declaration as a dividend
solely to the mutual holding company, and, in accordance with SFAS 5, where
the savings association determines that the payment of such dividend to the
mutual holding company is probable, an
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appropriate dollar amount is recorded as a liability; (iv) the amount of any
waived dividend is considered as having been paid by the savings association
in evaluating any proposed dividend under OTS capital distribution
regulations; and (v) in the event the mutual holding company converts to
stock form, the appraisal submitted to the OTS in connection with the
conversion application takes into account the aggregate amount of the
dividends waived by the mutual holding company.
FEDERAL SECURITIES LAWS
The Company has filed with the SEC a registration statement under the
Securities Act of 1933, as amended ("Securities Act"), for the registration
of the Common Stock to be issued pursuant to the Conversion. Upon completion
of the Conversion, the Company's Common Stock will be registered with the SEC
under the Exchange Act. The Company will then be subject to the information,
proxy solicitation, insider trading restrictions and other requirements under
the Exchange Act.
The registration under the Securities Act of shares of the Common Stock
to be issued in the Conversion does not cover the resale of such shares.
Shares of the Common Stock purchased by persons who are not affiliates of the
Company may be resold without registration. Shares purchased by an affiliate
of the Company will be subject to the resale restrictions of Rule 144 under
the Securities Act. If the Company meets the current public information
requirements of Rule 144 under the Securities Act, each affiliate of the
Company who complies with the other conditions of Rule 144 (including those
that require the affiliate's sale to be aggregated with those of certain
other persons) would be able to sell in the public market, without
registration, a number of shares not to exceed, in any three-month period,
the greater of (i) 1% of the outstanding shares of the Company or (ii) the
average weekly volume of trading in such shares during the preceding four
calendar weeks. Provision may be made in the future by the Company to permit
affiliates to have their shares registered for sale under the Securities Act
under certain circumstances.
TAXATION
FEDERAL TAXATION
TAX BAD DEBT RESERVES. The Bank is subject to the rules of federal
income taxation generally applicable to corporations under the Internal
Revenue Code of 1986, as amended (the "Code"). Most corporations are not
permitted to make deductible additions to bad debt reserves under the Code.
However, savings and loan associations and savings associations such as the
Bank, which meet certain tests prescribed by the Code may benefit from
favorable provisions regarding deductions from taxable income for annual
additions to their bad debt reserve. For purposes of the bad debt reserve
deduction, loans are separated into "qualifying real property loans," which
generally are loans collateralized by interests in real property, and
non-qualifying loans, which are all other loans. The bad debt reserve
deduction with respect to non-qualifying loans must be based on actual loss
experience. The amount of the bad debt reserve deduction with respect to
qualifying real property loans may be based upon actual loss experience (the
"experience method") or a percentage of taxable income determined without
regard to such deduction (the "percentage of taxable income method").
The Bank has elected to use the method that results in the greatest
deduction for federal income tax purposes. The amount of the bad debt
deduction that a thrift institution may claim with respect to additions to
its reserve for bad debts is subject to certain limitations. First, the full
deduction is available only if at least 60% of the institution's assets fall
within certain designated categories. Second, under the percentage of taxable
income method the bad debt deduction attributable to "qualifying real
property loans" cannot exceed the greater of (i) the amount deductible under
the experience method or (ii) the amount which, when added to the bad debt
deduction for non-qualifying loans, equals the amount by which 12% of the sum
of the total deposits and the advance payments by borrowers for taxes and
insurance at the end of the taxable years exceeds the sum of the surplus,
undivided profits, and reserves at the beginning of the taxable year. Third,
the amount of the bad debt deduction attributable to qualifying real property
loans computed using the percentage of taxable income method is permitted
only to the extent that the institution's
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<PAGE>
reserve for losses on qualifying real property loans at the close of the
taxable year does not exceed 6% of such loans outstanding at such time.
Under recently enacted legislation, the percentage of taxable income
method has been repealed for years beginning after December 31, 1995. Large
associations, i.e., those for which the quarterly average of the
association's total assets or the consolidated group of which it is a member,
exceeds $500 million for the year, may no longer be entitled to use the
experience method of computing additions to their bad debt reserve. A "large"
association must use the direct write-off method for deducting bad debts,
under which charge-offs are deducted and recoveries are taken into taxable
income as incurred. If the Bank is not a "large" association, the Bank will
continue to be permitted to use the experience method. The Bank will be
required to recapture (i.e., take into income) over a six year period its
applicable excess reserves, i.e. the balances of its reserves for losses on
qualifying loans and nonqualifying loans, as of the close of the last tax
year beginning before January 1, 1996, over the greater of (a) the balance of
such reserves as of December 31, 1987 (pre-1988 reserves) or (b) in the case
of a bank which is not a "large" association, an amount that would have been
the balance of such reserves as of the close of the last tax year beginning
before January 1, 1996, had the bank always computed the additions to its
reserves using the experience method. Postponement of the recapture is
possible for a two-year period if an association meets a minimum level of
mortgage lending for 1996 and 1997. As of September 30, 1997, the Bank's bad
debt reserve subject to recapture over a six-year period totaled
approximately $1,178,000. The Bank has established, as a component of its net
deferred tax asset, a deferred tax liability of approximately $477,000 for
this recapture.
If an association ceases to qualify as a a bank (as defined in Code
Section 581) or converts to a credit union, the pre-1988 reserves and the
supplemental reserve are restored to income ratably over a six-year period,
beginning in the tax year the association no longer qualifies as a bank. The
balance of the pre-1988 reserves are also subject to recapture in the case of
certain excess distributions to (including distributions on liquidation and
dissolution), or redemptions of, shareholders.
DISTRIBUTIONS. To the extent that (i) the Bank's tax bad debt reserve
for losses on qualifying real property loans exceeds the amount that would
have been allowed under an experience method and (ii) the Bank makes
"non-dividend distributions" to stockholders that are considered to result in
distributions from the excess tax bad debt reserve or the reserve for losses
on loans ("Excess Distributions"), then an amount based on the amount
distributed will be included in the Bank's taxable income. Non-dividend
distributions include distributions in excess of the Bank's current and
accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation. However, dividends paid out
of the Bank's current or accumulated earnings and profits, as calculated for
federal income tax purposes, will not be considered to result in a
distribution from the Bank's tax bad debt reserves. Thus, any dividends to
the Company that would reduce amounts appropriated to the Bank's tax bad debt
reserves and deducted for federal income tax purposes would create a tax
liability for the Bank. The amount of additional taxable income created from
an Excess Distribution is an amount that when reduced by the tax attributable
to the income is equal to the amount of the distribution. Thus, if certain
portions of the Bank's accumulated tax bad debt reserve are used for any
purpose other than to absorb qualified tax bad debt losses, such as for the
payment of dividends or other distributions with respect to the Bank's
capital stock (including distributions upon redemption or liquidation),
approximately one and one-half times the amount so used would be includable
in gross income for federal income tax purposes, assuming a 34% corporate
income tax rate (exclusive of state taxes). See "Regulation--Federal
Regulations--Limitations on Capital Distributions" for limits on the payment
of dividends of the Bank. The Bank does not intend to pay dividends that
would result in a recapture of any portion of its tax bad debt reserves.
CORPORATE ALTERNATIVE MINIMUM TAX. The Bank is subject to the corporate
alternative minimum tax which is imposed to the extent it exceeds the Bank's
regular income tax for the year. The alternative minimum tax will be imposed
at the rate of 20% of a specially computed tax base. Included in this base
will be a number of preference items, including the following: (i) 100% of
the excess of a thrift institution's bad debt deduction over the amount that
would have been allowable on the basis of actual experience; (ii) interest on
certain tax-exempt bonds issued after August 7, 1986; and (iii) for years
beginning in 1988 and 1989 an amount equal to one-half of the amount by which
a institution's "book income" (as specially defined) exceeds its taxable
income with certain adjustments, including the
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<PAGE>
addition of preference items (for taxable years commencing after 1989 this
adjustment item is replaced with a new preference item relating to "adjusted
current earnings" as specially computed). In addition, for purposes of the
new alternative minimum tax, the amount of alternative minimum taxable income
that may be offset by net operating losses is limited to 90% of alternative
minimum taxable income.
The Mutual Holding Company and the Bank file separate federal tax return.
The Bank has not had its income tax returns examined by the IRS or the State
of Arkansas within the last three years. The Bank has not been audited by the
IRS or the Arkansas State Revenue Department in recent years.
ARKANSAS TAXATION
The State of Arkansas generally imposes income tax on thrift institutions
computed at a rate of 6.5% of net earnings. For the purpose of the 6.5%
income tax, net earnings are defined as the net income of the thrift
institution computed in the manner prescribed for computing the net taxable
income for federal corporate income tax purposes, less (i) interest income
from obligations of the United States, of any county, municipal or public
corporation authority, special district or political subdivision of Arkansas,
plus (ii) any deduction for state income taxes.
The Company will be required to file an Arkansas income tax return
because it will be doing business in Arkansas. For Arkansas tax purposes,
regular corporations are presently taxed at a rate equal to 6.5% of taxable
income. For this purpose, "taxable income" generally means Federal taxable
income subject to certain adjustments (including addition of interest income
on state and municipal obligation).
DELAWARE TAXATION
As a Delaware holding company not earning income in Delaware, the Company
is exempt from Delaware corporate income tax but is required to file an
annual report with and pay an annual franchise tax to the State of Delaware.
MANAGEMENT OF THE COMPANY
The Board of Directors of the Company consists of those persons who
currently serve as Directors of the Bank. The Board of Directors is divided
into three classes, each of which contains approximately one-third of the
Board. The directors shall be elected by the stockholders of the Company for
staggered three year terms, or until their successors are elected and
qualified. One class of directors, consisting of directors Martin, Ervin and
Campbell have terms of office expiring in 1998; a second class, consisting of
directors Rainwater and Edington have terms of office expiring in 1999; and a
third class, consisting of directors Baltz and Van Camp have terms of office
expiring in 2000. Their names and biographical information are set forth
under "Management of the Bank--Directors."
The following individuals hold positions as executive officers of the
Company as is set forth below opposite their names.
NAME POSITION WITH THE COMPANY
- --------------------------------------- ----------------------------------
Skip Martin Director, President and Chief
Executive Officer
James A. Edington Executive Vice President and
Director
Dwayne Powell Chief Financial Officer
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<PAGE>
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors.
Since the formation of the Company, none of the executive officers,
directors or other personnel has received remuneration from the Company.
Information concerning the principal occupations, employment and compensation
of the directors and officers of the Company during the past five years is
set forth under "Management of the Bank."
MANAGEMENT OF THE BANK
DIRECTORS
The Bank's Board of Directors is composed of seven members. Directors of
the Bank are generally elected to serve for a three year period or until
their respective successors shall have been elected and shall qualify. The
following table sets forth certain information regarding the composition of
the Bank's Board of Directors as of September 30, 1997, including the terms
of office of Board members.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
POSITIONS BENEFICIALLY
HELD IN THE SERVED CURRENT TERM OWNED ON PERCENT
NAME (1) AGE BANK SINCE (2) TO EXPIRE RECORD DATE (3) OF CLASS
- ---------------- --- ------------------------- --------- ------------ --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Ralph P. Baltz 49 Chairman 1986 2000 26,183 1.6%
Skip Martin 48 President, Chief 1988 1998 32,537 2.0%
Executive Officer and
Director
Robert Rainwater 62 Director 1981 1999 6,158 *
N. Ray Campell 47 Director 1992 1998 7,039 *
Charles R. Ervin 60 Director 1988 1998 11,265 *
James A. Edington 47 Executive Vice 1994 1999 21,494 1.3%
President and
Director
Marcus Van Camp 49 Director 1990 2000 5,283 *
</TABLE>
- ------------------------
* Less than 1%
(1) The mailing address for each person listed is 203 West Broadway,
Pocahontas, Arkansas 72455. Each of the persons listed is also a director
of Pocahontas Federal Mutual Holding Company, Inc., which owns the
majority of the Bank's issued and outstanding shares of Common Stock.
(2) Reflects initial appointment to the Board of Directors of the Bank's
mutual predecessor.
(3) See definition of "beneficial ownership" in the table "Beneficial
Ownership of Common Stock."
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following table sets forth information regarding the executive
officer of the Bank who is not also a director.
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<PAGE>
POSITION
HELD IN THE
NAME AGE BANK
- ---------------------------- --- -----------------------
Dwayne Powell 33 Chief Financial Officer
SKIP MARTIN has been the President and Chief Executive Officer of the
Bank since 1990, and a member of the Board of Directors of the Bank since
1988. Prior to his appointment as President and Chief Executive Officer, Mr.
Martin served as Vice President of the Bank. Mr. Martin has been employed by
the Bank since 1972 and has been an officer of the Bank since 1978.
RALPH P. BALTZ has been Chairman of the Board since January 1997. Mr.
Baltz is a general contractor and residential developer and is the President
and owner/operator of Tri-County Sand and Gravel, Inc.
MARCUS VAN CAMP is the Superintendent of Schools at Pocahontas Public
Schools, and has been employed by such schools for 25 years.
JAMES A. EDINGTON has been Executive Vice President of the Bank since
1991. In this position, Mr. Edington serves as the Bank's compliance officer,
security officer, secretary and treasurer. Mr. Edington serves a similar role
with the Mutual Holding Company. Mr. Edington has been employed in executive
roles with the Bank since 1983.
CHARLES R. ERVIN is retired. Prior to his retirement, Mr. Ervin was
President and owner of C.E.C., Inc., a construction company, since March
1992. Prior to that, Mr. Ervin was President and part-owner of M.T.C., Inc.,
a general contractor specializing in tenant construction in shopping centers
nationally.
N. RAY CAMPBELL is the Plant Manager at Waterloo Industries Incorporated,
an industrial firm located in Pocahontas, Arkansas.
ROBERT RAINWATER is semi-retired. Prior to his retirement, Mr. Rainwater
was the owner of Sexton Pharmacy in Walnut Ridge, Arkansas.
DWAYNE POWELL, CPA, has served as Chief Financial Officer of the Bank
since October 1996. Prior to that Mr. Powell was an Audit Manager for
Deloitte & Touche LLP, primarily serving financial institution clients.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Bank's Board of Directors is conducted through
meetings and activities of the Board and its committees. During the fiscal
year ended September 30, 1997, the Board of Directors held 12 regular and two
special meetings. During the fiscal year ended September 30, 1997, no
director attended fewer than 75 percent of the total meetings of the Board of
Directors of the Bank and committees on which such director served.
The Asset/Liability Management Committee consists of the entire Board of
Directors and meets at least quarterly to oversee interest rate risk and
asset classification. The Asset/Liability Management Committee met five times
during the fiscal year ended September 30, 1997.
The Audit Committee of the Bank consists of all the outside Board of
Directors. The Audit Committee met three times during the fiscal year ended
September 30, 1997. The Audit Committee normally meets on a quarterly basis
and serves as a liaison between the Board, the Bank's independent auditors,
federal regulators and management.
The Loan Committee of the Bank consists of all the Board of Directors,
Chief Financial Officer Dwayne Powell, Vice President Robert Sorg and Senior
Vice President Bill Stacy, and meets as necessary to approve loans
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<PAGE>
over a pre-established dollar limit. The Loan Committee must have at least
two outside board members to have a quorum. The Loan Committee met nineteen
times during the fiscal year ended September 30, 1997.
The Finance/Budget Committee consists of directors Ralph P. Baltz, N. Ray
Campbell, Robert Rainwater, James A. Edington, Skip Martin and Chief
Financial Officer Dwayne Powell. The Finance Committee reviews management's
implementation of the Bank's investment policy. The Finance Committee met one
time during the fiscal year ended September 30, 1997.
The Nominating Committee consists of directors Robert Rainwater, Marc Van
Camp and James A. Edington, and meets annually to present officer and
director candidates to the Bank. The Nominating Committee met once during the
fiscal year ended September 30, 1997.
The Proxy Committee consists of all the Board of Directors and meets as
needed at the request of the Chairman of the Board. The Proxy Committee met
once during the fiscal year ended September 30, 1997.
The Executive Compensation Committee consists of directors Ralph P.
Baltz, N. Ray Campbell, Marc Van Camp and Robert Rainwater, and meets
annually to set the compensation levels of executive officers. The committee
met once for the fiscal year ended September 30, 1997.
The Dividend Committee consists of the entire Board of Directors. The
Dividend Committee meets at least quarterly to recommend the amount and type
of dividend to be paid by the Bank. The Dividend Committee met seven times
during the fiscal year ended September 30, 1997.
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended September 30,
1997, 1996, and 1995, certain information as to the total remuneration paid by
the Bank to the Chief Executive Officer of the Bank and all other executive
officers earning in excess of $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
NAME AND YEAR OTHER
PRINCIPAL ENDED SALARY ANNUAL
POSITION SEPTEMBER 30, (1) BONUS COMPENSATION
- ------------------------------------------------------------------- ----------------- --------- --------- -------------
<S> <C> <C> <C> <C>
Skip Martin,....................................................... 1997 $ 166,100 $ 10,200 --
President and Chief Executive Officer 1996 141,100 9,900 --
1995 138,100 11,100 --
James A. Edington,................................................. 1997 $ 140,000 $ 9,700 --
Executive Vice President 1996 95,000 9,700 --
1995 89,883 10,900 --
Dwayne Powell,.....................................................
Chief Financial Office (4) 1997 $ 100,000 -- --
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS PAYOUTS
------------------------ --------- ALL
NAME AND RESTRICTED OPTIONS/ OTHER
PRINCIPAL STOCK SARS LTIP COMPENSATION
POSITION AWARDS(3) (#) PAYOUTS (2)
- ------------------------------------------------------------------- ----------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Skip Martin,....................................................... $ -- -- $ -- $ 18,957
President and Chief Executive Officer -- -- -- 20,551
-- -- -- 21,507
James A. Edington,................................................. $ -- -- $ -- $ 19,778
Executive Vice President -- -- -- 13,071
-- -- -- 13,845
Dwayne Powell,.....................................................
Chief Financial Office (4) $ 53,047 -- $ -- 88
</TABLE>
- ------------------------
(1) Includes Board of Director and committee fees.
(2) Consists of payments made pursuant to the Bank's Profit Sharing Plan. See
"Benefits--Profit Sharing Plan." Also includes the Bank's contributions or
allocations (but not earnings) pursuant to the Bank's Employee Stock
Ownership Plan. Does not include benefits pursuant to the Bank's Pension
Plan. See "Benefits." The Bank also provides its Chief Executive Officer
with use of a Bank-owned automobile, the value of which use did not exceed
the lesser of $50,000 or 10% of such officer's cash compensation.
73
<PAGE>
(3) Represents awards made pursuant to the Bank's Recognition and Retention Plan
for Employees, which awards vest in five equal annual installments
commencing on March 31, 1995. Dividends on such shares accrue and are paid
to the recipient when the shares vest. The value of such shares was
determined by multiplying the number of shares awarded by the price at which
the shares of common stock were sold in the Bank's initial public offering
on such date. At September 30, 1997, Mr. Martin held 2,990, Mr. Edington
held 1,994, and Mr. Powell held 1,564 shares, respectively, of common stock
that remained subject to restrictions under the Plan. The fair market value
of such restricted stock on September 30, 1997 (based on the price of the
last sale reported on NASDAQ on such date) was $98,670, $65,802 and $51,612,
respectively.
(4) Mr. Powell was not employed by the Bank in fiscal year 1996 or 1995.
EMPLOYMENT AGREEMENTS. The Bank has entered into employment agreements with
Skip Martin, its President and Chief Executive Officer, James A. Edington, its
Executive Vice President and Dwayne Powell, its Chief Financial Officer. Each
employment agreement provides for a term of three years. Commencing on the first
anniversary date and continuing each anniversary date thereafter, the Board of
Directors may extend each agreement for an additional year such that the
remaining terms shall be up to three years unless written notice of nonrenewal
is given by the Board of Directors after conducting a performance evaluation.
The agreements provide that the base salary of the executive will be reviewed
annually. In addition to the base salary, the agreements provide that the
executive is to receive all benefits provided to permanent full time employees
of the Bank, including among other things, disability pay, participation in
stock benefit plans and other fringe benefits applicable to executive personnel.
Each agreement permits the Bank to terminate the executive's employment for
cause at any time. In the event the Bank chooses to terminate the executive's
employment for reasons other than for cause, or upon the termination of
executive's employment for reasons other than a change in control, as defined,
or in the event of the executive's resignation from the Bank upon (i) failure to
be reelected to his current office, (ii) a material change in his functions,
duties or responsibilities, (iii) relocation of his principal place of
employment, (iv) the liquidation or dissolution of the Bank or the Holding
Company, or (v) a breach of the agreement by the Bank, the executive, or in the
event of death, his beneficiaries, would be entitled to receive an amount equal
to the greater of the remaining payments, including base salary, bonuses and
other payments due under the remaining term of the agreement or three times the
average of the executive's base salary, including bonuses and other cash
compensation paid, and the amount of any benefits received pursuant to any
employee benefit plans maintained by the Bank.
If termination, voluntary or involuntary, follows a change in control of the
Bank, as defined in the agreement, the executive or, in the event of his death,
his beneficiaries, would be entitled to a payment equal to the greater of (i)
the payments due under the remaining term of the agreement or (ii) 2.99 times
his average annual compensation over the five years preceding termination. The
Bank would also continue the executive's life, health, and disability coverage
for the remaining unexpired term of the agreement to the extent allowed by the
plan or policies maintained by the Bank from time to time. The Bank would also
continue the executive's life, health, and disability coverage for the remaining
unexpired term of the agreement to the extent allowed by the plans or policies
maintained by the Bank from time to time.
Each employment agreement provides that for a period of one year following
termination, the executive agrees not to compete with the Bank in any city, town
or county in which the Bank maintains an office or has filed an application to
establish an office.
DIRECTORS' COMPENSATION
Members of the Board of Directors of the Bank each received fees of $1,250
per month during the fiscal year ended September 30, 1997. In addition, the
Chairman of the Board received an additional $625 per month during the fiscal
year ended September 30, 1997. No additional compensation or fees are received
for serving as directors of the Bank.
1994 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS. The Bank adopted the 1994
Stock Option Plan for Outside Directors of the Bank (the "1994 Directors' Plan")
in April 1994, and such plan was subsequently approved by the Bank's
stockholders. At that time, non-statutory stock options to purchase 20,643
shares were granted to the outside
74
<PAGE>
directors of the Bank. The 1994 Directors' Plan reserved 4,274 shares of Bank
Common Stock for future grant. Any person who becomes a non-employee director
subsequent to the effective date of the 1994 Directors' Plan is entitled to
receive options for 1,424 shares of Bank Common Stock to the extent options
are available. Options granted in 1994 vest ratably at 20% per year
commencing on the first September 30th after the effective date of the 1994
Directors' Plan. The exercise price of the options will be equal to the fair
market value of the shares of Bank Common Stock underlying such option at the
time the option is granted, or $10.00 per share of Bank Common Stock for
options granted in conjunction with the Bank's stock offering. All options
granted under the 1994 Directors' Plan may be exercised from time to time in
whole or in part, and expire upon the earlier of ten years following the date
of grant or three years following the date the optionee ceases to be a
director. No options were granted under the 1994 Directors' Plan during the
fiscal year ended September 30, 1997. In fiscal 1997, Ralph P. Baltz, Charles
Ervin and W.W. Scott, a former director, exercised 3,559, 3,559 and 712
options respectively, under the 1994 Directors' Plan. To the extent not
exercised by the Effective Date, the options to purchase Bank Common Stock
will be converted into and become options to purchase Common Stock. The
number of shares of Common Stock to be received upon exercise of such options
will be determined pursuant to the Exchange Ratio. The aggregate exercise
price, duration and vesting schedule of such options will not be affected.
1994 RECOGNITION AND RETENTION PLAN FOR OUTSIDE DIRECTORS. In April 1994,
the Bank adopted the 1994 Recognition and Retention Plan for Outside Directors
("1994 Directors' Recognition Plan"), which was subsequently approved by the
Bank's stockholders. Awards under the 1994 Directors' Recognition Plan have been
granted in the form of shares of Bank Common Stock that were restricted by the
terms of the 1994 Directors' Recognition Plan ("Restricted Stock"). During 1994,
each outside director of the Bank was awarded 1,238 shares of Bank Common Stock
under the 1994 Directors' Recognition Plan, which vest in five equal
installments commencing September 30, 1994. In September 1997, directors Baltz,
Rainwater, Campbell, Ervin, and Van Camp each vested in 248 shares of Bank
Common Stock, and will vest in the remaining awards in one final installment on
September 30, 1998. Awards also become fully vested upon a director's
disability, death, retirement or following termination of service in connection
with a change in control of the Bank or the Mutual Holding Company. Unvested
shares are forfeited by a director upon failure to seek reelection, failure to
be reelected, or resignation from the Board. Prior to vesting, recipients of
awards under the 1994 Directors' Recognition Plan will receive the cash and
stock dividends paid with respect to the restricted stock and may vote the
shares of restricted stock allocated to them. On the Effective Date, unvested
shares of Restricted Stock will be converted into shares of Common Stock
pursuant to the Exchange Ratio and will be restricted on the same terms as the
Restricted Stock.
DIRECTOR PLAN. The Bank maintains a non-tax qualified Director Plan that
provides directors who serve on the Board of Directors until the age of 60 or,
in some cases, 65, with an annual benefit equal to a predetermined amount
ranging between $29,316 and $35,640 following the directors' termination of
service due to retirement, death, or after a change in control. Benefits are
payable monthly to the director, or in the case of his death, to his
beneficiary, over a period of twenty years. The Director Plan provides for a
$15,000 "burial benefit," which is designated for the payment of burial and/or
funeral expenses. In the event of a director's disability, the director will be
entitled to a disability benefit equal to the annuitized present value of his
accrued benefit payable monthly for twenty years. In addition, upon the
director's death following disability, the director's beneficiary will receive a
lump sum benefit equal to up to $600,000, reduced by all prior contributions
made to the Director Plan on behalf of the director.
The Bank and the Director Plan participants have each established an
irrevocable trust in connection with the Director Plan. These trusts will be
funded with contributions from the Bank for the purpose of providing the
benefits promised under the terms of the Director Plan. The assets of the trusts
established by the participants will be beneficially owned by the Director Plan
participants, who will recognize income as contributions are made to the trust.
Earnings on the trusts' assets are taxable to the participants. The trustee of
the trusts may invest the trusts' assets in the Company Common Stock and may
purchase life insurance on the lives of the participants with assets of the
trusts.
DIRECTOR EMERITUS PLAN. The Bank currently has two former directors who
have been appointed "Director Emeritus". Upon reaching age 70 with 10 years of
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<PAGE>
continuous service as a director, each current Director Emeritus was, upon
retirement from the Board of Directors, appointed a "Director Emeritus" in
exchange for performing consulting services for the Board of Directors. Under
the current plan, in consideration of his services, a Director Emeritus will
receive an annual fee of $18,000 for a ten year period (the "benefit period")
following the director's designation as a Director Emeritus. The Director
Emeritus Plan provides for survivor benefits payable to a designated beneficiary
in an amount equal to the annual fee for the remainder of the ten year period,
plus a $10,000 "burial benefit," which is designated for the payment of burial
and/or funeral expenses.
BENEFITS FOR EMPLOYEES AND OFFICERS
1994 INCENTIVE STOCK OPTION PLAN. The Bank adopted the 1994 Incentive Stock
Option Plan (the "Incentive Option Plan") for officers and employees of the Bank
and its affiliates in April 1994, and such plan was subsequently approved by the
Bank's stockholders. The Incentive Option Plan is administered by a committee of
outside directors. The Incentive Option Plan authorizes the grant of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986 (the "Code"), "non-statutory options," which do not qualify as incentive
stock options, and certain "limited rights" exercisable only upon a change in
control of the Bank or the Mutual Holding Company.
Incentive stock options (with limited rights) for 49,833 shares of Bank
Common Stock were granted to employees and officers contemporaneously with the
completion of the Bank's stock offering in April 1994 at an exercise price of
$10.00. No options were granted or exercised under the Incentive Option Plan
during the fiscal year ended September 30, 1997.
At September 30, 1997, the number of shares of Bank Common Stock underlying
unexercised options granted to all participants as a group was 48,052 and the
unrealized value of such stock options was $1.1 million (based on the difference
between the strike price for such options and the price for the Bank Common
Stock underlying such options on the last sale date reported on NASDAQ on
September 30, 1997). All such options granted are exercisable at $10.00 per
share. The following tables sets forth certain information regarding the shares
acquired and the value realized during fiscal year 1997 by certain executive
officers of the Bank at September 30, 1997. To the extent not exercised by the
Effective Date, the options to purchase Bank Common Stock will be converted into
and become options to purchase Common Stock. The number of shares of Common
Stock to be received upon exercise of such options will be determined pursuant
to the Exchange Ratio. The aggregate exercise price, duration and vesting
schedule of such options will not be affected.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-
SHARES OPTIONS AT THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END FISCAL YEAR-END
UPON VALUE ----------------------- -----------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------------------------ ----------- ----------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Skip Martin............................... -- -- 14,950/9,966 $ 343,850/$229,218
James A. Edington......................... -- -- 7,475/4,983 $ 171,925/$114,609
</TABLE>
RECOGNITION AND RETENTION PLAN. In April 1994, the Bank established the
Recognition and Retention Plan for Employees (the "Employees' RRP") as a method
of providing officers, and key employees with a proprietary interest in the Bank
in a manner designed to encourage such persons to remain with the Bank.
76
<PAGE>
A Committee of the Board of Directors of the Bank composed of all of the
outside directors of the Bank administers the Employees' RRP. Awards have been
granted in the form of shares of Bank Common Stock that were restricted by the
terms of the Employees' RRP ("Restricted Stock"). Restricted Stock is
nontransferable and nonassignable. Participants in the Employees' RRP become
vested in shares of Bank Common Stock covered by an award, and all restrictions
lapse, at a rate of 20% per year commencing on March 31, 1995. Awards to
officers and employees become fully vested (i.e., all restrictions lapse) upon
termination of employment due to normal retirement, death, or disability or
following a termination of employment in connection with a change in control of
the Bank or the Mutual Holding Company. Upon termination of employment for any
other reason, unvested shares of Restricted Stock are forfeited. The holders of
Restricted Stock will have the right to vote such shares during the restricted
period and will receive the cash and stock dividends with respect to restricted
stock when declared and paid. The holders may not sell, assign, transfer, pledge
or otherwise encumber any of the Restricted Stock during the restricted period.
On the Effective Date, unvested shares of Restricted Stock will be converted
into shares of Common Stock pursuant to the Exchange Ratio and will be
restricted on the same terms as the Restricted Stock.
401(K) SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN. The Bank merged its
Employee Stock Ownership Plan ("ESOP") and Profit Sharing Plan to form the
401(k) Savings and Employee Stock Ownership Plan (the "KSOP"), effective October
1, 1997, to enable participants to invest in Bank Common Stock with the pre-tax
deferral of their salary ("Elective Deferrals"). The KSOP is a tax-qualified
plan subject to the requirements of the Employee Retirement Income Security Act
of 1974 ("ERISA") and the Code. Employees with a year of service with the Bank
during which they worked at least 1,000 hours and who have attained age 21 are
eligible to participate in any ESOP, matching or discretionary contributions
under the plan. Any employee with one hour of service may participate in making
any Elective Deferrals.
The ESOP portion of the KSOP provides the plan with the ability to borrow
money for the purpose of purchasing Bank Common Stock. As part of the Offering,
the ESOP portion of the KSOP intends to borrow funds from the Company and use
those funds to purchase a number of shares equal to 8% of the Common Stock to be
issued in the Offering. Collateral for the loan will be the Common Stock
purchased by the KSOP. The loan will be repaid principally from the Bank's
contributions to the KSOP. Shares purchased with the ESOP loan will be held in a
suspense account for allocation among participants as the loan is repaid. As the
ESOP loan is repaid from contributions the Bank makes to the ESOP portion of the
KSOP, shares will be released from the suspense account in an amount
proportional to the repayment of the KSOP loan. The released shares will be
allocated among the ESOP accounts of participants who have a 1000 hours of
service for the current plan year and are employed on the last day of the plan
year, on the basis of compensation in the year of allocation, up to an annual
adjusted maximum level of compensation. On the Effective Date, the Bank Common
Stock held by the KSOP will be exchanged for shares of Common Stock, pursuant to
the Exchange Ratio.
Participants may elect to defer up to 15% of their salary into the KSOP
("Elective Deferrals") . The Bank may, in its discretion, make discretionary
("Discretionary Contributions") and/or matching contributions ("Matching
Contributions") to the KSOP. Benefits in the ESOP, Discretionary Contributions
and Matching Contributions generally will become 100% vested after five years of
credited service. Employees are 100% vested in the Elective Deferral accounts
and rollover accounts at all times under the plan. Participants will be credited
for years of service with the Bank prior to the effective date of the plan.
Forfeitures of Matching and Discretionary Contributions will be used to reduce
such contributions in succeeding plan years; forfeitures of ESOP Contributions
are reallocated among remaining participating employees in the same proportion
as contributions. Benefits may be payable upon death, retirement, early
retirement, disability, or separation from service in a lump sum or, at the
election of the participant, in installments not to exceed five years. The
Bank's contributions to the KSOP are discretionary, subject to the ESOP loan
terms and tax law limits, so benefits payable under the KSOP cannot be
estimated.
The KSOP provides for loans to employees not to exceed 50% of their
vested Discretionary Contribution, Elective Deferral, Matching Contribution
or Rollover Account balances, or $50,000. Withdrawals are permitted only to
the extent of hardship (e.g., medical expenses),
77
<PAGE>
to purchase a primary residence, for limited education expenses or any other
condition or event as determined by the Commissioner of the Internal Revenue
Service from the vested portion or the Discretionary Contribution, Elective
Deferral, Matching Contribution or Rollover Accounts.
A committee is appointed by the Board of Directors of the Bank to administer
the KSOP (the "KSOP Committee"). The KSOP Committee instructs the trustee
regarding investment of funds contributed to the KSOP. The KSOP trustee is
required to vote all allocated shares held in the KSOP in accordance with the
instructions of the participants; unallocated shares shall be voted in a manner
calculated to reflect most accurately the instructions the KSOP trustee has
received from participants regarding the allocated stock. If no shares have been
allocated, KSOP participants will be deemed to have one share of stock allocated
to his account for the sole purpose of providing the trustee with voting
instructions. Under ERISA, the Secretary of Labor is authorized to bring an
action against the KSOP trustee for the failure of the KSOP trustee to comply
with its fiduciary responsibilities. Such a suit could seek to enjoin the KSOP
trustee from violating its fiduciary responsibilities and could result in the
imposition of civil penalties or criminal penalties if the breach is found to be
willful.
SUPPLEMENTAL RETIREMENT PLAN. In November 1993, management of the Bank
approved a supplemental retirement plan (the "Retirement Plan") for the Bank's
former Chairman of the Board, Mr. Joe R. Martin, who retired in January 1996.
The plan provides for an annual payment of $75,000 per year for ten years. The
payment will be made to Mr. Martin's spouse in the event of his death during
such ten-year period. In fiscal 1997, the Board approved an additional $75,000
and a one year extension of the Retirement Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Bank has implemented a
non-qualified Supplemental Executive Retirement Plan ("SERP") to provide a
select group of management and highly compensated employees with additional
benefits following termination of employment due to retirement, death, after a
change in control or involuntary termination. The contribution made to the SERP
is intended to provide an actuarially determined annual benefit of $182,143 for
Skip Martin, $147,143 for James A. Edington, and $214,286 for Dwayne Powell,
payable monthly for 20 years. In the event of the employee's disability, the
employee will be entitled to a disability benefit equal to the annuitized
present value of his accrued benefit payable monthly for twenty years. In
addition, upon the employee's death following disability, the director's
beneficiary will receive a lump sum death benefit equal to $3 million, $2.7
million and $2.6 million in the case of Messrs. Martin, Edington, and Powell,
respectively, reduced by all prior contributions made to the SERP on behalf of
the participant. The SERPs also provide for a $15,000 "burial benefit," which is
designated for the payment of burial and/or funeral expenses.
The Bank and the SERP participants have each established an irrevocable
trust in connection with each SERP. These trust will be funded with
contributions from the Bank for the purpose of providing the benefits promised
under the terms of the SERP. The assets of the trust will be beneficially owned
by the SERP participants, who will recognize income as contributions are made to
the trust. Earnings on the trust's assets are taxable to the participants. The
trustee of the trust may invest the trust's assets in the Company Common Stock
and may purchase life insurance on the life of the participant with assets of
the trust.
1998 STOCK OPTION PLAN. At a meeting of the Company's stockholders to be
held at least six months after the completion of the Offering, the Board of
Directors intends to submit for stockholder approval the 1998 Stock Option
Plan for directors and officers of the Bank and of the Company. If approved
by the stockholders, Common Stock in an aggregate amount equal to 10% of the
shares issued in the Offering would be reserved for issuance by the Company
upon the exercise of the stock options granted under the 1998 Stock Option
Plan. Ten percent of the shares issued in the Offering would amount to
212,500 shares, 250,000 shares, 287,500 shares or 330,625 shares at the
minimum, midpoint, maximum and adjusted maximum of the Offering Range,
respectively. No options would be granted under the 1998 Stock Option Plan
until the date on which stockholder approval is received.
The exercise price of the options granted under the 1998 Stock Option
Plan will be equal to the fair market value of the shares on the date of
grant of the stock options. If the 1998 Stock Option Plan is adopted within
one year following the Offering, options will become exercisable at a rate of
20% at the end of each twelve months of service with the Bank after the date
of grant, subject to early vesting in the event of death or disability.
Options granted under the 1998 Stock Option Plan would be adjusted for
capital changes such as stock splits and stock dividends. Notwithstanding the
foregoing, awards will be 100% vested upon termination of employment due to
death or
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<PAGE>
disability, and if the 1998 Stock Option Plan is adopted more than 12 months
after the Offering, awards would be 100% vested upon normal retirement or a
change in control of the Bank or the Company. Under OTS rules, if the 1998
Stock Option Plan is adopted within the first 12 months after the Offering,
no individual officer can receive more than 25% of the awards under the plan,
no outside director can receive more than 5% of the awards under the plan,
and all outside directors as a group can receive no more than 30% of the
awards under the plan in the aggregate.
The 1998 Stock Option Plan would be administered by a Committee of
non-employee members of the Company's Board of Directors. Options granted under
the 1998 Stock Option Plan to employees could be "incentive" stock options
designed to result in a beneficial tax treatment to the employee but no tax
deduction to the Company. Non-qualified stock options could also be granted
under the 1998 Stock Option Plan, and will be granted to the non-employee
directors who receive grants of stock options. In the event an option recipient
terminated his employment or service as an employee or director, the options
would terminate during certain specified periods.
1998 RECOGNITION PLAN. At a meeting of the Company's stockholders to be
held at least six months after the completion of the Offering, the Board of
Directors also intends to submit a Recognition and Retention Plan (the "1998
Recognition Plan") for stockholder approval. The 1998 Recognition Plan will
provide the Bank's directors and officers an ownership interest in the Company
in a manner designed to encourage them to continue their service with the Bank.
The Bank will contribute funds to the1998 Recognition Plan from time to time to
enable it to acquire an aggregate amount of Common Stock equal to up to 4% of
the shares of Common Stock issued in the Offering, either directly from the
Company or in open market purchases. Four percent of the shares issued in the
Offering would amount to 85,000 shares, 100,000 shares, 115,000 or 132,250
shares at the minimum, midpoint, maximum and adjusted maximum of the Offering
Range, respectively. In the event that additional authorized but unissued shares
would be acquired by the 1998 Recognition Plan after the Offering, the interests
of existing shareholders would be diluted. The executive officers and directors
will be awarded Common Stock under the 1998 Recognition Plan without having to
pay cash for the shares. No awards under the 1998 Recognition Plan would be made
until the date the 1998 Recognition Plan is approved by the Company's
stockholders.
Awards under the 1998 Recognition Plan would be nontransferable and
nonassignable, and during the lifetime of the recipient could only be earned by
him. If the 1998 Recognition Plan is adopted within one year following the
Offering, the shares which are subject to an award would vest and be earned by
the recipient at a rate of 20% of the shares awarded at the end of each full 12
months of service with the Bank after the date of grant of the award. Awards
would be adjusted for capital changes such as stock dividends and stock splits.
Notwithstanding the foregoing, awards would be 100% vested upon termination of
employment or service due to death or disability, and if the 1998 Recognition
Plan is adopted more than 12 months after the Offering, awards would be 100%
vested upon normal retirement or a change in control of the Bank or the Company.
If employment or service were to terminate for other reasons, the award
recipient would forfeit any nonvested award. If employment or service is
terminated for cause (as would be defined in the 1998 Recognition Plan), shares
not already delivered under the 1998 Recognition Plan would be forfeited. Under
OTS rules, if the 1998 Recognition Plan is adopted within the first 12 months
after the Offering, no individual officer can receive more than 25% of the
awards under the plan, no outside director can receive more than 5% of the
awards under the plan, and all outside director as a group can receive no more
than 30% of the awards under the plan in the aggregate.
When shares become vested under the 1998 Recognition Plan, the participant
will recognize income equal to the fair market value of the Common Stock earned,
determined as of the date of vesting, unless the recipient makes an election
under Section 83(b) of the Code to be taxed earlier. The amount of income
recognized by the participant would be a deductible expense for tax purposes for
the Company. If the 1998 Recognition Plan is adopted within one year following
the Offering, dividends and other earnings will accrue and be payable to the
award recipient when the shares vest. If the 1998 Recognition Plan is adopted
within one year following the Offering, shares not yet vested under the 1998
Recognition Plan will be voted by the trustee of the 1998 Recognition Plan,
taking into account the best interests of the recipients of the 1998 Recognition
Plan awards. If the 1998 Recognition Plan is adopted more than one year
following the Offering, dividends declared on unvested shares will be
distributed to the participant when paid, and the participant will be entitled
to vote the unvested shares.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
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The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") requires that all loans or extensions of credit to executive officers
and directors must be made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with the general public and must not involve more than the normal
risk of repayment or present other unfavorable features. In addition, loans made
to a director or executive officer in excess of the greater of $25,000 or 5% of
the Bank's capital and surplus (up to a maximum of $100,000 for executive
officers, not including loans on primary residences) must be approved in advance
by a majority of the disinterested members of the Board of Directors. Loans made
to officers, directors, and executive officers are made by the Bank in the
ordinary course of business on the same terms and conditions as the Bank would
make to any other customer in the ordinary course of business and do not involve
more than a normal risk of collectibility or present other unfavorable features.
The Bank intends that all transactions between the Bank and its executive
officers, directors, holders of 10% or more of the shares of any class of its
common stock and affiliates thereof, will contain terms no less favorable to the
Bank than could have been obtained by it in arm's-length negotiations with
unaffiliated persons and will be approved by a majority of independent outside
directors of the Bank not having any interest in the transaction. At September
30, 1997, the Bank had loans with an aggregate balance of $876,138 outstanding
to its executive officers and directors.
Set forth below is certain information as to loans made by the Bank to each
of its directors and executive officers whose aggregate indebtedness to the Bank
exceeded $60,000 at any time since October 1, 1996.
<TABLE>
<CAPTION>
HIGHEST
BALANCE INTEREST RATE
ORIGINAL OUTSTANDING BALANCE AS OF ON
NAME OF OFFICER OR DATE LOAN DURING SEPTEMBER 30, SEPTEMBER 30,
DIRECTOR LOAN TYPE ORIGINATED AMOUNT FISCAL 1997 1997 1997
- --------------------------------------------- ----------- ----------- --------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Ralph P. Baltz Mortgage 3/31/97 $ 76,000 $ 76,000 $ 75,728 7.75%
Mortgage 3/31/97 $ 61,600 $ 61,600 $ 61,380 7.75%
Charles R. Ervin Mortgage 3/10/94 $ 99,450 $ 78,481 $ 76,359 8.17%
N. Ray Campell Mortgage 9/12/94 $ 88,000 $ 82,972 $ 79,015 8.06%
Skip Martin Mortgage 6/14/96 $ 124,500 $ 130,744 $ 128,956 7.75%
James Edington Mortgage 1/5/96 $ 148,500 $ 147,788 $ 146,489 8.00%
Mortgage 10/27/95 $ 100,000 $ 97,098 $ 92,651 8.50%
Dwayne Powell Mortgage 10/4/96 $ 75,650 $ 75,650 $ 74,947 7.75%
</TABLE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
BENEFICIAL OWNERSHIP OF BANK COMMON STOCK
The following table includes, as of December 15, 1997, certain information
as to the Bank Common Stock beneficially owned by (i) the only persons or
entities, including any "group" as that term issued in Section 13(d)(3) of the
Exchange Act, who or which was known to the Bank to be the beneficial owner of
more than 5% of the issued and outstanding Bank Common Stock, and (ii) all
directors and executive officer of the Bank as a group. For information
concerning proposed subscriptions by directors and executive officers and the
anticipated ownership of Common Stock by such persons upon consummation of the
Conversion, see "--Subscriptions by Executive Officers and Directors."
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF SHARES
OWNED AND NATURE PERCENT OF SHARES
NAME AND ADDRESS OF OF BENEFICIAL OF COMMON STOCK
BENEFICIAL OWNERS OWNERSHIP (1)(3) OUTSTANDING
- ----------------------------------------------------------------------------- ---------------- -------------------
<S> <C> <C>
Pocahontas Federal Mutual
Holding Company, Inc. (2) 862,500 52.8%
203 West Broadway
Pocahontas, Arkansas 72455
Harris Associates, LP 140,000 8.6%
2 North LaSalle Street
Suite 500
Chicago, Illinois 60602
All Directors and Executive Officers 112,877 6.8%
as a Group (8 persons)
</TABLE>
- ------------------------
* Less than 1%
(1) Based upon filings made pursuant to the Exchange Act and
information furnished by the respective individuals. In accordance with Rule
13d-3 under the Exchange Act, a person is deemed to be the beneficial owner
for purposes of this table, of any shares of common stock if he has shared
voting or investment power with respect to such security, or has a right to
acquire beneficial ownership at any time within 60 days from the date as to
which beneficial ownership is being determined. As used herein, "voting
power" is the power to vote or direct the voting of shares and "investment
power" is the power to dispose or direct the disposition of shares. Includes
all shares held directly as well as by spouses and minor children, in trust
and other indirect ownership, over which shares the named individuals
effectively exercise sole or shared voting and investment power.
(2) The executive officers and directors of the Bank are also executive
officers and directors of Pocahontas Federal Mutual Holding Company
(3) Under applicable regulations, a person is deemed to have beneficial
ownership of any shares of Bank Common Stock which may be acquired within
60 days of the date as of which beneficial ownership is being determined
pursuant to the exercise of outstanding stock options. Shares of Bank
Common Stock which are subject to stock options are deemed to be
outstanding for the purpose of computing the percentage of outstanding
Bank Common Stock owned by such person or group but not deemed
outstanding for the purpose of computing the percentage of Bank Common
Stock owned by any other person or group.
SUBSCRIPTIONS BY EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth, for each of the Company's directors and
executive officers and for all of the directors and executive officers as a
group, (i) the number of Exchange Shares to be held upon consummation of the
Conversion, based upon their beneficial ownership of the Bank Common Stock as
of October 31, 1997, (ii) the proposed purchases of Subscription Shares,
assuming sufficient shares are available to satisfy their subscriptions, and
(iii) the total amount of Common Stock to be held upon consummation of the
Conversion in each case assuming that Subscription Shares are sold at the
midpoint of the Offering Range.
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<PAGE>
<TABLE>
<CAPTION>
PROPOSED PURCHASES OF TOTAL COMMON STOCK
NUMBER OF CONVERSION STOCK (1) TO BE HELD
EXCHANGE SHARES ----------------------- ----------------------------
TO BE HELD NUMBER NUMBER PERCENTAGE
(2)(3) OF SHARES AMOUNT OF SHARES OF TOTAL
--------------- ----------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Ralph P. Baltz................................... 75,886 15,000 $ 150,000 90,886 1.9%
N. Ray Campbell.................................. 20,401 8,500 85,000 28,901 *
James A. Edington................................ 62,296 15,000 150,000 77,296 1.6
Charles R. Ervin................................. 32,649 5,000 50,000 37,649 *
Skip Martin...................................... 94,302 5,000 50,000 99,302 2.1
Dwayne Powell.................................... 8,457 10,000 100,000 18,457 *
Robert Rainwater................................. 17,848 1,000 10,000 18,848 *
Mark Van Camp.................................... 15,312 4,300 43,000 19,612 *
------- ------ ---------- -------
All Directors and Executive Officers as a Group
(8 persons).................................... 327,151 63,800 $ 638,000 390,951 8.3%
------- ------ ---------- -------
------- ------ ---------- -------
</TABLE>
- ------------------------
(1) Includes proposed subscriptions, if any, by associates. Does not include
subscription order by the KSOP. Intended purchases by the KSOP are expected
to be 8% of the shares issued in the Offering.
(2) Includes shares underlying options that may be exercised within 60 days of
the date as of which ownership is being determined, and vested shares of
restricted stock. See "--Beneficial Ownership of Bank Common Stock."
(3) Does not include stock options and awards that may be granted under the
Company's 1998 Stock Option Plan and 1998 Recognition Plan if such plans are
approved by stockholders at an annual meeting or special meeting of
shareholders at least six months following the Conversion. See "Management
of the Bank--New Benefits Plans."
*Less than 0.1%
THE CONVERSION
THE BOARD OF DIRECTORS OF THE MUTUAL HOLDING COMPANY, AND THE OTS, HAVE
APPROVED THE PLAN OF CONVERSION, SUBJECT TO APPROVAL BY THE MEMBERS OF THE
MUTUAL HOLDING COMPANY ENTITLED TO VOTE ON THE MATTER, THE STOCKHOLDERS OF
THE BANK ENTITLED TO VOTE ON THE MATTER AND THE SATISFACTION OF CERTAIN OTHER
CONDITIONS. SUCH OTS APPROVAL, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION
OR ENDORSEMENT OF THE PLAN BY SUCH AGENCY.
GENERAL
On October 14, 1997, the Board of Directors of the Mutual Holding Company
adopted the Plan of Conversion, pursuant to which the Mutual Holding Company
will be converted from a federally chartered mutual holding company to a
Delaware stock corporation to be named "Pocahontas Bancorp, Inc." (the
Company). It is currently intended that all of the capital stock of the Bank
will be held by the Company after the Conversion. The Plan of Conversion was
approved by the OTS, subject to, among other things, approval of the Plan of
Conversion by the Mutual Holding Company's members and the stockholders of
the Bank. The Special Meeting of Members and the Special Meeting of
Stockholders have been called for this purpose.
As part of the Conversion, each of the Minority Shares shall
automatically, without further action by the holder thereof, be converted
into and become a right to receive a number of shares of Common Stock
determined pursuant to the Exchange Ratio, which ensures that immediately
after the Conversion and Share Exchange, Minority Stockholders will own the
same aggregate percentage of the Company's Common Stock as they owned of the
Bank's common stock immediately prior to the Conversion. Pursuant to the Plan
of Conversion, the Conversion will be effected as follows or in any other
manner that is consistent with applicable federal law and regulations and the
intent
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<PAGE>
of the Plan of Conversion. Except for step (i), each of the following steps
in the Conversion will be completed contemporaneously on the Effective Date.
(i) The Bank will organize the Company (which will become the stock
holding company of the Bank) as a direct subsidiary of the Bank;
(ii) The Company will organize an interim savings bank (the "Interim
Savings Bank") as a wholly owned federal stock savings bank
subsidiary of the Company;
(iii) The Mutual Holding Company will convert into an interim federal stock
savings association and simultaneously merge with and into the Bank in
the MHC Merger pursuant to the Agreement of Merger between the Mutual
Holding Company and the Bank, whereby each Eligible Account Holder
and Supplemental Eligible Account Holder will receive an interest in
the liquidation account established in the Bank pursuant to
regulations of the OTS in exchange for such member's ownership
interest in the Mutual Holding Company, and the Bank's common stock
held by the Mutual Holding Company will be canceled;
(iv) The Interim Savings Bank will merge with and into the Bank with the
Bank as the resulting institution in the Bank Merger pursuant to the
Agreement of Merger among the Bank, the Company and the Interim
Savings Bank, the Company's stock held by the Bank will be canceled,
the Interim Savings Bank stock held by the Company will become Bank
common stock by operation of law and Minority Stockholders will
receive Common Stock in the Share Exchange; and
(v) Contemporaneously with the Bank Merger, the Company will offer for
sale in the Offering Subscription Shares representing the pro forma
market value of the Company, immediately prior to the Conversion.
The Company expects to receive the approval of the OTS to become a
savings and loan holding company and to own all of the common stock of the
Bank. The Company intends to contribute at least 50% of the net proceeds of
the Offering to the Bank. The Conversion will be effected only upon
completion of the sale of all of the shares of Common Stock of the Company to
be issued pursuant to the Plan of Conversion.
The Plan of Conversion provides generally that (i) the Mutual Holding
Company will convert from a federal mutual holding company to a federal stock
savings association and simultaneously merge with and into the Bank and (ii)
the Company will offer shares of Common Stock for sale in the Subscription
Offering to Eligible Account Holders, the Bank's KSOP, Supplemental Eligible
Account Holders, Other Members and Minority Stockholders. Subject to the
prior rights of these holders of subscription rights, the Company will offer
Common Stock for sale in a concurrent Community Offering to certain members
of the general public, with a preference given to natural persons residing in
the Community. The Bank has the right to accept or reject, in whole or in
part, any orders to purchase shares of the Common Stock received in the
Community Offering. The Community Offering must be completed within 45 days
after the completion of the Subscription Offering unless otherwise extended
by the OTS. See "--Community Offering."
The number of shares of Common Stock to be issued in the Offering will be
determined based upon an independent appraisal of the estimated pro forma
market value of the Common Stock of the Company. All shares of Common Stock
to be issued and sold in the Offering will be sold at the same price. The
Independent Valuation will be updated and the final number of the shares to
be issued in the Offering will be determined at the completion of the
Offering. See "--Stock Pricing and Number of Shares to be Issued" for more
information as to the determination of the estimated pro forma market value
of the Common Stock.
THE FOLLOWING IS A BRIEF SUMMARY OF THE CONVERSION. The summary is
qualified in its entirety by reference to the provisions of the Plan of
Conversion. A copy of the Plan of Conversion is available for inspection at
each branch of the Bank and at the Midwest Regional and Washington, D.C.
offices of the OTS. The Plan of Conversion is also filed as an Exhibit to the
Application to Convert from Mutual to Stock Form of which this Prospectus is
a part, copies of which may be obtained from the OTS. See "Additional
Information."
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<PAGE>
PURPOSES OF CONVERSION
The Board of Directors unanimously determined to conduct the Conversion
because it believed that the market for equity securities in financial
services companies was at an unprecedented level and that the Bank (together
with the Company, the "Converted Institution") could raise substantial funds
from such a transaction. The Board of Directors believed that maximizing such
proceeds is in the best interests of the Converted Institution because such
proceeds can be used to increase the net income of the Converted Institution
though investment and eventual leveraging of the proceeds, and support the
possible expansion of the Bank's existing franchise through internal growth
or the acquisition of branch offices or other financial institutions.
Management believed that acquisition opportunities would increase as a result
of the Conversion because the Converted Institution would have substantially
more capital following the Conversion. The Bank acquired three branch offices
in January 1998, and intends to actively explore additional acquisitions,
although neither the Company nor the Bank has any specific plans,
arrangements or understandings regarding any additional expansions or
acquisitions at this time, nor have criteria been established to identify
potential candidates for acquisition. In addition, the Board considered that
there was no assurance that the pricing for financial services stocks would
continue at such favorable levels, and that if the market were to become less
favorable, the amount of capital that could be raised in the Conversion might
be substantially reduced. See "Risk Factors--Potential Low Return on Equity"
and " Uncertainty as to Future Growth Opportunities."
After completion of the Conversion, the unissued common and preferred
stock authorized by the Company's Certificate of Incorporation will permit
the Company, subject to market conditions and regulatory approval of an
offering, to raise additional equity capital through further sales of
securities, and to issue securities in connection with possible acquisitions.
At the present time, the Company has no plans with respect to additional
offerings of securities, other than the issuance of additional shares upon
exercise of stock options. Following the Conversion, the Company will also be
able to use stock-related incentive programs to attract and retain executive
and other personnel for itself and its subsidiaries.
APPROVALS REQUIRED
The affirmative vote of a majority of the total eligible votes of the
members of the Mutual Holding Company at the Special Meeting of Members is
required to approve the Plan of Conversion. By their approval of the Plan of
Conversion the members of the Mutual Holding Company will also be deemed to
approve the MHC Merger and the Bank Merger. The affirmative vote of the
holders of (i) at least two-thirds of the outstanding common stock of the
Bank and (ii) a majority of the Minority Shares at the Special Meeting of
Stockholders is required to approve the Plan of Conversion. Consummation of
the Conversion is also subject to the approval of the OTS.
SHARE EXCHANGE RATIO
OTS regulations provide that in a conversion of a mutual holding company
to stock form, the minority stockholders will be entitled to exchange their
shares of subsidiary savings bank common stock for common stock of the
converted holding company, provided that the bank and the mutual holding
company demonstrate to the satisfaction of the OTS that the basis for the
exchange is fair and reasonable. The Boards of Directors of the Bank and the
Company have determined that each Minority Share will on the Effective Date
be automatically converted into and become the right to receive a number of
Exchange Shares determined pursuant to the Exchange Ratio, which ensures that
after the Conversion and before giving effect to Minority Stockholders'
purchases in the Offering and receipt of cash in lieu of fractional shares,
Minority Stockholders will own the same aggregate percentage of the Company's
Common Stock as they owned of the Bank's common stock immediately prior to
the Conversion. As of October 31, 1997, there were 1,632,424 shares of the
Bank's common stock outstanding, 769,924, or 47.2%, of which were Minority
Shares. Based on the percentage of the Bank's common stock held by Minority
Stockholders and the Offering Range, the Exchange Ratio is expected to range
from approximately 2.4638 Exchange Shares for each Minority Share at the
minimum of the Offering Range to 3.8333 Exchange Shares for each Minority
Share at the adjusted maximum of the Offering Range. The Bank will pay cash
to Minority Stockholders for fractional shares.
84
<PAGE>
The following table sets forth, at the minimum, midpoint, maximum, and
adjusted maximum of the Offering Range, the following: (i) the total number
of Subscription Shares and Exchange Shares to be issued in the Conversion,
(ii) the percentage of Common Stock outstanding after the Conversion that
will be sold in the Offering and issued in the Share Exchange, and (iii) the
Exchange Ratio:
<TABLE>
<CAPTION>
TOTAL
SUBSCRIPTION SHARES EXCHANGE SHARES SHARES
TO BE ISSUED TO BE ISSUED OF COMMON
--------------------- --------------------- STOCK TO BE EXCHANGE
AMOUNT PERCENT AMOUNT PERCENT OUTSTANDING RATIO
---------- --------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Minimum............................................. 2,125,000 52.836 1,896,914 47.164 4,021,914 2.4638
Midpoint............................................ 2,500,000 52.836 2,231,663 47.164 4,731,663 2.8983
Maximum............................................. 2,875,000 52.836 2,566,413 47.164 5,441,413 3.3333
Adjusted maximum.................................... 3,306,250 52.836 2,951,375 47.164 6,257,625 3.8333
</TABLE>
Options to purchase Minority Shares will also be converted into and
become options to purchase Common Stock. As of September 30, 1997, there were
outstanding options to purchase 48,052 Minority Shares. The number of shares
of Common Stock to be received upon exercise of such options will be
determined pursuant to the Exchange Ratio. The aggregate exercise price,
duration, and vesting schedule of such options will not be affected. As of
September 30, 1997, options to purchase 33,102 shares were vested. If all
such options to purchase Minority Shares are exercised prior to the Effective
Date, then there will be (i) an increase in the percentage of the Bank's
common stock held by Minority Stockholders to 48.2%, (ii) an increase in the
number of shares of Common Stock issued to Minority Stockholders in the Share
Exchange, (iii) a decrease in the Exchange Ratio to 2.3622, 2.7791, 3.1959,
and 3.6753 at the minimum, midpoint, maximum and adjusted maximum of the
Offering Range, and (iv) a decrease in the Offering Range. Executive officers
and directors of the Bank do not intend to exercise options prior to the
Effective Date. The Bank has no plans to grant additional stock options prior
to the Effective Date.
EFFECT OF THE CONVERSION ON MINORITY STOCKHOLDERS
EFFECT ON STOCKHOLDERS' EQUITY PER SHARE OF THE SHARES EXCHANGED. The
Conversion will increase the stockholders' equity of Minority Stockholders.
At September 30, 1997, the stockholders' equity per share was $14.85 for each
share of the Bank's common stock outstanding, including shares held by the
Mutual Holding Company. Based on the pro forma information set forth in "Pro
Forma Data," assuming the sale of 2,500,000 shares of Common Stock at the
midpoint of the Offering Range, the pro forma stockholders' equity per share
of Common Stock was $9.73, and the pro forma stockholders' equity for the
aggregate number of Exchange Shares to be received for each Minority Share
was $46.1 million. The pro forma stockholders' equity for the aggregate
number of Exchange Shares to be received for each Minority Share was $42.8
million, $49.3 million and $53.1 million at the minimum, maximum, and
adjusted maximum of the Offering Range.
EFFECT ON EARNINGS PER SHARE OF THE SHARES EXCHANGED. The Conversion
will also affect Minority Stockholders' pro forma earnings per share. For the
fiscal year ended September 30, 1997, the earnings per share was $1.46 for
each share of the Bank's common stock outstanding, including shares held by
the Mutual Holding Company. Based on the pro forma information set forth in
"Pro Forma Data," assuming the sale of 2,500,000 shares of Common Stock at
the midpoint of the Offering Range, the pro forma earnings per share of
Common Stock was $0.63 for such period, and the pro forma earnings for the
aggregate number of Exchange Shares to be received for each Minority Share
was $2.8 million. For the fiscal year ended September 30, 1997, the pro forma
earnings for the aggregate number of Exchange Shares to be received for each
Minority Share was $2.8 million, $2.9 million and $3.0 million at the
minimum, maximum, and adjusted maximum of the Offering Range.
EFFECT ON DIVIDENDS PER SHARE. The Company's Board of Directors
anticipates declaring and paying quarterly cash dividends on the Common Stock
equal to $1.5 million, or $0.373, $0.317, $0.276 and $0.240 per share of
Common Stock on an annual basis, at the minimum, midpoint, maximum and
maximum, as adjusted, of the Offering Range, respectively. Dividends, when
and if paid, will be subject to determination and declaration by the Board of
Directors in its discretion, which will take into account the Company's
consolidated financial condition and results of operations, tax
considerations, industry standards, economic conditions, regulatory
restrictions on dividend
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payments by the Bank to the Company, general business practices and other
factors. See "Dividend Policy." Since the completion of the first full fiscal
quarter following the initial sale by the Bank of the Bank Common Stock in
April 1994, the Bank has paid average annual cash dividends on the Bank
Common Stock of $.725 per share, which amounts to a quarterly dividend of
$.181 per share. The Bank's current quarterly cash dividend is $0.225 per
share, and the Bank intends to continue to pay regular quarterly cash
dividends through the earlier of (i) the Effective Date (on a pro rated
basis), or (ii) the fiscal quarter ending March 31, 1998. See "The Bank's
Common Stock" and "Regulation and Supervision--Federal Regulation of Savings
Institutions--Limitation on Capital Distributions." The Mutual Holding
Company intends to waive the receipt of such dividend.
EFFECT ON THE MARKET AND APPRAISED VALUE OF THE SHARES EXCHANGED. The
aggregate Subscription Price of the shares of Common Stock received in
exchange for each Minority Share is $18,969,140, $22,316,630, $25,664,130,
and $29,513,750 at the minimum, midpoint, maximum and adjusted maximum of the
Offering Range. The last trade of the Bank's common stock on September 17,
1997, the day preceding the announcement of the Conversion, was $28.00 per
share, and the price at which the Bank's common stock last traded on ,
1998, was $ per share.
DISSENTERS' AND APPRAISAL RIGHTS. Under OTS regulations, Minority
Stockholders will not have dissenters' rights or appraisal rights in
connection with the exchange of Minority Shares for shares of Common Stock of
the Company.
EFFECTS OF CONVERSION ON DEPOSITORS, BORROWERS AND MEMBERS
GENERAL. Each depositor in the Bank has both a deposit account in the
Bank and a pro rata ownership interest in the net worth of the Mutual Holding
Company based upon the balance in his or her account, which interest may only
be realized in the event of a liquidation of the Mutual Holding Company and
the Bank. However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account. Any
depositor who opens a deposit account obtains a pro rata ownership interest
in the Mutual Holding Company which owns a majority of the common stock of
the Bank without any additional payment beyond the amount of the deposit. A
depositor who reduces or closes his account receives a portion or all of the
balance in the account but nothing for his ownership interest in the net
worth of the Mutual Holding Company, which is lost to the extent that the
balance in the account is reduced or closed.
Consequently, depositors in a stock subsidiary of a mutual holding
company normally have no way of realizing the value of their ownership
interest, which has realizable value only in the unlikely event that the
Mutual Holding Company and the Bank are liquidated. In such event, the
depositors of record at that time, as owners, would share pro rata in any
residual surplus and reserves of the Mutual Holding Company after other
claims, including claims of depositors to the amounts of their deposits, are
paid.
When a mutual holding company converts to stock form, permanent
nonwithdrawable capital stock is created in the stock holding company to
represent the ownership of the subsidiary institution's net worth. The Common
Stock is separate and apart from deposit accounts and cannot be and is not
insured by the FDIC or any other governmental agency. Certificates are issued
to evidence ownership of the capital stock. The stock certificates are
transferable, and therefore the stock may be sold or traded if a purchaser is
available with no effect on any account the seller may hold in the Bank.
CONTINUITY. While the Conversion is being accomplished, the normal
business of the Bank of accepting deposits and making loans will continue
without interruption. The Bank will continue to be subject to regulation by
the OTS and the FDIC. After the Conversion, the Bank will continue to provide
services for depositors and borrowers under current policies by its present
management and staff. The Directors serving the Bank at the time of the
Conversion will serve as Directors of the Bank after the Conversion. The
Directors of the Company will consist of individuals currently serving on the
Board of Directors of the Bank.
EFFECT ON DEPOSIT ACCOUNTS. Under the Plan of Conversion, each depositor
in the Bank at the time of the Conversion will automatically continue as a
depositor after the Conversion, and each such deposit account will remain the
same with respect to deposit balance, interest rate and other terms. Each
such account will be insured by the
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<PAGE>
FDIC to the same extent as before the Conversion. Depositors will continue to
hold their existing certificates, passbooks and other evidences of their
accounts.
EFFECT ON LOANS. No loan outstanding from the Bank will be affected by
the Conversion, and the amount, interest rate, maturity and security for each
loan will remain as they were contractually fixed prior to the Conversion.
EFFECT ON VOTING RIGHTS OF MEMBERS. At present, all depositors and
certain borrowers of the Bank are members of, and have voting rights in, the
Mutual Holding Company as to all matters requiring membership action. Upon
completion of the Conversion, depositors and borrowers will cease to be
members of the Mutual Holding Company and will no longer be entitled to vote
at meetings of the Mutual Holding Company. Upon completion of the Conversion,
all voting rights in the Bank will be vested in the Company as the sole
shareholder of the Bank. Exclusive voting rights with respect to the Company
will be vested in the holders of Common Stock. Depositors and borrowers of
the Bank will not have voting rights after the Conversion except to the
extent that they become stockholders of the Company through the purchase of
Common Stock.
TAX EFFECTS. The Bank will receive an opinion of counsel with regard to
federal and state income taxation to the effect that the adoption and
implementation of the Plan of Conversion will not be taxable for federal or
state income tax purposes to the Bank, the Mutual Holding Company, the
Minority Stockholders, the Interim Savings Bank, members of the Mutual
Holding Company, eligible account holders or the Company. See "--Tax Aspects."
EFFECT ON LIQUIDATION RIGHTS. Were the Bank to liquidate prior to the
Conversion, all claims of creditors of the Bank, including those of
depositors to the extent of their deposit balances, would be paid first.
Thereafter, if there were any assets of the Bank remaining, such assets would
be distributed to the Mutual Holding Company, to the extent of its stock
ownership interest in the Bank. Were the Mutual Holding Company to liquidate,
all claims of creditors would be paid first. Thereafter, if there were any
assets of the Mutual Holding Company remaining, members of the Mutual Holding
Company would receive such remaining assets, pro rata, based upon the deposit
balances in their deposit account in the Bank immediately prior to
liquidation. In the unlikely event that the Bank were to liquidate after the
Conversion, all claims of creditors (including those of depositors, to the
extent of their deposit balances) would also be paid first, followed by
distribution of the "liquidation account" to certain depositors (see
"Liquidation Rights"), with any assets remaining thereafter distributed to
the Company as the holder of the Bank's capital stock. Pursuant to the rules
and regulations of the OTS, a post-conversion merger, consolidation, sale of
bulk assets or similar combination or transaction with another insured
savings institution would not be considered a liquidation and, in such a
transaction, the liquidation account would be assumed by the surviving
institution.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
The Plan of Conversion and federal regulations require that the aggregate
purchase price of the Common Stock in the Offering must be based on the
appraised pro forma market value of the Common Stock, as determined by the
Independent Valuation. The Bank and the Company have retained RP Financial to
make such valuation. For its services in making such appraisal, RP Financial
will receive a fee of $30,000 (which amount does not include a fee of $7,500
to be paid to RP Financial for assistance in preparation of a business plan).
The Bank and the Company have agreed to indemnify RP Financial and its
employees and affiliates against certain losses (including any losses in
connection with claims under the federal securities laws) arising out of its
services as appraiser, except where RP Financial's liability results from its
negligence or bad faith.
The Independent Valuation was prepared by RP Financial in reliance upon
the information contained in the Prospectus, including the Consolidated
Financial Statements. RP Financial also considered the following factors,
among others: the present and projected operating results and financial
condition of the Company and the Bank and the economic and demographic
conditions in the Bank's existing marketing area; certain historical,
financial and other information relating to the Bank; a comparative
evaluation of the operating and financial statistics of the Bank with those
of other publicly traded savings institutions located in the Bank's region
and on a national basis; the aggregate size of the Offering of the Common
Stock; the impact of the Conversion on the Bank's stockholders' equity and
earnings potential; the proposed dividend policy of the Company and the Bank;
and the trading market for securities of comparable institutions and general
conditions in the market for such securities.
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<PAGE>
The Independent Valuation was prepared based on the assumption that the
aggregate amount of Common Stock sold in the Offering would be equal to the
estimated pro forma market value of the Company multiplied by the Minority
Ownership Percentage. The Independent Valuation states that as of December
12, 1997, the estimated pro forma market value of the Company ranged from a
minimum of $40,219,142 to a maximum of $54,414,133 with a midpoint of
$47,316,638 (the "Valuation Range"). The Board of Directors determined to
offer the Subscription Shares for $10.00 per share (the "Subscription
Price"). The aggregate offering price of the Subscription Shares offered in
the Offering will be equal to the Valuation Range multiplied by the Minority
Ownership Percentage. The number of Subscription Shares offered in the
Offering will be equal to the aggregate offering price of the Subscription
Shares divided by the Subscription Price. The number of Subscription Shares
offered in the Offering and/or the aggregate of the offering price of the
Subscription Shares are referred to herein as the "Offering Range." Based on
the Valuation Range, the Minority Ownership Percentage and the Subscription
Price, the minimum of the Offering Range will be 2,125,000 Subscription
Shares, the midpoint of the Offering Range will be 2,500,000 Subscription
Shares, and the maximum of the Offering Range will be 2,875,000 Subscription
Shares.
The Board of Directors reviewed the Independent Valuation and, in
particular, considered (i) the Bank's financial condition and results of
operations for the fiscal year ended September 30, 1997, (ii) financial
comparisons of the Bank in relation to financial institutions of similar size
and asset quality, (iii) stock market conditions generally and in particular
for financial institutions, and (iv) the historical trading price of the
Minority Shares, all of which are set forth in the Independent Valuation. The
Board also reviewed the methodology and the assumptions used by RP Financial
in preparing the Independent Valuation. The Offering Range may be amended
with the approval of the OTS (if required), if necessitated by subsequent
developments in the financial condition of the Company or the Bank or market
conditions generally. In the event the Independent Valuation is updated to
amend the pro forma market value of the Company to less than $40.2 million or
more than $62.6 million, such appraisal will be filed with the Securities and
Exchange Commission by post-effective amendment.
The Independent Valuation, however, is not intended, and must not be
construed, as a recommendation of any kind as to the advisability of
purchasing such shares. RP Financial did not independently verify the
Consolidated Financial Statements and other information provided by the Bank,
nor did RP Financial value independently the assets or liabilities of the
Bank. The Independent Valuation considers the Bank as a going concern and
should not be considered as an indication of the liquidation value of the
Bank. Moreover, because such valuation is necessarily based upon estimates
and projections of a number of matters, all of which are subject to change
from time to time, no assurance can be given that persons purchasing such
shares in the Offering will thereafter be able to sell such shares at prices
at or above the Subscription Price.
Following commencement of the Subscription Offering, the maximum of the
Valuation Range may be increased by up to 15% to up to $62,576,253, which
will result in a corresponding increase of up to 15% in the maximum of the
Offering Range to 3,306,250 shares, to reflect changes in the market and
financial conditions, without the resolicitation of subscribers. The minimum
of the Valuation Range and of the Offering Range may not be decreased without
a resolicitation of subscribers. The Subscription Price of $10.00 per share
will remain fixed. See "--Limitations on Common Stock Purchases" as to the
method of distribution and allocation of additional shares that may be issued
in the event of an increase in the Offering Range to fill unfilled orders in
the Subscription and Community Offerings.
If the update to the Independent Valuation at the conclusion of the
Offering results in an increase in the maximum of the Valuation Range to more
than $62,576,253 and a corresponding increase in the Offering Range to more
than 3,306,250 shares, or a decrease in the minimum of the Valuation Range to
less than $40,219,142 and a corresponding decrease in the Offering Range to
fewer than 2,125,000 shares, then the Company, after consulting with the OTS,
may terminate the Plan of Conversion and return all funds promptly with
interest at the Bank's passbook rate of interest on payments made by check,
certified or teller's check, bank draft or money order, extend or hold a new
Subscription Offering, Community Offering, or both, establish a new Offering
Range, commence a resolicitation of subscribers or take such other actions as
permitted by the OTS in order to complete the Conversion. In the event that a
resolicitation is commenced, unless an affirmative response is received
within a reasonable period of time, all funds will be promptly returned to
investors as described above. A resolicitation, if any, following the
conclusion of the Subscription and Community Offerings would not exceed 45
days unless further extended by the OTS for periods of up to 90 days not to
extend beyond .
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<PAGE>
An increase in the number of shares to be issued in the Offering would
decrease both a subscriber's ownership interest and the Company's pro forma
earnings and stockholders' equity on a per share basis while increasing pro
forma earnings and stockholders' equity on an aggregate basis. A decrease in
the number of shares to be issued in the Offering would increase both a
subscriber's ownership interest and the Company's pro forma earnings and
stockholders' equity on a per share basis while decreasing pro forma net
income and stockholders' equity on an aggregate basis. For a presentation of
the effects of such changes, see "Pro Forma Data."
Copies of the appraisal report of RP Financial and the detailed
memorandum of the appraiser setting forth the method and assumptions for such
appraisal are available for inspection at the main office of the Bank and the
other locations specified under "Additional Information."
EXCHANGE OF STOCK CERTIFICATES
Until the Effective Date, Minority Shares will continue to be available
for trading on the Nasdaq "SmallCap" Market. The conversion of the Bank
Common Stock into Company Common Stock will occur automatically on the
Effective Date. After the Effective Date, former holders of the Bank Common
Stock will have no further equity interest in the Bank (other than as
stockholders of the Company) and there will be no further transfers of the
Bank Common Stock on the stock transfer records of the Bank.
As soon as practicable after the Effective Date, the Company, or a bank
or trust company designated by the Company, in the capacity of exchange agent
(the "Exchange Agent"), will send a transmittal form to each Minority
Stockholder. The transmittal forms are expected to be mailed within five
business days after the Effective Date and will contain instructions with
respect to the surrender of certificates representing the Bank Common Stock
to be exchanged into the Company's Common Stock. It is expected that
certificates for shares of the Company's Common Stock will be distributed
within five business days after the receipt of properly executed transmittal
forms and other required documents.
THE BANK'S STOCKHOLDERS SHOULD NOT FORWARD POCAHONTAS FEDERAL SAVINGS AND
LOAN ASSOCIATION STOCK CERTIFICATES TO THE BANK OR THE EXCHANGE AGENT UNTIL
THEY HAVE RECEIVED TRANSMITTAL FORMS.
Until the certificates representing the Bank Common Stock are surrendered
for exchange after consummation of the Conversion, upon compliance with the
terms of the transmittal form, holders of such certificates will not receive
the shares of the Company's Common Stock and will not be paid dividends on
the Company Common Stock into which such shares have been converted. When
such certificates are surrendered, any unpaid dividends will be paid without
interest. For all other purposes, however, each certificate which represents
shares of the Bank Common Stock outstanding at the Effective Date will be
deemed to evidence ownership of the shares of the Company's Common Stock into
which those shares have been converted by virtue of the Conversion.
All shares of the Company Common Stock issued upon conversion of shares
of the Bank Common Stock shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of the Bank Common
Stock, subject, however, to the Company's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Date
which may have been declared or made by the Bank on such shares of the Bank
Common Stock on or prior to the Effective Date and which remain unpaid at the
Effective Date. The Bank intends to continue to pay a quarterly cash dividend
of $0.225 per share through the earlier of (i) the Effective Date (on a pro
rated basis), or (ii) the fiscal quarter ending March 31, 1998. The Mutual
Holding Company intends to waive the receipt of such dividend.
No fractional shares of the Company's Common Stock will be issued to any
Minority Stockholder upon consummation of the Conversion. For each fractional
share that would otherwise be issued, the Company will pay by check an amount
equal to the product obtained by multiplying the fractional share interest to
which such holder would otherwise be entitled by the Subscription Price.
Payment for fractional shares will be made as soon as practicable after the
receipt by the Exchange Agent of surrendered Pocahontas Federal Savings and
Loan Association stock certificates.
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If a certificate for the Bank Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable
upon receipt of appropriate evidence as to such loss, theft or destruction,
appropriate evidence as to the ownership of such certificate by the claimant,
and appropriate and customary indemnification.
SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS
In accordance with the Plan of Conversion, rights to subscribe for the
purchase of Common Stock in the Subscription Offering have been granted under
the Plan of Conversion in the following order of descending priority. All
subscriptions received will be subject to the availability of Common Stock
after satisfaction of all subscriptions of all persons having prior rights in
the Subscription Offering and to the maximum, minimum, and overall purchase
limitations set forth in the Plan of Conversion and as described below under
"--Limitations on Common Stock Purchases."
PRIORITY 1: ELIGIBLE ACCOUNT HOLDERS. Each depositor with aggregate
savings account balances of $50 or more (a "Qualifying Deposit") as of
September 30, 1996 (the "Eligibility Record Date," and such account holders,
"Eligible Account Holders") will receive, without payment therefor,
nontransferable subscription rights to subscribe in the Subscription Offering
for the greater of 15,000 subscription shares (i.e., approximately 0.6% of
the shares offered at the midpoint of the Offering Range), .10% of the total
offering of shares, or fifteen times the product (rounded down to the next
whole number) obtained by multiplying the aggregate number of Exchange Shares
and Subscription Shares issued in the Conversion by a fraction of which the
numerator is the amount of the Eligible Account Holder's Qualifying Deposit
and the denominator is the total amount of Qualifying Deposits of all
Eligible Account Holders, in each case on the Eligibility Record Date,
subject to the overall purchase limitations and exclusive of shares purchased
by the KSOP from any increase in the shares offered pursuant to an increase
in the maximum of the Offering Range. See "--Limitations on Common Stock
Purchases." If there are not sufficient shares available to satisfy all
subscriptions, shares first will be allocated so as to permit each
subscribing Eligible Account Holder to purchase a number of shares sufficient
to make his total allocation equal to the lesser of 100 shares or the number
of shares for which he subscribed. Thereafter, unallocated shares (except for
additional shares issued to the KSOP upon an increase in the maximum of the
Offering Range) will be allocated to each subscribing Eligible Account Holder
whose subscription remains unfilled in the proportion that the amount of his
aggregate Qualifying Deposit bears to the total amount of Qualifying Deposits
of all subscribing Eligible Account Holders whose subscriptions remain
unfilled. If an amount so allocated exceeds the amount subscribed for by any
one or more Eligible Account Holders, the excess shall be reallocated among
those Eligible Account Holders whose subscriptions are not fully satisfied
until all available shares have been allocated.
To ensure proper allocation of stock, each Eligible Account Holder must
list on his subscription order form and certification form all deposit
accounts in which he has an ownership interest on the Eligibility Record
Date. Failure to list an account could result in fewer shares being allocated
than if all accounts had been disclosed. The subscription rights of Eligible
Account Holders who are also directors or officers of the Bank or their
associates will be subordinated to the subscription rights of other Eligible
Account Holders to the extent attributable to increased deposits in the
twelve months preceding the Eligibility Record Date.
PRIORITY 2: KSOP. To the extent that there are sufficient shares
remaining after satisfaction of subscriptions by Eligible Account Holders,
the KSOP of the Company and the Bank will receive, without payment therefor,
nontransferable subscription rights to purchase in the aggregate up to 8% of
the Common Stock offered in the Subscription Offering, including any shares
to be issued in the Subscription Offering as a result of an increase in the
Estimated Price Range after commencement of the Subscription Offering and
prior to completion of the Conversion.
PRIORITY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. To the extent that
there are sufficient shares remaining after satisfaction of subscriptions by
Eligible Account Holders and the KSOP, each depositor with a Qualifying
Deposit as of December 31, 1997 (the "Supplemental Eligibility Record Date")
who is not an Eligible Account Holder ("Supplemental Eligible Account
Holder") will receive, without payment therefor, nontransferable subscription
rights to subscribe in the Subscription Offering for the greater of 15,000
shares (i.e., approximately 0.6% of the shares offered at the midpoint of the
Offering Range), .10% of the total offering of shares, or fifteen times the
product (rounded down to the next whole number) obtained by multiplying the
aggregate number of Exchange Shares and
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Subscription Shares issued in the Conversion by a fraction of which the
numerator is the amount of the Supplemental Eligible Account Holder's
Qualifying Deposit and the denominator is the total amount of Qualifying
Deposits of all Supplemental Eligible Account Holders, in each case on the
Supplemental Eligibility Record Date, subject to the overall purchase
limitations. See "--Limitations on Common Stock Purchases." If there are not
sufficient shares available to satisfy all subscriptions, shares will be
allocated so as to permit each subscribing Supplemental Eligible Account
Holder to purchase a number of shares sufficient to make his total allocation
equal to the lesser of 100 shares or the number of shares for which he
subscribed. Thereafter, unallocated shares will be allocated to each
subscribing Supplemental Eligible Account Holder whose subscription remains
unfilled in the proportion that the amount of his Qualifying Deposit bears to
the total amount of Qualifying Deposits of all subscribing Supplemental
Eligible Account Holders whose subscriptions remain unfilled.
To ensure proper allocation of stock, each Supplemental Eligible Account
Holder must list on his subscription order form and certification form all
deposit accounts in which he has an ownership interest at December 31, 1997.
Failure to list an account could result in less shares being allocated than
if all accounts had been disclosed.
PRIORITY 4: OTHER MEMBERS. To the extent that there are shares remaining
after satisfaction of subscriptions by Eligible Account Holders, the KSOP,
and Supplemental Eligible Account Holders, each member of the Mutual Holding
Company on the Voting Record Date who is not an Eligible Account Holder or
Supplemental Eligible Account Holder ("Other Members") will receive, without
payment therefor, nontransferable subscription rights to subscribe in the
Subscription Offering for the greater of 15,000 shares (i.e., approximately
0.6% of the shares offered at the midpoint of the Offering Range), or .10% of
the total offering of shares, subject to the overall purchase limitations.
See "--Limitations on Stock Purchases." If there are not sufficient shares
available to satisfy all subscriptions, available shares will be allocated
first to Other Members who reside in the Community on the Voting Record Date
and thereafter to nonresident Other Members on a pro rata basis based on the
size of the order of each Other Member.
PRIORITY 5: MINORITY STOCKHOLDERS. To the extent that there are shares
remaining after satisfaction of subscriptions by Eligible Account Holders,
the KSOP, Supplemental Eligible Account Holders and Other Members, each
Minority Stockholder will receive, without payment therefor, nontransferable
subscription rights to subscribe in the Subscription Offering for the greater
of 15,000 (i.e., approximately 0.6% of the shares offered at the midpoint of
the Offering Range), or .10% of the total offering of shares, subject to the
overall purchase limitations. In the event the Minority Stockholders
subscribe for a number of shares which, when added to the shares subscribed
for by Eligible Account Holders, the KSOP, Supplemental Eligible Account
Holders and Other Members, is in excess of the total number of shares offered
in the Offering, available shares will be allocated on a pro rata basis based
on the size of the order of each Minority Stockholder.
EXPIRATION DATE FOR THE SUBSCRIPTION OFFERING. The Subscription Offering
will expire on March , 1998 (the "Expiration Date"), unless extended
for up to 45 days or such additional periods by the Bank with the approval of
the OTS, if necessary. The Bank and the Company may determine to extend the
Subscription Offering and/or the Community Offering for any reason, whether
or not subscriptions have been received for shares at the minimum, midpoint,
or maximum of the Offering Range, and are not required to give subscribers
notice of any such extension. Subscription rights which have not been
exercised prior to the Expiration Date will become void.
The Company will not execute orders until all shares of Common Stock have
been subscribed for or otherwise sold. If 2,125,000 shares have not been
subscribed for or sold within 45 days after the Expiration Date, unless such
period is extended with the consent of the OTS, all funds delivered to the
Bank pursuant to the Subscription Offering will be returned promptly to the
subscribers with interest and all withdrawal authorizations will be
cancelled. If an extension beyond the 45 day period following the Expiration
Date is granted, the Bank will notify subscribers of the extension of time
and of any rights of subscribers to modify or rescind their subscriptions.
Such extensions may not go beyond .
PERSONS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES. The Company will
make reasonable efforts to comply with the securities laws of all states in
the United States in which persons entitled to subscribe for stock pursuant
to the Plan of Conversion reside. However, the Company is not required to
offer stock in the Offering to any person who resides in a foreign country or
resides in a state of the United States with respect to which (i) a small
number
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of persons otherwise eligible to subscribe for shares of Common Stock reside
in such state; or (ii) the Company determines that compliance with the
securities laws of such state would be impracticable for reasons of cost or
otherwise, including but not limited to a request that the Company or its
officers or directors, under the securities laws of such state, register as a
broker, dealer, salesman or selling agent or to register or otherwise qualify
the subscription rights or Common Stock for sale or subject any filing with
respect thereto in such state. Where the number of persons eligible to
subscribe for shares in one state is small, the Company will base its
decision as to whether or not to offer the Common Stock in such state on a
number of factors, including the size of accounts being held by account
holders in the state, the cost of registering or qualifying the shares or the
need to register the Company, its officers, directors or employees as
brokers, dealers or salesmen.
COMMUNITY OFFERING
To the extent that shares remain available for purchase after
satisfaction of all subscriptions of the Eligible Account Holders, the KSOP,
Supplemental Eligible Account Holders, Other Members and Minority
Stockholders, the Company has determined to offer shares pursuant to the Plan
of Conversion to certain members of the general public in a direct community
offering (the "Community Offering"), with preference given first to natural
persons residing in the Community (such natural person referred to as
"Preferred Subscribers"). Such persons, together with associates of and
persons acting in concert with such persons, may subscribe for up to 30,000
Subscription Shares (i.e., approximately 1.2% of the shares offered at the
midpoint of the Offering Range), subject to the overall purchase limitations.
See "--Limitations on Common Stock Purchases." Depending upon market or
financial conditions this amount may be increased to up to a maximum of 5%.
The minimum purchase is 25 shares. The opportunity to subscribe for shares of
Common Stock in the Community Offering category is subject to the right of
the Company, in its sole discretion, to accept or reject any such orders in
whole or in part either at the time of receipt of an order or as soon as
practicable following the Expiration Date. If the Bank with the approval of
the OTS increases the maximum purchase limitation, the Company is only
required to resolicit persons who subscribed for the maximum purchase amount
and may, in the sole discretion of the Company, resolicit certain other large
subscribers. In the event that the maximum purchase limitation is increased
to 5%, such limitation may be further increased to 9.99% provided that orders
for Common Stock exceeding 5% of the Subscription Shares issued in the
Offering shall not exceed in the aggregate 10% of the total Subscription
Shares issued in the Offering. Requests to purchase additional shares of the
Common Stock in the event that the purchase limitation is so increased will
be determined by the Board of Directors of the Company in its sole discretion.
Subject to the foregoing, if the amount of stock remaining is
insufficient to fill the orders of Preferred Subscribers, such stock will be
allocated among the Preferred Subscribers in the manner that permits each
such person, to the extent possible, to purchase the number of shares
necessary to make his total allocation of Common Stock equal to the lesser of
100 shares offered or the number of shares subscribed for by each such
Preferred Subscriber; provided that if there are insufficient shares
available for such allocation, then shares will be allocated among Preferred
Subscribers whose orders remain unsatisfied in the proportion that the
unfilled subscription of each bears to the total unfilled subscriptions of
all Preferred Subscribers whose subscription remain unsatisfied. If all
orders of Preferred Subscribers are filled, any shares remaining will be
allocated to other persons who purchase in the Community Offering applying
the same allocation described above for Preferred Subscribers.
The term "resided" or "residing" as used herein shall mean any person who
occupies a dwelling within the Community, has a present intent to remain
within the Community for a period of time, and manifests the genuineness of
that intent by establishing an ongoing physical presence within the Community
together with an indication that such presence within the Community is
something other than merely transitory in nature. To the extent the person is
a corporation or other business entity, the principal place of business or
headquarters shall be in the Community. To the extent a 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. The Bank may
utilize deposit or loan records or such other evidence provided to it to make
a determination as to whether a person is a resident. In all cases, however,
such a determination shall be in the sole discretion of the Bank.
The Community Offering will terminate no more than 45 days following the
Expiration Date, unless extended by the Bank and the Company with the
approval of the OTS if necessary. The Bank and the Company may determine
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to extend the Subscription Offering and/or the Community Offering for any
reason, whether or not subscriptions have been received for shares at the
minimum, midpoint, or maximum of the Offering Range, and are not required to
give subscribers notice of any such extension. The Company will not execute
orders until all shares of Common Stock have been subscribed for or otherwise
sold. If 2,125,000 shares have not been subscribed for or sold within 45 days
after the Expiration Date, unless such period is extended with the consent of
the OTS, all funds delivered to the Bank pursuant to the Subscription
Offering will be returned promptly to the subscribers with interest and all
withdrawal authorizations will be cancelled. If an extension beyond the 45
day period following the Expiration Date is granted, the Bank will notify
subscribers of the extension of time and of any rights of subscribers to
modify or rescind their subscriptions. Such extensions may not go beyond .
The Board of Directors has the right to reject any order submitted in the
Offering by a person whose representations the Board of Directors believes to
be false or who it otherwise believes, either alone or acting in concert with
others, is violating, evading, circumventing, or intends to violate, evade or
circumvent the terms and conditions of the Plan of Conversion.
SYNDICATED COMMUNITY OFFERING
If feasible, the Board of Directors may determine to offer all
Subscription Shares not subscribed for in the Subscription and Community
Offerings in a Syndicated Community Offering, subject to such terms,
conditions and procedures as may be determined by the Company, in a manner
that will achieve the widest distribution of the Common Stock subject to the
right of the Bank to accept or reject in whole or in part any subscriptions
in the Syndicated Community Offering. In the Syndicated Community Offering,
any person together with any associate or group of persons acting in concert
may purchase a number of Subscription Shares that when combined with Exchange
shares received by such person, together with any associate or group of
persons acting in concert is equal to 30,000 shares, subject to the overall
purchase limitations; provided, however, that the shares purchased by any
person together with an associate or group of persons acting in concert in
the Community Offering shall be counted toward meeting the overall purchase
limitations. Provided that the Subscription Offering has commenced, the
Company may commence the Syndicated Community Offering at any time after the
mailing to the members of the Proxy Statement to be used in connection with
the Special Meeting of Members of the Mutual Holding Company, provided that
the completion of the offer and sale of the Subscription Shares shall be
conditioned upon the approval of the Plan of Conversion by the members. If
the Syndicated Community Offering is not sooner commenced pursuant to the
provisions of the preceding sentence, the Syndicated Community Offering will
be commenced as soon as practicable following the date upon which the
Subscription and Community Offerings terminate.
Alternatively, if a Syndicated Community Offering is not held, the Bank
shall have the right to sell any Subscription Shares remaining following the
Subscription and Community Offerings in an underwritten firm commitment
public offering. The overall purchase limitations shall not be applicable to
sales to underwriters for purposes of such an offering but shall be
applicable to the sales by the underwriters to the public. The price to be
paid by the underwriters in such an offering shall be equal to the
Subscription Price less an underwriting discount to be negotiated among such
underwriters and the Bank, which will in no event exceed an amount deemed to
be acceptable by the OTS.
If for any reason a Syndicated Community Offering or an underwritten firm
commitment public offering of shares of Subscription Shares not sold in the
Subscription and Community Offerings cannot be effected, or in the event that
any insignificant residue of shares of Subscription Shares is not sold in the
Subscription and Community Offerings or in the Syndicated Community or
underwritten firm commitment public offering, other arrangements will be made
for the disposition of unsubscribed shares by the Bank, if possible. Such
other purchase arrangements will be subject to the approval of the OTS.
PLAN OF DISTRIBUTION AND SELLING COMMISSIONS
Offering materials for the Offering initially have been distributed to
certain persons by mail, with additional copies made available at the Bank's
office and by Friedman, Billings, Ramsey & Co., Inc. All prospective
purchasers are to send payment along with a completed Order Form and
certification form directly to the Bank, where such funds will be held in a
segregated special escrow account and not released until the Offering is
completed or terminated.
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To assist in the marketing of the Common Stock, the Bank has retained
FBR, which is a broker-dealer registered with the National Association of
Securities Dealers, Inc. (the "NASD"). FBR will assist the Bank in the
Offering as follows: (i) in training and educating the Bank's employees
regarding the mechanics and regulatory requirements of the Conversion; (ii)
in conducting any informational meetings for employees, customers and the
general public; (iii) in coordinating the selling efforts in the Bank's local
communities; and (iv) keeping records of all orders for Common Stock. For
these services, FBR will receive (i) an advisory and management fee of
$50,000; and (ii) a marketing fee of 1.0% of the total dollar amount of the
Common Stock sold in the Subscription and Community Offerings, reduced by the
advisory and management fee. No fee shall be payable by the Bank in
connection with the sale of Common Stock to the KSOP or to the Bank's or the
Company's directors, officers, employees, and such persons' immediate family
members.
The Bank also will reimburse FBR for its reasonable out-of-pocket
expenses associated with its marketing effort, up to a maximum of $39,500,
including legal fees and expenses. The Bank has made an advance payment to
FBR in the amount of $25,000. The Bank will indemnify FBR against liabilities
and expenses (including legal fees) incurred in connection with certain
claims or litigation arising out of or based upon untrue statements or
omissions contained in the offering material for the Common Stock, including
liabilities under the Securities Act of 1933.
Certain directors and executive officers of the Company and Bank may
participate in the solicitation of offers to purchase Common Stock. Such
persons will be reimbursed by the Mutual Holding Company and/or the Bank for
their reasonable out-of-pocket expenses, including, but not limited to, de
minimis telephone and postage expenses, incurred in connection with such
solicitation. Other regular, full-time employees of the Bank may participate
in the Offering but only in ministerial capacities, providing clerical work
in effecting a sales transaction or answering questions of a potential
purchaser provided that the content of the employee's responses is limited to
information contained in the Prospectus or other offering documents, and no
offers or sales may be made by tellers or at the teller counter. All sales
activity will be conducted in a segregated or separately identifiable area of
the Bank's offices apart from the area accessible to the general public for
the purpose of making deposits or withdrawals. Other questions of prospective
purchasers will be directed to executive officers or registered
representatives. Such other employees have been instructed not to solicit
offers to purchase Common Stock or provide advice regarding the purchase of
Common Stock. The Company will rely on Rule 3a4-1 under the Securities
Exchange Act of 1934 (the "Exchange Act"), and sales of Common Stock will be
conducted within the requirements of Rule 3a4-1, so as to permit officers,
directors and employees to participate in the sale of Common Stock. No
officer, director or employee of the Company or the Bank will be compensated
in connection with his participation by the payment of commissions or other
remuneration based either directly or indirectly on the transactions in the
Common Stock.
PROCEDURE FOR PURCHASING SHARES
EXPIRATION DATE. The Offering will terminate at noon, Central time, on
March , 1998, unless extended by the Company, with prior approval of
the OTS, if required, for up to an additional 45 days (as so extended, the
"Expiration Date). Such extension may be granted by the Company, in its sole
discretion, without further approval or additional notice to purchasers in
the Offering. Any extension of the Offering beyond the Expiration Date would
be subject to OTS approval and potential purchasers would be given the right
to increase, decrease, or rescind their orders for Common Stock. If the
minimum number of shares offered in the Offering is not sold by the
Expiration Date the Company may terminate the Offering and promptly refund
all orders for Common Stock. A reduction in the number of shares below the
minimum of the Offering Range will not require the approval of the Mutual
Holding Company's members or the Bank's stockholders, or an amendment to the
Independent Valuation. If the number of shares is reduced below the minimum
of the Offering Range, purchasers will be given an opportunity to increase,
decrease, or rescind their orders.
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 an
Order Form will confirm receipt or delivery in accordance with Rule 15c2-8.
Order Forms will be distributed only with a Prospectus.
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The Company reserves the right in its sole discretion to terminate the
Offering at any time and for any reason, in which case the Company will
return all purchase orders, plus interest at its current passbook rate from
the date of receipt.
USE OF ORDER AND CERTIFICATION FORMS. In order to purchase the Common
Stock, each purchaser must complete an Order Form and a certification form.
Incomplete Order Forms, or Order Forms that are not accompanied by a
certification form, will not be accepted. The Bank will not be required to
accept orders submitted on photocopied or facsimilied stock order forms. Any
person receiving an Order Form who desires to purchase Common Stock must do
so prior to noon, Central time, on March , 1998 by delivering (by mail
or in person) to the Company a properly executed and completed Order Form and
a certification form, together with full payment for the shares purchased.
Once tendered, an Order Form cannot be modified or revoked without the
consent of the Company. The Company reserves the absolute right, in its sole
discretion, to reject orders received in the Community Offering, in whole or
in part, at the time of receipt or at any time prior to completion of the
Offering. Each person ordering shares is required to represent that he is
purchasing such shares for his own account and that he has no agreement or
understanding with any person for the sale or transfer of such shares. The
interpretation by the Company of the terms and conditions of the Plan of
Conversion and of the acceptability of the Order Forms and certification
forms will be final.
PAYMENT FOR SHARES. Payment for all shares will be required to accompany
all completed Order Forms for the purchase to be valid. Payment for shares
may be made by (i) cash (if delivered in person), (ii) check, money order,
certified or teller's check or bank draft made payable to Pocahontas Bancorp,
Inc., or (iii) authorization of withdrawal from savings accounts (including
certificates of deposit) maintained with the Bank. Appropriate means by which
such withdrawals may be authorized are provided in the Order Forms. Once such
a withdrawal amount has been authorized, a hold will be placed on such funds,
making them unavailable to the depositor until the Offering has been
completed or terminated. In the case of payments authorized to be made
through withdrawal from deposit accounts, all funds authorized for withdrawal
will continue to earn interest at the contract rate until the Offering is
completed or terminated. Interest penalties for early withdrawal applicable
to certificate accounts will not apply to withdrawals authorized for the
purchase of shares; however, if a withdrawal results in a certificate account
with a balance less than the applicable minimum balance requirement, the
certificate shall be cancelled at the time of withdrawal without penalty, and
the remaining balance will earn interest at the passbook rate subsequent to
the withdrawal. In the case of payments made by cash, check or money order,
such funds will be placed in a segregated savings account and interest will
be paid by the Bank at the current passbook rate per annum from the date
payment is received until the Offering is completed or terminated. An
executed Order Form, once received by the Bank, may not be modified, amended
or rescinded without the consent of the Bank, unless the Offering is not
completed by the Expiration Date, in which event purchasers may be given the
opportunity to increase, decrease, or rescind their orders for a specified
period of time.
A depositor interested in using his or her IRA funds to purchase Common
Stock must do so through a self-directed IRA. Since the Bank does not offer
such accounts, it will allow a depositor to make a trustee-to-trustee
transfer of the IRA funds to a trustee offering a self-directed IRA program
with the agreement that such funds will be used to purchase the Company's
Common Stock in the Offering. There will be no early withdrawal or IRS
interest penalties for such transfers. The new trustee would hold the Common
Stock in a self-directed account in the same manner as the Bank now holds the
depositor's IRA funds. An annual administrative fee may be payable to the new
trustee. Depositors interested in using funds in a Bank IRA to purchase
Common Stock should contact the Stock Center at the Bank as soon as possible
so that the necessary forms may be forwarded for execution and returned prior
to the Expiration Date.
The KSOP will not be required to pay for shares purchased until
consummation of the Offering, provided that there is in force from the time
the order is received a loan commitment from an unrelated financial
institution or the Company to lend to the KSOP the necessary amount to fund
the purchase.
DELIVERY OF STOCK CERTIFICATES. Certificates representing Common Stock
issued in the Offering and Bank checks representing interest paid on
subscriptions made by cash, check, or money order will be mailed by the Bank
to the persons entitled thereto at the address noted on the Order Form, as
soon as practicable following consummation of the Offering and receipt of all
necessary regulatory approvals. Any certificates returned as undeliverable
will be
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held by the Bank until claimed by persons legally entitled thereto or
otherwise disposed of in accordance with applicable law. Until certificates
for the Common Stock are available and delivered to purchasers, purchasers
may not be able to sell the shares of stock which they ordered. Regulations
prohibit the Bank from lending funds or extending credit to any persons to
purchase Common Stock in the Offering.
OTHER RESTRICTIONS. Notwithstanding any other provision of the Plan of
Conversion, no person is entitled to purchase any Common Stock to the extent
such purchase would be illegal under any federal or state law or regulation
(including state "blue-sky" registrations), or would violate regulations or
policies of the NASD, particularly those regarding free riding and
withholding. The Bank and/or its agents may ask for an acceptable legal
opinion from any purchaser as to the legality of such purchase and may refuse
to honor any such purchase order if such opinion is not timely furnished.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES
Prior to the completion of the Conversion, the OTS conversion regulations
prohibit any person with subscription rights, including the Eligible Account
Holders, Supplemental Eligible Account Holders, Other Members and Minority
Stockholders of the Bank, from transferring or entering into any agreement or
understanding to transfer the legal or beneficial ownership of the
subscription rights issued under the Plan of Conversion or the shares of
Common Stock to be issued upon their exercise. Such rights may be exercised
only by the person to whom they are granted and only for his account. Each
person exercising such subscription rights will be required to certify that
he is purchasing shares solely for his own account and that he has no
agreement or understanding regarding the sale or transfer of such shares. The
regulations also prohibit any person from offering or making an announcement
of an offer or intent to make an offer to purchase such subscription rights
or shares of Common Stock prior to the completion of the Conversion.
The Bank and the Company will pursue any and all legal and equitable
remedies in the event they become aware of the transfer of subscription
rights and will not honor orders known by them to involve the transfer of
such rights.
LIMITATIONS ON COMMON STOCK PURCHASES
The Plan of Conversion includes the following limitations on the number
of shares of Common Stock which may be purchased during the Conversion:
(1) No person may purchase less than 25 shares of Common Stock.
(2) The KSOP may purchase in the aggregate up to 8% of the Subscription
Shares issued in the Offering, including shares issued in the event of an
increase in the Offering Range of 15%.
(3) No person, together with associates of and groups of persons acting
in concert with such person, may purchase in the Offering a number of
Subscription Shares that when combined with Exchange Shares received by any
such person, together with associates of and persons acting in concert with
such person exceeds 5% of the shares of Conversion Stock issued and
outstanding upon consummation of the Conversion and the Offering, except for
the KSOP which may subscribe for up to 8% of the Common Stock offered in the
Subscription Offering (including shares issued in the event of an increase in
the Estimated Price Range of 15%); provided, however, that in the event the
maximum purchase limitation is increased, orders for Subscription Shares in
the Community Offering and in the Syndicated Offering (or, alternatively, an
underwritten firm commitment public offering), if any, shall as determined by
the Bank, first be filled to a maximum of 30,000 shares and thereafter
remaining shares shall be allocated, on an equal number of shares basis per
order until all orders have been filled.
(4) The maximum number of shares of Common Stock which may be purchased
in all categories of the Offering by officers and directors of the Bank and
their associates in the aggregate, shall not exceed [27%] of the Subscription
Shares offered in the Offering.
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Depending upon market or financial conditions, the Board of Directors of
the Company, with the approval of the OTS and without further approval of
members of the Mutual Holding Company, may decrease or further increase the
purchase limitations. Subject to any required regulatory approval and the
requirements of applicable laws and regulations, but without further approval
of the members of the Company, both the individual amount permitted to be
subscribed for and the overall purchase limitation may be increased to up to
a maximum of 5% at the sole discretion of the Company and the Bank. If such
amount is increased, subscribers for the maximum amount will be, and certain
other large subscribers who through their subscriptions evidence a desire to
purchase the maximum allowable number of shares in the sole discretion of the
Bank may be, given the opportunity to increase their subscriptions up to the
then applicable limit. The effect of such a resolicitation will be an
increase in the number of shares owned by subscribers who choose to increase
their subscriptions. In addition, the Boards of Directors of the Company and
the Bank may, in their sole discretion, increase the maximum purchase
limitation referred to above up to 9.99%, provided that orders for shares
exceeding 5% of the shares being offered shall not exceed, in the aggregate,
10% of the total offering. Requests to purchase additional shares under this
provision will be determined by the respective Boards of Directors in their
sole discretion.
In the event of an increase in the total number of shares offered in the
Offering due to an increase in the Offering Range of up to 15%, the maximum
number of shares that may be purchased as restricted by the purchase
limitations shall not be increased proportionately (except for the KSOP), and
the additional shares sold will be allocated in the following order of
priority in accordance with the Plan of Conversion: (i) to fill the KSOP's
subscription for 8% of the total number of shares sold; (ii) in the event
that there is an oversubscription at the Eligible Account Holder,
Supplemental Eligible Account Holder, Other Member, or Minority Stockholder
levels, to fill unfulfilled subscriptions of such subscribers according to
such respective priorities; and (iii) to fill unfulfilled subscriptions in
the Community Offering with preference given to natural persons residing in
the Community.
The term "associate" of a person is defined to mean: (i) any corporation or
organization (other than the Bank or a majority-owned subsidiary of the Bank) of
which such person is an officer, partner or 10% stockholder; (ii) any trust or
other estate in which such person has a substantial beneficial interest or
serves as a director or in a similar fiduciary capacity; provided, however, such
term shall not include any employee stock benefit plan in which such person has
a substantial beneficial interest or serves as director or in a similar
fiduciary capacity; and (iii) any relative or spouse of such persons, or any
relative of such spouse, who either has the same home as such person or who is a
director or officer of the Bank. Directors are not treated as associates solely
because of their Board membership. For a further discussion of limitations on
purchases of a converting institution's stock at the time of Conversion and
subsequent to Conversion, see "Management of the Bank--Subscriptions by
Management and Directors," and "The Conversion -- Certain Restrictions on
Purchase or Transfer of Shares After Conversion" and "Restrictions on
Acquisition of the Company and the Bank."
LIQUIDATION RIGHTS
In the unlikely event of a complete liquidation of the Bank prior to the
Conversion, all claims of creditors of the Bank, including those of depositors
to the extent of their deposit balances, would be paid first. Thereafter, if
there were any assets of the Bank remaining, such assets would be distributed to
stockholders, including the Mutual Holding Company. Were the Mutual Holding
Company and the Bank to liquidate prior to the Conversion, all claims of
creditors would be paid first. Thereafter, if there were any assets of the
Mutual Holding Company remaining, members of the Mutual Holding Company would
receive such remaining assets, pro rata, based upon the deposit balances in
their deposit account in the Bank immediately prior to liquidation. In the
unlikely event that the Bank were to liquidate after Conversion, all claims of
creditors (including those of depositors, to the extent of their deposit
balances) would also be paid first, followed by distribution of the "liquidation
account" to certain depositors, with any assets remaining thereafter distributed
to the Company as the holder of the Bank's capital stock. Pursuant to the rules
and regulations of the OTS, a post-conversion merger, consolidation, sale of
bulk assets or similar combination or transaction with another insured savings
institution would not be considered a liquidation and, in such a transaction,
the liquidation account would be assumed by the surviving institution.
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
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amount equal to the greater of: (a) the sum of (i) the Mutual Holding
Company's ownership interest in the surplus and reserves of the Bank as of
the date of its latest balance sheet contained in the final Prospectus used
in connection with the Conversion, and (ii) the restricted retained income
account that reflects certain dividends waived by the Mutual Holding Company;
or (b) the retained earnings of the Bank at the time that the Bank
reorganized into the Mutual Holding Company on December 31, 1991. The purpose
of the liquidation account is to provide Eligible Account Holders and
Supplemental Eligible Account Holders who maintain their deposit accounts
with the Bank after the conversion with a distribution upon complete
liquidation of the Bank after the Conversion. Each Eligible Account Holder
and Supplemental Eligible Account Holder, if he were to continue to maintain
his deposit account at the Bank, would be entitled, on a complete liquidation
of the Bank after the Conversion to an interest in the liquidation account
prior to any payment to the stockholders of the Bank. Each Eligible Account
Holder and the Supplemental Eligible Account Holder would have an initial
interest in such liquidation account for each deposit account, including
regular accounts, transaction accounts such as NOW accounts, money market
deposit accounts, and certificates of deposit, with a balance of $50 or more
held in the Bank on the Eligibility Record Date, or the Supplemental
Eligibility Record Date, respectively ("Deposit Accounts"). Each Eligible
Account Holder and Supplemental Eligible Account Holder will have a pro rata
interest in the total liquidation account for each of his Deposit Accounts
based on the proportion that the balance of each such Deposit Account on the
Eligibility Record Date, or the Supplemental Eligibility Record Date,
respectively, bore to the balance of all Deposit Accounts in the Bank on such
dates.
If, however, on any September 30 annual closing date of the Bank, commencing
after September 30, 1998, the amount in any Deposit Account is less than the
amount in such Deposit Account on the Eligibility Record Date, or the
Supplemental Eligibility Record Date, respectively, or any other annual closing
date, then the interest in the liquidation account relating to such Deposit
Account would be reduced from time to time by the proportion of any such
reduction, and such interest will cease to exist if such Deposit Account is
closed. In addition, no interest in the liquidation account would ever be
increased despite any subsequent increase in the related Deposit Account.
Payment pursuant to liquidation rights of Eligible Account Holders and
Supplemental Eligible Account Holders would be separate and apart from any
insured deposit accounts to such depositor. Any assets remaining after the above
liquidation rights of Eligible Account Holders and Supplemental Eligible Account
Holders are satisfied would be distributed to the Company as the sole
shareholder of the Bank.
TAX ASPECTS
The Conversion will be effected as (i) an exchange of the Mutual Holding
Company's charter for an interim stock savings association charter and
simultaneous merger into the Bank in a tax-free reorganization under Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) a merger of the Interim Savings Bank into the Bank with the Bank's
stockholders exchanging their Bank Common Stock for Common Stock of the Company
in a tax-free reorganization under Code Section 368(a)(1)(A) by reason of Code
Section 368(a)(2)(E). Consummation of the Conversion is expressly conditioned
upon the prior receipt of an opinion of counsel with respect to federal and
state income taxation that indicates that the Conversion will not be a taxable
transaction to the Mutual Holding Company, the Bank, the Company, the Interim
Savings Bank, Eligible Account Holders, Supplemental Eligible Account Holders,
or members of the Mutual Holding Company.
Pursuant to Revenue Procedure 97-3, the IRS has stated that it will not rule
on whether a transaction qualifies as a tax-free reorganization under Code
Section 368(a)(1)(A), including a transaction that qualifies under Code Section
368(a)(1)(A) by reason of Code Section 368(a)(2)(E), or whether the taxpayer is
subject to the consequences of qualification under that section (such as
nonrecognition and basis issues) but that it would rule on significant
sub-issues that must be resolved to determine whether the transaction qualifies
under the above sections. In several instances over the last two years, the IRS
ruled favorably on certain significant sub-issues associated with downstream
mergers of mutual holding companies into their less than 80 percent owned
subsidiary savings associations. In such cases, the IRS has ruled that (i) the
exchange of the member's equity interests in the mutual holding company for
interests in a liquidation account established at the savings association will
satisfy the continuity of interest requirement with respect to the merger of
mutual holding company into the savings association; (ii) pursuant to the merger
of an interim savings association into the savings association, the stock
holding company will acquire control of the savings association (as defined in
Code Section 368(c)) as the interests in the liquidation account and the shares
of savings association stock previously held by the mutual holding company will
be disregarded; and (iii) the continuity of interest
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requirement will not be violated by the exchange of stock holding company
stock for savings association stock in the merger of an interim savings
association into the savings association.
In December 1994, the IRS issued Revenue Procedure 94-76 which states
that the IRS will not issue private letter rulings with respect to downstream
mergers of a corporation into a "less than 80 percent distributee", i.e., a
corporation, such as the Bank, in which the merging corporation (i.e., the
Mutual Holding Company) possesses less than 80 percent of the total voting
power of the stock of such corporation and less than 80 percent of the total
value of the stock of such corporation. The IRS has assumed this "no-rule"
position to study whether such downstream mergers circumvent the purpose
behind the repeal of General Utilities & Operating Co. v. Helvering, 296 U.S.
200 (1935). Counsel to the Company is of a view that the downstream merger to
effect the Conversion of the Mutual Holding Company to stock form, where
after consummation of the Conversion, the Company holds 100% of the shares of
the Bank and the untaxed appreciation of the Bank remains in corporate
solution, is not the type of downstream merger which can be considered as
circumventing the repeal of General Utilities. If, however, the IRS were to
conclude that such mergers circumvent the repeal of General Utilities, the
IRS could issue correcting regulations which could have the effect of taxing
to the merging corporation, as of the effective time of the merger, the fair
market value of the assets of such corporation over its basis in such assets.
If such regulations are issued, it is expected that they would apply on a
prospective basis and would have no effect on transactions consummated before
their issuance. The Company will receive an opinion of counsel that, in the
absence of a change in the regulations, and based on current law and
regulations, the merger of the Mutual Holding Company into the Bank will
qualify as a tax-free merger under Code Section 368(a)(1)(A), as more fully
discussed below.
On the Effective Date, the Mutual Holding Company and the Bank will
receive an opinion of counsel, Luse Lehman Gorman Pomerenk & Schick, A
Professional Corporation, which will indicate that the federal income tax
consequences of the Conversion will be as follows: (i) the conversion of the
Mutual Holding Company from mutual to stock form (which company in its mutual
and stock form is referred to herein as the "Mutual Holding Company") and the
simultaneous merger of the Mutual Holding Company with and into the Bank will
qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code, (ii) the exchange of the members' equity interests in the Mutual
Holding Company for interests in a liquidation account established at the
Bank will satisfy the continuity of interest requirement with respect to the
merger of the Mutual Holding Company into the Bank; (iii) the Mutual Holding
Company will not recognize any gain or loss on the transfer of its assets to
the Bank in exchange for a liquidation account in Bank, and non-transferable
subscription rights to purchase stock, and the Bank's assumption of the
liabilities of Mutual Holding Company, if any; (iv) no gain or loss will be
recognized by the Bank upon the receipt of the assets of the Mutual Holding
Company in exchange for a liquidation account in Bank and non-transferable
subscription rights to purchase common stock of the Company; (v) the basis of
the assets of Mutual Holding Company to be received by Bank will be the same
as the basis of such assets in the hands of the Mutual Holding Company
immediately prior to the transfer; (vi) the holding period of the assets of
the Mutual Holding Company to be received by the Bank will include the
holding period of those assets in the hands of the Mutual Holding Company
immediately prior to the transfer; (vii) Mutual Holding Company members will
recognize no gain or loss upon the receipt of an interest in the liquidation
account in the Bank and non-transferable subscription rights in exchange for
their membership interest in the Mutual Holding Company; (viii) the merger of
the Interim Savings Bank into the Bank with the Bank as the surviving
institution qualifies as a reorganization within the meaning of Section
368(a)(1)(A) of the Code, pursuant to Section 368(a)(2)(E) of the Code; (ix)
interests in the liquidation account established at the Bank, and the shares
of Bank Common Stock held by the Mutual Holding Company prior to consummation
of the merger of the Mutual Holding Company and the Bank, will be disregarded
for the purposes of determining that an amount of stock in the Bank which
constitutes "control" was acquired by the Company pursuant to the merger of
the Interim Savings Bank into the Bank; (x) the exchange of shares of Company
Common Stock for common stock of the Bank in the merger of the Interim
Savings Bank into the Bank, following the merger of the Mutual Holding
Company into the Bank, will not violate the continuity of interest
requirement of the income tax regulations; (xi) the Interim Savings Bank will
not recognize any gain or loss on the transfer of its assets to the Bank in
exchange for Bank stock and the assumption by the Bank of the liabilities, if
any, of the Interim Savings Bank; (xii) the Bank will not recognize any gain
or loss on the receipt of the assets of the Interim Savings Bank in exchange
for Bank stock; (xiii) the Bank's basis in the assets received from the
Interim Savings Bank in the proposed transaction will, in each case, be the
same as the basis of such assets in the hands of the Interim Savings Bank
immediately prior to the transaction; (xiv) the Company will not recognize
any gain or loss upon its receipt of Bank stock solely in exchange for stock;
(xv) the Bank's holding period for the assets received from the Interim
Savings Bank in the
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proposed transaction will, in each instance, include the period during which
such assets were held by the Interim Savings Bank; (xvi) the Company will not
recognize any gain or loss upon its receipt of Bank stock in exchange for
Interim Savings Bank stock; (xvii) Bank stockholders will not recognize any
gain or loss upon their exchange of Bank stock solely for shares of Company
Common Stock; (xviii) each Bank shareholder's aggregate basis in his or her
Company Common Stock received in the exchange will be the same as the
aggregate basis of the Bank stock surrendered in exchange therefor; (xix)
each Bank shareholder's holding period in his or her Company Common Stock
received in the exchange will include the period during which the Bank stock
surrendered was held, provided that the Bank stock surrendered is a capital
asset in the hands of the Bank shareholder on the date of the exchange; and
(xx) the Eligible Account Holders and Supplemental Eligible Account Holders
will recognize gain, if any, upon the issuance to them of withdrawable
savings accounts, an interest in the liquidation account and nontransferable
subscription rights to purchase Company common stock, but only to the extent
of the value, if any, of the subscription rights. The form of such opinion
has been filed with the SEC as an exhibit to the Company's registration
statement.
In the opinion of RP Financial, which opinion is not binding on the IRS, the
subscription rights do not have any value, based on the fact that such rights
are acquired by the recipients without cost, are nontransferable and of short
duration, and afford the recipients the right only to purchase the Common Stock
at a price equal to its estimated fair market value, which will be the same
price as the Purchase Price for the unsubscribed shares of Common Stock. If the
subscription rights granted to Eligible Account Holders and Supplemental
Eligible Account Holders are deemed to have an ascertainable value, receipt of
such rights could result in taxable gain to those Eligible Account Holders and
Supplemental Eligible Account Holders who exercise the subscription rights in an
amount equal to such value and the Bank could recognize gain on such
distribution. Eligible Account Holders and Supplemental Eligible Account Holders
are encouraged to consult with their own tax advisor as to the tax consequences
in the event that such subscription rights are deemed to have an ascertainable
value.
Unlike private rulings, an opinion of counsel is not binding on the IRS and
the IRS could disagree with the conclusions reached therein. Depending on the
conclusion or conclusions with which the IRS disagrees, the IRS may take the
position that the transaction is taxable to any one or more of the Mutual
Holding Company and/or the members of the Mutual Holding Company, the Bank, the
Minority Stockholders of the Bank and/or the Eligible Account Holders and
Supplemental Eligible Account Holders who exercise their subscription rights. In
the event of such disagreement, there can be no assurance that the IRS would not
prevail in a judicial or administrative proceeding.
CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER CONVERSION
All Subscription Shares purchased in the Offering by a director or an
executive officer of the Bank will be subject to a restriction that the shares
not be sold for a period of one year following the Conversion, except in the
event of the death of such director or executive officer. Each certificate for
restricted shares will bear a legend giving notice of this restriction on
transfer, and instructions will be issued to the effect that any transfer within
such time period of any certificate or record ownership of such shares other
than as provided above is a violation of the restriction. Any shares of Common
Stock issued at a later date as a stock dividend, stock split, or otherwise,
with respect to such restricted stock will be subject to the same restrictions.
The directors and executive officers of the Bank will also be subject to the
insider trading rules promulgated pursuant to the Exchange Act.
Purchases of outstanding shares of Common Stock of the Company by directors,
executive officers (or any person who was an executive officer or director of
the Bank after adoption of the Plan of Conversion) and their associates during
the three-year period following the Conversion may be made only through a
broker or dealer registered with the SEC, except with the prior written approval
of the OTS. This restriction does not apply, however, to negotiated transactions
involving more than 1% of the Company's outstanding Common Stock or to the
purchase of stock pursuant to a stock option plan or any tax qualified employee
stock benefit plan of or non-tax qualified employee stock benefit plan of the
Bank or the Company (including any employee plan, recognition plans or
restricted stock plans).
OTS regulations applicable to the Company as a result of the Conversion
prohibit the Company from repurchasing shares of its Common Stock for three
years, except for: (i) an offer to all stockholders on a pro rata basis; or (ii)
for the repurchase of qualifying shares of a director. Notwithstanding the
foregoing and except as provided below, beginning one year following completion
of the Conversion, the Company may repurchase its
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Common Stock so long as (i) the repurchases within the following two years
are part of an open-market program not involving greater than 5% of its
outstanding capital stock during a twelve-month period; (ii) the repurchases
do not cause the Bank to become "undercapitalized" within the meaning of the
OTS prompt corrective action regulation; and (iii) the Company provides to
the Regional Director of the OTS no later than ten days prior to the
commencement of a repurchase program written notice containing a full
description of the program to be undertaken and such program is not
disapproved by the Regional Director. See "Regulation and Supervision--Prompt
Corrective Regulatory Action." In addition, under current OTS policies,
repurchases may be allowed in the first year following the Conversion and in
amounts greater than 5% in the second and third years following the
Conversion provided there are valid and compelling business reasons for such
repurchases and the OTS does not object to such repurchases.
RESTRICTIONS ON THE ACQUISITION OF THE COMPANY AND THE BANK
GENERAL
The Plan of Conversion provides for the Conversion of the Mutual Holding
Company from the mutual to the stock form of organization and in connection
therewith, the Company, as a new Delaware stock corporation has been
organized which will become the sole stockholder of the Bank following the
Conversion. Provisions in the Company's Certificate of Incorporation and
Bylaws together with provisions of Delaware corporate law, may have
anti-takeover effects. In addition, certain provisions of the Company's and
Bank's compensation plans contain provisions which may discourage or make
more difficult for persons or companies to acquire control of either the
Company or the Bank. Also, the Bank's Stock Charter and Bylaws and
compensation plans entered into in connection with the Conversion may have
anti-takeover effects as described below. In addition, regulatory
restrictions may make it difficult for persons or companies to acquire
control of either the Company or the Bank.
RESTRICTIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
A number of provisions of the Company's Certificate of Incorporation and
Bylaws deal with matters of corporate governance and certain rights of
stockholders. The following discussion is a general summary of certain
provisions of the Company's Certificate of Incorporation and Bylaws and certain
other statutory and regulatory provisions relating to stock ownership and
transfers, and business combinations, which might be deemed to have a potential
"anti-takeover" effect. These provisions may have the effect of discouraging a
future takeover attempt or change of control which is not approved by the Board
of Directors but which a majority of individual Company stockholders may deem to
be in their best interests or in which stockholders may receive a substantial
premium for their shares over then current market prices. As a result,
stockholders who desire to participate in such a transaction may not have an
opportunity to do so. Such provisions will also render the removal of the
current Board of Directors or management of the Company more difficult. The
following description of certain of the provisions of the Certificate of
Incorporation and Bylaws of the Company is necessarily general and reference
should be made in each case to such Certificate of Incorporation and Bylaws.
LIMITATION ON VOTING RIGHTS. The Certificate of Incorporation of the
Company provides that in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or indirectly, by a person
who beneficially owns in excess of 10% of the then outstanding shares of Common
Stock (the "Limit") be entitled or permitted to any vote in respect of the
shares held in excess of the Limit. Beneficial ownership is determined pursuant
to Rule 13d-3 of the General Rules and Regulations promulgated pursuant to the
Securities Exchange Act of 1934, and includes shares beneficially owned by such
person or any of his affiliates (as defined in the Certificate of
Incorporation), shares which such person or his affiliates have the right to
acquire upon the exercise of conversion rights or options and shares as to which
such person and his affiliates have or share investment or voting power, but
shall not include shares beneficially owned by the KSOP or directors, officers
and employees of the Bank or the Company or shares that are subject to a
revocable proxy and that are not otherwise beneficially owned, or deemed by the
Company to be beneficially owned, by such person and his affiliates. The
Certificate of Incorporation of the Company further provides that the provision
limiting voting rights may only be amended upon the vote of 80% of the
outstanding shares of voting stock.
BOARD OF DIRECTORS. The Board of Directors of the Company is divided into
three classes, each of which shall contain approximately one-third of the whole
number of the members of the Board. Each class shall serve a staggered
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term, with approximately one-third of the total number of directors being
elected each year. The Company's Certificate of Incorporation and Bylaws
provide that the size of the Board shall be determined by a majority of the
directors. The Certificate of Incorporation and the Bylaws provide that any
vacancy occurring in the Board, including a vacancy created by an increase in
the number of directors or resulting from death, resignation, retirement,
disqualification, removal from office or other cause, shall be filled for the
remainder of the unexpired term exclusively by a majority vote of the
directors then in office. The classified Board is intended to provide for
continuity of the Board of Directors and to make it more difficult and time
consuming for a shareholder group to fully use its voting power to gain
control of the Board of Directors without the consent of the incumbent Board
of Directors of the Company. The Certificate of Incorporation of the Company
provides that a director may be removed from the Board of Directors prior to
the expiration of his term only for cause, upon the vote of 80% of the
outstanding shares of voting stock.
The Company will have a Nominating Committee which will be responsible for
nominations of directors. Stockholders who wish to nominate persons for election
to the Board of Directors may do so if the stockholder makes timely written
notice to the Company's Secretary. Generally, to be timely, such notice, which
must include all information required to be disclosed pursuant to Regulation 14A
under the Securities Exchange Act of 1934, must be received at the Company's
principal executive offices no later than ninety (90) days prior to the date of
the meeting.
In the absence of these provisions, the vote of the holders of a majority of
the shares could remove the entire Board, with or without cause, and replace it
with persons of such holders' choice.
CUMULATIVE VOTING, SPECIAL MEETINGS AND ACTION BY WRITTEN CONSENT. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, special meetings of shareholders of the Company may be called
only by the Board of Directors of the Company. The Certificate of Incorporation
also provides that any action required or permitted to be taken by the
shareholders of the Company may be taken only at an annual or special meeting
and prohibits shareholder action by written consent in lieu of a meeting.
AUTHORIZED SHARES. The Certificate of Incorporation authorizes the
issuance of 7.0 million shares of Common Stock and 500,000 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 employee stock options. However, these additional
authorized shares may also be used by the Board of Directors consistent with
its fiduciary duty to deter future attempts to gain control of the 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
rating 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 for the issuance of additional shares, other
than the issuance of additional shares upon exercise of stock options and to
permit the 1998 Recognition Plan to obtain the equivalent of 4% of the shares
sold in the Offering.
SHAREHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH PRINCIPAL
STOCKHOLDERS. The Certificate of Incorporation requires the approval of the
holders of at least 80% of the Company's outstanding shares of voting stock to
approve certain "Business Combinations," as defined therein, and related
transactions. Under Delaware law, absent this provision, Business Combinations,
including mergers, consolidations and sales of all or substantially all of the
assets of a corporation must, subject to exceptions, be approved by the vote of
the holders of only a majority of the outstanding shares of Common Stock of the
Company and any other affected class of stock. Under the Certificate of
Incorporation, at least 80% approval of stockholders is required in connection
with any Business Combination involving an Interested Stockholder (as defined
below) except (i) in cases where the proposed transaction has been approved in
advance by a majority of those members of the Company's Board of Directors who
are unaffiliated with the Interested Stockholder and were directors prior to the
time when the shareholder became an Interested Stockholder or (ii) if the
proposed transaction met certain conditions set forth therein which are designed
to afford the shareholders a fair price in consideration for their shares, in
which cases approval of only a majority of the outstanding shares of voting
stock is required. The term "Interested Stockholder" is defined to include any
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individual, corporation, partnership or other entity (other than the Company or
its subsidiary) which owns beneficially or controls, directly or indirectly, 10%
or more of the outstanding shares of voting stock of the Company. This provision
of the Certificate of Incorporation applies to any "Business Combination," which
is defined to include (i) any merger or consolidation of the Company or any of
its subsidiaries with or into any Interested Stockholder or Affiliate (as
defined in the Certificate of Incorporation) of an Interested Stockholder; (ii)
any sale, lease, exchange, mortgage, transfer, pledge or other disposition to or
with any Interested Stockholder or Affiliate of an Interested Stockholder of 25%
or more of the assets of the Company or combined assets of the Company and its
subsidiary; (iii) the issuance or transfer to any Interested Stockholder or its
Affiliate by the Company (or any subsidiary) of any securities of the Company in
exchange for any assets, cash or securities the value of which equals or exceeds
25% of the fair market value of the Common Stock of the Company; (iv) the
adoption of any plan for the liquidation or dissolution of the Company proposed
by or on behalf of any Interested Stockholder or Affiliate thereof; and (v) any
reclassification of securities, recapitalization, merger or consolidation of the
Company which has the effect of increasing the proportionate share of Common
Stock or any class of equity or convertible securities of the Company owned
directly or indirectly, by an Interested shareholder or Affiliate thereof.
EVALUATION OF OFFERS. The Certificate of Incorporation of the Company
further provides that the Board of Directors of the Company, when evaluating
any offer of another "Person" (as defined therein), to (i) make a tender or
exchange offer for any equity security of the Company, (ii) merge or
consolidate the Company with another corporation or entity or (iii) purchase
or otherwise acquire all or substantially all of the properties and assets of
the Company, may, in connection with the exercise of its judgment in
determining what is in the best interest of the Company, the Bank and the
stockholders of the Company, give due consideration to all relevant factors,
including, without limitation, the social and economic effects of acceptance
of such offer on the Company's customers and the Bank's present and future
account holders, borrowers and employees; on the communities in which the
Company and the Bank operate or are located; and on the ability of the
Company to fulfill its corporate objectives as a savings and loan holding
company and on the ability of the Bank to fulfill the objectives of a
federally chartered stock savings association under applicable statutes and
regulations. By having these standards in the Certificate of Incorporation of
the Company, the Board of Directors may be in a stronger position to oppose
such a transaction if the Board concludes that the transaction would not be
in the best interest of the Company, even if the price offered is
significantly greater than the then market price of any equity security of
the Company.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
Company's Certificate of Incorporation must be approved by a majority vote of
its Board of Directors and also by a majority of the outstanding shares of its
voting stock, provided, however, that an affirmative vote of at least 80% of the
outstanding voting stock entitled to vote (after giving effect to the provision
limiting voting rights) is required to amend or repeal certain provisions of the
Certificate of Incorporation, including the provision limiting voting rights,
the provisions relating to approval of certain business combinations, calling
special meetings, the number and classification of directors, director and
officer indemnification by the Company and amendment of the Company's Bylaws and
Certificate of Incorporation. The Company's Bylaws may be amended by its Board
of Directors, or by a vote of 80% of the total votes eligible to be voted at a
duly constituted meeting of stockholders.
CERTAIN BYLAW PROVISIONS. The Bylaws of the Company also require a
shareholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at a shareholder meeting to have at least 90
days advance notice to the Secretary of the Company. The notice provision
requires a shareholder who desires to raise new business to provide certain
information to the Company concerning the nature of the new business, the
shareholder and the stockholder's interest in the business matter. Similarly, a
shareholder wishing to nominate any person for election as a director must
provide the Company with certain information concerning the nominee and the
proposing stockholder.
The provisions described above are intended to reduce the Company's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its Board of Directors. The
provisions of the Bank's current and proposed employment agreements and stock
benefit plans may also discourage takeover attempts by increasing the costs to
be incurred by the Bank and Company in the event of a takeover. See "Management
of the Bank--Benefits."
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The foregoing provisions and limitations may make it more difficult for
companies or persons to acquire control of the Bank. Additionally, the
provisions could deter offers to the shareholders which might be viewed by such
shareholders to be in their best interests.
The Company's Board of Directors believes that the provisions of the
Certificate of Incorporation, Bylaws and compensation plans are in the best
interests of the Company and its stockholders. An unsolicited non-negotiated
proposal can seriously disrupt the business and management of a corporation and
cause it great expense. Accordingly, the Board of Directors believes it is in
the best interests of the Company and its stockholders to encourage potential
acquirors to negotiate directly with management and that these provisions will
encourage such negotiations and discourage non-negotiated takeover attempts. It
is also the Board of Directors' view that these provisions should not discourage
persons from proposing a merger or other transaction at a price that reflects
the true value of the Company and that otherwise is in the best interest of all
stockholders.
DELAWARE CORPORATE LAW
In 1988, Delaware enacted a statute designed to provide Delaware
corporations with additional protection against hostile takeovers. The takeover
statute, which is codified in Section 203 of the Delaware General Corporate Law
("Section 203"), is intended to discourage certain takeover practices by
impeding the ability of a hostile acquiror to engage in transactions with the
target company.
In general, Section 203 provides that a "Person" (as defined therein) who
owns 15% or more of the outstanding voting stock of a Delaware corporation
(an "Interested Stockholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the
three-year period following the date such "Person" became an Interested
Stockholder. The term "business combination" is defined broadly to cover a
wide range of corporate transactions including mergers, sales of assets,
issuances of stock, transactions with subsidiaries and the receipt of
disproportionate financial benefits.
The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
an Interested Stockholder, the Board of Directors approved either the business
combination or the transaction which resulted in the shareholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he became an Interested Stockholder, calculated without regard to those
shares owned by the corporation's directors who are also officers or certain
employee stock plans; (iii) any business combination with an Interested
Stockholder that is approved by the Board of Directors and by a two-thirds vote
of the outstanding voting stock not owned by the Interested Stockholder; and
(iv) certain business combinations that are proposed after the corporation had
received other acquisition proposals and which are approved or not opposed by a
majority of certain continuing members of the Board of Directors. A corporation
may exempt itself from the requirements of the statute by adopting an amendment
to its Certificate of Incorporation or Bylaws electing not to be governed by
Section 203. At the present time, the Board of Directors of the Company does not
intend to propose any such amendment.
RESTRICTIONS IN THE BANK'S FEDERAL STOCK CHARTER AND BYLAWS
The Bank's Charter contains a provision whereby the acquisition of or offer
to acquire beneficial ownership of more than 10% of the issued and outstanding
shares of any class of equity securities of the Bank by any person (i.e., any
individual, corporation, group acting in concert, trust, partnership, joint
stock company or similar organization), either directly or through an affiliate
thereof, will be prohibited until [April 1999]. Any stock beneficially owned in
excess of 10% of the stock outstanding will be deemed to be acquired in
violation of the Charter provision and will not be counted as outstanding for
voting purposes. This limitation shall not apply to any transaction in which the
Bank forms a stock holding company without a change in the respective beneficial
ownership interests of its stockholders, other than pursuant to the exercise of
any dissenter or appraisal rights, the purchase of shares by underwriters in
connection with a public offering, or the purchase of shares by a tax qualified
employee stock benefit plan. In the event that holders of revocable proxies for
more than 10% of the shares of the Common Stock of the Company seek, among other
things, to elect one-third or more of the Company's Board of Directors, to cause
the Company's stockholders to approve the acquisition or corporate
reorganization of the Company, or to exert a continuing influence on a material
aspect of the business operations of the Company, which actions could indirectly
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result in a change in control of the Bank, the Board of Directors of the Bank
will be able to assert this provision of the Bank's Charter against such
holders. Although the Board of Directors of the Bank is not currently able to
determine when and if it would assert this provision of the Bank's Charter, the
Board of Directors, in exercising its fiduciary duty, may assert this provision
if it were deemed to be in the best interests of the Bank, the Company and its
stockholders. It is unclear, however whether this provision, if asserted, would
be successful against such persons in a proxy contest which could result in a
change in control of the Bank indirectly through a change in control of the
Company. For a period of five years from [April 1999], shareholders will not be
permitted to call a special meeting of shareholders relating to a change of
control of the Bank or a Charter amendment or to cumulate their votes in the
election of directors. The staggered terms of the Board of Directors could have
an anti-takeover effect by making it more difficult for a majority of shares to
force an immediate change in the Board of Directors since only one-third of the
Board is elected each year. The purpose of the provisions is to assure stability
and continuity of management of the Bank.
Although the Bank has no arrangements, understandings or plans at the
present time for the issuance or use of the shares of undesignated preferred
stock proposed to be authorized, the Board of Directors believes that the
availability of such shares will provide the Bank with increased flexibility
in structuring possible future financing and acquisitions and in meeting
other corporate needs which may arise. In the event of a proposed merger,
tender offer or other attempt to gain control of the Bank of which management
does not approve, it might be possible for the Board of Directors to
authorize the issuance of one or more series of preferred stock with rights
and preferences which could impede the completion of such a transaction. An
effect of the possible issuance of such preferred stock, therefore, may be to
deter or render more difficult a future takeover attempt. The Board of
Directors of the Bank does not intend to issue any preferred stock except on
terms which the Board deems to be in the best interests of the Bank and its
then existing stockholders.
REGULATORY RESTRICTIONS
The Plan of Conversion prohibits any person, prior to the completion of the
Conversion, from transferring, or from entering into any agreement or
understanding to transfer, to the account of another, legal or beneficial
ownership of the subscription rights issued under the Plan of Conversion or the
Common Stock to be issued upon their exercise. The Plan of Conversion also
prohibits any person, prior to the completion of the Conversion, from offering,
or making an announcement of an offer or intent to make an offer, to purchase
such subscription rights or Common Stock.
For three years following the Conversion, OTS regulations prohibit any
person from acquiring, either directly or indirectly, or making an offer to
acquire more than 10% of the stock of any converted savings institution, without
the prior written approval of the OTS, except for (i) offers that if
consummated, would not result in the acquisition by such person during the
preceding 12-month period of more than 1% of such stock, (ii) offers in the
aggregate for up to 24.99% by the KSOP of the Company or the Bank, and (iii)
offers which are not offered by recently converted savings associations and
which receive prior OTS approval. Such prohibition is also applicable to the
acquisition of the Common Stock of the Company. 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 matters submitted to a vote of shareholders. The definition
of beneficial ownership for this regulation extends to persons holding revocable
or irrevocable proxies for the Company's stock under circumstances that give
rise to a conclusive or rebuttable determination of control under the OTS
regulations.
In addition, any proposal to acquire 10% of any class of equity security of
the Company generally would be subject to approval by the OTS under the Savings
and Loan Holding Company Act (the "SLHCA"). The OTS requires all persons seeking
control of a savings institution, and, therefore, indirectly its holding
company, to obtain regulatory approval prior to offering to obtain control. Such
change in control restrictions on the acquisition of holding company stock are
not limited to three years after conversion but will apply for as long as the
regulations are in effect. Persons holding revocable or irrevocable proxies may
be deemed to be beneficial owners of such securities under OTS regulations and
therefore prohibited from voting all or the portion of such proxies in excess of
the 10% aggregate beneficial ownership limit. Such regulatory restrictions may
prevent or inhibit proxy contests for control of the Company or the Bank which
have not received prior regulatory approval.
105
<PAGE>
ADDITIONAL ANTITAKEOVER EFFECTS
Assuming executive officers and directors (i) purchase _____ Subscription
Shares in the Offering, (ii) receive Exchange Shares in the Share Exchange as
described above, (iii) receive a number of shares of Common Stock equal to 4%
and 10% of the number of Subscription Shares sold in the Offering pursuant to
the 1998 Recognition Plan and 1998 Stock Option Plan, respectively (assuming
such plans are approved by stockholders, that all awards are vested and all
options exercised, and the 1998 Recognition Plan shares are purchased in the
open market); and (iv) receive all stock benefits that were not vested as of
September 30, 1997, and exercised all such stock options; then executive
officers and directors will own between ___% and ___% of the Company's Common
Stock at the minimum and adjusted maximum of the Offering Range,
respectively. Such amount does not include the ___% of the Company's Common
Stock that will be owned by the KSOP at the conclusion of the Conversion,
assuming the KSOP purchases 8% of the Subscription Shares sold in the
Offering, and assuming that all participants vote the shares allocated to
their KSOP account in accordance with management's recommendations. Under the
terms of the KSOP, the unallocated shares will be voted by the independent
KSOP trustee in the same proportion as the allocated shares. Accordingly,
directors and officers will have effective voting control over a substantial
amount of Common Stock issued and outstanding at the completion of the
Conversion. The potential voting control by directors and officers could,
together with additional stockholder support or upon exercise of their
options, defeat stockholder proposals requiring an 80% supermajority vote. As
a result, these provisions may preclude takeover attempts that certain
stockholders deem to be in their best interest and may tend to perpetuate
existing management.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
At the Effective Date, the Company will be authorized to issue 7.0 million
shares of Common Stock having a par value of $.01 per share and 500,000 shares
of preferred stock (the "Preferred Stock"). The Company currently expects to
issue up to 2,875,000 (subject to adjustment) shares of Common Stock in the
Offering, and up to 2,566,413 shares (subject to adjustment) in exchange for
Minority Shares in the Conversion. The Company does not intend to issue shares
of Preferred Stock in the Conversion. Each share of the Company's Common Stock
will have the same relative rights as, and will be identical in all respects
with, each other share of Common Stock. Upon payment of the Purchase Price for
the Common Stock, in accordance with the Plan of Conversion, all such stock will
be duly authorized, fully paid and nonassessable.
The Common Stock of the Company will represent nonwithdrawable capital, will
not be an account of an insurable type, and will not be insured by the FDIC or
any other government agency.
COMMON STOCK
DIVIDENDS. The Company can pay dividends out of statutory surplus or from
certain net profits if, as and when declared by its Board of Directors. The
payment of dividends by the Company is subject to limitations which are
imposed by law and applicable regulation. See "Dividend Policy." The holders
of Common Stock of the Company will be entitled to receive and share equally
in such dividends as may be declared by the Board of Directors of the Company
out of funds legally available therefor. If the Company issues Preferred
Stock, the holders thereof may have a priority over the holders of the Common
Stock with respect to dividends.
VOTING RIGHTS. Upon Conversion, the holders of Common Stock of the Company
will possess exclusive voting rights in the Company. They will elect the
Company's Board of Directors and act on such other matters as are required to be
presented to them under Delaware law or as are otherwise presented to them by
the Board of Directors. Except as discussed in "Restrictions on Acquisition of
the Company and the Bank," each holder of Common Stock will be entitled to one
vote per share and (for a period of five years from the consummation of the
Conversion) will not have any right to cumulate votes in the election of
directors. If the Company issues Preferred Stock, holders of the Preferred Stock
may also possess voting rights. Certain matters require an 80% shareholder vote.
See "Restrictions on Acquisition of the Company and the Bank."
106
<PAGE>
As a federal stock savings association, corporate powers and control of
the Bank are vested in its Board of Directors, who elect the officers of the
Bank and who fill any vacancies on the Board of Directors as it exists upon
the Conversion. Voting rights of the Bank are vested exclusively in the
owners of the shares of capital stock of the Bank, which will be the Company,
and voted at the direction of the Company's Board of Directors. Consequently,
the holders of the Common Stock will not have direct control of the Bank.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
the Bank, the Company, as holder of the Bank's capital stock would be entitled
to receive, after payment or provision for payment of all debts and liabilities
of the Bank (including all deposit accounts and accrued interest thereon) and
after distribution of the balance in the special liquidation account to Eligible
Account Holders and Supplemental Eligible Account Holders (see "The
Conversion--Liquidation Rights"), all assets of the Bank available for
distribution. In the event of liquidation, dissolution or winding up of the
Company, the holders of its Common Stock would be entitled to receive, after
payment or provision for payment of all its debts and liabilities, all of the
assets of the Company available for distribution. If Preferred Stock is issued,
the holders thereof may have a priority over the holders of the Common Stock in
the event of liquidation or dissolution.
PREEMPTIVE RIGHTS. Holders of the Common Stock of the Company will not be
entitled to preemptive rights with respect to any shares which may be issued.
The Common Stock is not subject to redemption.
PREFERRED STOCK
None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion. Such stock may be issued with such preferences and
designations as the Board of Directors may from time to time determine. The
Board of Directors can, without shareholder approval, issue Preferred Stock with
voting, dividend, liquidation and conversion rights which could dilute the
voting strength of the holders of the Common Stock and may assist management in
impeding an unfriendly takeover or attempted change in control.
DESCRIPTION OF CAPITAL STOCK OF THE BANK
GENERAL. The Charter of the Bank authorizes the issuance of capital stock
consisting of 20,000,000 shares of common stock, par value $.01 per share, and
10,000,000 shares of preferred stock, which preferred stock may be issued in
series and classes having such rights, preferences, privileges and restrictions
as the Board of Directors may determine. Each share of common stock of the Bank
has the same relative rights as, and is identical in all respects with, each
other share of common stock. The Board of Directors of the Bank is authorized to
approve the issuance of common stock up to the amount authorized by the Charter
without the approval of the Bank's stockholders. All of the issued and
outstanding Common Stock of the Bank will be held by the Company as the Bank's
sole stockholder.
DIVIDENDS. The holders of the Bank's common stock are entitled to receive
and to share equally in such dividends as may be declared by the Board of
Directors of the Bank out of funds legally available therefore. See "Dividend
Policy" for certain restrictions on the payment of dividends.
VOTING RIGHTS. The holders of the Bank's common stock possess exclusive
voting rights in the Bank. Each holder of shares of common stock is entitled to
one vote for each share held, subject to any right of shareholders to cumulate
their votes for the election of directors. During the period ending in [April
1999], the holders of the Bank's common stock shall not be permitted to cumulate
their votes for the election of directors. See "Restrictions on Acquisition of
the Company and the Bank--Antitakeover Effects of the Company's Certificate of
Incorporation, Bylaws and Compensation Plans Adopted in the Conversion."
LIQUIDATION. In the event of any liquidation, dissolution, or winding up of
the Bank, the holders of the Bank's common stock will be entitled to receive,
after payment of all debts and liabilities of the Bank (including all deposit
accounts and accrued interest thereon), and distribution of the balance in the
special liquidation account to Eligible Account Holders, all assets of the Bank
available for distribution in cash or in kind. If additional preferred stock is
issued subsequent to the Conversion, the holders thereof may also have priority
over the holders of common stock in the event of liquidation or dissolution.
107
<PAGE>
PREEMPTIVE RIGHTS; REDEMPTION. Holders of the common stock of the Bank will
not be entitled to preemptive rights with respect to any shares of the Bank
which may be issued. The common stock will not be subject to redemption. Upon
receipt by the Bank of the full specified purchase price thereon, the common
stock will be fully paid and nonassessable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is the Registrar and
Transfer Company.
EXPERTS
The consolidated financial statements included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
RP Financial has consented to the publication herein of the summary of its
report to the Bank and the Company setting forth its opinion as to the estimated
pro forma market value of the Common Stock upon Conversion and its opinion with
respect to subscription rights.
LEGAL OPINIONS
The legality of the Common Stock and the federal income tax consequences of
the Conversion will be passed upon for the Bank and the Company by Luse Lehman
Gorman Pomerenk & Schick, A Professional Corporation, Washington, D.C., special
counsel to the Bank and the Company. Certain legal matters will be passed upon
for FBR by Peabody & Brown, Washington, D.C.
ADDITIONAL INFORMATION
The Company has filed with the SEC a registration statement under the
Securities Act with respect to the Common Stock offered hereby. As permitted by
the rules and regulations of the SEC, this Prospectus does not contain all the
information set forth in the registration statement. Such information, including
the Conversion Valuation Appraisal Report which is an exhibit to the
Registration Statement, 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 statements contained in this Prospectus as to the contents of any contract
or other document filed as an exhibit to the registration statement are, of
necessity, brief descriptions thereof and are not necessarily complete.
The 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
Prospectus 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 Office of the Regional Director of the
OTS located at 122 West John Carpenter Freeway, Irving, Texas 75039.
In connection with the Conversion, the Company will register its Common
Stock with the SEC under Section 12(g) of the Exchange Act, and, upon such
registration, the Company and the holders of its stock will become subject to
the proxy solicitation rules, reporting requirements and restrictions on
stock purchases and sales by directors, officers and greater than 10%
stockholders, the annual and periodic reporting and certain other
requirements of the Exchange Act. Under the Plan of Conversion, the Company
has undertaken that it will not terminate such registration for a period of
at least three years following the Conversion. In the event that the Bank
amends the Plan of Conversion to eliminate the concurrent formation of the
Company as part of the Conversion, the Bank will register its stock with the
OTS under Section 12(g) of the Exchange Act and, upon such registration, the
Bank and the holders of the Conversion Stock will become subject to the same
obligations and restrictions.
A copy of the Certificate of Incorporation and the Bylaws of the Company and
the Federal Stock Charter and Bylaws of the Bank are available without charge
from the Bank.
108
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INDEPENDENT AUDITORS' REPORT.................................... F-2
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(As of September 30, 1997 and 1996)............................. F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
(For the fiscal years ended September 30, 1997, 1996 and 1995).. F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(For the fiscal years ended September 30, 1997, 1996 and 1995).. F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(For the fiscal years ended September 30, 1997, 1996 and 1995).. F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(For the fiscal years ended September 30, 1997, 1996 and 1995).. F-10
</TABLE>
All schedules are omitted as the required information is not applicable or
the information is presented in the consolidated financial statements.
Financial statements of Pocahontas Bancorp, Inc. (the "Company") are not
presented herein because the Company has not yet issued any stock, has no assets
and no liabilities, and has not conducted any business other than of an
organizational nature.
Financial statements of Pocahontas Federal Mutual Holding Company (the
"Mutual Holding Company") are not presented herein because the Mutual Holding
Company's only assets are $461,000 cash and its stock investment in Pocahontas
Federal Savings and Loan Association and it has no liabilities and does not
conduct any business.
F-1
<PAGE>
AUDIT OPINION
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
Pocahontas Federal Savings and Loan Association:
We have audited the accompanying consolidated statements of financial
condition of Pocahontas Federal Savings and Loan Association (the
"Association") and subsidiaries as of September 30, 1997 and 1996 and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1997.
These financial statements are the responsibility of the Association's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
presently fairly, in all material respects, the financial position of the
Association and subsidiaries as of September 30, 1997 and 1996 and the results
of their operations and their cash flows for each of the three years in the
period ended September 30, 1997 in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Little Rock, Arkansas
October 30, 1997
F-2
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
S> <C> <C>
ASSETS
Cash and due from banks......................... $2,805,273 $2,046,135
Cash surrender value of life insurance.......... 5,639,161 5,438,860
Securities held-to-maturity, at amortized
cost (fair value of $202,897,745 and
$218,969,300 in 1997 and 1996, respectively).. 200,552,569 219,689,835
Loans receivable, net........................... 159,690,201 136,871,613
Accrued interest receivable..................... 2,229,531 2,277,584
Premises and equipment, net..................... 1,804,832 1,923,247
Federal Home Loan Bank stock.................... 10,052,700 11,607,700
Other assets.................................... 642,947 1,706,712
------------ -----------
TOTAL........................................... $383,417,214 $381,561,686
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits....................................... $143,354,096 $116,282,608
Federal Home Loan Bank advances.................. 190,601,038 227,220,906
Securities sold under agreements to repurchase... 20,685,000 10,100,000
Deferred compensation............................ 947,186 860,000
Special SAIF premium assessment payable.......... -- 937,000
Accrued expenses and other liabilities........... 3,583,625 3,471,971
------------ -----------
Total liabilities.............................. 359,170,945 358,872,485
------------ -----------
------------ -----------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, 20,000,000
shares authorized; 1,632,424 and 1,624,594
shares issued and outstanding in 1997
and 1996, respectively......................... 163,242 162,459
Additional paid-in capital....................... 14,913,491 14,770,569
Reduction for ESOP debt guaranty................. (103,644) (209,300)
Cumulative waived dividends...................... 1,630,125 1,254,937
Retained earnings................................ 7,643,055 6,710,536
------------ -----------
Total stockholders' equity..................... 24,246,269 22,689,201
------------ -----------
TOTAL.............................................. $383,417,214 $381,561,686
------------ -----------
------------ -----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
INTEREST INCOME:
Loans receivable.................. $ 12,006,825 $ 10,517,365 $ 9,107,904
Securities held-to-maturity....... 14,086,352 14,899,664 14,191,812
------------- ------------- ------------
Total interest income........... 26,093,177 25,417,029 23,299,716
INTEREST EXPENSE:
Deposits.......................... 5,939,098 5,380,077 5,588,738
Borrowed funds.................... 12,759,704 13,248,265 11,651,886
------------- ------------- ------------
Total interest expense.......... 18,698,802 18,628,342 17,240,624
------------- ------------- ------------
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES......... 7,394,375 6,788,687 6,059,092
PROVISION FOR LOAN LOSSES........... 60,000 411,200 --
------------- ------------- ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES......... 7,334,375 6,377,487 6,059,092
OTHER INCOME:
Dividends......................... 626,422 828,505 270,971
Fees and service charges.......... 398,234 314,437 430,108
Other............................. 326,526 383,263 209,519
------------- ------------- ------------
Total other income.............. 1,351,182 1,526,205 910,598
OTHER EXPENSES:
Compensation and benefits......... 2,954,912 2,704,002 2,623,833
Occupancy and equipment........... 566,229 438,872 376,792
Deposit insurance premium and
assessment...................... 108,136 1,197,722 278,830
Professional fees................. 276,149 209,275 143,648
Data processing................... 237,995 205,369 170,737
Advertising....................... 184,456 171,044 104,741
OTS assessment.................... 92,034 87,546 74,559
Other............................. 545,639 536,939 253,076
------------- ------------- ------------
Total other expenses............ 4,965,550 5,550,769 4,026,216
------------- ------------- ------------
INCOME BEFORE INCOME TAXES.......... 3,720,007 2,352,923 2,943,474
INCOME TAX PROVISION................ 1,344,490 386,382 1,000,781
------------- ------------- ------------
NET INCOME.......................... $ 2,375,517 $ 1,966,541 $ 1,942,693
------------- ------------- ------------
------------- ------------- ------------
Earnings per share.................. $ 1.46 $ 1.22 $ 1.21
------------- ------------- ------------
------------- ------------- ------------
Weighted average shares outstanding. 1,629,011 1,617,690 1,610,000
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
------------------------ PAID-IN ESOP WAIVED RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL GUARANTY DIVIDENDS EARNINGS EQUITY
----------- ----------- ------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1,
1994.................. 1,610,000 $ 161,000 $ 14,462,887 $ (418,600) $ 215,625 $ 4,999,189 $ 19,420,101
Net income.............. 1,942,693 1,942,693
Repayment of ESOP loan
and related increase
in share value........ 115,454 104,650 220,104
Dividends paid or to be
paid.................. (574,713) (574,713)
Dividends waived........ 375,187 (375,187)
----------- ----------- ------------- ----------- ------------ ------------ -------------
BALANCE, SEPTEMBER 30,
1995.................. 1,610,000 161,000 14,578,341 (313,950) 590,812 5,991,982 21,008,185
Net income.............. 1,966,541 1,966,541
Repayment of ESOP loan
and related increase
in share value........ 47,747 104,650 152,397
Options exercised....... 14,594 1,459 144,481 145,940
Dividends paid or to be
paid.................. 583,862 (583,862)
Dividends waived........ 664,125 (664,125)
----------- ----------- ------------- ----------- ------------ ------------ -------------
BALANCE, SEPTEMBER 30,
1996.................. 1,624,594 162,459 14,770,569 (209,300) 1,254,937 6,710,536 22,689,201
Net income.............. 2,375,517 2,375,517
Repayment of ESOP loan
and related increase
in share value........ 65,405 105,656 171,061
Options exercised....... 7,830 783 77,517 78,300
Dividends paid or to be
paid.................. (1,067,810) (1,067,810)
Dividends waived........ 375,188 (375,188)
----------- ----------- ------------- ----------- ------------ ------------ -------------
BALANCE, SEPTEMBER 30,
1997.................. 1,632,424 $ 163,242 $ 14,913,491 $ (103,644) $ 1,630,125 $ 7,643,055 $ 24,246,269
----------- ----------- ------------- ----------- ------------ ------------ -------------
----------- ----------- ------------- ----------- ------------ ------------ -------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income........................................................... $ 2,375,517 $ 1,966,541 $ 1,942,693
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation of premises and equipment............................. 199,576 180,025 179,686
Deferred income tax provision (benefit)............................ 414,295 (146,428) (215,677)
Amortization of deferred loan fees................................. (183,648) (183,649) (122,536)
Amortization of premiums and discounts, net........................ (116,045) (180,379) (327,984)
Adjustment of ESOP shares and release of shares under recognition
and retention plan............................................... 65,405 47,747 115,454
Provision for loan losses.......................................... 60,000 411,200 --
Net gains (losses) on sales of assets.............................. (47,600) 79,811 7,289
Increase in cash surrender value of life
insurance policies............................................... (200,301) (118,860) --
Changes in operating assets and liabilities:
Accrued interest receivable...................................... 48,053 237,936 (198,424)
Other assets..................................................... 253,596 (581,240) 100,159
Deferred compensation............................................ 87,186 267,146 217,800
Special SAIF assessment payable.................................. (937,000) 937,000 --
Accrued expenses and other liabilities........................... 217,310 24,400 1,138,836
------------- ------------- -------------
Net cash provided by operating activities...................... 2,236,344 2,941,250 2,837,296
INVESTING ACTIVITIES:
Purchases of investment securities held-to-maturity.................. (8,460,626) (57,973,899) (66,492,165)
Proceeds from sale of securities available-for-sale.................. -- 15,788,567 --
Proceeds from maturities and principal repayments
of investment securities held-to-maturity.......................... 29,268,937 35,962,923 42,009,170
Increase in loans, net............................................... (24,817,073) (22,163,548) (13,238,991)
Proceeds from sale of loans.......................................... 2,155,506 1,320,713 751,990
Proceeds from sale of foreclosed real estate......................... 410,101 163,059 177,145
Purchase of life insurance policies.................................. -- (5,320,000) --
Purchases of premises and equipment.................................. (81,161) (297,335) (226,841)
------------- ------------- -------------
Net cash used by investing activities.......................... (1,524,316) (32,519,520) (37,019,692)
</TABLE>
(Continued)
F-6
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- --------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net increase (decrease) in deposits.......................... $ 27,071,488 $ 3,824,696 $ (948,777)
Federal Home Loan Bank advances.............................. 2,037,150,900 1,479,348,400 239,850,000
Repayment of Federal Home Loan Bank advances................. (2,073,770,768) (1,463,114,691) (78,084,610)
Net increase (decrease) in repurchase agreements............. 10,585,000 10,100,000 (119,430,000)
Decrease in amounts due for investments not settled.......... -- -- (7,204,556)
Exercise of stock options.................................... 78,300 145,940 --
Dividends paid............................................... (1,067,810) (539,685) (458,850)
---------------- ---------------- --------------
Net cash provided by financing activities.............. 47,110 29,764,660 33,723,207
NET INCREASE (DECREASE) IN CASH
AND DUE FROM BANKS.......................................... 759,138 186,390 (459,189)
CASH AND DUE FROM BANKS, BEGINNING OF YEAR................... 2,046,135 1,859,745 2,318,934
---------------- ---------------- --------------
CASH AND DUE FROM BANKS, END OF YEAR......................... $ 2,805,273 $ 2,046,135 $ 1,859,745
---------------- ---------------- --------------
---------------- ---------------- --------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest..................................................... $ 18,426,591 $ 18,528,748 $ 16,371,063
---------------- ---------------- --------------
---------------- ---------------- --------------
Income taxes................................................. $ 825,000 $ 870,000 $ 825,219
---------------- ---------------- --------------
---------------- ---------------- --------------
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTMENT ACTIVITIES:
Transfers from loans to real estate acquired, or deemed
acquired, through foreclosure.............................. $ 294,241 $ 233,293 $ 87,659
---------------- ---------------- --------------
---------------- ---------------- --------------
Loans originated to finance the sale of real estate acquired
through foreclosure........................................ $ 349,446 $ 145,393 $ 205,239
---------------- ---------------- --------------
---------------- ---------------- --------------
</TABLE>
(Concluded)
See notes to consolidated financial statements.
F-7
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The accompanying consolidated financial
statements include the accounts of Pocahontas Federal Savings and Loan
Association (the "Association") and its wholly-owned subsidiaries, P.F.
Service, Inc. and Sun Realty, Inc. which provide real estate services.
All significant intercompany transactions have been eliminated in
consolidation. The Pocahontas Federal Mutual Holding Company (the
"Company"), whose activity is not included in the accompanying financial
statements, owns 52.84% of the outstanding common stock of the
Association.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash Equivalents--For the purpose of presentation in the consolidated
statements of cash flows, cash and cash equivalents include cash on hand
and in demand accounts at other depository institutions and short-term
liquid investments having a maturity at the time acquired of three
months or less.
Securities Held-to-Maturity--Bonds, notes and debentures for which the
Association has the positive intent and ability to hold to maturity are
reported at cost, adjusted for the amortization of premiums and the
accretion of discounts, which are recognized in income using the
level-yield method over the assets' remaining lives, adjusted for
anticipated prepayments. Should other than a temporary decline in the
fair value of a security occur, the carrying value of such security
would be written down to market value by a charge to operations.
Loans Receivable--Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or pay-off
are reported at their outstanding principal adjusted for any charge-off,
the allowance for loan losses, and any deferred fees or costs on
originated loans and unamortized premiums or discounts on purchased
loans.
Discounts and premiums on purchased residential real estate loans are
amortized to income using the interest method over the remaining period
to contractual maturity, adjusted for anticipated prepayments. Discounts
and premiums on purchased consumer loans are recognized over the
expected lives of the loans using methods that approximate the interest
method.
Loan origination fees and certain direct origination costs are capitalized
and recognized as an adjustment of the yield of the related loan.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet contractual
principal or interest obligations or where interest or principal is 90
days or more past due. When a loan is placed on nonaccrual status,
accrual of interest ceases and, in general, uncollected past due
interest (including interest applicable to prior reporting periods, if
any) is reversed and charged against current income. Therefore, interest
income is not recognized unless the financial condition
F-8
<PAGE>
and payment record of the borrower warrant the recognition of interest
income. Interest on loans that have been restructured is generally
accrued according to the renegotiated terms.
Allowance for Loan Losses--The allowance for loan losses is increased by
charges to income and decreased by charge-offs (net of recoveries). Loan
principal is charged against the allowance for loan losses when
management believes that the loss of the principal is probable. If, as a
result of loans charged off or increases in the size or risk
characteristics of the loan portfolio, the allowance is below the level
considered by management to be adequate to absorb future loan losse on
existing loans, the provisison for loan losses is increased to the level
considered necessary to provide an adequate allowance. The allowance is
an amount that management believes will be adequate to absorb possible
losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of the loans. The evaluations take
into consideration such factors as changes in the nature and volume of
the loan portfolio, overall portfolio quality, review of specific
problem loans and current economic conditions that may affect the
borrowers' ability to pay. Economic conditions may result in the
necessity to change the allowance quickly in order to react to
deteriorating financial conditions of the Association's borrowers. As a
result, additional provisions on existing loans may be required in the
future if borrowers' financial conditions deteriorate or if real estate
values decline.
Estimates of anticipated loan losses involve judgment. While it is
possible that in particular periods the Association may sustain losses
which are substantial relative to the allowance for loan losses, it is
the judgment of management that the allowances for loan losses reflected
in the consolidated statements of financial condition are adequate to
absorb anticipated losses which may exist in the current loan portfolio.
Foreclosed Real Estate--Real estate properties acquired through, or in
lieu of, loan foreclosure are initially recorded at fair value at the
date of foreclosure establishing a new cost basis. After foreclosure,
valuations are periodically performed by management and the real estate
is carried at the lower of carrying amount or fair value less cost to
sell. Revenue and expenses from operations and changes in the valuation
allowance are included in loss on foreclosed real estate.
Premises and Equipment--Land is carried at cost. Buildings and
improvements and furniture, fixtures, and equipment are carried at cost,
less accumulated depreciation. Depreciation for financial statement
purposes is computed using the straight-line method over the estimated
useful lives of the assets ranging from 3 to 40 years.
Income Taxes--Deferred tax assets and liabilities are recorded for
temporary differences between the book and tax bases of assets and
liabilities. Such amounts are reflected at currently enacted income tax
rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
Interest Rate Risk--The Association's asset base is exposed to risk
including the risk resulting from changes in interest rates, market
values of collateral for borrowings and changes in the timing of cash
flows. The Association analyzes the effect of such risks by considering
the mismatch of the maturities of its assets and liabilities in the
current interest rate environment and the sensitivity of assets and
liabilities to changes in interest rates. The Association's management
has considered the effect of significant increases and decreases in
interest rates and believes such changes, if they occurred, would be
manageable and would not affect the ability of the Association to hold
its assets to maturity. However, the Association is exposed to
significant market risk in the event of significant and prolonged
interest rate changes, because fixed rate assets and certain variable rate
assets that are capped are funded with short-term liabilities.
F-9
<PAGE>
Financial Instruments--The Association is party to purchased interest
rate caps contracts in the management of its interest rate exposure.
Interest rate caps are matched with specific liabilities. Premiums paid
to acquire interest rate caps are carried at cost and amortized into
interest expense over the life of the cap. Income received is recorded
on a settlement basis. Payments received are recorded as a reduction of
interest expense on a settlement basis. All derivative financial
instruments held or issued by the Association are held or issued for
purposes other than trading. In the ordinary course of business, the
Association has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit, commercial letters of
credit, and standby letters of credit. Such financial instruments are
recorded in the financial statements when they are funded or related
fees are incurred or received.
Earnings per Share--Earnings per share have been computed using the
weighted average number of shares of common stock outstanding. Common
stock equivalents have less than 3% dilutive effect. See Note 20.
Reclassifications--Certain 1996 and 1995 amounts have been reclassified to
conform to the 1997 presentation.
F-10
<PAGE>
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair value amounts of financial instruments have been
determined by the Association using available market information and
appropriate valuation methodologies. However, considerable judgment is
required to interpret market data to develop the estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Association could realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated
fair value amounts. The carrying amounts and estimated fair values of
financial instruments at September 30, 1997 and 1996, were as follows
(items which are not financial instruments are not included):
<TABLE>
<CAPTION>
1997 1996
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNTS FAIR VALUE AMOUNTS FAIR VALUE
<S> <C> <C> <C> <C>
Financial assets and liabilities:
Cash and due from banks....................... $ 2,805,273 $ 2,805,273 $ 2,046,135 $ 2,046,135
Cash surrender value of
life insurance............................... 5,639,161 5,639,161 5,438,860 5,438,860
Securities held-to-maturity................... 200,552,569 202,897,745 219,689,835 218,969,300
Loans receivable.............................. 161,849,001 167,482,954 139,087,284 139,920,668
Accrued interest receivable................... 2,229,531 2,229,531 2,277,584 2,277,584
Federal Home Loan Bank stock.................. 10,052,700 10,052,700 11,607,700 11,607,700
Interest rate caps............................ 441,936 148,194 836,563 668,806
Demand and savings deposits................... 35,073,337 35,073,337 34,425,102 34,425,102
Time deposits................................. 108,280,759 108,379,913 81,857,506 82,734,409
Federal Home Loan Bank advances............... 190,601,038 190,304,592 227,220,906 223,950,599
Securities sold under agreements to
repurchase................................... 20,685,000 20,685,000 10,100,000 10,100,000
Special SAIF premium assessment payable....... -- -- 937,000 937,000
Off-balance sheet assets
(liabilities) -
Interest rate swaps.......................... -- -- -- (31,498)
</TABLE>
For purposes of the above disclosures of estimated fair value, the
following assumptions were used. The estimated fair value for cash and
due from banks, cash surrender value of life insurance, accrued interest
receivable, and Federal Home Loan Bank stock is considered to
approximate cost due to the short-term nature of such instruments. The
estimated fair values for securities and interest rate swaps and caps
are based on quoted market values for the individual securities or for
equivalent securities. The fair value for loans is estimated by
discounting the future cash flows using the current rates the
Association would charge for similar such loans at the applicable date.
The estimated fair values for demand and savings deposits, and the
special SAIF premium assessment payable are based on the amount for
which they could be settled on demand. The estimated fair values for
time deposits and borrowed funds are based on estimates of the rate the
Association would pay on such deposits and borrowed funds at the
applicable date, applied for the time period until maturity. The
estimated fair values for other financial instruments and off-balance
sheet loan commitments approximate cost and are not considered
significant to this presentation.
F-11
<PAGE>
3. INVESTMENT SECURITIES
The amortized cost and estimated fair values of securities held-to-maturity
at September 30 are as follows:
<TABLE>
<CAPTION>
1997
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U.S. Government agencies..................... $ 26,857,998 $ 229,148 $ (10,679) $ 27,076,467
State and municipal securities............... 4,859,006 89,216 -- 4,948,222
Mortgage backed securities................... 168,835,565 2,794,249 (756,758) 170,873,056
-------------- ------------ -------------- -------------
Total..................................... $ 200,552,569 $ 3,112,613 $ (767,437) $202,897,745
-------------- ------------ -------------- -------------
-------------- ------------ -------------- -------------
</TABLE>
<TABLE>
<CAPTION>
1996
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U.S. Government agencies...................... $ 39,871,262 $ 118,718 $ (234,173) $ 39,755,807
State and municipal securities................ 459,277 14,876 -- 474,153
Mortgage backed securities.................... 179,359,296 1,666,877 (2,286,833) 178,739,340
-------------- ------------ ------------- --------------
Total...................................... $ 219,689,835 $ 1,800,471 $ (2,521,006) $ 218,969,300
-------------- ------------ ------------- --------------
-------------- ------------ ------------- --------------
</TABLE>
The amortized cost and estimated fair value of debt securities at
September 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>
ESTIMATED
AMORTIZED FAIR
COST VALUE
<S> <C> <C>
Due in one year or less.................................................... $ 506,247 $ 515,744
Due from one year to five years............................................ 19,283,642 19,393,949
Due from five years to ten years........................................... 7,148,186 7,249,524
Due after ten years........................................................ 4,778,929 4,865,472
-------------- --------------
Mortgage backed securities................................................. 168,835,565 170,873,056
$ 200,552,569 $ 202,897,745
-------------- --------------
-------------- --------------
</TABLE>
Securities with a carrying value of approximately $3,670,456 and $7,443,767
and a fair value of approximately $3,788,296 and $7,417,969 at September 30,
1997 and 1996, were pledged to collateralize public deposits.
F-12
<PAGE>
4. LOANS RECEIVABLE
Loans receivable at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Residential mortgage loans................................................. $ 135,724,070 $ 119,802,079
Consumer loans............................................................. 3,731,435 2,794,842
Commercial loans, including agriculture.................................... 22,393,496 16,490,363
Less:
Deferred loan fees, net................................................... (467,793) (481,691)
Allowance for loan losses................................................. (1,691,007) (1,733,980)
-------------- --------------
Loans receivable, net...................................................... $ 159,690,201 $ 136,871,613
-------------- --------------
-------------- --------------
</TABLE>
The Association originates adjustable rate mortgage loans to hold for
investment. The Association also originates 15 year and 30 year fixed
rate mortgage loans and sells substantially all new originations of such
loans to outside investors. Loans held for sale at September 30, 1997
and 1996, are considered by management to be immaterial. Such loans have
approximate market rates of interest.
The Association is not committed to lend additional funds to debtors whose
loans have been modified.
The Association grants real estate loans, primarily single-family
residential loans, and consumer and agricultural real estate loans,
primarily in the northeastern portion of Arkansas. Substantially all
loans are collateralized by real estate or consumer assets. Loans
collateralized by residential real estate mortgages comprise
approximately 85% of the net loan portfolio as of September 30, 1997.
The Association currently supplements the local mortgage loan demand by
investing in investment securities.
5. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at September 30 is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Securities held-to-maturity.................................................. $ 938,070 $ 1,128,396
Loans receivable............................................................. 1,291,461 1,149,188
------------ ------------
TOTAL........................................................................ $ 2,229,531 $ 2,277,584
------------ ------------
------------ ------------
</TABLE>
F-13
<PAGE>
6. ALLOWANCE FOR LOAN AND FORECLOSED REAL ESTATE LOSSES
Activity in the allowance for losses on loans and foreclosed real estate for
the years ended September 30, 1997, 1996, and 1995, is as follows:
<TABLE>
<CAPTION>
FORECLOSED
LOANS REAL ESTATE
<S> <C> <C>
BALANCE, OCTOBER 1, 1994.................................... $ 1,330,498 $ 131,072
Charge-offs, net of recoveries............................. 26,211 (85,877)
------------ ----------
BALANCE, SEPTEMBER 30, 1995................................. 1,356,709 45,195
Provision for losses....................................... 411,200 --
Charge-offs, net of recoveries............................. (33,929) 3,332
------------ ----------
BALANCE, SEPTEMBER 30, 1996................................. 1,733,980 48,527
Provision for losses....................................... 60,000 --
Charge-offs, net of recoveries............................. (102,973) (5,240)
------------ ----------
BALANCE, SEPTEMBER 30, 1997................................. $ 1,691,007 $ 43,287
------------ ----------
------------ ----------
</TABLE>
7. PREMISES AND EQUIPMENT
Premises and equipment at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cost:
Land............................................................... $ 332,476 $ 342,476
Buildings and improvements......................................... 1,937,912 1,852,502
Furniture, fixtures, and equipment................................. 1,373,813 1,396,884
----------- -----------
3,644,201 3,591,862
Less accumulated depreciation....................................... (1,839,369) (1,668,615)
----------- -----------
$ 1,804,832 $ 1,923,247
----------- -----------
----------- -----------
</TABLE>
8. DEPOSITS
Deposits at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Checking accounts, including noninterest-bearing deposits
of $2,697,858 and $1,975,823 in 1997 and 1996, respectively.............. $ 26,417,875 $ 26,381,406
Passbook savings........................................................... 8,655,462 8,043,696
Certificates of deposit.................................................... 108,280,759 81,857,506
-------------- --------------
TOTAL...................................................................... $ 143,354,096 $ 116,282,608
-------------- --------------
-------------- --------------
</TABLE>
F-14
<PAGE>
The aggregate amount of short-term jumbo certificates of deposit with a
minimum denomination of $100,000 was approximately $20,411,446 and
$11,325,243 at September 30, 1997 and 1996.
At September 30, 1997, scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30: TOTAL
<S> <C>
1998 .............................................................. $ 89,359,861
1999 .............................................................. 15,983,268
2000 .............................................................. 2,083,391
2001 .............................................................. 180,723
2002 .............................................................. 673,516
--------------
TOTAL ............................................................. $ 108,280,759
--------------
--------------
</TABLE>
Interest expense on deposits for the years ended September 30, 1997, 1996,
and 1995, is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Checking.......................................................... $ 611,594 $ 569,817 $ 596,197
Passbook savings.................................................. 247,173 229,227 231,764
Certificates of deposit........................................... 5,080,331 4,581,033 4,687,386
------------ ------------ ------------
TOTAL............................................................. $ 5,939,098 $ 5,380,077 $ 5,515,347
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
9. FEDERAL HOME LOAN BANK ADVANCES
THE ASSOCIATION IS REQUIRED TO PURCHASE STOCK IN THE FHLB. Such stock
may be redeemed at par but is not readily marketable. At September 30,
1997 and 1996, the Association had stock of $10,052,700 and $11,607,700,
respectively. Pursuant to collateral agreements with the FHLB, advances
are collateralized by all of the Association's stock in the FHLB and by
65% of qualifying single family first mortgage loans with a carrying
value at September 30, 1997 and 1996, of approximately $130,000,000 and
$112,000,000, respectively, and investment securities having a carrying
value of $117,370,552 and $182,569,810 at September 30, 1997 and 1996,
respectively. Advances at September 30, 1997 and 1996, have maturity
dates as follows:
<TABLE>
<CAPTION>
1997
---------------------------
WEIGHTED
AVERAGE
RATE AMOUNT
<S> <C> <C>
September 30:
1998 .................................................... 5.62% $ 157,601,038
1999 .................................................... 5.66 33,000,000
2000 .................................................... -- --
2001 .................................................... -- --
2002 .................................................... -- --
--------------
TOTAL .................................................... $ 190,601,038
--------------
--------------
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
1996
----------------------------
WEIGHTED
AVERAGE
RATE AMOUNT
<S> <C> <C>
September 30:
1997 ..................................................... 5.42% $ 128,478,000
1998 ..................................................... 5.58 52,742,906
1999 ..................................................... 5.02 23,000,000
2000 ..................................................... -- --
2001 ..................................................... 4.99 23,000,000
--------------
TOTAL ..................................................... $ 227,220,906
--------------
--------------
</TABLE>
Interest expense on FHLB advances was $11,732,367, $13,128,761, and
$6,827,660 for the years ended September 30, 1997, 1996, and 1995,
respectively.
10. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase ("Reverse Repurchase
Agreements") are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Balance outstanding at September 30........................................... $ 20,685,000 $ 10,100,000
Average balance during the year............................................... 17,684,231 2,940,167
Average interest rate during the year......................................... 5.81% 5.59%
Maximum month-end balance during the year..................................... 21,060,000 10,525,000
Investment securities underlying the
agreements at September 30:
Carrying value............................................................... 21,155,072 10,414,998
Estimated market value....................................................... 21,304,348 10,305,887
</TABLE>
Interest expense on Reverse Repurchase Agreements was $1,027,337,
$119,504, and $4,824,226 for the years ended September 30, 1997, 1996,
and 1995, respectively.
11. DEFERRED COMPENSATION
The Association has funded and unfunded deferred compensation agreements
with an executive and non-officer members of the Board of Directors. The
plans limit the ability of the executive to compete with the Association
and require that the directors continue to serve for a specified period
of time. The amount of expense related to such plans for the years ended
September 30, 1997, 1996 and 1995, was approximately $190,000, $355,000
and $218,000, respectively.
F-16
<PAGE>
12. RETIREMENT PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN
The Association has a defined contribution retirement plan. The plan
covers all employees who have accumulated two years with 1,000 hours of
service in each year. A flat percentage rate, selected at the discretion
of the Board of Directors is applied to the base salary of each eligible
employee. The retirement plan expense for the years ended September 30,
1997, 1996, and 1995, was $125,000, $116,109, and $92,024, respectively.
The Association has an Employee Stock Ownership Plan ("ESOP"). The ESOP
has borrowed funds which are collateralized by common stock of the
Association and a guaranty of the Company. The borrowing is included on
the Association's statements of financial condition as a liability and
as a corresponding reduction of stockholders' equity. The Association's
expense related to the ESOP was $171,061, $152,397 and $104,650 for the
years ended September 30, 1997, 1996 and 1995 respectively.
The Association also has a supplemental retirement plan for two
executive officers. The plan requires that a set amount be deposited
into a trust each year until the executive officers reach 60 years of
age. The amount of expense related to such plans for the years ended
September 30, 1997 and 1996, was approximately $235,000 and $213,000,
respectively.
13. INCOME TAXES
The Association and subsidiaries file consolidated federal income tax
returns. If certain conditions are met in determining taxable income,
the Association is allowed a special bad-debt deduction based on a
percentage of its savings and loan taxable income or on specified
experience formulas. The Association used the
percentage-of-taxable-income method for the years ended September 30,
1997, 1996, and 1995.
Income tax expense for the years ended September 30 is summarized as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ---------- ------------
<S> <C> <C> <C>
Current................................................................... $ 930,195 $ 532,810 $ 1,216,458
Deferred.................................................................. 414,295 (146,428) (215,677)
------------ ---------- ------------
TOTAL..................................................................... $ 1,344,490 $ 386,382 $ 1,000,781
------------ ---------- ------------
------------ ---------- ------------
</TABLE>
The net deferred tax asset, which is included in other assets, consisted of
the following:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax assets:
Deferred compensation................................................................... $ 383,610 $ 292,400
Special SAIF assessment................................................................. -- 318,580
Bad debt reserves....................................................................... 195,568 201,402
Deferred loan fees...................................................................... 42,495 71,351
Other................................................................................... 48,056 57,675
---------- ----------
Total deferred tax assets............................................................. 669,729 941,408
Deferred tax liabilities:
FHLB stock dividends.................................................................... (587,049) (349,127)
Other................................................................................... (16,465) (111,771)
---------- ----------
Total deferred tax liabilities........................................................ (603,514) (460,898)
Valuation allowance...................................................................... -- --
---------- ----------
Net deferred tax asset................................................................... $ 66,215 $ 480,510
---------- ----------
---------- ----------
</TABLE>
F-17
<PAGE>
The income tax provision differed from the amounts computed by applying
the federal and state income tax rates as a result of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ --------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Expected income tax expense......................... 38.3% $ 1,424,765 38.3% $ 901,170 38.3% $ 1,127,350
Exempt income....................................... (1.5) (54,618) (6.1) (143,203) (0.4) (10,743)
Cash surrender value of life insurance.............. (2.0) (73,096)
State tax, net of federal benefit................... 1.6 60,127
Reduction in valuation allowance.................... (5.5) (129,184) (2.1) (60,527)
Change in estimate.................................. (0.3) (12,688) (10.3) (242,401) (1.9) (55,299)
------- ----------- ----- --------- ------- -----------
TOTAL............................................... 36.1% $ 1,344,490 16.4% $ 386,382 33.9% $ 1,000,781
------- ----------- ----- --------- ------- -----------
------- ----------- ----- --------- ------- -----------
</TABLE>
The Association provides for the recognition of a deferred tax asset or
liability for the future tax consequences of differences in carrying
amounts and tax bases of assets and liabilities. Specifically exempted
from this provision are bad debt reserves for tax purposes of U.S.
savings and loan associations in the Association's base year, as
defined. Base year reserves total approximately $2,979,000 at September
30, 1997. Consequently, a deferred tax liability of approximately
$1,013,000 related to such reserves is not provided for in the statement
of financial condition at September 30, 1997.
14. REGULATORY MATTERS
The Association is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory--and possibly
additional discretionary--actions by regulators that, if undertaken,
could have a direct material effect on the Association's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Association must meet
specific capital guidelines that involve quantitative measures of the
Association's assets, liabilities, and certain off-balance sheet items
as calculated under regulatory accounting practices. The Association's
capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Association to maintain minimum amounts and ratios
(set forth in the table below) of tangible and core capital (as defined
in the regulations) to adjusted total assets (as defined), and of total
capital (as defined) to risk weighted assets (as defined). Management
believes, as of September 30, 1997, that the Association meets all
capital adequacy requirements to which it is subject.
Prior to September 30, 1997, the most recent notification from the
Office of Thrift Supervision ("OTS") categorized the Association as well
capitalized under the regulatory framework for prompt corrective action.
To be categorized as well capitalized the Association must maintain
minimum total, tangible, and core capital ratios as set forth in the
table below.
F-18
<PAGE>
The Association's actual capital amounts and ratios are also presented in
the table (in thousands):
<TABLE>
<CAPTION>
REQUIRED
FOR CAPITAL
ACTUAL ADEQUACY
--------------- PURPOSES
ACTUAL -------------
AMOUNT RATIO AMOUNT RATIO
------- ------ ------ -----
<S> <C> <C> <C> <C>
As of September 30, 1997:
Tangible capital to adjusted total assets................. $24,245 6.32% $5,754 1.50%
Core capital to adjusted total assets..................... 24,245 6.32 11,509 3.00
Total capital to risk weighted assets..................... 25,913 16.22 12,781 8.00
Tier I capital to risk weighted assests................... 24,245 15.18 6,389 4.00
As of September 30, 1996:
Tangible capital to adjusted total assets................. $22,783 5.97% $5,722 1.50%
Core capital to adjusted total assets..................... 22,783 5.97 11,444 3.00
Total capital to risk weighted assets..................... 24,428 16.75 11,660 8.00
Tier I capital to risk weighted assests................... 22,783 15.63 5,830 4.00
<CAPTION>
REQUIRED TO BE
CATEGORIZED AS
WELL
CAPITALIZED
UNDER
PROMPT
CORRECTIVE
ACTION
PROVISIONS
--------------
AMOUNT RATIO
------ ------
<S> <C> <C>
As of September 30, 1997:
Tangible capital to adjusted total assets................. N/A N/A
Core capital to adjusted total assets..................... $19,181 5.00%
Total capital to risk weighted assets..................... 15,976 10.00
Tier I capital to risk weighted assests................... 9,583 6.00
As of September 30, 1996:
Tangible capital to adjusted total assets................. N/A N/A
Core capital to adjusted total assets..................... $22,888 5.00%
Total capital to risk weighted assets..................... 14,575 10.00
Tier I capital to risk weighted assests................... 8,745 6.00
</TABLE>
15. DIVIDENDS
During the years ended September 30, 1997, 1996, and 1995, the Association
declared dividends of $0.885, $0.77 and $0.59 per common share, respectively.
Cash dividends of $1,067,810, $583,862, and $574,713 were paid or accrued to be
paid in the years ended September 30, 1997, 1996, and 1995, respectively. The
Company waived dividends of $375,188, $664,125 and $375,187 in the years ended
September 30, 1997, 1996, and 1995, respectively, (see Note 19).
16. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Association and subsidiaries have
various outstanding commitments and contingent liabilities that are not
reflected in the accompanying consolidated financial statements. In addition,
the Association is a defendant in certain claims and legal actions arising in
the ordinary course of business. In the opinion of management, after
consultation with legal counsel, the ultimate disposition of these matters is
not expected to have a material adverse effect on the consolidated financial
statements of the Association and subsidiaries.
17. FINANCIAL INSTRUMENTS
The Association is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend credit,
standby letters of credit and financial guarantees, interest-rate swaps, and
futures contracts. Those instruments involve, to varying degrees, elements of
credit and interest-rate risk in excess of the amount recognized in the
consolidated statements of financial condition. The contract or notional
amounts of those instruments reflect the extent of the Association's
involvement in particular classes of financial instruments.
F-19
<PAGE>
The Association's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend credit,
standby letters of credit, and financial guarantees written is represented by
the contractual notional amount of those instruments. The Association uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments. For interest-rate swap transactions,
forward and futures contracts, the contract or notional amounts do not represent
exposure to credit loss. The Association controls the credit risk of its
interest-rate swap agreements and forward and futures contracts through credit
approvals, limits, and monitoring procedures.
Unless noted otherwise, the Association does not require collateral or other
security to support financial instruments with credit risk.
INTEREST-RATE EXCHANGE AGREEMENTS--The Association enters into interest-rate
swap transactions to manage its interest-rate exposure. Interest-rate swap
transactions generally involve the exchange of fixed-and floating-rate
interest-payment obligations without the exchange of the underlying principal
amounts. Entering into interest-rate swap agreements involves not only the risk
of dealing with counterparties and their ability to meet the terms of the
contracts but also the interest-rate risk associated with unmatched positions.
Notional principal amounts often are used to express the volume of these
transactions, but the amounts potentially subject to credit risk are much
smaller. During the years ended September 30, 1997, 1996 and 1995 the
Association was a counter-party in an agreement to assume fixed-rate interest
rate interest payments in exchange for variable market-indexed interest payments
(interest-rate swaps). The notional principal amounts of the interest-rate swap
outstanding was $12,000,000 at September 30, 1996. The original term was two
years. The fixed-payment rates were 6.06% at September 30, 1996. Variable-
interest payments received are based on the three-month LIBOR. The effect of
these agreements was to lengthen short-term variable-rate liabilities into
longer-term fixed-rate liabilities. The net cost of this agreement was $51,900
$56,611 and $711 for the years ended September 30, 1997, 1996 and 1995,
respectively.
INTEREST-RATE CAPS--The Association purchases interest rate caps in order
manage its interest rate risk exposure. As of September 30, 1997, the
Association was party to the following interest rate cap positions.
<TABLE>
<CAPTION>
NOTIONAL AMOUNT EXPIRATION DATE CAP RATE INDEX RATE
- ---------------- ---------------------- ------------- ----------------------
<C> <C> <C> <S>
$ 10,000,000 December 20, 1998 6.0% Three-month Libor
$ 10,000,000 June 20, 1999 6.0% Three-month Libor
$ 10,000,000 June 30, 1999 6.0% Three-month Libor
$ 10,000,000 December 31, 1999 6.0% Three-month Libor
</TABLE>
Commitments to Extend Credit and Financial Guarantees--Commitments to
extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Association evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,
if it is deemed necessary by the Association upon extension of credit, is
based on management's credit evaluation of the counterparty.
Standby letters of credit are conditional commitments issued by the
Association to guarantee the performance of a customer to a third party. The
credit risk involved in issuing letters of credit is essentially
F-20
<PAGE>
the same as that involved in extending loan facilities to customers. The
Association holds marketable securities as collateral supporting these
commitments for which collateral is deemed necessary.
At September 30, 1997, the Association had the following outstanding
commitments to extend credit:
<TABLE>
<S> <C>
Undisbursed loans in process................................................... $2,814,983
Unfunded lines of credit....................................................... 1,933,675
Outstanding loan commitments................................................... 6,514,061
-----------
Total outstanding commitments............................................ $11,262,719
-----------
-----------
</TABLE>
The Association has not incurred any losses on its commitments in any of the
three years in the period ended September 30, 1997.
18. RELATED PARTY TRANSACTIONS
In the normal course of business, the Association has made loans to its
directors, officers, and their related business interests. In the opinion of
management, related party loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and do not involve more than the
normal risk of collectibility. The aggregate dollar amount of loans outstanding
to directors, officers and their related business interests total approximately
$857,176 and $798,679 at September 30, 1997 and 1996, respectively.
19. CUMULATIVE WAIVED DIVIDENDS TO MAJORITY STOCKHOLDER
The Company filed notices with the OTS requesting approval to waive its
right to receive cash dividends declared by the Association for each declared
dividend beginning in the quarter ended June 30, 1994. The OTS did not object to
the dividend waiver request subject to the following conditions: (1) for as long
as the Association is controlled by the Company, the amount of dividends waived
by the Company must be considered as a restriction on retained earnings of the
Association; (2) the amount of the dividend waived by the Company shall be
available for declaration as a dividend solely to the Company; (3) the amount of
the dividend waived by the Company must be considered as having been paid by the
Association in evaluating any proposed dividend. In addition, the OTS may
rescind its non-objection to the waiver of dividends if, based on subsequent
developments, the proposed waivers are determined to be detrimental to the safe
and sound operation of the Association.
If management determines that it is probable that the waived dividends will
be paid, it will be necessary to record a liability in accordance with Statement
of Financial Accounting Standards No. 5. In management's opinion it is not
probable that the waived dividends will be paid, therefore, a liability has not
been recorded in the financial statements of the Association. The cumulative
unpaid dividends are classified as restricted retained earnings.
20. STOCK OPTION PLANS
The Association has two stock option plans. The plans granted options prior
to October 1, 1995 for 70,476 shares at the fair value of the stock at the date
of grant, which was $10 per share. At October 1, 1995, 70,476 shares remained
unexercised. During the years ended September 30, 1997 and 1996, 7,830 and
14,594 options were exercised, respectively. At September 30, 1997, 48,052
remain unexercised of which, 33,102 were exercisable. The remaining options vest
ratably until April 1999, at which time they become 100% vested. Options
available for grant under the plans total 4,274 shares at September 30,
F-21
<PAGE>
1997. Such options are reserved for future board members and vest ratably at
20% each year beginning with the year of grant.
21. SPECIAL SAIF ASSESSMENT
The Deposit Insurance Funds Act of 1996 required a special one-time
assessment on Savings Association Insurance Fund ("SAIF") assessable deposits of
65.7 basis points (.657%) to capitalize the SAIF. The special assessment was
based on deposits as of March 31, 1995, as reported on the Association's Thrift
Financial Report. The assessment was charged to operations and recorded as a
liability as of September 30, 1996.
22. RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS 123"). SFAS 123 establishes financial accounting and
reporting standards for stock-based compensation plans. Those plans include all
arrangements by which employees receive shares of stock or other equity
instruments of the employer. SFAS No. 123 defines a fair value based method of
accounting for an employee stock option or similar equity instrument. Under the
fair value based method, compensation cost is measured at the grant date based
on the value of the award and is recognized over the service period, which is
usually the vesting period. Accounting Principles Board ("APB") Opinion 25,
requires compensation cost for stock-based employee compensation plans to be
recognized based on the difference, if any, between the quoted market price of
the stock and the amount an employee must pay to acquire the stock. SFAS No. 123
permits an entity in determining its net income to continue to apply the
accounting provisions of APB Opinion 25 to its stock-based employee compensation
arrangements. An entity that continues to apply APB Opinion 25 must comply with
the disclosure requirements of SFAS 123. SFAS 123 is effective for fiscal years
beginning after December 15, 1995. The Association adopted SFAS 123 and it did
not have a material effect on the Association's consolidated financial
statements.
The FASB has issued Statement of Financial Accounting Standards No. 125,
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES, ("SFAS 125"), as amended by SFAS No. 127. This statement
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. The statement is effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. SFAS 127 delayed the effective
date of certain provisions of SFAS 125 until December 31, 1997. The adoption of
SFAS 125, as amended by SFAS 127, is not expected to have a material effect on
the Assoication's consolidated financial statements.
In February 1997, the FASB issued Statement No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 establishes standards for computing and presenting
earnings per share ("EPS"), simplifying the standards previously found in APB
Opinion No. 15, "Earnings Per Share." The current presentation of primary EPS
is replaced with a presentation of basic EPS. Dual presentation of basic and
diluted EPS will be required on the face of the income statement as well as a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted
EPS is computed similarly to fully diluted EPS pursuant to APB Opinion No. 15.
Also in February 1997, the FASB issued Statement No. 129, "Disclosure of
Information about Capital Structure", establishing standards for disclosing
information abut an entity's capital structure. SFAS 129 calls for summary form
information regarding rights and privileges of various securities outstanding
and other capital instrument information. SFAS 128 and 129
F-22
<PAGE>
are effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. The adoption of SFAS 128 and
129 is not expected to have a material effect on the Association's
consolidated financial statements.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards to reporting and display of
comprehensive income and its components. SFAS 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Association will be
required to classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of the statement of financial condition. Also in June 1997, the
FASB issued Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information", establishing standards for the way public enterprises
report information about operating segments in interim financial reports issued
to shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS 130 and 131
are effective for fiscal years beginning after December 15, 1997, with
reclassification of earlier periods. The adoption of SFAS 130 and 131 is not
expected to have a material effect on the Association's consolidated financial
statements.
23. EMPLOYMENT AGREEMENTS
The Association has entered into employment agreements with three executive
officers. Under certain circumstances provided in the agreements, the
Association may be obligated to continue the officers' salary for a period of up
to three years.
24. BRANCH ACQUISITION
On August 21, 1997 the Association entered into an agreement with
NationsBank, N.A., a national banking association, ("NationsBank") whereby the
Association agreed to purchase the fixed assets and assume the deposits of the
NationsBank branches located in Hardy, Lake City, and Walnut Ridge, Arkansas.
The transaction is pending regulatory approval. The Association agreed to pay a
premium of 5.87% of the deposit liabilities located at the Hardy and Walnut
Ridge branches and 7.51% of the deposit liabilities at Lake City.
The dollar amount of deposit liabilities purchased will be determined on the
date of closing.
25. SUBSEQUENT EVENTS
On October 14, 1997, the Board of Directors of the Company adopted a plan
of conversion (the "Plan") of Pocahontas Federal Mutual Holding Company into
Pocahontas Bancorp, Inc., a capital stock corporation organized under
Delaware law (the "Holding Company"). The purpose of the conversion is to
convert the Mutual Holding Company to the capital stock form of organization,
which is intended to provide the Holding Company and the Association with
greater flexibility and capital resources to respond to changing regulatory
and market conditions and to effect corporate transactions, including mergers
and acquisitions.
The plan was adopted by the Board of Directors of the Company, and must also
be approved by (i) a majority of the total number of votes entitled to be cast
by Voting Members of the Company at a Special Meeting of Members to be called
for that purpose, and (ii) at least two-thirds of the outstanding common stock
of the Association at the Special Meeting of Stockholders, including at least a
majority of the votes
F-23
<PAGE>
cast, in person or by proxy, of the Minority Stockholders. Prior to the
submission of the Plan to the Voting Members and stockholders of the
Association for consideration, the Plan must be approved by the OTS.
26. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tables represent summarized data for each of the four quarters
in the years ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997
----
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income.......................................... $ 6,663,462 $ 6,592,792 $ 6,360,775 $ 6,476,148
Interest expense......................................... 4,830,954 4,711,491 4,540,067 4,616,290
------------ ------------ ------------ ------------
Net interest income...................................... 1,832,508 1,881,301 1,820,708 1,859,858
Provision for loan losses................................ -- -- 30,000 30,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses...... 1,832,508 1,881,301 1,790,708 1,829,858
Non-interest income...................................... 391,666 291,452 315,158 352,906
Non-interest expense..................................... 1,387,640 1,178,784 1,115,768 1,283,358
------------ ------------ ------------ ------------
Income before income taxes............................... 836,534 993,969 990,098 899,406
Income tax expense....................................... 309,713 371,480 347,903 315,394
------------ ------------ ------------ ------------
Net income............................................... $ 526,821 $ 622,489 $ 642,195 $ 584,012
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per common share................................ $ 0.33 $ 0.38 $ 0.39 $ 0.36
Cash dividends declared per common share................. $ 0.225 $ 0.225 $ 0.225 $ 0.21
Average common shares and common stock equivalents
outstanding............................................ 1,632,424 1,629,686 1,628,367 1,625,561
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
1996
----
FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income.......................................... $ 6,517,861 $ 6,457,416 $ 6,196,528 $ 6,245,224
Interest expense......................................... 4,602,865 4,696,358 4,671,957 4,657,162
------------ ------------ ------------ ------------
Net interest income...................................... 1,914,996 1,761,057 1,524,571 1,588,062
Provision for loan losses................................ 220,000 105,000 30,000 56,200
------------ ------------ ------------ ------------
Net interest income after provision for loan losses...... 1,694,996 1,656,057 1,494,571 1,531,862
Non-interest income...................................... 704,065 336,067 117,549 368,523
Non-interest expense..................................... 2,131,049 1,310,668 1,062,783 1,046,268
------------ ------------ ------------ ------------
Income before income taxes............................... 268,011 681,457 549,338 854,117
Income tax (benefit) expense............................. (154,773) 153,565 39,634 347,956
------------ ------------ ------------ ------------
Net income............................................... $ 442,784 $
527,892 $ 509,704 $ 506,161
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per common share................................ $ 0.27 $ 0.33 $ 0.32 $ 0.31
Cash dividends declared per common share................. $ 0.21 $ 0.20 $ 0.19 $ 0.17
Average common shares and common stock equivalents
outstanding............................................ 1,624,541 1,617,996 1,617,400 1,610,000
* * * * * *
</TABLE>
F-25
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY POCAHONTAS BANCORP, INC., THE BANK OR FBR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF POCAHONTAS BANCORP, INC. OR THE BANK SINCE ANY OF THE DATES AS OF
WHICH INFORMATION IS FURNISHED HEREIN OR SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
---------
Summary.........................................................
Selected Consolidated Financial and Other Data of the Bank and
Subsidiary....................................................
Risk Factors....................................................
Pocahontas Bancorp, Inc.........................................
Pocahontas Federal Savings and Loan Association.................
Historical Pro Forma Capital Compliance.........................
Use of Proceeds.................................................
Dividend Policy.................................................
Market for the Common Stock.....................................
Capitalization..................................................
Pro Forma Data..................................................
Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................
Business of the Bank............................................
Regulation and Supervision......................................
Federal and State Taxation......................................
Management of Pocahontas Bancorp, Inc...........................
Management of the Bank..........................................
Beneficial Ownership of the Bank's Common Stock and Expected
Beneficial Ownership of the Company's Common Stock............
The Conversion..................................................
Restrictions on the Acquisition of the Company and the Bank.....
Description of Capital Stock of the Company.....................
Description of Capital Stock of the Bank........................
Transfer Agent and Registrar....................................
Experts.........................................................
Legal Opinions..................................................
Additional Information..........................................
Index to Consolidated Financial Statements...................... F-1
------------------------
UNTIL MARCH , 1998 OR 25 DAYS AFTER COMMENCEMENT OF THE SYNDICATED
COMMUNITY OFFERING, IF ANY, WHICHEVER IS LATER, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OF SUBSCRIPTIONS.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
UP TO 2,875,000 SHARES
(ANTICIPATED MAXIMUM)
POCAHONTAS
BANCORP, INC.
(PROPOSED HOLDING COMPANY FOR
POCAHONTAS FEDERAL SAVINGS
AND LOAN ASSOCIATION
COMMON STOCK
PAR VALUE $.01 PER SHARE
---------------------
PROSPECTUS
---------------------
FRIEDMAN, BILLINGS,
RAMSEY & CO., INC.
February , 1998
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Amount
------
* Legal Fees and Expenses................................ $ 105,000
* Printing and Mailing................................... 25,000
* Appraisal and Business Plan Fees and Expenses.......... 42,500
* Accounting Fees and Expenses........................... 95,000
** Marketing Fees and Expenses............................ 334,500
* Filing Fees (SEC and OTS).............................. 26,859
* Other Expenses......................................... 15,000
-----------
** Total ................................................. $ 643,859
===========
- ----------
* Estimated
** The Bank and the Company have retained Friedman, Billings, Ramsey & Co,
Inc. ("FBR") to assist in the sale of common stock on a best efforts basis
in the Subscription and Community Offerings. For purposes of computing
estimated expenses, it has been assumed that FBR will receive fees of
approximately $304,500, exclusive of expenses of $29,500.
Item 14. Indemnification of Directors and Officers
Articles TENTH and ELEVENTH of the Certificate of Incorporation of
Pocahontas Bancorp, Inc. (the "Corporation") sets forth circumstances under
which directors, officers, employees and agents of the Corporation may be
insured or indemnified against liability which they incur in their capacities as
such.
TENTH:
A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a Director or an Officer of the
Corporation or is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a Director, Officer,
employee or agent or in any other capacity while serving as a Director, Officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as provided
in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred in Section A of this Article
TENTH shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a Director or Officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final
<PAGE>
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section or otherwise. The rights to indemnification and to
the advancement of expenses conferred in Sections A and B of this Article TENTH
shall be contract rights and such rights shall continue as to an indemnitee who
has ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not paid in
full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article TENTH or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article TENTH with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation.
ELEVENTH: A Director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
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, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the Director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
Not Applicable.
<PAGE>
Item 16. Exhibits and Financial Statement Schedules:
The exhibits and financial statement schedules filed as part of this
registration statement are as follows:
(a) List of Exhibits
1.1 Engagement Letter between Pocahontas Federal Savings and Loan Association
and Friedman, Billings, Ramsey & Co., Inc.
1.2 Form of Agency Agreement among Pocahontas Bancorp, Inc., Pocahontas
Federal Savings and Loan Association, and Friedman, Billings, Ramsey &
Co., Inc.
2 Plan of Conversion and Reorganization
3.1 Certificate of Incorporation of Pocahontas Bancorp, Inc. (Incorporated
herein by reference to Exhibit D of the Plan of Conversion and
Reorganization)
3.2 Bylaws of Pocahontas Bancorp, Inc. (Incorporated herein by reference to
Exhibit E of the Plan of Conversion and Reorganization)
4 Form of Common Stock Certificate of Pocahontas Bancorp, Inc.
5 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. regarding legality
of securities being registered
8.1 Form of Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C.
8.2* Form of State Tax Opinion of Deloitte & Touche, LLP
8.3 Letter from RP Financial, LC with respect to Subscription Rights
10.1 Employment Agreement for Skip Martin
10.2 Employment Agreement for James A. Edington
10.3 Employment Agreement for Dwayne Powell
10.4 Restated Supplemental Retirement Income Agreement for Skip Martin
10.5 Restated Supplemental Retirement Income Agreement for James A. Edington
10.6 Supplemental Retirement Income Agreement for Dwayne Powell
10.7 1994 Incentive Stock Option Plan
10.8 1994 Stock Option Plan for Outside Directors
10.9 1994 Recognition and Retention Plan for Employees
10.10 1994 Recognition and Retention Plan for Outside Directors
10.11 401(K) Savings and Employee Stock Ownership Plan
21 Subsidiaries of the Registrant
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (contained in
opinion filed as Exhibit 5)
23.2 Consent of Deloitte & Touche, LLP
<PAGE>
23.3 Consent of RP Financial, LC
23.4* Consent of Deloitte & Touche, LLP (contained in opinion filed as Exhibit
8.2)
24 Power of Attorney (set forth on Signature Page)
27 EDGAR Financial Data Schedule
99.1 Appraisal Agreement between Pocahontas Federal Savings and Loan
Association and RP Financial, LC
99.2 Appraisal Report of RP Financial, LC
99.3 Proxy Statement
99.4* Marketing Materials
99.5* Order and Acknowledgment Form
- ----------
* To be filed supplementally or 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;
(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 material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) To provide to the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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
<PAGE>
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
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Pocahontas, Arkansas on December 22,
1997.
Pocahontas Bancorp, Inc.
By: /s/ Skip Martin
---------------------------------------
Skip Martin
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned directors and officers of Pocahontas Bancorp, Inc.
(the "Company") hereby severally constitute and appoint Skip Martin as our true
and lawful attorney and agent, to do any and all things in our names in the
capacities indicated below which said Skip Martin may deem necessary or
advisable to enable the Company to comply with the Securities Act of 1933, and
any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with the registration statement on Form S-1 relating
to the offering of the Company's 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 approve, ratify and confirm
all that said Skip Martin shall do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and as of the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Skip Martin President, Chief Executive December 22, 1997
- ------------------------ Officer and Director (Principal
Skip Martin Executive Officer)
/s/ James A. Edington Executive Vice President and December 22, 1997
- ------------------------ Director
James A. Edington
/s/ Dwayne Powell Senior Vice President and December 22, 1997
- ------------------------ Chief Financial Officer (Principal
Dwayne Powell Financial and Accounting Officer)
/s/ Ralph P. Baltz Chairman December 22, 1997
- ------------------------
Ralph P. Baltz
/s/ N. Ray Campbell Director December 22, 1997
- ------------------------
N. Ray Campbell
/s/ Charles R. Ervin Director December 22, 1997
- ------------------------
Charles R. Ervin
<PAGE>
/s/ Robert Rainwater Director December 22, 1997
Robert Rainwater
/s/ Marcus Van Camp Director December 22, 1997
- ------------------------
Marcus Van Camp
<PAGE>
As filed with the Securities and Exchange Commission on December 22, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
EXHIBITS
TO
REGISTRATION STATEMENT
ON
FORM S-1
-----------------------------
POCAHONTAS BANCORP, INC.
================================================================================
<PAGE>
EXHIBIT INDEX
1.1 Engagement Letter between Pocahontas Federal Savings and Loan Association
and Friedman, Billings, Ramsey & Co., Inc.
1.2 Form of Agency Agreement among Pocahontas Bancorp, Inc., Pocahontas
Federal Savings and Loan Association, and Friedman, Billings, Ramsey &
Co., Inc.
2 Plan of Conversion and Reorganization
3.1 Certificate of Incorporation of Pocahontas Bancorp, Inc. (Incorporated
herein by reference to Exhibit D of the Plan of Conversion and
Reorganization)
3.2 Bylaws of Pocahontas Bancorp, Inc. (Incorporated herein by reference to
Exhibit E of the Plan of Conversion and Reorganization)
4 Form of Common Stock Certificate of Pocahontas Bancorp, Inc.
5 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. regarding legality
of securities being registered
8.1 Form of Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C.
8.2* Form of State Tax Opinion of Deloitte & Touche, LLP
8.3 Letter from RP Financial, LC with respect to Subscription Rights
10.1 Employment Agreement for Skip Martin
10.2 Employment Agreement for James A. Edington
10.3 Employment Agreement for Dwayne Powell
10.4 Restated Supplemental Retirement Income Agreement for Skip Martin
10.5 Restated Supplemental Retirement Income Agreement for James A. Edington
10.6 Supplemental Retirement Income Agreement for Dwayne Powell
10.7 1994 Incentive Stock Option Plan
10.8 1994 Stock Option Plan for Outside Directors
10.9 1994 Recognition and Retention Plan for Employees
10.10 1994 Recognition and Retention Plan for Outside Directors
10.11 401(K) Savings and Employee Stock Ownership Plan
21 Subsidiaries of the Registrant
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (contained in
opinion filed as Exhibit 5)
<PAGE>
23.2 Consent of Deloitte & Touche, LLP
23.3 Consent of RP Financial, LC
23.4* Consent of Deloitte & Touche, LLP (contained in opinion filed as Exhibit
8.2)
24 Power of Attorney (set forth on Signature Page)
27 EDGAR Financial Data Schedule
99.1 Appraisal Agreement between Pocahontas Federal Savings and Loan
Association and RP Financial, LC
99.2 Appraisal Report of RP Financial, LC
99.3 Proxy Statement
99.4* Marketing Materials
99.5* Order and Acknowledgment Form
- ----------
* To be filed supplementally or by amendment.
<PAGE>
EXHIBIT 1.1
<PAGE>
October 8, 1997
Board of Directors
Attn: Skip Martin
President & Chief Executive Officer
Pocahontas Federal Savings and Loan Association
203 W. Broadway
P.O. Box 27
Pocahontas, AR 72455
RE: Reorganization and Plan of Conversion Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Friedman,
Billings, Ramsey and Co., Inc. ("FBR") and Pocahontas Federal Savings and Loan
Association ("Pocahontas Federal"), concerning our Investment Banking Services
in connection with the Plan of Conversion and Plan of Reorganization (the
"Plan") in connection with the reorganization of Pocahontas Federal and
Pocahontas Federal Mutual Holding Company from the mutual holding company
format into the stock holding company structure.
FBR is prepared to assist Pocahontas Federal in connection with the offering
of its shares of common stock during the Subscription Offering and Community
Offering as such terms are defined in the Plan. The specific terms (including
those related to indemnification) of the services contemplated hereunder shall
be set forth in a definitive sales agency agreement (the "Agreement") between
FBR and Pocahontas Federal to be executed prior to mailing of the Offering
material. The price of the shares during the Subscription Offering and
Community Offering will be the price established by Pocahontas Federal Board
of Directors, based upon an independent appraisal as approved by the
appropriate regulatory authorities, provided such price is mutually acceptable
to FBR and Pocahontas Federal.
In connection with the Subscription Offering and Community Offering, FBR will
render the following services:
1. Act as the Financial Advisor to Pocahontas Federal
2. Create marketing materials and formulate a marketing plan
3. Conduct training for all Directors and Employees concerning the
reorganization and stock offering
4. Manage Stock Center and staff with FBR personnel
5. Assist Pocahontas Federal and Attorneys with listing on NASDAQ
After the Offering, FBR intends to become a Market Maker and continue coverage
of Pocahontas Federal through after market support and research.
At the appropriate time, FBR, in conjunction with its counsel, will conduct an
examination of the relevant documents and records of Pocahontas Federal as FBR
deems necessary and appropriate. Pocahontas Federal will make all documents,
records and other information deemed necessary by FBR or its counsel available
to them upon request.
For its services hereunder, FBR will receive the following compensation and
reimbursement from Pocahontas Federal:
1. A management fee of $50,000 payable as follows, $25,000 upon the
signing of this letter and $25,000 upon receiving OTS approval of the
Plan Application. Should the Plan be terminated for any reason not
<PAGE>
Mr. Martin
October 8, 1997
Page 2
attributable to the action or inaction of FBR, FBR shall have earned and
be entitled to be paid fees accruing through the stage at which point the
termination occurred.
2. A marketing fee of 1.00% of the aggregate Purchase Price of Common
Stock sold in the Subscription Offering and Community Offering, excluding
those shares purchased by Pocahontas Federal officers, directors, or
employees (or members of their immediate families) or by any ESOP,
charitable foundation, tax-qualified or stock compensation plans (except
IRA's) or similar plan created by Pocahontas Federal for some or all of
its directors or employees. The management fee of $50,000 will be
subtracted from the marketing fee.
3. The foregoing commissions are to be payable to FBR at closing as
defined in the agreement to be entered into between FBR and Pocahontas
Federal.
4. FBR shall be reimbursed for allocable expenses incurred by them,
including legal fees, whether or not the Agreement is consummated. These
expenses shall not exceed $29,500.
It is further understood that Pocahontas Federal will pay all other expenses
of the Plan including but not limited to its attorneys' fees, NASD filing
fees, filing and registration fees and fees of either FBR's attorneys or the
attorneys relating to any required state securities law filing, telephone
charges, air freight, supplies, conversion agent charges, transfer agent
charges, fees relating to auditing and accounting and costs of printing all
documents necessary in connection with the foregoing.
For purpose of FBR's obligation to file certain documents and to make certain
representations to the NASD in connection with the Plan, Pocahontas Federal
warrants that: (a) Pocahontas Federal has not privately placed any securities
within the last 18 months; (b) there have been no material dealings within the
last 12 months between Pocahontas Federal and any NASD member or any person
related to or associated with any such member; (c) none of the officers or
directors of Pocahontas Federal has any affiliation with the NASD; (d) except
as contemplated by this engagement letter with FBR, Pocahontas Federal has no
financial or management consulting contracts outstanding with any other
person; (e) Pocahontas Federal has not granted FBR a right of first refusal
with respect to the underwriting of any future offering of Pocahontas Federal
stock; and (f) there has been no intermediary between FBR and Pocahontas
Federal in connection with the public offering of Pocahontas Federal shares,
and no person is being compensated in any manner for providing such service.
Pocahontas Federal agrees to indemnify and hold harmless FBR and its
affiliates (as defined in Rule 405 under the Securities Act of 1933, as
amended) and their respective directors, officers, employees, agents and
controlling persons (FBR and each such person being an "Indemnified Party")
from and against any and all losses, claims, damages and liabilities (or
actions, including shareholder actions, in respect thereof), joint or several,
to which such Indemnified Party may become subject under any applicable
federal or state law, or otherwise, which are related to or result from the
performance by FBR of the services contemplated by, or the engagement of FBR
pursuant to, this letter agreement and will promptly reimburse any Indemnified
Party for all reasonable expenses (including reasonable counsel fees and
expenses) as they are incurred in connection with the investigation of,
preparation for or defense arising therefrom, whether or not such Indemnified
Party is a party and whether or not such claim, action or proceeding is
initiated or brought by Pocahontas Federal. Pocahontas Federal will not be
liable to any Indemnified Party under the foregoing indemnification and
reimbursement provisions, (i) for any settlement by an Indemnified Party
effected without its prior written consent; or (ii) to the extent that any
loss, claim, damage or liability is found in a final judgment by a court to
have resulted primarily from FBR's gross negligence or willful misconduct.
FBR shall repay to Pocahontas Federal any amounts paid by Pocahontas Federal
for reimbursement of FBR's and any Indemnified Party's expenses in the event
that such expenses were incurred in relation to an act or omission with
respect to which it is finally determined that FBR has acted in gross
negligence or with willful misconduct. Pocahontas Federal also agrees that no
Indemnified Party shall have any liability (whether director or indirect, in
contract or tort or otherwise) to Pocahontas Federal or its security
<PAGE>
Mr. Martin
October 8, 1997
Page 3
holders or creditors related to or arising out of the engagement of FBR
pursuant to, or the performance by FBR of the services contemplated by, this
letter agreement except to the extent that any loss, claim, damage or
liability is found in a final judgment by a court to have resulted primarily
from FBR's gross negligence or willful misconduct.
Promptly after receipt by an Indemnified Party of notice of any intention
or threat to commence an action, suit or proceeding or notice of the
commencement of any action, suit or proceeding, such Indemnified Party will,
if a claim in respect thereof is to be made against Pocahontas Federal
pursuant hereto, promptly notify Pocahontas Federal in writing of the same.
In case any such action is brought against any Indemnified Party and such
Indemnified Party notifies Pocahontas Federal of the commencement thereof,
Pocahontas Federal may elect to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party, and an Indemnified Party
may retain counsel to participate in the defense of any such action; provided,
however, that in no event shall Pocahontas Federal be required to pay fees and
expenses for more than one firm of attorneys representing Indemnified Parties.
If the indemnification provided for in this letter agreement is for any
reason held unenforceable by an Indemnified Party, Pocahontas Federal agrees
to contribute to the losses, claims, damages and liabilities for which such
indemnification is held unenforceable (i) in such proportion as is appropriate
to reflect the relative benefits to Pocahontas Federal, on the one hand, and
FBR on the other hand, or, (ii) if (but only if) the allocation provided for
in clause (i) is for any reason unenforceable, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) but also the relative fault of Pocahontas Federal, on the one hand, and
FBR, on the other hand, as well as any other relevant equitable
considerations. Each of the parties hereto (on its own behalf and, to the
extent permitted by applicable law, on behalf of its stockholders) waives all
right to trial by jury in any action, proceeding or counteraction (whether
based upon contract, or otherwise) related to or arising out of our engagement
pursuant to, or the performance by us of the services contemplated by, this
Letter Agreement.
This letter is merely a statement of intent and is not a binding legal
agreement except as to the compensation and reimbursement paragraphs numbered
1-4 above. While FBR and Pocahontas Federal agree in principle to the
contents hereof and the purpose to proceed promptly, and in good faith, to
work out the arrangements with respect to the proposed offering, any legal
obligations between FBR and Pocahontas Federal shall be only as set forth in a
duly executed Agreement. The indemnification provision described above will
be superseded by the indemnification provisions of the Agreement entered into
by Pocahontas Federal and FBR. Such Agreement shall be in the form and
content satisfactory to, among other things, there being in FBR's opinion no
material adverse change in the condition or obligations of Pocahontas Federal
or no market conditions which might render the sale of the shares by
Pocahontas Federal hereby contemplated inadvisable.
The validity and interpretation of this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Virginia (excluding the conflicts of laws rules).
Please acknowledge your agreement to the foregoing by signing below and
returning to FBR one copy of this letter along with a payment of $25,000.
This proposal is open for your acceptance for a period of thirty (30) days
from the date hereof.
Very truly yours,
/s/ Karen K. Edwards, CFA /s/ David H. Neiswander
By: Karen K. Edwards, CFA David H. Neiswander
Title: Managing Director Vice President
Date: October 8, 1997
<PAGE>
Mr. Martin
October 8, 1997
Page 4
Agreed and Accepted to this 14th day of October, 1997.
Pocahontas Federal Savings and Loan Association
By: /s/ James A. Edington
----------------------------------------
Title: Executive Vice President
----------------------------------------
<PAGE>
EXHIBIT 1.2
<PAGE>
POCAHONTAS BANCORP, INC.
Up to 2,875,000 Shares
(Anticipated Maximum)
COMMON STOCK
($.01 Par Value)
Subscription Price $10.00 Per Share
AGENCY AGREEMENT
____________, 1997
Friedman, Billings, Ramsey & Co., Inc.
1001 Nineteenth Street North
Arlington, Virginia 22209
Ladies and Gentlemen:
Pocahontas Bancorp, Inc. a Delaware corporation (the "Company"),
Pocahontas Federal Mutual Holding Company (the "MHC") and Pocahontas Federal
Savings and Loan Association, Pocahontas, Arkansas, a federal stock savings bank
(the "Bank"), with its deposit accounts insured by the Savings Association
Insurance Fund ("SAIF") administered by the Federal Deposit Insurance
Corporation ("FDIC"), hereby confirm their agreement with Friedman, Billings,
Ramsey & Co., Inc. (the "Agent") as follows (defined terms used herein shall
have the same definition given in the Prospectus dated ____________, 1998 unless
otherwise defined herein):
Section 1. The Offering. Pocahontas Bancorp, Inc., a Delaware corporation,
will convert first to a federal stock holding company and thereafter to an
interim federal stock savings bank. Thereafter, it will merge into the Bank. The
MHC, in accordance with its Plan of Conversion and Reorganization adopted by its
Board of Directors (the "Plan"), intends to convert to an interim federal stock
savings bank and merge with and into the Bank, pursuant to which the MHC will
cease to exist (the "Conversion"). In connection therewith, each stockholder
other than the MHC immediately prior to the Conversion ("Public Stockholders")
will receive Exchange Shares of the Company's common stock ("Common Stock," or
"Shares") pursuant to a ratio that will result in Public Stockholders owning in
the aggregate immediately after the Conversion the same percentage of the
outstanding shares of Common Stock, before giving effect to (a) the payment of
cash in lieu of fractional shares and (b) the purchase by such stockholders of
additional shares of Common Stock in the Offering.
<PAGE>
Pursuant to the Plan and in connection with the Conversion, the Company is
offering up to 2,875,000 shares of its common stock (the "Conversion Stock") in
a subscription and community offering (the "Offerings"). Conversion Stock is
first being offered in a subscription offering with nontransferable subscription
rights being granted, in the following order of priority, to (i) depositors of
the Bank with account balances of $50.00 or more as of the close of business on
September 30, 1996 ("Eligible Account Holders"); (ii) the Bank's KSOP; (iii)
depositors of the Bank with account balances of $50.00 or more as of the close
of business on December 31, 1997 ("Supplemental Eligible Account Holders"); (iv)
depositors of the Bank as of the close of business on ______________, 1998
(other than Eligible Account Holders and Supplemental Eligible Account Holders)
and certain borrowers ("Other Members") and (v) stockholders of the Company,
other than the Mutual Holding Company ("Public Stockholders"). Subscription
rights will expire if not exercised by Noon, Central time, on March __, 1998,
unless extended.
Subject to the prior rights of holders of subscription rights, Conversion
Stock not subscribed for in the Subscription Offering is being offered in the
Community Offering to certain members of the general public to whom a copy of
the Prospectus is delivered, with preference given to natural persons residing
in the Local Community. The Primary Parties reserve the absolute right to reject
or accept any orders in the Community Offering in whole or in part, either at
the time of receipt of an order or as soon as practicable following the
Expiration Date.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (File No. 333-_____) (the
"Registration Statement") containing a prospectus relating to the Offerings for
the registration of the Shares under the Securities Act of 1933 (the "1933
Act"), and has filed such amendments thereof, if any, and such amended
prospectuses as may have been required to the date hereof. The prospectus, as
amended, on file with the Commission at the time the Registration Statement
initially became effective is hereinafter called the "Prospectus," except that
if any prospectus is filed by the Company pursuant to Rule 424(b) or (c) of the
rules and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations") differing from the prospectus on file at the time the Registration
Statement initially becomes effective, the term "Prospectus" shall refer to the
prospectus filed pursuant to Rule 424(b) or (c) from and after the time said
prospectus is filed with the Commission.
In accordance with the regulations of the Office of Thrift Supervision
("OTS") governing the conversions of savings associations (the "Conversion
Regulations"), the MHC has filed with the OTS an Application for Conversion on
Form AC (the "Conversion Application"), including the prospectus, and has filed
such amendments thereto, if any, as may have been required by the OTS. The
Conversion Application has been approved by the OTS and the related Prospectus
has been authorized for use by the OTS.
2
<PAGE>
Section 2. Retention of the Agent; Compensation; Sale and Delivery of the
Shares. Subject to the terms and conditions herein set forth, the Company, the
MHC and the Bank hereby appoint the Agent as their financial advisor and
marketing agent to utilize its best efforts to solicit subscriptions for Shares
of the Company's Common Stock and to advise and assist the Company and the Bank
with respect to the Company's sale of the Shares in the Offerings and in the
areas of market making, research coverage and syndicate formation (if
necessary).
On the basis of the representations, warranties, and agreements herein
contained, but subject to the terms and conditions herein set forth, the Agent
accepts such appointment and agrees to consult with and advise the Company, the
MHC and the Bank as to the matters set forth in the letter agreement ("Letter
Agreement"), dated ____________, 1997, between the Bank and the Agent (a copy of
which is attached hereto as Exhibit A). It is acknowledged by the Company, the
MHC and the Bank that the Agent shall not be required to purchase any Shares and
shall not be obligated to take any action which is inconsistent with all
applicable laws, regulations, decisions or orders. In the event of a Community
Offering, the Agent will assemble and manage a selling group of broker-dealers
which are members of the National Association of Securities Dealers, Inc. (the
"NASD") to participate in the solicitation of purchase orders for shares under a
selected dealers' agreement ("Selected Dealers' Agreement"), the form of which
is set forth as Exhibit B to this Agreement.
The obligations of the Agent pursuant to this Agreement shall terminate
upon the completion or termination or abandonment of the Plan by the Company or
upon termination of the Offerings, but in no event later than 45 days after the
completion of the Subscription Offering (the "End Date"). All fees or expenses
due to the Agent but unpaid will be payable to the Agent in next day funds at
the earlier of the Closing Date (as hereinafter defined) or the End Date. In the
event the Offerings are extended beyond the End Date, the Company, the MHC, the
Bank and the Agent may agree to renew this Agreement under mutually acceptable
terms.
In the event the Company is unable to sell a minimum of 2,125,000 Shares
within the period herein provided, this Agreement shall terminate and the
Company shall refund to any persons who have subscribed for any of the Shares,
the full amount which it may have received from them plus accrued interest as
set forth in the Prospectus; and none of the parties to this Agreement shall
have any obligation to the other parties hereunder, except as set forth in this
Section 2 and in Sections 6, 8 and 9 hereof.
In the event the Offerings are terminated for any reason not attributable
to the action or inaction of the Agent, the Agent shall be paid the fees due to
the date of such termination pursuant to subparagraphs (a) and (b) below.
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If all conditions precedent to the consummation of the Conversion,
including, without limitation, the sale of all Shares required by the Plan to be
sold, are satisfied, the Company agrees to issue, or have issued, the Shares
sold in the Offering and to release for delivery certificates for such Shares on
the Closing Date (as hereinafter defined) against payment to the Company by any
means authorized by the Plan, provided, however, that no funds shall be released
to the Company until the conditions specified in Section 7 hereof shall have
been complied with to the reasonable satisfaction of the Agent and their
counsel. The release of Shares against payment therefor shall be made on a date
and at a place acceptable to the Company, the MHC, the Bank and the Agent (it
being understood that such date shall not be more than ten business days after
termination of the Offering) or such other time or place as shall be agreed upon
by the Company, the MHC, the Bank and the Agent. Certificates for shares shall
be delivered directly to the purchasers in accordance with their directions. The
date upon which the Company shall release or deliver the Shares sold in the
Offering, in accordance with the terms herein, is called the "Closing Date."
The Agent shall receive the following compensation for its services
hereunder:
(a) An advisory and management fee to the Agent in the amount of
$50,000, of which $25,000 has been paid and of which $25,000 will be
paid upon OTS approval of the Plan application. Such fees shall be
deemed to be earned when due. Should the Conversion be terminated
for any reason not attributable to the action or inaction of the
Agent, the Agent shall have earned and be entitled to be paid fees
accruing through the stage at which point the termination occurred,
including any accrued legal fees expanded by the Agent.
(b) A marketing fee of 1.00% of the aggregate Purchase Price of Common
Stock sold in the Subscription Offering and Community Offering,
excluding those shares purchased by the Bank's officers, directors,
or employees (or members of their immediate families) or by any
KSOP, tax-qualified or stock compensation plans (except IRA's) or
similar plan created by the Bank for some or all of its directors or
employees. The management fee of $50,000 will be subtracted from the
marketing fee.
(c) The decision to utilize other selected Broker-Dealers will be made
jointly by the Agent and the Bank. Selected broker-dealers who
assist in the subscription or purchase, excluding those shares
purchased by the Bank's officers, directors or employees or by any
KSOP, tax-qualified or stock based compensation plans (except IRA's)
or similar plan created by the Bank for some or all of its directors
or employees or by member depositors in the original subscription
phase of the offering, will be paid a fee not to exceed 4% of the
aggregate
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Actual Purchase Price of the shares of common stock sold by them in
the Subscription and/or Community Offerings. The Agent's fee for
such shares shall equal 1.5% of the aggregate Actual Purchase Price
of the shares of common stock sold by selected broker-dealers in the
Subscription and/or Community Offering. Fees with respect to
subscriptions or purchases effected with the assistance of
Registered Representatives employed by a Broker/Dealer other than
the Agent shall be paid to the Agent at Closing and then transmitted
by the Agent to such Broker/Dealer.
(d) The Bank and the Company hereby agree to reimburse the Agent, from
time to time upon the Agent's request, for its reasonable
out-of-pocket expenses, including without limitation, accounting,
communication, travel expenses, and legal fees and expenses, for
amounts not to exceed $29,500. Further, the Bank will reimburse the
Agent for (i) up to $29,500 of legal fees, and (ii) expenses of such
counsel. The Bank will bear the expenses of the Offerings
customarily borne by issuers including, without limitation, OTS,
SEC, "Blue Sky," and NASD filing and registration fees; the fees of
the Bank's accountants, conversion agent, data processor, attorneys,
appraiser, transfer agent and registrar, printing, mailing and
marketing expenses associated with the Conversion; and the fees set
forth under this Section 2.
Full payment of the Agent's actual and accountable expenses, advisory fees
and compensation shall be made in next day funds on the earlier of the Closing
Date or a determination by the Bank to terminate or abandon the Plan.
In the event of an oversubscription or other event, which causes the
Offerings to continue beyond the original expiration date or a resolicitation of
subscribers, the parties agree to renegotiate the expense cap on legal fees
applicable to the Agent.
Section 3. Prospectus; Offering. The Shares are to be initially offered in
the Offerings at the Purchase Price as defined and set forth on the cover page
of the Prospectus.
Section 4. Representations and Warranties. The Company, the MHC and the
Bank jointly and severally represent and warrant to the Agent on the date hereof
as follows:
(a) The Registration Statement was declared effective by the
Commission on _________, 1998. At the time the Registration Statement,
including the Prospectus contained therein (including any amendment or
supplement thereto), became effective, the Registration Statement complied
in all material respects with the requirements of the 1933 Act and the
1933 Act Regulations and the Registration Statement, including the
Prospectus contained therein (including any amendment or supplement
thereto), and
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any information regarding the Company or the Bank contained in Sales
Information (as such term is defined in Section 8 hereof) authorized by
the Company or the Bank for use in connection with the Offerings, did not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and at the time any Rule 424(b) or (c) Prospectus was filed
with the Commission and at the Closing Date referred to in Section 2, the
Registration Statement, including the Prospectus contained therein
(including any amendment or supplement thereto), any information regarding
the Company or the Bank contained in Sales Information (as such term is
defined in Section 8 hereof) authorized by the Company or the Bank for use
in connection with the Offerings will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that the representations and
warranties in this Section 4(a) shall not apply to statements or omissions
made in reliance upon and in conformity with written information furnished
to the Company or the Bank by the Agent expressly regarding the Agent for
use in the Prospectus under the caption "The Conversion-Marketing
Arrangements" or statements in or omissions from any Sales Information or
information filed pursuant to state securities or blue sky laws or
regulations regarding the Agent.
(b) The Conversion Application was approved by the OTS on _________,
1998 and the related Prospectus has been authorized for use by the OTS. At
the time of the approval of the Conversion Application, including the
Prospectus (including any amendment or supplement thereto), by the OTS and
at all times subsequent thereto until the Closing Date, the Conversion
Application, including the Prospectus (including any amendment or
supplement thereto), will comply in all material respects with the
Conversion Regulations except to the extent waived by the OTS. The
Conversion Application, including the Prospectus (including any amendment
or supplement thereto), does not include any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this Section 4(b)
shall not apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company, the MHC or
the Bank by the Agent expressly regarding the Agent for use in the
Prospectus contained in the Conversion Application under the caption "The
Conversion-Marketing Arrangements" or statements in or omissions from any
sales information or information filed pursuant to state securities or
blue sky laws or regulations regarding the Agent.
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<PAGE>
(c) No order has been issued by the OTS preventing or suspending the
use of the Prospectus and no action by or before any such government
entity to revoke any approval, authorization or order of effectiveness
related to the Conversion is, to the best knowledge of the Company, the
MHC or the Bank, pending or threatened.
(d) At the Closing Date referred to in Section 2, the Plan will have
been adopted by the Boards of Directors of the Company, the MHC and the
Bank and the offer and sale of the Shares will have been conducted in all
material respects in accordance with the Plan, the Conversion Regulations,
and all other applicable laws, regulations, decisions and orders,
including all terms, conditions, requirements and provisions precedent to
the Conversion imposed upon the Company, the MHC or the Bank by the OTS,
the Commission or any other regulatory authority and in the manner
described in the Prospectus. To the best knowledge of the Company, no
person has sought to obtain review of the final action of the OTS in
approving or taking no objection to the Plan or in approving or taking no
objection to the Conversion or the Holding Company Application pursuant to
the Conversion Regulations or any other statute or regulation.
(e) The Bank has been organized and is a validly existing federally
chartered savings and loan association in stock form of organization and
upon the Conversion will continue as such, is duly authorized to conduct
its business and own its property as described in the Registration
Statement and the Prospectus; the Bank has obtained all material licenses,
permits and other governmental authorizations currently required for the
conduct of its business; all such licenses, permits and governmental
authorizations are in full force and effect, and the Bank is in all
material respects complying with all laws, rules, regulations and orders
applicable to the operation of its business; the Bank is existing under
the laws of the United States and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which its ownership of property or leasing or property or
the conduct of its business requires such qualification, unless the
failure to be so qualified in one or more of such jurisdictions would not
have a material adverse effect on the condition, financial or otherwise,
or the business, operations or income of the Bank. The Bank does not own
equity securities or any equity interest in any other business enterprise
except as described in the Prospectus or as would not be material to the
operations of the Bank. Upon completion of the sale by the Company of the
Shares contemplated by the Prospectus, (i) all of the authorized and
outstanding capital stock of the Bank will continue to be owned by the
Company, and (ii) the Company will have no direct subsidiaries other than
the Bank. The Conversion will have been effected in all material respects
in accordance with all applicable statutes, regulations, decisions and
orders; and, except with respect to the filing of certain post-sale,
post-Conversion reports, and documents in compliance with the 1933 Act
Regulations or the OTS'
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<PAGE>
resolutions or letters of approval or no objection taken, all terms,
conditions, requirements and provisions with respect to the Conversion
(except those that are conditions subsequent) imposed by the Commission or
the OTS, if any, will have been complied with by the Company, the MHC and
the Bank in all material respects or appropriate waivers will have been
obtained and all material notice and waiting periods will have been
satisfied, waived or elapsed.
(f) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware
with corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and the Company is qualified to do business
as a foreign corporation in each jurisdiction in which the conduct of its
business requires such qualification, except where the failure to so
qualify would not have a material adverse effect on the condition,
financial or otherwise, or the business, operations or income of the
Company. The Company has obtained all material licenses, permits and other
governmental authorizations currently required for the conduct of its
business; all such licenses, permits and governmental authorizations are
in full force and effect, and the Company is in all material respects
complying with all laws, rules, regulations and orders applicable to the
operation of its business.
(g) The MHC has been duly organized and is a validly existing
federally chartered mutual holding company, with corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus,
and the MHC is qualified to do business as a foreign corporation in each
jurisdiction in which the conduct of its business requires such
qualification, except where the failure to so qualify would not have a
material adverse effect on the condition, financial or otherwise, or the
business, operations or income of the MHC. The MHC has obtained all
material licenses, permits and other governmental authorizations currently
required for the conduct of its business; all such licenses, permits and
governmental authorizations are in full force and effect, and the MHC is
in all material respects complying with all laws, rules, regulations and
orders applicable to the operation of its business.
(h) The Bank is a member of the Federal Home Loan Bank of Dallas
("FHLB-Dallas"). The deposit accounts of the Bank are insured by the FDIC
up to the applicable limits; and no proceedings for the termination or
revocation of such insurance are pending or, to the best knowledge of the
Company, the MHC or the Bank, threatened. Upon consummation of the
Conversion, the liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders
8
<PAGE>
will be duly established in accordance with the requirements of the
Conversion Regulations.
(i) The Company, the MHC and the Bank have good and marketable title
to all real property and other assets material to the business of the
Company, the MHC and the Bank and to those properties and assets described
in the Registration Statement and Prospectus as owned by them, free and
clear of all liens, charges, encumbrances or restrictions, except such as
are described in the Registration Statement and Prospectus or are not
material to the business of the Company, the MHC and the Bank taken as a
whole; and all of the leases and subleases material to the business of the
Company, the MHC and the Bank under which the Company, the MHC or the Bank
hold properties, including those described in the Registration Statement
and Prospectus, are in full force and effect.
(j) The Company, the MHC and the Bank have received an opinion of
their special counsel, Luse Lehman Gorman Pomerenk & Schick ("Luse
Lehman"), with respect to the federal income tax consequences of the
conversion of the MHC from mutual to stock form, and the sale of the
Shares as described in the Registration Statement and the Prospectus, and
an opinion from ______________________________ ("_______") with respect to
the Arkansas state income tax consequences of the proposed transaction;
all material aspects of the opinions of Luse Lehman and
_____________________________ are accurately summarized in the Prospectus;
and the facts and representations upon which such opinions are based are
truthful, accurate and complete.
(k) The Company, the MHC and the Bank have all such power,
authority, authorizations, approvals and orders as may be required to
enter into this Agreement, to carry out the provisions and conditions
hereof and to issue and sell the Shares to be sold by the Company as
provided herein and as described in the Prospectus.
(l) The Company, the MHC and the Bank are not in violation of any
directive received from the OTS, the FDIC, or any other agency to make any
material change in the method of conducting their businesses so as to
comply in all material respects with all applicable statutes and
regulations (including, without limitation, regulations, decisions,
directives and orders of the OTS and the FDIC) and, except as set forth in
the Registration Statement and the Prospectus, there is no suit or
proceeding or charge or action before or by any court, regulatory
authority or governmental agency or body, pending or, to the knowledge of
the Company, the MHC and the Bank, threatened, which might materially and
adversely affect the Conversion, the performance of this Agreement or the
consummation of the transactions contemplated in the Plan and as described
in the Registration Statement
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<PAGE>
and the Prospectus or which might result in any material adverse change in
the condition (financial or otherwise), earnings, capital or properties of
the Company, or the Bank, or which would materially affect their
properties and assets.
(m) The financial statements which are included in the Prospectus
fairly present the financial condition, results of operations, retained
earnings and cash flows of the Company and/or the Bank (as applicable) at
the respective dates thereof and for the respective periods covered
thereby and comply as to form in all material respects with the applicable
accounting requirements of Titles 12 and 17 of the Code of Federal
Regulations and generally accepted accounting principles (including those
requiring the recording of certain assets at their current market value).
Such financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied through the periods
involved, present fairly in all material respects the information required
to be stated therein and are consistent with the most recent financial
statements and other reports filed by the Bank with the OTS and the FDIC,
except that accounting principles employed in such regulatory filings
conform to the requirements of such authorities and not necessarily to
generally accepted accounting principles. The other financial, statistical
and pro forma information and related notes included in the Prospectus
present fairly the information shown therein on a basis consistent with
the audited and unaudited financial statements of the Company and/or the
Bank (as applicable) included in the Prospectus, and as to the pro forma
adjustments, the adjustments made therein have been properly applied on
the basis described therein.
(n) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus; (i) there has not been any
material adverse change, financial or otherwise, in the condition of the
Company, the MHC, the Bank or in the earnings, capital or properties of
the Company, the MHC or the Bank, whether or not arising in the ordinary
course of business; (ii) there has not been any material increase in the
long-term debt of the Bank or in loans past due 90 days or more or real
estate acquired by foreclosure, by deed-in-lieu of foreclosure or deemed
in-substance foreclosure or any material decrease in surplus and reserves
or total assets of the Bank nor has the Company or the Bank issued any
securities or incurred any liability or obligation for borrowing other
than in the ordinary course of business; (iii) there have not been any
material transactions entered into by the Company, the MHC or the Bank,
except with respect to those transactions entered into in the ordinary
course of business; (iv) the capitalization, liabilities, assets,
properties and business of the Company, the MHC and the Bank conform in
all material respects to the descriptions thereof contained in the
Prospectus; and (v) neither the Company, the MHC nor the Bank has any
material contingent liabilities, except as set forth in the Prospectus.
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<PAGE>
(o) As of the date hereof and as of the Closing Date, neither the
Company, the MHC nor the Bank is in violation of its articles of
incorporation or bylaws or charter or bylaws, as applicable, or in default
in the performance or observance of any material obligation, agreement,
covenant, or condition contained in any material contract, lease, loan
agreement, indenture or other instrument to which it is a party or by
which it or any of its property may be bound; the consummation of the
Conversion, the execution, delivery and performance of this Agreement and
the consummation of the transactions herein contemplated have been duly
and validly authorized by all necessary corporate action on the part of
the Company and the Bank and this Agreement has been validly executed and
delivered by the Company, the MHC and the Bank and is the valid, legal and
binding Agreement of the Company, the MHC and the Bank enforceable in
accordance with its terms, except as the enforceability thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium,
conservatorship, receivership or other similar laws now or hereafter in
effect relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of Federal savings institutions and
their holding companies, (ii) general equitable principles, (iii) laws
relating to the safety and soundness of insured depository institutions,
and (iv) applicable law or public policy with respect to the
indemnification and/or contribution provisions contained herein, and
except that no representation or warranty need be made as to the effect or
availability of equitable remedies or injunctive relief (regardless of
whether such enforceability is considered in a proceeding in equity or at
law). The consummation of the transactions herein contemplated will not:
(i) conflict with or constitute a breach of, or default under, the
articles of incorporation and bylaws of the Company or the charters and
bylaws of the Bank or the MHC (in either mutual or capital stock form), or
any material contract, lease or other instrument to which the Company, the
MHC or the Bank has a beneficial interest, or any applicable law, rule,
regulation or order; (ii) violate any authorization, approval, judgment,
decree, order, statute, rule or regulation applicable to the Company, the
MHC or the Bank, except for such violations which would not have a
material adverse effect on the financial condition and results of
operations of the Company, the MHC and the Bank on a consolidated basis;
or (iii) with the exception of the liquidation account established in the
Conversion, result in the creation of any material lien, charge or
encumbrance upon any property of the Company, the MHC or the Bank.
(p) No default exists, and no event has occurred which with notice
or lapse of time, or both, would constitute a default on the part of the
Company, the MHC or the Bank, in the due performance and observance of any
term, covenant or condition of any indenture, mortgage, deed of trust,
note, bank loan or credit agreement or any other instrument or agreement
to which the Company, the MHC or the Bank is a party or by which any of
them or any of their property is bound or affected except such
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defaults which would not have a material adverse effect on the financial
condition or results of operations of the Company, the MHC and the Bank on
a consolidated basis; such agreements are in full force and effect; and no
other party to any such agreements has instituted or, to the best
knowledge of the Company, the MHC or the Bank, threatened any action or
proceeding wherein the Company, the Bank or the MHC would or might be
alleged to be in default thereunder under circumstances where such action
or proceeding, if determined adversely to the Company, the MHC or the
Bank, would have a material adverse effect on the Company, the MHC and the
Bank, taken as a whole.
(q) Upon consummation of the Conversion, the authorized, issued and
outstanding equity capital of the Company will be within the range set
forth in the Prospectus under the caption "Capitalization"; the Shares
will have been duly and validly authorized for issuance and, when issued
and delivered by the Company pursuant to the Plan against payment of the
consideration calculated as set forth in the Plan and in the Prospectus,
will be duly and validly issued, fully paid and non-assessable; no
preemptive rights exist with respect to the Shares; and the terms and
provisions of the Shares will conform in all material respects to the
description thereof contained in the Registration Statement and the
Prospectus. To the best knowledge of the Company, the MHC and the Bank,
upon the issuance of the Shares, good title to the Shares will be
transferred from the Company to the purchasers thereof against payment
therefor, subject to such claims as may be asserted against the purchasers
thereof by third-party claimants.
(r) No approval of any regulatory or supervisory or other public
authority is required in connection with the execution and delivery of
this Agreement or the issuance of the Shares, except for the approval or
non-objection, as applicable, of the Commission, the OTS, and any
necessary qualification, notification, registration or exemption under the
securities or blue sky laws of the various states in which the Shares are
to be offered, and except as may be required under the rules and
regulations of the NASD and/or the Nasdaq National Market.
(s) Deloitte & Touche ("Deloitte"), which has certified the
financial statements of the Bank included in the Prospectus as of
September 30, 1997 and 1996 and for each of the years in the three year
period ended September 30, 1997, has advised the Company, the MHC and the
Bank in writing that they are, with respect to the Company, the MHC and
the Bank, independent public accountants within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public
Accountants and Title 121 of the Code of Federal Regulations and Section
571.2(c)(3).
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(t) RP Financial, LC which has prepared the Bank's Conversion
Valuation Appraisal Report as of ______, 1997 (as amended or supplemented,
if so amended or supplemented) (the "Appraisal"), has advised the Company
in writing that it is independent of the Company, the MHC and the Bank
within the meaning of the Conversion Regulations.
(u) The Company, the MHC and the Bank have timely filed all required
federal, state and local tax returns; the Company, the MHC and the Bank
have paid all taxes that have become due and payable in respect of such
returns, except where permitted to be extended, have made adequate
reserves for similar future tax liabilities and no deficiency has been
asserted with respect thereto by any taxing authority.
(v) The Company, the MHC and the Bank are in compliance in all
material respects with the applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting
Act of 1970, as amended, and the regulations and rules thereunder.
(w) To the knowledge of the Company, the MHC and the Bank, neither
the Company, the MHC, the Bank nor employees of the Company, the MHC or
the Bank have made any payment of funds of the Company, the MHC or the
Bank as a loan for the purchase of the Shares (other than a loan by the
Company to the KSOP) or made any other payment of funds prohibited by law,
and no funds have been set aside to be used for any payment prohibited by
law.
(x) Prior to the Conversion, the Bank had ___________ shares of
authorized capital stock, of which _________ shares were issued and
outstanding, the Company had ______ shares of authorized capital stock, of
which ________ shares were issued and outstanding and the MHC was not
authorized to issue shares. Neither the Bank, the Company nor the MHC has:
(i) other than as described in the Prospectus issued any securities within
the last 18 months (except for notes to evidence other bank loans and
reverse repurchase agreements or other liabilities in the ordinary course
of business or as described in the Prospectus); (ii) had any material
dealings within the 12 months prior to the date hereof with any member of
the NASD, or any person related to or associated with such member, other
than discussions and meetings relating to the proposed offering and
routine purchases and sales of United States government and agency
securities; (iii) entered into a financial or management consulting
agreement except as contemplated hereunder and except for the Letter
Agreement set forth in Exhibit A; and (iv) engaged any intermediary
between the Agents and the Company, the MHC and the Bank in connection
with the offering of the Shares, and no person is being compensated in any
manner for such service.
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(y) The Company, the MHC and the Bank have not relied upon the Agent
or the Agent's counsel for any legal, tax or accounting advice in
connection with the Conversion.
(z) The Company is not required to be registered under the
Investment Company Act of 1940, as amended.
Any certificates signed by an officer of the Company, the MHC or the Bank
pursuant to the conditions of this Agreement and delivered to the Agent or its
counsel that refers to this Agreement shall be deemed to be a representation and
warranty by the Company, the MHC or the Bank to the Agent as to the matters
covered thereby with the same effect as if such representation and warranty were
set forth herein.
Section 5. Representations and Warranties of the Agent. The Agent
represents and warrants to the Company, the MHC and the Bank that:
(a) The Agent is a corporation and is validly existing in good
standing under the laws of the State of Delaware with full power and
authority to provide the services to be furnished to the Bank, the
MHC and the Company hereunder.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary action on the part of the
Agent, and this Agreement has been duly and validly executed and
delivered by the Agent and is the legal, valid and binding agreement
of the Agent, enforceable in accordance with its terms.
(c) Each of the Agent and its employees, agents and representatives
who shall perform any of the services hereunder shall be duly
authorized and empowered, and shall have all licenses, approvals and
permits necessary to perform such services, including appropriate
licenses and the Company's approvals in the various states in which
securities shall be offered.
(d) The execution and delivery of this Agreement by the Agent, the
consummation of the transactions contemplated hereby and compliance
with the terms and provisions hereof will not conflict with, or
result in a breach of, any of the terms, provisions or conditions
of, or constitute a default (or event which with notice or lapse of
time or both would constitute a default) under, the articles of
incorporation of the Agent or any agreement, indenture or other
instrument to which the Agent is a party or by which it or its
property is bound.
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(e) No approval of any regulatory or supervisory or other public
authority is required in connection with the Agent's execution and
delivery of this Agreement, except as may have been received.
(f) There is no suit or proceeding or charge of action before or by
any court, regulatory authority or government agency or body or, to
the knowledge of the Agent, pending or threatened, which might
materially adversely affect the Agent's performance of this
Agreement.
Section 5.1 Covenants of the Company, the MHC and the Bank. The Company,
the MHC and the Bank hereby jointly and severally covenant with the Agent as
follows:
(a) The Company has filed the Registration Statement with the
Commission. The Company will not, at any time after the date the
Registration Statement is declared effective, file any amendment or
supplement to the Registration Statement without providing the Agent and
its counsel an opportunity to review such amendment or supplement or file
any amendment or supplement to which amendment or supplement the Agent or
its counsel shall reasonably object. (b) The MHC has filed the Conversion
Application with the OTS. The Bank will not, at any time after the
Conversion Application is approved by the OTS, file any amendment or
supplement to such Conversion Application without providing the Agent and
its counsel an opportunity to review such amendment or supplement or file
any amendment or supplement to which amendment or supplement the Agent or
its counsel shall reasonably object.
(c) The Company and the Bank will use their best efforts to cause
any post-effective amendment to the Registration Statement to be declared
effective by the Commission and any post-effective amendment to the
Conversion Application to be approved by the OTS and will immediately upon
receipt of any information concerning the events listed below notify the
Agent: (i) when the Registration Statement, as amended, has become
effective; (ii) when the Conversion Application, as amended, has been
approved by the OTS; (iii) of any comments from the Commission, the OTS or
any other governmental entity with respect to the Conversion or the
transactions contemplated by this Agreement; (iv) of the request by the
Commission, the OTS or any other governmental entity for any amendment or
supplement to the Registration Statement or the Conversion Application or
for additional information; (v) of the issuance by the Commission, the OTS
or any other governmental entity of any order or other action suspending
the Offering or the use of the Registration Statement or the Prospectus or
any other filing of the Company or the Bank under the Conversion
Regulations, or other applicable law, or the threat of any such action;
(vi) the issuance by the Commission, the OTS or any state authority of any
stop order suspending the
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<PAGE>
effectiveness of the Registration Statement or the approval of the
Conversion Application, or of the initiation or threat of initiation or
threat of any proceedings for any such purpose; or (vii) of the occurrence
of any event mentioned in paragraph (h) below. The Company, the MHC and
the Bank will make every reasonable effort (i) to prevent the issuance by
the Commission, the OTS or any state authority of any such order and, if
any such order shall at any time be issued, (ii) to obtain the lifting
thereof at the earliest possible time.
(d) The Company, the MHC and the Bank will deliver to the Agent and
to its counsel two conformed copies of the Registration Statement and the
Conversion Application, as originally filed and of each amendment or
supplement thereto, including all exhibits. Further, the Company, the MHC
and the Bank will deliver such additional copies of the foregoing
documents to counsel to the Agent as may be required for any NASD and blue
sky filings.
(e) The Company, the MHC and the Bank will furnish to the Agent,
from time to time during the period when the Prospectus (or any later
prospectus related to this offering) is required to be delivered under the
1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"), such
number of copies of such Prospectus (as amended or supplemented) as the
Agent may reasonably request for the purposes contemplated by the 1933
Act, the 1933 Act Regulations, the 1934 Act or the rules and regulations
promulgated under the 1934 Act (the "1934 Act Regulations"). The Company
authorizes the Agent to use the Prospectus (as amended or supplemented, if
amended or supplemented) in any lawful manner contemplated by the Plan in
connection with the sale of the Shares by the Agent.
(f) The Company, the MHC and the Bank will comply with any and all
material terms, conditions, requirements and provisions with respect to
the Conversion and the transactions contemplated thereby imposed by the
Commission, the OTS, the Conversion Regulations or the OTS, and by the
1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act
Regulations to be complied with prior to or subsequent to the Closing Date
and when the Prospectus is required to be delivered, the Company, the MHC
and the Bank will comply, at their own expense, with all material
requirements imposed upon them by the Commission, the OTS, the Conversion
Regulations or the OTS, and by the 1933 Act, the 1933 Act Regulations, the
1934 Act and the 1934 Act Regulations, including, without limitation, Rule
10b-5 under the 1934 Act, in each case as from time to time in force, so
far as necessary to permit the continuance of sales or dealing in shares
of Common Stock during such period in accordance with the provisions
hereof and the Prospectus.
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(g) If, at any time during the period when the Prospectus relating
to the Shares is required to be delivered, any event relating to or
affecting the Company, the MHC or the Bank shall occur, as a result of
which it is necessary or appropriate, in the opinion of counsel for the
Company, the MHC and the Bank or in the reasonable opinion of the Agent's
counsel, to amend or supplement the Registration Statement or Prospectus
in order to make the Registration Statement or Prospectus not misleading
in light of the circumstances existing at the time the Prospectus is
delivered to a purchaser, the Company and the Bank will at their expense,
prepare and file with the Commission and the OTS and furnish to the Agent
a reasonable number of copies of an amendment or amendments of, or a
supplement or supplements to, the Registration Statement or Prospectus (in
form and substance satisfactory to the Agent and its counsel after a
reasonable time for review) which will amend or supplement the
Registration Statement or Prospectus so that as amended or supplemented it
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light
of the circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading. For the purpose of this Agreement, the Company,
the MHC and the Bank each will timely furnish to the Agent such
information with respect to itself as the Agent may from time to time
reasonably request.
(h) The Company, the MHC and the Bank will take all necessary
actions, in cooperating with the Agent, and furnish to whomever the Agent
may direct, such information as may be required to qualify or register the
Shares for offering and sale by the Company or to exempt such Shares from
registration, or to exempt the Company as a broker-dealer and its
officers, directors and employees as broker-dealers or agents under the
applicable securities or blue sky laws of such jurisdictions in which the
Shares are required under the Conversion Regulations to be sold or as the
Agent and the Company, the MHC and the Bank may reasonably agree upon;
provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify to do business in any
jurisdiction in which it is not so qualified. In each jurisdiction where
any of the Shares shall have been qualified or registered as above
provided, the Company will make and file such statements and reports in
each fiscal period as are or may be required by the laws of such
jurisdiction.
(i) The liquidation account for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders will be duly established
and maintained by the Bank in accordance with the requirements of the OTS,
and such Eligible Account Holders and Supplemental Eligible Account
Holders who continue to maintain their savings accounts in the Bank will
have an inchoate interest in their pro rata portion of the liquidation
account which shall have a priority superior to that of the holders of
shares of Common Stock in the event of a complete liquidation of the Bank.
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(j) The Company, the MHC and the Bank will not sell or issue,
contract to sell or otherwise dispose of, for a period of 90 days after
the Closing Date, without the Agent's prior written consent, any shares of
Common Stock other than the Shares or other than in connection with any
plan or arrangement described in the Prospectus.
(k) The Company shall maintain the effectiveness of the registration
of its Common Stock under Section 12 (g) of the 1934 Act for not less than
three (3) years or such shorter period as may be required by the OTS.
(l) During the period during which the Company's Common Stock is
registered under the 1934 Act or for three years from the date hereof,
whichever period is greater, the Company will furnish to its stockholders
as soon as practicable after the end of each fiscal year an annual report
of the Company (including a consolidated balance sheet and statements of
consolidated income, stockholders' equity and cash flows of the Company
and its subsidiaries as at the end of and for such year, certified by
independent public accountants in accordance with Regulation S-X under the
1933 Act and the 1934 Act).
(m) During the period of three years from the date hereof, the
Company will furnish to the Agent: (i) as soon as practicable after such
information is publicly available, a copy of each report of the Company
furnished to or filed with the Commission under the 1934 Act or any
national securities exchange or system on which any class of securities of
the Company is listed or quoted (including, but not limited to, reports on
Forms 10-K, 10-Q and 8-K and all proxy statements and annual reports to
stockholders), (ii) a copy of each other non-confidential report of the
Company mailed to its stockholders or filed with the Commission, the OTS
or any other supervisory or regulatory authority or any national
securities exchange or system on which any class of securities of the
Company is listed or quoted, each press release and material news items
and additional documents and information with respect to the Company or
the Bank as the Agent may reasonably request; and (iii) from time to time,
such other nonconfidential information concerning the Company or the Bank
as the Agent may reasonably request.
(n) The Company and the Bank will use the net proceeds from the sale
of the Shares in the manner set forth in the Prospectus under the caption
"Use of Proceeds."
(o) Other than as permitted by the Conversion Regulations, the Home
Owners Loan Act of 1933 (the "HOLA"), the 1933 Act, the 1933 Act
Regulations, and the laws of any state in which the Shares are registered
or qualified for sale or exempt
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from registration, neither the Company, the MHC nor the Bank will
distribute any prospectus, offering circular or other offering material in
connection with the offer and sale of the Shares.
(p) The Company will use its best efforts to (i) encourage and
assist two market makers to maintain a market for the Shares and (ii)
continue to list the Shares on the Nasdaq National Market.
(q) The Bank will maintain appropriate arrangements for depositing
all funds received from persons mailing subscriptions for or orders to
purchase Shares in the Offerings on an interest bearing basis at the rate
described in the Prospectus until the Closing Date and satisfaction of all
conditions precedent to the release of the Bank's obligation to refund
payments received from persons subscribing for or ordering Shares in the
Offerings in accordance with the Plan and as described in the Prospectus
or until refunds of such funds have been made to the persons entitled
thereto or withdrawal authorizations canceled in accordance with the Plan
and as described in the Prospectus. The Bank will maintain such records of
all funds received to permit the funds of each subscriber to be separately
insured by the FDIC (to the maximum extent allowable) and to enable the
Bank to make the appropriate refunds of such funds in the event that such
refunds are required to be made in accordance with the Plan and as
described in the Prospectus.
(r) The Company and the Bank will take such actions and furnish such
information as are reasonably requested by the Agent in order for the
Agent to ensure compliance with the NASD's "Interpretation Relating to
Free Riding and Withholding."
(s) Neither the Bank nor the MHC will amend the Plan of Conversion
without notifying the Agent prior thereto.
(t) The Company shall assist the Agent, if necessary, in connection
with the allocation of the Shares in the event of an oversubscription and
shall provide the Agent with any information necessary to assist the
Company in allocating the Shares in such event and such information shall
be accurate and reliable.
(u) Prior to the Closing Date, the Company, the MHC and the Bank
will inform the Agent of any event or circumstances of which it is aware
as a result of which the Registration Statement, the Conversion
Application and/or Prospectus, as then amended or supplemented, would
contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading.
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Section 5.2 Covenants of the Agent. The Agent hereby covenants with
the Company, the MHC and the Bank as follows:
(a) During the period when the Prospectus is used, the Agent will
comply, in all material respects and at its own expense, with all
requirements imposed upon it by the OTS and, to the extent applicable, by
the 1933 Act and the 1934 Act and the rules and regulations promulgated
thereunder.
(b) The Agent shall return unused prospectuses, if any, to the
Company promptly upon the completion of the Conversion.
(c) The Agent will distribute the Prospectuses or offering materials
in connection with the sales of the common stock only in accordance with
OTS regulations, the 1933 Act and the rules and regulations promulgated
thereunder.
(d) The Agent shall assist the Bank in maintaining arrangements for
the deposit of funds and the making of refunds, as appropriate (as
described in Section 5.1(r)), and shall perform the allocation of shares
in the event of an oversubscription, in conformance with the Plan and
applicable regulations and based upon information furnished to the Agent
by the Bank (as described in Section 5.1(v)).
Section 6. Payment of Expenses. Whether or not the Conversion is completed
or the sale of the Shares by the Company is consummated, the Company, the MHC
and the Bank jointly and severally agree to pay or reimburse the Agent for: (a)
all filing fees in connection with all filings with the NASD; (b) any stock
issue or transfer taxes which may be payable with respect to the sale of the
Shares; (c) all reasonable expenses of the Conversion including but not limited
to the Company, the MHC and the Bank's attorneys' fees, transfer agent,
registrar and other agent charges, fees relating to auditing and accounting or
other advisors and costs of printing all documents necessary in connection with
the Conversion; and (d) all reasonable out-of-pocket expenses incurred by the
Agent not to exceed $29,500 (including legal fees and expenses). Such
out-of-pocket expenses include, but are not limited to, travel, communications
and postage. However, such out-of-pocket expenses do not include expenses
incurred with respect to the matters set forth in (a) or (b) above. In the event
the Company is unable to sell a minimum of 2,125,000 Shares or the Conversion is
terminated or otherwise abandoned, the Company, the MHC and the Bank shall
reimburse the Agent in accordance with Section 2 hereof.
Section 7. Conditions to the Agent's Obligations. The Agent's obligations
hereunder, as to the Shares to be delivered at the Closing Date, are subject, to
the extent not waived by the Agent, to the condition that all representations
and warranties of the Company,
20
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the MHC and the Bank herein are, at and as of the commencement of the Offerings
and at and as of the Closing Date, true and correct in all material respects,
the condition that the Company, the MHC and the Bank shall have performed all of
their obligations hereunder to be performed on or before such dates, and to the
following further conditions:
(a) At the Closing Date, the Company, the MHC and the Bank shall
have conducted the Conversion in all material respects in accordance with
the Plan, the Conversion Regulations, and all other applicable laws,
regulations, decisions and orders, including all terms, conditions,
requirements and provisions precedent to the Conversion imposed upon them
by the OTS.
(b) The Registration Statement shall have been declared effective by
the Commission, the Conversion Application approved by the OTS, not later
than 5:30 p.m. on the date of this Agreement, or with the Agent's consent
at a later time and date; and at the Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the 1933 Act or proceedings therefore initiated or threatened
by the Commission, or any state authority and no order or other action
suspending the authorization of the Prospectus or the consummation of the
Conversion shall have been issued or proceedings therefore initiated or,
to the Company's, the MHC's or the Bank's knowledge, threatened by the
Commission, the OTS or any state authority.
(c) At the Closing Date, the Agent shall have received:
(1) The favorable opinion, dated as of the Closing Date and
addressed to the Agent and for its benefit, of Luse Lehman, special
counsel for the Company, the MHC and the Bank, in form and substance
to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation under the laws of the State of
Delaware and has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in
the Registration Statement and the Prospectus. All of the
outstanding capital stock of the Company is duly authorized and
validly issued, fully paid and non-assessable.
(ii) The Bank has been duly organized and is a validly
existing federal savings association in capital stock form of
organization, duly authorized to conduct its business and own its
property as described in the Registration Statement and Prospectus.
All of the outstanding capital stock of the Bank is duly authorized
and validly issued, fully paid and non-assessable
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and owned by the Company, free and clear of any liens, encumbrances,
claims or other restrictions.
(iii) The MHC has been duly organized and is a validly
existing federal mutual holding company duly authorized to conduct
its business and own its property as described in the Registration
Statement and Prospectus.
(iv) The Bank is a member of the FHLB-Dallas. The
deposit accounts of the Bank are insured by the FDIC up to the
maximum amount allowed under law and no proceedings for the
termination or revocation of such insurance are pending or, to such
counsel's Actual Knowledge, threatened; the description of the
liquidation account as set forth in the Prospectus under the caption
"The Conversion and Reorganization-Liquidation Rights" to the extent
that such information constitutes matters of law and legal
conclusions has been reviewed by such counsel and is accurate in all
material respects.
(v) Upon consummation of the Conversion, the authorized,
issued and outstanding capital stock of the Company will be within
the range set forth in the Prospectus under the caption
"Capitalization," and except for shares issued as described in the
Prospectus or pursuant to employee stock benefit plans described in
the Prospectus in the section titled "Management of the Bank --
Executive Compensation," no shares of Common Stock have been issued
prior to the Closing Date; at the time of the Conversion, the Shares
subscribed for pursuant to the Offerings will have been duly and
validly authorized for issuance, and when issued and delivered by
the Company pursuant to the Plan against payment of the
consideration calculated as set forth in the Plan and the
Prospectus, will be duly and validly issued and fully paid and
non-assessable; the issuance of the Shares is not subject to
preemptive rights and the terms and provisions of the Shares conform
in all material respects to the description thereof contained in the
Prospectus. To such counsel's Actual Knowledge, upon the issuance of
the Shares, good title to the Shares will be transferred from the
Company to the purchasers thereof against payment therefor, subject
to such claims as may be asserted against the purchasers thereof by
third-party claimants.
(vi) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action on the part of
the Company, the MHC, and the Bank; and this Agreement is a valid
and binding obligation of the Company, the MHC and the Bank,
enforceable in accordance with its terms, except as the
enforceability thereof may be limited by (i) bankruptcy,
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insolvency, moratorium, reorganization, conservatorship,
receivership or other similar laws now or hereafter in effect
relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of savings institutions and
their holding companies, (ii) general equitable principles, (iii)
laws relating to the safety and soundness of insured depository
institutions, and (iv) applicable law or public policy with respect
to the indemnification and/or contribution provisions contained
herein, including, without limitation, the provisions of Section 23A
and 23B of the Federal Reserve Act, and except that no opinion need
to be expressed as to the effect or availability of equitable
remedies or injunctive relief (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(vii) The Conversion Application has been approved by
the OTS and the Prospectus has been authorized for use by the OTS
and no action has been taken, and to such counsel's Actual
Knowledge, none is pending or threatened, to revoke any such
authorization or approval.
(viii) The Plan has been duly adopted by the required
vote of the directors of the Company, the MHC and the Bank and,
based upon the certificate of the inspector of election, by the
members of the MHC, the stockholders of the Company and the
stockholders of the Bank.
(ix) Subject to the satisfaction of the conditions to
the OTS' approval of the Conversion, no further approval,
registration, authorization, consent or other order of or notice to
any federal or Delaware regulatory agency is required in connection
with the execution and delivery of this Agreement, the issuance of
the Shares and the consummation of the Conversion, except as may be
required under the securities or blue sky laws of various
jurisdictions (as to which no opinion need be rendered) and except
as may be required under the rules and regulations of the NASD
and/or the Nasdaq National Market (as to which no opinion need be
rendered).
(x) The Registration Statement is effective under the
1933 Act and no stop order suspending the effectiveness has been
issued under the 1933 Act or proceedings therefor initiated or, to
such counsel's Actual Knowledge, threatened by the Commission.
(xi) At the time the Conversion Application, including
the Prospectus contained therein, was approved by the OTS, the
Conversion Application, including the Prospectus contained therein,
complied as to form in all material respects with the requirements
of the Conversion Regulations, the HOLA and all applicable rules and
regulations promulgated thereunder (other
23
<PAGE>
than the financial statements, the notes thereto, and other tabular,
financial, statistical and appraisal data included therein, as to
which no opinion need be rendered).
(xii) At the time that the Registration Statement became
effective, (i) the Registration Statement (as amended or
supplemented, if so amended or supplemented) (other than the
financial statements, the notes thereto and other tabular,
financial, statistical and appraisal data included therein, as to
which no opinion need be rendered) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933
Act Regulations, and (ii) the Prospectus (other than the financial
statements, the notes thereto and other tabular, financial,
statistical and appraisal data included therein, as to which no
opinion need be rendered) complied as to form in all material
respects with the requirements of the 1933 Act, the 1933 Act
Regulations, the Conversion Regulations and federal law.
(xiii) The terms and provisions of the Shares of the
Company conform, in all material respects, to the description
thereof contained in the Registration Statement and Prospectus, and
the form of certificate used to evidence the Shares is in due and
proper form.
(xiv) There are no legal or governmental proceedings
pending or to such counsel's Actual Knowledge, threatened which are
required to be disclosed in the Registration Statement and
Prospectus, other than those disclosed therein, and to such
counsel's Actual Knowledge, all pending legal and governmental
proceedings to which the Company, the MHC or the Bank is a party or
of which any of their property is the subject, which are not
described in the Registration Statement and the Prospectus,
including ordinary routine litigation incidental to the Company's,
the MHC's or the Bank's business, are, considered in the aggregate,
not material.
(xv) To such counsel's Actual Knowledge, there are no
material contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments required to be described or referred to
in the Conversion Application, the Registration Statement or the
Prospectus or required to be filed as exhibits thereto other than
those described or referred to therein or filed as exhibits thereto
in the Conversion Application, the Registration Statement or the
Prospectus. The description in the Conversion Application, the
Registration Statement and the Prospectus of such documents and
exhibits is accurate in all material respects and fairly presents
the information required to be shown.
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(xvi) To such counsel's Actual Knowledge, the Company,
the MHC and the Bank have conducted the Conversion, in all material
respects, in accordance with all applicable requirements of the Plan
and the HOLA and regulations thereunder, and the Plan complies in
all material respects with all applicable Delaware and federal laws,
rules, regulations, decisions and orders including, but not limited
to, the Conversion Regulations (except where a written waiver has
been received); no order has been issued by the OTS, the Commission
or any state authority to suspend the Offerings or the use of the
Prospectus, and no action for such purposes has been instituted or,
to such counsel's Actual Knowledge, threatened by the OTS or the
Commission or any state authority and, to such counsel's Actual
Knowledge, no person has sought to obtain regulatory or judicial
review of the final action of the OTS approving the Plan, the
Conversion Application or the Prospectus.
(xvii) To such counsel's Actual Knowledge, the Company,
the MHC and the Bank have obtained all material federal and Delaware
licenses, permits and other governmental authorizations currently
required for the conduct of their businesses and all such licenses,
permits and other governmental authorizations are in full force and
effect, and the Company, the MHC and the Bank are in all material
respects complying therewith, except where the failure to have such
licenses, permits and other governmental authorizations or the
failure to be in compliance therewith would not have a material
adverse affect on the business or operations of the Bank, the MHC
and the Company, taken as a whole.
(xviii) To such counsel's Actual Knowledge, neither the
Company, the MHC nor the Bank is in violation of its articles of
incorporation, bylaws, or charter, as applicable, or, to such
counsel's Actual Knowledge, in default or violation of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its property may
be bound except for such defaults or violations which would not have
a material adverse impact on the financial condition or results of
operations of the Company, the MHC nor the Bank on a consolidated
basis; to such counsel's Actual Knowledge, the execution and
delivery of this Agreement, the occurrence of the obligations herein
set forth and the consummation of the transactions contemplated
herein will not conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company, the MHC
or the Bank pursuant to any material contract, indenture, mortgage,
loan agreement, note, lease or other instrument to which the
Company, the MHC or the Bank is
25
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a party or by which any of them may be bound, or to which any of the
property or assets of the Company, the MHC or the Bank is subject
(other than the establishment of a liquidation account), and such
action will not result in any violation of the provisions of the
articles of incorporation, bylaws or charter, as applicable, of the
Company, the MHC or the Bank, or any applicable federal or Delaware
law, act, regulation (except that no opinion need be rendered with
respect to the securities or blue sky laws of various jurisdictions
or the rules and regulations of the NASD and/or the Nasdaq National
Market) or order or court order, writ, injunction or decree.
(xix) The Company's articles of incorporation and bylaws
comply in all material respects with the General Corporation Law
("GCL") of the State of Delaware. The Bank's and the MHC's charter
and bylaws comply in all material respects with the HOLA and the
rules and regulations of the OTS.
(xx) To such counsel's Actual Knowledge, neither the
Company, the MHC nor the Bank is in violation of any directive from
the OTS or the FDIC to make any material change in the method of
conducting its respective business.
(xxi) The information in the Prospectus under the
captions "Regulation," "The Conversion," "Restrictions on
Acquisition of the Company" and "Description of Capital Stock of
Pocahontas Bancorp," to the extent that such information constitutes
matters of law, summaries of legal matters, documents or
proceedings, or legal conclusions, has been reviewed by such counsel
and is correct in all material respects. The description of the
Conversion process under the caption "The Conversion" in the
Prospectus has been reviewed by such counsel and is in all material
respects correct. The discussion of statutes or regulations
described or referred to in the Prospectus are accurate summaries
and fairly present the information required to be shown. The
information under the caption "The Conversion-Tax Aspects" has been
reviewed by such counsel and constitutes a correct summary of the
opinions rendered by Luse Lehman and Deloitte to the Company, the
MHC and the Bank with respect to such matters.
In giving such opinion, such counsel may rely as to all
matters of fact on certificates of officers or directors of the
Company, the MHC and the Bank and certificates of public officials.
Such counsel's opinion shall be limited to matters governed by
federal laws and by the State of Delaware General Corporation Law.
With respect to matters involving the application of
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Delaware law, such counsel may rely, to the extent it deems proper
and as specified in its opinion, upon the opinion of local counsel
(providing that such counsel states that it believes the Agent is
justified in relying upon such specified opinion or opinions). The
opinion of Luse Lehman shall be governed by the Legal Opinion Accord
("Accord") of the American Bar Association Section of Business Law
(1991). The term "Actual Knowledge" as used herein shall have the
meaning set forth in the Accord. For purposes of such opinion, no
proceedings shall be deemed to be pending, no order or stop order
shall be deemed to be issued, and no action shall be deemed to be
instituted unless, in each case, a director or executive officer of
the Company, the MHC or the Bank shall have received a copy of such
proceedings, order, stop order or action. In addition, such opinion
may be limited to present statutes, regulations and judicial
interpretations and to facts as they presently exist; in rendering
such opinion, such counsel need assume no obligation to revise or
supplement it should the present laws be changed by legislative or
regulatory action, judicial decision or otherwise; and such counsel
need express no view, opinion or belief with respect to whether any
proposed or pending legislation, if enacted, or any proposed or
pending regulations or policy statements issued by any regulatory
agency, whether or not promulgated pursuant to any such legislation,
would affect the validity of the Conversion or any aspect thereof.
Such counsel may assume that any agreement is the valid and binding
obligation of any parties to such agreement other than the Company,
the MHC or the Bank.
In addition, such counsel shall provide a letter stating that
during the preparation of the Conversion Application, the
Registration Statement and the Prospectus, they participated in
conferences with certain officers of, the independent public and
internal accountants for, and other representatives of the Company,
the MHC and the Bank, at which conferences the contents of the
Conversion Application, the Registration Statement and the
Prospectus and related matters were discussed and, while such
counsel has not confirmed the accuracy or completeness of or
otherwise verified the information contained in the Conversion
Application, the Registration Statement or the Prospectus, and does
not assume any responsibility for such information, based upon such
conferences and a review of documents deemed relevant for the
purpose of rendering their opinion (relying as to materiality as to
factual matters on certificates of officers and other factual
representations by the Company, the MHC and the Bank), nothing has
come to their attention that would lead them to believe that the
Conversion Application, the Registration Statement, the Prospectus,
or any amendment or supplement thereto (other than the financial
statements, the notes thereto, and other tabular, financial,
statistical and appraisal data included therein as to which no
opinion need be rendered)
27
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contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
(2) The favorable opinion, dated as of the Closing Date and
addressed to the Agent and for its benefit, of the Bank's local
counsel, in form and substance to the effect that, to the best of
such counsel's knowledge, (i) the Company, the MHC and the Bank have
good and marketable title to all properties and assets which are
material to the business of the Company, the MHC and the Bank and to
those properties and assets described in the Registration Statement
and Prospectus, as owned by them, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described
in the Registration Statement and Prospectus, or are not material in
relation to the business of the Company, the MHC and the Bank
considered as one enterprise; (ii) all of the leases and subleases
material to the business of the Company, the MHC and the Bank under
which the Company, the MHC and the Bank hold properties, as
described in the Registration Statement and Prospectus, are in full
force and effect; (iii) to counsel's actual knowledge based on
certificates of officers, the Bank is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which its ownership of property or leasing of
property or the conduct of its business requires such qualification,
unless the failure to be so qualified in one or more of such
jurisdictions would not have a material adverse effect on the
condition, financial or otherwise, or the business, operations or
income of the Bank; and (iv) the MHC is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which its ownership of property or leasing of
property or the conduct of its business requires such qualification,
unless the failure to be so qualified in one or more of such
jurisdictions would not have a material adverse effect on the
condition, financial or otherwise, or the business, operations or
income of the MHC.
(3) The favorable opinion, dated as of the Closing Date, of
Peabody & Brown, the Agent's counsel, with respect to such matters
as the Agent may reasonably require. Such opinion may rely upon the
opinions of counsel to the Company, the MHC and the Bank, and as to
matters of fact, upon certificates of officers and directors of the
Company, the MHC and the Bank delivered pursuant hereto or as such
counsel shall reasonably request.
(d) At the Closing Date, the Agents shall receive a certificate of
the Chief Executive Officer and the Chief Financial Officer of the Company
and a certificate of the Chief Executive Officer and the Chief Financial
Officer of the MHC and the Bank,
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<PAGE>
both dated as of such Closing Date, to the effect that: (i) they have
reviewed the Prospectus and, in their opinion, at the time the Prospectus
became authorized for final use, the Prospectus did not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) since the date the Prospectus
became authorized for final use, no material adverse change in the
condition, financial or otherwise, or in the earnings, capital, properties
or business of the Company, the MHC and the Bank has occurred and, to
their knowledge, no other event has occurred, which should have been set
forth in an amendment or supplement to the Prospectus which has not been
so set forth, and the conditions set forth in this Section 7 have been
satisfied; (iii) since the respective dates as of which information is
given in the Registration Statement and Prospectus, there has been no
material adverse change in the condition, financial or otherwise, or in
the earnings, capital or properties of the Company, the MHC or the Bank,
independently, or of the Company, the MHC and the Bank considered as one
enterprise, whether or not arising in the ordinary course of business;
(iv) the representations and warranties in Section 4 are true and correct
with the same force and effect although expressly made at and as of the
Closing Date; (v) the Company, the MHC and the Bank have complied in all
material respects with all agreements and satisfied all conditions on
their part to be performed or satisfied at or prior to the Closing Date
and will comply in all material respects with all obligations to be
satisfied by them after Conversion; (vi) no stop order suspending the
effectiveness of the Registration Statement has been initiated or, to the
best knowledge of the Company, the MHC or the Bank, threatened by the
Commission or any state authority; (vii) no order suspending the
Offerings, the Conversion or the effectiveness of the Prospectus has been
issued and no proceedings for that purpose are pending or, to the best
knowledge of the Company, the MHC or the Bank, threatened by the OTS, the
Commission or any state authority; and (viii) to the best knowledge or the
Company or the Bank, no person has sought to obtain review of the final
action of the OTS approving the Plan.
(e) Prior to and at the Closing Date: (i) in the reasonable opinion
of the Agent, there shall have been no material adverse change in the
condition, financial or otherwise (other than as a result of a change in
law or regulation and affecting the savings association industry as a
whole), or in the earnings or business of the Company, the MHC or the Bank
independently, or of the Company, the MHC and the Bank considered as one
enterprise, from that as of the latest dates as of which such condition is
set forth in the Prospectus other than transactions referred to or
contemplated therein; (iii) the Company, the MHC or the Bank shall not
have received from the OTS or the FDIC any direction (oral or written) to
make any material change in the method of conducting their business with
which it has not complied (which direction, if any, shall have been
disclosed to the Agents) or which materially and
29
<PAGE>
adversely would affect the business, operations or financial condition or
income of the Company, the MHC and the Bank considered as one enterprise;
(iv) the Company, the MHC and the Bank shall not have been in default (nor
shall any event have occurred which, with notice or lapse of time or both,
would constitute a default) under any provision of any agreement or
instrument relating to any outstanding indebtedness; (v) no action, suit
or proceedings, at law or in equity or before or by any federal or state
commission, board or other administrative agency, shall be pending or, to
the knowledge of the Company, the MHC or the Bank, threatened against the
Company, the MHC or the Bank or affecting any of their properties wherein
an unfavorable decision, ruling or finding would materially and adversely
affect the business operations, financial condition or income of the
Company, the MHC and the Bank considered as one enterprise; and (vi) the
Shares have been qualified or registered for offering and sale or exempted
therefrom under the securities or blue sky laws of the jurisdictions as
the Agents shall have requested and as agreed to by the Company and the
Bank.
(f) Concurrently with the execution of this Agreement, the Agents
shall receive a letter from Deloitte dated as of the date of the
Prospectus and addressed to the Agent: (i) confirming that Deloitte is a
firm of independent public accountants within the meaning of Rule 101 of
the Code of Professional Ethics of the American Institute of Certified
Public Accountants and applicable regulations of the OTS and FDIC and
stating in effect that in Deloitte's opinion the financial statements of
the Company and/or the Bank (as applicable) as of September 30, 1997 and
1996 and for each of the three years in the period ended September 30,
1997, as are included in the Prospectus and covered by their opinion
included therein, comply as to form in all material respects with the
applicable accounting requirements and related published rules and
regulations of the OTS, the FDIC, the SEC and the 1933 Act; (ii) a
statement from Deloitte in effect that, on the basis of certain agreed
upon procedures (but not an audit in accordance with generally accepted
auditing standards) consisting of a reading of the latest available
unaudited interim consolidated financial statements of the Company
prepared by the Company, a reading of the minutes of the meetings of the
Board of Directors of the Company and the Bank and consultations with
officers of the Company and the Bank responsible for financial and
accounting matters, nothing came to their attention which caused them to
believe that: (A) the unaudited financial statements included in the
Prospectus, are not in conformity with the 1933 Act, applicable accounting
requirements of the OTS, the FDIC, and the SEC and generally accepted
accounting principles applied on a basis substantially consistent with
that of the audited financial statements included in the Prospectus; or
(B) during the period from the date of the latest unaudited consolidated
financial statements included in the Prospectus to a specified date not
more than three business days prior to the date of the Prospectus, except
as has been described in the Prospectus, there was any material increase
in
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<PAGE>
borrowings, other than normal deposit fluctuations, by the Company or the
Bank; or (C) there was any decrease in consolidated net assets of the
Company or the Bank at the date of such letter as compared with amounts
shown in the latest unaudited consolidated statement of condition included
in the Prospectus; and (iii) a statement from Deloitte that, in addition
to the audit referred to in their opinion included in the Prospectus and
the performance of the procedures referred to in clause (ii) of this
subsection (f), they have compared with the general accounting records of
the Company and the Bank, which are subject to the internal controls of
the Company and the Bank, the accounting system and other data prepared by
the Company and the Bank, directly from such accounting records, to the
extent specified in such letter, such amounts and/or percentages set forth
in the Prospectus as the Agent may reasonably request; and they have
reported on the results of such comparisons.
(g) At the Closing Date, the Agent shall receive a letter from
Deloitte dated the Closing Date, addressed to the Agent, confirming the
statements made by them in the letter delivered by them pursuant to
subsection (f) of this Section 7, the "specified date" referred to in
clause (ii) of subsection (f) thereof to be a date specified in such
letter, which shall not be more than three business days prior to the
Closing Date.
(h) At the Closing Date, the Agent shall receive a letter from RP
Financial, LC, dated the date thereof and addressed to counsel for the
Agent (i) confirming that said firm is independent of the Company, the MHC
and the Bank and is experienced and expert in the area of corporate
appraisals within the meaning of Title 12 of the Code of Federal
Regulations, Part 303, (ii) stating in effect that the Appraisal prepared
by such firm complies in all material respects with the applicable
requirements of Title 12 of the Code of Federal Regulations, and (iii)
further stating that their opinion of the aggregate pro forma market value
of the Company, the MHC and the Bank expressed in their Appraisal dated as
of _______, 1997, and most recently updated, remains in effect.
(i) The Company, the MHC and the Bank shall not have sustained since
the date of the latest audited financial statements included in the
Prospectus any material loss or interference with their businesses from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Registration Statement and Prospectus.
(j) At or prior to the Closing Date, the Agent shall receive: (i) a
copy of the letter from the OTS approving the Conversion Application and
authorizing the use of the Prospectus; (ii) a copy of the order from the
Commission declaring the Registration Statement effective; (iii)
certificates from the OTS evidencing the existence of the Bank
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<PAGE>
and the MHC; (iv) certificates of good standing from the State of Delaware
evidencing the good standing of the Company; (v) a certificate from the
FDIC evidencing the Bank's insurance of accounts, and (vi) a certificate
of the FHLB-Dallas evidencing the Bank's membership thereof.
(k) Subsequent to the date hereof, there shall not have occurred any
of the following: (i) a suspension or limitation in trading in securities
generally on the New York Stock Exchange or in the over-the-counter
market, or quotations halted generally on the Nasdaq National Market, or
minimum or maximum prices for trading have been fixed, or maximum ranges
for prices for securities have been required by either of such exchanges
or the NASD or by order of the Commission or any other governmental
authority; (ii) a general moratorium on the operations of commercial banks
or federal savings associations or a general moratorium on the withdrawal
of deposits from commercial banks or federal savings associations declared
by federal or state authorities; (iii) the engagement by the United States
in hostilities which have resulted in the declaration, on or after the
date hereof, of a national emergency or war; or (iv) a material decline in
the price of equity or debt securities if the effect of such a declaration
or decline, in the Agent's reasonable judgment, makes it impracticable or
inadvisable to proceed with the Offerings or the delivery of the shares on
the terms and in the manner contemplated in the Registration Statement and
Prospectus.
Section 8. Indemnification.
(a) The Company, the MHC and the Bank jointly and severally agree to
indemnify and hold harmless the Agent, its officers, directors, agents,
servants and employees and each person, if any, who controls the Agent
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
1934 Act, against any and all loss, liability, claim, damage or expense
whatsoever (including but not limited to settlement expenses), joint or
several, that the Agent or any of them may suffer or to which the Agent
and any such persons may become subject under all applicable federal or
state laws or otherwise, and to promptly reimburse the Agent and any such
persons upon written demand for any expense (including fees and
disbursements of counsel) incurred by the Agent or any of them in
connection with investigating, preparing or defending any actions,
proceedings or claims (whether commenced or threatened) to the extent such
losses, claims, damages, liabilities or actions: (i) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment or
supplement thereto), preliminary or final Prospectus (or any amendment or
supplement thereto), the Conversion Application (or any amendment or
supplement thereto), or any blue sky application or other instrument or
document executed by the Company, the MHC or the Bank based upon written
information supplied by the Company, the MHC or the Bank filed in any
state or
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<PAGE>
jurisdiction to register or qualify any or all of the Shares or to claim
an exemption therefrom, or provided to any state or jurisdiction to exempt
the Company as a broker-dealer or its officers, directors and employees as
broker-dealers or agents, under the securities laws thereof (collectively,
the "Blue Sky Application"), or any application or other document,
advertisement, oral statement or communication ("Sales Information")
prepared, made or executed by or on behalf of the Company, the MHC or the
Bank with their consent or based upon written or oral information
furnished by or on behalf of the Company, the MHC or the Bank, whether or
not filed in any jurisdiction, in order to qualify or register the Shares
or to claim an exemption therefrom under the securities laws thereof; (ii)
arise out of or based upon the omission or alleged omission to state in
any of the foregoing documents or information, a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; or (iii)
arise from any theory of liability whatsoever relating to or arising from
or based upon the Registration Statement (or any amendment or supplement
thereto), preliminary or final Prospectus (or any amendment or supplement
thereto), the Conversion Application (or any amendment or supplement
thereto), any Blue Sky Application or Sales Information or other
documentation distributed in connection with the Conversion; provided,
however, that no indemnification is required under this paragraph (a) to
the extent such losses, claims, damages, liabilities or actions arise out
of or are based upon any untrue material statement or alleged untrue
material statements in, or material omission or alleged material omission
from, the Registration Statement (or any amendment or supplement thereto),
preliminary or final Prospectus (or any amendment or supplement thereto),
the Conversion Application, any Blue Sky Application or Sales Information
made in reliance upon and in conformity with information furnished in
writing to the Company or the Bank by the Agent regarding the Agent and
provided further that such indemnification shall be to the extent
permitted by the OTS and the FDIC.
(b) The Agent agrees to indemnify and hold harmless the Company, the
MHC and the Bank, their directors and officers and each person, if any,
who controls the Company, the MHC or the Bank within the meaning of
Section 15 of the 1933 Act or Section 20(a) of the 1934 Act against any
and all loss, liability, claim, damage or expense whatsoever (including
but not limited to settlement expenses), joint or several, which they, or
any of them, may suffer or to which they, or any of them may become
subject under all applicable federal and state laws or otherwise, and to
promptly reimburse the Company, the MHC, the Bank, and any such persons
upon written demand for any expenses (including reasonable fees and
disbursements of counsel) incurred by them, or any of them, in connection
with investigating, preparing or defending any actions, proceedings or
claims (whether commenced or threatened) to the extent such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained
in the
33
<PAGE>
Registration Statement (or any amendment or supplement thereto), the
Conversion Application (or any amendment or supplement thereto) or the
preliminary or final Prospectus (or any amendment or supplement thereto),
or are based upon the omission or alleged omission to state in any of the
foregoing documents a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Agent's obligations under this Section 8(b) shall exist
only if and only to the extent (i) that such untrue statement or alleged
untrue statement was made in, or such material fact or alleged material
fact was omitted from, the Registration Statement (or any amendment or
supplement thereto), the preliminary or final Prospectus (or any amendment
or supplement thereto) or the Conversion Application (or any amendment or
supplement thereto), any Blue Sky Application or Sales Information in
reliance upon and in conformity with information furnished in writing to
the Company or the Bank by the Agent regarding the Agent. In no case shall
the Agent be liable or responsible for any amount in excess of the fees
received by the Agent pursuant to Section 2 of this Agreement.
(c) Each indemnified party shall give prompt written notice to each
indemnifying party of any action, proceeding, claim (whether commenced or
threatened), or suit instituted against it in respect of which indemnity
may be sought hereunder, but failure to so notify an indemnifying party
shall not relieve it from any liability which it may have on account of
this Section 8 or otherwise. An indemnifying party may participate at its
own expense in the defense of such action. In addition, if it so elects
within a reasonable time after receipt of such notice, an indemnifying
party, jointly with any other indemnifying parties receiving such notice,
may assume defense of such action with counsel chosen by it and approved
by the indemnified parties that are defendants in such action, unless such
indemnified parties reasonably object to such assumption on the ground
that there may be legal defenses available to them that are different from
or in addition to those available to such indemnifying party. If an
indemnifying party assumes the defense of such action, the indemnifying
parties shall not be liable for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection with such action,
proceeding or claim, other than reasonable costs of investigation. In no
event shall the indemnifying parties be liable for the fees and expenses
of more than one separate firm of attorneys (and any special counsel that
said firm may retain) for each indemnified party in connection with any
one action, proceeding or claim or separate but similar or related
actions, proceedings or claims in the same jurisdiction arising out of the
same general allegations or circumstances.
(d) The agreements contained in this Section 8 and in Section 9
hereof and the representations and warranties of the Company, the MHC and
the Bank set forth in this Agreement shall remain operative and in full
force and effect regardless of: (i) any
34
<PAGE>
investigation made by or on behalf of the Agent or its officers, directors
or controlling persons, agents or employees or by or on behalf of the
Company, the MHC or the Bank or any officers, directors or controlling
persons, agents or employees of the Company, the MHC or the Bank; (ii)
deliver of and payment hereunder for the Shares; or (iii) any termination
of this Agreement.
Section 9. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 8 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company, the Bank or the Agent, the Company,
the Bank and the Agent shall contribute to the aggregate losses, claims, damages
and liabilities (including any investigation, legal and other expenses incurred
in connection with, and any amount paid in settlement of, any action, suit or
proceeding of any claims asserted, but after deducting any contribution received
by the Company, the Bank or the Agent from persons other than the other party
thereto, who may also be liable for contribution) in such proportion so that the
Agent shall be responsible for that portion represented by the percentage that
the fees paid to the Agent pursuant to Section 2 of this Agreement (not
including expenses) bears to the gross proceeds received by the Company from the
sale of the Shares in the Offerings and the Company and the Bank shall be
responsible for the balance. If, however, the allocation provided above is not
permitted by applicable law or if the indemnified party failed to give the
notice required under Section 8 above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative fault of the
Company and the Bank on the one hand and the Agent on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions, proceedings or claims in respect thereto), but also
the relative benefits received by the Company and the Bank on the one hand and
the Agent on the other from the Offerings (before deducting expenses). The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company and/or the Bank on the one hand or the Agent on the other and the
parties' relative intent, good faith, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Bank and the Agent agree that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro-rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above in this Section 9. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions, proceedings or claims in respect thereof) referred to
above in this Section 9 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action, proceeding or claim. It is expressly agreed that
the Agent shall not be liable for any loss, liability, claim, damage or expense
or be required to contribute any amount which in the aggregate exceeds the
amount paid (excluding reimbursable expenses) to
35
<PAGE>
the Agent under this Agreement. It is understood that the above stated
limitation on the Agent's liability is essential to the Agent and that the Agent
would not have entered into this Agreement if such limitation had not been
agreed to by the parties to this Agreement. No person found guilty of any
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not found guilty
of such fraudulent misrepresentation. The obligations of the Company and the
Bank under this Section 9 and under Section 8 shall be in addition to any
liability which the Company and the Bank may otherwise have. For purposes of
this Section 9, each of the Agent's, the Company's or the Bank's officers and
directors and each person, if any, who controls the Agent or the Company or the
Bank within the meaning of the 1933 Act and the 1934 Act shall have the same
rights to contribution as the Agent, the Company or the Bank. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action,
suit, claim or proceeding against such party in respect of which a claim for
contribution may be made against another party under this Section 9, will notify
such party from whom contribution may be sought, but the omission to so notify
such party shall not relieve the party from whom contribution may be sought from
any other obligation it may have hereunder or otherwise than under this Section
9.
Section 10. Survival of Agreements, Representations and Indemnities. The
respective indemnities of the Company, the Bank and the Agent and the
representations and warranties and other statements of the Company and the Bank
set forth in or made pursuant to this Agreement shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of the Agent, the Company, the Bank or any
controlling person referred to in Section 8 hereof, and shall survive the
issuance of the Shares, and any legal representative, successor or assign of the
Agent, the Company, the Bank, and any such controlling person shall be entitled
to the benefit of the respective agreements, indemnities, warranties and
representations.
Section 11. Termination. The Agent may terminate its obligations under
this Agreement by giving the notice indicated below in this Section 11 at any
time after this Agreement becomes effective as follows:
(a) In the event the Company fails to sell all of the Shares by
___________, 1998, and in accordance with the provisions of the Plan or as
required by the Conversion Regulations, and applicable law, this Agreement
shall terminate upon refund by the Bank to each person who has subscribed
for or ordered any of the Shares the full amount which it may have
received from such person, together with interest as provided in the
Prospectus, and no party to this Agreement shall have any obligation to
the other hereunder, except for payment by the Company and/or the Bank as
set forth in Sections 2(a) and (d), 6, 8 and 9 hereof.
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<PAGE>
(b) If any of the conditions specified in Section 7 shall not have
been fulfilled when and as required by this Agreement unless waived in
writing, or by the Closing Date, this Agreement and all of the Agent's
obligations hereunder may be canceled by the Agent by notifying the
Company, the MHC and the Bank of such cancellation in writing or by
telegram at any time at or prior to the Closing Date, and any such
cancellation shall be without liability of any party to any other party
except as otherwise provided in Sections 2, 6, 8 and 9 hereof.
(c) If the Agent elects to terminate this Agreement as provided in
this Section, the Company, the MHC and the Bank shall be notified promptly
by the Agent by telephone or telegram, confirmed by letter.
The Company, the MHC and the Bank may terminate this Agreement in the
event the Agent is in material breach of the representations and warranties or
covenants contained in Section 5 and such breach has not been cured after the
Company and the Bank have provided the Agent with notice of such breach.
This Agreement may also be terminated by mutual written consent of the
parties hereto.
Section 12. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be mailed in writing and if sent to the
Agent shall be mailed, delivered or telegraphed and confirmed to Friedman,
Billings, Ramsey & Co., Inc., 1001 19th Street North, Arlington, Virginia
22209-1710, Attention: David Neiswander (with a copy to Peabody & Brown, 1255
23rd Street, N.W., Suite 800, Washington, D.C. 20037, Attention: Raymond J.
Gustini, Esq.) and, if sent to the Company, the MHC and the Bank, shall be
mailed, delivered or telegraphed and confirmed to the Company, the MHC and the
Bank at 203 West Broadway, Pocahontas, Arkansas 72455-3420, Attention: Skip
Martin, President and Chief Executive Officer (with a copy to Luse Lehman,
Attention: Robert Pomerenk, Esq.)
Section 13. Parties. The Company, the MHC and the Bank shall be entitled
to act and rely on any request, notice, consent, waiver or agreement purportedly
given on behalf of the Agent, when the same shall have been given by the
undersigned. The Agent shall be entitled to act and rely on any request, notice,
consent, waiver or agreement purportedly given on behalf of the Company, the MHC
or the Bank, when the same shall have been given by the undersigned or any other
officer of the Company, the MHC or the Bank. This Agreement shall inure solely
to the benefit of, and shall be binding upon, the Agent, the Company, the MHC,
the Bank, and their respective successors, legal representatives and assigns,
and no other person shall have or be construed to have any legal or equitable
right, remedy or claim under or in respect of or by virtue of this Agreement or
any provision herein contained. It is understood and agreed that this Agreement
is the exclusive agreement among the parties
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<PAGE>
hereto, and supersedes any prior agreement among the parties and may not be
varied except in writing signed by all the parties.
Section 14. Closing. The closing for the sale of the Shares shall take
place on the Closing Date at such location as mutually agreed upon by the Agent
and the Company, the MHC and the Bank. At the closing, the Company, the MHC and
the Bank shall deliver to the Agent in next day funds the commissions, fees and
expenses due and owing to the Agent as set forth in Sections 2 and 6 hereof and
the opinions and certificates required hereby and other documents deemed
reasonably necessary by the Agent shall be executed and delivered to effect the
sale of the Shares as contemplated hereby and pursuant to the terms of the
Prospectus.
Section 15. Partial Invalidity. In the event that any term, provision or
covenant herein or the application thereof to any circumstance or situation
shall be invalid or unenforceable, in whole or in part, the remainder hereof and
the application of said term, provision or covenant to any other circumstances
or situation shall not be affected thereby, and each term, provision or covenant
herein shall be valid and enforceable to the full extent permitted by law.
Section 16. Construction. This Agreement shall be construed in accordance
with the laws of the State of Delaware.
Section 17. Counterparts. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall be an original, but
all of which together shall constitute but one and the same instrument.
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<PAGE>
If the foregoing correctly sets forth the arrangement among the Company,
the MHC, the Bank, and the Agent, please indicate acceptance thereof in the
space provided below for that purpose, whereupon this letter and the Agent's
acceptance shall constitute a binding agreement.
Very truly yours,
POCAHONTAS BANCORP, INC. POCAHONTAS FEDERAL SAVINGS
AND LOAN ASSOCIATION
By: By:
---------------------------------- ----------------------------------
Skip Martin Skip Martin
President and Chief Executive President and Chief Executive
Officer Officer
POCAHONTAS FEDERAL MUTUAL
HOLDING COMPANY
By:
----------------------------------
Skip Martin
President and Chief Executive
Officer
Accepted as of the date first above written
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By:
----------------------------------
David Neiswander
Vice President
39
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EXHIBIT B
POCAHONTAS BANCORP, INC.
Up to 2,875,000 Shares (Anticipated Maximum)
(Par Value $.01 Per Share)
Selected Dealers' Agreement
______________, 1998
Gentlemen:
We have agreed to assist Pocahontas Federal Savings and Loan Association
(the "Bank"), a federally chartered stock savings bank, and the Bank's federal
mutual holding company, Pocahontas Federal Mutual Holding Company (the "MHC"),
in connection with the offer and sale of up to 2,875,000 shares of the
conversion common stock, par value $.01 per share (the "Common Stock") of
Pocahontas Bancorp, Inc. (the "Company"), a Delaware corporation, to be issued
in connection with the conversion of the MHC. The total number of shares of
Common Stock to be offered may be decreased to a minimum of 25 shares. The price
per share has been fixed at $10.00. The Common Stock, the number of shares to be
issued, and certain of the terms on which they are being offered, are more fully
described in the enclosed Prospectus dated _________, 1998 (the "Prospectus").
In connection with the Conversion, the Company, on a best-efforts basis is
offering for sale between 2,125,000 and 2,875,000 shares (the "Shares") of the
Common Stock, in a Subscription Offering, as defined, as contemplated by Office
of Thrift Supervision (the "OTS") Regulation. Any Shares not sold in the
Subscription Offering will be offered to the general public in a community
offering (the "Community Offering") giving preference to residents of the Bank's
Local Community, as defined in the Prospectus.
The Subscription and Community Offerings are being conducted under a Plan
of Conversion (the "Plan") adopted by the Bank and the MHC pursuant to which the
MHC intends to convert from a federal mutual holding company to an interim
federal stock savings bank and simultaneously merge with and into the Company
(the "Conversion"). As part of the Conversion, the Company will sell the Common
Stock to the public as provided for in the Plan. The Subscription and Community
Offerings are further being conducted in accordance with the regulations of the
OTS subject to the restrictions contained in the Plan.
The Common Stock is also being offered in accordance with the Plan by
broker/dealers licensed by the National Association of Securities Dealers, Inc.
("NASD"), which have been approved by the Bank ("Approved Brokers").
B-1
<PAGE>
We are offering the selected dealers (of which you are one) the
opportunity to participate in the solicitation of offers to buy the Common Stock
and we will pay you a fee in the amount of four percent (4%) of the dollar
amount of the Common Stock sold on behalf of the Company by you, as evidenced by
the authorized designation of your firm on the order form or forms for payment
therefor to the special account established by the Bank for the purpose of
holding such funds. It is understood, of course, that payment of your fee will
be made only out of compensation received by us for the Common Stock sold on
behalf of the Company by you, as evidenced in accordance with the preceding
sentence. As soon as practicable after the closing date of the offering, we will
remit to you, only out of our compensation as provided above, the fees to which
you are entitled hereunder.
Each order form for the purchase of Common Stock must set forth the
identity and address of each person to whom the certificates for such Common
Stock should be issued and delivered. Such order form also must clearly identify
your firm in order for you to receive compensation. You shall instruct any
subscriber who elects to send his order form to you to make any accompanying
check payable to "Pocahontas Bancorp, Inc."
This offer is made subject to the terms and conditions herein set forth
and is made only to selected dealers who are members in good standing of the
NASD who are to comply with all applicable rules of the NASD, including, without
limitation, the NASD's Interpretation With Respect to Free-Riding and
Withholding and Section 24 of Article III of the NASD's Rules of Fair Practice.
Orders for Common Stock will be subject to confirmation and we, acting on
behalf of the Company, the MHC and the Bank, reserve the right in our unfettered
discretion to reject any order in whole or in part, to accept or reject orders
in the order of their receipt or otherwise, and to allot. Neither you nor any
other person is authorized by the Company, the MHC and the Bank, or by us to
give any information or make any representations other than those contained in
the Prospectus in connection with the sale of any of the Common Stock. No
selected dealer is authorized to act as agent for us when soliciting offers to
buy the Common Stock from the public or otherwise. No selected dealer shall
engage in any stabilizing (as defined in Rule 10b-7 promulgated under the
Securities Exchange Act of 1934) with respect to the Company's Common Stock
during the offering.
We and each selected dealer assisting in selling Common Stock pursuant
hereto agree to comply with the applicable requirements of the Securities
Exchange Act of 1934 and applicable state rules and regulations. Each
customer-carrying selected dealer that is not a $250,000 net capital reporting
broker/dealer agrees that it will not use a sweep arrangement and that it will
transmit all customer checks by noon of the next business day after receipt
thereof. In addition, we and each selected dealer confirm that the Securities
and Exchange Commission interprets Rule 15c2-8 promulgated under the Securities
Exchange Act of 1934 as
B-2
<PAGE>
requiring that a Prospectus be supplied to each person who is expected to
receive a confirmation of sale 48 hours prior to delivery of such person's order
form.
We and each selected dealer further agree that to the extent that your
customers desire to pay for shares with funds held by or to be deposited with
us, in accordance with the interpretations of the Securities and Exchange
Commission of Rule 15c2-4 promulgated under the Securities and Exchange Act of
1934, either (a) upon receipt of an executed order form or direction to execute
an order form on behalf of a customer to forward the offering price of the
Common Stock ordered on or before twelve noon Delaware time of the next business
day following receipt or execution of an order form by us to the Company for
deposit in a segregated account or (b) to solicit indications of interest in
which event (i) we will subsequently contact any customer indicating interest to
confirm the interest and give instructions to execute and return an order form
or to receive authorization to execute the order form on the customer's behalf,
(ii) we will mail acknowledgments of receipt of orders to each customer
confirming interest on the business day following such confirmation, (iii) we
will debit accounts of such customers on the third business day (the "Debit
Date") following receipt of the confirmation referred to in (i), and (iv) we
will forward complete order forms together with such funds to the Company on or
before twelve noon on the next business day and each selected dealer
acknowledges that if the procedure in (b) is adopted, our customers' funds are
not required to be in their accounts until the Debit Date.
Unless earlier terminated by us, this Agreement shall terminate upon the
closing date of the Conversion. We may terminate this Agreement or any
provisions hereof any time by written or telegraphic notice to you. Of course,
our obligations hereunder are subject to the successful completion of the
Conversion.
You agree that at any time or times prior to the termination of this
Agreement you will, upon our request, report to us the number of shares of
Common Stock sold on behalf of the Company by you under this Agreement.
We shall have full authority to take such actions as we may deem advisable
in respect of all matters pertaining to the offering. We shall be under no
liability to you except for lack of good faith and for obligations expressly
assumed by us in this Agreement.
Upon application to us, we will inform you as to the states in which we
believe the Common Stock has been qualified for sale under, or are exempt from
the requirements of, the respective blue sky laws of such states, but we assume
no responsibility or obligation as to your rights to sell Common Stock in any
state.
Additional copies of the Prospectus and any supplements thereto will be
supplied in reasonable quantities upon request.
B-3
<PAGE>
Any notice from us to you shall be deemed to have been duly given if
mailed, telephoned, or telegraphed to you at the address to which this Agreement
is mailed.
This Agreement shall be construed in accordance with the laws of the State
of Delaware.
Please confirm your agreement hereto by signing and returning the
confirmations accompanying this letter at once to us at Friedman, Billings,
Ramsey & Co., Inc., Potomac Tower, 1001 Nineteenth Street North, Arlington,
Virginia 22209. The enclosed duplicate copy will evidence the agreement between
us.
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
By:
----------------------------------
David Neiswander
Vice President
CONFIRMED AS OF:
, 1997
(Name of Dealer)
By:
----------------------------------
Its:
---------------------------------
B-4
<PAGE>
EXHIBIT 2
<PAGE>
PLAN OF CONVERSION AND REORGANIZATION
OF
POCAHONTAS FEDERAL MUTUAL HOLDING COMPANY
<PAGE>
TABLE OF CONTENTS
1. INTRODUCTION.............................................................. 1
2. DEFINITIONS............................................................... 1
3. PROCEDURES FOR CONVERSION................................................. 5
4. HOLDING COMPANY APPLICATIONS AND APPROVALS................................ 7
5. SALE OF SUBSCRIPTION SHARES............................................... 7
6. NUMBER OF SHARES AND PURCHASE PRICE OF SUBSCRIPTION SHARES................ 8
7. RETENTION OF CONVERSION PROCEEDS BY THE HOLDING COMPANY................... 8
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY).......... 9
9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)................... 9
10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD
PRIORITY)................................................................. 9
11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)....................10
12. MINORITY STOCKHOLDERS (FIFTH PRIORITY)....................................10
13. COMMUNITY OFFERING (SIXTH PRIORITY).......................................10
14. SYNDICATED COMMUNITY OFFERING.............................................11
15. LIMITATION ON PURCHASES...................................................12
16. PAYMENT FOR SUBSCRIPTION SHARES...........................................13
17. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS..............14
18. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT...........15
19. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES.........................15
20. ESTABLISHMENT OF LIQUIDATION ACCOUNT......................................15
21. VOTING RIGHTS OF STOCKHOLDERS.............................................16
22. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION..........................16
23. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE
CONVERSION................................................................17
24. TRANSFER OF DEPOSIT ACCOUNTS..............................................17
(i)
<PAGE>
25. REGISTRATION AND MARKETING................................................17
26. TAX RULINGS OR OPINIONS...................................................17
27. STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS.............................18
28. RESTRICTIONS ON ACQUISITION OF BANK AND HOLDING COMPANY...................18
29. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK..............................19
30. CHARTER AND BYLAWS........................................................19
31. CONSUMMATION OF CONVERSION AND EFFECTIVE DATE.............................20
32. EXPENSES OF CONVERSION....................................................20
33. AMENDMENT OR TERMINATION OF PLAN..........................................20
34. CONDITIONS TO CONVERSION..................................................20
35. INTERPRETATION............................................................20
EXHIBIT A MHC AGREEMENT OF MERGER
EXHIBIT B BANK AGREEMENT OF MERGER
EXHIBIT C AMENDED CHARTER OF AMERICAN NATIONAL SAVINGS BANK, F.S.B.
EXHIBIT D CERTIFICATE OF INCORPORATION OF THE HOLDING COMPANY
EXHIBIT E BYLAWS OF HOLDING COMPANY
(ii)
<PAGE>
PLAN OF CONVERSION AND REORGANIZATION OF
POCAHONTAS FEDERAL MUTUAL HOLDING COMPANY
1. INTRODUCTION
This Plan of Conversion and Reorganization (this "Plan") provides for the
conversion of Pocahontas Federal Mutual Holding Company (the "Mutual Holding
Company") into Pocahontas Bancorp, Inc., a capital stock corporation organized
under Delaware law (the "Holding Company"). The Mutual Holding Company
currently owns a majority of the common stock of Pocahontas Federal Savings
and Loan Association (the "Bank"), a federal stock savings bank which is
headquartered in Pocahontas, Arkansas. The purpose of the Conversion is to
convert the Mutual Holding Company to the capital stock form of organization,
which will provide the Holding Company and the Bank with greater flexibility
and capital resources to respond to changing regulatory and market conditions
and to effect corporate transactions, including mergers and acquisitions. The
Holding Company will offer its Common Stock upon the terms and conditions set
forth herein to Eligible Account Holders, the Employee Plans established by
the Bank or the Holding Company, Supplemental Eligible Account Holders, Other
Members, and Minority Stockholders in the respective priorities set forth in
this Plan. Any Subscription Shares not subscribed for by the foregoing
classes of persons will be offered for sale to certain members of the public
directly by the Holding Company through a Community Offering or a Syndicated
Community Offering or through an underwritten firm commitment public offering,
or through a combination thereof. As part of the Conversion, each Minority
Stockholder will receive Common Stock of the Holding Company in exchange for
Minority Shares. The Conversion will result in the voting interests of the
Mutual Holding Company's members being transferred to persons who purchase
Subscription Shares in the Offering and persons who exchange common stock of
the Bank for Common Stock of the Holding Company. The Conversion will have no
impact on depositors, borrowers or customers of the Bank. After the
Conversion, the Bank will continue to be regulated by the OTS as its
chartering authority. The Bank also will continue to be a member of the
Federal Home Loan Bank System and all its insured savings deposits will
continue to be insured by the FDIC to the full extent provided by applicable
law.
This Plan has been adopted by the Board of Directors of the Mutual
Holding Company, and must also be approved by (i) a majority of the total
number of votes entitled to be cast by Voting Members of the Mutual Holding
Company at a Special Meeting of Members to be called for that purpose, and
(ii) at least two-thirds of the outstanding common stock of the Bank at the
Special Meeting of Stockholders, including at least a majority of the votes
cast, in person or by proxy, by the Minority Stockholders. Prior to the
submission of this Plan to the Voting Members and stockholders of the Bank for
consideration, this Plan must be approved by the OTS.
2. DEFINITIONS
For the purposes of this Plan, the following terms have the following
meanings:
Account Holder - Any Person holding a Deposit Account in the Bank.
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 or company which acts in concert with another person or company ("other
party") shall also be deemed to be acting in concert with any person or
company 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 plan will be aggregated.
Affiliate - Any person that controls, is controlled by, or is under
common control with another person.
<PAGE>
Associate - The term Associate when used to indicate a relationship with
any person, means (i) any corporation or organization (other than the Bank or
a majority-owned subsidiary of the Bank) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities, (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity, except that for the purposes of
Sections 8 through 15, the term "Associate" does not include any
Non-Tax-Qualified Employee Stock Benefit Plan or any Tax-Qualified Employee
Stock Benefit Plan in which a person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity, and except that, for
purposes of aggregating total shares that may be held by Officers and
Directors the term "Associate" does not include any Tax-Qualified Employee
Stock Benefit Plan, and (iii) any relative or spouse of such person, or any
relative of such spouse, who has the same home as such person or who is a
Director or Officer of the Bank or the Holding Company, or any of its parents
or subsidiaries.
Bank - Pocahontas Federal Savings and Loan Association, Pocahontas,
Arkansas.
Bank Merger - The merger of the Interim Savings Bank with the Bank as set
forth in this Plan.
Code - The Internal Revenue Code of 1986, as amended.
Common Stock - The common stock, par value $.01 per share, of the Holding
Company.
Community - The term Community means all counties in which the Bank has
its home office or a branch office.
Community Offering - The offering for sale to certain members of the
general public directly by the Holding Company of any shares not subscribed
for in the Subscription Offering.
Control (including the terms "controlled by", "controlling" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
Conversion - The conversion and reorganization of the Mutual Holding
Company to stock form pursuant to this Plan, and all steps incident or
necessary thereto, including the MHC Merger, the Share Exchange and the
Offering.
Conversion Stock - The Subscription Shares and the Exchange Shares issued
in the Conversion.
Deposit Account - The term Deposit Account means any withdrawable account
as defined in Section 561.42 of the Rules and Regulations of the OTS,
including certificates of deposit.
Director - A member of the Board of Directors of the Bank, the Holding
Company or the Mutual Holding Company, as appropriate in the context.
Eligible Account Holder - Any Person holding a Qualifying Deposit on the
Eligibility Record Date for purposes of determining subscription rights and
establishing subaccount balances in the Liquidation Account.
Eligibility Record Date - The date for determining Eligible Account
Holders of the Bank which is September 30, 1996.
Employees - All Persons who are employed by the Bank or the Mutual
Holding Company.
Employee Plans - Any Tax-Qualified Employee Stock Benefit Plan of the
Bank, including the ESOP.
2
<PAGE>
ESOP - An Employee Stock Ownership Plan and related trust established by
the Bank or the Holding Company.
Estimated Price Range - The range of the estimated consolidated pro forma
market value of the Holding Company, which shall also be equal to the pro
forma market value of the total number of shares of Conversion Stock to be
issued in the Conversion, as determined by the Independent Appraiser prior to
the Subscription Offering and as it may be amended from time to time
thereafter. The maximum and minimum of the Estimated Price Range will vary
within 15% above and 15% below, respectively, the midpoint of the Estimated
Price Range.
Exchange Ratio - The rate at which shares of Holding Company Common Stock
are exchanged for Minority Shares upon consummation of the Conversion. The
Exchange Ratio shall be determined as of the closing of the Conversion and
shall be the rate that will result in the Minority Stockholders owning in the
aggregate the same percentage of the outstanding shares of Common Stock of the
Holding Company immediately upon completion of the Conversion as the
percentage of Bank common stock owned by them in the aggregate immediately
prior to the consummation of the Conversion, before giving effect to (i) the
payment of cash in lieu of issuing fractional shares of Holding Company Common
Stock, and (ii) any shares of Common Stock purchased by the Minority
Stockholders in the Conversion.
Exchange Shares - Shares of Common Stock, par value $.01 per share, of
the Holding Company issued to Minority Stockholders in exchange for Minority
Shares.
FDIC - The Federal Deposit Insurance Corporation.
Holding Company - The Delaware (or other state) corporation formed for
the purpose of acquiring all of the shares of capital stock of the Bank in
connection with the Conversion. Shares of Common Stock of the Holding Company
will be issued in the Conversion to Participants and others in the Conversion.
Independent Appraiser - The appraiser retained by the Mutual Holding
Company and the Bank to prepare an appraisal of the pro forma market value of
the Conversion Stock.
Interim Savings Bank - One or more interim savings bank subsidiaries of
the Bank or the Holding Company established by the Bank or the Holding Company
to effect the Conversion.
Liquidation Account - The account established for the Members as set
forth in Section 20.
Member - Any Person or entity who qualifies as a member of the Mutual
Holding Company pursuant to its charter and bylaws.
MHC Merger - The merger of the Mutual Holding Company with the Bank as
set forth in this Plan.
Minority Shares - Any outstanding common stock of the Bank, or shares of
common stock of the Bank issuable upon the exercise of options or grant of
stock awards, held by persons other than the Mutual Holding Company.
Minority Stockholder - Any owner of Minority Shares immediately prior to
the closing of the Conversion.
Minority Stock Offering - The offering of the Bank's common stock to
persons other than the Mutual Holding Company in connection with the formation
of the Mutual Holding Company.
Mutual Holding Company - Pocahontas Federal Mutual Holding Company, the
mutual holding company of the Bank.
3
<PAGE>
OTS - The Office of Thrift Supervision of the Department of the Treasury
or any successor thereto.
Offering - The offering for sale, pursuant to this Plan, of Common Stock
in a Subscription Offering, Community Offering, and Syndicated Community
Offering (or underwritten public offering), as the case may be. The term
"Offering" does not include the Common Stock of the Holding Company issued in
exchange for Minority Shares pursuant to this Plan.
Officer - An executive officer of the Bank, the Holding Company or the
Mutual Holding Company as appropriate in the context, which includes the Chief
Executive Officer, President, Senior Vice Presidents, Vice President in charge
of principal business functions, Secretary and Controller and any Person
performing functions similar to those performed by the foregoing persons.
Order Form - Any form (together with any attached cover letter and/or
certifications or acknowledgments), sent by the Bank to any Participant or
Person containing among other things a description of the alternatives
available to such Person under this Plan and by which any such Person may make
elections regarding subscriptions for Conversion Stock in the Subscription
Offering.
Other Member - Any Member on the Voting Record Date who is not an
Eligible Account Holder or Supplemental Eligible Account Holder.
Participant - Any Eligible Account Holder, Employee Plan, Supplemental
Eligible Account Holder, Other Member or Minority Stockholder.
Person - An individual, a corporation, a partnership, an association, a
joint-stock company, a trust (including Individual Retirement Accounts and
KEOGH Accounts), any unincorporated organization, a government or political
subdivision thereof or any other entity.
Plan - This Plan of Conversion and Reorganization of the Mutual Holding
Company, including the MHC Merger and the Bank Merger, as it exists on the
date hereof and as it may hereafter be amended in accordance with its terms.
Prospectus - The one or more documents used in offering the Subscription
Shares in the Offering and the Exchange Shares.
Qualifying Deposit - The aggregate balance of all Deposit Accounts in the
Bank of (i) an Eligible Account Holder at the close of business on the
Eligibility Record Date, provided such aggregate balance is not less than $50,
and (ii) a Supplemental Eligible Account Holder at the close of business on
the Supplemental Eligibility Record Date, provided such aggregate balance is
not less than $50.
Recognition Plans - The Bank's Recognition and Retention Plans and Trusts
adopted by the Board of Directors of the Bank and/or the Holding Company.
Resident - Any person who occupies a dwelling within the Community, has a
present intent to remain within the Community for a period of time, and
manifests the genuineness of that intent by establishing an ongoing physical
presence within the Community together with an indication that such presence
within the Community is something other than merely transitory in nature. To
the extent the person is a corporation or other business entity, the principal
place of business or headquarters shall be in the Community. To the extent a
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. The Bank may utilize deposit or loan records or such other
evidence provided to it to make a determination as to whether a person is a
resident. In all cases, however, such a determination shall be in the sole
discretion of the Bank. A Participant must be a "Resident" for purposes of
determining whether such person "resides" in the Community as such term is
used in this Plan.
4
<PAGE>
SEC - The Securities and Exchange Commission.
Share Exchange - The Exchange of Minority Shares for Holding Company
Common Stock in the Conversion.
Special Meeting of Members - The special meeting of members of the Mutual
Holding Company and any adjournments thereof held to consider and vote upon
this Plan.
Special Meeting of Stockholders - The special meeting of stockholders of
the Bank and any adjournments thereof held to consider and vote upon this
Plan.
Subscription Offering - The offering of Subscription Shares to
Participants.
Subscription Price - The price per share of Subscription Shares to be
paid by Participants in the Subscription Offering and Persons in the Community
Offering.
Subscription Shares - The $.01 par value common stock offered and issued
by the Holding Company in the Offering. Subscription Shares do not include
shares of Common Stock issued in exchange for Minority Shares in the Share
Exchange.
Supplemental Eligible Account Holder - Any Person, other than Directors
and Officers of the Bank and their Associates, holding a Qualifying Deposit on
the Supplemental Eligibility Record Date, who is not an Eligible Account
Holder.
Supplemental Eligibility Record Date - The date for determining
Supplemental Eligible Account Holders, which shall be the last day of the
calendar quarter preceding OTS approval of the application for conversion.
Syndicated Community Offering - The offering of Subscription Shares
following the Subscription and Community Offerings through a syndicate of
broker-dealers.
Tax-Qualified Employee Stock Benefit Plan - Any defined benefit plan or
defined contribution plan, 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. The Bank may make scheduled discretionary contributions to a
tax-qualified employee stock benefit plan, provided such contributions do not
cause the Bank to fail to meet its regulatory capital requirement. A
"Non-Tax-Qualified Employee Stock Benefit Plan" is any defined benefit plan or
defined contribution plan which is not so qualified.
Voting Member - Any Person who at the close of business on the Voting
Record Date is entitled to vote as a member of the Mutual Holding Company
pursuant to its charter and bylaws.
Voting Record Date - January 20, 1998, or such other date fixed by the
Directors in accordance with OTS regulations for determining eligibility to
vote at the Special Meeting of Members and/or the Special Meeting of
Stockholders.
3. PROCEDURES FOR CONVERSION
A. After approval of this Plan by the Board of Directors of the Bank,
this Plan shall be submitted together with all other requisite material to the
OTS for its approval. Notice of the adoption of this Plan by the Board of
Directors of the Holding Company and the submission of this Plan to the OTS
for its approval will be published in a newspaper having general circulation
in each community in which an office of the Bank is located and copies of this
Plan will be made available at each office of the Bank for inspection by the
Members. Upon receipt of notice
5
<PAGE>
from the OTS to do so, the Mutual Holding Company also will cause to be
published a notice of the filing with the OTS of an application to convert in
accordance with the provisions of this Plan.
B. Promptly following approval by the OTS, this Plan will be submitted
to a vote of (i) the Voting Members, at the Special Meeting of Members, and
(ii) the stockholders of the Bank at the Special Meeting of Stockholders. The
Mutual Holding Company will mail to all Members as of the Voting Record Date,
at their last known address appearing on the records of the Bank, a proxy
statement in either long or summary form describing this Plan which will be
submitted to a vote of the Members at the Special Meeting of Members. The
Holding Company will also mail to all Participants either a Prospectus and
Order Form for the purchase of Subscription Shares or a letter informing them
of their right to receive a Prospectus and Order Form and a postage prepaid
card to request such materials, subject to the provisions of Sections 17 and
18. In addition, all Participants will receive, or be given the opportunity
to request by either returning a postage prepaid card which will be
distributed with the proxy statement or by letter addressed to the Bank's
Secretary, a copy of this Plan as well as the certificate of incorporation or
bylaws of the Holding Company. Upon approval of this Plan by (i) a majority
of the total number of votes entitled to be cast by the Voting Members,
(ii) at least two-thirds of the outstanding common stock of the Bank, and
(iii) a majority vote of Minority Stockholders present in person or by proxy,
the Mutual Holding Company, the Holding Company and the Bank will take all
other necessary steps pursuant to applicable laws and regulations to
consummate the Conversion and Offering. The Conversion must be completed
within 24 months of the approval of this Plan by the Voting Members, unless a
longer time period is permitted by governing laws and regulations.
C. The Conversion will be effected as follows, or in any other manner
approved by the OTS which is consistent with the purposes of this Plan and
applicable laws and regulations. The choice of which method to use to effect
the Conversion will be made by the Board of Directors of the Mutual Holding
Company immediately prior to the closing of the Conversion. Each of the steps
set forth below shall be deemed to occur in such order as is necessary to
consummate the Conversion pursuant to this Plan, the intent of the Board of
Directors of the Mutual Holding Company and the Bank, and OTS regulations.
Approval of this Plan by the Members and stockholders of the Bank shall also
constitute approval of each of the conditions to the implementation of this
Plan, including the Bank Merger and the MHC Merger, as discussed herein.
1. The Bank will organize the Holding Company (which will become the
stock holding company of the Bank) as a first tier subsidiary of the
Bank.
2. The Holding Company will organize Interim Savings Bank as a
wholly-owned subsidiary of the Holding Company.
3. The Mutual Holding Company will convert into an interim federal
stock savings association and will simultaneously merge with and
into the Bank (the "MHC Merger") pursuant to the Agreement of Merger
attached hereto as Exhibit A between the Mutual Holding Company and
the Bank, whereby the shares of Bank common stock held by the Mutual
Holding Company will be canceled and each Eligible Account Holder
and Supplemental Eligible Account Holder will receive an interest in
the Liquidation Account of the Bank in exchange for such Member's
interest in the Mutual Holding Company.
4. Interim Savings Bank will merge with and into the Bank (the "Bank
Merger") with the Bank as the resulting entity pursuant to the
Agreement of Merger attached hereto as Exhibit B between the Bank,
the Holding Company and the Interim Savings Bank whereby each
Minority Stockholder shall receive Common Stock of the Holding
Company in exchange for Minority Shares, based on the Exchange
Ratio, with cash paid in lieu of fractional shares based upon the
Actual Purchase Price.
5. All of the shares of common stock of Interim Savings Bank held by
the Holding Company shall be converted into shares of common stock
of the Bank.
6
<PAGE>
6. Contemporaneously with the Bank Merger, the Holding Company will
offer for sale in the Offering Subscription Shares representing the
pro forma market value of the Holding Company immediately prior to
the Conversion.
D. As part of the Conversion, each of the Minority Shares shall
automatically, without further action of the holder thereof, be converted into
and become the right to receive Common Stock of the Holding Company based upon
the Exchange Ratio established by the Board of Directors of the Holding
Company and the Bank, subject to OTS approval. The basis for exchange of
Minority Shares for Common Stock of the Holding Company shall be fair and
reasonable. Options to purchase shares of Bank common stock which are
outstanding immediately prior to the consummation of the Conversion shall be
converted into options to purchase shares of Holding Company Common Stock,
with the number of shares subject to the option and the exercise price per
share to be adjusted based upon the Exchange Ratio so that the aggregate
exercise price remains unchanged, and with the duration of the option
remaining unchanged.
E. Concurrently with the filing of the Conversion Application with the
OTS, the Holding Company shall also seek to register the Conversion Stock with
the SEC and any appropriate state securities authorities. In addition, if
required by applicable law and regulations, the Board of Directors of the Bank
shall prepare preliminary proxy materials as well as other applications and
information for review by the OTS in connection with the solicitation of
stockholder approval of this Plan.
F. The Charter of the Bank shall be amended upon consummation of the
Conversion to reflect the establishment of the Liquidation Account. The
Charter, as amended, shall read in the form of Exhibit C. The Bylaws of the
Bank shall be unaffected by the Conversion.
G. The home office and branch offices of the Bank shall be unaffected
by the Conversion. The executive offices of the Holding Company shall be
located at the current offices of the Mutual Holding Company.
4. HOLDING COMPANY APPLICATIONS AND APPROVALS
The Board of Directors of the Holding Company and the Bank will take all
necessary steps to convert the Mutual Holding Company to stock form, form the
Holding Company and complete the Offering. The Holding Company shall make
timely applications for any requisite regulatory approvals, including an
Application on Form AC and a Holding Company Application on Form H-(e)1 or
H-(e)1-S, to be filed with the OTS and a Registration Statement on Form S-1 to
be filed with the SEC.
5. SALE OF SUBSCRIPTION SHARES
The Subscription Shares will be offered simultaneously in the
Subscription Offering to the Participants in the respective priorities set
forth in Sections 8 through 13. The Subscription Offering may be commenced as
early as the mailing of the Proxy Statement for the Special Meeting of Members
and must be commenced in time to complete the Conversion within the time
period specified in Section 3. The Common Stock will not be insured by the
FDIC. The Bank will not knowingly lend funds or otherwise extend credit to
any Person to purchase shares of the Common Stock.
Any shares of Common Stock not subscribed for in the Subscription
Offering will be offered for sale in the Community Offering as provided in
Section 13. The Subscription Offering may be commenced prior to the Special
Meeting of Members and, in that event, the Community Offering may also be
commenced prior to the Special Meeting of Members. The offer and sale of
Common Stock prior to the Special Meeting of Members shall, however, be
conditioned upon approval of this Plan by the Voting Members and stockholders
of the Bank.
If feasible, any shares of Common Stock remaining after the Subscription
and Community Offerings, will be sold in a Syndicated Community Offering as
provided in Section 14 in a manner that will achieve the widest distribution
of the Common Stock. The sale of all Common Stock subscribed for in the
Subscription and Community
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Offerings will be consummated simultaneously on the date the sale of Common
Stock in the Syndicated Community Offering is consummated and only if all
unsubscribed for Common Stock is sold.
6. NUMBER OF SHARES AND PURCHASE PRICE OF SUBSCRIPTION SHARES
The total number of shares (or a range thereof) of Common Stock to be
issued and offered for sale in the Offering will be determined jointly by the
Boards of Directors of the Bank and of the Holding Company immediately prior
to the commencement of the Subscription and Community Offerings, subject to
adjustment thereafter if necessitated by market or financial conditions, with
the approval of the OTS, if necessary. In particular, the total number of
shares may be increased by up to 15% of the number of shares offered in the
Subscription and Community Offerings if the Estimated Price Range is increased
subsequent to the commencement of the Subscription and Community Offerings to
reflect changes in market and financial conditions and the aggregate purchase
price is not more than 15% above the maximum of the Estimated Price Range.
All shares sold in the Offering will be sold at a uniform price per share
referred to in this Plan as the Subscription Price. The aggregate purchase
price for all shares of Common Stock will not be inconsistent with the
estimated consolidated pro forma market value of the Holding Company. The
estimated consolidated pro forma market value of the Holding Company will be
determined for such purpose by the Independent Appraiser. Prior to the
commencement of the Subscription and Community Offerings, an Estimated Price
Range will be established, which range will vary within 15% above to 15% below
the midpoint of such range. The number of shares of Common Stock to be issued
and the purchase price per share may be increased or decreased by the Holding
Company. In the event that the aggregate purchase price of the Common Stock
is below the minimum of the Estimated Price Range, or materially above the
maximum of the Estimated Price Range, resolicitation of purchasers may be
required, provided that up to a 15% increase above the maximum of the
Estimated Price Range will not be deemed material so as to require a
resolicitation. Any such resolicitation shall be effected in such manner and
within such time as the Bank shall establish, with the approval of the OTS if
required. Up to a 15% increase in the number of shares to be issued which is
supported by an appropriate change in the estimated pro forma market value of
the Holding Company will not be deemed to be material so as to require a
resolicitation of subscriptions. Based upon the independent valuation as
updated prior to the commencement of the Subscription and Community Offerings,
the Board of Directors of the Holding Company will fix the Subscription Price.
If there is a Syndicated Community Offering of shares of Common Stock not
subscribed for in the Subscription and Community Offerings, the price per
share at which the Common Stock is sold in such Syndicated Community Offering
shall be equal to the Subscription Price.
Notwithstanding the foregoing, no sale of Common Stock may be consummated
unless, prior to such consummation, the Independent Appraiser confirms to 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 Common Stock at the Subscription
Price is incompatible with its estimate of the aggregate consolidated pro
forma market value of the Holding Company. An increase in the aggregate value
of the Common Stock by up to 15% would not be deemed to be material. If such
confirmation is not received, the Holding Company may cancel the Subscription
and Community Offerings and/or the Syndicated Community Offering, extend the
Conversion, establish a new Subscription Price and/or Estimated Price Range,
extend, reopen or hold new Subscription and Community Offerings and/or
Syndicated Community Offering or take such other action as the OTS may permit.
The Common Stock to be issued in the Conversion shall be fully paid and
nonassessable.
7. RETENTION OF CONVERSION PROCEEDS BY THE HOLDING COMPANY
Upon the consummation of the sale of all of the Common Stock and the
issuance of Exchange Shares to Minority Stockholders, the Holding Company will
own all of the capital stock of the Bank.
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The Holding Company will apply to the OTS to retain up to 50% of the
proceeds of the Offering. The Holding Company believes that the Offering
proceeds will provide economic strength to the Holding Company and the Bank in
the future in a highly competitive and regulated environment and would
facilitate the possible expansion through acquisitions of financial service
organizations, possible diversification into other related businesses and for
other business and investment purposes, including the possible payment of
dividends and possible future repurchases of the Common Stock as permitted by
the OTS.
8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS (FIRST PRIORITY)
A. Each Eligible Account Holder shall receive, without payment,
nontransferable subscription rights to subscribe in the Subscription Offering
for the greater of 15,000 Subscription Shares, .10% of the total offering of
shares, or fifteen times the product (rounded down to the next whole number)
obtained by multiplying the aggregate number of Exchange Shares and
Subscription Shares issued in the Conversion by a fraction of which the
numerator is the amount of the Eligible Account Holder's Qualifying Deposit
and the denominator is the total amount of Qualifying Deposits of all Eligible
Account Holders, in each case on the Eligibility Record Date, subject to the
provisions of Section 15, including the maximum purchase limitations specified
in Section 15A and the minimum purchase limitation specified in Section 15C.
B. In the event that Eligible Account Holders exercise Subscription
Rights for a number of Subscription Shares in excess of the total number of
such shares eligible for subscription, the Subscription Shares shall be
allocated among the subscribing Eligible Account Holders so as to permit each
subscribing Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his or her total allocation of
Subscription Shares equal to the lesser of 100 shares or the number of shares
subscribed for by the Eligible Account Holder. Any shares remaining after
that allocation will be allocated among the subscribing Eligible Account
Holders whose subscriptions remain unsatisfied in the proportion that the
amount of the Qualifying Deposit of each Eligible Account Holder whose
subscription remains unsatisfied bears to the total amount of the Qualifying
Deposits of all Eligible Account Holders whose subscriptions remain
unsatisfied. If the amount so allocated exceeds the amount subscribed for by
any one or more Eligible Account Holders, the excess shall be reallocated (one
or more times as necessary) among those Eligible Account Holders whose
subscriptions are still not fully satisfied on the same principle until all
available shares have been allocated.
C. Subscription rights as Eligible Account Holders received by
Directors and Officers and their Associates which are based on increased
deposits in the Bank made by such persons during the twelve (12) months
preceding the Eligibility Record Date shall be subordinated to the
Subscription Rights of all other Eligible Account Holders.
9. SUBSCRIPTION RIGHTS OF EMPLOYEE PLANS (SECOND PRIORITY)
Subject to the availability of sufficient shares after filling in full
all subscription orders of Eligible Account Holders, the Employee Plans of the
Holding Company and the Bank shall receive, without payment, subscription
rights to purchase in the aggregate up to 8% of the Common Stock offered in
the Subscription Offering, including any shares of Common Stock to be issued
in the Subscription Offering as a result of an increase in the Estimated Price
Range after commencement of the Subscription Offering and prior to completion
of the Conversion. Consistent with applicable laws and regulations and
practices and policies of the OTS, the Employee Plans may use funds
contributed by the Holding Company or the Bank and/or borrowed from an
independent financial institution to exercise such subscription rights, and
the Holding Company and the Bank may make scheduled discretionary
contributions thereto, provided that such contributions do not cause the
Holding Company or the Bank to fail to meet any applicable regulatory capital
requirements. The Employee Plans shall not be deemed to be Associates or
Affiliates of or Persons Acting in Concert with any Director or Officer of the
Holding Company or the Bank.
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10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS (THIRD
PRIORITY)
A. Each Supplemental Eligible Account Holder shall receive, without
payment, nontransferable subscription rights to subscribe in the Subscription
Offering for the greater of 15,000 Subscription Shares, .10% of the total
offering of shares, or fifteen times the product (rounded down to the next
whole number) obtained by multiplying the aggregate number of Exchange Shares
and Subscription Shares issued in the Conversion by a fraction of which the
numerator is the amount of the Supplemental Eligible Account Holder's
Qualifying Deposit and the denominator is the total amount of Qualifying
Deposits of all Supplemental Eligible Account Holders, in each case on the
Supplemental Eligibility Record Date, subject to the availability of
sufficient shares after filling in full all subscription orders of the
Eligible Account Holders and Employee Plans under Sections 8 and 9 and to the
maximum purchase limitation specified in Section 15A and the minimum purchase
limitation specified in Section 15C.
B. In the event that Supplemental Eligible Account Holders exercise
Subscription Rights for a number of Subscription Shares in excess of the total
number of such shares eligible for subscription, the Subscription Shares shall
be allocated among the subscribing Supplemental Eligible Account Holders so as
to permit each such subscribing Supplemental Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his or her
total allocation of Subscription Shares equal to the lesser of 100 shares or
the number of shares subscribed for by each such Supplemental Eligible Account
Holder. Any shares remaining after that allocation will be allocated among
the subscribing Supplemental Eligible Account Holders whose subscriptions
remain unsatisfied in the proportion that the amount of the Qualifying Deposit
of each such Supplemental Eligible Account Holder bears to the total amount of
the Qualifying Deposits of all Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied. If the amount so allocated exceeds the
amount subscribed for by any one or more Supplemental Eligible Account
Holders, the excess shall be reallocated (one or more times as necessary)
among those Supplemental Eligible Account Holders whose subscriptions are
still not fully satisfied on the same principle until all available shares
have been allocated or all subscriptions satisfied.
11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)
A. Each Other Member shall receive, without payment, nontransferable
subscription rights to subscribe in the Subscription Offering for the greater
of 15,000 Subscription Shares, or .10% of the total offering of shares,
subject to the maximum purchase limitation specified in Section 15A and the
minimum purchase limitation specified in Section 15C.
B. In the event that such Other Members subscribe for a number of
Subscription Shares which, when added to the Subscription Shares subscribed
for by the Eligible Account Holders, Employee Plans and Supplemental Eligible
Account Holders, is in excess of the total number of Subscription Shares being
issued, the subscriptions of such Other Members will be allocated to those
Other Members residing in the Community in proportion to the amounts of their
relative subscriptions and thereafter to those Other Members not residing in
the Community.
12. MINORITY STOCKHOLDERS (FIFTH PRIORITY)
A. Each Minority Stockholder as of the Voting Record Date shall
receive, without payment, nontransferable subscription rights to subscribe in
the Subscription Offering for the greater of 15,000 Subscription Shares, or
.10% of the total offering of shares, subject to the maximum purchase
limitation specified in Section 15A and the minimum purchase limitation
specified in Section 15C.
B. In the event that such Minority Stockholders subscribe for a number
of Subscription Shares which, when added to the Subscription Shares subscribed
for by Eligible Account Holders, Employee Plans, Supplemental Eligible Account
Holders and Other Members, is in excess of the total number of Subscription
Shares being issued, the subscriptions of such Minority Stockholders will be
allocated among subscribing Minority Stockholders in proportion to the amounts
of their relative subscriptions.
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13. COMMUNITY OFFERING (SIXTH PRIORITY)
If less than the total number of shares of Common Stock to be subscribed
for in the Offering are sold in the Subscription Offering, it is expected that
shares remaining unsubscribed for will be made available for purchase in the
Community Offering to certain members of the general public, which may
subscribe together with any Associate or group of persons Acting in Concert
for up to 30,000 Subscription Shares, subject to the maximum purchase
limitation specified in Section 15A and the minimum purchase limitation
specified in Section 15C. The shares may be made available in the Community
Offering through a direct community marketing program which may provide for
utilization of a broker, dealer, consultant or investment banking firm
experienced and expert in the sale of savings institutions securities. Such
entities may be compensated on a fixed fee basis or on a commission basis, or
a combination thereof. Shares offered in the Community Offering will be
available for purchase by the general public with preference given to natural
persons residing in the Community (such natural persons referred to as the
"Preferred Subscribers"). Any excess of shares will be available for purchase
by the general public. The Bank shall make distribution of the Subscription
Shares to be sold in the Community Offering in such a manner as to promote a
wide distribution of Subscription Shares. The Bank reserves the right to
reject any or all orders in whole or in part, which are received in the
Community Offering. The number of Subscription Shares that any person may
purchase in the Community Offering shall not exceed the maximum purchase
limitation specified in Section 15A nor be less than the minimum purchase
limitation specified in Section 15C.
Subject to the foregoing, if the amount of stock remaining is
insufficient to fill the orders of Preferred Subscribers, such stock will be
allocated among the Preferred Subscribers in the manner that permits each such
person, to the extent possible, to purchase the number of shares necessary to
make his total allocation of Common Stock equal to the lesser of 100 shares
offered or the number of shares subscribed for by each such Preferred
Subscriber; provided that if there are insufficient shares available for such
allocation, then shares will be allocated among Preferred Subscribers whose
orders remain unsatisfied in the proportion that the unfilled subscription of
each bears to the total unfilled subscriptions of all Preferred Subscribers
whose subscription remain unsatisfied. If all orders of Preferred Subscribers
are filled, any shares remaining will be allocated to other persons who
purchase in the Community Offering applying the same allocation described
above for Preferred Subscribers. The Bank may establish all other terms and
conditions of such offer. It is expected that the Community Offering will
commence concurrently with the Subscription Offering. The Community Offering
must be completed within 45 days after the completion of the Subscription
Offering unless otherwise extended by the OTS.
14. SYNDICATED COMMUNITY OFFERING
If feasible, the Board of Directors may determine to offer all
Subscription Shares not subscribed for in the Subscription and Community
Offerings in a Syndicated Community Offering, subject to such terms,
conditions and procedures as may be determined by the Holding Company, in a
manner that will achieve the widest distribution of the Common Stock subject
to the right of the Bank to accept or reject in whole or in part any
subscriptions in the Syndicated Community Offering. In the Syndicated
Community Offering, any person together with any Associate or group of Persons
acting in concert may purchase a number of Subscription Shares that when
combined with Exchange Shares received by such person, together with any
Associate or group of Persons acting in concert is equal to 30,000 shares,
subject to the maximum purchase limitation specified in Section 15A and the
minimum purchase limitation specified in Section 15C; provided, however, that
the shares purchased by any Person together with an Associate or group of
Persons acting in concert pursuant to Section 13 shall be counted toward
meeting the maximum purchase limitation found in this Section 14. Provided
that the Subscription Offering has commenced, the Bank may commence the
Syndicated Community Offering at any time after the mailing to the Members of
the Proxy Statement to be used in connection with the Special Meeting of
Members, provided that the completion of the offer and sale of the
Subscription Shares shall be conditioned upon the approval of this Plan by the
Voting Members. If the Syndicated Community Offering is not sooner commenced
pursuant to the provisions of the preceding sentence, the Syndicated Community
Offering will be commenced as soon as practicable following the date upon
which the Subscription and Community Offerings terminate.
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Alternatively, if a Syndicated Community Offering is not held, the Bank
shall have the right to sell any Subscription Shares remaining following the
Subscription and Community Offerings in an underwritten firm commitment public
offering. The provisions of Section 15 shall not be applicable to sales to
underwriters for purposes of such an offering but shall be applicable to the
sales by the underwriters to the public. The price to be paid by the
underwriters in such an offering shall be equal to the Subscription Price less
an underwriting discount to be negotiated among such underwriters and the
Bank, which will in no event exceed an amount deemed to be acceptable by the
OTS.
If for any reason a Syndicated Community Offering or an underwritten firm
commitment public offering of shares of Subscription Shares not sold in the
Subscription and Community Offerings cannot be effected, or in the event that
any insignificant residue of shares of Subscription Shares is not sold in the
Subscription and Community Offerings or in the Syndicated Community or
underwritten firm commitment public offering, other arrangements will be made
for the disposition of unsubscribed shares by the Bank, if possible. Such
other purchase arrangements will be subject to the approval of the OTS.
15. LIMITATION ON PURCHASES
The following limitations shall apply to all purchases of shares of
Subscription Shares:
A. The maximum number of Subscription Shares which may be subscribed
for or purchased in all categories in the Offering by any Person or
Participant together with any Associate or group of Persons Acting in Concert
together with Exchange Shares received in the Share Exchange by any such
Person, or Participant together with any Associate or group of Persons Acting
in Concert shall not exceed 5% of the shares of Conversion Stock issued and
outstanding upon consummation of the Conversion and the Offering, except for
the Employee Plans which may subscribe for up to 8% of the Common Stock
offered in the Subscription Offering (including shares issued in the event of
an increase in the Estimated Price Range of 15%); provided, however, that, in
the event the maximum purchase limitation is increased, orders for
Subscription Shares in the Community Offering and in the Syndicated Offering
(or, alternatively, an underwritten firm commitment public offering), if any,
shall, as determined by the Bank, first be filled to a maximum of 30,000
shares and thereafter remaining shares shall be allocated, on an equal number
of shares basis per order until all orders have been filled.
B. The maximum number of shares of Common Stock which may be purchased
in all categories of the Offering by Officers and Directors of the Bank and
their Associates in the aggregate, shall not exceed [27%] of the Subscription
Shares offered in the Offering.
C. A minimum of 25 shares of Common Stock must be purchased by each
Person purchasing shares in the Offering to the extent those shares are
available; provided, however, that in the event the minimum number of shares
of Common Stock purchased times the price per share exceeds $500, then such
minimum purchase requirement shall be reduced to such number of shares which
when multiplied by the price per share shall not exceed $500, as determined by
the Board.
If the number of shares of Common Stock otherwise allocable pursuant to
Sections 8 through 14, inclusive, to any Person or that Person's Associates
would be in excess of the maximum number of shares permitted as set forth
above, the number of shares of Common Stock allocated to each such person
shall be reduced to the lowest limitation applicable to that Person, and then
the number of shares allocated to each group consisting of a Person and that
Person's Associates shall be reduced so that the aggregate allocation to that
Person and his or her Associates complies with the above limits, and such
maximum number of shares shall be reallocated among that Person and his or her
Associates as they may agree, or in the absence of an agreement, in proportion
to the shares subscribed by each (after first applying the maximums applicable
to each Person, separately).
Depending upon market or financial conditions, the Board of Directors of
the Holding Company, with the approval of the OTS and without further approval
of the Members, may decrease or further increase the purchase
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limitations in this Plan, provided that the maximum purchase limitations may
not be increased to a percentage in excess of 5% except as provided below. If
the Holding Company increases the maximum purchase limitations, the Holding
Company is only required to resolicit Persons who subscribed for the maximum
purchase amount and may, in the sole discretion of the Holding Company,
resolicit certain other large subscribers. In the event that the maximum
purchase limitation is increased to 5%, such limitation may be further
increased to 9.99%, provided that orders for Common Stock exceeding 5% of the
Subscription Shares issued in the Offering shall not exceed in the aggregate
10% of the total Subscription Shares issued in the Offering. Requests to
purchase additional Subscription Shares in the event that the purchase
limitation is so increased will be determined by the Board of Directors of the
Holding Company in its sole discretion.
In the event of an increase in the total number of shares offered in the
Offering due to an increase in the Estimated Price Range of up to 15% (the
"Adjusted Maximum"), the additional shares will be used in the following order
of priority: (i) to fill the Employee Plans' subscription to the Adjusted
Maximum; (ii) in the event that there is an oversubscription at the Eligible
Account Holder, Supplemental Eligible Account Holder, Other Member, or
Minority Stockholder levels, to fill unfulfilled subscriptions of such
subscribers according to such respective priorities exclusive of the Adjusted
Maximum; and (iii) to fill unfulfilled subscriptions in the Community Offering
exclusive of the Adjusted Maximum with preference given to Preferred
Subscribers.
For purposes of this Section 15, the Directors of the Bank and the
Holding Company shall not be deemed to be Associates or a group affiliated
with each other or otherwise Acting in Concert solely as a result of their
being Directors of the Bank or the Holding Company.
Each Person purchasing Common Stock in the Offering shall be deemed to
confirm that such purchase does not conflict with the above purchase
limitations contained in this Plan.
16. PAYMENT FOR SUBSCRIPTION SHARES
All payments for Common Stock subscribed for in the Subscription,
Community and Syndicated Community Offerings must be delivered in full to the
Holding Company, together with a properly completed and executed Order Form
and certification or acknowledgment form, or purchase order in the case of the
Syndicated Community Offering, on or prior to the expiration date of the
Offering; provided, however, that if the Employee Plans subscribe for shares
during the Subscription Offering, such plans will not be required to pay for
the shares at the time they subscribe but rather may pay for such shares of
Common Stock subscribed for by such plans at the Subscription Price per share
upon consummation of the Conversion.
Notwithstanding the foregoing, the Holding Company shall have the right,
in its sole discretion, to permit institutional investors to submit
contractually irrevocable orders in the Offering and to thereafter submit
payment by wire transfer for the Common Stock for which they are subscribing
in the Offering at any time prior to 48 hours before the completion of the
Conversion, unless such 48 hour period is waived by the Holding Company in its
sole discretion.
Payment for Common Stock subscribed for shall be made either in cash (if
delivered in person), check, money order, certified or teller's check or bank
draft. Alternatively, subscribers in the Subscription and Community Offerings
may pay for the shares subscribed for by authorizing the Bank on the Order
Form to make a withdrawal from the subscriber's Deposit Account at the Bank in
an amount equal to the Subscription Price for each of such shares. Such
authorized withdrawal, whether from a savings passbook or certificate account,
shall be without penalty as to premature withdrawal. If the authorized
withdrawal is from a certificate account, and the remaining balance does not
meet the applicable minimum balance requirement, the certificate shall be
canceled at the time of withdrawal, without penalty, and the remaining balance
will earn interest at the passbook rate. Funds for which a withdrawal is
authorized will remain in the subscriber's Deposit Account but may not be used
by the subscriber during the Subscription and Community Offerings.
Thereafter, the withdrawal will be given effect only to the extent necessary
to satisfy the subscription (to the extent it can be filled) at the
Subscription Price per share. Interest will continue to
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be earned on any amounts authorized for withdrawal until such withdrawal is
given effect. Interest will be paid by the Bank at not less than the passbook
annual rate on payments for Common Stock received in cash or by check. Such
interest will be paid from the date payment is received by the Bank until
consummation or termination of the Conversion. If for any reason the
Conversion is not consummated, all payments made by subscribers in the
Subscription, Community and Syndicated Community Offerings will be refunded to
them with interest. In case of amounts authorized for withdrawal from Deposit
Accounts, refunds will be made by canceling the authorization for withdrawal.
The Bank is prohibited by regulation from knowingly making any loans or
granting any lines of credit for the purchase of stock in the Conversion, and
therefore, will not do so.
17. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER FORMS
As soon as practicable after the Prospectus prepared by the Holding
Company and Bank has been declared effective by the SEC, Order Forms will be
distributed to the Eligible Account Holders, Employee Plans, Supplemental
Eligible Account Holders, Other Members and Minority Stockholders at their
last known addresses appearing on the records of the Bank for the purpose of
subscribing for shares of Common Stock in the Subscription Offering and will
be made available for use by those Persons entitled to purchase in the
Community Offering. Notwithstanding the foregoing, the Bank may elect to send
Order Forms only to those Persons who request them after receipt of such
notice in a form approved by the OTS and which is adequate to apprise the
Eligible Account Holders, Employee Plans, Supplemental Eligible Account
Holders, Other Members and Minority Stockholders of the pendency of the
Subscription Offering. Such notice may be included with the proxy statement
for the Special Meeting of Members and the proxy statement for the Special
Meeting of Stockholders and may also be included in the notice of the pendency
of the Conversion and the Special Meeting of Members sent to all Members in
accordance with regulations of the OTS.
Each Order Form will be preceded or accompanied by the Prospectus
describing the Holding Company, the Bank, the Common Stock and the
Subscription and Community Offerings. Each Order Form will contain, among
other things, the following:
A. A specified date by which all Order Forms must be received by the
Holding Company, which date shall be not less than twenty (20), nor more than
forty-five (45) days, following the date on which the Order Forms are mailed
by the Holding Company, and which date will constitute the termination of the
Subscription Offering;
B. The Subscription Price per share for shares of Common Stock to be
sold in the Subscription and Community Offerings;
C. A description of the minimum and maximum number of Subscription
Shares which may be subscribed for pursuant to the exercise of Subscription
Rights or otherwise purchased in the Community Offering;
D. Instructions as to how the recipient of the Order Form is to
indicate thereon the number of Subscription Shares for which such person
elects to subscribe and the available alternative methods of payment therefor;
E. An acknowledgment that the recipient of the Order Form has received
a final copy of the Prospectus prior to execution of the Order Form;
F. A statement to the effect that all subscription rights are
nontransferable, will be void at the end of the Subscription Offering, and can
only be exercised by delivering to the Holding Company within the subscription
period such properly completed and executed Order Form, together with payment
in the full amount of the aggregate purchase price as specified in the Order
Form for the shares of Common Stock for which the recipient elects to
subscribe in the Subscription Offering (or by authorizing on the Order Form
that the Bank withdraw said amount from the subscriber's Deposit Account at
the Bank); and
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G. A statement to the effect that the executed Order Form, once
received by the Holding Company, may not be modified or amended by the
subscriber without the consent of the Holding Company.
Notwithstanding the above, the Holding Company reserves the right in its
sole discretion to accept or reject orders received on photocopied or
facsimilied order forms.
18. UNDELIVERED, DEFECTIVE OR LATE ORDER FORM; INSUFFICIENT PAYMENT
In the event Order Forms (a) are not delivered and are returned to the
Holding Company or the Bank by the United States Postal Service or the Holding
Company is unable to locate the addressee, (b) are not received back by the
Holding Company or are received by the Holding Company after the expiration
date specified thereon, (c) are defectively filled out or executed, (d) are
not accompanied by the full required payment, or, in the case of institutional
investors in the Community Offering, by delivering irrevocable orders together
with a legally binding commitment to pay in cash, check, money order or wire
transfer the full amount of the Subscription Price prior to 48 hours before
the completion of the Conversion, unless waived by the Holding Company, for
each of the shares of Common Stock subscribed for (including cases in which
deposit accounts from which withdrawals are authorized are insufficient to
cover the amount of the required payment), or (e) are not mailed pursuant to
a "no mail" order placed in effect by the account holder, the subscription
rights of the Person to whom such rights have been granted will lapse as
though such Person failed to return the completed Order Form within the time
period specified thereon; provided, however, that the Holding Company may, but
will not be required to, waive any immaterial 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 the Holding Company may specify.
The interpretation of the Holding Company of terms and conditions of this Plan
and of the Order Forms will be final, subject to the authority of the OTS.
19. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES
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 shares of Common Stock pursuant to this Plan reside.
However, no such Person will be issued subscription rights or be permitted to
purchase shares of Common Stock in the Subscription Offering if such Person
resides in a foreign country or in a State of the United States with respect
to which all of the following apply: A. a small number of Persons otherwise
eligible to subscribe for shares under this Plan reside in such State; B. the
issuance of subscription rights or the offer or sale of shares of Common Stock
to such Persons would require the Holding Company under the securities laws of
such state, to register as a broker, dealer, salesman or agent or to register
or otherwise qualify its securities for sale in such state; or C. such
registration or qualification would be impracticable for reasons of cost or
otherwise.
20. ESTABLISHMENT OF LIQUIDATION ACCOUNT
The Bank shall establish at the time of the Conversion a liquidation
account in an amount equal to the amount of dividends paid on Bank common
stock which have been waived by the Mutual Holding Company plus the greater
of: (a) approximately 52.1 % (the Mutual Holding Company stock ownership
interest in the Bank) of the Bank's total stockholders' equity as reflected in
the latest statement of financial condition contained in the final Prospectus
utilized in the Conversion; or (b) the retained earnings of the Bank at the
time the Bank underwent its initial mutual holding company reorganization.
The liquidation account will be maintained by the Bank for the benefit of the
Eligible Account Holders and Supplemental Eligible Account Holders who
continue to maintain their Deposit Accounts at the Bank. Each Eligible
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Account Holder and Supplemental Eligible Account Holder shall, with respect to
his Deposit Account, hold a related inchoate interest in a portion of the
liquidation account balance, in relation to his Deposit Account balance at the
Eligibility Record Date or Supplemental Eligibility Record Date, respectively,
or to such balance as it may be subsequently reduced, as hereinafter provided.
In the unlikely event of a complete liquidation of the Bank (and only in
such event), following all liquidation payments to creditors (including those
to Account Holders to the extent of their Deposit Accounts) each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidating distribution from the liquidation account, in the amount
of the then adjusted subaccount balance for his Deposit Account then held,
before any liquidation distribution may be made to any holders of the Bank's
capital stock. No merger, consolidation, purchase of bulk assets with
assumption of Deposit Accounts and other liabilities, or similar transactions
with an FDIC-insured institution, in which the Bank is not the surviving
institution, shall be deemed to be a complete liquidation for this purpose.
In such transactions, the liquidation account shall be assumed by the
surviving institution.
The initial subaccount balance for a Deposit Account held by an Eligible
Account Holder and Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the liquidation account by a fraction, the
numerator of which is the amount of the Qualifying Deposits of such account
holder and the denominator of which is the total amount of all Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders. Such initial subaccount balance shall not be increased, but shall be
subject to downward adjustment as described below.
If, at the close of business on any September 30 annual closing date,
commencing on or after the effective date of the Conversion, the deposit
balance in the Deposit Account of an Eligible Account Holder or Supplemental
Eligible Account Holder is less than the lesser of (i) the balance in the
Deposit Account at the close of business on any other annual closing date
subsequent to the Eligibility Record Date or Supplemental Eligibility Record
Date, or (ii) the amount of the Qualifying Deposit in such Deposit Account as
of the Eligibility Record Date or Supplemental Eligibility Record Date, the
subaccount balance for such Deposit Account shall be adjusted by reducing such
subaccount balance in an amount proportionate to the reduction in such deposit
balance. In the event of such downward adjustment, the subaccount balance
shall not be subsequently increased, notwithstanding any subsequent increase
in the deposit balance of the related Deposit Account. If any such Deposit
Account is closed, the related subaccount shall be reduced to zero.
The creation and maintenance of the liquidation account shall not operate
to restrict the use or application of any of the net worth accounts of the
Bank, except that the Bank shall not declare or pay a cash dividend on, or
repurchase any of, its capital stock if the effect thereof would cause its net
worth to be reduced below (i) the amount required for the liquidation account;
or (ii) the net worth requirements contained in Part 567 of the Rules and
Regulations of the OTS.
21. VOTING RIGHTS OF STOCKHOLDERS
Following consummation of the Conversion, voting rights with respect to
the Bank shall be held and exercised exclusively by the holders of its capital
stock. The holders of the voting capital stock of the Holding Company shall
have the exclusive voting rights with respect to the Holding Company.
22. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION
A. All Subscription Shares purchased by Directors or Officers of the
Holding Company or the Bank in the Offering shall be subject to the
restriction that, except as provided in Section 22B, or as may be approved by
the OTS, no interest in such shares may be sold or otherwise disposed of for
value for a period of one (1) year following the date of purchase.
B. The restriction on disposition of Subscription Shares set forth in
Section 22A shall not apply to the following:
(i) Any exchange of such shares in connection with a merger or
acquisition involving the Bank or the Holding Company, as the case may
be, which has been approved by the OTS; and
(ii) Any disposition of such shares following the death of the
person to whom such shares were initially sold under the terms of this
Plan.
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C. With respect to all Subscription Shares subject to restrictions on
resale or subsequent disposition, each of the following provisions shall
apply:
(i) Each certificate representing shares restricted within the
meaning of Section 22A, shall bear a legend prominently stamped on its
face giving notice of the restriction;
(ii) Instructions shall be issued to the stock transfer agent for
the Holding Company not to recognize or effect any transfer of any
certificate or record of ownership of any such shares in violation of the
restriction on transfer; and
(iii) Any shares of capital stock of the Holding Company issued
with respect to a stock dividend, stock split, or otherwise with respect
to ownership of outstanding Subscription Shares subject to the
restriction on transfer hereunder shall be subject to the same
restriction as is applicable to such shares.
23. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING THE
CONVERSION
For a period of three years following the Conversion, no Officer,
Director or their Associates shall purchase, without the prior written
approval of the OTS, any outstanding shares of Common Stock of the Holding
Company except from a broker-dealer registered with the SEC. This provision
shall not apply to negotiated transactions involving more than 1% of the
outstanding shares of Common Stock of the Holding Company, the exercise of any
options pursuant to a stock option plan or purchases of common stock of the
Holding Company made by or held by any Tax-Qualified Employee Stock Benefit
Plan or Non-Tax-Qualified Employee Stock Benefit Plan of the Bank or the
Holding Company (including the Employee Plans or the Recognition Plans) which
may be attributable to any Officer or Trustee. As used herein, the term
"negotiated transaction" means a transaction in which the securities are
offered and the terms and arrangements relating to any sale are arrived at
through direct communications between the seller or any person acting on its
behalf and the purchaser or his investment representative. The term
"investment representative" shall mean a professional investment advisor
acting as agent for the purchaser and independent of the seller and not acting
on behalf of the seller in connection with the transaction.
24. TRANSFER OF DEPOSIT ACCOUNTS
Each person holding a Deposit Account at the Bank at the time of the
Conversion shall retain an identical Deposit Account at the Bank following the
Conversion in the same amount and subject to the same terms and conditions
(except as to voting and liquidation rights).
25. REGISTRATION AND MARKETING
Within the time period required by applicable laws and regulations, the
Holding Company will register the securities issued in connection with the
Conversion pursuant to the Securities Exchange Act of 1934 and will not
deregister such securities for a period of at least three years thereafter,
except that the maintenance of registration for three years requirement may be
fulfilled by any successor to the Bank or any holding company of the Bank. In
addition, the Bank or Holding Company will use its best efforts to encourage
and assist a market-maker to establish and maintain a market for the
Conversion Stock and to list those securities on a national or regional
securities exchange or the Nasdaq Stock Market.
26. TAX RULINGS OR OPINIONS
Consummation of the Conversion is expressly conditioned upon prior
receipt by the Mutual Holding Company and the Bank of either a ruling or an
opinion of counsel with respect to federal tax laws, and either a ruling or an
opinion of counsel with respect to Arkansas tax laws, to the effect that
consummation of the transactions contemplated by the Conversion and this Plan
will not result in a taxable reorganization under the provisions of the
applicable codes
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<PAGE>
or otherwise result in any adverse tax consequences to the Mutual Holding
Company, the Holding Company or the Bank, or the account holders receiving
subscription rights before or after the Conversion, except in each case to the
extent, if any, that subscription rights are deemed to have value on the date
such rights are issued.
27. STOCK BENEFIT PLANS AND EMPLOYMENT AGREEMENTS
A. The Holding Company and the Bank are authorized to adopt
Tax-Qualified Employee Stock Benefit Plans in connection with the Conversion,
including without limitation, an ESOP. Existing as well as any newly created
Tax-Qualified Employee Stock Benefit Plans may purchase Subscription Shares in
the Conversion, to the extent permitted by the terms of such benefit plans and
this Plan.
B. As a result of the Conversion, the Holding Company shall be deemed
to have ratified and approved the Bank's 1994 Incentive Stock Option Plan, and
1994 Stock Option Plan for Outside Directors (the "Option Plans") and the 1994
Recognition and Retention Plan for Employees, and 1994 Recognition and
Retention Plan for Outside Directors (the "Retention Plans"), and shall have
agreed to issue (and reserve for issuance) Holding Company Common Stock in
lieu of Bank common stock pursuant to the terms of such benefit plans. Upon
consummation of the Conversion, the Bank common stock held by such benefit
plans shall be converted into Holding Company Common Stock based upon the
Exchange Ratio. Also upon consummation of the Conversion, (i) all rights to
purchase, sell or receive Bank common stock and all rights to elect to make
payment in Bank common stock under any agreement between the Bank and any
Director, Officer or Employee thereof or under any plan or program of the Bank
(including, without limitation, the Bank's Employee Stock Ownership Plan and
the Recognition Plans), shall automatically, by operation of law, be converted
into and shall become an identical right to purchase, sell or receive Holding
Company Common Stock and an identical right to make payment in Holding Company
Common Stock under any such agreement between the Bank and any Director,
Officer or Employee thereof or under such plan or program of the Bank, and
(ii) rights outstanding under the Option Plan shall be assumed by the Holding
Company and thereafter shall be rights only for shares of Holding Company
Common Stock, with each such right being for a number of shares of Holding
Company common stock based upon the Exchange Ratio and the number of shares of
Bank common stock that were available thereunder immediately prior to
consummation of the Conversion, with the price adjusted to reflect the
Exchange Ratio but with no change in any other term or condition of such
right.
C. The Holding Company and the Bank are authorized to enter into
employment agreements with their executive officers.
D. The Holding Company and the Bank are authorized to adopt stock
option plans, restricted stock grant plans and other Non-Tax-Qualified
Employee Stock Benefit Plans, provided that no such plans will be established,
no stock options shall be granted, and no shares of Conversion Stock shall be
purchased pursuant to any of such plans prior to the earlier of (i) the
one-year anniversary of the consummation of the Conversion or (ii) the receipt
of stockholder approval of such plans at the first annual meeting of
stockholders following the Conversion. All such plans implemented within one
year following the consummation of the Conversion shall be submitted to the
Midwest Regional Director of the OTS for approval in accordance with OTS
regulations.
28. RESTRICTIONS ON ACQUISITION OF BANK AND HOLDING COMPANY
A. In accordance with OTS regulations, for a period of three years from
the date of consummation of the Conversion, no Person, other than the Holding
Company, shall directly or indirectly offer to acquire or acquire the
beneficial ownership of more than 10% of any class of an equity security of
the Bank without the prior written consent of the OTS.
B. (i) The charter of the Bank contains a provision stipulating that
no person, except the Holding Company, for a period of five years following
the date of the Bank's mutual holding company reorganization, shall directly
or indirectly offer to acquire or acquire the beneficial ownership of more
than 10% of any class of an equity security of the Bank, without the prior
written approval of the OTS. In addition, such charter may also provide that
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for a period of five years following the Bank's mutual holding company
reorganization, shares beneficially owned in violation of the above-described
charter provision shall not be entitled to vote and shall not be voted by any
person or counted as voting stock in connection with any matter submitted to
stockholders for a vote. In addition, special meetings of the stockholders
relating to changes in control or amendment of the charter may only be called
by the Board of Directors, and shareholders shall not be permitted to cumulate
their votes for the election of directors.
(ii) The Certificate of Incorporation of the Holding Company will
contain a provision stipulating that in no event shall any record owner of any
outstanding shares of the Holding Company's Common Stock who beneficially owns
in excess of 10% of such outstanding shares be entitled or permitted to any
vote in respect to any shares held in excess of 10%. In addition, the
Certificate of Incorporation and Bylaws of the Holding Company contain
provisions which provide for staggered terms of the directors, noncumulative
voting for directors, limitations on the calling of special meetings, a fair
price provision for certain business combinations and certain notice
requirements.
C. For the purposes of Section 28.B(i):
(i) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock
company, a trust, an unincorporated organization or similar company, a
syndicate or any other group formed for the purpose of acquiring, holding
or disposing of securities of an insured institution;
(ii) The term "offer" includes every offer to buy or acquire,
solicitation of an offer to sell, tender offer for, or request or
invitation for tenders of, a security or interest in a security for
value;
(iii) The term "acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or otherwise;
and
(iv) The term "security" includes non-transferable subscription
rights issued pursuant to a plan of conversion as well as a "security" as
defined in 15 U.S.C. Section 8c(a)(10).
29. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK
A. The Holding Company may repurchase any shares of its capital stock
during the first three years following consummation of the Conversion, except
as prohibited by OTS regulations or authorization.
B. The Bank shall not declare or pay a cash dividend on, or repurchase
any of, its capital stock if the effect thereof would cause its regulatory
capital to be reduced below (i) the amount required for the Liquidation
Account or (ii) the federal regulatory capital requirement in Section 567.2 of
the Rules and Regulations of the OTS. Otherwise, the Bank may declare
dividends or make capital distributions in accordance with applicable law and
regulations, including 12 C.F.R. Section 563.134 or its successor.
30. CHARTER AND BYLAWS
By voting to adopt this Plan, Members of the Mutual Holding Company will
be voting to adopt the Certificate of Incorporation and Bylaws for a Delaware
corporation attached as Exhibits D and E to this Plan.
31. CONSUMMATION OF CONVERSION AND EFFECTIVE DATE
The Effective Date of the Conversion shall be the date upon which the
Articles of Combination shall be filed with the OTS with respect to the MHC
Merger and the Bank Merger, with the Bank being the surviving institution in
each case. The Articles of Combination shall be filed with the OTS after all
requisite regulatory, member and stockholder approvals have been obtained, all
applicable waiting periods have expired, and sufficient subscriptions and
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<PAGE>
orders for Subscription Shares have been received. The sale of all
Subscription Shares in the Subscription Offering, Community Offering and/or
Syndicated Community Offering shall occur simultaneously on the closing date
of the Conversion.
32. EXPENSES OF CONVERSION
The Mutual Holding Company, the Bank and the Holding Company may retain
and pay for the services of legal, financial and other advisors to assist in
connection with any or all aspects of the Conversion, including the Offering,
and such parties shall use their best efforts to assure that such expenses
shall be reasonable.
33. AMENDMENT OR TERMINATION OF PLAN
If deemed necessary or desirable, this Plan may be substantively amended
as a result of comments from regulatory authorities or otherwise at any time
prior to solicitation of proxies from Members and Bank stockholders to vote on
this Plan by the Board of Directors of the Mutual Holding Company, and at any
time thereafter by the Board of Directors of the Mutual Holding Company with
the concurrence of the OTS. Any amendment to this Plan made after approval by
the Members and Bank stockholders with the approval of the OTS shall not
necessitate further approval by the Members unless otherwise required by the
OTS. This Plan may be terminated by the Board of Directors of the Mutual
Holding Company at any time prior to the Special Meeting of Members and the
Special Meeting of Stockholders to vote on this Plan, and at any time
thereafter with the concurrence of the OTS.
By adoption of this Plan, the Members of the Mutual Holding Company
authorize the Board of Directors of the Mutual Holding Company to amend or
terminate this Plan under the circumstances set forth in this Section.
34. CONDITIONS TO CONVERSION
Consummation of the Conversion pursuant to this Plan is expressly
conditioned upon the following:
A. Prior receipt by the Mutual Holding Company and the Bank of rulings
of the United States Internal Revenue Service and the state taxing
authorities, or opinions of counsel or tax advisers as described in Section
26;
B. The sale of all of the Subscription Shares offered in the
Conversion; and
C. The completion of the Conversion within the time period specified in
Section 3.
35. INTERPRETATION
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the Bank
shall be final, subject to the authority of the OTS.
Dated: October 14, 1997
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EXHIBIT A
MUTUAL HOLDING COMPANY AGREEMENT OF MERGER
<PAGE>
EXHIBIT B
BANK AGREEMENT OF MERGER
<PAGE>
EXHIBIT C
AMENDED CHARTER OF POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
<PAGE>
EXHIBIT D
CERTIFICATE OF INCORPORATION OF HOLDING COMPANY
<PAGE>
EXHIBIT E
BYLAWS OF HOLDING COMPANY
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
POCAHONTAS BANCORP, INC.
FIRST: The name of the Corporation is Pocahontas Bancorp, Inc.
(hereinafter referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in
the City of Wilmington, County of New Castle. The name of the registered
agent at that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
FOURTH:
A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is seven million five hundred
thousand (7,500,000) consisting of:
1. five hundred thousand (500,000) shares of Preferred Stock,
par value one cent ($.01) per share (the "Preferred Stock"); and
2. seven million (7,000,000) shares of Common Stock, par value
one cent ($.01) per share (the "Common Stock").
B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable
law of the State of Delaware (such certificate being hereinafter referred
to as a "Preferred Stock Designation"), to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, powers, preferences, and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof. The
number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the Common Stock,
without a vote of the holders of the Preferred Stock, or of any series
thereof, unless a vote of any such holders is required pursuant to the
terms of any Preferred Stock Designation.
C. 1. Notwithstanding any other provision of this Certificate of
Incorporation, in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or indirectly, by a
person who, as of any record date for the determination of stockholders
entitled to vote on any matter, beneficially owns in excess of 10% of the
then-outstanding shares of Common Stock (the "Limit"), be entitled, or
permitted to any vote in respect of the shares held in excess of the
Limit. The number of votes which may be cast by any record owner by
virtue of the provisions hereof in respect of Common Stock beneficially
owned by such person owning shares in excess of the Limit shall be a
number equal to the total number of votes which a single record owner of
all Common Stock owned by such person would be entitled to cast,
multiplied by a fraction, the numerator of which is the number of shares
of such class or series which are both beneficially owned by such person
and owned of record by such
<PAGE>
record owner and the denominator of which is the total number of shares of
Common Stock beneficially owned by such person owning shares in excess of
the Limit.
2. The following definitions shall apply to this Section C of
this Article FOURTH:
(a) "Affiliate" shall have the meaning ascribed to it in
Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on
the date of filing of this Certificate of
Incorporation.
(b) "Beneficial ownership" shall be determined pursuant to
Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934 (or any successor
rule or statutory provision), or, if said Rule 13d-3
shall be rescinded and there shall be no successor
rule or statutory provision thereto, pursuant to said
Rule 13d-3 as in effect on the date of filing of this
Certificate of Incorporation; provided, however, that
a person shall, in any event, also be deemed the
"beneficial owner" of any Common Stock:
(1) which such person or any of its affiliates
beneficially owns, directly or indirectly; or
(2) which such person or any of its affiliates has
(i) the right to acquire (whether such right is
exercisable immediately or only after the passage
of time), pursuant to any agreement, arrangement
or understanding (but shall not be deemed to be
the beneficial owner of any voting shares solely
by reason of an agreement, contract, or other
arrangement with this Corporation to effect any
transaction which is described in any one or more
of clauses of Section A of Article EIGHTH) or
upon the exercise of conversion rights, exchange
rights, warrants, or options or otherwise, or
(ii) sole or shared voting or investment power
with respect thereto pursuant to any agreement,
arrangement, understanding, relationship or
otherwise (but shall not be deemed to be the
beneficial owner of any voting shares solely by
reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a
public solicitation of proxies for such meeting,
with respect to shares of which neither such
person nor any such Affiliate is otherwise deemed
the beneficial owner); or
(3) which is beneficially owned, directly or
indirectly, by any other person with which such
first mentioned person or any of its Affiliates
acts as a partnership, limited partnership,
syndicate or other group pursuant to any
agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or
disposing of any shares of capital stock of this
Corporation;
and provided further, however, that (1) no Director or
Officer of this Corporation (or any Affiliate of any
such Director or Officer) shall, solely by reason of
any or all of such Directors or Officers acting in
their capacities as such, be deemed, for any purposes
hereof, to beneficially own any Common Stock
beneficially owned by another such Director or Officer
(or any Affiliate thereof), and (2) neither any
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<PAGE>
employee stock ownership plan or similar plan of this
Corporation or any subsidiary of this Corporation, nor
any trustee with respect thereto or any Affiliate of
such trustee (solely by reason of such capacity of
such trustee), shall be deemed, for any purposes
hereof, to beneficially own any Common Stock held
under any such plan. For purposes of computing the
percentage beneficial ownership of Common Stock of a
person the outstanding Common Stock shall include
shares deemed owned by such person through application
of this subsection but shall not include any other
Common Stock which may be issuable by this Corporation
pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise.
For all other purposes, the outstanding Common Stock
shall include only Common Stock then outstanding and
shall not include any Common Stock which may be
issuable by this Corporation pursuant to any
agreement, or upon the exercise of conversion rights,
warrants or options, or otherwise.
(c) A "person" shall mean any individual, firm,
corporation, or other entity.
3. The Board of Directors shall have the power to construe and
apply the provisions of this section and to make all determinations
necessary or desirable to implement such provisions, including but not
limited to matters with respect to (i) determining the number of shares of
Common Stock beneficially owned by any person, (ii) determining whether a
person is an affiliate of another, (iii) determining whether a person has
an agreement, arrangement, or understanding with another as to the matters
referred to in the definition of beneficial ownership, (iv) determining
the application of any other definition or operative provision of the
section to the given facts, or (v) any other matter relating to the
applicability or effect of this section.
4. The Board of Directors shall have the right to demand that
any person who is reasonably believed to beneficially own Common Stock in
excess of the Limit (or holds of record Common Stock beneficially owned by
any person in excess of the Limit) supply the Corporation with complete
information as to (i) the record owner(s) of all shares beneficially owned
by such person who is reasonably believed to own shares in excess of the
Limit, (ii) any other factual matter relating to the applicability or
effect of this section as may reasonably be requested of such person.
5. Except as otherwise provided by law or expressly provided
in this section, the presence, in person or by proxy, of the holders of
record of shares of capital stock of the Corporation entitling the holders
thereof to cast a majority of the votes (after giving effect, if required,
to the provisions of this section) entitled to be cast by the holders of
shares of capital stock of the Corporation entitled to vote shall
constitute a quorum at all meetings of the stockholders, and every
reference in this Certificate of Incorporation to a majority or other
proportion of capital stock (or the holders thereof) for purposes of
determining any quorum requirement or any requirement for stockholder
consent or approval shall be deemed to refer to such majority or other
proportion of the votes (or the holders thereof) then entitled to be cast
in respect of such capital stock giving effect to the provisions of this
Article FOURTH.
6. Any constructions, applications, or determinations made by
the Board of Directors pursuant to this section in good faith and on the
basis of such information and assistance as was then reasonably available
for such purpose shall be conclusive and binding upon the Corporation and
its stockholders.
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<PAGE>
7. In the event any provision (or portion thereof) of this
section shall be found to be invalid, prohibited or unenforceable for any
reason, the remaining provisions (or portions thereof) of this section
shall remain in full force and effect, and shall be construed as if such
invalid, prohibited or unenforceable provision had been stricken herefrom
or otherwise rendered inapplicable, it being the intent of this
Corporation and its stockholders that such remaining provision (or portion
thereof) of this section remain, to the fullest extent permitted by law,
applicable and enforceable as to all stockholders, including stockholders
owning an amount of stock over the Limit, notwithstanding any such
finding.
FIFTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its Directors and stockholders:
A. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. In
addition to the powers and authority expressly conferred upon them by
statute or by this Certificate of Incorporation or the Bylaws of the
Corporation, the Directors are hereby empowered to exercise all such
powers and do all such acts and things as may be exercised or done by
the Corporation.
B. The Directors of the Corporation need not be elected
by written ballot unless the Bylaws so provide.
C. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may
not be effected by any consent in writing by such stockholders.
D. Special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directorships
whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the
Board for adoption (the "Whole Board") or as otherwise provided in
the Bylaws.
SIXTH:
A. The number of Directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by
a majority of the Whole Board. The Directors shall be divided into three
classes, with the term of office of the first class to expire at the first
annual meeting of stockholders, the term of office of the second class to
expire at the annual meeting of stockholders one year thereafter and the
term of office of the third class to expire at the annual meeting of
stockholders two years thereafter with each director to hold office until
his or her successor shall have been duly elected and qualified. At each
annual meeting of stockholders following such initial classification and
election, Directors elected to succeed those Directors whose terms expire
shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election with each director to
hold office until his or her successor shall have been duly elected and
qualified.
B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of Directors or any vacancies in the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal
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from office or other cause may be filled only by a majority vote of the
Directors then in office, though less than a quorum, and Directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have
been chosen expires. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of any incumbent Director.
C. Advance notice of stockholder nominations for the election of
Directors and of business to be brought by stockholders before any meeting
of the stockholders of the Corporation shall be given in the manner
provided in the Bylaws of the Corporation.
D. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any Director, or the entire Board of Directors,
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 80 percent of the voting power
of all of the then-outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of Directors (after giving
effect to the provisions of Article FOURTH of this Certificate of
Incorporation ("Article FOURTH")), voting together as a single class.
SEVENTH: The Board of Directors is expressly empowered to adopt,
amend or repeal the Bylaws of the Corporation. Any adoption, amendment or
repeal of the Bylaws of the Corporation by the Board of Directors shall
require the approval of a majority of the Whole Board. The stockholders
shall also have power to adopt, amend or repeal the Bylaws of the
Corporation; provided, however, that, in addition to any vote of the
holders of any class or series of stock of the Corporation required by law
or by this Certificate of Incorporation, the affirmative vote of the
holders of at least 80 percent of the voting power of all of the
then-outstanding shares of the capital stock of the Corporation entitled
to vote generally in the election of Directors (after giving effect to the
provisions of Article FOURTH), voting together as a single class, shall be
required to adopt, amend or repeal any provisions of the Bylaws of the
Corporation.
EIGHTH:
A. In addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as otherwise expressly provided
in this section:
1. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested
Stockholder (as hereinafter defined) or (ii) any other corporation
(whether or not itself an Interested Stockholder) which is, or after
such merger or consolidation would be, an Affiliate (as hereinafter
defined) of an Interested Stockholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to
or with any Interested Stockholder, or any Affiliate of any
Interested Stockholder, of any assets of the Corporation or any
Subsidiary having an aggregate Fair Market Value (as hereinafter
defined) equaling or exceeding 25% or more of the combined assets of
the Corporation and its Subsidiaries; or
3. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate Fair Market Value (as hereinafter
defined)
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equaling or exceeding 25% of the combined Fair Market Value of the
then-outstanding common stock of the Corporation and its
Subsidiaries, except to an employee benefit plan of the Corporation
or any Subsidiary thereof; or
4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of an Interested Stockholder;
or
5. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger
or consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportional share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly
owned by an Interested Stockholder or any Affiliate of an Interested
Stockholder;
shall require the affirmative vote of the holders of at least 80% of the
voting power of the then-outstanding shares of stock of the Corporation
entitled to vote in the election of Directors (the "Voting Stock") (after
giving effect to the provisions of Article FOURTH), voting together as a
single class. Such affirmative vote shall be required notwithstanding the
fact that no vote may be required, or that a lesser percentage may be
specified, by law or by any other provisions of this Certificate of
Incorporation or any Preferred Stock Designation or in any agreement with
any national securities exchange or otherwise.
The term "Business Combination" as used in this Article EIGHTH shall
mean any transaction which is referred to in any one or more of paragraphs
1 through 5 of Section A of this Article EIGHTH.
B. The provisions of Section A of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only the affirmative vote of the majority of the
outstanding shares of capital stock entitled to vote, or such vote as is
required by law or by this Certificate of Incorporation, if, in the case
of any Business Combination that does not involve any cash or other
consideration being received by the stockholders of the Corporation solely
in their capacity as stockholders of the Corporation, the condition
specified in the following paragraph 1 is met or, in the case of any other
Business Combination, all of the conditions specified in either of the
following paragraphs 1 or 2 are met:
1. The Business Combination shall have been approved by
two-thirds of the Disinterested Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the
Business Combination of consideration other than cash
to be received per share by the holders of Common
Stock in such Business Combination shall at least be
equal to the higher of the following:
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage
commissions, transfer taxes and soliciting
dealers' fees, paid
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by the Interested Stockholder or any of its
Affiliates for any shares of Common Stock
acquired by it (i) within the two-year period
immediately prior to the first public
announcement of the proposal of the Business
Combination (the "Announcement Date"), or (ii) in
the transaction in which it became an Interested
Stockholder, whichever is higher.
(2) the Fair Market Value per share of Common Stock
on the Announcement Date or on the date on which
the Interested Stockholder became an Interested
Stockholder (such latter date is referred to in
this Article EIGHTH as the "Determination Date"),
whichever is higher.
(b) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the
Business Combination of consideration other than cash
to be received per share by holders of shares of any
class of outstanding Voting Stock other than Common
Stock shall be at least equal to the highest of the
following (it being intended that the requirements of
this subparagraph (b) shall be required to be met with
respect to every such class of outstanding Voting
Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class
of Voting Stock):
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage
commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Stockholder
for any shares of such class of Voting Stock
acquired by it (i) within the two-year period
immediately prior to the Announcement Date, or
(ii) in the transaction in which it became an
Interested Stockholder, whichever is higher;
(2) (if applicable) the highest preferential amount
per share to which the holders of shares of such
class of Voting Stock are entitled in the event
of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; and
(3) the Fair Market Value per share of such class of
Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher.
(c) The consideration to be received by holders of a
particular class of outstanding Voting Stock
(including Common Stock) shall be in cash or in the
same form as the Interested Stockholder has paid for
shares of such class of Voting Stock. If the
Interested Stockholder has previously paid for shares
of any class of Voting Stock with varying forms of
consideration, the form of consideration to be
received per share by holders of shares of such class
of Voting Stock shall be either cash or the form used
to acquire the largest number of shares of such class
of Voting Stock previously acquired by the Interested
Stockholder. The price determined in accordance with
subparagraph B.2 of this Article EIGHTH shall be
subject to appropriate adjustment in the event of any
stock dividend, stock split, combination of shares or
similar event.
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(d) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation
of such Business Combination: (1) except as approved
by a majority of the Disinterested Directors, there
shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding stock
having preference over the Common Stock as to
dividends or liquidation; (2) there shall have been
(i) no reduction in the annual rate of dividends paid
on the Common Stock (except as necessary to reflect
any subdivision of the Common Stock), except as
approved by a majority of the Disinterested Directors,
and (ii) an increase in such annual rate of dividends
as necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction which has
the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure to so
increase such annual rate is approved by a majority of
the Disinterested Directors; and (3) neither such
Interested Stockholder or any of its Affiliates shall
have become the beneficial owner of any additional
shares of Voting Stock except as part of the
transaction which results in such Interested
Stockholder becoming an Interested Stockholder.
(e) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder
shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise.
(f) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934
and the rules and regulations thereunder (or any
subsequent provisions replacing such Act, rules or
regulations) shall be mailed to stockholders of the
Corporation at least 30 days prior to the consummation
of such Business Combination (whether or not such
proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions).
C. For the purposes of this Article EIGHTH:
1. A "Person" shall include an individual, a group acting in
concert, a corporation, a partnership, an association, a joint
venture, a pool, a joint stock company, a trust, an unincorporated
organization or similar company, a syndicate or any other group
formed for the purpose of acquiring, holding or disposing of
securities.
2. "Interested Stockholder" shall mean any person (other than
the Corporation or any holding company or Subsidiary thereof) who or
which:
(a) is the beneficial owner, directly or indirectly, of
more than 10% of the voting power of the outstanding Voting
Stock; or
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(b) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of
10% or more of the voting power of the then-outstanding Voting
Stock; or
(c) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the
two-year period immediately prior to the date in question
beneficially owned by an Interested Stockholder, if such
assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
3. For purposes of this Article EIGHTH, "beneficial ownership"
shall be determined in the manner provided in Section C of Article
FOURTH hereof.
4. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in
effect on the date of filing of this Certificate of Incorporation.
5. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Interested Stockholder set forth in paragraph 2 of this
section, the term "Subsidiary" shall mean only a corporation of which
a majority of each class of equity security is owned, directly or
indirectly, by the Corporation.
6. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was
a member of the Board of Directors prior to the time that the
Interested Stockholder became an Interested Stockholder, and any
Director who is thereafter chosen to fill any vacancy of the Board of
Directors or who is elected and who, in either event, is unaffiliated
with the Interested Stockholder and in connection with his or her
initial assumption of office is recommended for appointment or
election by a majority of Disinterested Directors then on the Board
of Directors.
7. "Fair Market Value" means: (a) in the case of stock, the
highest closing sales price of the stock during the 30-day period
immediately preceding the date in question of a share of such stock
on the National Association of Securities Dealers Automated Quotation
System or any system then in use, or, if such stock is admitted to
trading on a principal United States securities exchange registered
under the Securities Exchange Act of 1934, Fair Market Value shall be
the highest sales price reported during the 30-day period preceding
the date in question, or, if no such quotations are available, the
Fair Market Value on the date in question of a share of such stock as
determined by the Board of Directors in good faith, in each case with
respect to any class of stock, appropriately adjusted for any
dividend or distribution in shares of such stock or any stock split
or reclassification of outstanding shares of such stock into a
greater number of shares of such stock or any combination or
reclassification of outstanding shares of such stock into a smaller
number of shares of such stock, and (b) in the case of property other
than cash or stock, the Fair Market Value of such property on the
date in question as determined by the Board of Directors in good
faith.
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8. Reference to "Highest Per Share Price" shall in each case
with respect to any class of stock reflect an appropriate adjustment
for any dividend or distribution in shares of such stock or any stock
split or reclassification of outstanding shares of such stock into a
greater number of shares of such stock or any combination or
reclassification of outstanding shares of such stock into a smaller
number of shares of such stock.
9. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in subparagraphs (a) and (b) of paragraph 2 of
Section B of this Article EIGHTH shall include the shares of Common
Stock and/or the shares of any other class of outstanding Voting
Stock retained by the holders of such shares.
D. A majority of the Directors of the Corporation shall have the
power and duty to determine for the purposes of this Article EIGHTH, on
the basis of information known to them after reasonable inquiry (a)
whether a person is an Interested Stockholder; (b) the number of shares of
Voting Stock beneficially owned by any person; (c) whether a person is an
Affiliate or Associate of another; and (d) whether the assets which are
the subject of any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the Corporation or
any Subsidiary in any Business Combination has an aggregate Fair Market
Value equaling or exceeding 25% of the combined Fair Market Value of the
common stock of the Corporation and its Subsidiaries. A majority of the
Directors shall have the further power to interpret all of the terms and
provisions of this Article EIGHTH.
E. Nothing contained in this Article EIGHTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed
by law.
F. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the Voting Stock required by
law, this Certificate of Incorporation or any Preferred Stock Designation,
the affirmative vote of the holders of at least 80 percent of the voting
power of all of the then-outstanding shares of the Voting Stock, voting
together as a single class, shall be required to alter, amend or repeal
this Article EIGHTH.
NINTH: The Board of Directors of the Corporation, when evaluating
any offer of another Person (as defined in Article EIGHTH hereof) to (A)
make a tender or exchange offer for any equity security of the
Corporation, (B) merge or consolidate the Corporation with another
corporation or entity or (C) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation, may, in
connection with the exercise of its judgment in determining what is in the
best interest of the Corporation and its stockholders, give due
consideration to all relevant factors, including, without limitation, the
social and economic effect of acceptance of such offer on the
Corporation's present and future customers and employees and those of its
Subsidiaries (as defined in Article EIGHTH hereof); on the communities in
which the Corporation and its Subsidiaries operate or are located; on the
ability of the Corporation to fulfill its corporate objectives as a
savings bank holding company and on the ability of its subsidiary savings
bank to fulfill the objectives of a stock savings bank under applicable
statutes and regulations.
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TENTH:
A. Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or
was a Director or an Officer of the Corporation or is or was serving at
the request of the Corporation as a Director, Officer, employee or agent
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a Director, Officer, employee or
agent or in any other capacity while serving as a Director, Officer,
employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than
such law permitted the Corporation to provide prior to such amendment),
against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as provided in
Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of this
Article TENTH shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a Director or
Officer (and not in any other capacity in which service was or is rendered
by such indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article TENTH is not
paid in full by the Corporation within sixty days after a written claim
has been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim. If successful
in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that, the indemnitee has
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not met any applicable standard for indemnification set forth in the
Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of
such suit that indemnification of the indemnitee is proper in the
circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the indemnitee has
not met such applicable standard of conduct, shall create a presumption
that the indemnitee has not met the applicable standard of conduct or, in
the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking, the burden of proving that the indemnitee is not entitled
to be indemnified, or to such advancement of expenses, under this Article
TENTH or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, Officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and Officers of
the Corporation.
ELEVENTH: A Director of this Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a Director, except for liability (i) for any
breach of the Director's 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, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the Director derived an improper personal benefit.
If the Delaware General Corporation Law is amended to authorize corporate
action further eliminating or limiting the personal liability of
Directors, then the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such
repeal or modification.
TWELFTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred
upon stockholders are granted subject to this reservation; provided,
however, that,
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notwithstanding any other provision of this Certificate of Incorporation
or any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any vote of the holders of any class or series of
the stock of the Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at least 80 percent
of the voting power of all of the then-outstanding shares of the capital
stock of the Corporation entitled to vote generally in the election of
Directors (after giving effect to the provisions of Article FOURTH),
voting together as a single class, shall be required to amend or repeal
this Article TWELFTH, Section C of Article FOURTH, Sections C or D of
Article FIFTH, Article SIXTH, Article SEVENTH, or Article EIGHTH.
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I, THE UNDERSIGNED, being the incorporator, for the purpose of
forming a corporation under the laws of the State of Delaware, do make,
file and record this Certificate of Incorporation, do certify that the
facts herein stated are true, and accordingly, have hereto set my hand
this 22nd day of December, 1997.
/s/ Robert B. Pomerenk
--------------------------------
Robert B. Pomerenk
Incorporator
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Exhibit 3.2
POCAHONTAS BANCORP, INC.
BYLAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such place,
on such date, and at such time as the Board of Directors shall each year fix,
which date shall be within thirteen (13) months subsequent to the later of the
date of incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of Directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board").
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time
by the Delaware General Corporation Law or the Certificate of Incorporation of
the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than
thirty (30) days after the date for which the meeting was originally noticed,
or if a new record date is fixed for the adjourned meeting, written notice of
the place, date, and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or
by proxy (after giving effect to the Article FOURTH of the Corporation's
Certificate of Incorporation), shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law. Where a separate vote by a class or classes is required, a
majority of the shares of such class or classes present in person or
represented by proxy shall constitute a quorum entitled to take action with
respect to that vote on that matter.
<PAGE>
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place,
date, or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board of the Corporation or, in
his or her absence, the Chief Executive Officer or, in his or her absence,
such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order
any meeting of the stockholders and act as chairman of the meeting. In the
absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
Section 6. Conduct of Business.
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including such regulation
of the manner of voting and the conduct of discussion as seem to him or her in
order. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
(b) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting: (i) by or at
the direction of the Board of Directors or: (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed
to and received at the principal executive offices of the Corporation not less
than ninety (90) days prior to the date of the annual meeting; provided,
however, that in the event that less than one hundred (100) days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not
later than the close of business on the 10th day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth
as to each matter such stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting; (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business; (iii) the class and number of
shares of the Corporation's capital stock that are beneficially owned by such
stockholder; and (iv) any material interest of such stockholder in such
business. Notwithstanding anything in these Bylaws to the contrary, no
business shall be brought before or conducted at an annual meeting except in
accordance with the provisions of this Section 6(b). The Officer of the
Corporation or other person presiding over the annual meeting shall, if the
facts so warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 6(b) and, if he or she
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should so determine, he or she shall so declare to the meeting and any such
business so determined to be not properly brought before the meeting shall not
be transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the
procedures set forth in these Bylaws shall be eligible for election as
Directors. Nominations of persons for election to the Board of Directors of
the Corporation may be made at a meeting of stockholders at which Directors
are to be elected only: (i) by or at the direction of the Board of Directors
or; (ii) by any stockholder of the Corporation entitled to vote for the
election of Directors at the meeting who complies with the notice procedures
set forth in this Section 6(c). Such nominations, other than those made by or
at the direction of the Board of Directors, shall be made by timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered or mailed to and received at the principal executive
offices of the Corporation not less than ninety (90) days prior to the date of
the meeting; provided, however, that in the event that less than one hundred
(100) days' notice or prior disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the 10th day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's notice shall set forth: (i) as to
each person whom such stockholder proposes to nominate for election or
re-election as a Director, all information relating to such person that is
required to be disclosed in solicitations of proxies for the election of
Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934 (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
Director if elected); and (ii) as to the stockholder giving notice (x) the
name and address, as they appear on the Corporation's books, of such
stockholder and (y) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such stockholder. At the request
of the Board of Directors any person nominated by the Board of Directors for
election as a Director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
Director of the Corporation unless nominated in accordance with the provisions
of this Section 6(c). The Officer of the Corporation or other person
presiding at the meeting shall, if the facts so warrant, determine that a
nomination was not made in accordance with such provisions and, if he or she
should so determine, he or she shall declare to the meeting and the defective
nomination shall be disregarded.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure
established for the meeting. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to this
paragraph 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
telecommunication or other reproduction shall be a complete reproduction of
the entire original writing or transmission.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation,
may be by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or by his or her proxy, a stock vote shall be
taken.
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Every stock vote shall be taken by ballots, each of which shall state the
name of the stockholder or proxy voting and such other information as may be
required under the procedure established for the meeting. The Corporation
shall, in advance of any meeting of stockholders, appoint one or more
inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able
to act at a meeting of stockholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by the Certificate of Incorporation or by law,
all other matters shall be determined by a majority of the votes present and
cast at a properly called meeting of stockholders.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.
Section 9. Consent of Stockholders in Lieu of Meeting.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special
meeting of stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office.
The business and affairs of the Corporation shall be under the direction
of its Board of Directors. The number of Directors who shall constitute the
Whole Board shall be such number as the Board of Directors shall from time to
time have designated by resolution. The Board of Directors shall annually
elect a Chairman of the Board from among its members who shall, when present,
preside at its meetings.
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The Directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of
stockholders, the term of office of the second class to expire at the annual
meeting of stockholders one year thereafter and the term of office of the
third class to expire at the annual meeting of stockholders two years
thereafter, with each Director to hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting of stockholders,
commencing with the first annual meeting, Directors elected to succeed those
Directors whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election, with each Director to hold office until his or her successor shall
have been duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of preferred
stock, and unless the Board of Directors otherwise determines, newly created
Directorships resulting from any increase in the authorized number of
Directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
may be filled only by a majority vote of the Directors then in office, though
less than a quorum, and Directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires and until such Director's
successor shall have been duly elected and qualified. No decrease in the
number of authorized Directors constituting the Board shall shorten the term
of any incumbent Director.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by a majority of
the Directors then in office (rounded up to the nearest whole number) or by
the Chairman of the Board or by the President and Chief Executive Officer and
shall be held at such place, on such date, and at such time as they or he or
she shall fix. Notice of the place, date, and time of each such special
meeting shall be given to each Director by whom it is not waived by mailing
written notice not less than five (5) days before the meeting or be
telegraphing or telexing or by facsimile transmission of the same not less
than twenty-four (24) hours before the meeting. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at a special
meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend
any meeting, a majority of those present may adjourn the meeting to another
place, date, or time, without further notice or waiver thereof.
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<PAGE>
Section 6. Participation in Meetings By Conference Telephone
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the Directors
present, except as otherwise provided herein or required by law. Action may
be taken by the Board of Directors without a meeting if all members thereof
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors.
Section 8. Powers.
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done
by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(4) To remove any Officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any Officer upon any
other person for the time being;
(5) To confer upon any Officer of the Corporation the power to
appoint, remove and suspend subordinate Officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for Directors, Officers, employees and
agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for Directors, Officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and affairs.
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<PAGE>
Section 9. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
Section 1. Committee of the Board of Directors.
The Board of Directors, by a vote of a majority of the Whole Board, may
from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a Director or Directors to serve as the member or members, designating,
if it desires, other Directors as alternate members who may replace any absent
or disqualified member at any meeting of the committee. Any committee so
designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be
made for notice to members of all meetings; a majority of the members shall
constitute a quorum, and all matters shall be determined by a majority vote of
the members present, subject to a quorum being present. Action may be taken
by any committee without a meeting if all members thereof consent thereto in
writing, and the writing or writings are filled with the minutes of the
proceedings of such committee.
Section 3. Nominating Committee.
The Board of Directors shall appoint a Nominating Committee of the Board,
consisting of not less than three (3) members, one of which shall be the
Chairman of the Board. The Nominating Committee shall have authority (a) to
review any nominations for election to the Board of Directors made by a
stockholder of the Corporation pursuant to Section 6(c) (ii) of Article I of
these Bylaws in order to determine compliance with such By-law provision and
(b) to recommend to the Whole Board nominees for election to the Board of
Directors to replace those Directors whose terms expire at the annual meeting
of stockholders next ensuing.
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<PAGE>
ARTICLE IV - OFFICERS
Section 1. Generally.
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a Chairman of the Board, a
President and Chief Executive Officer, one or more Vice Presidents, and a
Secretary and from time to time may choose such other Officers as it may deem
proper. The Chairman of the Board shall be chosen from among the Directors.
Any number of offices may be held by the same person.
(b) The term of office of all Officers shall be until the next
annual election of Officers and until their respective successors are chosen,
but any Officer may be removed from office at any time by the affirmative vote
of two-thirds of the authorized number of Directors then constituting the
Board of Directors, or removed by an Officer pursuant to authority delegated
by the Board to such Officer in accordance with Section 8(5) of Article II.
(c) All Officers chosen by the Board of Directors shall each have
such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this Article IV. Such Officers shall
also have such powers and duties as from time to time may be conferred by the
Board of Directors or by any committee thereof.
Section 2. Chairman of the Board.
The Chairman of the Board shall, subject to the provisions of these
Bylaws and to the direction of the Board of Directors, serve in a general
executive capacity and, when present, shall preside at all meetings of the
Board of Directors. The Chairman of the Board shall perform all duties and
have all powers which are commonly incident to the office of Chairman of the
Board or which are delegated to him or her by the Board of Directors. He or
she shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized.
Section 3. President and Chief Executive Officer.
The President and Chief Executive Officer (the "President") shall have
general responsibility for the management and control of the business and
affairs of the Corporation and shall perform all duties and have all powers
which are commonly incident to the offices of President and Chief Executive
Officer or which are delegated to him or her by the Board of Directors.
Subject to the direction of the Board of Directors, the President shall have
power to sign all stock certificates, contracts and other instruments of the
Corporation which are authorized and shall have general supervision of all of
the other Officers (other than the Chairman of the Board), employees and
agents of the Corporation.
Section 4. Vice President.
The Vice President or Vice Presidents shall perform the duties of the
President in his or her absence or during his disability to act. In addition,
the Vice Presidents shall perform the duties and exercise the powers usually
incident to their respective offices and/or such other duties and powers as
may be properly assigned to them by the Board of Directors, the Chairman of
the Board or the President. A Vice President or Vice Presidents may be
designated as Executive Vice President or Senior Vice President
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<PAGE>
or any such designation as the Board of Directors, Chairman of the Board or
President deems appropriate.
Section 5. Secretary.
The Secretary or an Assistant Secretary shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate
books, shall perform such other duties and exercise such other powers as are
usually incident to such offices and/or such other duties and powers as are
properly assigned thereto by the Board of Directors, the Chairman of the Board
or the President.
Section 6. Assistant Secretaries and Other Officers.
The Board of Directors may appoint one or more Assistant Secretaries and
such other Officers who shall have such powers and shall perform such duties
as are provided in these Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.
Section 7. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or any
Officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to any action of stockholders
of any other corporation in which the Corporation may hold securities and
otherwise to exercise any and all rights and powers which the Corporation may
possess by reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board or the President, and by
the Secretary or an Assistant Secretary, or any Treasurer or Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
Bylaws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise
any rights in respect of any change, conversion or exchange of stock or for
the
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purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the day next preceding
the day on which the meeting is held, and, for determining stockholders
entitled to receive payment of any dividend or other distribution or allotment
of rights or to exercise any rights of change, conversion or exchange of stock
or for any other purpose, the record date shall be at the close of business on
the day on which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, Director, Officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the
mails, postage paid, or by sending such notice by prepaid telegram or mailgram
or other courier. Any such notice shall be addressed to such stockholder,
Director, Officer, employee or agent at his or her last known address as the
same appears on the books of the Corporation. The time when such notice is
received, if hand delivered, or dispatched, if delivered through the mails or
by telegram or mailgram or other courier, shall be the time of the giving of
the notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, Director,
Officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, Director, Officer, employee or agent.
Neither the business nor the purpose of any meeting need be specified in such
a waiver.
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ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any Officer
or Officers of the Corporation may be used whenever and as authorized by the
Board of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If
and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Comptroller or by an
Assistant Secretary or an assistant to the Comptroller.
Section 3. Reliance upon Books, Reports and Records.
Each Director, each member of any committee designated by the Board of
Directors, and each Officer of the Corporation shall, in the performance of
his or her duties, be fully protected in relying in good faith upon the books
of account or other records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
Officers or employees, or committees of the Board of Directors so designated,
or by any other person as to matters which such Director or committee member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these Bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be
excluded, and the day of the event shall be included.
ARTICLE VIII - AMENDMENT
The Board of Directors may by a two-thirds vote amend, alter or repeal
these Bylaws at any meeting of the Board, provided notice of the proposed
change is given not less than two days prior to the meeting. The stockholders
shall also have power to amend, alter or repeal these Bylaws at any meeting of
stockholders, provided notice of the proposed change was given in the Notice
of the Meeting; provided, however, that, notwithstanding any other provisions
of these Bylaws or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock Designation or these Bylaws,
the affirmative votes of the holders of at least 80% of the voting power of
all the then-outstanding shares of the Voting Stock, voting together as a
single class, shall be required to alter, amend or repeal any provisions of
these Bylaws.
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EXHIBIT 4
<PAGE>
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
POCAHONTAS BANCORP, INC.
POCAHONTAS, ARKANSAS
$.01 par value common stock--fully paid and non-assessable
This certifies that _____________________________ is the owner of __________
shares of the common stock of POCAHONTAS BANCORP, INC. (the "Corporation"), a
Delaware corporation.
The shares evidenced by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, in person or
by his duly authorized attorney or legal representative, upon surrender of this
certificate properly endorsed. This Certificate in not valid until countersigned
and registered by the Corporation's transfer agent and registrar. This security
is not a deposit or account and is not federally insured or guaranteed.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed
by the facsimile signatures of its duly authorized officers and has caused its
seal to be affixed hereto.
DATED:____________________
- ---------------------------- --------------------------
Secretary (SEAL) President
<PAGE>
The shares evidenced by this Certificate are subject to a limitation
contained in the Certificate of Incorporation to the effect that in no event
shall any record owner of any outstanding Common Stock which is beneficially
owned, directly or indirectly, by a person who beneficially owns in excess of
10% of the outstanding shares of Common Stock (the "Limit") be entitled or
permitted to any vote in respect of shares held in excess of the Limit.
The Board of Directors of the Corporation is authorized by resolution or
resolutions, from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the voting powers, designations,
preferences, limitations and restrictions thereof. The Corporation will furnish
to any shareholder upon request and without charge a full description of each
class of stock and any series thereof.
The shares represented by this Certificate may not be cumulatively voted
on any matter. The Certificate of Incorporation requires the affirmative vote of
the holders of at least 80% of the voting stock of the Corporation, voting
together as a single class, to approve certain business combinations and other
transactions and to amend certain provisions of the Certificate of
Incorporation.
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 UNIF GIFT MIN ACT - Custodian
------- -------
(Cust) (Minor)
TEN ENT - as tenants by the entireties
Under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common ---------------------------------
(State)
Additional abbreviations may also be used though not in the above list
For value received, _____________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY
NUMBER OR OTHER IDENTIFYING NUMBER
- ----------------------------------
- ----------------------------------
- --------------------------------------------------------------------------------
(please print or typewrite name and address
including postal zip code of assignee)
- --------------------------------------------------------------------------------
Shares of
- ----------------------------------------------------------------------
the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
Attorney to transfer the said shares on the books of the within named
corporation with full power of substitution in the premises.
Dated, _____________________________
In the presence of Signature:
- ----------------------------------- -------------------------------
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
EXHIBIT 5
<PAGE>
(202) 274-2000
December __, 1997
The Board of Directors
Pocahontas Bancorp, Inc.
203 West Broadway
Pocahontas, Arkansas, 72455
Re: Pocahontas Bancorp, Inc.
Common Stock, Par Value $.01 Per Share
Gentlemen:
You have requested the opinion of this firm as to certain matters in
connection with the offer and sale (the "Offering") of Pocahontas Bancorp, Inc.
(the "Company") Common Stock, par value $.01 per share ("Common Stock"). We have
reviewed the Company's Certificate of Incorporation, Registration Statement on
Form S-1 ("Form S-1"), as well as applicable statutes and regulations governing
the Company and the offer and sale of the Common Stock.
We are of the opinion that upon the declaration of effectiveness of the
Form S-1 and the incorporation of Pocahontas Bancorp, Inc. as a Delaware
corporation, the Common Stock, when sold, will be legally issued, fully paid and
non-assessable.
This Opinion has been prepared solely for the use of the Company in
connection with the Form S-1. We hereby consent to our firm being referenced
under the caption "Legal Opinions."
Very truly yours,
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
By:
---------------------------------------
Robert B. Pomerenk, Esq.
<PAGE>
EXHIBIT 8.1
<PAGE>
FORM OF
FEDERAL TAX OPINION
____________, 1998
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
203 West Broadway
Pocahontas, Arkansas 72455-3420
Ladies and Gentlemen:
You have requested this firm's opinion regarding certain federal income
tax consequences which will result from the conversion of Pocahontas Federal
Mutual Holding Company (the "Mutual Holding Company"), to the stock holding
company form, as effectuated pursuant to the two integrated transactions
described below. This Opinion Letter is governed by, and should be interpreted
in accordance with, the Legal Opinion Accord (the "Accord") of the American Bar
Association Section of Business Law (1991). As a consequence, it is subject to a
number of qualifications, exceptions, definitions, limitations on coverage and
other limitations, all as more particularly described in the Accord. Our opinion
is based upon the existing provisions of the Internal Revenue Code of 1986, as
amended (the "Code) and regulations thereunder, both final and proposed (the
"Treasury Regulations"), and upon current Internal Revenue Service ("IRS")
published rulings and existing court decisions, any of which could be changed at
any time. Any such changes may be retroactive and could significantly modify the
statements and opinions expressed herein. Similarly, any change in the facts and
assumptions stated below, upon which this opinion is based, could modify the
conclusions. This opinion is as of the date hereof, and we disclaim any
obligation to advise you of any change in any matter considered herein after the
date hereof.
We, of course, opine only as to the matters we expressly set forth, and no
opinions should be inferred as to any other matters or as to the tax treatment
of the transactions that we do not specifically address. We express no opinion
as to other federal laws and regulations, or as to laws and regulations of other
jurisdictions, or as to factual or legal matters other than as set forth herein.
<PAGE>
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
_____________, 1998
Page 2
We have made such other investigations as we have deemed relevant or
necessary for the purpose of this opinion. In our examination, we have assumed
the authenticity of original documents, the accuracy of copies and the
genuineness of signatures. We have further assumed the absence of adverse facts
not apparent from the face of the instruments and documents we examined and have
relied upon the accuracy of the factual matters set forth in the Plan of
Conversion and Reorganization (the "Plan") and the Registration Statement on
Form S-1 filed by Pocahontas Bancorp, Inc. (the "Company") with the Securities
and Exchange Commission ("SEC") under the Securities Act of 1933, as amended,
and the Application for Conversion on Form AC filed with the Office of Thrift
Supervision (the "OTS").
In issuing our opinions, we have assumed that the Plan has been duly and
validly authorized and has been approved and adopted by the board of directors
of the Mutual Holding Company and the Bank at a meeting duly called and held;
that the Bank will comply with the terms and conditions of the Plan, and that
the various representations and warranties which are provided to us are
accurate, complete, true and correct. Accordingly, we express no opinion
concerning the effect, if any, of variations from the foregoing.
We specifically express no opinion concerning tax matters relating to the
Plan under state and local tax laws and under Federal income tax laws except on
the basis of the documents and assumptions described above. We note that in
December 1994, the IRS published Revenue Procedure 94-76 which states that the
IRS will not issue private letter rulings with respect to the downstream merger
of a corporation into a less than "80 percent distributee", i.e, a corporation
in which the merging corporation possesses less than 80 percent of the total
voting power and less than 80 percent of the total value of such corporation's
stock. The IRS has assumed this "no-rule" position to study whether such
downstream mergers circumvent the purpose behind the repeal of General Utilities
& Operating Co. v. Helvering, 296 U.S. 200 (1935). If the IRS were to conclude
that such mergers circumvent the repeal of General Utilities, the IRS could
issue regulations which could have the effect of taxing to the merging
corporation, as of the effective time of the merger, the fair market value of
the assets of such corporation over its basis in such assets. Accordingly, the
issuance of such regulations could significantly modify the opinions expressed
herein.
For purposes of this opinion, we are relying on the representations
provided to us by the Mutual Holding Company and Pocahontas Federal Savings and
Loan Association (the "Bank" or "Pocahontas Federal") as described in the
Affidavits of the President of the Mutual Holding Company and the Bank,
incorporated herein by reference.
<PAGE>
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
_____________, 1998
Page 3
The Proposed Transactions
Based solely upon our review of the documents described above, and in
reliance upon such documents, we understand that the relevant facts are as
follows. In December 1991, Pocahontas Federal, a Federally-chartered mutual
savings bank, reorganized into the mutual holding company form of organization.
In April, 1994, the Bank sold 747,500 shares of common stock ("Bank Common
Stock") at $10.00 per share to the public (the "Minority Stockholders"). After
the conclusion of the sale to Minority Stockholders, the Mutual Holding Company
held 53.6% of the Bank's Common Stock outstanding. The shares of Bank Common
Stock that were sold to the Minority Stockholders constituted approximately
46.4% of the issued and outstanding shares of Bank Common Stock.
At the present time, two transactions referred to as the "MHC Merger" and
the "Bank Merger" are being undertaken. The MHC Merger and the Bank Merger are
being accomplished pursuant to a Plan of Conversion and Reorganization
(hereafter referred to as the "Plan"). Pursuant to the Plan, the conversion
("Conversion") will be effected in the following steps, each of which will be
completed contemporaneously.
(i) The Bank will organize the Company (which will become the stock
holding company of the Bank) as a first tier wholly-owned subsidiary
of the Bank;
(ii) The Company will organize an interim savings bank ("Interim") as a
wholly-owned stock savings bank subsidiary of the Company;
(iii) Mutual Holding Company will exchange its charter for a federal stock
savings association charter and will simultaneously merge in a
statutory merger with and into the Bank (the "MHC Merger") with the
Bank as the resulting entity, pursuant to the Agreement of Merger
between Mutual Holding Company and the Bank, whereby each member of
the Mutual Holding Company who is an Eligible Account Holder or
Supplemental Eligible Account Holder will receive an interest in a
liquidation account established in the Bank pursuant to regulations
of the Commissioner (the "Liquidation Account") in exchange for such
member's ownership interest in the Mutual Holding Company. In
conjunction with the MHC Merger, the Bank's stock held by the Mutual
Holding Company will be canceled.
<PAGE>
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
_____________, 1998
Page 4
(iv) Interim will merge in a statutory merger with and into the Bank with
the Bank as the resulting institution (the "Bank Merger") pursuant
to the Agreement of Merger between the Bank, the Company and
Interim, whereby each Minority Stockholder will receive common stock
of the Company ("Company Common Stock") in exchange for minority
Shares, based on an exchange ratio (the "Exchange Ratio"), with cash
paid in lieu of fractional shares.
(v) As a result of the Bank Merger, the Company will own all of the
common stock of the Bank, and the Company will offer for sale
Company Common Stock in an offering (the "Offering") that will occur
contemporaneously with the Conversion (discussed below).
The Plan complies with the provisions of Subpart A of 12 C.F.R. Part 563b,
which sets forth the OTS regulations for conversions of mutual institutions to
stock form. The Plan also complies with the provisions of 12 C.F.R. Section
575.12(a), which is the OTS regulation governing the conversion of mutual
holding companies to stock form.
In the MHC Merger, a liquidation account is being established by the Bank
for the benefit of Eligible Account Holders and Supplemental Account Holders.
Pursuant to Section 20 of the Plan, the initial balance of the liquidation
account will be equal to the sum of (i) approximately 52.1% (the Mutual Holding
Company stock ownership interest in the Bank) of the Bank's total stockholders'
equity as reflected in its latest statement of financial condition contained in
the final Prospectus utilized in the Conversion, or (ii) the retained earnings
of the Bank at the time the Bank underwent its initial mutual holding company
reorganization.
Upon the date of consummation of the Bank Merger ("the Effective Date"),
Interim will be merged with and into the Bank and Interim will cease to exist as
a legal entity. All of the then outstanding shares of Bank Common Stock will be
converted into and become shares of Company Common Stock pursuant to the
Exchange Ratio that ensures that after the Conversion and before giving effect
to Minority Stockholders' purchases in the Offering and receipt of cash in lieu
of fractional shares, Minority Stockholders will own the same aggregate
percentage of the Company's Common Stock as they currently own of the Bank
Common Stock. The common stock of Interim owned by the Company prior to the Bank
Merger will be converted into and become shares of common stock of the Bank on
the Effective Date. The Company Common Stock held by the Bank immediately prior
to the Effective Date will be canceled on the Effective Date. Immediately
following the Bank Merger, additional shares of the Company Common Stock
<PAGE>
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
_____________, 1998
Page 5
will be sold to depositors and former shareholders of the Bank and to members of
the public in the Offering.
As a result of the MHC Merger and the Bank Merger, the Company will be a
publicly held corporation, will register the Company Common Stock under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and will become subject to the rules and regulations thereunder and file
periodic reports and proxy statements with the SEC. The Bank will become a
wholly owned subsidiary of the Company and will continue to carry on its
business and activities as conducted immediately prior to the Conversion.
The stockholders of the Company will be the former Minority Stockholders
of the Bank immediately prior to the Bank Merger (i.e., all stockholders of the
Bank, excluding the Mutual Holding Company), plus those persons who purchase
shares of Company Common Stock in the Offering. Nontransferable rights to
subscribe for the Company Common Stock have been granted, in order of priority,
to depositors of the Bank who have account balances of $50.00 or more as of the
close of business on September 30, 1996 ("Eligible Account Holders"), the Bank's
tax-qualified employee plans ("Employee Plans"), depositors of the Bank who have
account balances of $50.00 or more as of the close of business on ________, 199_
("Supplemental Eligible Account Holders"), other members of the Bank (other than
Eligible Account Holders and Supplemental Eligible Account Holders) ("Other
Members"), and owners of shares of Bank Common Stock other than the Mutual
Holding Company ("Minority Stockholders"). Subscription rights are
nontransferable. The Company will also offer shares of Company Common Stock not
subscribed for in the Subscription Offering, if any, for sale in a community
offering to certain members of the general public (the "Community Offering").
Opinions
Based on the foregoing description of the MHC Merger and the Bank Merger,
and subject to the qualifications and limitations set forth in this letter, we
are of the opinion that, if the MHC Merger were to be consummated as described
above as of the date hereof, then:
1. The MHC Merger qualifies as a tax-free reorganization within the
meaning of Section 368(a)(1)(A) of the Code. (Section 368(a)(1)(A) of the Code.)
2. The Mutual Holding Company will not recognize any gain or loss on the
transfer of its assets to the Bank in exchange for an interest in a liquidation
account established in the Bank
<PAGE>
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
_____________, 1998
Page 6
for the benefit of the Mutual Holding Company's members who remain depositors of
the Bank and non-transferable subscription rights to purchase stock. (Section
361 of the Code.)
3. The exchange of the members' equity interests in the Mutual Holding
Company for interests in a liquidation account established at the Bank in the
MHC Merger will satisfy the continuity of interest requirement of Section
1.368-1(b) of the Income Tax Regulations (cf. Rev. Rul. 69-3, 1969-1 C.B. 103,
and Rev. Rul. 69-646, 1969-2 C.B. 54).
4. No gain or loss will be recognized by the Bank upon the receipt of the
assets of the Mutual Holding Company in the MHC Merger in exchange for the
transfer to the members of the Mutual Holding Company of an interest in the
liquidation account in the Bank and non-transferable subscription rights.
(Section 1032(a) of the Code.)
5. The basis of the assets of Mutual Holding Company to be received by
Bank will be the same as the basis of such assets in the hands of the Mutual
Holding Company immediately prior to the transfer. (Section 362(b) of the Code.)
6. The holding period of the assets of the Mutual Holding Company to be
received by Bank will include the holding period of those assets in the hands of
the Mutual Holding Company immediately prior to the transfer. (Section 1223(2)
of the Code.)
7. Mutual Holding Company members will recognize no gain or loss upon the
receipt of an interest in the liquidation account in Bank and non-transferable
subscription rights in exchange for their membership interest in Mutual Holding
Company. (Section 354(a) of the Code.)
In addition, we are of the opinion that, if the Bank Merger was to be
consummated as described above as of the date hereof, then:
1. The Bank Merger qualifies as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code, pursuant to Section 368(a)(2)(E) of the Code.
The Bank Merger is not disqualified from qualifying as a reorganization within
the meaning of Section 368(a)(1)(A) because Company Common Stock will be
conveyed to the Bank's stockholders in exchange for their Bank Common Stock.
(Section 368(a)(2)(E) of the Code.)
2. Interests in the Liquidation Account, and the shares of Bank Common
Stock held by Mutual Holding Company prior to consummation of the MHC Merger,
will be disregarded for
<PAGE>
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
_____________, 1998
Page 7
the purpose of determining that an amount of stock in the Bank which constitutes
"control" of such corporation was acquired by the Company in exchange for shares
of Company Common Stock pursuant to the Bank Merger (Code Section 368(c)).
3. The exchange of shares of Company Common Stock for the shares of Bank
Common Stock in the Bank Merger, following consummation of the MHC Merger, will
not violate the continuity of interest requirement of Income Tax Regulation
Section 1.368-1(b) in the Bank Merger.
4. Interim will not recognize any gain or loss on the transfer of its
assets to Bank in exchange for Bank Common Stock and the assumption by Bank of
the liabilities, if any, of Interim. (Section 361(a) and 357(a) of the Code.)
5. Bank will not recognize any gain or loss on the receipt of the assets
of Interim in exchange for Bank Common Stock. (Section 1032(a) of the Code.)
6. Bank's basis in the assets received from Interim in the proposed
transaction will, in each case, be the same as the basis of such assets in the
hands of Interim immediately prior to the transaction. (Section 362(b) of the
Code.)
7. Bank's holding period for the assets received from Interim in the
proposed transaction will, in each instance, include the period during which
such assets were held by Interim. (Section 1223(2) of the Code.)
8. The Company will not recognize any gain or loss upon its receipt of
Bank Common Stock in exchange for Interim stock. (Section 354(a) of the Code.)
9. Bank shareholders will not recognize any gain or loss upon their
exchange of Bank Common Stock solely for shares of Company Common Stock.
(Section 354(a) of the Code.)
10. Each Bank shareholder's aggregate basis in his or her Company Common
Stock received in the exchange will be the same as the aggregate basis of the
Bank Common Stock surrendered in exchange therefor. (Section 358(a) of the
Code.)
11. Each Bank shareholder's holding period in his or her Company Common
Stock received in the exchange will include the period during which the Bank
stock surrendered was
<PAGE>
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
_____________, 1998
Page 8
held, provided that the Bank Common Stock surrendered is a capital asset in the
hands of the Bank shareholder on the date of the exchange. (Section 1223(1) of
the Code.)
12. The Eligible Account Holders and Supplemental Eligible Account Holders
will recognize gain, if any, upon the issuance to them of withdrawable savings
accounts, an interest in the liquidation account established in the Bank and
nontransferable subscription rights to purchase Company Common Stock, but only
to the extent of the value, if any, of the subscription rights.
Analysis
Section 368(a)(1)(A) of the Code defines the term "reorganization" to
include a "statutory merger or consolidation" of corporations such as the MHC
Merger and the Bank Merger. Section 368(a)(2)(E) of the Code provides that a
transaction otherwise qualifying as a merger under Section 368(a)(1)(A), such as
the Bank Merger, shall not be disqualified by reason of the fact that common
stock of a corporation (referred to in the Code as the "controlling
corporation") (i.e., the Company) which before the merger was in control of the
merged corporation is used in the transaction if:
(i) after the transaction, the corporation surviving the merger (the
Bank) holds substantially all of its properties and the properties
of the merged corporation (Interim) (other than common stock of the
controlling corporation (the Company) distributed in the
transaction); and
(ii) in the transaction, former stockholders of the surviving corporation
(the Bank stockholders) exchanged, for an amount of voting common
stock of the controlling corporation, an amount of common stock in
the surviving corporation which constitutes control of such
corporation.
Section 1.368-2(b)(1) of the Treasury Regulations provides that, in order
to qualify as a reorganization under Section 368(a)(1)(A), a transaction must be
a merger or consolidation effected pursuant to the corporation laws of the
United States or a state. The Plan provides that the MHC Merger and the Bank
Merger will be accomplished in accordance with applicable state and federal law.
Treasury Regulations and case law require that, in addition to the
existence of statutory authority for a merger, certain other conditions must be
satisfied in order to qualify a proposed
<PAGE>
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
_____________, 1998
Page 9
transaction as a reorganization within the meaning of Section 368(a)(1)(A) of
the Code. The "business purpose test," which requires a proposed merger to have
a bona fide business purpose, must be satisfied. See 26 C.F.R. Section
1.368-1(c). We believe that the MHC Merger and Bank Merger satisfy the business
purpose test for the reasons set forth in the Prospectus under the caption "The
Conversion--Reasons for the Conversion." The "continuity of business enterprise
test" requires an acquiring corporation either to continue an acquired
corporation's historic business or use a significant portion of its historic
assets in a business. See 26 C.F.R. Section 1.368-1(d). We believe that the
business conducted by the Bank prior to the MHC Merger and the Bank Merger will
be unaffected by the transactions.
The "continuity of interest doctrine" requires that the continuing common
stock interest of the former owners of an acquired corporation, considered in
the aggregate, represent a "substantial part" of the value of their former
interest, and provide them with a "definite and substantial interest" in the
affairs of the acquiring corporation or a corporation in control of the
acquiring corporation. Paulsen v. Comm'r., 469 U.S. 131 (1985); Helvering v.
Minnesota Tea Co., 296 U.S. 378 (1935); John A. Nelson Co. v. Helvering, 296
U.S. 374 (1935); Southwest Natural Gas Co. v. Comm'r., 189 F.2d 332 (5th Cir.
1951), cert. denied, 342 U.S. 860 (1951). We believe that the MHC Merger
satisfies the continuity of interest doctrine based on the information set forth
in the Company's Registration Statement and based on Revenue Rulings 69- 646,
1969-2 C.B. 54 and 69-3, 1965-1 C.B. 103. We believe that the Bank Merger
satisfies the continuity of interest doctrine based on representations received
from the Bank in connection with the preparation of this opinion to the effect
that, to the best knowledge of the management of the Bank, former shareholders
of the Bank owning 50% or more of all of the outstanding stock of the Bank
immediately prior to the Conversion, disregarding shares held by the Mutual
Holding Company that were canceled in the MHC Merger, would continue to own
shares of the Company immediately after the Bank Merger. In addition, we believe
other applicable requirements of the Treasury Regulations and case law which are
preconditions to qualification of the MHC Merger and the Bank Merger as a
reorganization, within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code, are satisfied on the basis of the information contained in the Plan
and the Prospectus.
Section 354 of the Code provides that no gain or loss shall be recognized
by stockholders who exchange common stock in a corporation, such as the Bank,
which is a party to a reorganization, solely for common stock in another
corporation which is a party to the reorganization, such as the Company. Section
356 of the Code provides that stockholders shall recognize gain to the extent
they receive money as part of a reorganization, such as cash received in lieu of
fractional shares. Section 358 of the Code provides that, with certain
adjustments for
<PAGE>
Boards of Directors
Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Pocahontas Federal Mutual Holding Company
_____________, 1998
Page 10
money received in a reorganization, such as cash received in lieu of fractional
shares, a stockholder's basis in the common stock he or she receives in a
reorganization shall equal the basis of the common stock which he or she
surrendered in the transaction. Section 1223(1) states that, where a stockholder
receives property in an exchange which has the same basis as the property
surrendered, he or she shall be deemed to have held the property received for
the same period as the property exchanged, provided that the property exchanged
had been held as a capital asset.
Section 361 of the Code provides that no gain or loss shall be recognized
to a corporation such as the Interim which is a party to a reorganization on any
transfer of property pursuant to a plan of reorganization such as the Plan of
Conversion. Section 362 of the Code provides that if property is acquired by a
corporation such as the Bank in connection with a reorganization, then the basis
of such property shall be the same as it would be in the hands of the transferor
immediately prior to the transfer. Section 1223(2) of the Code states that where
a corporation such as the Savings Bank will have a carryover basis in property
received from another corporation which is a party to a reorganization, the
holding period of such assets in the hands of the acquiring corporation shall
include the period for which such assets were held by the transferor, provided
that the property transferred had been held as a capital asset. Section 1032 of
the Code states that no gain or loss shall be recognizes to a corporation, such
as the Company, on the receipt of property in exchange for common stock.
We hereby consent to the filing of the opinion as an exhibit to the MHC's
Application for Conversion on Form AC as filed with the OTS and to the Company's
Registration Statement on Form S-1 as filed with the SEC. We also consent to the
references to our firm in the Prospectus contained in the Forms AC and S-1 under
the captions "The Conversion--Tax Aspects" and "Legal Opinions."
Very truly yours,
LUSE LEHMAN GORMAN POMERENK
& SCHICK, A PROFESSIONAL CORPORATION
<PAGE>
EXHIBIT 8.3
<PAGE>
[Letterhead of RP Financial, LC.]
December 17, 1997
Board of Directors
Pocahontas Federal Mutual Holding Company, Inc.
Pocahontas Federal Savings and Loan Association
203 West Broadway Street
Pocahontas, Arkansas 72455
Re: Plan of Conversion: Subscription Rights
Gentlemen:
All capitalized terms not otherwise defined in this letter have the
meanings given such terms in the Plan of Conversion and Reorganization (the
"Plan of Conversion") adopted by the Board of Directors of Pocahontas Federal
Savings and Loan Association (the "Association") and Pocahontas Federal Mutual
Holding Company, Inc. (the "Mutual Holding Company"). Pursuant to the Plan of
Conversion, Pocahontas Bancorp, Inc. (the "Holding Company") will offer and sell
Common Stock in connection with the conversion of the Mutual Holding Company
from a federally chartered mutual holding company to a Delaware stock
corporation.
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 KSOP; (3) Supplemental Eligible
Account Holders; and (4) Other Members. Based solely upon our observation that
the Subscription Rights will be available to such parties without cost, will be
legally non-transferable and of short duration, and will afford such parties the
right only to purchase shares of Common Stock at the same price as will be paid
by members of the general public in the Community Offering, but without
undertaking any independent investigation of state or federal law or the
position of the Internal Revenue Service with respect to this issue, we are of
the belief that, as a factual matter:
(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 (such
as natural disasters or significant world events) may occur from time to time,
often with great unpredictability and may materially impact the value of thrift
stocks as a whole or the Holding Company's value alone. Accordingly, no
assurance can be given that persons who subscribe to shares of Common Stock in
the conversion will thereafter be able to buy or sell such shares at the same
price paid in the Subscription Offering.
Very truly yours,
RP FINANCIAL, LC.
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
EXHIBIT 10.1
<PAGE>
POCAHONTAS FEDERAL SAVINGS LOAN ASSOCIATION
EMPLOYMENT AGREEMENT
This Agreement is made effective as of the 16th day of August, 1995, by
and between Pocahontas Federal Savings and Loan Association (the "Bank"), a
federally chartered savings institution, with its principal administrative
office at 203 West Broadway, Pocahontas, Arkansas, and Skip Martin (the
"Executive"). Any reference to "Holding Company" herein shall mean Pocahontas
Federal Mutual Holding Company, Inc. or any successor thereto. This Agreement
supercedes those certain Employment Agreements between the Bank and the
Executive dated April 4, 1994 and May 1995, which Employment Agreements are
terminated as of the date of this Agreement.
WHEREAS, the Bank wishes to assure itself of the services of Executive for
the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve
as Chief Executive Officer and President of the Bank. During said period,
Executive also agrees to serve, if elected, as an officer and director of any
subsidiary or affiliate of the Bank. Failure to reelect Executive as President
and Chief Executive Officer without the consent of the Executive during the term
of this Agreement shall constitute a breach of this Agreement.
2. TERMS AND DUTIES
(a) On each October 1 commencing on October 1, 1995 and continuing at each
anniversary date thereafter, the Agreement shall renew for an additional year,
subject to the approval of the Board of Directors, such that the remaining term
shall be three (3) years unless written notice is provided to Executive at least
ten (10) days and not more than thirty (30) days prior to any such anniversary
date, that his employment shall cease at the end of twenty-four (24) months
following such anniversary date. Prior to each notice period for non-renewal,
the disinterested members of the Board of Directors of the Bank ("Board") will
conduct a comprehensive performance evaluation and review of the Executive for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithfill performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the Bank,
or materially affect the performance of Executive's duties pursuant to this
Agreement.
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3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The Bank
shall pay Executive as compensation a salary of not less than $126,100 per year
("Base Salary"). Such Base Salary shall be payable biweekly. During the period
of this Agreement, Executive's Base Salary shall be reviewed at least annually;
the first such review will be made no later than the first September 30th after
the effective date of the Agreement and continuing each September 30th
thereafter. Such review shall be conducted by a Committee designated by the
Board, and the Board may increase Executive's Base Salary. In addition to the
Base Salary provided in this Section 3(a), the Bank shall provide Executive at
no cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not make any
changes in such plans, arrangements or perquisites which would adversely affect
Executive's rights or benefits thereunder. Without limiting the generality of
the foregoing provisions of this Subsection (b), Executive will be entitled to
participate in or receive benefits under any employee benefit plans including
but not limited to, retirement plans, supplemental retirement plans, pension
plans, profit-sharing plans, health-and-accident plans, medical coverage or any
other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Bank shall pay or reimburse Executive for all reasonable travel
and other reasonable expenses incurred by Executive performing his obligations
under this Agreement and may provide such additional compensation in such form
and such amounts as the Board may from time to time determine.
(d) Compensation and reimbursement to be paid pursuant to paragraphs (a),
(b) and (c) of this Section 3 shall be paid by the Bank and the Holding Company,
respectively on a pro rata basis based upon the amount of service the Executive
devotes to the Bank and Holding Company, respectively.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 8 and 15.
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during the Executive's term of
employment under this Agreement. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Holding Company of Executive's full-time
employment hereunder for any reason other than, (A) Disability or Retirement as
defined in Section 6 below, (B) a Change in Control, as defined in Section 5(a)
hereof, or (C) for Termination for Cause as defined in Section 7 hereof; or (ii)
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Executive's resignation from the Bank's employ, upon any (A) failure to elect or
reelect or to appoint or reappoint Executive as President and Chief Operating
Officer, (B) material change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above, (C) a relocation of Executive's principal
place of employment by more than 30 miles from its location at the effective
date of this Agreement, or a material reduction in the benefits and perquisites
to the Executive from those being provided as of the effective date of this
Agreement, (D) liquidation or dissolution of the Bank or Holding Company other
than liquidations or dissolutions that are caused by reorganizations that do not
affect the status of Executive, or (E) breach of this Agreement by the Bank.
Upon the occurrence of any event described in clauses (ii)(A), (B), (C), (D) or
(E), above, Executive shall have the right to elect to terminate his employment
under this Agreement by resignation upon sixty (60) days prior written notice
given within a reasonable period of time not to exceed four calendar months
after the initial event giving rise to said right to elect. Notwithstanding the
preceding sentence, in the event of a continuing breach of this Agreement by the
Bank, the Executive, after giving due notice within the prescribed time frame of
an initial event specified above, shall not waive any of his rights solely under
this Agreement and this Section 4 by virtue of the fact that Executive has
submitted his resignation but has remained in the employment of the Bank and is
engaged in good faith discussions to resolve any occurrence of an event
described in clauses (A), (B), (C), (D) and (E) above.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to the greater of the payments due for the remaining term of the Agreement or
three (3) times the average of the five preceding years' salary ("Salary," which
term shall include bonuses and any other cash compensation paid to the Executive
during any such year, and the amount of any benefits received pursuant to any
employee benefit plans on behalf of the Executive, maintained by the Bank during
any such year); provided, however, that if the Bank is not in compliance with
its minimum capital requirements or if such payments would cause the Bank's
capital to be reduced below its minimum capital requirements, such payments
shall be deferred until such time as the Bank is in capital compliance, and
provided further, that in no event shall total severance compensation from all
sources exceed three times the Executive's Salary for the immediately preceding
year. At the election of the Executive, which election is to be made within
thirty (30) days of an Event of Termination such payments shall be made in a
lump sum or paid monthly during the remaining term of the agreement following
the Executive's termination. In the event that no election is made, payment to
the Executive will be made on a monthly basis during the remaining term of the
agreement. Such payments shall not be reduced in the event the Executive obtains
other employment following termination of employment.
(c) Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, provided that such benefits shall not be provided in the event they
should constitute an unsafe or unsound banking practice relating to executive
compensation and employment contracts pursuant to 12 C.F.R ss.ss. 563.39 and
563.161, as is now or hereafter in effect. Such coverage shall cease upon the
expiration of the remaining term of this Agreement.
(d) In the event that the Executive is receiving monthly payments pursuant
to Section 4(b) or (c) hereof, on an annual basis, thereafter, between the dates
of January 1 and January 31 of each year, Executive shall elect whether the
balance of the amount payable under the Agreement at that time shall be
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paid in a lump sum or on a pro rata basis. Such election shall be irrevocable
for the year for which such election is made.
5. CHANGE IN CONTROL
(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank or Holding Company, as set forth
below. For purposes of this Agreement, a "Change in Control" of the Bank or
Holding Company shall mean an event of a nature that: (i) would be required to
be reported in response to Item I of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section l3 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a Change in
Control of the Bank or the Holding Company within the meaning of the Home
Owners' Loan Act of 1933 and the Rules and Regulations promulgated by the Office
of Thrift Supervision, as in effect on the date hereof; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (a) any "Person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 1 3d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Holding Company representing 25% or more of the Bank's or the Holding
Company's outstanding securities except that securities issued by the Bank, in
connection with its initial public offering, to the Holding Company andlor the
Bank's employee benefit plans and that continue to be held by such Holding
Company or plans shall not be counted in determining whether such Holding
Company or plans are the beneficial owner of more than 25% of the Bank's
securities; or (b) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least two-thirds of the
directors comprising the Incumbent Board or whose nomination for election by the
Holding Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (a),
considered as though he were a member of the incumbent Board; or (c) a
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Holding Company or similar transaction in which the
Bank or Holding Company is not the resulting entity occurs; or (d) a tender
offer is made for 25% or more of the outstanding securities of the Bank or
Holding Company and shareholders owning beneficially or of record 25% or more of
the outstanding securities of the Bank or Holding Company have tendered or
offered to sell their shares pursuant to such tender offer. Notwithstanding the
foregoing, a "Change in Control" of the Bank or the Holding Company shall not be
deemed to have occurred if the Holding Company ceases to own at least 51% of all
outstanding shares of stock of the Bank in connection with a conversion of the
Holding Company from mutual to stock form.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred, Executive shall be entitled to the benefits
provided in paragraphs (c), (d), (e), (f), (g) and (h) of this Section 5 upon
his subsequent termination of employment at any time during the term of this
Agreement, regardless of whether such termination results from (i) his
resignation or (ii) his dismissal upon the Change in Control.
(c) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank shall pay Executive, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to the
greater of the payments due for the remaining term of the Agreement or 2.99
times the average of the five preceding years' Salary. Such payment shall be
made by the Bank on the Date of Termination. At the election of the Executive,
which election shall be made no later than the Date of Termination
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following a Change in Control, such payment may be made in a lump sum or paid in
equal monthly installments during the thirty-six (36) months following the
Executive's termination. In the event that no election is made, payment to the
Executive will be made on a monthly basis during the remaining term of the
Agreement.
(d) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the Bank for Executive prior to his severance. Such coverage and
payments shall cease upon the expiration of thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, Executive will be entitled
to any benefits granted to him pursuant to any Stock Option Plan of the Bank or
Holding Company.
(f) Upon the occurrence of a Change in Control the Executive will be
entitled to any benefits awarded to him under the Bank's Recognition and
Retention Plan or any restricted stock plan in effect.
(g) In the event that the Executive is receiving monthly payments pursuant
to Section 5(c) hereof, on an annual basis, thereafter, between the dates of
January 1 and January 31 of each year, Executive shall elect whether the balance
of the amount payable under the Agreement at that time shall be paid in a lump
sum or on a pro rata basis. Such election shall be irrevocable for the year for
which such election is made.
(h) Notwithstanding the preceding paragraphs of this Section 5, in the
event that:
(i) the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits")
would be deemed to include an "excess parachute payment" under
Section 280G of the Code or any successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the
"Non-Triggering Amount"), the value of which is one dollar
($l.00) less than an amount equal to the total amount of
payments permissible under Section 280G of the Code or any
successor thereto,
then the Termination Benefits to be paid to Executive shall be so
reduced so as to be a Non-Triggering Amount.
(i) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
(j) Any payments made to Executive pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
ss. 1828(k) and any regulations promulgated thereunder.
(k) The Executive shall not be entitled to any payments pursuant to this
Section 5 if the Bank is not in compliance with its minimum capital requirements
or if such payments would cause the Bank's capital to be reduced below its
minimum capital requirements, such payments shall be deferred until such
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times as the Bank is in capital compliance and provided further, that in no
event shall total severance compensation from all sources exceed three times the
Executive's Salary for the immediately preceding year.
6. TERMINATION UPON RETIREMENT OR DISABILITY
Termination by the Bank of the Executive based on "Retirement" shall mean
termination in accordance with the Bank's retirement policy or in accordance
with any retirement arrangement established with Executive's consent with
respect to him. Upon termination of Executive upon Retirement, Executive shall
be entitled to all benefits under any retirement plan of the Bank and other
plans to which Executive is a party.
Termination by the Bank of Executive's employment based on "Disability"
shall mean termination because of any physical or mental impairment which
qualifies the Executive for disability benefits under the applicable long-term
disability plan maintained by the Bank or, if no such plan applies, which would
qualify the Executive for disability benefits under the federal social security
system.
7. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willfull 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. In determining incompetence, the acts
or omissions shall be measured against standards generally prevailing in the
savings institutions industry. For purposes of this paragraph, no act or failure
to act on the part of Executive shall be considered "willful" unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Bank. Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
cow of a resolution duly adopted by the affirmative vote of a majority of the
disinterested members of the Board at a meeting of the Board called and held for
that purpose (after reasonable notice to Executive and an opportunity for hire,
together with counsel to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. Any stock options granted to Executive
under any stock option plan of the Bank, the Holding Company or any subsidiary
or affiliate thereof, shall become null and void effective upon Executive's
receipt of Notice of Termination for Cause pursuant to Section 8 hereof, and
shall not be exercisable by Executive at any time subsequent to such Termination
for Cause.
8. NOTICE
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
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(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall be the date
such Notice of Termination is given).
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control, Termination for Cause, or voluntary termination by the
Executive in which case the date of termination shall be the date specified in
the Notice, the Date of Termination shall be the date on which the dispute is
finally determined either by mutual written agreement of the parties, by a
binding arbitration award or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal having expired and no appeal having
been perfected) and provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the Bank
will continue to pay Executive his full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement,
provided such dispute is resolved within nine months after the Date of
Termination specified in the Notice or Termination. If such dispute is not
resolved within such nine- month period the Bank shall not be obligated pending
final resolution of such dispute to pay Executive compensation and other
payments after nine months from the Date of the Termination specified in the
Notice of Termination. Amounts paid under this Section are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Notwithstanding provisions of
subsection (c), and paragraph 7, the Board of Directors may immediately suspend
the Executive from the Association's affairs should grounds exist for
Termination for Cause.
9. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 9 during
the term of this Agreement and for one ( 1) full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party.
10. NON-COMPETITION
(a) Upon any termination of Executive's employment hereunder pursuant to
Section 4(c) hereof, Executive agrees not to compete with the Bank and/or the
Holding Company for a period of one (1) year following such termination in any
city, town or county in which the Bank and/or the Holding Company has an office
or has filed an application for regulatory approval to establish an office,
determined as of the effective date of such termination, except as agreed to
pursuant to a resolution duly adopted by the Board. Executive agrees that during
such period and within said cities, towns and counties, Executive shad not work
for or advise, consult or otherwise serve with, directly or indirectly, any
entity whose business materially competes with the depository, lending or other
business activities of the Bank and/or the Holding Company. The parties hereto,
recognizing that irreparable injury will result to the Bank and/or the Holding
Company, its business and property in the event of Executive's breach of this
Subsection 10(a)
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agree that in the event of any such breach by Executive, the Bank and/or the
Holding Company will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Executive,
Executive's partners, agents, servants, employers, employees and all persons
acting for or with Executive. Nothing herein will be construed as prohibiting
the Bank and/or the Holding Company from pursuing any other remedies available
to the Bank and/or the Holding Company for such breach or threatened breach,
including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank;
Executive may disclose any information requested, in writing, by federal banking
regulatory agencies; and Executive may disclose any information regarding the
Bank or the Holding Company which is otherwise publicly available. In the event
of a breach or threatened breach by the Executive of the provisions of this
Section 10, the Bank will be entitled to an injunction restraining Executive
from disclosing, in whole or in part, the knowledge of the past, present,
planned or considered business activities of the Bank or affiliates thereof, or
from rendering any services to any person, film, corporation, other entity to
whom such knowledge, in whole or in part, has been disclosed or is threatened to
be disclosed. Nothing herein will be construed as prohibiting the Bank from
pursuing any other remedies available to the Bank for such breach or threatened
breach, including the recovery of damages from Executive.
11. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Holding Company, however,
guarantees payment and provision of all amounts and benefits due hereunder to
Executive and, if such amounts and benefits due from the Bank are not timely
paid or provided by the Bank, such amounts and benefits shall be paid or
provided by the Holding Company.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.
13. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
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(b) This Agreement shall be binding upon and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
14. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific tenn or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
15. REQUIRED PROVISIONS
(a) The Bank's board of directors may terminate the Executive's employment
at any time, but any termination by the Bank, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement. Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause.
(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Banlc's affairs by a notice
served under Section 8(e)(3) (12 U.S.C. ss.ss. 1828(e)(3)) or 8(g) (12 U.S.C.
ss. 1828(g)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the Bank's
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the Executive all or part of
the compensation withheld while their contract obligations were suspended and
(ii) reinstate (in whole or in part) any of the obligations which were
suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. ss.ss. 1828(e)) or 8(g) (12 U.S.C. ss. 1828(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (l2 U.S.C. ss.
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by Director of the OTS, at
the time 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) (12 U.S.C. ss.
1823(c)) of the Federal Deposit Insurance Act, as
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amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1982; or (ii) by the Office of Thrift Supervision ("OTS") at the time the OTS or
its District Director approves a supervisory merger to resolve problems related
to the operations of the Bank or when the Bank is determined by the OTS or FDIC
to be in an unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.
16. SEVERABILITY
If, for any reason any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Arkansas but
only to the extent not superseded by federal law.
19. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
20. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank, provided that the dispute or interpretation has been
settled by Executive and the Bank or resolved in the Executive's favor.
21. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest permitted
under federal law against all expenses and liabilities reasonably incurred by
him in connection with or arising out of any action suit or proceeding in which
he may be involved by reason of his having been a director or officer of the
Bank (whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and
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attorneys' fees and the cost of reasonable settlements (such settlements must be
approved by the Board of Directors of the Bank). If such action suit or
proceeding is brought against Executive in his capacity as an officer or
director of the Bank, however, such indemnification shall not extend to matters
as to which Executive is finaUy adjudged to be liable for willful misconduct in
the performance of his duties. No indemnification shall be paid that would
violate 12 U.S.C. 1828(K) or any regulations promulgated thereunder, or 12 C.F.R
545.121.
22. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Holding Company,
expressly and unconditionally to assume and agree to perform the Bank's
obligations under this Agreement, in the same manner and to the same extent that
the Bank would be required to perfomm if no such succession or assignment had
taken place.
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SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
their seals to be affixed hereunto by its duly authorized officer, and Executive
has signed this Agreement, on the day and date first set forth above.
ATTEST: POCAHONTAS FEDERAL SAVINGS AND LOAN
ASSOCIATION
- ----------------------------------- -------------------------------------
Secretary Chairman of the Board
WITNESS:
- ----------------------------------- -------------------------------------
Secretary Skip Martin, Executive
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EXHIBIT 10.2
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POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
EMPLOYMENT AGREEMENT
This Agreement is made effective as of the 16th day of August, 1995, by
and between Pocahontas Federal Savings and Loan Association (the "Bank"), a
federally chartered savings institution, with its principal administrative
office at 203 West Broadway, Pocahontas, Arkansas, and James A. Edington (the
"Executives"). Any reference to "Holding Company" herein shall mean Pocahontas
Federal Mutual Holding Company, Inc. or any successor thereto. This Agreement
supersedes those certain Employment Agreements between the Bank and the
Executive dated April 4, 1994 and May 1995, which Employment Agreements are
terminated as of the date of this Agreement.
WHEREAS, the Bank wishes to assure itself of the services of Executive for
the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve
as Executive Vice President and Secretary of the Bank. During said period,
Executive also agrees to serve, if elected, as an officer and director of any
subsidiary or affiliate of the Bank. Failure to reelect Executive as Executive
Vice President and Secretary without the consent of the Executive during the
term of this Agreement shall constitute a breach of this Agreement.
2. TERMS AND DUTIES
(a) On each October 1 commencing on October 1, 1995 and continuing at each
anniversary date thereafter, the Agreement shall renew for an additional year,
subject to the approval of the Board of Directors, such that the remaining term
shall be three (3) years unless written notice is provided to Executive at least
ten (10) days and not more than thirty (30) days prior to any such anniversary
date, that his employment shall cease at the end of twenty-four (24) months
following such anniversary date. Prior to each notice period for non-renewal the
disinterested members of the Board of Directors of the Bank ("Boards") will
conduct a comprehensive performance evaluation and review of the Executive for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill and efforts to the faithful performance of his duties hereunder
including activities and services related to the organization, operation and
management of the Bank; provided, however, that, with the approval of the Board,
as evidenced by a resolution of such Board, from time to time, Executive may
serve, or continue to serve, on the boards of directors of, and hold any other
offices or positions in, companies or organizations, which, in such Board's
judgment, will not present any conflict of interest with the Bank, or materially
affect the performance of Executive's duties pursuant to this Agreement.
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3. COMPENSATION AND REIMBURSEMENT
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The Bank
shall pay Executive as compensation a salary of not less than S72,000 per year
("Base Salary"). Such Base Salary shall be payable biweekly. During the period
of this Agreement, Executive's Base Salary shall be reviewed at least annually;
the first such review will be made no later than the first September 30th after
the effective date of the Agreement and continuing each September 30th
thereafter. Such review shall be conducted by a Committee designated by the
Board, and the Board may increase Executive's Base Salary. In addition to the
Base Salary provided in this Section 3(a), the Bank shall provide Executive at
no cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.
(b) The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not make any
changes in such plans, arrangements or perquisites which would adversely affect
Executive's rights or benefits thereunder. Without limiting the generality of
the foregoing provisions of this Subsection (b), Executive will be entitled to
participate in or receive benefits under any employee benefit plans including
but not limited to, retirement plans, supplemental retirement plans, pension
plans, profit-sharing plans, health-and-accident plans, medical coverage or any
other employee benefit plan or arrangement made available by the Bank in the
future to its senior executives and key management employees, subject to and on
a basis consistent with the terms, conditions and overall administration of such
plans and arrangements. Executive will be entitled to incentive compensation and
bonuses as provided in any plan of the Bank in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Bank shall pay or reimburse Executive for all reasonable travel
and other reasonable expenses incurred by Executive performing his obligations
under this Agreement and may provide such additional compensation in such form
and such amounts as the Board may from time to time determine.
(d) Compensation and reimbursement to be paid pursuant to paragraphs (a),
(b) and (c) of this Section 3 shall be paid by the Bank and the Holding Company,
respectively on a pro rata basis based upon the amount of service the Executive
devotes to the Bank and Holding Company, respectively.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 8 and 15.
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during the Executive's term of
employment under this Agreement. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Holding Company of Executive's full-time
employment hereunder for any reason other than, (A) Disability or Retirement as
defined in Section 6 below, (B) a Change in Control, as defined in Section 5(a)
hereof, or (C) for Termination for Cause as defined in Section 7 hereof; or (ii)
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Executive's resignation from the Bank's employ, upon any (A) failure to elect or
reelect or to appoint or reappoint Executive as President and Chief Operating
Officer, (B) material change in Executive's function, duties, or
responsibilities, which change would cause Executive's position to become one of
lesser responsibility, importance, or scope from the position and attributes
thereof described in Section 1, above (C) a relocation of Executive's principal
place of employment by more than 30 miles from its location at the effective
date of this Agreement, or a material reduction in the benefits and perquisites
to the Executive from those being provided as of the effective date of this
Agreement, (D) liquidation or dissolution of the Bank or Holding Company other
than liquidations or dissolutions that are caused by reorganizations that do not
affect the status of Executive, or (E) breach of this Agreement by the Bank.
Upon the occurrence of any event described in clauses (ii)(A), (B), (C), (D) Or
(E), above, Executive shall have the right to elect to terminate his employment
under this Agreement by resignation upon sixty (60) days prior written notice
given within a reasonable period of time not to exceed four calendar months
after the initial event giving rise to said right to elect. Notwithstanding the
preceding sentence, in the event of a continuing breach of this Agreement by the
Bank, the Executive, after giving due notice within the prescribed time frame of
an initial event specified above, shall not waive any of his rights solely under
this Agreement and this Section 4 by virtue of the fact that Executive has
submitted his resignation but has remained in the employment of the Bank and is
engaged in good faith discussions to resolve any occurrence of an event
described in clauses (A), (B), (C), (D) and (E) above.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to the greater of the payments due for the remaining term of the Agreement or
three (3) times the average of the five preceding years' salary ("Salary," which
term shall include bonuses and any other cash compensation paid to the Executive
during any such year, and the amount of any benefits received pursuant to any
employee benefit plans on behalf of the Executive, maintained by the Bank during
any such year); provided however that if the Bank is not in compliance with its
minimum capital requirements or if such payments would cause the Bank's capital
to be reduced below its minimum capital requirements, such payments shall be
deferred until such time as the Bank is in capital compliance, and provided
further, that in no event shall total severance compensation from all sources
exceed three times the Executive's Salary for the immediately preceding year. At
the election of the Executive, which election is to be made within thirty (30)
days of an Event of Termination, such payments shall be made in a lump sum or
paid monthly during the remaining term of the agreement following the
Executive's termination. In the event that no election is made, payment to the
Executive will be made on a monthly basis during the remaining term of the
agreement. Such payments shall not be reduced in the event the Executive obtains
other employment following termination of employment.
(c) Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, provided that such benefits shall not be provided in the event they
should constitute an unsafe or unsound banking practice relating to executive
compensation and employment contracts pursuant to 12 C.F.R ss.ss. 563.39 and
563.161, as is now or hereafter in effect. Such coverage shall cease upon the
expiration of the remaining term of this Agreement.
(d) In the event that the Executive is receiving monthly payments pursuant
to Section 4(b) or (c) hereof, on an annual basis, thereafter, between the dates
of January 1 and January 31 of each year, Executive shall elect whether the
balance of the amount payable under the Agreement at that time shall be
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paid in a lump sum or on a pro rata basis. Such election shall be irrevocable
for the year for which such election is made.
5. CHANGE IN CONTROL
(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank or Holding Company, as set forth
below. For purposes of this Agreement, a "Change in Control" of the Bank or
Holding Company shall mean an event of a nature that: (i) would be required to
be reported in response to Item I of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a Change in
Control of the Bank or the Holding Company within the meaning of the Home
Owners' Loan Act of 1933 and the Rules and Regulations promulgated by the Office
of Thrift Supervision, as in effect on the date hereof; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (a) any "Person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Holding Company representing 25% or more of the Bank's or the Holding
Company's outstanding securities except that securities issued by the Bank, in
connection with its initial public offering, to the Holding Company and/or the
Bank's employee benefit plans and that continue to be held by such Holding
Company or plans shall not be counted in determining whether such Holding
Company or plans are the beneficial owner of more than 25% of the Bank's
securities; or (if) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least two-thirds of the
directors comprising the Incumbent Board or whose nomination for election by the
Holding Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (a),
considered as though he were a member of the Incumbent Board; or (c) a
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Holding Company or similar transaction in which the
Bank or Holding Company is not the resulting entity occurs; or (d) a tender
offer is made for 25% or more of the outstanding securities of the Bank or
Holding Company and shareholders owning beneficially or of record 25% or more of
the outstanding securities of the Bank or Holding Company have tendered or
offered to sell their shares pursuant to such tender offer. Notwithstanding the
foregoing, a "Change in Control" of the Bank or the Holding Company shall not be
deemed to have occurred if the Holding Company ceases to own at least 51% of all
outstanding shares of stock of the Bank in connection with a conversion of the
Holding Company from mutual to stock form.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred, Executive shall be entitled to the benefits
provided in paragraphs (c), (d), (e), (f), (g) and (h) of this Section 5 upon
his subsequent termination of employment at any time during the term of this
Agreement, regardless of whether such termination results from (i) his
resignation or (ii) his dismissal upon the Change in Control.
(c) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank shall pay Executive, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to the
greater of the payments due for the remaining term of the Agreement or 2.99
times the average of the five preceding years' Salary. Such payment shall be
made by the Bank on the Date of Termination. At the election of the Executive,
which election shall be made no later than the Date of Termination
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following a Change in Control, such payment may be made in a lump sum or paid in
equal monthly installments during the thirty-six (36) months following the
Executive's termination. In the event that no election is made, payment to the
Executive will be made on a monthly basis during the remaining term of the
Agreement
(d) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the Bank for Executive prior to his severance. Such coverage and
payments shall cease upon the expiration of thirty-six (36) months.
(e) Upon the occurrence of a Change in Control, Executive will be entitled
to any benefits granted to him pursuant to any Stock Option Plan of the Bank or
Holding Company
(f) Upon the occurrence of a Change in Control the Executive will be
entitled to any benefits awarded to hem under the Bank's Recognition and
Retention Plan or any restricted stock plan in effect.
(g) In the event that the Executive is receiving monthly payments pursuant
to Section S(c) hereof, on an annual basis, thereafter, between the dates of
January 1 and January 31 of each year, Executive shall elect whether the balance
of the amount payable under the Agreement at that time shall be paid in a lump
sum or on a pro rata basis. Such election shall be irrevocable for the year for
which such election is made.
(h) Notwithstanding the preceding paragraphs of this Section 5, in the
event that:
(i) the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits")
would be deemed to include an "excess parachute payment" under
Section 280G of the Code or any successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the
"Non-Triggering Amount"), the value of which is one dollar
($1.00) less than an amount equal to the total amount of
payments permissible under Section 280G of the Code or any
successor thereto,
then the Termination Benefits to be paid to Executive shall be so
reduced so as to be a Non-Triggering Amount.
(i) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
(j) Any payments made to Executive pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
ss. 1828(k) and any regulations promulgated thereunder.
(k) The Executive shall not be entitled to any payments pursuant to this
Section 5 if the Bank is not in compliance with its minimum capital requirements
or if such payments would cause the Bank's capital to be reduced below its
minimum capital requirements, such payments shall be deferred until such
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times as the Bank is in capital compliance and provided further, that in no
event shall total severance compensation from all sources exceed three times the
Executive's Salary for the immediately preceding year.
6. TERMINATION UPON RETIREMENT OR DISABILITY
Termination by the Bank of the Executive based on "Retirement" shall mean
termination in accordance with the Bank's retirement policy or in accordance
with any retirement arrangement established with Executive's consent with
respect to him. Upon termination of Executive upon Retirement, Executive shall
be entitled to all benefits under any retirement plan of the Bank and other
plans to which Executive is a party.
Termination by the Bank of Executive's employment based on "Disability"
shall mean termination because of any physical or mental impairment which
qualifies the Executive for disability benefits under the applicable long-term
disability plan maintained by the Bank or, if no such plan applies, which would
qualify the Executive for disability benefits under the federal social security
system.
7. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willfill 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. In determining incompetence, the acts
or omissions shall be measured against standards generally prevailing in the
savings institutions industry. For purposes of this paragraph, no act or failure
to act on the part of Executive shall be considered "willful" unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Bank. Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of a majority of the
disinterested members of the Board at a meeting of the Board called and held for
that purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation of other benefits for
any period after Termination for Cause. Any stock options granted to Executive
under any stock option plan of the Bank, the Holding Company or any subsidiary
or affiliate thereof, shall become null and void effective upon Executive's
receipt of Notice of Termination for Cause pursuant to Section 8 hereof, and
shall not be exercisable by Executive at any time subsequent to such Termination
for Cause.
8. NOTICE
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
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(b) "Date of Terminations" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall be the date
such Notice of Termination is given).
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control, Termination for Cause, or voluntary termination by the
Executive in which case the date of termination shall be the date specified in
the Notice, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal having expired and no appeal having
been perfected) and provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the Bank
will continue to pay Executive his full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, Base
Salary) and continue Executive as a participant in all compensation, benefit and
insurance plans in which he was participating when the notice of dispute was
given, until the dispute is finally resolved in accordance with this Agreement,
provided such dispute is resolved within nine months after the Date of
Termination specified in the Notice or Termination. If such dispute is not
resolved within such nine- month period, the Bank shall not be obligated pending
final resolution of such dispute to pay Executive compensation and other
payments after nine months from the Date of the Termination specified in the
Notice of Termination. Amounts paid under this Section are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement. Notwithstanding provisions of
subsection (c), and paragraph 7, the Board of Directors may immediately suspend
the Executive from the Association's affairs should grounds exist for
Termination for Cause.
9. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 9 during
the term of this Agreement and for one (1) full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party.
10. NON-COMPETITION
(a) Upon any termination of Executive's employment hereunder pursuant to
Section 4(c) hereof, Executive agrees not to compete with the Bank and/or the
Holding Company for a period of one (1) year following such termination in any
city, town or county in which the Bank and/or the Holding Company has an office
or has filed an application for regulatory approval to establish an office,
determined as of the effective date of such termination, except as agreed to
pursuant to a resolution duly adopted by the Board. Executive agrees that during
such period and within said cities, towns and counties, Executive shall not work
for or advise, consult or otherwise serve with, directly or indirectly, any
entity whose business materially competes with the depository, lending or other
business activities of the Bank and/or the Holding Company. The parties hereto,
recognizing that irreparable injury will result to the Bank and/or the Holding
Company, its business and property in the event of Executive's breach of this
Subsection 10(a)
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agree that in the event of any such breach by Executive, the Bank and/or the
Holding Company will be entitled, in addition to any other remedies and damages
available, to an injunction to restrain the violation hereof by Executive,
Executive's partners, agents, servants, employers, employees and all persons
acting for or with Executive. Nothing herein will be construed as prohibiting
the Bank and/or the Holding Company from pursuing any other remedies available
to the Bank and/or the Holding Company for such breach or threatened breach,
including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank;
Executive may disclose any information requested, in writing, by federal banking
regulatory agencies; and Executive may disclose any information regarding the
Bank or the Holding Company which is otherwise publicly available. In the event
of a breach or threatened breach by the Executive of the Provisions of this
Section 10, the Bank will be entitled to an injunction restraining Executive
from disclosing, in whole or in part, the knowledge of the past, present,
planned or considered business activities of the Bank or affiliates thereof, or
from rendering any services to any person film, corporation, other entity to
whom such knowledge, in whole or in part has been disclosed or is threatened to
be disclosed. Nothing herein will be construed as prohibiting the Bank from
pursuing any other remedies available to the Bank for such breach or threatened
breach including the recovery of damages from Executive.
11. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Holding Company, however,
guarantees payment and provision of all amounts and benefits due hereunder to
Executive and, if such amounts and benefits due from the Bank are not timely
paid or provided by the Bank, such amounts and benefits shall be paid or
provided by the Holding Company.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.
13. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
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(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
14. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the parry charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
15. REQUIRED PROVISIONS
(a) The Bank's board of directors may terminate the Executive's employment
at any time, but any termination by the Bank, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement. Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause.
(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 U.S.C. ss.ss. 1828(e)(3)) or 8(g) ( 12 U.S.C.
ss. 1828(g)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the Bank's
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the Executive all or part of
the compensation withheld while their contract obligations were suspended and
(ii) reinstate (in whole or in part) any of the obligations which were
suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. ss.ss. 1828(e)) or 8(g) (12 U.S.C. ss. 1828(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 U.S.C. ss.
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this conbact shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by Director of the OTS, at
the time 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) (12 U.S.C. ss.
1823(c)) of the Federal Deposit Insurance Act, as
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amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1982; or (ii) by the Office of Thrift Supervision ("OTS") at the time the OTS or
its District Director approves a supervisory merger to resolve problems related
to the operations of the Bank or when the Bank is determined by the OTS or FDIC
to be in an unsafe or unsound condition. Any rights of the parties that have
already vested, however, shall not be affected by such action.
16. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW
This Agreement shall be governed by the laws of the State of Arkansas but
only to the extent not superseded by federal law.
19. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
20. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
reimbursed by the Bank, provided that the dispute or interpretation has been
settled by Executive and the Bank or resolved in the Executive's favor.
21. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Bank (whether or not he continues to be a director or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgments, court costs
10
<PAGE>
and attorneys' fees and the cost of reasonable settlements (such settlements
must be approved by the Board of Directors of the Bank). If such action, suit or
proceeding is brought against Executive in his capacity as an officer or
director of the Bank, however, such indemnification shall not extend to matters
as to which Executive is finally adjudged to be liable for willfull misconduct
in the performance of his duties. No Indemnification shall be paid that would
violate 12 U.S.C. 1828(K) or any regulations promulgated thereunder, or 12 C.F.R
545.121.
22. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Holding Company,
expressly and unconditionally to assume and agree to perform the Bank's
obligations under this Agreement, in the same manner and to the same extent that
the Bank would be required to perform if no such succession or assignment had
taken place.
11
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
their seals to be affixed hereunto by its duly authorized officer, and Executive
has signed this Agreement, on the day and date first set forth above.
ATTEST: POCAHONTAS FEDERAL SAVINGS AND LOAN
ASSOCIATION
- ----------------------------------- -------------------------------------
President Chairman of the Board
WITNESS:
- ----------------------------------- -------------------------------------
President James A. Edington, Executive
12
<PAGE>
EXHIBIT 10.3
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
EMPLOYMENT AGREEMENT
This Agreement is made effective as of the 1st day of October, 1996, by
and between Pocahontas Federal Savings and Loan Association (the "Bank"), a
federally chartered savings institution, with its principal administrative
office at 203 West Broadway, Pocahontas, Arkansas, and Dwayne Powell (the
"Executive"). Any reference to "Holding Company" herein shall mean Pocahontas
Federal Mutual Holding Company, Inc. or any successor thereto.
WHEREAS, the Bank wishes to assure itself of the services of Executive for
the period provided in this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Bank on a
full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:
1. POSITION AND RESPONSIBILITIES
During the period of his employment hereunder, Executive agrees to serve
as Chief Financial Officer of the Bank. During said period, Executive also
agrees to serve, if elected, as an officer and director of any subsidiary or
affiliate of the Bank. Failure to reelect Executive as Chief Financial Officer
without the consent of the Executive during the term of this Agreement shall
constitute a breach of this Agreement.
2. TERMS AND DUTIES
(a) On each October 1 commencing on October 1, 1996 and continuing at each
anniversary date thereafter, the Agreement shall renew for an additional year,
subject to the approval of the Board of Directors, such that the remaining term
shall be three (3) years unless written notice is provided to Executive at least
ten (10) days and not more than thirty (30) days prior to any such anniversary
date, that his employment shall cease at the end of twenty-four (24) months
following such anniversary date. Prior to each notice period for non-renewal,
the disinterested members of the Board of Directors of the Bank ("Board") will
conduct a comprehensive performance evaluation and review of the Executive for
purposes of determining whether to extend the Agreement, and the results thereof
shall be included in the minutes of the Board's meeting.
(b) During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other of rices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the Bank,
or materially affect the performance of Executive's duties pursuant to this
Agreement.
3. COMPENSATION AND REIMBURSEMENT
<PAGE>
(a) The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The Bank
shall pay Executive as compensation a salary of not less than $75,000 per year
("Base Salary"). Such Base Salary shall be payable biweekly. During the period
of this Agreement, Executive's Base Salary shall be reviewed at least annually;
the first such review will be made no later than the first September 30th after
the effective date of the Agreement and continuing each September 30th
thereafter. Such review shall be conducted by a Committee designated by the
Board, and the Board may increase Executive's Base Salary. In addition to the
Base Salary provided in this Section 3(a), the Bank shall provide Executive at
no cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank. As a condition of employment,
Exeutive waives the right of salary review for a two year period following
Executive's employment.
(b) Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plans, medical coverage or any other employee benefit plan
or arrangement made available by the Bank in the future to its senior executives
and key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.
Executive will be entitled to incentive compensation and bonuses as provided in
any plan of the Bank in which Executive is eligible to participate. Nothing paid
to the Executive under any such plan or arrangement will be deemed to be in lieu
of other compensation to which the Executive is entitled under this Agreement.
(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Bank shall pay or reimburse Executive for all reasonable travel
and other reasonable expenses incurred by Executive performing his obligations
under this Agreement and may provide such additional compensation in such form
and such amounts as the Board may from time to time determine.
(d) Compensation and reimbursement to be paid pursuant to paragraphs (a),
(b) and (c) of this Section 3 shall be paid by the Bank and the Holding Company,
respectively on a pro rata basis based upon the amount of semice the Executive
devotes to the Bank and Holding Company, respectively.
(e) Upon completion of three years continuous service from the date of
this agreement, Executive will be entitled to receive 500 shares of PFSL stock,
free and clear of all encumbrances.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION
The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 8 and 15.
(a) The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during the Executive's term of
employment under this Agreement. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank or the Holding Company of Executive's full-time
employment hereunder for any reason other than, (A) Disability or Retirement as
defined in Section 6 below, (B) a Change in Control, as defined in Section 5(a)
hereof, or (C) for Termination for Cause as defined in Section 7 hereof; or (ii)
Executive's resignation from the Bank's employ, upon any (A) failure to elect or
reelect or to appoint or reappoint Executive as Chief Financial Officer, (B)
material change in Executive's function, duties, or responsibilities, which
change would cause Executive's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Section 1, above, (C) a relocation of Executive's principal place of employment
by more than 30 miles from its location at the effective date
<PAGE>
of this Agreement, or a material reduction in the benefits and perquisites to
the Executive from those being provided as of the effective date of this
Agreement, (D) liquidation or dissolution of the Bank or Holding Company other
than liquidations or dissolutions that are caused by reorganizations that do not
affect the status of Executive, or (E) breach of this Agreement by the Bank.
Upon the occurrence of any event described in clauses (ii)(A), (B), (C), (D) or
(E), above, Executive shall have the right to elect to terminate his employment
under this Agreement by resignation upon sixty (60) days prior written notice
given within a reasonable period of time not to exceed four calendar months
after the initial event giving rise to said right to elect. Notwithstanding the
preceding sentence, in the event of a continuing breach of this Agreement by the
Bank, the Executive, after giving due notice within the prescribed time frame of
an initial event specified above, shall not waive any of his rights solely under
this Agreement and this Section 4 by virtue of the fact that Executive has
submitted his resignation but has remained in the employment of the Bank and is
engaged in good faith discussions to resolve any occurrence of an event
described in clauses (A), (B), (C), (D) and (E) above.
(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to the greater of the payments due for the remaining term of the Agreement or
three (3) times the average of the five preceding years' salary ("Salary," which
term shall include bonuses and any other cash compensation paid to the Executive
during any such year, and the amount of any benefits received pursuant to any
employee benefit plans on behalf of the Executive, maintained by the Bank during
any such year); provided, however, that if the Bank is not in compliance with
its minimum capital requirements or if such payments would cause the Bank's
capital to be reduced below its minimum capital requirements, such payments
shall be deferred until such time as the Bank is in capital compliance, and
provided further, that in no event shall total severance compensation from all
sources exceed three times the Executive's Salary for the immediately preceding
year. At the election of the Executive, which election is to be made within
thirty (30) days of an Event of Termination, such payments shall be made in a
lump sum or paid monthly during the remaining term of the agreement following
the Executive's termination. In the event that no election is made, payment to
the Executive will be made on a monthly basis during the remaining term of the
agreement. Such payments shall not be reduced in the event the Executive obtains
other employment following termination of employment.
(c) Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Bank for Executive prior to his
termination, provided that such benefits shall not be provided in the event they
should constitute an unsafe or unsound banking practice relating to executive
compensation and employment contracts pursuant to 12 C.F.R. ss.ss. 563.39 and
563.161, as is now or hereafter in effect. Such coverage shall cease upon the
expiration of the remaining term of this Agreement.
(d) In the event that the Executive is receiving monthly payments pursuant
to Section 4(b) or (c) hereof, on an annual basis, thereafter, between the dates
of January 1 and January 31 of each year, Executive shall elect whether the
balance of the amount payable under the Agreement at that time shall be paid in
a lump sum or on a pro rata basis. Such election shall be irrevocable for the
year for which such election is made.
5. CHANGE IN CONTROL
(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank or Holding Company, as set forth
below. For purposes of this Agreement, a "Change
<PAGE>
in Control" of the Bank or Holding Company shall mean an event of a nature that:
(i) would be required to be reported in response to Item 1 of the current report
on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act'); or (ii) results in a
Change in Control of the Bank or the Holding Company within the meaning of the
Home Owners' Loan Act of 1933 and the Rules and Regulations promulgated by the
Office of Thrift Supervision, as in effect on the date hereof; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (a) any "Person' (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Bank or
the Holding Company representing 25% or more of the Bank's or the Holding
Company's outstanding securities except that securities issued by the Bank, in
connection with its initial public offering, to the Holding Company and/or the
Bank's employee benefit plans and that continue to be held by such Holding
Company or plans shall not be counted in determining whether such Holding
Company or plans are the beneficial owner of more than 25% of the Bank's
securities; or (b) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election was approved by a vote of at least two-thirds of the
directors comprising the Incumbent Board or whose nomination for election by the
Holding Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or (c) a
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Holding Company or similar transaction in which the
Bank or Holding Company is not the resulting entity occurs; or (d) a tender
offer is made for 25% or more of the outstanding securities of the Bank or
Holding Company and shareholders owning beneficially or of record 25% or more of
the outstanding securities of the Bank or Holding Company have tendered or
offered to sell their shares pursuant to such tender offer. Notwithstanding the
foregoing, a "Change in Control" of the Bank or the Holding Company shall not be
deemed to have occurred if the Holding Company ceases to own at least 51 % of
all outstanding shares of stock of the Bank in connection with a conversion of
the Holding Company from mutual to stock form.
(b) If any of the events described in Section 5(a) hereof constituting a
Change in Control have occurred, Executive shall be entitled to the benefits
provided in paragraphs (c), (d), (e), (f), (g) and (h) of this Section 5 upon
his subsequent termination of employment at any time during the term of this
Agreement, regardless of whether such termination results from (i) his
resignation or (ii) his dismissal upon the Change in Control.
(c) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank shall pay Executive, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to the
greater of the payments due for the remaining term of the Agreement or 2.99
times the average of the five preceding years' Salary. Such payment shall be
made by the Bank on the Date of Termination. At the election of the Executive,
which election shall be made no later than the Date of Termination following a
Change in Control, such payment may be made in a lump sum or paid in equal
monthly installments during the thirty-six (36) months following the Executive's
termination. In the event that no election is made, payment to the Executive
will be made on a monthly basis during the remaining term of the Agreement.
(d) Upon the occurrence of a Change in Control followed by the Executive's
termination of employment, the Bank will cause to be continued life, medical,
dental and disability coverage substantially identical to coverage maintained by
the Bank for Executive prior to his severance. Such coverage and payments shall
cease upon the expiration of thirty-six (36) months.
<PAGE>
(e) Upon the occurrence of a Change in Control, Executive Will be entitled
to any benefits granted to him pursuant to any Stock Option Plan of the Bank or
Holding Company
(f) Upon the occurrence of a Change in Control the Executive will be
entitled to any benefits awarded to him under the Bank's Recognition and
Retention Plan or any restricted stock plan in effect.
(g) In the event that the Executive is receiving monthly payments pursuant
to Section 5(c) hereof, on an annual basis, thereafter, between the dates of
January 1 and January 31 of each year, Executive shall elect whether the balance
of the amount payable under the Agreement at that time shall be paid in a lump
sum or on a pro rata basis. Such election shall be irrevocable for the year for
which such election is made.
(h) Notwithstanding the preceding paragraphs of this Section 5, in the
event that:
(i) the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits")
would be deemed to include an "excess parachute payment" under
Section 280G of the Code or any successor thereto, and
(ii) if such Termination Benefits were reduced to an amount (the
"Non-Triggering Amount"), the value of which is one dollar
($1.00) less than an amount equal to the total amount of
payments permissible under Section 280G of the Code or any
successor thereto,
then the Termination Benefits to be paid to Executive shall be so
reduced so as to be a Non-Triggering Amount.
(i) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.
(j) Any payments made to Executive pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with 12 U.S.C.
ss. 1828(k) and any regulations promulgated thereunder.
(k) The Executive shall not be entitled to any payments pursuant to this
Section 5 if the Bank is not in compliance with its minimum capital requirements
or if such payments would cause the Bank's capital to be reduced below its
minimum capital requirements, such payments shall be deferred until such times
as the Bank is in capital compliance and provided further, that in no event
shall total severance compensation from all sources exceed three times the
Executive's Salary for the immediately preceding year.
6. TERMINATION UPON RETIREMENT OR DISABILITY
Termination by the Bank of the Executive based on "Retirement" shall mean
termination in accordance with the Bank's retirement policy or in accordance
with any retirement arrangement established with Executive's consent with
respect to him. Upon termination of Executive upon Retirement, Executive shall
be entitled to all benefits under any retirement plan of the Bank and other
plans to which Executive is a party.
<PAGE>
Termination by the Bank of Executive's employment based on "Disability"
shall mean termination because of any physical or mental impairment which
qualifies the Executive for disability benefits under the applicable long-term
disability plan maintained by the Bank or, if no such plan applies, which would
qualify the Executive for disability benefits under the federal social security
system.
7. TERMINATION FOR CAUSE
The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the acts
or omissions shall be measured against standards generally prevailing in the
savings institutions industry. For purposes of this paragraph, no act or failure
to act on the part of Executive shall be considered "willful" unless done, or
omitted to be done, by the Ex ecutive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Bank. Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative of a majority of the
disinterested members of the Board at a meeting of the Board called and held for
that purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. Any stock options granted to Executive
under any stock option plan of the Bank, the Holding Company or any subsidiary
or affiliate thereof, shall become null and void effective upon Executive's
receipt of Notice of Termination for Cause pursuant to Section 8 hereof, and
shall not be exercisable by Executive at any time subsequent to such Termination
for Cause.
8. NOTICE
(a) Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall be the date
such Notice of Termination is given).
(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control, Termination for Cause, or voluntary termination by the
Executive in which case the date of termination shall be the date specified in
the Notice, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal having expired and no appeal having
been perfected) and provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the Bank
will continue to pay Executive his full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, Base
Salary) and
<PAGE>
continue Executive as a participant in all compensation, benefit and insurance
plans in which he was participating when the notice of dispute was given, until
the dispute is finally resolved in accordance with this Agreement, provided such
dispute is resolved within nine months after the Date of Termination specified
in the Notice or Termination. If such dispute is not resolved within such nine-
month period, the Bank shall not be obligated pending final resolution of such
dispute to pay Executive compensation and other payments after nine months from
the Date of the Termination specified in the Notice of Termination. Amounts paid
under this Section are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement. Notwithstanding provisions of subsection (c), and paragraph 7, the
Board of Directors may immediately suspend the Executive from the Association's
affairs should grounds exist for Termination for Cause.
9. POST-TERMINATION OBLIGATIONS
(a) All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 9 during
the term of this Agreement and for one (1) full year after the expiration or
termination hereof.
(b) Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party.
10. NON-COMPETITION
(a) Upon any termination of Executive's employment hereunder pursuant to
Section 4(c) hereof, Executive agrees not to compete with the Bank and/or the
Holding Company for a period of one (1) year following such termination in any
city, town or county in which the Bank and/or the Holding Company has an office
or has filed an application for regulatory approval to establish an office,
determined as of the effective date of such termination, except as agreed to
pursuant to a resolution duly adopted by the Board. Executive agrees that during
such period and within said cities, towns and counties, Executive shall not work
for or advise, consult or otherwise serve with, directly or indirectly, any
entity whose business materially competes with the depository, lending or other
business activities of the Bank and/or the Holding Company. The parties hereto,
recognizing that irreparable injury will result to the Bank and/or the Holding
Company, its business and property in the event of Executive's breach of this
Subsection 10(a) agree that in the event of any such breach by Executive, the
Bank and/or the Holding Company will be entitled, in addition to any other
remedies and damages available, to an injunction to restrain the violation
hereof by Executive, Executive's partners, agents, servants, employers,
employees and all persons acting for or with Executive. Nothing herein will be
construed as prohibiting the Bank and/or the Holding Company from pursuing any
other remedies available to the Bank and/or the Holding Company for such breach
or threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Bank;
Executive may disclose any information requested, in writing, by federal banking
regulatory agencies; and Executive may disclose any information regarding the
Bank
<PAGE>
or the Holding Company which is otherwise publicly available. In the event of a
breach or threatened breach by the Executive of the Provisions of this Section
l0, the Bank will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof, or from
rendering any services to any person, firm, corporation, other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting the Bank from
pursuing any other remedies available to the Bank for such breach or threatened
breach, including the recovery of damages from Executive.
11. SOURCE OF PAYMENTS
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Holding Company, however,
guarantees payment and provision of all amounts and benefits due hereunder to
Executive and, if such amounts and benefits due from the Bank are not timely
paid or provided by the Bank, such amounts and benefits shall be paid or
provided by the Holding Company.
12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.
13. NO ATTACHMENT
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.
14. MODIFICATION AND WAIVER
(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.
15. REQUIRED PROVISIONS
<PAGE>
(a) The Bank's board of directors may terminate the Executive's employment
at any time, but any termination by the Bank, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement. Executive shall not have the right to receive compensation or
other benefits for any period after Termination for Cause.
(b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 U.S.C. ss.ss. 1828(e)(3)) or 8(g) (12 U.S.C.
ss. 1828(g)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the Bank's
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the Executive all or part of
the compensation withheld while their contract obligations were suspended and
(ii) reinstate (in whole or in part) any of the obligations which were
suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. ss.ss. 1828(e)) or 8(g) (12 U.S.C. ss. 1828(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.
(d) If the Bank is in default as defined in Section 3(x) (12 U.S.C. ss.
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.
(e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by Director of the OTS, at
the time 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) (12 U.S.C. ss.
1823(c)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1982; or (ii) by the Office
of Thrift Supervision ("HOTS") at the time the OTS or its District Director
approves a supervisory merger to resolve problems related to the operations of
the Bank or when the Bank is determined by the OTS or FDIC to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.
16. SEVERABILITY
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.
18. GOVERNING LAW
<PAGE>
This Agreement shall be governed by the laws of the State of Arkansas but
only to the extent not superseded by federal law.
19. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with the
rules of the American Arbitration Association then in effect. judgment be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
20. PAYMENT OF LEGAL FEES
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank, provided that the dispute or interpretation has been
settled by Executive and the Bank or resolved in the Executive's favor.
21. INDEMNIFICATION
The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Bank (whether or not he continues to be a director or officer
at the time of incurring such expenses or liabilities), such expenses and
liabilities to include, but not be limited to, judgments, court costs and
attomeys' fees and the cost of reasonable settlements (such settlements must be
approved by the Board of Directors of the Bank). If such action, suit or
proceeding is brought against Executive in his capacity as an officer or
director of the Bank, however, such indemnification shall not extend to matters
as to which Executive is finally adjudged to be liable for willful misconduct in
the performance of his duties. No Indemnification shall be paid that would
violate 12 U.S.C. 1828(K) or any regulations promulgated thereunder, or 12
C.F.R. 545.121.
22. SUCCESSOR TO THE BANK
The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Holding Company,
expressly and unconditionally to assume and agree to perform the Bank's
obligations under this Agreement, in the same manner and to the same extent that
the Bank would be required to perfomm if no such succession or assignment had
taken place.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
their seals to be affixed hereunto by its duly authorized officer, and Executive
has signed this Agreement, on the day and date first set forth above.
ATTEST: POCAHONTAS FEDERAL SAVINGS AND LOAN
ASSOCIATION
- ----------------------------------- -------------------------------------
Secretary Chairman of the Board
WITNESS:
- ----------------------------------- -------------------------------------
Secretary Dwayne Powell, Executive
<PAGE>
RESTATED SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
FOR
SKIP MARTIN
<PAGE>
RESTATED SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
FOR SKIP MARTIN
This Restated Supplemental Retirement Income Agreement (the "Agreement"),
effective as of the 1st day of January, 1998, supercedes the Supplemental
Retirement Income Agreement, entered into the 28th day of February, 1997, and
formalizes the understanding by and between POCAHONTAS FEDERAL SAVINGS AND LOAN
ASSOCIATION (the "Bank"), a federally chartered savings association, and SKIP
MARTIN, hereinafter referred to as "Participant".
W I T N E S S E T H :
WHEREAS, the Participant is employed by the Bank and serves on the board
of directors; and
WHEREAS, the Bank recognizes the valuable services heretofore performed by
the Participant and wishes to encourage continued employment as well as
continued service on the board of directors; and
WHEREAS, the Participant wishes to be assured that he will be entitled to
a certain amount of additional compensation for some definite period of time
from and after retirement or other termination of employment and wishes to
provide his beneficiary with benefits from and after death; and
WHEREAS, the Bank and the Participant wish to provide the terms and
conditions upon which the Bank shall pay such additional compensation to the
Participant after retirement or other termination of employment and/or death
benefits to his beneficiary after death; and
WHEREAS, the Bank has adopted this Restated Supplemental Retirement Income
Agreement which controls all issues relating to benefits as described herein
and which supercedes the Supplemental Retirement Income Agreement entered into
on the 28th day of February, 1997;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the Bank and the Participant agree as follows:
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SECTION I
DEFINITIONS
When used herein, the following words and phrases shall have the meanings
below unless the context clearly indicates otherwise:
1.1 "Accrued Benefit Account" shall be represented by the bookkeeping entries
required to record the Participant's (i) Phantom Contributions plus (ii)
accrued interest, equal to the Interest Factor, earned to-date on such
amounts. However, neither the existence of such bookkeeping entries nor
the Accrued Benefit Account itself shall be deemed to create either a
trust of any kind, or a fiduciary relationship between the Bank and the
Participant or any Beneficiary.
1.2 "Act" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.3 "Bank" means POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION and any
successor thereto.
1.4 "Beneficiary" means the person or persons (and their heirs) designated as
Beneficiary in Exhibit B of this Agreement to whom the deceased
Participant's benefits are payable. If no Beneficiary is so designated,
then the Participant's Spouse, if living, will be deemed the Beneficiary.
If the Participant's Spouse is not living, then the Children of the
Participant will be deemed the Beneficiaries and will take on a per
stirpes basis. If there are no Children, then the Estate of the
Participant will be deemed the Beneficiary.
1.5 "Benefit Age" means the later of: (i) Participant's sixtieth (60th)
birthday or (ii) the actual date the Participant's full-time employment
with the Bank terminates.
1.6 "Benefit Eligibility Date" means the date on which the Participant is
entitled to receive any benefit(s) pursuant to Section(s) III or V of this
Agreement. It shall be the first day of the month following the month in
which the Participant attains his Benefit Age.
1.7 "Benefit Period" means the time frame during which certain benefits
payable hereunder shall be distributed. Payments shall be made in monthly
installments commencing on the first day of the month following the
occurrence of the event which triggers distribution and continuing for a
period of two
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<PAGE>
hundred forty (240) months. Should the Participant make a Timely
Election to receive a lump sum benefit payment, the Participant's Benefit
Period shall be deemed to be one (1) month.
1.8 "Board of Directors" means the board of directors of the Bank.
1.9 "Cause" means personal dishonesty, willful misconduct, willful
malfeasance, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses),
or final cease-and-desist order, material breach of any provision of this
Agreement, or gross negligence in matters of material importance to the
Bank.
1.10 "Change in Control" of the Bank shall mean and include the following:
(1) a Change in Control of a nature that would be required to be reported
in response to Item 1(a) of the current report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or
(2) a change in control of the Bank within the meaning of 12 C.F.R.
574.4; or
(3) a Change in Control at such time as
(i) any "person" (as the term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Bank representing Twenty
Percent (20.0%) or more of the combined voting power of the
Bank's outstanding securities ordinarily having the right to
vote at the election of directors, except for any stock
purchased by the Bank's Employee Stock Ownership Plan and/or
trust; or
(ii) individuals who constitute the Board of Directors on the date
hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election
was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board, or whose nomination
for election by the Bank's stockholders was approved by the
Bank's nominating committee which is comprised of members of the
Incumbent Board, shall be, for purposes of this clause (ii),
considered as though he were a member of the Incumbent Board; or
(iii)merger, consolidation, or sale of all or substantially all
of the assets of the Bank occurs; or
(iv) a proxy statement is issued soliciting proxies from the
stockholders of the Bank by someone other than the current
management of the Bank, seeking member stockholder
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approval of a plan of reorganization, merger, or consolidation
of the Bank with one or more corporations as a result of which
the outstanding shares of the class of the Bank's securities are
exchanged for or converted into cash or property or securities
not issued by the Bank.
1.11 "Children" means all natural or adopted children of the Participant, and
issue of any predeceased child or children.
1.12 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.13 "Contribution(s)" means those annual contributions which the Bank is
required to make to the Retirement Income Trust Fund on behalf of the
Participant in accordance with Subsection 2.1(a) and in the amounts set
forth in Exhibit A of the Agreement.
1.14 (a) "Disability Benefit" means the benefit payable to the Participant
following a determination, in accordance with Subsection 6.1(a), that he
is no longer able, properly and satisfactorily, to perform his duties at
the Bank.
(b) "Disability Benefit-Supplemental" (if applicable) means the
benefit payable to the Participant's Beneficiary upon the
Participant's death, in accordance with Subsection 6.1(b).
1.15 "Effective Date" of this restatement shall be January 1, 1998. The
Agreement was initially adopted on February 28, 1997.
1.16 "Estate" means the estate of the Participant.
1.17 "Interest Factor" means monthly compounding, discounting or annuitizing,
as applicable, at a rate set forth in Exhibit A.
1.18 "Phantom Contributions" means those annual Contributions which the Bank
is no longer required to make on behalf of the Participant to the
Retirement Income Trust Fund. Rather, once the Participant has exercised
the withdrawal rights provided for in Subsection 2.2, the Bank shall be
required to record the annual amounts set forth in Exhibit A of the
Agreement in the Participant's Accrued Benefit Account, pursuant to
Subsection 2.1.
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1.19 "Plan Year" shall mean February 28th, 1996 through December 31, 1996,
for the first Plan Year. Thereafter, the term shall mean the twelve
(12) month period commencing January 1, 1997 and each consecutive
twelve (12) month period thereafter.
1.20 "Retirement Age" means the Participant's sixtieth (60th) birthday
provided; however, that the Participant's actual retirement from
full-time employment may occur at any later date mutually agreed
upon by the parties.
1.21 "Retirement Income Trust Fund" means the trust fund account established
by the Participant and into which annual Contributions will be made by
the Bank on behalf of the Participant pursuant to Subsection 2.1. The
contractual rights of the Bank and the Participant with respect to the
Retirement Income Trust Fund shall be outlined in a separate writing to
be known as the Skip Martin Grantor Trust agreement.
1.22 "Spouse" means the individual to whom the Participant is legally married
at the time of the Participant's death.
1.23 "Supplemental Retirement Income Benefit" means an annual amount (before
taking into account federal and state income taxes), payable in monthly
installments throughout the Benefit Period. Such benefit is projected
pursuant to the Agreement for the purpose of determining the
Contributions to be made to the Retirement Income Trust Fund (or Phantom
Contributions to be recorded in the Accrued Benefit Account). The
annual Contributions and Phantom Contributions have been actuarially
determined, using the assumptions set forth in Exhibit A, in order to
fund for the projected Supplemental Retirement Income Benefit. The
Supplemental Retirement Income Benefit for which Contributions (or
Phantom Contributions) are being made (or recorded) is set forth in
Exhibit A.
1.24 "Timely Election" means the Participant has made an election to change
the form of his benefit payment(s) by filing with the Administrator a
Notice of Election to Change Form of Payment (Exhibit C of this
Agreement), such election having been made prior to the event which
triggers distribution and at least two (2) years prior to the
Participant's Benefit Eligibility Date; provided however, that if all
payments to the participant shall be made from the Retirement Income
Trust Fund, then a Timely Election is an election made at any time.
5
<PAGE>
SECTION II
BENEFITS - GENERALLY
2.1 (a) Retirement Income Trust Fund and Accrued Benefit Account. The
Participant shall establish the Skip Martin Grantor Trust into which the
Bank shall be required to make annual Contributions on the Participant's
behalf, pursuant to Exhibit A and this Section II of the Agreement. A
trustee shall be selected by the Participant. The trustee shall maintain
an account, separate and distinct from the Participant's personal
contributions, which account shall constitute the Retirement Income Trust
Fund. The trustee shall be charged with the responsibility of investing
all contributed funds. Distributions from the Retirement Income Trust
Fund of the Skip Martin Grantor Trust shall be made by the trustee to the
Participant, for purposes of payment of any income taxes due and owing on
Contributions by the Bank to the Retirement Income Trust Fund, if any,
and on any taxable earnings associated with such Contributions which the
Participant shall be required to pay from year to year under applicable
law prior to actual receipt of any benefit payments from the Retirement
Income Trust Fund. If the Participant exercises his withdrawal rights
pursuant to Subsection 2.2, the Bank's obligation to make Contributions to
the Retirement Income Trust Fund shall cease and the Bank's obligation to
record Phantom Contributions in the Accrued Benefit Account shall
immediately commence pursuant to Exhibit A and this Section II of the
Agreement. To the extent this Agreement is inconsistent with the Skip
Martin Grantor Trust agreement, this Agreement shall supersede the Skip
Martin Grantor Trust agreement.
The annual Contributions (or Phantom Contributions) required to be made by
the Bank to the Retirement Income Trust Fund (or recorded by the Bank in
the Accrued Benefit Account) have been fixed and determined and are set
forth in Exhibit A which is attached hereto and incorporated herein by
reference. Contributions shall be made by the Bank to the Retirement
Income Trust Fund (i) within thirty (30) days of establishment of such
trust, and (ii) within the first ten (10) days of the beginning of each
subsequent Plan Year, unless this Section expressly provides otherwise.
Phantom Contributions, if any, shall be recorded in the Accrued Benefit
Account within the first ten (10) days of the beginning of each applicable
Plan Year, unless this Section expressly provides otherwise. Phantom
Contributions shall accrue interest at a rate equal to the Interest Factor
during the Benefit Period, until the balance of the Accrued Benefit
Account has been fully distributed. Interest on any and all Phantom
Contributions shall not commence until such Benefit Period commences.
6
<PAGE>
(b) Withdrawal Rights Not Exercised.
(1) Contributions Made Annually
If the Participant does not exercise any withdrawal rights pursuant to
Subsection 2.2, the annual Contributions to the Retirement Income Trust
Fund included on Exhibit A shall continue each year, unless this
Subsection 2.1(b) specifically states otherwise, until the earlier of (i)
the last Plan Year that Contributions are required pursuant to Exhibit A,
or (ii) the Plan Year of the Participant's termination of employment.
(2) Termination Following a Change in Control
If the Participant does not exercise his withdrawal rights pursuant to
Subsection 2.2 and a Change in Control occurs at the Bank, followed at any
time by either (i) the Participant's involuntary termination of
employment, or (ii) the Participant's voluntary termination of employment
after: (A) a material change in the Participant's function, duties, or
responsibilities, which change would cause the Participant's position to
become one of lesser responsibility, importance, or scope from the
position the Participant held at the time of the Change in Control, (B) a
relocation of the Participant's principal place of employment by more than
thirty (30) miles from its location prior to the Change in Control, or (C)
a material reduction in the benefits and perquisites to the Participant
from those being provided at the time of the Change in Control, the
Contribution set forth below shall be required of the Bank in addition to
all previous Contributions. The Bank shall be required to make a final
Contribution to the Retirement Income Trust Fund within ten (10) days of
the Participant's termination of employment. The amount of such final
Contribution shall be equal to (i) $3,000,000 less (ii) the sum of all
prior Contributions to the Retirement Income Trust Fund.
(3) Termination For Cause
If the Participant (i) does not exercise his withdrawal rights pursuant to
Subsection 2.2, and (ii) is terminated for Cause pursuant to Subsection
5.2, no further Contribution(s) to the Retirement Income Trust Fund shall
be required of the Bank, and if not yet made, no Contribution shall be
required for the Plan Year in which such termination for Cause occurs.
(4) Involuntary Termination of Employment.
If (i) the Participant does not exercise his withdrawal rights pursuant to
Subsection 2.2, and (ii) the Participant's employment with the Bank is
involuntarily terminated for any reason other than a termination related
to disability, termination for Cause or termination following a Change in
Control, the Contribution set forth below shall be required of the Bank.
The Bank shall be required to make
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<PAGE>
a final Contribution to the Retirement Income Trust Fund within ten (10)
days of the Participant's involuntary termination of employment. The
amount of such final Contribution shall be equal to (i) $3,000,000 less
(ii)the sum of all prior Contributions to the Retirement Income Trust
Fund.
(5) Voluntary Termination of Employment.
If (i) the Participant does not exercise his withdrawal rights pursuant to
Subsection 2.2, and (ii) the Participant voluntary terminates employment
with the Bank, for any reason other than a voluntary termination as
described in Subsection 2.1(b)(2), the Participant shall not be entitled
to any further Contributions to the Retirement Income Trust Fund
subsequent to the date of such voluntary termination of employment.
(6) Death Prior to Retirement Age.
(A) Death During Employment.
If the Participant (i) does not exercise any withdrawal rights pursuant to
Subsection 2.2, and (ii) dies while employed by the Bank (including
employment following a Change in Control), the Bank shall be required to
make a final Contribution to the Retirement Income Trust Fund within ten
(10) days of the Participant's death. The amount of such final
Contribution shall be equal to: (i) $3,000,000 less (ii) the sum of all
prior Contributions to the Retirement Income Trust Fund.
(B) Death Following Termination of Employment But Prior to Retirement Age.
If the Participant (i) does not exercise any withdrawal rights pursuant to
Subsection 2.2 and (ii) dies after termination of employment for any
reason other than Cause, but prior to Retirement Age, the Bank shall be
required to make a final Contribution to the Retirement Income Trust Fund
equal to $500,000.00.
(7) Termination Due to Disability.
If the Participant (i) does not exercise any withdrawal rights pursuant to
Subsection 2.2, and (ii) terminates employment due to disability, no
further Contributions shall be made on behalf of the Participant until
the Participant's death. Upon the Participant's death, the Bank shall be
required to make a final Contribution to the Retirement Income Trust
Fund. Such Contribution shall be made within ten (10) days of the date
on which the Bank learns of the participant's death. The amount of such
final Contribution shall be equal to: (i) $3,000,000 less (ii) the sum of
all prior Contributions to the Retirement Income Trust Fund.
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(c) Withdrawal Rights Exercised.
(1) Phantom Contributions Made Annually.
If the Participant exercises his withdrawal rights pursuant to Subsection
2.2, no further Contributions to the Retirement Income Trust Fund shall be
required of the Bank. Thereafter, Phantom Contributions shall be recorded
annually in the Participant's Accrued Benefit Account within ten (10) days
of the beginning of each Plan Year, commencing with the first Plan Year
following the Plan Year in which the Participant exercises his withdrawal
rights. Such Phantom Contributions shall continue to be recorded
annually, unless this Subsection 2.1(c) specifically states otherwise,
until the earlier of (i) the last Plan Year that Phantom Contributions are
required pursuant to Exhibit A, or (ii) the Plan Year of the Participant's
termination of employment.
(2) Termination Following a Change in Control
If the Participant exercises his withdrawal rights pursuant to Subsection
2.2, Phantom Contributions shall commence in the Plan Year following the
Plan Year in which the Participant first exercises his withdrawal rights.
If a Change in Control occurs at the Bank, followed by either (i) the
participant's involuntary termination of employment or (ii) the
participant's voluntary termination of employment after: (A) a material
change in the Participant's function, duties, or responsibilities, which
change would cause the Participant's position to become one of lesser
responsibility, importance, or scope from the position the Participant
held at the time of the Change in Control, (B) a relocation of the
Participant's principal place of employment by more than thirty (30) miles
from its location prior to the Change in Control, or (C) a material
reduction in the benefits and perquisites to the Participant from those
being provided at the time of the Change in Control, the Phantom
Contribution set forth below shall be required of the Bank in addition to
all previous annual Phantom Contributions or Contributions (as
applicable). The Bank shall be required to record a final lump sum
Phantom Contribution in the Accrued Benefit Account within ten (10) days
of the Participant's termination of employment. The amount of such final
Phantom Contribution shall be equal to (i) $3,000,000 less (ii) the sum of
all prior Phantom Contributions recorded in the Accrued Benefit Account
and Contributions made to the Retirement Income Trust Fund.
(3) Termination For Cause
If the Participant is terminated for Cause pursuant to Subsection 5.2, the
entire balance of the Participant's Accrued Benefit Account at the time of
such termination, which shall include any Phantom Contributions which have
been recorded plus accrued interest, shall be forfeited.
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(4) Involuntary Termination of Employment.
If (i) the Participant exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) the Participant's employment with the Bank is
involuntarily terminated for any reason other than a termination related
to disability, termination for Cause, or termination following a Change in
Control, the Phantom Contribution set forth below shall be required of the
Bank. The Bank shall be required to record a final Phantom Contribution
in the Accrued Benefit Account within ten (10) days of the Participant's
involuntary termination of employment. The amount of such final Phantom
Contribution shall be equal to (i) $3,000,000 less (ii) the sum of all
prior Phantom Contributions recorded in the Accrued Benefit Account and
Contributions made to the Retirement Income Trust Fund.
(5) Voluntary Termination of Employment. If (i) the Participant exercises
his withdrawal rights pursuant to Subsection 2.2, and (ii) the Participant
voluntarily terminates employment with the Bank, for any reason other than
a voluntary termination as described in Subsection 2.1(c)(2), the
Participant shall not be entitled to any further Phantom Contributions
subsequent to the date of such voluntary termination of employment.
(6) Death Prior to Retirement Age.
(A) Death During Employment
If the Participant (i) exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) dies while employed by the Bank (including
employment following a Change in Control), the Bank shall be required to
record a final Phantom Contribution in the Participant's Accrued Benefit
Account. Phantom Contributions shall commence in the Plan Year following
the Plan Year in which the Participant exercises his withdrawal rights and
shall continue through the Plan Year in which the Participant dies. The
final Phantom Contribution shall be equal to: (i) $3,000,000 less (ii)
the sum of the all prior Phantom Contributions recorded in the Accrued
Benefit Account and/or Contributions made to the Retirement Income Trust
Fund. Such final Phantom Contribution shall be recorded in the Accrued
Benefit Account within ten (10) days of the Participant's death.
(B) Death Following Termination of Employment But Prior to Retirement Age.
If the Participant (i) exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) dies after termination of employment for any
reason other than Cause, but prior to Retirement Age, the Bank shall be
required to record a final Phantom Contribution in the Accrued Benefit
Account equal to
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<PAGE>
$500,000.00. Such final Phantom Contribution shall be recorded in the
Accrued Benefit Account within ten (10) days of the date on which the
Bank learns of the Participant's death.
7. Termination Due to Disability
If the Participant (i) exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) terminates employment due to disability, no
further Phantom Contributions shall be recorded on behalf of the
Participant until the Participant's death. Upon the participant's death,
the Bank shall be required to record a final Phantom Contribution in the
Accrued Benefit Account. The final Phantom Contribution shall be recorded
within ten (10) days of the date on which the Bank learns of the
Participant's death. The amount of such final Contribution shall be equal
to : (i) $3,000,000 less (ii) the sum of all prior Phantom Contributions
recorded in the Accrued Benefit Account and Contributions made to the
Retirement Income Trust Fund.
2.2 Withdrawals From Retirement Income Trust Fund.
Exercise of withdrawal rights by the Participant pursuant to the Skip
Martin Grantor Trust agreement shall terminate the Bank's obligation to
make any further Contributions to the Retirement Income Trust Fund, and
the Bank's obligation to record Phantom Contributions pursuant to
Subsection 2.1(c) shall commence. For purposes of this Subsection 2.2,
"exercise of withdrawal rights" shall mean those withdrawal rights to
which the Participant is entitled under Article III of the Skip Martin
Grantor Trust agreement and shall exclude any distributions made by the
trustee of the Retirement Income Trust Fund to the Participant for
purposes of payment of income taxes in accordance with Subsection 2.1 of
this Agreement, or other trust expenses properly payable from the Skip
Martin Grantor Trust pursuant to the provisions of the trust document.
2.3 Benefits Payable From Retirement Income Trust Fund
Notwithstanding anything else to the contrary in this Agreement, in the
event that the trustee of the Retirement Income Trust Fund purchases a
life insurance policy with the Contributions to and, if applicable,
earnings of the Trust, and such life insurance policy is intended to
continue in force beyond the Benefit Period for the disability or
retirement benefits payable from the Retirement Income Trust Fund pursuant
to this Agreement, then the Trustee shall have discretion to determine the
portion of the cash value of such policy available for purposes of
annuitizing the Retirement Income Trust Fund to provide the disability or
retirement benefits payable under this Agreement, after taking into
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consideration the amounts reasonably believed to be required in order to
maintain the cash value of such policy to continue such policy in effect
until the death of the Participant and payment of death benefits
thereunder.
SECTION III
RETIREMENT BENEFIT
3.1 (a) Normal form of payment.
If (i) the Participant is employed with the Bank at least until reaching
his Retirement Age, including employment with the Bank following a Change
in Control, and (ii) the Participant has not made a Timely Election to
receive a lump sum benefit, this Subsection 3.1(a) shall be controlling
with respect to retirement benefits.
The Retirement Income Trust Fund, measured as of the Participant's Benefit
Age, shall be annuitized (using the Interest Factor) into monthly
installments and shall be payable for the Benefit Period. Such benefit
payments shall commence on the Participant's Benefit Eligibility Date.
Should Retirement Income Trust Fund assets actually earn a rate of return,
following the date such balance is annuitized, which is less than the rate
of return used to annuitize the Retirement Income Trust Fund, no
additional contributions to the Retirement Income Trust Fund shall be
required by the Bank in order to fund the final benefit payment(s) and
make up for any shortage attributable to the less-than-expected rate of
return. Should Retirement Income Trust Fund assets actually earn a rate
of return, following the date such balance is annuitized, which is greater
than the rate of return used to annuitize the Retirement Income Trust
Fund, the final benefit payment to the Participant (or his Beneficiary)
shall distribute the excess amounts attributable to the
greater-than-expected rate of return. In the event the Participant dies
at any time after attaining his Benefit Age, but prior to commencement or
completion of all the payments due and owing hereunder, (i) the trustee of
the Retirement Income Trust Fund shall pay to the Participant's
Beneficiary the monthly installments (or a continuation of such monthly
installments if they have already commenced) for the balance of months
remaining in the Benefit Period, or (ii) the Participant's Beneficiary may
request to receive the unpaid balance of the Participant's Retirement
Income Trust Fund in a lump sum payment. If a lump sum payment is
requested by the Beneficiary, payment of the balance of the Retirement
Income Trust Fund in such lump sum form shall be made only if the
Participant's Beneficiary (i) obtains approval from the trustee of the
Skip Martin Grantor Trust and (ii) notifies the Administrator in writing
of such election. Such lump sum payment, if approved by the trustee,
shall be payable within thirty (30) days of such trustee approval.
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The Participant's Accrued Benefit Account (if applicable), measured as of
the Participant's Benefit Age, shall be annuitized (using the Interest
Factor) into monthly installments and shall be payable for the Benefit
Period. Such benefit payments shall commence on the Participant's Benefit
Eligibility Date. In the event the Participant dies at any time after
attaining his Benefit Age, but prior to commencement or completion of all
the payments due and owing hereunder, (i) the Bank shall pay to the
Participant's Beneficiary the same monthly installments (or a continuation
of such monthly installments if they have already commenced) for the
balance of months remaining in the Benefit Period, or (ii) the
Participant's Beneficiary may request to receive the remainder of any
unpaid benefit payments in a lump sum payment. If a lump sum payment is
requested by the Beneficiary, the amount of such lump sum payment shall be
equal to the unpaid balance of the Participant's Accrued Benefit Account.
Payment in such lump sum form shall be made only if the Participant's
Beneficiary (i) obtains Board of Director approval, and (ii) notifies the
Administrator in writing of such election. Such lump sum payment, if
approved by the Board of Directors, shall be made within thirty (30) days
of such Board of Director approval.
(b) Alternative payout option.
If (i) the Participant is employed with the Bank at least until reaching
his Retirement Age, including employment with the Bank following a Change
in Control, and (ii) the Participant has made a Timely Election to receive
a lump sum benefit, this Subsection 3.1(b) shall be controlling with
respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
Participant's Benefit Age, shall be paid to the Participant in a lump sum
on his Benefit Eligibility Date. In the event the Participant dies after
becoming eligible for such payment (upon attainment of his Benefit Age),
but before the actual payment is made, his Beneficiary shall be entitled
to receive the lump sum benefit in accordance with this Subsection 3.1(b)
within thirty (30) days of the date the Administrator receives notice of
the Participant's death.
The balance of the Participant's Accrued Benefit Account (if applicable),
measured as of the Participant's Benefit Age, shall be paid to the
Participant in a lump sum on his Benefit Eligibility Date. In the event
the Participant dies after becoming eligible for such payment (upon
attainment of his Benefit Age), but before the actual payment is made, his
Beneficiary shall be entitled to receive the lump sum benefit in
accordance with this Subsection 3.1(b) within thirty (30) days of the date
the Administrator receives notice of the Participant's death.
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SECTION IV
PRE-RETIREMENT DEATH BENEFIT
4.1 (a) Normal form of payment.
If (i) the Participant dies while employed by the Bank, including death
during employment following a Change in Control, and (ii) the Participant
has not made a Timely Election to receive a lump sum benefit, this
Subsection 4.1(a) shall be controlling with respect to pre-retirement
death benefits.
The Participant's Retirement Income Trust Fund, measured as of the later
of (i) the Participant's death, or (ii) the date any final lump sum
Contribution is made pursuant to Subsection 2.1(b), shall be annuitized
(using the Interest Factor) into monthly installments and shall be payable
to the Participant's Beneficiary for the Benefit Period. Such benefit
payments shall commence within thirty (30) days of the date the
Administrator receives notice of the Participant's death, or if later,
within thirty (30) days after any final lump sum Contribution is made to
the Retirement Income Trust Fund in accordance with Subsection 2.1(b).
Should Retirement Income Trust Fund assets actually earn a rate of return,
following the date such balance is annuitized, which is less than the rate
of return used to annuitize the Retirement Income Trust Fund, no
additional contributions to the Retirement Income Trust Fund shall be
required by the Bank in order to fund the final benefit payment(s) and
make up for any shortage attributable to the less-than-expected rate of
return. Should Retirement Income Trust Fund assets actually earn a rate of
return, following the date such balance is annuitized, which is greater
than the rate of return used to annuitize the Retirement Income Trust
Fund, the final benefit payment to the Participant's Beneficiary shall
distribute the excess amounts attributable to the greater-than-expected
rate of return. The Participant's Beneficiary may request to receive the
unpaid balance of the Participant's Retirement Income Trust Fund in a lump
sum payment. If a lump sum payment is requested by the Beneficiary,
payment of the balance of the Retirement Income Trust Fund in such lump
sum form shall be made only if the Participant's Beneficiary (i) obtains
approval from the trustee of the Skip Martin Grantor Trust and (ii)
notifies the Administrator in writing of such election. Such lump sum
payment, if approved by the trustee, shall be made within thirty (30) days
of such trustee approval.
The Participant's Accrued Benefit Account (if applicable), measured as of
the later of (i) the Participant's death or (ii) the date any final lump
sum Phantom Contribution is recorded in the Accrued Benefit Account
pursuant to Subsection 2.1(c), shall be annuitized (using the Interest
Factor) into monthly installments and shall be payable to the
Participant's Beneficiary for the Benefit Period. Such
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benefit payments shall commence within thirty (30) days of the date the
Administrator receives notice of the Participant's death, or if later,
within thirty (30) days after any final lump sum Phantom Contribution is
recorded in the Accrued Benefit Account in accordance with Subsection
2.1(c). The Participant's Beneficiary may request to receive the
remainder of any unpaid monthly benefit payments due from the Accrued
Benefit Account in a lump sum payment. If a lump sum payment is requested
by the Beneficiary, the amount of such lump sum payment shall be equal to
the balance of the Participant's Accrued Benefit Account. Payment in such
lump sum form shall be made only if the Participant's Beneficiary (i)
obtains Board of Director approval, and (ii) notifies the Administrator in
writing of such election. Such lump sum payment, if approved by the Board
of Directors, shall be payable within thirty (30) days of such Board of
Director approval.
(b) Alternative payout option.
If (i) the Participant dies while employed by the Bank, including death
during employment following a Change in Control, and (ii) the Participant
has made a Timely Election to receive a lump sum benefit, this Subsection
4.1(b) shall be controlling with respect to pre-retirement death benefits.
The balance of the Participant's Retirement Income Trust Fund, measured as
of the later of (i) the Participant's death, or (ii) the date any final
lump sum Contribution is made pursuant to Subsection 2.1(b), shall be paid
to the Participant's Beneficiary in a lump sum within thirty (30) days of
the date the Administrator receives notice of the Participant's death.
The balance of the Participant's Accrued Benefit Account (if applicable),
measured as of the later of (i) the Participant's death, or (ii) the date
any final Phantom Contribution is recorded pursuant to Subsection 2.1(c),
shall be paid to the Participant's Beneficiary in a lump sum within thirty
(30) days of the date the Administrator receives notice of the
Participant's death.
SECTION V
BENEFIT(S) IN THE EVENT OF TERMINATION OF EMPLOYMENT
PRIOR TO RETIREMENT AGE
5.1 Voluntary or Involuntary Termination of Employment Other Than for Cause.
In the event the Participant's employment with the Bank is voluntarily or
involuntarily terminated prior to Retirement
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Age, for any reason including a Change in Control, but excluding (i) the
Participant's pre-retirement death, which shall be covered in Section IV,
(ii) termination for Cause, which shall be covered in Subsection 5.2, or
(iii) termination due to disability, which shall be covered in Section VI,
the Participant (or his Beneficiary) shall be entitled to receive benefits
in accordance with this Subsection 5.1. Payments of benefits pursuant to
this Subsection 5.1 shall be made in accordance with Subsection 5.1 (a) or
5.1 (b) below, as applicable.
(a) Normal form of payment.
(1) Participant Lives Until Benefit Age
If (i) after such termination, the Participant lives until attaining his
Benefit Age, and (ii) the Participant has not made a Timely Election to
receive a lump sum benefit, then payments made under this Subsection
5.1(a)(1) shall be made in the same manner as under Subsection 3.1(a).
(2) Participant Dies Prior to Benefit Age
If (i) after such termination, the Participant dies prior to attaining his
Benefit Age, and (ii) the Participant has not made a Timely Election to
receive a lump sum benefit, then payments made under this Subsection
5.1(a)(2) shall be made in the same time and manner as under Subsection
4.1(a).
(b) Alternative Payout Option.
(1) Participant Lives Until Benefit Age
If (i) after such termination, the Participant lives until attaining his
Benefit Age, and (ii) the Participant has made a Timely Election to
receive a lump sum benefit, this Subsection 5.1(b)(1) shall be controlling
with respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
Participant's Benefit Age, shall be paid to the Participant in a lump sum
on his Benefit Eligibility Date. In the event the Participant dies after
becoming eligible for such payment (upon attainment of his Benefit Age),
but before the actual payment is made, his Beneficiary shall be entitled
to receive the lump sum benefit in accordance with this Subsection
5.1(b)(1) within thirty (30) days of the date the Administrator receives
notice of the Participant's death.
The balance of the Participant's Accrued Benefit Account (if applicable),
measured as of the Participant's Benefit Age, shall be paid to the
Participant in a lump sum on his Benefit Eligibility Date. In the event
the Participant dies after becoming eligible for such payment (upon
attainment of his
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Benefit Age), but before the actual payment is made, his Beneficiary shall
be entitled to receive the lump sum benefit in accordance with this
Subsection 5.1(b)(1) within thirty (30) days of the date the Administrator
receives notice of the Participant's death.
(2) Participant Dies Prior to Benefit Age
If (i) after such termination, the Participant dies prior to attaining his
Benefit Age, and (ii) the Participant has made a Timely Election to
receive a lump sum benefit, this Subsection 5.1(b)(2) shall be controlling
with respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the date
of the Participant's death, shall be paid to the Participant's Beneficiary
within thirty (30) days of the date the Administrator receives notice of
the Participant's death.
The balance of the Participant's Accrued Benefit Account (if applicable),
measured as of the date of the Participant's death, shall be paid to the
Participant's Beneficiary within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
5.2 Termination For Cause.
If the Participant is terminated for Cause, all benefits under this
Agreement, other than those which can be paid from previous Contributions
to the Retirement Income Trust Fund (and earnings on such Contributions),
shall be forfeited. Furthermore, no further Contributions (or Phantom
Contributions, as applicable) shall be required of the Bank for the year
in which such termination for Cause occurs (if not yet made). The
Participant shall be entitled to receive a benefit in accordance with this
Subsection 5.2.
The balance of the Participant's Retirement Income Trust Fund shall be
paid to the Participant in a lump sum on his Benefit Eligibility Date. In
the event the Participant dies prior to his Benefit Eligibility Date, his
Beneficiary shall be entitled to receive the balance of the Participant's
Retirement Income Trust Fund in a lump sum within thirty (30) days of the
date the Administrator receives notice of the Participant's death.
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SECTION VI
OTHER BENEFITS
6.1 (a) Disability Benefit.
If the Participant's employment terminates prior to Retirement Age due to
a disability which meets the criteria set forth below, the Participant
shall be entitled to receive the Disability Benefit in lieu of the
retirement benefit(s) available pursuant to Section 5.1 (which is (are)
not available prior to the Participant's Benefit Eligibility Date).
Notwithstanding any other provision hereof, if requested by the
Participant and approved by the Board of Directors, the Participant shall
receive a lump sum disability benefit hereunder, in any case in which it
is determined by a duly licensed independent physician selected by the
Bank, that the Participant is no longer able, properly and satisfactorily,
to perform his regular duties as an officer and director, because of ill
health, accident disability or general ability due to age. The lump sum
benefit(s) to which the Participant is entitled shall include: (i) the
balance of the Retirement Income Trust Fund, plus (ii) the balance of the
Accrued Benefit Account (if applicable), both measured as of the date of
the disability determination. The benefit(s) shall be paid within thirty
(30) days following the date of the Participant's request for such
benefit. In the event the Participant dies after becoming eligible for
such payment(s) but before the actual payment(s) is (are) made, his
Beneficiary shall be entitled to the benefit(s) provided for in this
Subsection 6.1(a) within thirty (30) days of the date the Administrator
receives notice of the Participant's death.
(b) Disability Benefit-Supplemental
Within thirty (30) days of the Participant's death, the Bank shall pay a
direct, lump sum payment to the Participant's Beneficiary equal to the sum
of all prior Contributions to the Retirement Income Trust Fund and/or
Phantom Contributions recorded in the Accrued Benefit Account, after
taking into consideration the final Contribution or Phantom Contribution
recorded pursuant to subsections 2(b)(7) and 2(c)(7). Such lump sum
payment, shall be payable within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
6.2 Additional Death Benefit - Burial Expense. Upon the Participant's death,
the Participant's Beneficiary shall also be entitled to receive a one-time
lump sum death benefit in the amount of Fifteen Thousand Dollars
($15,000.00). This benefit shall be paid directly from the Bank to the
Beneficiary and shall be provided specifically for the purpose of
providing payment for burial and/or funeral expenses of
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the Participant. Such death benefit shall be payable within thirty (30)
days from the date the Administrator receives notice of the Participant's
death. The Participant's Beneficiary shall not be entitled to such
benefit if the Participant is terminated for Cause prior to death.
SECTION VII
NON-COMPETITION
7.1 Non-Competition
In consideration of the agreements of the Bank contained herein and of
the payments to be made by the Bank pursuant hereto, the Participant
hereby agrees that, for as long as he remains employed by the Bank, he
will devote substantially all of his time, skill, diligence and attention
to the business of the Bank, and will not actively engage, either directly
or indirectly, in any business or other activity which is, or may be
deemed to be, in any way competitive with or adverse to the best interests
of the business of the Bank. The Participant further agrees that
following his employment with the Bank and continuing through the Benefit
Period he will not actively engage, either directly or indirectly, in any
business or other activity which is, or may be deemed to be, in any way
competitive with or adverse to the best interests of the Bank, unless the
Participant has the prior express written consent of the Board of
Directors of the Bank.
7.2 Breach of Non-Competition Clause.
(a) During Employment.
In the event the Participant breaches Subsection 7.1 while employed at the
Bank, all further Contributions to the Retirement Income Trust Fund (or
Phantom Contributions to the Accrued Benefit Account) shall immediately
cease, and all benefits under this Agreement, other than those which can
be paid from previous Contributions to the Retirement Income Trust Fund
(and earnings on such Contributions), shall be forfeited. If, following
such breach, the Participant lives until attaining his Benefit Age, he
shall be entitled to receive a benefit from the Retirement Income Trust
Fund equal to the balance of the Retirement Income Trust Fund, measured as
of the Participant's Benefit Age, payable in a lump sum on his Benefit
Eligibility Date. In the event the Participant dies after attaining his
Benefit Age but before actual payment is made, his Beneficiary shall be
entitled to receive the lump sum benefit payable within thirty (30) days
of the date of the Administrator receives notice of the Participant's
death. If, following such breach, the Participant dies prior to attaining
his Benefit Age, his Beneficiary shall be entitled to receive a benefit
from the Retirement Income Trust Fund equal to the balance of the
Retirement Income Trust Fund, measured as of the date of the Participant's
death,
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payable in a lump sum within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
In the event (i) any breach by the Participant of the agreements and
covenants described in Subsection 7.1 occurs, and (ii) the Participant's
employment with the Bank is terminated due to such breach, such
termination shall be deemed to be for Cause and the benefits payable to
the Participant shall be paid in accordance with Subsection 5.2 of this
Agreement.
(b) Breach Following Termination of Employment.
In the event the Participant breaches Subsection 7.1 following the
Participant's termination of employment with the Bank, all benefits under
this Agreement, other than those which can be paid from previous
Contributions to the Retirement Income Trust Fund shall be forfeited,
regardless of whether the Participant is receiving benefits at such time.
If the Participant has attained his Benefit Age and is receiving a benefit
at the time of such breach, his remaining balance in the Retirement Income
Trust Fund shall be paid to him in a lump sum within thirty (30) days of
the date the Bank has received notice of such breach (or in the event of
his death prior to payment of such lump sum, to his Beneficiary). If the
Participant has not attained his Benefit Age, and following such breach,
the Participant lives until his Benefit Age, he (or his Beneficiary, in
the event of his death prior to payment of his benefit) shall receive a
benefit payable in a lump sum from the Retirement Income Trust Fund in the
same manner as set forth above in Subsection 7.2(a).
In the event of a termination related to a Change in Control as described
in Subsection 2.1(b)(2) (or 2.1(c)(2)), paragraph (b) of this Subsection
shall cease to be a condition to the performance by the Bank of its
obligations under this Agreement.
SECTION VIII
BENEFICIARY DESIGNATION
The Participant shall make an initial designation of primary and secondary
Beneficiaries upon execution of this Agreement and shall have the right to
change such designation, at any subsequent time, by submitting to (i) the
Administrator, and (ii) the trustee of the Retirement Income Trust Fund,
in substantially the form attached as Exhibit B to this Agreement, a
written designation of primary and secondary Beneficiaries. Any
Beneficiary designation made subsequent to execution of this Agreement
shall become effective only when receipt thereof is acknowledged in
writing by the Administrator.
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SECTION IX
PARTICIPANT'S RIGHT TO ASSETS
The rights of the Participant, any Beneficiary, or any other person
claiming through the Participant under this Agreement, shall be solely
those of an unsecured general creditor of the Bank, unless this Agreement
provides otherwise. The Participant, the Beneficiary, or any other person
claiming through the Participant, shall only have the right to receive
from the Bank those payments so specified under this Agreement. The
Participant agrees that he, his Beneficiary, or any other person claiming
through him shall have no rights or interests whatsoever in any asset of
the Bank, including any insurance policies or contracts which the Bank
may possess or obtain to informally fund this Agreement. Any asset used
or acquired by the Bank in connection with the liabilities it has assumed
under this Agreement, unless expressly provided herein, shall not be
deemed to be held under any trust for the benefit of the Participant or
his Beneficiaries, nor shall any asset be considered security for the
performance of the obligations of the Bank. Any such asset shall be and
remain, a general, unpledged, and unrestricted asset of the Bank.
SECTION X
RESTRICTIONS UPON FUNDING
The Bank shall have no obligation to set aside, earmark or entrust any
fund or money with which to pay its obligations under this Agreement,
unless this Agreement provides otherwise. Except as otherwise provided
for in this Agreement, the Participant, his Beneficiaries or any successor
in interest to him shall be and remain simply a general unsecured creditor
of the Bank in the same manner as any other creditor having a general
claim for matured and unpaid compensation. The Bank reserves the
absolute right in its sole discretion to either purchase assets to meet
its obligations undertaken by this Agreement or to refrain from the same
and to determine the extent, nature, and method of such asset purchases.
Should the Bank decide to purchase assets such as life insurance, mutual
funds, disability policies or annuities, the Bank reserves the absolute
right, in its sole discretion, to terminate such assets at any time, in
whole or in part. At no time shall the Participant be deemed to have any
lien, right, title or interest in or to any specific investment or to any
assets of the Bank. If the Bank elects to invest in a life insurance,
disability or annuity policy upon the life of the Participant, then the
Participant shall assist the Bank by freely submitting to a physical
examination and by supplying such additional information necessary to
obtain such insurance or annuities.
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SECTION XI
ACT PROVISIONS
11.1 Named Fiduciary and Administrator. The Bank shall be the Administrator
(the "Administrator") of this Agreement. As Administrator, the Bank
shall be responsible for the management, control and administration of
the Agreement as established herein. The Administrator may delegate to
others certain aspects of the management and operational
responsibilities of the Agreement, including the employment of advisors
and the delegation of ministerial duties to qualified individuals.
11.2 Claims Procedure and Arbitration. In the event that benefits under this
Agreement are not paid to the Participant (or to his Beneficiary in the
case of the Participant's death) and such claimants feel they are
entitled to receive such benefits, then a written claim must be made to
the Administrator within sixty (60) days from the date payments are
refused. The Administrator shall review the written claim and, if the
claim is denied, in whole or in part, it shall provide in writing,
within ninety (90) days of receipt of such claim, its specific reasons
for such denial, reference to the provisions of this Agreement upon
which the denial is based, and any additional material or information
necessary to perfect the claim. Such writing by the Administrator shall
further indicate the additional steps which must be undertaken by
claimants if an additional review of the claim denial is desired.
If claimants desire a second review, they shall notify the Administrator
in writing within sixty (60) days of the first claim denial. Claimants
may review this Agreement or any documents relating thereto and submit
any issues and comments, in writing, they may feel appropriate. In its
sole discretion, the Administrator shall then review the second claim and
provide a written decision within sixty (60) days of receipt of such
claim. This decision shall state the specific reasons for the decision
and shall include reference to specific provisions of this Agreement upon
which the decision is based.
If claimants continue to dispute the benefit denial based upon completed
performance of this Agreement or the meaning and effect of the terms and
conditions thereof, then claimants may submit the dispute to a Board of
Arbitration for final arbitration. Said Board of Arbitration shall
consist of one member selected by the claimant, one member selected by
the Bank, and the third member selected by the first two members. The
Board of Arbitration shall operate under any generally recognized set of
arbitration rules. The parties hereto agree that they, their heirs,
personal representatives, successors and assigns shall be bound by the
decision of such Board of Arbitration with respect to any controversy
properly submitted to it for determination.
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SECTION XII
MISCELLANEOUS
12.1 No Effect on Employment Rights. Nothing contained herein will confer
upon the Participant the right to be retained in the employ of the Bank
nor limit the right of the Bank to discharge or otherwise deal with the
Participant without regard to the existence of the Agreement. Pursuant
to 12 C.F.R. Section 563.39(b), the following conditions shall apply to
this Agreement:
(1) The Bank's Board of Directors may terminate the Participant at
any time, but any termination by the Bank's Board of Directors
other than termination for Cause shall not prejudice the
Participant's vested right to compensation or other benefits
under the contract. As provided in Subsection 5.2, the
Participant shall have no right to receive additional
compensation or other benefits, other than those provided for in
Subsection 5.2, after termination for Cause.
(2) If the Participant is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a
notice served under Section 8(e)(3) or (g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. 1818(e)(3) and (g)(1)) the
Bank's obligations under the contract shall be suspended (except
vested rights) as of the date of termination of employment
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.
(3) If the Participant is terminated and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an
order issued under Section 8(e)(4) or (g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. 1818(e)(4) or (g)(1)), all
non-vested obligations of the Bank under the contract shall
terminate as of the effective date of the order.
(4) If the Bank is in default (as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act), all non-vested obligations under
the contract shall terminate as of the date of default.
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(5) All non-vested obligations under the contract shall be
terminated, except to the extent determined that continuation of
the contract is necessary for the continued operation of the
Bank:
(i) by the Director of the Federal Deposit Insurance
Corporation or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide
assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance
Act; or
(ii) by the Director of the Federal Deposit Insurance
Corporation or his designee, at the time the Director 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 to be in an unsafe or unsound
condition.
Any rights of the parties that have already vested, (i.e., the balance
of the Participant's Retirement Income Trust Fund and the balance of
the Participant's Accrued Benefit Account, if applicable), however,
shall not be affected by such action.
12.2 State Law. The Agreement is established under, and will be construed
according to, the laws of the state of Arkansas, to the extent such laws
are not preempted by the Act and valid regulations published thereunder.
12.3 Severability. In the event that any of the provisions of this Agreement
or portion thereof, are held to be inoperative or invalid by any court of
competent jurisdiction, then: (i) insofar as is reasonable, effect will
be given to the intent manifested in the provisions held invalid or
inoperative, and (ii) the validity and enforceability of the remaining
provisions will not be affected thereby.
12.4 Incapacity of Recipient. In the event the Participant is declared
incompetent and a conservator or other person legally charged with the
care of his person or Estate is appointed, any benefits under the
Agreement to which such Participant is entitled shall be paid to such
conservator or other person legally charged with the care of his person
or Estate.
12.5 Unclaimed Benefit. The Participant shall keep the Bank informed of his
current address and the current address of his Beneficiaries. The Bank
shall not be obligated to search for the whereabouts
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of any person. If the location of the Participant is not made known to
the Bank as of the date upon which any payment of any benefits from the
Accrued Benefit Account may first be made, the Bank shall delay payment
of the Participant's benefit payment(s) until the location of the
Participant is made known to the Bank; however, the Bank shall only be
obligated to hold such benefit payment(s) for the Participant until the
expiration of thirty-six (36) months. Upon expiration of the thirty-six
(36) month period, the Bank may discharge its obligation by payment to
the Participant's Beneficiary. If the location of the Participant's
Beneficiary is not made known to the Bank by the end of an additional
two (2) month period following expiration of the thirty-six (36) month
period, the Bank may discharge its obligation by payment to the
Participant's Estate. If there is no Estate in existence at such time or
if such fact cannot be determined by the Bank, the Participant and his
Beneficiary(ies) shall thereupon forfeit any rights to the balance, if
any, of the Participant's Accrued Benefit Account provided for such
Participant and/or Beneficiary under this Agreement.
12.6 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Agreement, no individual acting as an employee or
agent of the Bank, or as a member of the Board of Directors shall be
personally liable to the Participant or any other person for any claim,
loss, liability or expense incurred in connection with the Agreement.
12.7 Gender. Whenever in this Agreement words are used in the masculine or
neuter gender, they shall be read and construed as in the masculine,
feminine or neuter gender, whenever they should so apply.
12.8 Effect on Other Corporate Benefit Agreements. Nothing contained in this
Agreement shall affect the right of the Participant to participate in or
be covered by any qualified or non-qualified pension, profit sharing,
group, bonus or other supplemental compensation or fringe benefit
agreement constituting a part of the Bank's existing or future
compensation structure.
12.9 Suicide. Notwithstanding anything to the contrary in this Agreement, if
the Participant's death results from suicide, whether sane or insane,
within twenty-six (26) months after execution of this Agreement, all
further Contributions to the Retirement Income Trust Fund (or Phantom
Contributions recorded in the Accrued Benefit Account) shall thereupon
cease, and no Contribution (or Phantom Contribution) shall be made by the
Bank to the Retirement Income Trust Fund (or recorded in the Accrued
Benefit Account) in the year such death resulting from suicide occurs
(if not yet made). All benefits other than those available from previous
Contributions to the Retirement Income Trust Fund under this Agreement
shall be forfeited, and this Agreement shall become null and void. The
balance of the
25
<PAGE>
Retirement Income Trust Fund, measured as of the Participant's date of
death, shall be paid to the Beneficiary within thirty (30) days of the
date the Administrator receives notice of the Participant's death.
12.10 Inurement. This Agreement shall be binding upon and shall inure to
the benefit of the Bank, its successors and assigns, and the
Participant, his successors, heirs, executors, administrators, and
Beneficiaries.
12.11 Headings. Headings and sub-headings in this Agreement are inserted
for reference and convenience only and shall not be deemed a part of
this Agreement.
12.12 Establishment of a Rabbi Trust. The Bank shall establish a rabbi
trust into which the Bank shall contribute assets which shall be held
therein, subject to the claims of the Bank's creditors in the event
of the Bank's "Insolvency" (as defined in such rabbi trust
agreement), until the contributed assets are paid to the Participant
and/or his Beneficiary in such manner and at such times as specified
in this Agreement. It is the intention of the Bank that the
contribution or contributions to the rabbi trust shall provide the
Bank with a source of funds to assist it in meeting the liabilities
of this Agreement.
SECTION XIII
AMENDMENT/PLAN TERMINATION
13.1 Amendment or Plan Termination. The Bank intends this Agreement to be
permanent, but reserves the right to amend or terminate the Agreement
when, in the sole opinion of the Bank, such amendment or termination is
advisable. However, any termination of the Agreement which is done in
anticipation of or following to a "Change in Control", as defined in
Subsection 1.9, shall be deemed to trigger Subsection 2.1(b)(2) (or
2.1(c)(2), as applicable) of the Agreement notwithstanding the
Participant's continued employment, and benefit(s) shall be paid from the
Retirement Income Trust Fund (and Accrued Benefit Account, if applicable)
in accordance with Subsection 13.2 below and with Subsections 2.1(b)(2)
(or 2.1(c)(2), as applicable). Any amendment or termination of the
Agreement shall be made pursuant to a resolution of the Board of
Directors of the Bank and shall be effective as of the date of such
resolution. No amendment or termination of the Agreement shall directly
or indirectly deprive the Participant of all or any portion of the
Participant's Retirement Income Trust Fund (and Accrued Benefit Account,
if applicable) as of the effective date of the resolution amending or
terminating the Agreement.
26
<PAGE>
13.2 Participant's Right to Payment Following Plan Termination. In the event
of a termination of the Agreement, the Participant shall be entitled to
the balance, if any, of his Retirement Income Trust Fund (and Accrued
Benefit Account, if applicable), measured as of the date of plan
termination. However, if such termination is done in anticipation of or
pursuant to a "Change in Control," such balance(s) shall be measured as
of the date the final Contribution (or Phantom Contribution) is made (or
recorded) pursuant to Subsection 2.1(b)(2) (or 2.1(c)(2)). Payment of
the balance(s) of the Participant's Retirement Income Trust Fund (and
Accrued Benefit Account, if applicable) shall not be dependent upon his
continuation of employment with the Bank following the termination date
of the Agreement. Payment of the balance(s) of the Participant's
Retirement Income Trust Fund (and Accrued Benefit Account, if applicable)
shall be made in a lump sum within thirty (30) days of the date of
termination of the Agreement.
SECTION XIV
EXECUTION
14.1 This Agreement and the Skip Martin Grantor Trust agreement set forth the
entire understanding of the parties hereto with respect to the
transactions contemplated hereby, and any previous agreements or
understandings between the parties hereto regarding the subject matter
hereof are merged into and superseded by this Agreement and the Skip
Martin Grantor Trust agreement.
14.2 This Agreement shall be executed in triplicate, each copy of which, when
so executed and delivered, shall be an original, but all three copies
shall together constitute one and the same instrument.
27
<PAGE>
IN WITNESS WHEREOF, the Bank and the Participant have caused this
Agre ement to be executed on the day and date first above written.
POCAHONTAS FEDERAL SAVINGS AND LOAN
ASSOCIATION:
ATTEST:
By:
-----------------------------------------
- ----------------------------- --------------------------------------------
Secretary (Title)
- ----------------------------- --------------------------------------------
WITNESS: PARTICIPANT:
28
<PAGE>
CONDITIONS, ASSUMPTIONS,
AND
SCHEDULE OF CONTRIBUTIONS AND PHANTOM CONTRIBUTIONS
1. Interest Factor - for purposes of:
a. the Accrued Benefit Account - shall be equal to Six and One-Half
Percent (6 1/2%), compounded monthly.
b. the Retirement Income Trust Fund - shall be Four percent (4%) per
annum, compounded monthly, provided, however, that for purposes of
annuitizing the balance of the Retirement Income Trust Fund over the
Benefit Period, the trustee of the Skip Martin Grantor Trust shall
exercise discretion in selecting the appropriate rate, given the
nature of the investments contained in the Retirement Income Trust
Fund and the expected return associated with the investments.
2. The amount of the annual Contributions (or Phantom Contributions) to the
Retirement Income Trust Fund (or Accrued Benefit Account) has been based
on the annual straight-line accounting accruals which would be required of
the Bank until the Participant's Retirement Age, assuming a discount rate
equal to the Interest Factor (for the Accrued Benefit Account), in order
to fully record the present value of the unfunded, non-qualified
Supplemental Retirement Income Benefit as of the Participant's Retirement
Age.
3. Supplemental Retirement Income Benefit means an actuarially determined
annual amount equal to One Hundred Eighty-Two Thousand One Hundred Forty-
Three Dollars ($182,143) at age 60 if paid entirely from the Accrued
Benefit Account or One Hundred Twenty-Seven Thousand Five Hundred Dollars
($127,500) if paid from the Retirement Income Trust Fund.
The Supplemental Retirement Income Benefit:
- the definition of Supplemental Retirement Income Benefit has been
incorporated into the Agreement for the sole purpose of actuarially
establishing the amount of annual Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued
Benefit Account). The amount of any actual retirement,
pre-retirement or disability benefit payable pursuant to the
Agreement will be a function of (i) the amount and timing of
Contributions (or Phantom Contributions) to the Retirement Income
Trust Fund (or Accrued Benefit Account) and (ii) the actual
investment experience of such Contributions (or the monthly
compounding rate of Phantom Contributions).
29
<PAGE>
Exhibit A
4. Schedule of Annual Gross Contributions/Phantom Contributions
Plan Year Amount
--------- ------
1996 $ 161,855
1997 $ 127,956
1998 $ 181,853
1999 $ 181,853
2000 $ 181,853
2001 $ 181,853
2002 $ 181,853
2003 $ 181,853
2004 $ 181,853
2005 $ 181,853
2006 $ 181.853
2007 $ 181,853
2008 $ 181,853
<PAGE>
RESTATED SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
BENEFICIARY DESIGNATION
The Participant, under the terms of the restated Supplemental Retirement
Income Agreement executed by the Bank, dated the 1st day of January,1998,
hereby designates the following Beneficiary(ies) to receive any guaranteed
payments or death benefits under such Agreement, following his death:
PRIMARY BENEFICIARY:
------------------------------
SECONDARY BENEFICIARY:
------------------------------
This Beneficiary Designation hereby revokes any prior Beneficiary
Designation which may have been in effect.
Such Beneficiary Designation is revocable.
DATE: , 19
---------------------- ----
- ------------------------------------ -------------------------------
(WITNESS) PARTICIPANT
- ------------------------------------
(WITNESS)
<PAGE>
Exhibit B
RESTATED SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
NOTICE OF ELECTION TO CHANGE FORM OF PAYMENT
TO: Bank
Attention:
I hereby give notice of my election to change the form of payment of my
Supplemental Retirement Income Benefit, as specified below. I understand that
such notice, in order to be effective, must be submitted in accordance with
the time requirements described in my Restated Supplemental Retirement Income
Agreement.
/ / I hereby elect to change the form of payment of my benefits from
monthly installments throughout my Benefit Period to a lump sum
benefit payment.
/ / I hereby elect to change the form of payment of my benefits from a
lump sum benefit payment to monthly installments throughout my
Benefit Period. Such election hereby revokes my previous notice of
election to receive a lump sum form of benefit payments.
PARTICIPANT
---------------------------------
Date
----------------------------------------
Acknowledged By:
-----------------------------
Title:
---------------------------------------
Date
----------------------------------------
<PAGE>
RESTATED SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
FOR
JAMES EDINGTON
<PAGE>
RESTATED SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
FOR JAMES EDINGTON
This Restated Supplemental Retirement Income Agreement (the
"Agreement"), effective as of the 1st day of January, 1998, supercedes the
Supplemental Retirement Income Agreement, entered into the 28th day of
February, 1997, and formalizes the understanding by and between POCAHONTAS
FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Bank"), a federally chartered
savings association, and JAMES EDINGTON, hereinafter referred to as
"Participant".
W I T N E S S E T H :
WHEREAS, the Participant is employed by the Bank and serves on the
board of directors; and
WHEREAS, the Bank recognizes the valuable services heretofore
performed by the Participant and wishes to encourage continued employment
as well as continued service on the board of directors; and
WHEREAS, the Participant wishes to be assured that he will be
entitled to a certain amount of additional compensation for some definite
period of time from and after retirement or other termination of
employment and wishes to provide his beneficiary with benefits from and
after death; and
WHEREAS, the Bank and the Participant wish to provide the terms and
conditions upon which the Bank shall pay such additional compensation to
the Participant after retirement or other termination of employment and/or
death benefits to his beneficiary after death; and
WHEREAS, the Bank has adopted this Restated Supplemental Retirement
Income Agreement which controls all issues relating to benefits as
described herein and which supercedes the Supplemental Retirement Income
Agreement entered into on the 28th day of February, 1997;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the Bank and the Participant agree as follows:
1
<PAGE>
SECTION I
DEFINITIONS
When used herein, the following words and phrases shall have the
meanings below unless the context clearly indicates otherwise:
1.1 "Accrued Benefit Account" shall be represented by the bookkeeping
entries required to record the Participant's (i) Phantom
Contributions plus (ii) accrued interest, equal to the Interest
Factor, earned to-date on such amounts. However, neither the
existence of such bookkeeping entries nor the Accrued Benefit Account
itself shall be deemed to create either a trust of any kind, or a
fiduciary relationship between the Bank and the Participant or any
Beneficiary.
1.2 "Act" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.3 "Bank" means POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION and any
successor thereto.
1.4 "Beneficiary" means the person or persons (and their heirs)
designated as Beneficiary in Exhibit B of this Agreement to whom the
deceased Participant's benefits are payable. If no Beneficiary is so
designated, then the Participant's Spouse, if living, will be deemed
the Beneficiary. If the Participant's Spouse is not living, then the
Children of the Participant will be deemed the Beneficiaries and will
take on a per stirpes basis. If there are no Children, then the
Estate of the Participant will be deemed the Beneficiary.
1.5 "Benefit Age" means the later of: (i) Participant's sixtieth (60th)
birthday or (ii) the actual date the Participant's full-time
employment with the Bank terminates.
1.6 "Benefit Eligibility Date" means the date on which the Participant is
entitled to receive any benefit(s) pursuant to Section(s) III or V of
this Agreement. It shall be the first day of the month following the
month in which the Participant attains his Benefit Age.
1.7 "Benefit Period" means the time frame during which certain benefits
payable hereunder shall be distributed. Payments shall be made in
monthly installments commencing on the first day of the month
following the occurrence of the event which triggers distribution and
continuing for a period of two
2
<PAGE>
hundred forty (240) months. Should the Participant make a Timely
Election to receive a lump sum benefit payment, the Participant's
Benefit Period shall be deemed to be one (1) month.
1.8 "Board of Directors" means the board of directors of the Bank.
1.9 "Cause" means personal dishonesty, willful misconduct, willful
malfeasance, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of
any law, rule, regulation (other than traffic violations or similar
offenses), or final cease-and-desist order, material breach of any
provision of this Agreement, or gross negligence in matters of
material importance to the Bank.
1.10 "Change in Control" of the Bank shall mean and include the
following:
(1) a Change in Control of a nature that would be required to be
reported in response to Item 1(a) of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"); or
(2) a change in control of the Bank within the meaning of 12 C.F.R.
574.4; or
(3) a Change in Control at such time as
(i) any "person" (as the term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Bank
representing Twenty Percent (20.0%) or more of the combined
voting power of the Bank's outstanding securities
ordinarily having the right to vote at the election of
directors, except for any stock purchased by the Bank's
Employee Stock Ownership Plan and/or trust; or
(ii) individuals who constitute the Board of Directors on the
date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any
person becoming a director subsequent to the date hereof
whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Bank's
stockholders was approved by the Bank's nominating
committee which is comprised of members of the Incumbent
Board, shall be, for purposes of this clause (ii),
considered as though he were a member of the Incumbent
Board; or
(iii) merger, consolidation, or sale of all or substantially all
of the assets of the Bank occurs; or
(iv) a proxy statement is issued soliciting proxies from the
stockholders of the Bank by someone other than the current
management of the Bank, seeking member stockholder
3
<PAGE>
approval of a plan of reorganization, merger, or
consolidation of the Bank with one or more corporations as
a result of which the outstanding shares of the class of
the Bank's securities are exchanged for or converted into
cash or property or securities not issued by the Bank.
1.11 "Children" means all natural or adopted children of the Participant,
and issue of any predeceased child or children.
1.12 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
1.13 "Contribution(s)" means those annual contributions which the Bank is
required to make to the Retirement Income Trust Fund on behalf of the
Participant in accordance with Subsection 2.1(a) and in the amounts
set forth in Exhibit A of the Agreement.
1.14 (a) "Disability Benefit" means the benefit payable to the Participant
following a determination, in accordance with Subsection 6.1(a), that
he is no longer able, properly and satisfactorily, to perform his
duties at the Bank.
(b) "Disability Benefit-Supplemental" (if applicable) means the
benefit payable to the Participant's Beneficiary upon the
Participant's death, in accordance with Subsection 6.1(b).
1.15 "Effective Date" of this restatement shall be January 1, 1998. The
Agreement was initially adopted on February 28, 1997.
1.16 "Estate" means the estate of the Participant.
1.17 "Interest Factor" means monthly compounding, discounting or
annuitizing, as applicable, at a rate set forth in Exhibit A.
1.18 "Phantom Contributions" means those annual Contributions which the
Bank is no longer required to make on behalf of the Participant to
the Retirement Income Trust Fund. Rather, once the Participant has
exercised the withdrawal rights provided for in Subsection 2.2, the
Bank shall be required to record the annual amounts set forth in
Exhibit A of the Agreement in the Participant's Accrued Benefit
Account, pursuant to Subsection 2.1.
4
<PAGE>
1.19 "Plan Year" shall mean February 28th, 1996 through December 31, 1996,
for the first Plan Year. Thereafter, the term shall mean the twelve
(12) month period commencing January 1, 1997 and each consecutive
twelve (12) month period thereafter.
1.20 "Retirement Age" means the Participant's sixtieth (60th) birthday
provided; however, that the Participant's actual retirement from
full-time employment may occur at any later date mutually agreed upon
by the parties.
1.21 "Retirement Income Trust Fund" means the trust fund account
established by the Participant and into which annual Contributions
will be made by the Bank on behalf of the Participant pursuant to
Subsection 2.1. The contractual rights of the Bank and the
Participant with respect to the Retirement Income Trust Fund shall be
outlined in a separate writing to be known as the James Edington
Grantor Trust agreement.
1.22 "Spouse" means the individual to whom the Participant is legally
married at the time of the Participant's death.
1.23 "Supplemental Retirement Income Benefit" means an annual amount
(before taking into account federal and state income taxes), payable
in monthly installments throughout the Benefit Period. Such benefit
is projected pursuant to the Agreement for the purpose of determining
the Contributions to be made to the Retirement Income Trust Fund (or
Phantom Contributions to be recorded in the Accrued Benefit Account).
The annual Contributions and Phantom Contributions have been
actuarially determined, using the assumptions set forth in Exhibit A,
in order to fund for the projected Supplemental Retirement Income
Benefit. The Supplemental Retirement Income Benefit for which
Contributions (or Phantom Contributions) are being made (or recorded)
is set forth in Exhibit A.
1.24 "Timely Election" means the Participant has made an election to
change the form of his benefit payment(s) by filing with the
Administrator a Notice of Election to Change Form of Payment (Exhibit
C of this Agreement), such election having been made prior to the
event which triggers distribution and at least two (2) years prior to
the Participant's Benefit Eligibility Date; provided however, that if
all payments to the participant shall be made from the Retirement
Income Trust Fund, then a Timely Election is an election made at any
time.
5
<PAGE>
SECTION II
BENEFITS - GENERALLY
2.1 (a) Retirement Income Trust Fund and Accrued Benefit Account. The
Participant shall establish the James Edington Grantor Trust into
which the Bank shall be required to make annual Contributions on the
Participant's behalf, pursuant to Exhibit A and this Section II of
the Agreement. A trustee shall be selected by the Participant. The
trustee shall maintain an account, separate and distinct from the
Participant's personal contributions, which account shall constitute
the Retirement Income Trust Fund. The trustee shall be charged with
the responsibility of investing all contributed funds. Distributions
from the Retirement Income Trust Fund of the James Edington Grantor
Trust shall be made by the trustee to the Participant, for purposes
of payment of any income taxes due and owing on Contributions by the
Bank to the Retirement Income Trust Fund, if any, and on any taxable
earnings associated with such Contributions which the Participant
shall be required to pay from year to year under applicable law prior
to actual receipt of any benefit payments from the Retirement Income
Trust Fund. If the Participant exercises his withdrawal rights
pursuant to Subsection 2.2, the Bank's obligation to make
Contributions to the Retirement Income Trust Fund shall cease and the
Bank's obligation to record Phantom Contributions in the Accrued
Benefit Account shall immediately commence pursuant to Exhibit A and
this Section II of the Agreement. To the extent this Agreement is
inconsistent with the James Edington Grantor Trust agreement, this
Agreement shall supersede the James Edington Grantor Trust agreement.
The annual Contributions (or Phantom Contributions) required to be
made by the Bank to the Retirement Income Trust Fund (or recorded by
the Bank in the Accrued Benefit Account) have been fixed and
determined and are set forth in Exhibit A which is attached hereto
and incorporated herein by reference. Contributions shall be made by
the Bank to the Retirement Income Trust Fund (i) within thirty (30)
days of establishment of such trust, and (ii) within the first ten
(10) days of the beginning of each subsequent Plan Year, unless this
Section expressly provides otherwise. Phantom Contributions, if any,
shall be recorded in the Accrued Benefit Account within the first ten
(10) days of the beginning of each applicable Plan Year, unless this
Section expressly provides otherwise. Phantom Contributions shall
accrue interest at a rate equal to the Interest Factor during the
Benefit Period, until the balance of the Accrued Benefit Account has
been fully distributed. Interest on any and all Phantom
Contributions shall not commence until such Benefit Period commences.
6
<PAGE>
(b) Withdrawal Rights Not Exercised.
(1) Contributions Made Annually
If the Participant does not exercise any withdrawal rights pursuant
to Subsection 2.2, the annual Contributions to the Retirement Income
Trust Fund included on Exhibit A shall continue each year, unless
this Subsection 2.1(b) specifically states otherwise, until the
earlier of (i) the last Plan Year that Contributions are required
pursuant to Exhibit A, or (ii) the Plan Year of the Participant's
termination of employment.
(2) Termination Following a Change in Control
If the Participant does not exercise his withdrawal rights pursuant
to Subsection 2.2 and a Change in Control occurs at the Bank,
followed at any time by either (i) the Participant's involuntary
termination of employment, or (ii) the Participant's voluntary
termination of employment after: (A) a material change in the
Participant's function, duties, or responsibilities, which change
would cause the Participant's position to become one of lesser
responsibility, importance, or scope from the position the
Participant held at the time of the Change in Control, (B) a
relocation of the Participant's principal place of employment by more
than thirty (30) miles from its location prior to the Change in
Control, or (C) a material reduction in the benefits and perquisites
to the Participant from those being provided at the time of the
Change in Control, the Contribution set forth below shall be required
of the Bank in addition to all previous Contributions. The Bank
shall be required to make a final Contribution to the Retirement
Income Trust Fund within ten (10) days of the Participant's
termination of employment. The amount of such final Contribution
shall be equal to (i) $2,700,000 less (ii) the sum of all prior
Contributions to the Retirement Income Trust Fund.
(3) Termination For Cause
If the Participant (i) does not exercise his withdrawal rights
pursuant to Subsection 2.2, and (ii) is terminated for Cause pursuant
to Subsection 5.2, no further Contribution(s) to the Retirement
Income Trust Fund shall be required of the Bank, and if not yet made,
no Contribution shall be required for the Plan Year in which such
termination for Cause occurs.
(4) Involuntary Termination of Employment.
If (i) the Participant does not exercise his withdrawal rights
pursuant to Subsection 2.2, and (ii) the Participant's employment
with the Bank is involuntarily terminated for any reason other than a
termination related to disability, termination for Cause or
termination following a Change in Control, the Contribution set forth
below shall be required of the Bank. The Bank shall be required to
make
7
<PAGE>
a final Contribution to the Retirement Income Trust Fund within ten
(10) days of the Participant's involuntary termination of employment.
The amount of such final Contribution shall be equal to (i)
$2,700,000 less (ii)the sum of all prior Contributions to the
Retirement Income Trust Fund.
(5) Voluntary Termination of Employment.
If (i) the Participant does not exercise his withdrawal rights
pursuant to Subsection 2.2, and (ii) the Participant voluntary
terminates employment with the Bank, for any reason other than a
voluntary termination as described in Subsection 2.1(b)(2), the
Participant shall not be entitled to any further Contributions to the
Retirement Income Trust Fund subsequent to the date of such voluntary
termination of employment.
(6) Death Prior to Retirement Age.
(A) Death During Employment.
If the Participant (i) does not exercise any withdrawal rights
pursuant to Subsection 2.2, and (ii) dies while employed by the Bank
(including employment following a Change in Control), the Bank shall
be required to make a final Contribution to the Retirement Income
Trust Fund within ten (10) days of the Participant's death. The
amount of such final Contribution shall be equal to: (i) $2,700,000
less (ii) the sum of all prior Contributions to the Retirement Income
Trust Fund.
(B) Death Following Termination of Employment But Prior to Retirement Age.
If the Participant (i) does not exercise any withdrawal rights
pursuant to Subsection 2.2 and (ii) dies after termination of
employment for any reason other than Cause, but prior to Retirement
Age, the Bank shall be required to make a final Contribution to the
Retirement Income Trust Fund equal to $500,000.00.
(7) Termination Due to Disability.
If the Participant (i) does not exercise any withdrawal rights pursuant to
Subsection 2.2, and (ii) terminates employment due to disability, no further
Contributions shall be made on behalf of the Participant until the
Participant's death. Upon the Participant's death, the Bank shall be
required to make a final Contribution to the Retirement Income Trust
Fund. Such Contribution shall be made within ten (10) days of the date on
which the Bank learns of the participant's death. The amount of such
final Contribution shall be equal to: (i) $2,700,000 less (ii) the sum of
all prior Contributions to the Retirement Income Trust Fund.
8
<PAGE>
(c) Withdrawal Rights Exercised.
(1) Phantom Contributions Made Annually.
If the Participant exercises his withdrawal rights pursuant to
Subsection 2.2, no further Contributions to the Retirement Income
Trust Fund shall be required of the Bank. Thereafter, Phantom
Contributions shall be recorded annually in the Participant's Accrued
Benefit Account within ten (10) days of the beginning of each Plan
Year, commencing with the first Plan Year following the Plan Year in
which the Participant exercises his withdrawal rights. Such Phantom
Contributions shall continue to be recorded annually, unless this
Subsection 2.1(c) specifically states otherwise, until the earlier of
(i) the last Plan Year that Phantom Contributions are required
pursuant to Exhibit A, or (ii) the Plan Year of the Participant's
termination of employment.
(2) Termination Following a Change in Control
If the Participant exercises his withdrawal rights pursuant to
Subsection 2.2, Phantom Contributions shall commence in the Plan Year
following the Plan Year in which the Participant first exercises his
withdrawal rights. If a Change in Control occurs at the Bank,
followed by either (i) the participant's involuntary termination of
employment or (ii) the participant's voluntary termination of
employment after: (A) a material change in the Participant's
function, duties, or responsibilities, which change would cause the
Participant's position to become one of lesser responsibility,
importance, or scope from the position the Participant held at the
time of the Change in Control, (B) a relocation of the Participant's
principal place of employment by more than thirty (30) miles from its
location prior to the Change in Control, or (C) a material reduction
in the benefits and perquisites to the Participant from those being
provided at the time of the Change in Control, the Phantom
Contribution set forth below shall be required of the Bank in
addition to all previous annual Phantom Contributions or
Contributions (as applicable). The Bank shall be required to record
a final lump sum Phantom Contribution in the Accrued Benefit Account
within ten (10) days of the Participant's termination of employment.
The amount of such final Phantom Contribution shall be equal to (i)
$2,700,000 less (ii) the sum of all prior Phantom Contributions
recorded in the Accrued Benefit Account and Contributions made to the
Retirement Income Trust Fund.
(3) Termination For Cause
If the Participant is terminated for Cause pursuant to Subsection
5.2, the entire balance of the Participant's Accrued Benefit Account
at the time of such termination, which shall include any Phantom
Contributions which have been recorded plus accrued interest, shall
be forfeited.
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(4) Involuntary Termination of Employment.
If (i) the Participant exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) the Participant's employment with the Bank
is involuntarily terminated for any reason other than a termination
related to disability, termination for Cause, or termination
following a Change in Control, the Phantom Contribution set forth
below shall be required of the Bank. The Bank shall be required to
record a final Phantom Contribution in the Accrued Benefit Account
within ten (10) days of the Participant's involuntary termination of
employment. The amount of such final Phantom Contribution shall be
equal to (i) $2,700,000 less (ii) the sum of all prior Phantom
Contributions recorded in the Accrued Benefit Account and
Contributions made to the Retirement Income Trust Fund.
(5) Voluntary Termination of Employment.
If (i) the Participant exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) the Participant voluntarily terminates
employment with the Bank, for any reason other than a voluntary
termination as described in Subsection 2.1(c)(2), the Participant shall
not be entitled to any further Phantom Contributions subsequent to the
date of such voluntary termination of employment.
(6) Death Prior to Retirement Age.
(A) Death During Employment
If the Participant (i) exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) dies while employed by the Bank (including
employment following a Change in Control), the Bank shall be required
to record a final Phantom Contribution in the Participant's Accrued
Benefit Account. Phantom Contributions shall commence in the Plan
Year following the Plan Year in which the Participant exercises his
withdrawal rights and shall continue through the Plan Year in which
the Participant dies. The final Phantom Contribution shall be equal
to: (i) $2,700,000 less (ii) the sum of the all prior Phantom
Contributions recorded in the Accrued Benefit Account and/or
Contributions made to the Retirement Income Trust Fund. Such final
Phantom Contribution shall be recorded in the Accrued Benefit Account
within ten (10) days of the Participant's death.
(B) Death Following Termination of Employment But Prior to Retirement Age.
If the Participant (i) exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) dies after termination of employment for any
reason other than Cause, but prior to Retirement Age, the Bank shall be
required to record a final Phantom Contribution in the Accrued Benefit
Account equal to
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$500,000.00. Such final Phantom Contribution shall be recorded in
the Accrued Benefit Account within ten (10) days of the date on
which the Bank learns of the Participant's death.
(7) Termination Due to Disability
If the Participant (i) exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) terminates employment due to disability, no
further Phantom Contributions shall be recorded on behalf of the
Participant until the Participant's death. Upon the participant's
death, the Bank shall be required to record a final Phantom
Contribution in the Accrued Benefit Account. The final Phantom
Contribution shall be recorded within ten (10) days of the date on
which the Bank learns of the Participant's death. The amount of such
final Contribution shall be equal to : (i) $2,700,000 less (ii) the
sum of all prior Phantom Contributions recorded in the Accrued
Benefit Account and Contributions made to the Retirement Income Trust
Fund.
2.2 Withdrawals From Retirement Income Trust Fund.
Exercise of withdrawal rights by the Participant pursuant to the
James Edington Grantor Trust agreement shall terminate the Bank's
obligation to make any further Contributions to the Retirement Income
Trust Fund, and the Bank's obligation to record Phantom Contributions
pursuant to Subsection 2.1(c) shall commence. For purposes of this
Subsection 2.2, "exercise of withdrawal rights" shall mean those
withdrawal rights to which the Participant is entitled under Article
III of the James Edington Grantor Trust agreement and shall exclude
any distributions made by the trustee of the Retirement Income Trust
Fund to the Participant for purposes of payment of income taxes in
accordance with Subsection 2.1 of this Agreement, or other trust
expenses properly payable from the James Edington Grantor Trust
pursuant to the provisions of the trust document.
2.3 Benefits Payable From Retirement Income Trust Fund
Notwithstanding anything else to the contrary in this Agreement, in
the event that the trustee of the Retirement Income Trust Fund
purchases a life insurance policy with the Contributions to and, if
applicable, earnings of the Trust, and such life insurance policy is
intended to continue in force beyond the Benefit Period for the
disability or retirement benefits payable from the Retirement Income
Trust Fund pursuant to this Agreement, then the Trustee shall have
discretion to determine the portion of the cash value of such policy
available for purposes of annuitizing the Retirement Income Trust
Fund to provide the disability or retirement benefits payable under
this Agreement, after taking into
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consideration the amounts reasonably believed to be required in order
to maintain the cash value of such policy to continue such policy in
effect until the death of the Participant and payment of death
benefits thereunder.
SECTION III
RETIREMENT BENEFIT
3.1 (a) Normal form of payment.
If (i) the Participant is employed with the Bank at least until
reaching his Retirement Age, including employment with the Bank
following a Change in Control, and (ii) the Participant has not made
a Timely Election to receive a lump sum benefit, this Subsection
3.1(a) shall be controlling with respect to retirement benefits.
The Retirement Income Trust Fund, measured as of the Participant's
Benefit Age, shall be annuitized (using the Interest Factor) into
monthly installments and shall be payable for the Benefit Period.
Such benefit payments shall commence on the Participant's Benefit
Eligibility Date. Should Retirement Income Trust Fund assets
actually earn a rate of return, following the date such balance is
annuitized, which is less than the rate of return used to annuitize
the Retirement Income Trust Fund, no additional contributions to the
Retirement Income Trust Fund shall be required by the Bank in order
to fund the final benefit payment(s) and make up for any shortage
attributable to the less-than-expected rate of return. Should
Retirement Income Trust Fund assets actually earn a rate of return,
following the date such balance is annuitized, which is greater than
the rate of return used to annuitize the Retirement Income Trust
Fund, the final benefit payment to the Participant (or his
Beneficiary) shall distribute the excess amounts attributable to the
greater-than-expected rate of return. In the event the Participant
dies at any time after attaining his Benefit Age, but prior to
commencement or completion of all the payments due and owing
hereunder, (i) the trustee of the Retirement Income Trust Fund shall
pay to the Participant's Beneficiary the monthly installments (or a
continuation of such monthly installments if they have already
commenced) for the balance of months remaining in the Benefit Period,
or (ii) the Participant's Beneficiary may request to receive the
unpaid balance of the Participant's Retirement Income Trust Fund in a
lump sum payment. If a lump sum payment is requested by the
Beneficiary, payment of the balance of the Retirement Income Trust
Fund in such lump sum form shall be made only if the Participant's
Beneficiary (i) obtains approval from the trustee of the James
Edington Grantor Trust and (ii) notifies the Administrator in writing
of such election. Such lump sum payment, if approved by the trustee,
shall be payable within thirty (30) days of such trustee approval.
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The Participant's Accrued Benefit Account (if applicable), measured
as of the Participant's Benefit Age, shall be annuitized (using the
Interest Factor) into monthly installments and shall be payable for
the Benefit Period. Such benefit payments shall commence on the
Participant's Benefit Eligibility Date. In the event the Participant
dies at any time after attaining his Benefit Age, but prior to
commencement or completion of all the payments due and owing
hereunder, (i) the Bank shall pay to the Participant's Beneficiary
the same monthly installments (or a continuation of such monthly
installments if they have already commenced) for the balance of
months remaining in the Benefit Period, or (ii) the Participant's
Beneficiary may request to receive the remainder of any unpaid
benefit payments in a lump sum payment. If a lump sum payment is
requested by the Beneficiary, the amount of such lump sum payment
shall be equal to the unpaid balance of the Participant's Accrued
Benefit Account. Payment in such lump sum form shall be made only if
the Participant's Beneficiary (i) obtains Board of Director approval,
and (ii) notifies the Administrator in writing of such election.
Such lump sum payment, if approved by the Board of Directors, shall
be made within thirty (30) days of such Board of Director approval.
(b) Alternative payout option.
If (i) the Participant is employed with the Bank at least until
reaching his Retirement Age, including employment with the Bank
following a Change in Control, and (ii) the Participant has made a
Timely Election to receive a lump sum benefit, this Subsection 3.1(b)
shall be controlling with respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
Participant's Benefit Age, shall be paid to the Participant in a lump
sum on his Benefit Eligibility Date. In the event the Participant
dies after becoming eligible for such payment (upon attainment of his
Benefit Age), but before the actual payment is made, his Beneficiary
shall be entitled to receive the lump sum benefit in accordance with
this Subsection 3.1(b) within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
The balance of the Participant's Accrued Benefit Account (if
applicable), measured as of the Participant's Benefit Age, shall be
paid to the Participant in a lump sum on his Benefit Eligibility
Date. In the event the Participant dies after becoming eligible for
such payment (upon attainment of his Benefit Age), but before the
actual payment is made, his Beneficiary shall be entitled to receive
the lump sum benefit in accordance with this Subsection 3.1(b) within
thirty (30) days of the date the Administrator receives notice of the
Participant's death.
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SECTION IV
PRE-RETIREMENT DEATH BENEFIT
4.1 (a) Normal form of payment.
If (i) the Participant dies while employed by the Bank, including
death during employment following a Change in Control, and (ii) the
Participant has not made a Timely Election to receive a lump sum
benefit, this Subsection 4.1(a) shall be controlling with respect to
pre-retirement death benefits.
The Participant's Retirement Income Trust Fund, measured as of the
later of (i) the Participant's death, or (ii) the date any final lump
sum Contribution is made pursuant to Subsection 2.1(b), shall be
annuitized (using the Interest Factor) into monthly installments and
shall be payable to the Participant's Beneficiary for the Benefit
Period. Such benefit payments shall commence within thirty (30) days
of the date the Administrator receives notice of the Participant's
death, or if later, within thirty (30) days after any final lump sum
Contribution is made to the Retirement Income Trust Fund in
accordance with Subsection 2.1(b). Should Retirement Income Trust
Fund assets actually earn a rate of return, following the date such
balance is annuitized, which is less than the rate of return used to
annuitize the Retirement Income Trust Fund, no additional
contributions to the Retirement Income Trust Fund shall be required
by the Bank in order to fund the final benefit payment(s) and make
up for any shortage attributable to the less-than-expected rate of
return. Should Retirement Income Trust Fund assets actually earn a
rate of return, following the date such balance is annuitized, which
is greater than the rate of return used to annuitize the Retirement
Income Trust Fund, the final benefit payment to the Participant's
Beneficiary shall distribute the excess amounts attributable to the
greater-than-expected rate of return. The Participant's Beneficiary
may request to receive the unpaid balance of the Participant's
Retirement Income Trust Fund in a lump sum payment. If a lump sum
payment is requested by the Beneficiary, payment of the balance of
the Retirement Income Trust Fund in such lump sum form shall be made
only if the Participant's Beneficiary (i) obtains approval from the
trustee of the James Edington Grantor Trust and (ii) notifies the
Administrator in writing of such election. Such lump sum payment, if
approved by the trustee, shall be made within thirty (30) days of
such trustee approval.
The Participant's Accrued Benefit Account (if applicable), measured
as of the later of (i) the Participant's death or (ii) the date any
final lump sum Phantom Contribution is recorded in the Accrued
Benefit Account pursuant to Subsection 2.1(c), shall be annuitized
(using the Interest Factor) into monthly installments and shall be
payable to the Participant's Beneficiary for the Benefit Period. Such
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benefit payments shall commence within thirty (30) days of the date
the Administrator receives notice of the Participant's death, or if
later, within thirty (30) days after any final lump sum Phantom
Contribution is recorded in the Accrued Benefit Account in accordance
with Subsection 2.1(c). The Participant's Beneficiary may request to
receive the remainder of any unpaid monthly benefit payments due from
the Accrued Benefit Account in a lump sum payment. If a lump sum
payment is requested by the Beneficiary, the amount of such lump sum
payment shall be equal to the balance of the Participant's Accrued
Benefit Account. Payment in such lump sum form shall be made only if
the Participant's Beneficiary (i) obtains Board of Director approval,
and (ii) notifies the Administrator in writing of such election.
Such lump sum payment, if approved by the Board of Directors, shall
be payable within thirty (30) days of such Board of Director
approval.
(b) Alternative payout option.
If (i) the Participant dies while employed by the Bank, including
death during employment following a Change in Control, and (ii) the
Participant has made a Timely Election to receive a lump sum benefit,
this Subsection 4.1(b) shall be controlling with respect to
pre-retirement death benefits.
The balance of the Participant's Retirement Income Trust Fund,
measured as of the later of (i) the Participant's death, or (ii) the
date any final lump sum Contribution is made pursuant to Subsection
2.1(b), shall be paid to the Participant's Beneficiary in a lump sum
within thirty (30) days of the date the Administrator receives notice
of the Participant's death.
The balance of the Participant's Accrued Benefit Account (if
applicable), measured as of the later of (i) the Participant's death,
or (ii) the date any final Phantom Contribution is recorded pursuant
to Subsection 2.1(c), shall be paid to the Participant's Beneficiary
in a lump sum within thirty (30) days of the date the Administrator
receives notice of the Participant's death.
SECTION V
BENEFIT(S) IN THE EVENT OF TERMINATION OF EMPLOYMENT
PRIOR TO RETIREMENT AGE
5.1 Voluntary or Involuntary Termination of Employment Other Than for
Cause. In the event the Participant's employment with the Bank is
voluntarily or involuntarily terminated prior to Retirement
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Age, for any reason including a Change in Control, but excluding (i)
the Participant's pre-retirement death, which shall be covered in
Section IV, (ii) termination for Cause, which shall be covered in
Subsection 5.2, or (iii) termination due to disability, which shall
be covered in Section VI, the Participant (or his Beneficiary) shall
be entitled to receive benefits in accordance with this Subsection
5.1. Payments of benefits pursuant to this Subsection 5.1 shall be
made in accordance with Subsection 5.1 (a) or 5.1 (b) below, as
applicable.
(a) Normal form of payment.
(1) Participant Lives Until Benefit Age
If (i) after such termination, the Participant lives until attaining
his Benefit Age, and (ii) the Participant has not made a Timely
Election to receive a lump sum benefit, then payments made under this
Subsection 5.1(a)(1) shall be made in the same manner as under
Subsection 3.1(a).
(2) Participant Dies Prior to Benefit Age
If (i) after such termination, the Participant dies prior to
attaining his Benefit Age, and (ii) the Participant has not made a
Timely Election to receive a lump sum benefit, then payments made
under this Subsection 5.1(a)(2) shall be made in the same time and
manner as under Subsection 4.1(a).
(b) Alternative Payout Option.
(1) Participant Lives Until Benefit Age
If (i) after such termination, the Participant lives until attaining
his Benefit Age, and (ii) the Participant has made a Timely Election
to receive a lump sum benefit, this Subsection 5.1(b)(1) shall be
controlling with respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
Participant's Benefit Age, shall be paid to the Participant in a lump
sum on his Benefit Eligibility Date. In the event the Participant
dies after becoming eligible for such payment (upon attainment of his
Benefit Age), but before the actual payment is made, his Beneficiary
shall be entitled to receive the lump sum benefit in accordance with
this Subsection 5.1(b)(1) within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
The balance of the Participant's Accrued Benefit Account (if
applicable), measured as of the Participant's Benefit Age, shall be
paid to the Participant in a lump sum on his Benefit Eligibility
Date. In the event the Participant dies after becoming eligible for
such payment (upon attainment of his
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Benefit Age), but before the actual payment is made, his Beneficiary
shall be entitled to receive the lump sum benefit in accordance with this
Subsection 5.1(b)(1) within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
(2) Participant Dies Prior to Benefit Age
If (i) after such termination, the Participant dies prior to
attaining his Benefit Age, and (ii) the Participant has made a Timely
Election to receive a lump sum benefit, this Subsection 5.1(b)(2)
shall be controlling with respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
date of the Participant's death, shall be paid to the Participant's
Beneficiary within thirty (30) days of the date the Administrator
receives notice of the Participant's death.
The balance of the Participant's Accrued Benefit Account (if
applicable), measured as of the date of the Participant's death,
shall be paid to the Participant's Beneficiary within thirty (30)
days of the date the Administrator receives notice of the
Participant's death.
5.2 Termination For Cause.
If the Participant is terminated for Cause, all benefits under this
Agreement, other than those which can be paid from previous
Contributions to the Retirement Income Trust Fund (and earnings on
such Contributions), shall be forfeited. Furthermore, no further
Contributions (or Phantom Contributions, as applicable) shall be
required of the Bank for the year in which such termination for
Cause occurs (if not yet made). The Participant shall be entitled to
receive a benefit in accordance with this Subsection 5.2.
The balance of the Participant's Retirement Income Trust Fund shall
be paid to the Participant in a lump sum on his Benefit Eligibility
Date. In the event the Participant dies prior to his Benefit
Eligibility Date, his Beneficiary shall be entitled to receive the
balance of the Participant's Retirement Income Trust Fund in a lump
sum within thirty (30) days of the date the Administrator receives
notice of the Participant's death.
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SECTION VI
OTHER BENEFITS
6.1 (a) Disability Benefit.
If the Participant's employment terminates prior to Retirement Age
due to a disability which meets the criteria set forth below, the
Participant shall be entitled to receive the Disability Benefit in
lieu of the retirement benefit(s) available pursuant to Section 5.1
(which is (are) not available prior to the Participant's Benefit
Eligibility Date).
Notwithstanding any other provision hereof, if requested by the
Participant and approved by the Board of Directors, the Participant
shall receive a lump sum disability benefit hereunder, in any case in
which it is determined by a duly licensed independent physician
selected by the Bank, that the Participant is no longer able,
properly and satisfactorily, to perform his regular duties as an
officer and director, because of ill health, accident disability or
general ability due to age. The lump sum benefit(s) to which the
Participant is entitled shall include: (i) the balance of the
Retirement Income Trust Fund, plus (ii) the balance of the Accrued
Benefit Account (if applicable), both measured as of the date of the
disability determination. The benefit(s) shall be paid within thirty
(30) days following the date of the Participant's request for such
benefit. In the event the Participant dies after becoming eligible
for such payment(s) but before the actual payment(s) is (are) made,
his Beneficiary shall be entitled to the benefit(s) provided for in
this Subsection 6.1(a) within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
(b) Disability Benefit-Supplemental
Within thirty (30) days of the Participant's death, the Bank shall
pay a direct, lump sum payment to the Participant's Beneficiary equal
to the sum of all prior Contributions to the Retirement Income Trust
Fund and/or Phantom Contributions recorded in the Accrued Benefit
Account, after taking into consideration the final Contribution or
Phantom Contribution recorded pursuant to subsections 2(b)(7) and
2(c)(7). Such lump sum payment, shall be payable within thirty (30)
days of the date the Administrator receives notice of the
Participant's death.
6.2 Additional Death Benefit - Burial Expense.
Upon the Participant's death, the Participant's Beneficiary shall also be
entitled to receive a one-time lump sum death benefit in the amount of
Fifteen Thousand Dollars ($15,000.00). This benefit shall be paid
directly from the Bank to the Beneficiary and shall be provided
specifically for the purpose of providing payment for burial and/or
funeral expenses of
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the Participant. Such death benefit shall be payable within thirty (30)
days from the date the Administrator receives notice of the Participant's
death. The Participant's Beneficiary shall not be entitled to such
benefit if the Participant is terminated for Cause prior to death.
SECTION VII
NON-COMPETITION
7.1 Non-Competition
In consideration of the agreements of the Bank contained herein and
of the payments to be made by the Bank pursuant hereto, the
Participant hereby agrees that, for as long as he remains employed by
the Bank, he will devote substantially all of his time, skill,
diligence and attention to the business of the Bank, and will not
actively engage, either directly or indirectly, in any business or
other activity which is, or may be deemed to be, in any way
competitive with or adverse to the best interests of the business of
the Bank. The Participant further agrees that following his
employment with the Bank and continuing through the Benefit Period
he will not actively engage, either directly or indirectly, in any
business or other activity which is, or may be deemed to be, in any
way competitive with or adverse to the best interests of the Bank,
unless the Participant has the prior express written consent of the
Board of Directors of the Bank.
7.2 Breach of Non-Competition Clause.
(a) During Employment.
In the event the Participant breaches Subsection 7.1 while employed
at the Bank, all further Contributions to the Retirement Income Trust
Fund (or Phantom Contributions to the Accrued Benefit Account) shall
immediately cease, and all benefits under this Agreement, other than
those which can be paid from previous Contributions to the Retirement
Income Trust Fund (and earnings on such Contributions), shall be
forfeited. If, following such breach, the Participant lives until
attaining his Benefit Age, he shall be entitled to receive a benefit
from the Retirement Income Trust Fund equal to the balance of the
Retirement Income Trust Fund, measured as of the Participant's
Benefit Age, payable in a lump sum on his Benefit Eligibility Date.
In the event the Participant dies after attaining his Benefit Age but
before actual payment is made, his Beneficiary shall be entitled to
receive the lump sum benefit payable within thirty (30) days of the
date of the Administrator receives notice of the Participant's death.
If, following such breach, the Participant dies prior to attaining
his Benefit Age, his Beneficiary shall be entitled to receive a
benefit from the Retirement Income Trust Fund equal to the balance of
the Retirement Income Trust Fund, measured as of the date of the
Participant's death,
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payable in a lump sum within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
In the event (i) any breach by the Participant of the agreements and
covenants described in Subsection 7.1 occurs, and (ii) the
Participant's employment with the Bank is terminated due to such
breach, such termination shall be deemed to be for Cause and the
benefits payable to the Participant shall be paid in accordance with
Subsection 5.2 of this Agreement.
(b) Breach Following Termination of Employment.
In the event the Participant breaches Subsection 7.1 following the
Participant's termination of employment with the Bank, all benefits
under this Agreement, other than those which can be paid from
previous Contributions to the Retirement Income Trust Fund shall be
forfeited, regardless of whether the Participant is receiving
benefits at such time. If the Participant has attained his Benefit
Age and is receiving a benefit at the time of such breach, his
remaining balance in the Retirement Income Trust Fund shall be paid
to him in a lump sum within thirty (30) days of the date the Bank
has received notice of such breach (or in the event of his death
prior to payment of such lump sum, to his Beneficiary). If the
Participant has not attained his Benefit Age, and following such
breach, the Participant lives until his Benefit Age, he (or his
Beneficiary, in the event of his death prior to payment of his
benefit) shall receive a benefit payable in a lump sum from the
Retirement Income Trust Fund in the same manner as set forth above in
Subsection 7.2(a).
In the event of a termination related to a Change in Control as
described in Subsection 2.1(b)(2) (or 2.1(c)(2)), paragraph (b) of
this Subsection shall cease to be a condition to the performance by
the Bank of its obligations under this Agreement.
SECTION VIII
BENEFICIARY DESIGNATION
The Participant shall make an initial designation of primary and
secondary Beneficiaries upon execution of this Agreement and shall
have the right to change such designation, at any subsequent time, by
submitting to (i) the Administrator, and (ii) the trustee of the
Retirement Income Trust Fund, in substantially the form attached as
Exhibit B to this Agreement, a written designation of primary and
secondary Beneficiaries. Any Beneficiary designation made subsequent
to execution of this Agreement shall become effective only when
receipt thereof is acknowledged in writing by the Administrator.
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SECTION IX
PARTICIPANT'S RIGHT TO ASSETS
The rights of the Participant, any Beneficiary, or any other person
claiming through the Participant under this Agreement, shall be
solely those of an unsecured general creditor of the Bank, unless
this Agreement provides otherwise. The Participant, the
Beneficiary, or any other person claiming through the Participant,
shall only have the right to receive from the Bank those payments so
specified under this Agreement. The Participant agrees that he, his
Beneficiary, or any other person claiming through him shall have no
rights or interests whatsoever in any asset of the Bank, including
any insurance policies or contracts which the Bank may possess or
obtain to informally fund this Agreement. Any asset used or acquired
by the Bank in connection with the liabilities it has assumed under
this Agreement, unless expressly provided herein, shall not be deemed
to be held under any trust for the benefit of the Participant or his
Beneficiaries, nor shall any asset be considered security for the
performance of the obligations of the Bank. Any such asset shall be
and remain, a general, unpledged, and unrestricted asset of the Bank.
SECTION X
RESTRICTIONS UPON FUNDING
The Bank shall have no obligation to set aside, earmark or entrust
any fund or money with which to pay its obligations under this
Agreement, unless this Agreement provides otherwise. Except as
otherwise provided for in this Agreement, the Participant, his
Beneficiaries or any successor in interest to him shall be and remain
simply a general unsecured creditor of the Bank in the same manner
as any other creditor having a general claim for matured and unpaid
compensation. The Bank reserves the absolute right in its sole
discretion to either purchase assets to meet its obligations
undertaken by this Agreement or to refrain from the same and to
determine the extent, nature, and method of such asset purchases.
Should the Bank decide to purchase assets such as life insurance,
mutual funds, disability policies or annuities, the Bank reserves
the absolute right, in its sole discretion, to terminate such assets
at any time, in whole or in part. At no time shall the Participant
be deemed to have any lien, right, title or interest in or to any
specific investment or to any assets of the Bank. If the Bank
elects to invest in a life insurance, disability or annuity policy
upon the life of the Participant, then the Participant shall assist
the Bank by freely submitting to a physical examination and by
supplying such additional information necessary to obtain such
insurance or annuities.
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SECTION XI
ACT PROVISIONS
11.1 Named Fiduciary and Administrator. The Bank shall be the
Administrator (the "Administrator") of this Agreement. As
Administrator, the Bank shall be responsible for the management,
control and administration of the Agreement as established herein.
The Administrator may delegate to others certain aspects of the
management and operational responsibilities of the Agreement,
including the employment of advisors and the delegation of
ministerial duties to qualified individuals.
11.2 Claims Procedure and Arbitration. In the event that benefits under
this Agreement are not paid to the Participant (or to his Beneficiary
in the case of the Participant's death) and such claimants feel they
are entitled to receive such benefits, then a written claim must be
made to the Administrator within sixty (60) days from the date
payments are refused. The Administrator shall review the written
claim and, if the claim is denied, in whole or in part, it shall
provide in writing, within ninety (90) days of receipt of such claim,
its specific reasons for such denial, reference to the provisions of
this Agreement upon which the denial is based, and any additional
material or information necessary to perfect the claim. Such writing
by the Administrator shall further indicate the additional steps
which must be undertaken by claimants if an additional review of the
claim denial is desired.
If claimants desire a second review, they shall notify the
Administrator in writing within sixty (60) days of the first claim
denial. Claimants may review this Agreement or any documents
relating thereto and submit any issues and comments, in writing, they
may feel appropriate. In its sole discretion, the Administrator
shall then review the second claim and provide a written decision
within sixty (60) days of receipt of such claim. This decision shall
state the specific reasons for the decision and shall include
reference to specific provisions of this Agreement upon which the
decision is based.
If claimants continue to dispute the benefit denial based upon
completed performance of this Agreement or the meaning and effect of
the terms and conditions thereof, then claimants may submit the
dispute to a Board of Arbitration for final arbitration. Said Board
of Arbitration shall consist of one member selected by the claimant,
one member selected by the Bank, and the third member selected by the
first two members. The Board of Arbitration shall operate under any
generally recognized set of arbitration rules. The parties hereto
agree that they, their heirs, personal representatives, successors
and assigns shall be bound by the decision of such Board of
Arbitration with respect to any controversy properly submitted to it
for determination.
22
<PAGE>
SECTION XII
MISCELLANEOUS
12.1 No Effect on Employment Rights. Nothing contained herein will confer
upon the Participant the right to be retained in the employ of the
Bank nor limit the right of the Bank to discharge or otherwise deal
with the Participant without regard to the existence of the
Agreement. Pursuant to 12 C.F.R. Section 563.39(b), the following
conditions shall apply to this Agreement:
(1) The Bank's Board of Directors may terminate the Participant
at any time, but any termination by the Bank's Board of
Directors other than termination for Cause shall not
prejudice the Participant's vested right to compensation or
other benefits under the contract. As provided in
Subsection 5.2, the Participant shall have no right to
receive additional compensation or other benefits, other
than those provided for in Subsection 5.2, after
termination for Cause.
(2) If the Participant is suspended and/or temporarily
prohibited from participating in the conduct of the Bank's
affairs by a notice served under Section 8(e)(3) or (g)(1)
of the Federal Deposit Insurance Act (12 U.S.C. 1818(e)(3)
and (g)(1)) the Bank's obligations under the contract shall
be suspended (except vested rights) as of the date of
termination of employment 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.
(3) If the Participant is terminated and/or permanently
prohibited from participating in the conduct of the Bank's
affairs by an order issued under Section 8(e)(4) or (g)(1)
of the Federal Deposit Insurance Act (12 U.S.C. 1818(e)(4)
or (g)(1)), all non-vested obligations of the Bank under
the contract shall terminate as of the effective date of
the order.
(4) If the Bank is in default (as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act), all non-vested
obligations under the contract shall terminate as of the
date of default.
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<PAGE>
(5) All non-vested obligations under the contract shall be
terminated, except to the extent determined that
continuation of the contract is necessary for the continued
operation of the Bank:
(i) by the Director of the Federal Deposit Insurance
Corporation or his designee at the time the Federal
Deposit Insurance Corporation enters into an agreement
to provide assistance to or on behalf of the Bank
under the authority contained in Section 13(c) of the
Federal Deposit Insurance Act; or
(ii) by the Director of the Federal Deposit Insurance
Corporation or his designee, at the time the Director
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 to be in
an unsafe or unsound condition.
Any rights of the parties that have already vested, (i.e., the
balance of the Participant's Retirement Income Trust Fund and the
balance of the Participant's Accrued Benefit Account, if applicable),
however, shall not be affected by such action.
12.2 State Law. The Agreement is established under, and will be construed
according to, the laws of the state of Arkansas, to the extent such
laws are not preempted by the Act and valid regulations published
thereunder.
12.3 Severability. In the event that any of the provisions of this
Agreement or portion thereof, are held to be inoperative or invalid
by any court of competent jurisdiction, then: (i) insofar as is
reasonable, effect will be given to the intent manifested in the
provisions held invalid or inoperative, and (ii) the validity and
enforceability of the remaining provisions will not be affected
thereby.
12.4 Incapacity of Recipient. In the event the Participant is declared
incompetent and a conservator or other person legally charged with
the care of his person or Estate is appointed, any benefits under the
Agreement to which such Participant is entitled shall be paid to such
conservator or other person legally charged with the care of his
person or Estate.
12.5 Unclaimed Benefit. The Participant shall keep the Bank informed of
his current address and the current address of his Beneficiaries.
The Bank shall not be obligated to search for the whereabouts
24
<PAGE>
of any person. If the location of the Participant is not made known to
the Bank as of the date upon which any payment of any benefits from the
Accrued Benefit Account may first be made, the Bank shall delay payment
of the Participant's benefit payment(s) until the location of the
Participant is made known to the Bank; however, the Bank shall only be
obligated to hold such benefit payment(s) for the Participant until the
expiration of thirty-six (36) months. Upon expiration of the thirty-six
(36) month period, the Bank may discharge its obligation by payment to
the Participant's Beneficiary. If the location of the Participant's
Beneficiary is not made known to the Bank by the end of an additional
two (2) month period following expiration of the thirty-six (36) month
period, the Bank may discharge its obligation by payment to the
Participant's Estate. If there is no Estate in existence at such time
or if such fact cannot be determined by the Bank, the Participant and
his Beneficiary(ies) shall thereupon forfeit any rights to the balance,
if any, of the Participant's Accrued Benefit Account provided for such
Participant and/or Beneficiary under this Agreement.
12.6 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Agreement, no individual acting as an employee or
agent of the Bank, or as a member of the Board of Directors shall be
personally liable to the Participant or any other person for any
claim, loss, liability or expense incurred in connection with the
Agreement.
12.7 Gender. Whenever in this Agreement words are used in the masculine
or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender, whenever they should so apply.
12.8 Effect on Other Corporate Benefit Agreements. Nothing contained in
this Agreement shall affect the right of the Participant to
participate in or be covered by any qualified or non-qualified
pension, profit sharing, group, bonus or other supplemental
compensation or fringe benefit agreement constituting a part of the
Bank's existing or future compensation structure.
12.9 Suicide. Notwithstanding anything to the contrary in this Agreement,
if the Participant's death results from suicide, whether sane or
insane, within twenty-six (26) months after execution of this
Agreement, all further Contributions to the Retirement Income Trust
Fund (or Phantom Contributions recorded in the Accrued Benefit
Account) shall thereupon cease, and no Contribution (or Phantom
Contribution) shall be made by the Bank to the Retirement Income
Trust Fund (or recorded in the Accrued Benefit Account) in the year
such death resulting from suicide occurs (if not yet made). All
benefits other than those available from previous Contributions to
the Retirement Income Trust Fund under this Agreement shall be
forfeited, and this Agreement shall become null and void. The
balance of the
25
<PAGE>
Retirement Income Trust Fund, measured as of the Participant's date
of death, shall be paid to the Beneficiary within thirty (30) days of
the date the Administrator receives notice of the Participant's
death.
12.10 Inurement. This Agreement shall be binding upon and shall inure
to the benefit of the Bank, its successors and assigns, and the
Participant, his successors, heirs, executors, administrators,
and Beneficiaries.
12.11 Headings. Headings and sub-headings in this Agreement are
inserted for reference and convenience only and shall not be
deemed a part of this Agreement.
12.12 Establishment of a Rabbi Trust. The Bank shall establish a
rabbi trust into which the Bank shall contribute assets which
shall be held therein, subject to the claims of the Bank's
creditors in the event of the Bank's "Insolvency" (as defined in
such rabbi trust agreement), until the contributed assets are
paid to the Participant and/or his Beneficiary in such manner
and at such times as specified in this Agreement. It is the
intention of the Bank that the contribution or contributions to
the rabbi trust shall provide the Bank with a source of funds to
assist it in meeting the liabilities of this Agreement.
SECTION XIII
AMENDMENT/PLAN TERMINATION
13.1 Amendment or Plan Termination. The Bank intends this Agreement to
be permanent, but reserves the right to amend or terminate the
Agreement when, in the sole opinion of the Bank, such amendment or
termination is advisable. However, any termination of the Agreement
which is done in anticipation of or following to a "Change in
Control", as defined in Subsection 1.9, shall be deemed to trigger
Subsection 2.1(b)(2) (or 2.1(c)(2), as applicable) of the Agreement
notwithstanding the Participant's continued employment, and
benefit(s) shall be paid from the Retirement Income Trust Fund (and
Accrued Benefit Account, if applicable) in accordance with Subsection
13.2 below and with Subsections 2.1(b)(2) (or 2.1(c)(2), as
applicable). Any amendment or termination of the Agreement shall be
made pursuant to a resolution of the Board of Directors of the Bank
and shall be effective as of the date of such resolution. No
amendment or termination of the Agreement shall directly or
indirectly deprive the Participant of all or any portion of the
Participant's Retirement Income Trust Fund (and Accrued Benefit
Account, if applicable) as of the effective date of the resolution
amending or terminating the Agreement.
26
<PAGE>
13.2 Participant's Right to Payment Following Plan Termination. In the
event of a termination of the Agreement, the Participant shall be
entitled to the balance, if any, of his Retirement Income Trust Fund
(and Accrued Benefit Account, if applicable), measured as of the date
of plan termination. However, if such termination is done in
anticipation of or pursuant to a "Change in Control," such balance(s)
shall be measured as of the date the final Contribution (or Phantom
Contribution) is made (or recorded) pursuant to Subsection 2.1(b)(2)
(or 2.1(c)(2)). Payment of the balance(s) of the Participant's
Retirement Income Trust Fund (and Accrued Benefit Account, if
applicable) shall not be dependent upon his continuation of
employment with the Bank following the termination date of the
Agreement. Payment of the balance(s) of the Participant's Retirement
Income Trust Fund (and Accrued Benefit Account, if applicable) shall
be made in a lump sum within thirty (30) days of the date of
termination of the Agreement.
SECTION XIV
EXECUTION
14.1 This Agreement and the James Edington Grantor Trust agreement set
forth the entire understanding of the parties hereto with respect to
the transactions contemplated hereby, and any previous agreements or
understandings between the parties hereto regarding the subject
matter hereof are merged into and superseded by this Agreement and
the James Edington Grantor Trust agreement.
14.2 This Agreement shall be executed in triplicate, each copy of which,
when so executed and delivered, shall be an original, but all three
copies shall together constitute one and the same instrument.
27
<PAGE>
IN WITNESS WHEREOF, the Bank and the Participant have caused this
Agreement to be executed on the day and date first above written.
POCAHONTAS FEDERAL SAVINGS AND
LOAN ASSOCIATION:
ATTEST:
By:
--------------------------------
- ---------------------- --------------------------------
Secretary (Title)
WITNESS: PARTICIPANT:
- ---------------------- ------------------------------------
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<PAGE>
CONDITIONS, ASSUMPTIONS,
AND
SCHEDULE OF CONTRIBUTIONS AND PHANTOM CONTRIBUTIONS
1. Interest Factor - for purposes of:
a. the Accrued Benefit Account - shall be equal to Six and
One-Half Percent (6 1/2%), compounded monthly.
b. the Retirement Income Trust Fund - shall be Four percent (4%)
per annum, compounded monthly, provided, however, that for
purposes of annuitizing the balance of the Retirement Income
Trust Fund over the Benefit Period, the trustee of the James
Edington Grantor Trust shall exercise discretion in selecting
the appropriate rate, given the nature of the investments
contained in the Retirement Income Trust Fund and the expected
return associated with the investments.
2. The amount of the annual Contributions (or Phantom Contributions) to
the Retirement Income Trust Fund (or Accrued Benefit Account) has
been based on the annual straight-line accounting accruals which
would be required of the Bank until the Participant's Retirement Age,
assuming a discount rate equal to the Interest Factor (for the
Accrued Benefit Account), in order to fully record the present value
of the unfunded, non-qualified Supplemental Retirement Income Benefit
as of the Participant's Retirement Age.
3. Supplemental Retirement Income Benefit means an actuarially
determined annual amount equal to One Hundred Forty-Seven Thousand
One Hundred and Forty-Three Dollars ($147,143) at age 60 if paid
entirely from the Accrued Benefit Account or One Hundred and Three
Thousand Dollars ($103,000) if paid from the Retirement Income
Trust Fund.
The Supplemental Retirement Income Benefit:
- the definition of Supplemental Retirement Income Benefit has
been incorporated into the Agreement for the sole purpose of
actuarially establishing the amount of annual Contributions (or
Phantom Contributions) to the Retirement Income Trust Fund (or
Accrued Benefit Account). The amount of any actual retirement,
pre-retirement or disability benefit payable pursuant to the
Agreement will be a function of (i) the amount and timing of
Contributions (or Phantom Contributions) to the Retirement
Income Trust Fund (or Accrued Benefit Account) and (ii) the
actual investment experience of such Contributions (or the
monthly compounding rate of Phantom Contributions).
<PAGE>
Exhibit A
4. Schedule of Annual Gross Contributions/Phantom Contributions
Plan Year Amount
--------- ---------
1996 $ 122,405
1997 $ 107,459
1998 $ 143,299
1999 $ 143,299
2000 $ 143,299
2001 $ 143,299
2002 $ 143,299
2003 $ 143,299
2004 $ 143,299
2005 $ 143,299
2006 $ 143,299
2007 $ 143,299
2008 $ 143,299
2009 $ 143,299
2010 $ 143,299
<PAGE>
RESTATED SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
BENEFICIARY DESIGNATION
The Participant, under the terms of the Restated Supplemental
Retirement Income Agreement executed by the Bank, dated the 1st day of
January,1998, hereby designates the following Beneficiary(ies) to receive
any guaranteed payments or death benefits under such Agreement, following
his death:
PRIMARY BENEFICIARY: Linda L. Edington
SECONDARY BENEFICIARY: Ora C. Edington, James C. Edington,
Katie J. Edington, and Delaney S. Edington,
equally
This Beneficiary Designation hereby revokes any prior Beneficiary
Designation which may have been in effect.
Such Beneficiary Designation is revocable.
DATE: ______________________, 19____
___________________________________
______________________________
(WITNESS) PARTICIPANT
___________________________________
(WITNESS)
Exhibit B
<PAGE>
RESTATED SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
NOTICE OF ELECTION TO CHANGE FORM OF PAYMENT
TO: Bank
Attention:
I hereby give notice of my election to change the form of payment of
my Supplemental Retirement Income Benefit, as specified below. I
understand that such notice, in order to be effective, must be submitted
in accordance with the time requirements described in my Restated
Supplemental Retirement Income Agreement.
/ / I hereby elect to change the form of payment of my benefits from
monthly installments throughout my Benefit Period to a lump sum
benefit payment.
/ / I hereby elect to change the form of payment of my benefits from
a lump sum benefit payment to monthly installments throughout my
Benefit Period. Such election hereby revokes my previous notice
of election to receive a lump sum form of benefit payments.
PARTICIPANT
Date
Acknowledged
By:
Title:
Date
<PAGE>
EXHIBIT 10.6
SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
FOR
DWAYNE POWELL
<PAGE>
SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
FOR DWAYNE POWELL
This Supplemental Retirement Income Agreement (the "Agreement"),
effective as of the 1st day of January, 1998, formalizes the understanding by
and between POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Bank"), a
federally chartered savings association, and DWAYNE POWELL, hereinafter
referred to as "Participant".
W I T N E S S E T H :
WHEREAS, the Participant is employed by the Bank as Chief Financial
Officer; and
WHEREAS, the Bank recognizes the valuable services heretofore performed
by the Participant and wishes to encourage the Participant's continued
employment; and
WHEREAS, the Participant wishes to be assured that he will be entitled to
a certain amount of additional compensation for some definite period of time
from and after retirement or other termination of employment and wishes to
provide his beneficiary with benefits from and after death; and
WHEREAS, the Bank and the Participant wish to provide the terms and
conditions upon which the Bank shall pay such additional compensation to the
Participant after retirement or other termination of employment and/or death
benefits to his beneficiary after death; and
WHEREAS, the Bank has adopted this Supplemental Retirement Income
Agreement which controls all issues relating to benefits as described herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the Bank and the Participant agree as follows:
1
<PAGE>
SECTION I
DEFINITIONS
When used herein, the following words and phrases shall have the meanings
below unless the context clearly indicates otherwise:
1.1 "Accrued Benefit Account" shall be represented by the bookkeeping entries
required to record the Participant's (i) Phantom Contributions plus (ii)
accrued interest, equal to the Interest Factor, earned to-date on such
amounts. However, neither the existence of such bookkeeping entries nor
the Accrued Benefit Account itself shall be deemed to create either a
trust of any kind, or a fiduciary relationship between the Bank and the
Participant or any Beneficiary.
1.2 "Act" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.3 "Bank" means POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION and any
successor thereto.
1.4 "Beneficiary" means the person or persons (and their heirs) designated as
Beneficiary in Exhibit B of this Agreement to whom the deceased
Participant's benefits are payable. If no Beneficiary is so designated,
then the Participant's Spouse, if living, will be deemed the Beneficiary.
If the Participant's Spouse is not living, then the Children of the
Participant will be deemed the Beneficiaries and will take on a per
stirpes basis. If there are no Children, then the Estate of the
Participant will be deemed the Beneficiary.
1.5 "Benefit Age" means the later of: (i) Participant's sixtieth (60th)
birthday or (ii) the actual date the Participant's full-time employment
with the Bank terminates.
1.6 "Benefit Eligibility Date" means the date on which the Participant is
entitled to receive any benefit(s) pursuant to Section(s) III or V of
this Agreement. It shall be the first day of the month following the
month in which the Participant attains his Benefit Age.
1.7 "Benefit Period" means the time frame during which certain benefits
payable hereunder shall be distributed. Payments shall be made in
monthly installments commencing on the first day of the month following
the occurrence of the event which triggers distribution and continuing
for a period of two
2
<PAGE>
hundred forty (240) months. Should the Participant make a Timely
Election to receive a lump sum benefit payment, the Participant's Benefit
Period shall be deemed to be one (1) month.
1.8 "Board of Directors" means the board of directors of the Bank.
1.9 "Cause" means personal dishonesty, willful misconduct, willful
malfeasance, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any
law, rule, regulation (other than traffic violations or similar
offenses), or final cease-and-desist order, material breach of any
provision of this Agreement, or gross negligence in matters of material
importance to the Bank.
1.10 "Change in Control" of the Bank shall mean and include the following:
(1) a Change in Control of a nature that would be required to be
reported in response to Item 1(a) of the current report on Form 8-K,
as in effect on the date hereof, pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (the "Exchange Act"); or
(2) a change in control of the Bank within the meaning of 12 C.F.R.
574.4; or
(3) a Change in Control at such time as
(i) any "person" (as the term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Bank representing Twenty
Percent (20.0%) or more of the combined voting power of the
Bank's outstanding securities ordinarily having the right to
vote at the election of directors, except for any stock
purchased by the Bank's Employee Stock Ownership Plan and/or
trust; or
(ii) individuals who constitute the Board of Directors on the date
hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any
person becoming a director subsequent to the date hereof whose
election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose
nomination for election by the Bank's stockholders was approved
by the Bank's nominating committee which is comprised of
members of the Incumbent Board, shall be, for purposes of this
clause (ii), considered as though he were a member of the
Incumbent Board; or
(iii)merger, consolidation, or sale of all or substantially all of
the assets of the Bank occurs; or
(iv) a proxy statement is issued soliciting proxies from the
stockholders of the Bank by someone other than the current
management of the Bank, seeking member stockholder
3
<PAGE>
approval of a plan of reorganization, merger, or consolidation
of the Bank with one or more corporations as a result of which
the outstanding shares of the class of the Bank's securities
are exchanged for or converted into cash or property or
securities not issued by the Bank.
1.11 "Children" means all natural or adopted children of the Participant, and
issue of any predeceased child or children.
1.12 "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.13 "Contribution(s)" means those annual contributions which the Bank is
required to make to the Retirement Income Trust Fund on behalf of the
Participant in accordance with Subsection 2.1(a) and in the amounts set
forth in Exhibit A of the Agreement.
1.14 (a) "Disability Benefit" means the benefit payable to the Participant
following a determination, in accordance with Subsection 6.1(a), that he
is no longer able, properly and satisfactorily, to perform his duties at
the Bank.
(b) "Disability Benefit-Supplemental" (if applicable) means the benefit
payable to the Participant's Beneficiary upon the Participant's death, in
accordance with Subsection 6.1(b).
1.15 "Effective Date" of this Agreement shall be January 1, 1998.
1.16 "Estate" means the estate of the Participant.
1.17 "Interest Factor" means monthly compounding, discounting or annuitizing,
as applicable, at a rate set forth in Exhibit A.
1.18 "Phantom Contributions" means those annual Contributions which the Bank
is no longer required to make on behalf of the Participant to the
Retirement Income Trust Fund. Rather, once the Participant has exercised
the withdrawal rights provided for in Subsection 2.2, the Bank shall be
required to record the annual amounts set forth in Exhibit A of the
Agreement in the Participant's Accrued Benefit Account, pursuant to
Subsection 2.1.
4
<PAGE>
1.19 "Plan Year" shall mean February 28th, 1996 through December 31, 1996, for
the first Plan Year. Thereafter, the term shall mean the twelve (12)
month period commencing January 1, 1997 and each consecutive twelve (12)
month period thereafter.
1.20 "Retirement Age" means the Participant's sixtieth (60th) birthday
provided; however, that the Participant's actual retirement from
full-time employment may occur at any later date mutually agreed upon by
the parties.
1.21 "Retirement Income Trust Fund" means the trust fund account established
by the Participant and into which annual Contributions will be made by
the Bank on behalf of the Participant pursuant to Subsection 2.1. The
contractual rights of the Bank and the Participant with respect to the
Retirement Income Trust Fund shall be outlined in a separate writing to
be known as the Dwayne Powell Grantor Trust agreement.
1.22 "Spouse" means the individual to whom the Participant is legally married
at the time of the Participant's death.
1.23 "Supplemental Retirement Income Benefit" means an annual amount (before
taking into account federal and state income taxes), payable in monthly
installments throughout the Benefit Period. Such benefit is projected
pursuant to the Agreement for the purpose of determining the
Contributions to be made to the Retirement Income Trust Fund (or Phantom
Contributions to be recorded in the Accrued Benefit Account). The
annual Contributions and Phantom Contributions have been actuarially
determined, using the assumptions set forth in Exhibit A, in order to
fund for the projected Supplemental Retirement Income Benefit. The
Supplemental Retirement Income Benefit for which Contributions (or
Phantom Contributions) are being made (or recorded) is set forth in
Exhibit A.
1.24 "Timely Election" means the Participant has made an election to change
the form of his benefit payment(s) by filing with the Administrator a
Notice of Election to Change Form of Payment (Exhibit C of this
Agreement), such election having been made prior to the event which
triggers distribution and at least two (2) years prior to the
Participant's Benefit Eligibility Date; provided however, that if all
payments to the participant shall be made from the Retirement Income
Trust Fund, then a Timely Election is an election made at any time.
5
<PAGE>
SECTION II
BENEFITS - GENERALLY
2.1 (a) Retirement Income Trust Fund and Accrued Benefit Account. The
Participant shall establish the Dwayne Powell Grantor Trust into which
the Bank shall be required to make annual Contributions on the
Participant's behalf, pursuant to Exhibit A and this Section II of the
Agreement. A trustee shall be selected by the Participant. The trustee
shall maintain an account, separate and distinct from the Participant's
personal contributions, which account shall constitute the Retirement
Income Trust Fund. The trustee shall be charged with the responsibility
of investing all contributed funds. Distributions from the Retirement
Income Trust Fund of the Dwayne Powell Grantor Trust shall be made by the
trustee to the Participant, for purposes of payment of any income taxes
due and owing on Contributions by the Bank to the Retirement Income
Trust Fund, if any, and on any taxable earnings associated with such
Contributions which the Participant shall be required to pay from year to
year under applicable law prior to actual receipt of any benefit payments
from the Retirement Income Trust Fund. If the Participant exercises his
withdrawal rights pursuant to Subsection 2.2, the Bank's obligation to
make Contributions to the Retirement Income Trust Fund shall cease and
the Bank's obligation to record Phantom Contributions in the Accrued
Benefit Account shall immediately commence pursuant to Exhibit A and this
Section II of the Agreement. To the extent this Agreement is
inconsistent with the Dwayne Powell Grantor Trust agreement, this
Agreement shall supersede the Dwayne Powell Grantor Trust agreement.
The annual Contributions (or Phantom Contributions) required to be made
by the Bank to the Retirement Income Trust Fund (or recorded by the Bank
in the Accrued Benefit Account) have been fixed and determined and are
set forth in Exhibit A which is attached hereto and incorporated herein
by reference. Contributions shall be made by the Bank to the Retirement
Income Trust Fund (i) within thirty (30) days of establishment of such
trust, and (ii) within the first ten (10) days of the beginning of each
subsequent Plan Year, unless this Section expressly provides otherwise.
Phantom Contributions, if any, shall be recorded in the Accrued Benefit
Account within the first ten (10) days of the beginning of each
applicable Plan Year, unless this Section expressly provides otherwise.
Phantom Contributions shall accrue interest at a rate equal to the
Interest Factor during the Benefit Period, until the balance of the
Accrued Benefit Account has been fully distributed. Interest on any and
all Phantom Contributions shall not commence until such Benefit Period
commences.
6
<PAGE>
(b) Withdrawal Rights Not Exercised.
(1) Contributions Made Annually
If the Participant does not exercise any withdrawal rights pursuant to
Subsection 2.2, the annual Contributions to the Retirement Income Trust
Fund included on Exhibit A shall continue each year, unless this
Subsection 2.1(b) specifically states otherwise, until the earlier of (i)
the last Plan Year that Contributions are required pursuant to Exhibit A,
or (ii) the Plan Year of the Participant's termination of employment.
(2) Termination Following a Change in Control
If the Participant does not exercise his withdrawal rights pursuant to
Subsection 2.2 and a Change in Control occurs at the Bank, followed at
any time by either (i) the Participant's involuntary termination of
employment, or (ii) the Participant's voluntary termination of employment
after: (A) a material change in the Participant's function, duties, or
responsibilities, which change would cause the Participant's position to
become one of lesser responsibility, importance, or scope from the
position the Participant held at the time of the Change in Control, (B) a
relocation of the Participant's principal place of employment by more
than thirty (30) miles from its location prior to the Change in Control,
or (C) a material reduction in the benefits and perquisites to the
Participant from those being provided at the time of the Change in
Control, the Contribution set forth below shall be required of the Bank
in addition to all previous Contributions. The Bank shall be required
to make a final Contribution to the Retirement Income Trust Fund within
ten (10) days of the Participant's termination of employment. The amount
of such final Contribution shall be equal to (i) $2,600,000 less (ii) the
sum of all prior Contributions to the Retirement Income Trust Fund.
(3) Termination For Cause
If the Participant (i) does not exercise his withdrawal rights pursuant
to Subsection 2.2, and (ii) is terminated for Cause pursuant to
Subsection 5.2, no further Contribution(s) to the Retirement Income Trust
Fund shall be required of the Bank, and if not yet made, no Contribution
shall be required for the Plan Year in which such termination for Cause
occurs.
(4) Involuntary Termination of Employment.
If (i) the Participant does not exercise his withdrawal rights pursuant
to Subsection 2.2, and (ii) the Participant's employment with the Bank is
involuntarily terminated for any reason other than a termination related
to disability, termination for Cause or termination following a Change in
Control, the Contribution set forth below shall be required of the Bank.
The Bank shall be required to make
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a final Contribution to the Retirement Income Trust Fund within ten (10)
days of the Participant's involuntary termination of employment. The
amount of such final Contribution shall be equal to (i) $2,600,000 less
(ii)the sum of all prior Contributions to the Retirement Income Trust
Fund.
(5) Voluntary Termination of Employment.
If (i) the Participant does not exercise his withdrawal rights pursuant
to Subsection 2.2, and (ii) the Participant voluntary terminates
employment with the Bank, for any reason other than a voluntary
termination as described in Subsection 2.1(b)(2), the Participant shall
not be entitled to any further Contributions to the Retirement Income
Trust Fund subsequent to the date of such voluntary termination of
employment.
(6) Death Prior to Retirement Age.
(A) Death During Employment.
If the Participant (i) does not exercise any withdrawal rights pursuant
to Subsection 2.2, and (ii) dies while employed by the Bank (including
employment following a Change in Control), the Bank shall be required to
make a final Contribution to the Retirement Income Trust Fund within ten
(10) days of the Participant's death. The amount of such final
Contribution shall be equal to: (i) $2,600,000 less (ii) the sum of all
prior Contributions to the Retirement Income Trust Fund.
(B) Death Following Termination of Employment But Prior to Retirement Age.
If the Participant (i) does not exercise any withdrawal rights pursuant
to Subsection 2.2 and (ii) dies after termination of employment for
any reason other than Cause, but prior to Retirement Age, the Bank
shall be required to make a final Contribution to the Retirement Income
Trust Fund equal to $500,000.00.
(7) Termination Due to Disability.
If the Participant (i) does not exercise any withdrawal rights pursuant
to Subsection 2.2, and (ii) terminates employment due to disability, no
further Contributions shall be made on behalf of the Participant until
the Participant's death. Upon the Participant's death, the Bank shall be
required to make a final Contribution to the Retirement Income Trust
Fund. Such Contribution shall be made within ten (10) days of the date
on which the Bank learns of the participant's death. The amount of
such final Contribution shall be equal to: (i) $2,600,000 less (ii) the sum
of all prior Contributions to the Retirement Income Trust Fund.
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(c) Withdrawal Rights Exercised.
(1) Phantom Contributions Made Annually.
If the Participant exercises his withdrawal rights pursuant to Subsection
2.2, no further Contributions to the Retirement Income Trust Fund shall
be required of the Bank. Thereafter, Phantom Contributions shall be
recorded annually in the Participant's Accrued Benefit Account within ten
(10) days of the beginning of each Plan Year, commencing with the first
Plan Year following the Plan Year in which the Participant exercises his
withdrawal rights. Such Phantom Contributions shall continue to be
recorded annually, unless this Subsection 2.1(c) specifically states
otherwise, until the earlier of (i) the last Plan Year that Phantom
Contributions are required pursuant to Exhibit A, or (ii) the Plan Year
of the Participant's termination of employment.
(2) Termination Following a Change in Control
If the Participant exercises his withdrawal rights pursuant to Subsection
2.2, Phantom Contributions shall commence in the Plan Year following the
Plan Year in which the Participant first exercises his
withdrawal rights. If a Change in Control occurs at the Bank, followed
by either (i) the participant's involuntary termination of employment or
(ii) the participant's voluntary termination of employment after: (A) a
material change in the Participant's function, duties, or
responsibilities, which change would cause the Participant's position to
become one of lesser responsibility, importance, or scope from the
position the Participant held at the time of the Change in Control, (B) a
relocation of the Participant's principal place of employment by more
than thirty (30) miles from its location prior to the Change in Control,
or (C) a material reduction in the benefits and perquisites to the
Participant from those being provided at the time of the Change in
Control, the Phantom Contribution set forth below shall be required of
the Bank in addition to all previous annual Phantom Contributions or
Contributions (as applicable). The Bank shall be required to record a
final lump sum Phantom Contribution in the Accrued Benefit Account within
ten (10) days of the Participant's termination of employment. The amount
of such final Phantom Contribution shall be equal to (i) $2,600,000 less
(ii) the sum of all prior Phantom Contributions recorded in the Accrued
Benefit Account and Contributions made to the Retirement Income Trust
Fund.
(3) Termination For Cause
If the Participant is terminated for Cause pursuant to Subsection 5.2,
the entire balance of the Participant's Accrued Benefit Account at the
time of such termination, which shall include any Phantom Contributions
which have been recorded plus accrued interest, shall be forfeited.
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(4) Involuntary Termination of Employment.
If (i) the Participant exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) the Participant's employment with the Bank is
involuntarily terminated for any reason other than a termination related
to disability, termination for Cause, or termination following a Change
in Control, the Phantom Contribution set forth below shall be required of
the Bank. The Bank shall be required to record a final Phantom
Contribution in the Accrued Benefit Account within ten (10) days of the
Participant's involuntary termination of employment. The amount of such
final Phantom Contribution shall be equal to (i) $2,600,000 less (ii) the
sum of all prior Phantom Contributions recorded in the Accrued Benefit
Account and Contributions made to the Retirement Income Trust Fund.
(5) Voluntary Termination of Employment. If (i) the Participant
exercises his withdrawal rights pursuant to Subsection 2.2, and (ii) the
Participant voluntarily terminates employment with the Bank, for any
reason other than a voluntary termination as described in
Subsection 2.1(c)(2), the Participant shall not be entitled to any
further Phantom Contributions subsequent to the date of such voluntary
termination of employment.
(6) Death Prior to Retirement Age.
(A) Death During Employment
If the Participant (i) exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) dies while employed by the Bank (including
employment following a Change in Control), the Bank shall be required to
record a final Phantom Contribution in the Participant's Accrued Benefit
Account. Phantom Contributions shall commence in the Plan Year
following the Plan Year in which the Participant exercises his withdrawal
rights and shall continue through the Plan Year in which the Participant
dies. The final Phantom Contribution shall be equal to: (i) $2,600,000
less (ii) the sum of the all prior Phantom Contributions recorded in the
Accrued Benefit Account and/or Contributions made to the Retirement
Income Trust Fund. Such final Phantom Contribution shall be recorded in
the Accrued Benefit Account within ten (10) days of the Participant's
death.
(B) Death Following Termination of Employment But Prior to Retirement Age.
If the Participant (i) exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) dies after termination of employment for any
reason other than Cause, but prior to Retirement Age, the Bank shall be
required to record a final Phantom Contribution in the Accrued Benefit
Account equal to
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$500,000.00. Such final Phantom Contribution shall be recorded in the
Accrued Benefit Account within ten (10) days of the date on which the
Bank learns of the Participant's death.
(7) Termination Due to Disability
If the Participant (i) exercises his withdrawal rights pursuant to
Subsection 2.2, and (ii) terminates employment due to disability, no
further Phantom Contributions shall be recorded on behalf of the
Participant until the Participant's death. Upon the participant's death,
the Bank shall be required to record a final Phantom Contribution in the
Accrued Benefit Account. The final Phantom Contribution shall be
recorded within ten (10) days of the date on which the Bank learns of the
Participant's death. The amount of such final Contribution shall be
equal to : (i) $2,600,000 less (ii) the sum of all prior Phantom
Contributions recorded in the Accrued Benefit Account and Contributions
made to the Retirement Income Trust Fund.
2.2 Withdrawals From Retirement Income Trust Fund.
Exercise of withdrawal rights by the Participant pursuant to the Dwayne
Powell Grantor Trust agreement shall terminate the Bank's obligation to
make any further Contributions to the Retirement Income Trust Fund, and
the Bank's obligation to record Phantom Contributions pursuant to
Subsection 2.1(c) shall commence. For purposes of this Subsection 2.2,
"exercise of withdrawal rights" shall mean those withdrawal rights to
which the Participant is entitled under Article III of the Dwayne Powell
Grantor Trust agreement and shall exclude any distributions made by the
trustee of the Retirement Income Trust Fund to the Participant for
purposes of payment of income taxes in accordance with Subsection 2.1 of
this Agreement, or other trust expenses properly payable from the Dwayne
Powell Grantor Trust pursuant to the provisions of the trust document.
2.3 Benefits Payable From Retirement Income Trust Fund
Notwithstanding anything else to the contrary in this Agreement, in the
event that the trustee of the Retirement Income Trust Fund purchases a
life insurance policy with the Contributions to and, if applicable,
earnings of the Trust, and such life insurance policy is intended to
continue in force beyond the Benefit Period for the disability or
retirement benefits payable from the Retirement Income Trust Fund
pursuant to this Agreement, then the Trustee shall have discretion to
determine the portion of the cash value of such policy available for
purposes of annuitizing the Retirement Income Trust Fund to provide the
disability or retirement benefits payable under this Agreement, after
taking into
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consideration the amounts reasonably believed to be required in order to
maintain the cash value of such policy to continue such policy in effect
until the death of the Participant and payment of death benefits
thereunder.
SECTION III
RETIREMENT BENEFIT
3.1 (a) Normal form of payment.
If (i) the Participant is employed with the Bank at least until reaching
his Retirement Age, including employment with the Bank following a Change
in Control, and (ii) the Participant has not made a Timely Election to
receive a lump sum benefit, this Subsection 3.1(a) shall be controlling
with respect to retirement benefits.
The Retirement Income Trust Fund, measured as of the Participant's
Benefit Age, shall be annuitized (using the Interest Factor) into monthly
installments and shall be payable for the Benefit Period. Such benefit
payments shall commence on the Participant's Benefit Eligibility Date.
Should Retirement Income Trust Fund assets actually earn a rate of
return, following the date such balance is annuitized, which is less than
the rate of return used to annuitize the Retirement Income Trust Fund, no
additional contributions to the Retirement Income Trust Fund shall be
required by the Bank in order to fund the final benefit payment(s) and
make up for any shortage attributable to the less-than-expected rate of
return. Should Retirement Income Trust Fund assets actually earn a rate
of return, following the date such balance is annuitized, which is
greater than the rate of return used to annuitize the Retirement Income
Trust Fund, the final benefit payment to the Participant (or his
Beneficiary) shall distribute the excess amounts attributable to the
greater-than-expected rate of return. In the event the Participant dies
at any time after attaining his Benefit Age, but prior to commencement or
completion of all the payments due and owing hereunder, (i) the trustee
of the Retirement Income Trust Fund shall pay to the Participant's
Beneficiary the monthly installments (or a continuation of such monthly
installments if they have already commenced) for the balance of months
remaining in the Benefit Period, or (ii) the Participant's Beneficiary
may request to receive the unpaid balance of the Participant's Retirement
Income Trust Fund in a lump sum payment. If a lump sum payment is
requested by the Beneficiary, payment of the balance of the Retirement
Income Trust Fund in such lump sum form shall be made only if the
Participant's Beneficiary (i) obtains approval from the trustee of the
Dwayne Powell Grantor Trust and (ii) notifies the Administrator in
writing of such election. Such lump sum payment, if approved by the
trustee, shall be payable within thirty (30) days of such trustee
approval.
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The Participant's Accrued Benefit Account (if applicable), measured as of
the Participant's Benefit Age, shall be annuitized (using the Interest
Factor) into monthly installments and shall be payable for the Benefit
Period. Such benefit payments shall commence on the Participant's
Benefit Eligibility Date. In the event the Participant dies at any time
after attaining his Benefit Age, but prior to commencement or completion
of all the payments due and owing hereunder, (i) the Bank shall pay to
the Participant's Beneficiary the same monthly installments (or a
continuation of such monthly installments if they have already commenced)
for the balance of months remaining in the Benefit Period, or (ii) the
Participant's Beneficiary may request to receive the remainder of any
unpaid benefit payments in a lump sum payment. If a lump sum payment is
requested by the Beneficiary, the amount of such lump sum payment shall
be equal to the unpaid balance of the Participant's Accrued Benefit
Account. Payment in such lump sum form shall be made only if the
Participant's Beneficiary (i) obtains Board of Director approval, and
(ii) notifies the Administrator in writing of such election. Such lump
sum payment, if approved by the Board of Directors, shall be made within
thirty (30) days of such Board of Director approval.
(b) Alternative payout option.
If (i) the Participant is employed with the Bank at least until reaching
his Retirement Age, including employment with the Bank following a Change
in Control, and (ii) the Participant has made a Timely Election to
receive a lump sum benefit, this Subsection 3.1(b) shall be controlling
with respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
Participant's Benefit Age, shall be paid to the Participant in a lump sum
on his Benefit Eligibility Date. In the event the Participant dies after
becoming eligible for such payment (upon attainment of his Benefit Age),
but before the actual payment is made, his Beneficiary shall be entitled
to receive the lump sum benefit in accordance with this Subsection 3.1(b)
within thirty (30) days of the date the Administrator receives notice of
the Participant's death.
The balance of the Participant's Accrued Benefit Account (if applicable),
measured as of the Participant's Benefit Age, shall be paid to the
Participant in a lump sum on his Benefit Eligibility Date. In the event
the Participant dies after becoming eligible for such payment (upon
attainment of his Benefit Age), but before the actual payment is made,
his Beneficiary shall be entitled to receive the lump sum benefit in
accordance with this Subsection 3.1(b) within thirty (30) days of the
date the Administrator receives notice of the Participant's death.
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SECTION IV
PRE-RETIREMENT DEATH BENEFIT
4.1 (a) Normal form of payment.
If (i) the Participant dies while employed by the Bank, including death
during employment following a Change in Control, and (ii) the Participant
has not made a Timely Election to receive a lump sum benefit, this
Subsection 4.1(a) shall be controlling with respect to pre-retirement
death benefits.
The Participant's Retirement Income Trust Fund, measured as of the later
of (i) the Participant's death, or (ii) the date any final lump sum
Contribution is made pursuant to Subsection 2.1(b), shall be annuitized
(using the Interest Factor) into monthly installments and shall be
payable to the Participant's Beneficiary for the Benefit Period. Such
benefit payments shall commence within thirty (30) days of the date the
Administrator receives notice of the Participant's death, or if later,
within thirty (30) days after any final lump sum Contribution is made to
the Retirement Income Trust Fund in accordance with Subsection 2.1(b).
Should Retirement Income Trust Fund assets actually earn a rate of
return, following the date such balance is annuitized, which is less than
the rate of return used to annuitize the Retirement Income Trust Fund, no
additional contributions to the Retirement Income Trust Fund shall be
required by the Bank in order to fund the final benefit payment(s) and
make up for any shortage attributable to the less-than-expected rate of
return. Should Retirement Income Trust Fund assets actually earn a rate
of return, following the date such balance is annuitized, which is
greater than the rate of return used to annuitize the Retirement Income
Trust Fund, the final benefit payment to the Participant's Beneficiary
shall distribute the excess amounts attributable to the
greater-than-expected rate of return. The Participant's Beneficiary may
request to receive the unpaid balance of the Participant's Retirement
Income Trust Fund in a lump sum payment. If a lump sum payment is
requested by the Beneficiary, payment of the balance of the Retirement
Income Trust Fund in such lump sum form shall be made only if the
Participant's Beneficiary (i) obtains approval from the trustee of the
Dwayne Powell Grantor Trust and (ii) notifies the Administrator in
writing of such election. Such lump sum payment, if approved by the
trustee, shall be made within thirty (30) days of such trustee approval.
The Participant's Accrued Benefit Account (if applicable), measured as of
the later of (i) the Participant's death or (ii) the date any final lump
sum Phantom Contribution is recorded in the Accrued Benefit Account
pursuant to Subsection 2.1(c), shall be annuitized (using the Interest
Factor) into monthly installments and shall be payable to the
Participant's Beneficiary for the Benefit Period. Such
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<PAGE>
benefit payments shall commence within thirty (30) days of the date the
Administrator receives notice of the Participant's death, or if later,
within thirty (30) days after any final lump sum Phantom Contribution is
recorded in the Accrued Benefit Account in accordance with Subsection
2.1(c). The Participant's Beneficiary may request to receive the
remainder of any unpaid monthly benefit payments due from the Accrued
Benefit Account in a lump sum payment. If a lump sum payment is
requested by the Beneficiary, the amount of such lump sum payment shall
be equal to the balance of the Participant's Accrued Benefit Account.
Payment in such lump sum form shall be made only if the Participant's
Beneficiary (i) obtains Board of Director approval, and (ii) notifies the
Administrator in writing of such election. Such lump sum payment, if
approved by the Board of Directors, shall be payable within thirty (30)
days of such Board of Director approval.
(b) Alternative payout option.
If (i) the Participant dies while employed by the Bank, including death
during employment following a Change in Control, and (ii) the Participant
has made a Timely Election to receive a lump sum benefit, this Subsection
4.1(b) shall be controlling with respect to pre-retirement death
benefits.
The balance of the Participant's Retirement Income Trust Fund, measured
as of the later of (i) the Participant's death, or (ii) the date any
final lump sum Contribution is made pursuant to Subsection 2.1(b), shall
be paid to the Participant's Beneficiary in a lump sum within thirty (30)
days of the date the Administrator receives notice of the Participant's
death.
The balance of the Participant's Accrued Benefit Account (if applicable),
measured as of the later of (i) the Participant's death, or (ii) the date
any final Phantom Contribution is recorded pursuant to Subsection 2.1(c),
shall be paid to the Participant's Beneficiary in a lump sum within
thirty (30) days of the date the Administrator receives notice of the
Participant's death.
SECTION V
BENEFIT(S) IN THE EVENT OF TERMINATION OF EMPLOYMENT
PRIOR TO RETIREMENT AGE
5.1 Voluntary or Involuntary Termination of Employment Other Than for Cause.
In the event the Participant's employment with the Bank is voluntarily
or involuntarily terminated prior to Retirement
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Age, for any reason including a Change in Control, but excluding (i) the
Participant's pre-retirement death, which shall be covered in Section IV,
(ii) termination for Cause, which shall be covered in Subsection 5.2, or
(iii) termination due to disability, which shall be covered in Section
VI, the Participant (or his Beneficiary) shall be entitled to receive
benefits in accordance with this Subsection 5.1. Payments of benefits
pursuant to this Subsection 5.1 shall be made in accordance with
Subsection 5.1 (a) or 5.1 (b) below, as applicable.
(a) Normal form of payment.
(1) Participant Lives Until Benefit Age
If (i) after such termination, the Participant lives until attaining his
Benefit Age, and (ii) the Participant has not made a Timely Election to
receive a lump sum benefit, then payments made under this Subsection
5.1(a)(1) shall be made in the same manner as under Subsection 3.1(a).
(2) Participant Dies Prior to Benefit Age
If (i) after such termination, the Participant dies prior to attaining
his Benefit Age, and (ii) the Participant has not made a Timely Election
to receive a lump sum benefit, then payments made under this Subsection
5.1(a)(2) shall be made in the same time and manner as under Subsection
4.1(a).
(b) Alternative Payout Option.
(1) Participant Lives Until Benefit Age
If (i) after such termination, the Participant lives until attaining his
Benefit Age, and (ii) the Participant has made a Timely Election to
receive a lump sum benefit, this Subsection 5.1(b)(1) shall be
controlling with respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the
Participant's Benefit Age, shall be paid to the Participant in a lump sum
on his Benefit Eligibility Date. In the event the Participant dies after
becoming eligible for such payment (upon attainment of his Benefit Age),
but before the actual payment is made, his Beneficiary shall be entitled
to receive the lump sum benefit in accordance with this Subsection
5.1(b)(1) within thirty (30) days of the date the Administrator receives
notice of the Participant's death.
The balance of the Participant's Accrued Benefit Account (if applicable),
measured as of the Participant's Benefit Age, shall be paid to the
Participant in a lump sum on his Benefit Eligibility Date. In the event
the Participant dies after becoming eligible for such payment (upon
attainment of his
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Benefit Age), but before the actual payment is made, his Beneficiary
shall be entitled to receive the lump sum benefit in accordance with this
Subsection 5.1(b)(1) within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
(2) Participant Dies Prior to Benefit Age
If (i) after such termination, the Participant dies prior to attaining
his Benefit Age, and (ii) the Participant has made a Timely Election to
receive a lump sum benefit, this Subsection 5.1(b)(2) shall be
controlling with respect to retirement benefits.
The balance of the Retirement Income Trust Fund, measured as of the date
of the Participant's death, shall be paid to the Participant's
Beneficiary within thirty (30) days of the date the Administrator
receives notice of the Participant's death.
The balance of the Participant's Accrued Benefit Account (if applicable),
measured as of the date of the Participant's death, shall be paid to the
Participant's Beneficiary within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
5.2 Termination For Cause.
If the Participant is terminated for Cause, all benefits under this
Agreement, other than those which can be paid from previous Contributions
to the Retirement Income Trust Fund (and earnings on such Contributions),
shall be forfeited. Furthermore, no further Contributions (or Phantom
Contributions, as applicable) shall be required of the Bank for the year
in which such termination for Cause occurs (if not yet made). The
Participant shall be entitled to receive a benefit in accordance with
this Subsection 5.2.
The balance of the Participant's Retirement Income Trust Fund shall be
paid to the Participant in a lump sum on his Benefit Eligibility Date.
In the event the Participant dies prior to his Benefit Eligibility Date,
his Beneficiary shall be entitled to receive the balance of the
Participant's Retirement Income Trust Fund in a lump sum within thirty
(30) days of the date the Administrator receives notice of the
Participant's death.
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SECTION VI
OTHER BENEFITS
6.1 (a) Disability Benefit.
If the Participant's employment terminates prior to Retirement Age due to
a disability which meets the criteria set forth below, the Participant
shall be entitled to receive the Disability Benefit in lieu of the
retirement benefit(s) available pursuant to Section 5.1 (which is (are)
not available prior to the Participant's Benefit Eligibility Date).
Notwithstanding any other provision hereof, if requested by the
Participant and approved by the Board of Directors, the Participant shall
receive a lump sum disability benefit hereunder, in any case in which it
is determined by a duly licensed independent physician selected by the
Bank, that the Participant is no longer able, properly and
satisfactorily, to perform his regular duties as an officer and director,
because of ill health, accident disability or general ability due to age.
The lump sum benefit(s) to which the Participant is entitled shall
include: (i) the balance of the Retirement Income Trust Fund, plus (ii)
the balance of the Accrued Benefit Account (if applicable), both measured
as of the date of the disability determination. The benefit(s) shall be
paid within thirty (30) days following the date of the Participant's
request for such benefit. In the event the Participant dies after
becoming eligible for such payment(s) but before the actual payment(s) is
(are) made, his Beneficiary shall be entitled to the benefit(s) provided
for in this Subsection 6.1(a) within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
(b) Disability Benefit-Supplemental
Within thirty (30) days of the Participant's death, the Bank shall pay a
direct, lump sum payment to the Participant's Beneficiary equal to the
sum of all prior Contributions to the Retirement Income Trust Fund and/or
Phantom Contributions recorded in the Accrued Benefit Account, after
taking into consideration the final Contribution or Phantom Contribution
recorded pursuant to subsections 2(b)(7) and 2(c)(7). Such lump sum
payment, shall be payable within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
6.2 Additional Death Benefit - Burial Expense. Upon the Participant's death,
the Participant's Beneficiary shall also be entitled to receive a
one-time lump sum death benefit in the amount of Fifteen Thousand Dollars
($15,000.00). This benefit shall be paid directly from the Bank to the
Beneficiary and shall be provided specifically for the purpose of
providing payment for burial and/or funeral expenses of
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the Participant. Such death benefit shall be payable within thirty (30)
days from the date the Administrator receives notice of the Participant's
death. The Participant's Beneficiary shall not be entitled to such
benefit if the Participant is terminated for Cause prior to death.
SECTION VII
NON-COMPETITION
7.1 Non-Competition
In consideration of the agreements of the Bank contained herein and of
the payments to be made by the Bank pursuant hereto, the Participant
hereby agrees that, for as long as he remains employed by the Bank, he
will devote substantially all of his time, skill, diligence and attention
to the business of the Bank, and will not actively engage, either
directly or indirectly, in any business or other activity which is, or
may be deemed to be, in any way competitive with or adverse to the best
interests of the business of the Bank. The Participant further agrees
that following his employment with the Bank and continuing through the
Benefit Period he will not actively engage, either directly or
indirectly, in any business or other activity which is, or may be deemed
to be, in any way competitive with or adverse to the best interests of
the Bank, unless the Participant has the prior express written consent of
the Board of Directors of the Bank.
7.2 Breach of Non-Competition Clause.
(a) During Employment.
In the event the Participant breaches Subsection 7.1 while employed at
the Bank, all further Contributions to the Retirement Income Trust Fund
(or Phantom Contributions to the Accrued Benefit Account) shall
immediately cease, and all benefits under this Agreement, other than
those which can be paid from previous Contributions to the Retirement
Income Trust Fund (and earnings on such Contributions), shall be
forfeited. If, following such breach, the Participant lives until
attaining his Benefit Age, he shall be entitled to receive a benefit from
the Retirement Income Trust Fund equal to the balance of the Retirement
Income Trust Fund, measured as of the Participant's Benefit Age, payable
in a lump sum on his Benefit Eligibility Date. In the event the
Participant dies after attaining his Benefit Age but before actual
payment is made, his Beneficiary shall be entitled to receive the lump
sum benefit payable within thirty (30) days of the date of the
Administrator receives notice of the Participant's death. If, following
such breach, the Participant dies prior to attaining his Benefit Age, his
Beneficiary shall be entitled to receive a benefit from the Retirement
Income Trust Fund equal to the balance of the Retirement Income Trust
Fund, measured as of the date of the Participant's death,
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payable in a lump sum within thirty (30) days of the date the
Administrator receives notice of the Participant's death.
In the event (i) any breach by the Participant of the agreements and
covenants described in Subsection 7.1 occurs, and (ii) the Participant's
employment with the Bank is terminated due to such breach, such
termination shall be deemed to be for Cause and the benefits payable to
the Participant shall be paid in accordance with Subsection 5.2 of this
Agreement.
(b) Breach Following Termination of Employment.
In the event the Participant breaches Subsection 7.1 following the
Participant's termination of employment with the Bank, all benefits under
this Agreement, other than those which can be paid from previous
Contributions to the Retirement Income Trust Fund shall be forfeited,
regardless of whether the Participant is receiving benefits at such time.
If the Participant has attained his Benefit Age and is receiving a
benefit at the time of such breach, his remaining balance in the
Retirement Income Trust Fund shall be paid to him in a lump sum within
thirty (30) days of the date the Bank has received notice of such breach
(or in the event of his death prior to payment of such lump sum, to his
Beneficiary). If the Participant has not attained his Benefit Age, and
following such breach, the Participant lives until his Benefit Age, he
(or his Beneficiary, in the event of his death prior to payment of his
benefit) shall receive a benefit payable in a lump sum from the
Retirement Income Trust Fund in the same manner as set forth above in
Subsection 7.2(a).
In the event of a termination related to a Change in Control as described
in Subsection 2.1(b)(2) (or 2.1(c)(2)), paragraph (b) of this Subsection
shall cease to be a condition to the performance by the Bank of its
obligations under this Agreement.
SECTION VIII
BENEFICIARY DESIGNATION
The Participant shall make an initial designation of primary and
secondary Beneficiaries upon execution of this Agreement and shall have
the right to change such designation, at any subsequent time, by
submitting to (i) the Administrator, and (ii) the trustee of the
Retirement Income Trust Fund, in substantially the form attached as
Exhibit B to this Agreement, a written designation of primary and
secondary Beneficiaries. Any Beneficiary designation made subsequent to
execution of this Agreement shall become effective only when receipt
thereof is acknowledged in writing by the Administrator.
20
<PAGE>
SECTION IX
PARTICIPANT'S RIGHT TO ASSETS
The rights of the Participant, any Beneficiary, or any other person
claiming through the Participant under this Agreement, shall be solely
those of an unsecured general creditor of the Bank, unless this Agreement
provides otherwise. The Participant, the Beneficiary, or any other
person claiming through the Participant, shall only have the right to
receive from the Bank those payments so specified under this Agreement.
The Participant agrees that he, his Beneficiary, or any other person
claiming through him shall have no rights or interests whatsoever in any
asset of the Bank, including any insurance policies or contracts which
the Bank may possess or obtain to informally fund this Agreement. Any
asset used or acquired by the Bank in connection with the liabilities it
has assumed under this Agreement, unless expressly provided herein, shall
not be deemed to be held under any trust for the benefit of the
Participant or his Beneficiaries, nor shall any asset be considered
security for the performance of the obligations of the Bank. Any such
asset shall be and remain, a general, unpledged, and unrestricted asset
of the Bank.
SECTION X
RESTRICTIONS UPON FUNDING
The Bank shall have no obligation to set aside, earmark or entrust any
fund or money with which to pay its obligations under this Agreement,
unless this Agreement provides otherwise. Except as otherwise provided
for in this Agreement, the Participant, his Beneficiaries or any
successor in interest to him shall be and remain simply a general
unsecured creditor of the Bank in the same manner as any other creditor
having a general claim for matured and unpaid compensation. The Bank
reserves the absolute right in its sole discretion to either purchase
assets to meet its obligations undertaken by this Agreement or to
refrain from the same and to determine the extent, nature, and method of
such asset purchases. Should the Bank decide to purchase assets such as
life insurance, mutual funds, disability policies or annuities, the Bank
reserves the absolute right, in its sole discretion, to terminate such
assets at any time, in whole or in part. At no time shall the
Participant be deemed to have any lien, right, title or interest in or to
any specific investment or to any assets of the Bank. If the Bank
elects to invest in a life insurance, disability or annuity policy upon
the life of the Participant, then the Participant shall assist the Bank
by freely submitting to a physical examination and by supplying such
additional information necessary to obtain such insurance or annuities.
21
<PAGE>
SECTION XI
ACT PROVISIONS
11.1 Named Fiduciary and Administrator. The Bank shall be the Administrator
(the "Administrator") of this Agreement. As Administrator, the Bank
shall be responsible for the management, control and administration of
the Agreement as established herein. The Administrator may delegate to
others certain aspects of the management and operational responsibilities
of the Agreement, including the employment of advisors and the delegation
of ministerial duties to qualified individuals.
11.2 Claims Procedure and Arbitration. In the event that benefits under this
Agreement are not paid to the Participant (or to his Beneficiary in the
case of the Participant's death) and such claimants feel they are
entitled to receive such benefits, then a written claim must be made to
the Administrator within sixty (60) days from the date payments are
refused. The Administrator shall review the written claim and, if the
claim is denied, in whole or in part, it shall provide in writing, within
ninety (90) days of receipt of such claim, its specific reasons for such
denial, reference to the provisions of this Agreement upon which the
denial is based, and any additional material or information necessary to
perfect the claim. Such writing by the Administrator shall further
indicate the additional steps which must be undertaken by claimants if an
additional review of the claim denial is desired.
If claimants desire a second review, they shall notify the Administrator
in writing within sixty (60) days of the first claim denial. Claimants
may review this Agreement or any documents relating thereto and submit
any issues and comments, in writing, they may feel appropriate. In its
sole discretion, the Administrator shall then review the second claim and
provide a written decision within sixty (60) days of receipt of such
claim. This decision shall state the specific reasons for the decision
and shall include reference to specific provisions of this Agreement upon
which the decision is based.
If claimants continue to dispute the benefit denial based upon completed
performance of this Agreement or the meaning and effect of the terms and
conditions thereof, then claimants may submit the dispute to a Board of
Arbitration for final arbitration. Said Board of Arbitration shall
consist of one member selected by the claimant, one member selected by
the Bank, and the third member selected by the first two members. The
Board of Arbitration shall operate under any generally recognized set of
arbitration rules. The parties hereto agree that they, their heirs,
personal representatives, successors and assigns shall be bound by the
decision of such Board of Arbitration with respect to any controversy
properly submitted to it for determination.
22
<PAGE>
SECTION XII
MISCELLANEOUS
12.1 No Effect on Employment Rights. Nothing contained herein will confer
upon the Participant the right to be retained in the employ of the Bank
nor limit the right of the Bank to discharge or otherwise deal with the
Participant without regard to the existence of the Agreement. Pursuant
to 12 C.F.R. Section 563.39(b), the following conditions shall apply to
this Agreement:
(1) The Bank's Board of Directors may terminate the Participant at
any time, but any termination by the Bank's Board of Directors
other than termination for Cause shall not prejudice the
Participant's vested right to compensation or other benefits
under the contract. As provided in Subsection 5.2, the
Participant shall have no right to receive additional
compensation or other benefits, other than those provided for
in Subsection 5.2, after termination for Cause.
(2) If the Participant is suspended and/or temporarily prohibited
from participating in the conduct of the Bank's affairs by a
notice served under Section 8(e)(3) or (g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. 1818(e)(3) and (g)(1)) the
Bank's obligations under the contract shall be suspended
(except vested rights) as of the date of termination of
employment 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.
(3) If the Participant is terminated and/or permanently prohibited
from participating in the conduct of the Bank's affairs by an
order issued under Section 8(e)(4) or (g)(1) of the Federal
Deposit Insurance Act (12 U.S.C. 1818(e)(4) or (g)(1)), all
non-vested obligations of the Bank under the contract shall
terminate as of the effective date of the order.
(4) If the Bank is in default (as defined in Section 3(x)(1) of
the Federal Deposit Insurance Act), all non-vested obligations
under the contract shall terminate as of the date of default.
23
<PAGE>
(5) All non-vested obligations under the contract shall be
terminated, except to the extent determined that continuation
of the contract is necessary for the continued operation of the
Bank:
(i) by the Director of the Federal Deposit Insurance
Corporation or his designee at the time the Federal
Deposit Insurance Corporation enters into an agreement to
provide assistance to or on behalf of the Bank under the
authority contained in Section 13(c) of the Federal
Deposit Insurance Act; or
(ii) by the Director of the Federal Deposit Insurance
Corporation or his designee, at the time the Director 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 to be in an unsafe or
unsound condition.
Any rights of the parties that have already vested, (i.e., the balance of
the Participant's Retirement Income Trust Fund and the balance of the
Participant's Accrued Benefit Account, if applicable), however, shall not
be affected by such action.
12.2 State Law. The Agreement is established under, and will be construed
according to, the laws of the state of Arkansas, to the extent such laws
are not preempted by the Act and valid regulations published thereunder.
12.3 Severability. In the event that any of the provisions of this Agreement
or portion thereof, are held to be inoperative or invalid by any court of
competent jurisdiction, then: (i) insofar as is reasonable, effect will
be given to the intent manifested in the provisions held invalid or
inoperative, and (ii) the validity and enforceability of the remaining
provisions will not be affected thereby.
12.4 Incapacity of Recipient. In the event the Participant is declared
incompetent and a conservator or other person legally charged with the
care of his person or Estate is appointed, any benefits under the
Agreement to which such Participant is entitled shall be paid to such
conservator or other person legally charged with the care of his person
or Estate.
12.5 Unclaimed Benefit. The Participant shall keep the Bank informed of his
current address and the current address of his Beneficiaries. The Bank
shall not be obligated to search for the whereabouts
24
<PAGE>
of any person. If the location of the Participant is not made known to
the Bank as of the date upon which any payment of any benefits from the
Accrued Benefit Account may first be made, the Bank shall delay payment
of the Participant's benefit payment(s) until the location of the
Participant is made known to the Bank; however, the Bank shall only be
obligated to hold such benefit payment(s) for the Participant until the
expiration of thirty-six (36) months. Upon expiration of the thirty-six
(36) month period, the Bank may discharge its obligation by payment to
the Participant's Beneficiary. If the location of the Participant's
Beneficiary is not made known to the Bank by the end of an additional
two (2) month period following expiration of the thirty-six (36) month
period, the Bank may discharge its obligation by payment to the
Participant's Estate. If there is no Estate in existence at such time or
if such fact cannot be determined by the Bank, the Participant and his
Beneficiary(ies) shall thereupon forfeit any rights to the balance, if
any, of the Participant's Accrued Benefit Account provided for such
Participant and/or Beneficiary under this Agreement.
12.6 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Agreement, no individual acting as an employee or agent
of the Bank, or as a member of the Board of Directors shall be personally
liable to the Participant or any other person for any claim, loss,
liability or expense incurred in connection with the Agreement.
12.7 Gender. Whenever in this Agreement words are used in the masculine or
neuter gender, they shall be read and construed as in the masculine,
feminine or neuter gender, whenever they should so apply.
12.8 Effect on Other Corporate Benefit Agreements. Nothing contained in this
Agreement shall affect the right of the Participant to participate in or
be covered by any qualified or non-qualified pension, profit sharing,
group, bonus or other supplemental compensation or fringe benefit
agreement constituting a part of the Bank's existing or future
compensation structure.
12.9 Suicide. Notwithstanding anything to the contrary in this Agreement, if
the Participant's death results from suicide, whether sane or insane,
within twenty-six (26) months after execution of this Agreement, all
further Contributions to the Retirement Income Trust Fund (or Phantom
Contributions recorded in the Accrued Benefit Account) shall thereupon
cease, and no Contribution (or Phantom Contribution) shall be made by the
Bank to the Retirement Income Trust Fund (or recorded in the Accrued
Benefit Account) in the year such death resulting from suicide occurs
(if not yet made). All benefits other than those available from previous
Contributions to the Retirement Income Trust Fund under this Agreement
shall be forfeited, and this Agreement shall become null and void. The
balance of the
25
<PAGE>
Retirement Income Trust Fund, measured as of the Participant's date of
death, shall be paid to the Beneficiary within thirty (30) days of the
date the Administrator receives notice of the Participant's death.
12.10 Inurement. This Agreement shall be binding upon and shall inure to
the benefit of the Bank, its successors and assigns, and the
Participant, his successors, heirs, executors, administrators, and
Beneficiaries.
12.11 Headings. Headings and sub-headings in this Agreement are inserted
for reference and convenience only and shall not be deemed a part of
this Agreement.
12.12 Establishment of a Rabbi Trust. The Bank shall establish a rabbi
trust into which the Bank shall contribute assets which shall be
held therein, subject to the claims of the Bank's creditors in the
event of the Bank's "Insolvency" (as defined in such rabbi trust
agreement), until the contributed assets are paid to the Participant
and/or his Beneficiary in such manner and at such times as specified
in this Agreement. It is the intention of the Bank that the
contribution or contributions to the rabbi trust shall provide the
Bank with a source of funds to assist it in meeting the liabilities
of this Agreement.
SECTION XIII
AMENDMENT/PLAN TERMINATION
13.1 Amendment or Plan Termination. The Bank intends this Agreement to be
permanent, but reserves the right to amend or terminate the Agreement
when, in the sole opinion of the Bank, such amendment or termination is
advisable. However, any termination of the Agreement which is done in
anticipation of or following to a "Change in Control", as defined in
Subsection 1.9, shall be deemed to trigger Subsection 2.1(b)(2) (or
2.1(c)(2), as applicable) of the Agreement notwithstanding the
Participant's continued employment, and benefit(s) shall be paid from the
Retirement Income Trust Fund (and Accrued Benefit Account, if applicable)
in accordance with Subsection 13.2 below and with Subsections 2.1(b)(2)
(or 2.1(c)(2), as applicable). Any amendment or termination of the
Agreement shall be made pursuant to a resolution of the Board of
Directors of the Bank and shall be effective as of the date of such
resolution. No amendment or termination of the Agreement shall directly
or indirectly deprive the Participant of all or any portion of the
Participant's Retirement Income Trust Fund (and Accrued Benefit Account,
if applicable) as of the effective date of the resolution amending or
terminating the Agreement.
26
<PAGE>
13.2 Participant's Right to Payment Following Plan Termination. In the event
of a termination of the Agreement, the Participant shall be entitled to
the balance, if any, of his Retirement Income Trust Fund (and Accrued
Benefit Account, if applicable), measured as of the date of plan
termination. However, if such termination is done in anticipation of or
pursuant to a "Change in Control," such balance(s) shall be measured as
of the date the final Contribution (or Phantom Contribution) is made (or
recorded) pursuant to Subsection 2.1(b)(2) (or 2.1(c)(2)). Payment of
the balance(s) of the Participant's Retirement Income Trust Fund (and
Accrued Benefit Account, if applicable) shall not be dependent upon his
continuation of employment with the Bank following the termination date
of the Agreement. Payment of the balance(s) of the Participant's
Retirement Income Trust Fund (and Accrued Benefit Account, if applicable)
shall be made in a lump sum within thirty (30) days of the date of
termination of the Agreement.
SECTION XIV
EXECUTION
14.1 This Agreement and the Dwayne Powell Grantor Trust agreement set forth
the entire understanding of the parties hereto with respect to the
transactions contemplated hereby, and any previous agreements or
understandings between the parties hereto regarding the subject matter
hereof are merged into and superseded by this Agreement and the Dwayne
Powell Grantor Trust agreement.
14.2 This Agreement shall be executed in triplicate, each copy of which, when
so executed and delivered, shall be an original, but all three copies
shall together constitute one and the same instrument.
27
<PAGE>
IN WITNESS WHEREOF, the Bank and the Participant have caused this
Agreement to be executed on the day and date first above written.
POCAHONTAS FEDERAL SAVINGS AND LOAN
ASSOCIATION:
ATTEST:
By: _____________________________________
____________________________ _____________________________________
Secretary (Title)
WITNESS: PARTICIPANT:
____________________________ _________________________________________
28
<PAGE>
CONDITIONS, ASSUMPTIONS,
AND
SCHEDULE OF CONTRIBUTIONS AND PHANTOM CONTRIBUTIONS
1. Interest Factor - for purposes of:
a. the Accrued Benefit Account - shall be equal to Six and One-Half
Percent (6 1/2%), compounded monthly.
b. the Retirement Income Trust Fund - shall be Four percent (4%) per
annum, compounded monthly, provided, however, that for purposes of
annuitizing the balance of the Retirement Income Trust Fund over the
Benefit Period, the trustee of the Dwayne Powell Grantor Trust shall
exercise discretion in selecting the appropriate rate, given the
nature of the investments contained in the Retirement Income Trust
Fund and the expected return associated with the investments.
2. The amount of the annual Contributions (or Phantom Contributions) to the
Retirement Income Trust Fund (or Accrued Benefit Account) has been based
on the annual straight-line accounting accruals which would be required
of the Bank until the Participant's Retirement Age, assuming a discount
rate equal to the Interest Factor (for the Accrued Benefit Account), in
order to fully record the present value of the unfunded, non-qualified
Supplemental Retirement Income Benefit as of the Participant's Retirement
Age.
3. Supplemental Retirement Income Benefit means an actuarially determined
annual amount equal to Two Hundred Fourteen Thousand Two Hundred
Eighty-Six Dollars ($214,286) at age 60 if paid entirely from the Accrued
Benefit Account or One Hundred Fifty Thousand Dollars ($150,000) if paid
from the Retirement Income Trust Fund.
The Supplemental Retirement Income Benefit:
- the definition of Supplemental Retirement Income Benefit has been
incorporated into the Agreement for the sole purpose of actuarially
establishing the amount of annual Contributions (or Phantom
Contributions) to the Retirement Income Trust Fund (or Accrued
Benefit Account). The amount of any actual retirement,
pre-retirement or disability benefit payable pursuant to the
Agreement will be a function of (i) the amount and timing of
Contributions (or Phantom Contributions) to the Retirement Income
Trust Fund (or Accrued Benefit Account) and (ii) the actual
investment experience of such Contributions (or the monthly
compounding rate of Phantom Contributions).
<PAGE>
Exhibit A
4. Schedule of Annual Gross Contributions/Phantom Contributions
Plan Year Amount
1998 $ 76,894
1999 $ 76,894
2000 $ 76,894
2001 $ 76,894
2002 $ 76,894
2003 $ 76,894
2004 $ 76,894
2005 $ 76,894
2006 $ 76,894
2007 $ 76,894
2008 $ 76,894
2009 $ 76,894
2010 $ 76,894
2011 $ 76,894
2012 $ 76,894
2013 $ 76,894
2014 $ 76,894
2015 $ 76,894
2016 $ 76,894
2017 $ 76,894
2018 $ 76,894
2019 $ 76,894
2020 $ 76,894
2021 $ 76,894
2022 $ 76,894
2023 $ 76,894
2024 $ 76,894
Exhibit A
<PAGE>
SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
BENEFICIARY DESIGNATION
The Participant, under the terms of the Supplemental Retirement Income
Agreement executed by the Bank, dated the 1st day of January,1998, hereby
designates the following Beneficiary(ies) to receive any guaranteed payments
or death benefits under such Agreement, following his death:
PRIMARY BENEFICIARY:
SECONDARY BENEFICIARY:
This Beneficiary Designation hereby revokes any prior Beneficiary
Designation which may have been in effect.
Such Beneficiary Designation is revocable.
DATE: ______________________, 19____
___________________________________
______________________________
(WITNESS) PARTICIPANT
___________________________________
(WITNESS)
Exhibit B
<PAGE>
SUPPLEMENTAL RETIREMENT INCOME AGREEMENT
NOTICE OF ELECTION TO CHANGE FORM OF PAYMENT
TO: Bank
Attention:
I hereby give notice of my election to change the form of payment of my
Supplemental Retirement Income Benefit, as specified below. I understand that
such notice, in order to be effective, must be submitted in accordance with
the time requirements described in my Supplemental Retirement Income
Agreement.
/ / I hereby elect to change the form of payment of my benefits from
monthly installments throughout my Benefit Period to a lump sum
benefit payment.
/ / I hereby elect to change the form of payment of my benefits from a
lump sum benefit payment to monthly installments throughout my
Benefit Period. Such election hereby revokes my previous notice of
election to receive a lump sum form of benefit payments.
PARTICIPANT
Date
Acknowledged
By:
Title:
Date
<PAGE>
EXHIBIT 10.7
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN
ASSOCIATION
1994 INCENTIVE STOCK OPTION PLAN
1. Purpose
The purpose of the Pocahontas Federal Savings and Loan Association 1994
Incentive Stock Option Plan (the "Plan") is to advance the interests of
Pocahontas Federal Savings and Loan Association (the "Bank") and its
shareholders by providing senior officers and certain key Employees of the Bank
and its Affiliates, including Pocahontas Federal Mutual Holding Company, Inc.,
the mutual holding company of the Bank (the "Company"), upon whose judgment,
initiative and efforts the successful conduct of the business of the Bank and
its Affiliates largely depends, with an additional incentive to perform in a
superior manner as well as to attract people of experience and ability.
2. Definitions
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Bank, as such terms are defined in Section 424(e) or 424(f), respectively,
of the Code.
"Award" means an Award of Non-statutory Stock Options, Incentive Stock
Options, and/or Limited Rights granted under the provisions of the Plan.
"Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient'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 Recipient's surviving spouse, if any,
or if none, his estate.
"Board" means the board of directors of the Bank.
"Change in Control" of the Bank or the Company shall mean:
(a) No benefit shall be payable under this Section 5 unless there shall
have been a Change in Control of the Bank or Company, as set forth below. For
purposes of this Agreement, a "Change in Control" of the Bank or Company shall
mean an event of a nature that: (i) would be required to be reported in response
to Item 1 of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); or (ii) results in a Change in Control of the Bank or the
Company within the meaning of the Home Owners' Loan Act of 1933 and the Rules
and Regulations promulgated by the Office of Thrift Supervision, as in effect on
the date hereof; or (iii) without limitation such a Change in Control shall be
deemed to have occurred at such time as (a) any "Person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Bank or the Company representing 25 % or more
of the Bank's or the Company's outstanding securities except that securities
issued by the Bank, in connection with its initial public offering, to the
<PAGE>
Company and/or the Bank's employee benefit plans and that continue to be held by
such Company or plans shall not be counted in determining whether such Company
or plans are the beneficial owner of more than 25% of the Bank's securities; or
(b) individuals who constitute the Board on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof, provided
that any person becoming a director subsequent to the date hereof whose election
was approved by a vote of at least two-thirds of the directors comprising the
Incumbent Board or whose nomination for election by the Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (a), considered as though he were a member
of the Incumbent Board; or (c) a reorganization, merger, consolidation, sale of
all or substantially all the assets of the Bank or the Company or similar
transaction in which the Bank or Company is not the resulting entity occurs; or
(d) a tender offer is made for 25% or more of the outstanding securities of the
Bank or Company and shareholders owning beneficially or of record 25 % or more
of the outstanding securities of the Bank or Company have tendered or offered to
sell their shares pursuant to such tender offer. Notwithstanding the foregoing,
a "Change in Control" of the Bank or the Company shall not be deemed to have
occurred if the Company ceases to own at least 51% of all outstanding shares of
stock of the Bank in connection with a conversion of the Company from mutual to
stock form.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee of the Board consisting of all non-Employee
(i.e., "outside") directors.
"Common Stock" means the Common Stock of the Bank.
"Conversion Transaction" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in the
context of a merger conversion.
"Date of Grant" means the actual date on which an Award is granted by the
Committee.
"Director" means a member of the Board.
"Disability" means the permanent and total inability by reason of mental
or physical infirmity, or both, of an Employee to perform the work customarily
assigned to him. Additionally, a medical doctor selected or approved by the
Board must advise the Committee that it is either not possible to determine when
such Disability will terminate or that it appears probable that such Disability
will be permanent during the remainder of such Employee's lifetime.
"Employee" means any person who is currently employed by the Bank or an
Affiliate, including officers.
"Fair Market Value" means, when used in connection with the Common Stock
on a certain date, the reported closing price of the Common Stock as reported by
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
System (as published by the Wall Street Journal, if published) on the day prior
to such date, or if the Common Stock was not traded on such date, on the next
preceding day on which the Common Stock was traded thereon; provided, however,
that if the Common Stock is not reported on the NASDAQ System, Fair Market Value
shall mean the average sale price of all shares of Common Stock sold during the
30-day period immediately preceding the date on which such stock option
2
<PAGE>
was granted, and if no shares of stock have been sold within such 30-day period,
the average sale price of the last three sales of Common Stock sold during the
90-day period immediately preceding the date on which such stock option was
granted. In the event Fair Market Value cannot be determined in the manner
described above, then Fair Market Value shall be determined by the Committee.
The Committee shall be authorized to obtain an independent appraisal to
determine the Fair Market Value of the Common Stock. For purposes of the grant
of Options in the Stock Offering, Fair Market Value shall mean the initial
public offering price of the Common Stock.
"Incentive Stock Option" means an Option granted by the Committee to a
Participant, which Option is designated as an Incentive Stock Option pursuant to
Section 8.
"Limited Right" means the right to receive an amount of cash based upon
the terms set forth in Section 9.
"Non-Statutory Stock Option" means an Option granted by the Committee to a
participant and which is either (i) not designated by the Committee as an
Incentive Stock Option, or (ii) fails to satisfy the requirements of an
Incentive Stock Option as set forth in Section 422 of the Code and the
regulations thereunder.
"Normal Retirement" means retirement at the normal or early retirement
date as set forth in the Bank's Employee Stock Ownership Plan or any successor
tax-qualified plan.
"Option" means an Award granted under Section 7 or Section 8.
"Participant" means an Employee of the Bank or its Affiliates chosen by
the Committee to participate in the Plan.
"Stock Offering" means the initial public offering of the Common Stock of
the Bank.
"Termination for Cause" means the termination of employment caused by the
individual's personal dishonesty, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties, or
the willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, any of which
results in a material loss to the Bank or an Affiliate.
3. Administration
The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to establish such rules and
regulations as it deems necessary for the proper administration of the Plan and
to make whatever determinations and interpretations in connection with the Plan
it deems necessary or advisable. All determinations and interpretations made by
the Committee shall be binding and conclusive on all Participants in the Plan
and on their legal representatives and beneficiaries.
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4. Types of Awards
Awards under the Plan may be granted in any one or a combination of: (a)
Incentive Stock Options; (b) Non-Statutory Stock Options; and (c) Limited Rights
as deemed herein in Section 9.
5. Stock Subject to the Plan; Reservation of Shares for Future Awards
Subject to adjustment as provided in Section 14, the maximum number of
shares reserved for issuance under the Plan is six and two-thirds percent
(62/3%) of the shares of Common Stock of the Bank, issued in connection with the
Stock Offering (or 49,833 shares based upon a Stock Offering of 747,500 shares).
These shares of Common Stock may be either authorized but unissued shares or
shares previously issued and reacquired by the Bank. To the extent that Options
or rights granted under the Plan are exercised, the shares covered will be
unavailable for future grants under the Plan; to the extent that Options
together with any related rights granted under the Plan terminate, expire or are
cancelled without having been exercised or, in the case of Limited Rights
exercised for cash, new Awards may be made with respect to these shares.
No shares of Common Stock subject to the Plan shall be reserved for future
issuance.
6. Eligibility
Senior officers and certain key Employees of the Bank or its Affiliates
shall be eligible to receive Incentive Stock Options, Non-Statutory Stock
Options and/or Limited Rights under the Plan. Directors who are not Employees or
officers of the Bank or its Affiliates shall not be eligible to receive Awards
under the Plan.
7. Non-Statutory Stock Options
7.1 Grant of Non-Statutory Stock Options
The Committee may, from time to time, grant Non-Statutory Stock Options to
eligible Employees and, upon such terms and conditions as the Committee may
determine, grant Non-Statutory Stock Options in exchange for and upon surrender
of previously granted Awards under this Plan. Non-Statutory Stock Options
granted under this Plan are subject to the following terms and conditions:
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Bank and the Employee specifying the number of shares of
Common Stock that may be acquired through its exercise and containing such other
terms and conditions that are not inconsistent with the terms of this grant.
(b) Price. The purchase price per share of Common Stock deliverable upon
the exercise of each Non-Statutory Stock Option shall be determined by the
Committee on the date the Option is granted. Except as provided below, such
purchase price shall not be less than 100% of the Fair Market Value of the
Bank's Common Stock at the time the Option is granted. The purchase price per
share of Common Stock deliverable upon the exercise of each Non-Statutory Stock
Option granted in exchange for and upon surrender of previously granted awards
shall be not less than 85 % of the Fair Market Value of the Bank's
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Common Stock on the date the Option is granted, but in no event may the purchase
price of any Non-Statutory Stock Option be less than the par value of the Common
Stock. Shares may be purchased only upon full payment of the purchase price.
Payment of the purchase price may be made, in whole or in part, through the
surrender of shares of the Common Stock of the Bank at the Fair Market Value of
such shares determined in the manner described in Section 2.
(c) Manner of Exercise. The Option may be exercised from time to time, in
whole or in part, by delivering a written notice of exercise to the President or
Chief Executive Officer of the Bank. Such notice is irrevocable and must be
accompanied by full payment of the purchase price in cash or shares of
previously acquired Common Stock of the Bank at the Fair Market Value of such
shares determined on the exercise date by the manner described in Section 2
hereof. If previously acquired shares of Common Stock are tendered in payment of
all or part of the exercise price, the value of such shares shall be determined
as of the date of such exercise.
(d) Terms of Options. The term during which each Non-Statutory Stock
Option may be exercised shall be determined by the Committee, but in no event
shall a Non-Statutory Stock Option be exercisable in whole or in part more than
10 years from the Date of Grant. The Committee shall determine the date on which
each Non-Statutory Stock Option shall become exercisable in installments. The
shares of which each installment is composed may be purchased in whole or in
part at any time after such installment becomes purchasable. The Committee, in
its sole discretion, may accelerate the time at which any Non-statutory Stock
Option may be exercised in whole or in part. Notwithstanding the above, in the
event of a Change in Control of the Bank, all Non-Statutory Stock Options that
have been awarded shall become immediately exercisable.
(e) Termination of Employment. Upon the termination of an Employee's
service for any reason other than Disability, Normal Retirement, death or
Termination for Cause, the Employee's Non-Statutory Stock Options shall be
exercisable only as to those shares that were immediately purchasable by the
Employee at the date of termination and only for a period of three years
following termination. In the event of Termination for Cause, all rights under
the Employee's Non-Statutory Stock Options shall expire upon termination. In the
event of the death, Disability or Normal Retirement of any Employee, all
Non-Statutory Stock Options held by such Employee, whether or not exercisable at
such time, shall be exercisable by such Employee or such Employee's legal
representatives or beneficiaries for three years following the date of his
death, Normal Retirement or cessation of employment due to Disability; provided,
however, that in no event shall the period extend beyond the expiration of the
Non-Statutory Stock Option term.
8. Incentive Stock Options
8.1 Grant of Incentive Stock Options
The Committee, from time to time, may grant Incentive Stock Options to
eligible Employees. Incentive Stock Options granted pursuant to the Plan shall
be subject to the following terms and conditions:
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Bank and the Employee specifying the number of shares of
Common Stock that may be acquired through its exercise and containing such other
terms and conditions that are not inconsistent with the terms of this grant.
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(b) Price. The purchase price per share of Common Stock deliverable upon
the exercise of each Incentive Stock Option shall be not less than 100% of the
Fair Market Value of the Bank's Common Stock on the date the Incentive Stock
Option is granted. However, if an Employee owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Bank (or under
Section 424(d) of the Code, is deemed to own stock representing more than 10% of
the total combined voting power of all classes of stock of the Bank or its
Affiliates, by reason of the ownership of such classes of stock, directly or
indirectly, by or for any brother, sister, spouse, ancestor or lineal descendent
of such Employee, or by or for any corporation, partnership, estate or trust of
which such Employee is a shareholder, partner or benefciary), the purchase price
per share of Common Stock deliverable upon the exercise of each Incentive Stock
Option shall not be less than 110% of the Fair Market Value of the Bank's Common
Stock on the date the Incentive Stock Option is granted. Shares may be purchased
only upon payment of the full purchase price. Payment of the purchase price may
be made, in whole or in part, through the surrender of shares of the Common
Stock of the Bank at the Fair Market Value of such shares determined in the
manner described in Section 2.
(c) Manner of Exercise. The Option may be exercised from time to time, in
whole or in part, by delivering a written notice of exercise to the President or
Chief Executive Officer of the Bank. Such notice is irrevocable and must be
accompanied by full payment of the purchase price in cash or shares of
previously acquired Common Stock of the Bank at the Fair Market Value of such
shares determined on the exercise date by the manner described in Section 2
hereof. If previously acquired shares of Common Stock are tendered in payment of
all or part of the exercise price, the value of such shares shall be determined
as of the date of such exercise.
(d) Amount of Options. Incentive Stock Options may be granted to any
eligible Employee in such amounts as determined by the Committee; provided that
the amount granted is consistent with the terms of Section 422 of the Code. In
the case of an Option intended to qualify as an Incentive Stock Option, the
aggregate Fair Market Value (determined as of the time the Option is granted) of
the Common Stock with respect to which Incentive Stock Options granted are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Bank or an Affiliate) shall not exceed $100,000. The
provisions of this Section 8.1(d) shall be construed and applied in accordance
with Section 422(d) of the Code and the regulations, if any, promulgated
thereunder.
(e) Term of Options. The term during which each Incentive Stock Option may
be exercised shall be determined by the Committee, but in no event shall an
Incentive Stock Option be exercisable in whole or in part more than 10 years
from the Date of Grant. If any Employee, at the time an Incentive Stock Option
is granted to him, owns stock of the Bank or its Affiliates representing more
than 10% of the total combined voting power of all classes of stock (or, under
Section 424(d) of the Code, is deemed to own stock representing more than 10% of
the total combined voting power of all classes of stock of the Bank or its
Affiliates, by reason of the ownership of such classes of Common Stock, directly
or indirectly, by or for any brother, sister, spouse, ancestor or lineal
descendent of such Employee, or by or for any corporation, partnership, estate
or trust of which such Employee is a shareholder, partner or Beneficiary), the
Incentive Stock Option granted to him shall not be exercisable after the
expiration of five years from the Date of Grant. No Incentive Stock Option
granted under this Plan is transferable except by will or the laws of descent
and distribution and is exercisable during his lifetime only by the Employee to
which it is granted.
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The Committee shall determine the date on which each Incentive Stock
Option shall become exercisable and may provide that an Incentive Stock Option
shall become exercisable in installments. The shares comprising each installment
may be purchased in whole or in part at any time after such installment becomes
purchasable, provided that the amount able to be first exercised in a given year
is consistent with the terms of Section 422 of the Code. To the extent required
by Section 422 of the Code, the aggregate fair market value (determined at the
time the Option is granted) of the Common Stock for which Incentive Stock
Options are exercisable for the first time by a Participant during any calendar
year (under all plans of the Bank and its Affiliates) shall not exceed $100,000.
The Committee, in its sole discretion, may accelerate the time at which any
Incentive Stock Option may be exercised in whole or in part; provided that it is
consistent with the terms of Section 422 of the Code. Notwithstanding the above,
in the event of a Change in Control of the Bank, all Incentive Stock Options
that have been awarded shall become immediately exercisable, unless the fair
market value of the amount exercisable as a result of a Change in Control shall
exceed $100,000 (determined as of the date of grant). In such event, the first
$100,000 of Incentive Stock Options (determined as of the date of grant) shall
be exercisable as Incentive Stock Options and any excess shall be exercisable as
Non-Statutory Stock Options.
(f) Termination of Employment. Upon the termination of an Employee's
employment for any reason other than Disability, Normal Retirement, Change in
Control, death or Termination for Cause, an Employee's Incentive Stock Options
shall be exercisable only as to those shares which were immediately purchasable
by such Employee at the date of termination and only for a period of three years
following termination, provide however, that such Options shall not be eligible
for treatment as an Incentive Stock Option in the event such Option is exercised
more than three months following termination of employment. In the event of
Termination for Cause all rights under his Incentive Stock Options shall expire
upon termination.
In the event of death or Disability of any Employee, all Incentive Stock
Options held by such Employee, whether or not exercisable at such time, shall be
exercisable by such Employee or his legal representatives or beneficiaries for
three years following the date of his death or cessation of employment due to
Disability; provided, however, that such option shall not be eligible for
treatment as an Incentive Stock Option in the event that such option is
exercised more than one year following the date of his cessation of employment
due to Disability. In the case of an Employee's death, the option must be
exercised by the Employee's Beneficiary within three months after such
Employee's termination of employment to be eligible for treatment as an
Incentive Stock Option. Upon termination of an Employee's employment due to
Normal Retirement, or a Change in Control, all Incentive Stock Options held by
such Employee, whether or not exercisable at such time, shall be exercisable for
a period of three years following the date of his cessation of employment;
provided, however, that such Option shall not be eligible for treatment as an
Incentive Stock Option in the event such Option is exercised more than three
months following the date of his Normal Retirement or termination of employment
due to a Change in Control. In no event shall the exercise period extend beyond
the expiration of the Incentive Stock Option term.
(g) Compliance with Code. The Options granted under this Section 8 of the
Plan are intended to qualify as incentive stock options within the meaning of
Section 422 of the Code, but the Bank makes no warranty as to the qualification
of any Option as an incentive stock option within the meaning of Section 422 of
the Code. If an Option granted hereunder fails for whatever reason to comply
with the provisions of Section 422 of the Code, and such failure is not or
cannot be cured, such Option shall be a Non-Statutory Stock Option
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<PAGE>
9. Limited Rights
9.1 Grant of Limited Rights
The Committee may grant a Limited Right simultaneously with the grant of
any Option, with respect to all or some of the shares covered by such Option.
Limited Rights granted under this Plan are subject to the following terms and
conditions:
(a) Terms of Rights. In no event shall a Limited Right be exercisable in
whole or in part before the expiration of six months from the date of grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control of the Bank.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, provided that the Fair Market Value of the underlying
shares on the day of exercise is greater than the exercise price of the related
Option.
Upon exercise of a Limited Right, the related Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may-be for no more than 100% of the
difference between the exercise price and the Fair Market Value of the Common
Stock subject to the underlying Option. The Limited Right is transferable only
when the underlying Option is transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall promptly
receive from the Bank an amount of cash equal to the difference between the Fair
Market Value on the Date of Grant of the related Option and the Fair Market
Value of the underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such Limited Right is
being exercised.
10. Surrender of Option
In the event of a Participant's termination of employment as a result of
death, Disability or Retirement, the Participant (or his beneficiary in the
event of his death) may, in a form acceptable to the Committee, make application
to surrender all or part of Options held by such Participant in exchange for a
cash payment from the Bank of an amount equal to the difference between the Fair
Market Value of the Common Stock on the date of termination of employment and
the exercise price per share of the Option on the Date of Grant. Whether the
Bank accepts such application or determines to make payment, in whole or part,
is within its absolute and sole discretion, it being expressly understood that
the Bank is under no obligation to any Participant whatsoever to make such
payments. In the event that the Bank accepts such application and determines to
make payment, such payment shall be in lieu of the exercise of the underlying
Option and such Option shall cease to be exercisable.
11. Rights of a Shareholder; Nontransferability
An optionee shall have no rights as a shareholder with respect to any
shares covered by a Non-Statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in this Plan or in
any Award granted confers on any person any right to continue in the employ of
the Bank or its Affiliates or to continue to perform services for the Bank or
its Affiliates or interferes in any way with the right of the Bank or its
Affiliates to terminate his services as an officer or other Employee at any
time.
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No Award under the Plan shall be transferable by the optionee other than
by will or the laws of descent and distribution and may only be exercised during
his lifetime by the optionee, or by a guardian or legal representative.
12. Agreement with Participants
Each Award of Options, and/or Limited Rights will be evidenced by a
written agreement, executed by the Participant and the Bank or its Affiliates
that describes the conditions for receiving the Awards including the date of
Award, the purchase price if any, applicable periods, and any other terms and
conditions as may be required by the Board or applicable securities law.
13. Designation of Beneficiary
A Participant, with the consent of the Committee, may designate a person
or persons to receive, in the event of death, any stock Option or Limited Rights
Award to which he would then be entitled. Such designation will be made upon
forms supplied by and delivered to the Bank and may be revoked in writing. If a
Participant fails effectively to designate a Beneficiary, then his estate will
be deemed to be the Beneficiary.
14. Dilution and Other Adjustments
In the event of any change in the outstanding shares of Common Stock of
the Bank by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Bank, the Committee will make
such adjustments to previously granted Awards, to prevent dilution or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
which may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Plan;
(c) subject to Section 8.1(a) hereof, adjustments in the purchase price of
outstanding Incentive and/or Non-Statutory Stock Options, or any Limited
Rights attached to such Options.
No such adjustments, however, may change materially the value of benefits
available to a Participant under a previously granted Award.
15. Limitations upon Exercise of Options
Notwithstanding any other provision of the Plan, so long as the Company
remains in the mutual form of organization and so long as any applicable statute
or regulation requires the Company to own at least a majority of the outstanding
Common Stock of the Bank, an Option granted under this Plan may not be exercised
if the exercise of such an Option would result in the Company owning less than a
majority of the Common Stock of the Bank. Nothing herein shall preclude the Bank
from issuing additional
9
<PAGE>
authorized but unissued shares of Common Stock to the Company to allow for the
exercise of Options which would otherwise have resulted in the Company owning
less than a majority of the Common Stock of the Bank.
16. Treatment of Options in the Event of a Conversion Transaction
In the event that the Company converts to stock form in a Conversion
Transaction any Options outstanding shall, at the option of the holder, (i) be
convertible into Options for Common Stock of the Stock Company, or (ii) be
exercisable by the holder prior to the effective date of the Conversion
Transaction and the holder shall be entitled to exchange, in the same manner as
other minority stockholders of the Bank, the shares of Common Stock of the Bank
received upon such exercise for shares of Common Stock of the Stock Company.
Provided, however, that if for any reason the minority shareholders are not
permitted to exchange their Common Stock for Stock Company common stock in a
Conversion Transaction, the holders of any unexercised Options under this plan
shall be entitled to receive upon exercise of such Option cash payment from the
Bank for the shares of stock represented by the options in an amount equal to
the initial offering price of the common stock of the Stock Company at the
closing of the Conversion Transaction, less the original exercise price of such
options. Any exchange, conversion of options, or cash payment for shares shall
be subject to applicable federal and state regulations and, if necessary,
subject to the approval of the appropriate regulatory authorities.
17. Withholding
There may be deducted from each distribution of cash and/or Common Stock
under the Plan the amount of tax required by any governmental authority to be
withheld.
18. Amendment the Plan
The Board may at any time, and from time to time, modify or amend the Plan
in any respect; provided, however, that if necessary to continue to qualify the
Plan under the Securities and Exchange Commission Rule 16b-3, the approval by a
majority of the shares represented in person or by proxy shall be required for
any such modification or amendment that:
(a) increases the maximum number of shares for which options may be
granted under the Plan (subject, however, to the provisions of
Section 14 hereof;
(b) reduces the exercise price at which Awards may be granted (subject,
however, to the provisions of Sections 8. l(a) and 14 hereof);
(c) extends the period during which options may be granted or exercised
beyond the times originally prescribed (subject, however, to the
provisions of Section 8. l(a) hereof; or
(d) changes the persons eligible to participate in the Plan.
Failure to ratify or approve amendments or modifications to subsections
(a) through (d) of this Section 18 by shareholders shall be effective only as to
the specific amendment or modification requiring such ratification. Other
provisions, sections, and subsections of this Plan will remain in full force and
effect.
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No such termination, modification or amendment may affect the rights of a
Participant under an outstanding Award.
19. Approval by Stockholders
Within 12 months after the Plan has been adopted, the Plan shall be
presented to shareholders for ratification for purposes of: (i) obtaining
favorable treatment under Section 16(b) of the Exchange Act; (ii) obtaining
preferential tax treatment for Incentive Stock Options; and, if applicable,
(iii) maintaining listing on the NASDAQ System, and (iv) enabling the issuance
of options and underlying shares to qualify for exemption from OTS offering
circular requirements. No Options granted pursuant to the Plan shall be
exercisable prior to such shareholder approval.
20. Effective Date of Plan
The Plan shall become effective upon the consummation of the Stock
Offering (the "Effective Date").
21. Termination the Plan
The right to grant Awards under the Plan will terminate upon the earlier
of (i) 10 years after the Effective Date, or (ii) the date on which the exercise
of Options or related rights equaling the maximum number of shares reserved
under the Plan occurs, as set forth in Section 5 hereof. The Board has the right
to suspend or terminate the Plan at any time; provided that no such action will,
without the consent of a Participant, affect adversely his rights under a
previously granted Award.
22. Applicable Law
The Plan will be administered in accordance with the laws of the State of
Arkansas.
IN WITNESS WHEREOF, the Bank has caused this Plan to be adopted, executed
by its duly authorized officer, and duly attested as of the 4th day of April,
1994.
- ------------------------------------
Date Approved by Stockholders
POCAHONTAS FEDERAL SAVINGS AND
LOAN ASSOCIATION
---------------------------------
Skip Martin, President and Chief
Executive Officer
ATTESTED:
---------------------------------
Secretary
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EXHIBIT 10.8
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
1994 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
1. Purpose
The purpose of the Pocahontas Federal Savings and Loan Association 1994
Stock Option Plan for Outside Directors (the "Plan") is to promote the growth
and profitability of Pocahontas Federal Savings and Loan Association (the
"Bank"), and to provide Outside Directors of the Bank with an incentive to
achieve long-term objectives of the Bank, attract and retain Outside Directors
of outstanding competence and to provide such Outside Directors with an
opportunity to acquire an equity interest in the Bank.
2. Definitions
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Bank, as such terms are defined in Section 424(e) or 424(f), respectively,
of the Code.
"Award" means an Award of Non-statutory Stock Options granted under the
provisions of the Plan.
"Bank" means Pocahontas Federal Savings and Loan Association.
"Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient'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 Recipient's surviving spouse, if any,
or if none, his estate.
"Board" means the board of directors of the Bank.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee of the Board consisting of all Outside
Directors.
"Common Stock" means the Common Stock of the Bank.
"Company" means Pocahontas Federal Mutual Holding Company, Inc.
"Conversion Transaction" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in the
context of a merger conversion.
"Date of Grant" means the actual date on which an Award is granted by the
Committee.
<PAGE>
"Director" means a member of the Board.
"Disability" means the permanent and total inability by reason of mental
or physical infirmity, or both, of a Director to carry out the responsibilities
of a Director of the Bank, as required by applicable state and federal laws.
"Fair Market Value" means, when used in connection with the Common Stock
on a certain date, the reported closing price of the Common Stock as reported by
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
System (as published by the Wall Street Journal, if published) on the day prior
to such date, or if the Common Stock was not traded on such date, on the next
preceding day on which the Common Stock was traded thereon; provided, however,
that if the Common Stock is not reported on the NASDAQ System, Fair Market Value
shall mean the average sale price of all shares of Common Stock sold during the
30-day period immediately preceding the date on which such stock Option was
granted, and if no shares of stock have been sold within such 30-day period, the
average sale price of the last three sales of Common Stock sold during the
90-day period immediately preceding the date on which such stock Option was
granted. In the event Fair Market Value cannot be determined in the manner
described above, then Fair Market Value shall be determined by the Committee.
The Committee shall be authorized to obtain an independent appraisal to
determine the Fair Market Value of the Common Stock. For purposes of the grant
of Options in the Stock Offering, Fair Market Value shall mean the initial
public offering price of the Common Stock.
"Non-Statutory Stock Option" means an Option granted by the Committee to a
Participant.
"Option" means an Award of a Non-Statutory Stock Option granted pursuant
to the terms of the Plan.
"Outside Director" means a member of the Board who is not also serving as
an employee of the Bank.
"Participant" means a Director of the Bank or its Affiliates chosen by the
Committee to participate in the Plan.
"Stock Offering" means the initial public offering of the Common Stock of
the Bank.
"Termination for Cause" means the termination of service of a Director
caused by such Director's personal dishonesty, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, or the willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or a final cease-and-desist order, any
of which results in a material loss to the Bank or an Affiliate.
3. Administration
(a) The Directors' Option Plan shall be administered by the Committee. The
Committee is authorized, subject to the provisions of the Plan, to establish
such rules and regulations as it deems necessary for the proper administration
of the Directors' Option Plan and to make whatever determinations and
interpretations in connection with the Directors' Option Plan it deems necessary
or advisable. All determinations and interpretations made by the Committee shall
be binding and conclusive on all Participants in the Directors' Option Plan, and
on their legal representatives and beneficiaries.
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(b) The Directors' Option Plan is intended to comply with Rule 16b-3 under
the Securities Exchange Act of 1934. Notwithstanding any term to the contrary
appearing herein, unless permitted by Rule 16b-3(c)(2)(ii), subsequent to the
establishment of the Directors' Option Plan neither the Committee nor the Board
shall have the authority to determine the amount and price of securities to be
awarded and/or timing of awards to designated directors or categories of
directors, which terms shall be set forth herein. To the extent any provision of
the Plan or action by Plan administrators fails to comply with this subsection
3(b), such provision or action shall be deemed null and void to the extent
permitted by law and deemed advisable by the Board.
4. Grant of Options
(a) Initial Grant. Each Outside Director who is serving in such capacity
on the date of the consummation of the Bank's Stock Offering shall be granted a
single non-qualified stock option to purchase the following number of shares of
the Common Stock of the Bank subject to adjustment pursuant to Section 6:
Director Award
------------------- ---------
William W. Scott 712
Jacob W. Foster 2,136
Robert Rainwater 3,559
Charles R. Ervin 3,559
Ralph P. Baltz 3,559
Marcus Van Camp 3,559
N. Ray Campbell 3,559
The purchase price per share of the Common Stock deliverable upon the
exercise of each non-qualified stock option shall be the price at which the
Common Stock of the Bank is offered in the Offering.
(b) Subsequent Grants. 4,274 shares of Common Stock shall be reserved for
future issuance upon exercise of non-qualified stock options that are hereby
reserved for future grant. The purchase price per share of Common Stock
deliverable upon the exercise of any such non-qualified stock option shall be
the Fair Market Value of the Common Stock on the date of the grant of such
option. Each person who becomes an Outside Director following the closing of the
Offering shall be granted a single non-qualified stock option to purchase 1,424
shares of Common Stock, subject to adjustment pursuant to Section 6, to the
extent shares remain available under the Directors' Option Plan. Options
reserved for future grant which are awarded to persons who become Outside
Directors subsequent to the effective date hereof, shall vest ratably at twenty
percent (20%) per year commencing on the first September 30th after such person
first becomes an Outside Director and continuing on each September 30th
thereafter until such Outside Director is fully vested in his or her Options.
Notwithstanding anything to the contrary herein, any Option which has been
awarded but which is not fully vested on September 30, 2002, shall become vested
on such date. In the event Options awarded under the Directors' Option Plan are
forfeited for any reason, within 60 days of such forfeiture options to purchase
50% of the shares underlying such forfeited options shall be distributed equally
among non-employee directors with one or more years of service, and options to
purchase the remaining 50% of the shares underlying such forfeited options shall
be distributed among such directors proportionately based on years of service up
to a maximum of ten years.
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5. Terms of Options
(a) Option Agreement. Each Option shall be evidenced by a written option
agreement between the Bank and the Outside Director specifying the number of
shares of Common Stock that may be acquired through its exercise and containing
such other terms and conditions that are not inconsistent with the terms of this
grant.
(b) Termination of Option. Each Option shall expire upon the earlier of
(i) one hundred and twenty (120) months following the date of grant, or (ii)
three years following the date on which the Outside Director ceases to serve in
such capacity for any reason other than Termination for Cause. If the Outside
Director dies before fully exercising any portion of an Option then exercisable,
such Option may be exercised by such Outside Director's personal
representative(s), heir(s) or devisee(s) at any time within the three-year
period following his or her death; provided, however, that in no event shall the
Option be exercisable more than one hundred and twenty (120) months after the
date of its grant. If the Outside Director is Terminated for Cause all Options
awarded to him or her shall expire upon such termination.
(c) Manner of Exercise. The Option may be exercised from time to time, in
whole or in part, by delivering a written notice of exercise to the President or
Chief Executive Officer of the Bank. Such notice is irrevocable and must be
accompanied by full payment of the purchase price in cash or shares of
previously acquired Common Stock of the Bank at the Fair Market Value of such
shares determined on the exercise date by the manner described in Section 2. If
previously acquired shares of Common Stock are tendered in payment of all or
part of the exercise price, the value of such shares shall be determined as of
the date of such exercise.
(d) Termination of Service. In the event of an Outside Director's
termination of service as a result of death or Disability, the Outside Director
(or his or her personal representative(s), heir(s), or devisee(s)) may, in a
form acceptable to the Committee, make application to surrender all or part of
Options held by such Outside Director in exchange for a cash payment from the
Bank of an amount equal to the difference between the Fair Market Value of the
Common Stock on the date of termination of service and the exercise price per
share of the Option. Whether the Bank accepts such application or determines to
make payment, in whole or part, is within its absolute and sole discretion, it
being expressly understood that the Bank is under no obligation to any Outside
Director whatsoever to make such payments. In the event that the Bank accepts
such application and determines to make payment, such payment shall be in lieu
of the exercise of the underlying Option and such Option shall cease to be
exercisable.
(e) Transferability. Each Option granted hereby may be exercised only by
the Outside Director to whom it is issued or in the event of the Outside
Director's death, his or her personal representative(s), heir(s) or devisee(s)
pursuant to the terms of Section 5(b) hereof.
(f) Limitations Upon Exercise of Options. Notwithstanding any other
provision of this Director's Option Plan, so long as the Company remains in the
mutual form of organization and so long as any applicable statute or regulation
requires the Company to own at least a majority of the outstanding Common Stock
of the Bank, an Option granted under this Plan may not be exercised if the
exercise of such an Option would result in the Company owning less than a
majority of the Common Stock of the Bank. Nothing herein shall preclude the Bank
from issuing additional authorized but unissued shares of Common Stock to the
Company to allow for the exercise of Options which would otherwise have resulted
in the Company owning less than a majority of the Common Stock of the Bank.
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6. Common Stock Subject to the Plan
The shares that shall be issued and delivered upon exercise of Options
granted under the Directors' Option Plan may be either authorized and unissued
shares of Common Stock or authorized and issued shares of Common Stock held by
the Bank as treasury stock. The number of shares of Common Stock reserved for
issuance under the Directors' Option Plan shall not exceed three and one-third
percent (31/3%) of the Common Stock of the Bank, issued in connection with the
Stock Offering, subject to adjustments pursuant to this Section 6.
In the event of any change or changes in the outstanding Common Stock of
the Bank by reason of any stock dividend or split, recapitalization,
reorganization, merger, consolidation, split-off, combination or any similar
corporate change, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Bank, the number of shares of Common
Stock that may be issued under this Directors' Option Plan, the number of shares
of Common Stock subject to Options granted under the Directors' Option Plan, and
the Option price of such Options, shall be automatically adjusted to prevent
dilution or enlargement of the rights granted to an Outside Director under the
Directors' Option Plan.
7. Treatment of Options in the Event of a Conversion Transaction
In the event that the Company converts to stock form in a Conversion
Transaction (as converted, the "Stock Holding Company"), any Options outstanding
shall, at the Option of the holder, (i) be convertible into Options for common
stock of the Stock Holding Company, or (ii) be exercisable by the holder prior
to the effective date of the Conversion Transaction and the holder shall be
entitled to exchange, in the same manner as other minority stockholders of the
Bank, the shares of Common Stock of the Bank received upon such exercise for
shares of Common Stock of the Stock Holding Company. Provided, however, that if
for any reason the minority shareholders are not permitted to exchange their
Common Stock for Stock Holding Company common stock in a Conversion Transaction,
the holders of any unexercised Options under this Plan shall be entitled to
receive upon exercise of such Option, cash payment from the Bank for the shares
of stock represented by the Options in an amount equal to the initial offering
price of the common stock of the Stock Holding Company at the closing of the
Conversion Transaction, less the original exercise price of such Options. Any
exchange, conversion of Options, or cash payment for shares shall be subject to
applicable federal and state regulations and, if necessary, subject to the
approval of the appropriate Regulatory Authorities.
8. Effective Date of the Plan; Shareholder Ratification and Approval
The Directors' Option Plan has been adopted by the Bank's Board and shall
become effective upon the consummation of the Stock Offering (the "Effective
Date"). Following the consummation of the Stock Offering, the Directors' Option
Plan shall be presented to shareholders of the Bank for ratification and
approval for purposes of (i) obtaining favorable treatment under Section 16(b)
of the Securities Exchange Act of 1934; (ii) maintaining listing on the NASDAQ
System; and (iii) enabling the issuance by the Bank of the underlying shares to
qualify for exemption from Office of Thrift Supervision ("OTS") offering
circular requirements. No Options granted pursuant to the Plan shall be
exercisable prior to such shareholder approval.
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9. Termination of the Plan
The right to exercise Options under the Directors' Option Plan will
terminate upon the earlier of ten years after the Effective Date or the issuance
of the Common Stock or exercise of Options equal to the maximum number of shares
of Common Stock reserved for issuance under the Directors' Option Plan. A
majority of the shareholders of the Bank represented in person or proxy at a
meeting of the shareholders may terminate the Directors' Option Plan; provided,
however, no such termination shall, without the consent of the affected
individual, affect such individual's rights under a previously granted Option.
10. Compliance with Rule 16b-3 Under the Securities Exchange Act of 1934.
(a) Notwithstanding any contrary provisions herein, unless permitted by
Rule 16b-3(c)(2)(ii)(B) terms stating the amount and price of securities to be
awarded and/or timing of awards to designated directors or categories of
directors shall not be amended more than once every six months other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
as amended, or rules thereunder.
(b) Transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act, and
the Plan is intended to be administered in the manner specified in Rule
16b-3(c)(2)(ii). To the extent any provision of the Plan or action by the plan
administrators fails to so comply, it shall be deemed null and void to the
extent permitted by law and deemed advisable by the Plan administrators.
11. Applicable Law
The Plan will be administered in accordance with the laws of the State of
Arkansas.
IN WITNESS WHEREOF, the Bank has caused this Plan to be adopted, executed
by its duly authorized officer, and duly attested as of the 4th day of April,
1994.
- -------------------------------
Date Approved by Stockholders
POCAHONTAS FEDERAL SAVINGS AND
LOAN ASSOCIATION
/s/ Skip Martin
--------------------------------------
Skip Martin, President and
Chief Executive Officer
ATTESTED:
/s/ James A. Edington
--------------------------------------
Secretary
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EXHIBIT 10.9
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POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
1994 RECOGNITION AND RETENTION PLAN FOR EMPLOYEES
1. Establishment of the Plan; Creation of Separate Trust
1.01 Pocahontas Federal Savings and Loan Association (the "Bank") hereby
establishes the Bank 1994 Recognition Plan for Employees (the "Plan") upon the
terms and conditions hereinafter stated in this Recognition Plan.
1.02 A separate trust or trusts has been established to purchase the
shares of the Bank's Common Stock that will be awarded hereunder (the "Trust").
If a Recipient hereunder fails to satisfy the conditions of the Plan and
forfeits all or any portion of the Bank's Common Stock awarded to him, such
forfeited shares will be returned to said Trust.
2. Purpose of the Plan
The purpose of the Plan is to retain key employees and officers of
experience and ability by providing such persons with a proprietary interest in
the Bank as compensation for their contributions to the Bank and its Affiliates
and as an incentive to make such contributions and to promote the Bank's growth
and profitability in the future
3. Definitions
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Bank, as such terms are defined in Section 424(e) and (f), respectively, of
the Code.
"Award" means the grant by the Committee of Restricted Stock, as provided
in the Plan.
"Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient'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 Recipient's surviving spouse, if any,
or if none, his estate.
"Board" means the Board of Directors of the Bank.
"Change in Control" of the Bank or the Company shall mean:
No benefit shall be payable under this Section 5 unless there shall have
been a Change in Control of the Bank or Company, as set forth below. For
purposes of this Agreement, a "Change in Control" of the Bank or Company shall
mean an event of a nature that: (i) would be required to be reported in response
to Item 1 of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act'); or (ii) results in a Change in Control of the Bank or the
Company within the meaning of the Home Owners' Loan Act of 1933 and the Rules
and
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Regulations promulgated by the Office of Thrift Supervision, as in effect on the
date hereof; or (iii) without limitation such a Change in Control shall be
deemed to have occurred at such time as (a) any "Person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Bank or the Company representing 25% or more of
the Bank's or the Company's outstanding securities except that securities issued
by the Bank, in connection with its initial public offering, to the Company
and/or the Bank's employee benefit plans and that continue to be held by such
Company or plans shall not be counted in determining whether such Company or
plans are the beneficial owner of more than 25% of the Bank's securities; or (b)
individuals who constitute the Board on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least two-thirds of the directors comprising the
Incumbent Board or whose nomination for election by the Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (b), considered as though he were a member
of the Incumbent Board; or (c) a reorganization, merger, consolidation, sale of
all or substantially all the assets of the Bank or the Company or similar
transaction in which the Bank or Company is not the resulting entity occurs; or
(d) a tender offer is made for 25% or more of the outstanding securities of the
Bank or Company and shareholders owning beneficially or of record 25 % or more
of the outstanding securities of the Bank or Company have tendered or offered to
sell their shares pursuant to such tender offer. Notwithstanding the foregoing,
a "Change in Control" of the Bank or the Company shall not be deemed to have
occurred if the Company ceases to own at least 51 % of all outstanding shares of
stock of the Bank in connection with a conversion of the Company from mutual to
stock form.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee of the Board consisting of all non-employee
Directors of the Bank.
"Company" means Pocahontas Federal Mutual Holding Company, Inc.
"Common Stock" means shares of the common stock of the Bank.
"Continuous Service" means the absence of any interruption or termination
of service as an of fleer or Employee of the Bank. Service shall not be
considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Bank or in the case of transfers between
payroll locations of the Bank or between the Bank, its parent, its subsidiaries
or its successor.
"Conversion Transaction" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in the
context of a merger conversion.
"Director" means a member of the Board.
"Disability" means the permanent and total inability by reason of mental
or physical infirmity, or both, of an employee to perform the work customarily
assigned to him. Additionally, a medical doctor selected or approved by the
Board must advise the Committee that it is either not possible to determine when
such Disability will terminate or that it appears probable that such Disability
will be permanent during the remainder of said Participant's lifetime.
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"Effective Date" shall be April 4, 1994.
"Employee" means any person who is currently employed by the Bank or an
Affiliate, including officers.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Normal Retirement" means retirement at or after the normal or early
retirement date set forth in the Bank's Employee Stock Ownership Plan, or any
successor tax qualified plan.
"Recipient" means an Employee of the Bank who receives a Restricted Stock
Award under this Plan.
"Restricted Period" means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 6
hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" means shares of Common Stock which have been
contingently awarded to a Recipient by the Committee subject to the restrictions
referred to in Section 5 hereof, so long as such restrictions are in effect.
"Stock Offering" means the initial public offering of the Common Stock of
the Bank.
4. Administration of the Plan.
4.01 Role of the Committee. The Plan shall be administered and interpreted
by the Committee, which shall have all of the powers allocated to it in this and
other Sections of the Plan. The interpretation and construction by the Committee
of any provisions of the Plan or of any Restricted Stock Award granted hereunder
shall be final and binding. The Committee shall act by vote or written consent
of a majority of its members. Subject to the express provisions and limitations
of the Plan, the Committee may adopt such rules, regulations and procedures as
it deems appropriate for the conduct of its affairs. The Committee 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.
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 except as provided in Section 6.05, the Board may
not revoke any Restricted Stock Award except in the event of revocation for
Cause, or with respect to unearned Restricted Stock Awards in the event a
Recipient of a Restricted Stock Award voluntarily terminates employment with the
Bank prior to Normal Retirement.
4.03 Limitation on Liability. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Restricted Stock Awards granted under it. If a member of the Board
or the Committee is a party or is threatened to be made a party to any
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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 Bank shall
indemnify such member against expense (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in the best interests of the Bank and its
Affiliates and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
5. Grant of Awards to Employees
5.01 Eligibility. Key employees of the Bank and its Affiliates are
eligible to receive Restricted Stock Awards.
5.02 Awards to Employees. The Committee may determine which of the
Employees referenced in Section 5.01 will be granted Restricted Stock Awards and
the number of shares covered by each Award; provided, however, that in no event
shall any Awards be made that will violate the Charter, Bylaws or Plan of
Reorganization from Mutual Savings Bank to Mutual Company, and Stock Issuance
Plan of the Bank or any applicable federal or state law or regulation. Shares of
Restricted Stock which are awarded by the Committee shall, on the date of the
Award, be registered in the name of the Recipient and transferred from the trust
to the Recipient, in accordance with the terms and conditions set forth in
Section 5.03 hereof. In the event Restricted Stock is forfeited for any reason,
the Committee, from time to time, may determine which of the Employees
referenced in Section 5.01 will be granted additional Restricted Stock Awards to
be awarded from forfeited or reserved shares of Restricted Stock held by the
Trust. In selecting those Employees to whom Restricted Stock Awards will be
granted and the number of shares covered by such Awards, the Committee shall
consider the position and responsibilities of the eligible Employees, the length
and value of their services to the Bank and its Affiliates, the compensation
paid to the Employees and any other factors the Committee may deem relevant, and
the Committee may request the written recommendation of the Chief Executive
Officer and other senior executive officers of the Bank and its Affiliates. All
allocations by the Committee shall be subject to review, and approval or
rejection, by the Board.
Except as provided in Sections 6.02, 6.03 and 6.04, no Restricted Stock
shall be earned unless the Recipient maintains Continuous Service with the Bank
or any Affiliate until the restrictions lapse.
5.03 Manner of Award. As promptly as practicable after a determination is
made pursuant to Section 5.02 that a Restricted Stock Award has been granted,
the Committee shall notify the Recipient in writing of the grant of the Award,
the number of shares of Restricted Stock covered by the Award, and the terms
upon which the Restricted Stock subject to the Award may be earned. Upon
notification of an Award of Restricted Stock, the Recipient shall execute and
return to the Bank a restricted stock agreement setting forth the terms and
conditions under which the Recipient shall earn the Restricted Stock (the
"Restricted Stock Agreement"), together with a stock power endorsed in blank.
Thereafter, the Recipient's Restricted Stock and stock power shall be deposited
with an escrow agent specified by the Bank (the "Escrow Agent") who shall hold
such Restricted Stock under the terms and conditions set forth in the Restricted
Stock Agreement. Each certificate in respect of shares of Restricted Stock
Awarded under the Plan shall be registered in the name of the Recipient.
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6. Terms and Conditions of Restricted Stock
The Committee shall have full and complete authority, subject to the
limitations of the Plan, to grant awards of Restricted Stock and, in addition to
the terms and conditions contained in paragraphs 6.01 through 6.09 of this
Section 6, to provide such other terms and conditions (which need not be
identical among Recipients) in respect of such Awards, and the vesting thereof,
as the Committee shall determine.
6.01 General Rules. Unless the Committee shall specifically state to the
contrary at the time a Restricted Stock Award is granted, Restricted Stock shall
be earned by a Recipient at the rate of twenty percent (20 % ) of the aggregate
number of shares covered by the Award at the end of each full twelve months of
consecutive service with the Bank or an Affiliate after the date of grant of the
Award; provided, however, that no shares shall be earned during any period that
the Recipient fails to maintain Continuous Service with the Bank or an Affilate;
provided, further, that the Committee may provide for a less or more rapid
earnings rate than set forth herein for any or all Awards awarded subsequent to
the date of this Plan; and provided, further, that no shares shall be earned for
any year in which the Bank is not meeting all of its fully phased-in capital
requirements. Subject to any such other terms and conditions as the Committee
shall provide, shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Recipient, except as
hereinafter provided, during the Restricted Period. The Committee shall have the
authority, in its discretion, to accelerate the time at which any or all of the
restrictions shall lapse with respect thereto, or to remove any or all of such
restrictions, whenever it may determine that such action is appropriate by
reason of changes in applicable tax or other laws or other changes in
circumstances occurring after the commencement of such Restricted Period.
6.02 Continuous Service; Forfeiture. Except as provided in Section 6.04
hereof, if a Recipient ceases to maintain Continuous Service for any reason
(other than death, Disability or Normal Retirement as provided in Section 6.03),
unless the Committee shall otherwise determine, all shares of Restricted Stock
theretofore awarded to such Recipient and which at the time of such termination
of Continuous Service are subject to the restrictions imposed by Section 6.01
shall upon such termination of Continuous Service be forfeited and returned to
the Trust.
6.03 Exception for Termination Due to Death Disability or Normal
Retirement. Notwithstanding the general rule contained in 6.01, Restricted
Shares awarded to a Recipient whose employment with the Bank or an Affiliate
terminates due to death or Disability or Normaal Retirement, or any part thereof
that has not theretofore been earned, shall be deemed earned as of the
Recipient's last day of employment with the Bank or an Affiliate.
6.04 Exception for Terminations after a Change in Control. Notwithstanding
the general rule contained in Section 6.01, all Restricted Stock subject to a
Restricted Stock Award held by a Recipient whose service as an Employee of the
Bank or an Affiliate terminates following a Change in Control of the Bank or the
Company shall be deemed earned as of the Recipient's last day of service with
the Bank or an Affiliate.
6.05 Revocation for Cause. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Restricted Stock Award, or portion thereof, previously awarded under this
Plan, to the extent Restricted Stock has not been redelivered by the Escrow
Agent to the Recipient, whether or not yet earned, in the case of an Employee
whose employment
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is terminated by the Bank or an Affiliate for cause (as hereinafter defined), or
who is discovered after termination of employment to have engaged in conduct
that would have justified termination for Cause. "Cause" is defined as personal
dishonesty, willful misconduct, any breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, or the willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) or a final cease-and-desist order, any of which results in a material
loss to the Bank or an Affiliate.
6.06 Restricted Stock Legend. Each certificate in respect of shares of
Restricted Stock awarded under the Plan shall bear the following (or a similar)
legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the Pocahontas Federal Savings and Loan
Association 1994 Recognition and Retention Plan for Employees. Copies of
such Plan are on file in the office of the Secretary of Pocahontas Federal
Savings and Loan Association, 203 West Broadway, Pocahontas, Arkansas
72455 3420. "
6.07 Payment of Dividends. After a Restricted Stock Award has been granted
but before such Award has been earned, the Recipient shall receive any cash
dividends or stock dividends paid with respect to such shares. Unless the
Recipient has made an election under Section 83(b) of the Internal Revenue Code,
any dividends so paid on shares which have not yet been earned by the Recipient
shall be treated as compensation income to the Recipient when paid.
6.08 Voting of Restricted Shares. After a Restricted Stock Award has been
granted, the Recipient as owner of such shares shall have the right to vote such
shares.
6.09 Delivery of Earned Shares. At the expiration of the restrictions
imposed by Section 6.01, the Escrow Agent shall redeliver to the Recipient (or
where the relevant provision of Section 6.02 applies in the case of a deceased
Recipient, to his Beneficiary, the certificate(s) and stock power deposited with
it pursuant to Section 6.04 and the shares represented by such certificate(s)
shall be free of the restrictions referred to Section 6.01.
7. Adjustments Upon Changes in Capitalization
In the event of any change in the outstanding shares subsequent to the
effective date of the Plan by reason of any reorganization, recapitalization,
stock split, stock dividend, combination or exchange of shares, merger,
consolidation or any change in the corporate structure or shares of the Bank,
the maximum aggregate number and class of shares as to which Awards may be
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Any shares of stock or other securities
received, as a result of any of the foregoing, by a Recipient with respect to
Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
securities shall be legended and deposited with the Escrow Agent in the manner
provided in Section 6.06 hereof.
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8. Assignments and Transfers
No Award nor any right or interest of a Recipient under the Plan in any
instrument evidencing any Award under the Plan may be assigned, encumbered or
transferred except, in the event of the death of a Recipient, by will or the
laws of descent and distribution.
9. Treatment of Forfeited Shares
In the event shares of Restricted Stock are forfeited by a Recipient
hereunder, such shares shall be returned to the Trust and shall be held and
accounted for by such Trust pursuant to the terms of the trust agreement until
such time as the Committee re-awards such shares to another Recipient, in
accordance with the terms of this Plan and the applicable state and federal
laws, rules and regulations.
10. Employee Rights Under the Plan
No Employee shall have a right to be selected as a Recipient nor, having
been so selected, to be selected again as a Recipient and no Employee or other
person shall have any claim or right to be granted an Award under the Plan or
under any other incentive or similar plan of the Bank or any Affiliate. Neither
the Plan nor any action taken thereunder shall be construed as giving any
Employee any right to be retained in the employ of the Bank or any Affiliate.
11. Withholding Tax
Upon the termination of the Restricted Period with respect to any shares
of Restricted Stock (or at any such earlier time, if any, that an election is
made by the Recipient under Section 83(b) of the Code, or any successor
provision thereto, to include the value of such shares in taxable income), the
Bank shall have the right to require the Recipient or other person receiving
such shares to pay the Bank the amount of any taxes which the Bank is required
to withhold with respect to such shares, or, in lieu thereof, to retain or sell
without notice, a sufficient number of shares held by it to cover the amount
required to be withheld. The Bank shall have the right to deduct from all
dividends paid with respect to shares of Restricted Stock the amount of any
taxes which the Bank is required to withhold with respect to such dividend
payments.
12. Treatment of Restricted Stock in the Event of Conversion Transaction
In the event that the Company converts to stock form in a Conversion
Transaction, any Restricted Stock shall be exchanged into shares of Common Stock
of the Stock Company, provided, however, that if for any reason such shares are
not to be exchanged, the Stock Company shall, simultaneously with the closing of
the Conversion Transaction, purchase Restricted Stock for cash equal to the fair
market value of shares of Common Stock. Any exchange of shares or cash payment
for shares shall be subject to applicable federal and state regulations and, if
necessary, subject to the approval of the appropriate regulatory authorities.
13. Amendment or Termination
The Board may amend, suspend or terminate the Plan or any portion thereof
at any time, but (except as provided in Section 6 hereon no amendment shall be
made without approval of the stockholders of the Bank which shall (i) materially
increase the aggregate number of shares with respect to which
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Awards may be made under the plan, (ii) materially increase the aggregate number
of shares which may be subject to Awards to Recipients, or (iii) change the
class of persons eligible to participate in the Plan; provided, however, that no
such amendment, suspension or termination shall impair the rights of any
Recipient, without his consent, in any Award theretofore made pursuant to the
Plan.
14. Governing Law
The Plan shall be governed by the laws of the State of Arkansas.
15. Term of Plan
The Plan shall become effective upon its adoption by the Board, subject to
the Bank's completion of the Stock Offering and the approval of the Plan by
stockholders. It shall continue in effect for a term of ten years unless sooner
terminated under Section 13 hereof.
8
<PAGE>
EXHIBIT 10.10
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
1994 RECOGNITION AND RETENTION PLAN
FOR OUTSIDE DIRECTORS
1. Establishment of the Plan; Creation of Separate Trust
1.01 Pocahontas Federal Savings and Loan Association (the "Bank") hereby
establishes the Pocahontas Federal Savings and Loan Association 1994 Recognition
Plan for Outside Directors (the "Plan") upon the terms and conditions
hereinafter stated in this Recognition Plan.
1.02 A separate trust or trusts has been established to purchase the
shares of the Bank's Common Stock that will be awarded hereunder (the "Trust").
If a Recipient hereunder fails to satisfy the conditions of the Plan and
forfeits all or any portion of the Bank's Common Stock awarded to him, such
forfeited shares will be returned to said Trust.
2. Purpose of the Plan
The purpose of the Plan is to promote the long-term interests of the Bank
and its stockholders by providing a means for attracting and retaining directors
of the Bank.
3. Definitions
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural:
"Affiliate" means any "parent corporation" or "subsidiary corporation" of
the Bank, as such terms are defined in Section 424(e) and (f), respectively, of
the Code.
"Award" means the grant by the Committee of Restricted Stock, as provided
in the Plan.
"Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient'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 Recipient's surviving spouse, if any,
or if none, his estate.
"Board" means the Board of Directors of the Bank.
"Change in Control" of the Bank or the Company shall mean an event of a
nature that: (i) would be required to be reported in response to Item 1 of the
current report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act'); or (ii)
results in a Change in Control of the Bank or the Company within the meaning of
the Home Owners' Loan Act of 1933 and the Rules and Regulations promulgated by
the Office of Thrift Supervision, as in effect on the date hereof; or (iii)
without limitation such a Change in Control shall be deemed to have occurred at
such time as (a) any "Person' (as the term is used in Sections 13(d) and 14(d)
of the Exchange
<PAGE>
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Bank or the Company
representing 25% or more of the Bank's or the Company's outstanding securities
except that securities issued by the Bank, in connection with its initial public
offering, to the Company and/or the Bank's employee benefit plans and that
continue to be held by such Company or plans shall not be counted in determining
whether such Company or plans are the beneficial owner of more than 25% of the
Bank's securities; or (b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least two-thirds of the
directors comprising the Incumbent Board or whose nomination for election by the
Company's stockholders was approved by the same Nominating Committee serving
under an Incumbent Board, shall be, for purposes of this clause (b), considered
as though he were a member of the Incumbent Board; or (c) a reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Company or similar transaction in which the Bank or Company is not the
resulting entity occurs; or (d) a tender offer is made for 25% or more of the
outstanding securities of the Bank or Company and shareholders owning
beneficially or of record 25% or more of the outstanding securities of the Bank
or Company have tendered or offered to sell their shares pursuant to such tender
offer. Notwithstanding the foregoing, a "Change in Control" of the Bank or the
Company shall not be deemed to have occurred if the Company ceases to own at
least 51% of all outstanding shares of stock of the Bank in connection with a
conversion of the Company from mutual to stock form.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee of the Board consisting of all non-employee
Directors of the Bank.
"Company" means Pocahontas Federal Mutual Holding Company, Inc.
"Common Stock" means shares of the common stock of the Bank.
"Continuous Service" means the absence of any interruption or termination
of service as a Director of the Bank.
"Conversion Transaction" means the conversion of the Company from the
mutual to stock form of organization either on a stand-alone basis or in the
context of a merger conversion.
"Director" mean a member of the Board.
"Disability" means the permanent and total inability by reason of mental
or physical infirmity, or both, of a Director to carry out the responsibilities
of a Director of the Bank, as required by applicable state and federal law.
"Effective Date" shall be April 4, 1994.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Recipient" means a Director of the Bank who receives a Restricted Stock
Award under this Plan.
2
<PAGE>
"Restricted Period" means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 6
hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" means shares of Common Stock which have been
contingently awarded to a Recipient by the Committee subject to the restrictions
referred to in Section 5 hereof, so long as such restrictions are in effect.
"Stock Offering" means the initial public offering of the Common Stock of
the Bank.
4. Administration of the Plan
4.01 Role of the Committee. The Plan shall be administered and interpreted
by the Committee, which shall have all of the powers allocated to it in this and
other Sections of the Plan. The interpretation and construction by the Committee
of any provisions of the Plan or of any Restricted Stock Award granted hereunder
shall be final and binding. The Committee shall act by vote or written consent
of a majority of its members. Subject to the express provisions and limitations
of the Plan, the Committee may adopt such rules, regulations and procedures as
it deems appropriate for the conduct of its affairs. The Committee 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.
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 except as provided in Section 6.05, the Board may
not revoke any Restricted Stock Award except in the event of revocation for
Cause, or with respect to unearned Restricted Stock Awards in the event a
Recipient of a Restricted Stock Award is no longer a Director.
4.03 Plan Administration Restrictions. This Plan is intended to comply
with Rule 16b-3 under the Securities Exchange Act of 1934. Notwithstanding any
term to the contrary appearing in this Plan, unless permitted by Rule
16b-3(c)(2)(ii), subsequent to the establishment of this Plan the Trustee,
neither the Committee, nor the Board of Directors shall have the authority to
determine the amount and price of securities to be awarded and/or timing of
awards to designated Directors or categories of Directors, which terms shall be
set forth in the Plan. To the extent any provision of the Plan or action by Plan
administrators fails to comply with this Section, such provision or action shall
be deemed null and void to the extent permitted by law and deemed advisable by
the Board of Directors.
4.04 Limitation on Liability. No member of the Board or the Committee
shall be liable for any determination made in good faith with respect to the
Plan or any Restricted Stock Awards granted under it. If a member of the Board
or the Committee 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 Bank shall
indemnify such member against expense (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in the best
3
<PAGE>
interests of the Bank and its Affiliates and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
5. Grant of Awards to Non-Employee Directors
5.01 Initial Award. Each non-employee Director who is serving in such
capacity on the date of the Bank's Stock Offering and at the Effective Date of
this Plan, shall be issued an Award equal to 1,424 shares of Restricted Stock.
No Restricted Stock shall be earned unless the Recipient maintains
Continuous Service with the Bank. No shares of Restricted Stock shall be
reserved for future grant.
5.02 Subsequent Grants. Each non-employee director of the Bank elected by
stockholders or appointed by the Board shall receive 500 shares of Restricted
Stock to the extent forfeited shares are available.
5.03 Manner of Award. As promptly as practicable after a Restricted Stock
Award has been granted, the Committee shall notify the Recipient in writing of
the grant of the Award, the number of shares of Restricted Stock covered by the
Award, and the terms upon which the Restricted Stock subject to the Award may be
earned. Upon receipt of notification of an Award of Restricted Stock, the
Recipient shall execute and return to the Bank a restricted stock agreement
setting forth the terms and conditions under which the Recipient shall earn the
Restricted Stock (the "Restricted Stock Agreement), together with a stock power
endorsed in blank. Thereafter, the Recipient's Restricted Stock and stock power
shall be deposited with an escrow agent specified by the Bank (the "Escrow
Agent") who shall hold such Restricted Stock under the terms and conditions set
forth in the Restricted Stock Agreement. Each certificate in respect of shares
of Restricted Stock Awarded under the Plan shall be registered in the name of
the Recipient.
6. Terms and Conditions of Restricted Stock
The Committee shall have full and complete authority, subject to the
limitations of the Plan, to grant awards of Restricted Stock and, in addition to
the terms and conditions contained in paragraphs 6.01 to 6.09 of this Section 6,
to provide such other terms and conditions (which need not be identical among
Recipients) in respect of such Awards, and the vesting thereof, as the Committee
shall determine.
6.01 General Rules. Unless the Committee shall specifically state to the
contrary at the time a Restricted Stock Award is granted, Restricted Stock shall
be earned by a Recipient at the rate of twenty percent (20%) of the aggregate
number of shares covered by the Award as of the last day of the Bank's fiscal
year, or September 30, commencing, with respect to shares awarded at the time of
the Stock Offering, on September 30, 1994; provided, however, that no shares
shall be earned during any period that the Recipient fails to maintain
Continuous Service with the Bank or an Affiliate; and provided further, that no
shares shall be earned for any year in which the Bank is not meeting all of its
fully phased-in capital requirements. Subject to any such other terms and
conditions as the Committee shall provide, shares of Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered by the Recipient,
except as hereinafter provided, during the Restricted Period.
6.02 Continuous Service; Forfeiture. Except as provided in Section 6.04
hereof, if a Recipient ceases to maintain Continuous Service for any reason
(other than death or Disability as provided in Section
4
<PAGE>
6.02), unless the Committee shall otherwise determine, all shares of Restricted
Stock theretofore awarded to such Recipient and which at the time of such
termination of Continuous Service are subject to the restrictions imposed by
Section 6.01 shall upon such termination of Continuous Service be forfeited and
returned to the Trust.
6.03 Exception for Termination Due to Death or Disability. Notwithstanding
the general rule contained in 6.01, Restricted Shares awarded to a Recipient
whose service with the Bank or an Affiliate terminates due to death or
Disability, or any part thereof that has not theretofore been earned, shall be
deemed earned as of the Recipient's last day of service with the Bank or an
Affiliate.
6.04 Exception for Terminations after a Change in Control. Notwithstanding
the general rule contained in Section 6.01, all Restricted Stocks subject to a
Restricted Stock Award held by a Recipient whose service as a Director of the
Bank or an Affiliate terminates following a Change in Control of the Bank or the
Company shall be deemed earned as of the Recipient's last day of service with
the Bank or an Affiliate.
6.05 Revocation for Cause. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Restricted Stock Award, or portion thereof, previously awarded under this
Plan, to the extent Restricted Stock has not been redelivered by the Escrow
Agent to the Recipient, whether or not yet earned, in the case of a Director
whose service is terminated by the Bank or an Affiliate for cause (as
hereinafter defined), or who is discovered after termination of service to have
engaged in conduct that would have justified termination for Cause. "Cause" is
defined as personal dishonesty, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, or the
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) or a final cease-and-desist order, any of which results in
a material loss to the Bank or an Affiliate.
6.06 Restricted Stock Legend. Each certificate in respect of shares of
Restricted Stock shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the Pocahontas Federal Savings and Loan
Association 1994 Recognition and Retention Plan for Outside Directors.
Copies of such Plan are on file in the office of the Secretary of
Pocahontas Federal Savings and Loan Association, 203 West Broadway,
Pocahontas, Arkansas 21201-3978."
6.07 Payment of Dividends. After a Restricted Stock Award has been granted
but before such Award has been earned, the Recipient shall receive any cash
dividends or stock dividends paid with respect to such shares. Unless the
Recipient has made an election under Section 83(b) of the Internal Revenue Code,
any dividends so paid on shares which have not yet been earned by the Recipient
shall be treated as compensation income to the Recipient when paid.
6.08 Voting of Restricted Shares. After a Restricted Stock Award has been
granted, the Recipient as owner of such shares shall have the right to vote such
shares.
6.09 Delivery of Earned Shares. At the expiration of the restrictions
imposed by Section 6.01, the Escrow Agent shall redeliver to the Recipient (or
where the relevant provision of Section 6.02 applies
5
<PAGE>
in the case of a deceased Recipient, to his Beneficiary, the certificate(s) and
stock power deposited with it pursuant to Section 6.04 and the shares
represented by such certificate(s) shall be free of the restrictions referred to
Section 6.01.
7. Adjustments Upon Changes in Capitalization
In the event of any change in the outstanding shares subsequent to the
effective date of the Plan by reason of any reorganization, recapitalization,
stock split, stock dividend, combination or exchange of shares, merger,
consolidation or any change in the corporate structure or shares of the Bank,
the maximum aggregate number and class of shares as to which Awards may be
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Any shares of stock or other securities
received, as a result of any of the foregoing, by a Recipient with respect to
Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
securities shall be legended and deposited with the Bank in the manner provided
in Section 6.06 hereof.
8. Assignments and Transfers
No Award nor any right or interest of a Recipient under the Plan in any
instrument evidencing any Award under the Plan may be assigned, encumbered or
transferred except, in the event of the death of a Recipient, by will or the
laws of descent and distribution.
9. Treatment of Forfeited Shares
In the event share of Restricted Stock are forfeited by a Recipient
hereunder, such shares shall be returned to the Trust and shall be held and
accounted for by such Trust pursuant to the terms of the trust agreement until
such time as such shares are awarded to another Recipient, in accordance with
the terms of the Plan (including ss.4.03) and the applicable federal and state
laws, rules and regulations.
10. Director Rights Under the Plan
No Director shall have a right to be selected as a Recipient nor, having
been so selected, to be selected again as a Recipient and no Director, or other
person shall have any claim or right to be granted an Award under the Plan or
under any other incentive or similar plan of the Bank or any Affiliate. Neither
the Plan nor any action taken thereunder shall be construed as giving any
Director any right to be retained in the services of the Bank or any Affiliate.
11. Treatment of Restricted Stock in the Event of Conversion Transaction
In the event that the Company converts to stock form in a Conversion
Transaction, any Restricted Stock shall be exchanged into shares of Common Stock
of the Stock Holding Company, provided, however, that if for any reason such
shares are not to be exchanged, the Stock Holding Company shall, simultaneously
with the closing of the Conversion Transaction, purchase Restricted Stock for
cash equal to the fair market value of shares of Common Stock. Any exchange of
shares or cash payment for shares shall be subject to applicable federal and
state regulations and, if necessary, subject to the approval of the appropriate
regulatory authorities.
6
<PAGE>
12. Amendment or Termination
The Board of Directors of the Bank may amend, suspend or terminate the
Plan or any portion thereof at any time, but (except as provided in Section 6
hereof) no amendment shall be made without approval of the stockholders of the
Bank which shall (i) materially increase the aggregate number of shares with
respect to which Awards may be made under the plan, (ii) materially increase the
aggregate number of shares which may be subject to Awards to Recipients, or
(iii) change the class of persons eligible to participate in the Plan; provided,
however, that no such amendment, suspension or termination shall impair the
rights of any Recipient, without his consent, in any Award theretofore made
pursuant to the Plan.
This Plan provides for formula awards, as defined in Rule 16b-3(c)(2)(ii)
under the Securities Exchange Act of 1934. Accordingly, it may not be amended
more than once every six months, other than to comport with changes in the Code,
ERISA or the rules thereunder.
13. Governing Law
The Plan shall be governed by the laws of the State of Arkansas.
14. Term of Plan
The Plan shall become effective upon its adoption by the Board, subject to
the Bank's completion of the Stock Offering and the approval of the Plan by
stockholders. It shall continue in effect for a term of 10 years unless sooner
terminated under Section 12 hereof.
7
<PAGE>
EXHIBIT 10.11
<PAGE>
POCAHONTAS FEDERAL SAVINGS & LOAN ASSOCIATION
401(k) SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN
(adopted effective October 1, 1997)
<PAGE>
POCAHONTAS FEDERAL SAVINGS & LOAN ASSOCIATION
401(k) SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN
This 401(k) Savings and Employee Stock Ownership Plan, executed on
__________, 1997, by Pocahontas Federal Savings & Loan Association, a federally
chartered savings bank (the "Association"),
W I T N E S S E T H T H A T
WHEREAS, Pocahontas Federal Savings & Loan Association (hereinafter
referred to as the "Employer") has maintained the Pocahontas Federal Savings &
Loan Association 401(k) Savings and Profit Sharing Plan (hereinafter referred to
as the "401(k) Plan"), a discretionary contribution plan for the benefit of its
employees that allows for elective deferrals under Section 401(k) of the
Internal Revenue Code of 1986 (the "Code"), effective as of January 1, 1986;
WHEREAS, the Employer has maintained an Employee Stock Ownership Plan for
the benefit of its employees known as the Pocahontas Federal Savings & Loan
Association Employee Stock Ownership Plan (hereinafter referred to as the
"ESOP"), effective as of October 1, 1993;
WHEREAS, the Board of Directors of the Employer has authorized the
consolidation of the 401(k) Plan and the ESOP;
WHEREAS, the Board of Directors of the Employer has authorized the
adoption of this Plan, to be known as the Pocahontas Federal Savings & Loan
Association 401(k) Savings and Employee Stock Ownership Plan (hereinafter
referred to as the "Plan");
WHEREAS, it is intended that the Plan, effective October 1, 1997, is to be
a qualified plan under Sections 401(a) and 4975(e) of the Code and is to be for
the exclusive benefit of participants in the Plan and their beneficiaries; and
WHEREAS, it is intended that the ESOP portion of the Plan is to be
invested primarily in qualified employer securities within the meaning of
Section 4975(e)(8) of the Code;
NOW, THEREFORE, the Association hereby adopts the following Plan setting
forth the terms and conditions pertaining to contributions by the Employer and
the payment of benefits to Participants and Beneficiaries, effective October 1,
1997.
<PAGE>
IN WITNESS WHEREOF, the Association has adopted this Plan and caused this
instrument to be executed by its duly authorized officers as of the above date.
ATTEST:
By:
- ---------------------------------- --------------------------------
Secretary President
<PAGE>
C O N T E N T S
Page No.
--------
Section 1. Plan Identity................................................ 1
1.1 Name ....................................................... 1
1.2 Purpose...................................................... 1
1.3 Effective Date............................................... 1
1.4 Fiscal Period................................................ 1
1.5 Single Plan for All Employers................................ 1
Section 2. Definitions.................................................. 1
Section 3. Eligibility for Participation................................ 9
3.1 Initial Eligibility.......................................... 9
3.2 Definition of Eligibility Year............................... 9
3.3 Termination of Participation................................. 9
3.4 Certain Employees Ineligible................................. 10
3.5 Participation and Reparticipation............................ 10
3.6 Elective Deferral Agreement.................................. 10
Section 4. Contributions and Credits.................................... 11
4.1 Elective Deferral Contributions.............................. 11
4.2 Matching Contributions....................................... 11
4.3 Discretionary Contributions.................................. 12
4.4 ESOP ....................................................... 12
4.5 Voluntary Contributions...................................... 13
4.6 Definitions Related to Contributions......................... 13
4.7 Conditions as to Contributions............................... 13
4.8 Rollover Contributions ...................................... 14
4.9 Determination of Contributions............................... 14
4.10 Payment of Contributions..................................... 14
4.11 Participant-Directed Investment of Elective Deferral,
Qualified Non-Elective Contributions, Discretionary
Contributions, Matching Contribution, Qualified Matching
Contribution and Rollover Accounts......................... 14
4.12 Valuation of Assets.......................................... 15
4.13 Allocation of Trust Assets................................... 16
(i)
<PAGE>
Page No.
--------
Section 5. Limitations on Contributions
and Allocations............................................ 16
5.1 Maximum Amount of Elective Deferral Contributions............ 16
5.2 Limitation on Elective Deferral Contributions................ 17
5.3 Contributions to be Deductible............................... 18
5.4 Limitations on Matching Contributions........................ 18
5.5 Multiple Use Test............................................ 19
5.6 Limitation on Annual Additions............................... 19
5.7 Coordinated Limitations with Other Plans..................... 21
5.8 Effect of Limitations........................................ 22
5.9 Limitations as to Certain Participants....................... 22
Section 6. Trust Fund and Its Investment................................ 23
6.1 Creation of Trust Fund....................................... 23
6.2 Investments.................................................. 23
6.3 Acquisition of Stock......................................... 25
6.4 Participants' Option to Diversify............................ 26
Section 7. Voting Rights and Dividends on Stock......................... 27
7.1 Voting and Tendering of Stock................................ 27
7.2 Dividends on Stock........................................... 27
Section 8. Adjustments to Accounts...................................... 28
8.1 Adjustments for Transactions................................. 28
Section 9. Vesting of Participants' Interests........................... 28
9.1 Deferred Vesting in Accounts................................. 28
9.2 Computation of Vesting Years................................. 29
9.3.1 Full Vesting Upon Certain Events............................. 29
9.3.2 Full Vesting Upon Change in Control.......................... 29
9.4 Full Vesting Upon Plan Termination........................... 30
9.5 Forfeiture, Repayment, and Restoral.......................... 30
9.6 Accounting for Forfeitures................................... 30
9.7 Vesting and Nonforfeitability................................ 31
(ii)
<PAGE>
Page No.
--------
Section 10. Payment of Benefits.......................................... 31
10.1 Benefits for Participants.................................... 31
10.2 Time for Distribution........................................ 32
10.3 Marital Status............................................... 33
10.4 Delay in Benefit Determination............................... 33
10.5 Accounting for Benefit Payments.............................. 33
10.6 Options to Receive and Sell Stock............................ 33
10.7 Restrictions on Disposition of Stock......................... 35
10.8 Continuing Loan Provisions; Creation of Protections and
Rights..................................................... 35
10.9 Direct Rollover of Eligible Distribution..................... 35
10.10 Withdrawals During Employment................................ 36
10.11 Participant Loans............................................ 37
10.12 Waiver of 30-Day Period...................................... 38
Section 11. Rules Governing Benefit Claims and
Review of Appeals.......................................... 39
11.1 Claim for Benefits........................................... 39
11.2 Notification by Committee.................................... 39
11.3 Claims Review Procedure...................................... 39
Section 12. The Committee and Its Functions.............................. 40
12.1 Authority of Committee....................................... 40
12.2 Identity of Committee........................................ 40
12.3 Duties of Committee.......................................... 40
12.4 Valuation of Stock........................................... 41
12.5 Compliance with ERISA........................................ 41
12.6 Action by Committee.......................................... 41
12.7 Execution of Documents....................................... 41
12.8 Adoption of Rules............................................ 41
12.9 Responsibilities to Participants............................. 41
12.10 Alternative Payees in Event of Incapacity.................... 42
12.11 Indemnification by Employers................................. 42
12.12 Nonparticipation by Interested Member........................ 42
Section 13. Adoption, Amendment or Termination of the Plan............... 42
13.1 Adoption of Plan by Other Employers.......................... 42
(iii)
<PAGE>
Page No.
--------
13.2 Adoption of Plan by Successor................................ 42
13.3 Plan Adoption Subject to Qualification....................... 43
13.4 Right to Amend or Terminate.................................. 43
Section 14. Miscellaneous Provisions..................................... 44
14.1 Plan Creates No Employment Rights............................ 44
14.2 Nonassignability of Benefits................................. 44
14.3 Limit of Employer Liability.................................. 44
14.4 Treatment of Expenses........................................ 44
14.5 Number and Gender............................................ 44
14.6 Nondiversion of Assets....................................... 44
14.7 Separability of Provisions................................... 45
14.8 Service of Process........................................... 45
14.9 Governing State Law.......................................... 45
14.10 Employer Contributions Conditioned on Deductibility.......... 45
14.11 Unclaimed Accounts........................................... 45
14.12 Qualified Domestic Relations Order........................... 45
Section 15. Top-Heavy Provisions......................................... 46
15.1 Top-Heavy Plan............................................... 46
15.2 Super Top-Heavy Plan......................................... 47
15.3 Definitions.................................................. 47
15.4 Top-Heavy Rules of Application............................... 48
15.5 Top-Heavy Ratio.............................................. 50
15.6 Minimum Contributions........................................ 50
15.7 Minimum Vesting.............................................. 51
15.8 Top Heavy Provisions Control in Top-Heavy Plan............... 51
(iv)
<PAGE>
POCAHONTAS FEDERAL SAVINGS & LOAN ASSOCIATION
401(k) SAVINGS AND EMPLOYEE STOCK OWNERSHIP PLAN
Section 1. Plan Identity.
1.1 Name. The name of this Plan is "Pocahontas Federal Savings & Loan
Association 401(k) Savings and Employee Stock Ownership Plan."
1.2 Purpose. The purpose of this Plan is to describe the terms and
conditions under which contributions made pursuant to the Plan will be credited
and paid to the Participants and their Beneficiaries.
1.3 Effective Date. The initial Effective Date of the 401(k) Plan is
January 1, 1986. The initial Effective Date of the ESOP portion of the Plan is
October 1, 1993. The Effective Date of this restatement and combination of the
Plans is October 1, 1997.
1.4 Fiscal Period. This Plan shall be operated on the basis of an October
1 to September 30 fiscal year for the purpose of keeping the Plan's books and
records and distributing or filing any reports or returns required by law.
1.5 Single Plan for All Employers. This Plan shall be treated as a single
plan with respect to all participating Employers for the purpose of crediting
contributions and forfeitures and distributing benefits, determining whether
there has been any termination of Service, and applying the limitations set
forth in Section 5.
Accordingly, the Plan and Trust Agreement shall be interpreted and applied
in a manner consistent with this intent and shall be administered at all times
and in all respects in a nondiscriminatory manner.
Section 2. Definitions.
The following capitalized words and phrases shall have the meanings
specified when used in this Plan and in the Trust Agreement, unless the context
clearly indicates otherwise:
"Account" means each of the bookkeeping accounts maintained to reflect a
Participant's interest in the Plan. A Participant may have one or more of the
following accounts, as more fully described in Article IV: an "Elective Deferral
Account," a "Matching Contribution Account," a "Qualified Matching Contribution
Account", a "Discretionary Contribution Account," a "Qualified Non-Elective
Contribution Account", a "Rollover Account," and an "ESOP Account."
<PAGE>
"Active Participant" means any Employee who has satisfied the eligibility
requirements of Section 3.1(a) and who qualifies as an Active Participant for a
particular Plan Year under Section 4.6.
"Association" means Pocahontas Federal Savings & Loan Association, and any
entity which succeeds to the business of Pocahontas Federal Savings & Loan
Association and adopts this Plan as its own pursuant to Section 13.2.
"Beneficiary" means the person or persons who are designated by a
Participant to receive benefits payable under the Plan on the Participant's
death. In the absence of any designation or if all the designated Beneficiaries
shall die before the Participant dies or shall die before all benefits have been
paid, the Participant's Beneficiary shall be his surviving Spouse, if any, or
his estate if he is not survived by a Spouse. The Committee may rely upon the
advice of the Participant's executor or administrator as to the identity of the
Participant's Spouse.
"Break in Service" means any Vesting Year in which an Employee has 500 or
fewer Hours of Service. Solely for this purpose, an Employee shall be considered
employed for his normal hours of paid employment during a Recognized Absence
(said Employee shall not be credited with more than 501 Hours of Service to
avoid a Break in Service), unless he does not resume his Service at the end of
the Recognized Absence. Further, if an Employee is absent for any period, (i) by
reason of the Employee's pregnancy, (ii) by reason of the birth of the
Employee's child, (iii) by reason of the placement of a child with the Employee
in connection with the Employee's adoption of the child, or (iv) for purposes of
caring for such child for a period beginning immediately after such birth or
placement, the Employee shall be credited with the Hours of Service which would
normally have been credited but for such absence, up to a maximum of 501 Hours
of Service.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee responsible for the administration of this
Plan in accordance with Section 12.
"Company" means Pocahontas Federal Mutual Holding Company, Inc.
"Disability" means only a disability which renders the Participant totally
unable, as a result of bodily or mental disease or injury, to perform any duties
for an Employer for which he is reasonably fitted, which disability is expected
to be permanent or of long and indefinite duration. However, this term shall not
include any disability directly or indirectly resulting from or related to
habitual drunkenness or addiction to narcotics, a criminal act or attempt,
service in the armed forces of any country, an act of war, declared or
undeclared, any injury or disease occurring while compensation to the
Participant is suspended, or any injury which is intentionally self-inflicted.
Further, this term shall apply only if (i) the Participant is sufficiently
disabled to qualify for the payment of disability benefits under the federal
Social Security Act or Veterans Disability Act, or (ii) the Participant's
disability is certified by a physician selected by the Committee. Unless the
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Participant is sufficiently disabled to qualify for disability benefits under
the federal Social Security Act or Veterans Disability Act, the Committee may
require the Participant to be appropriately examined from time to time by one or
more physicians chosen by the Committee, and no Participant who refuses to be
examined shall be treated as having a Disability. In any event, the Committee's
good faith decision as to whether a Participant's Service has been terminated by
Disability shall be final and conclusive.
"Discretionary Contribution Account" means the Account maintained to
reflect the Discretionary Contributions made by the Employer on behalf of a
Participant and the investment experience, expenses, distributions and
forfeitures pertaining thereto.
"Discretionary Contributions" means the contributions made by the Employer
pursuant to Section 4.3.
"Early Retirement" means retirement on or after a Participant's attainment
of age 55 and the completion of ten years of Service for an Employer. If the
Participant separates from Service before satisfying the age requirement, but
has satisfied the Service requirement, the Participant will be entitled to elect
early retirement upon satisfaction of the age requirement.
"Effective Date" means October 1, 1997.
"Elective Deferral Account" means the Account maintained to reflect the
Elective Deferral Contributions made by the Employer on behalf of a Participant
and the investment experience, expenses and distributions pertaining thereto.
"Elective Deferral Agreement" means the agreement entered into between a
Participant and the Employer, as described in Section 3.6.
"Elective Deferral Contributions" means the contributions made by the
Employer pursuant to Section 4.1 on behalf of each Participant who has entered
into an Elective Deferral Agreement.
"Employee" means any individual who is or has been employed or
self-employed by an Employer. "Employee" also means an individual employed by a
leasing organization who, pursuant to an agreement between an Employer and the
leasing organization, has performed services for the Employer and any related
persons (within the meaning of Section 414(n)(6) of the Code) on a substantially
full-time basis for more than one year, if such services are performed under the
primary direction or control of the Employer. However, such a "leased employee"
shall not be considered an Employee if (i) he participates in a money purchase
pension plan sponsored by the leasing organization which provides for immediate
participation, immediate full vesting, and an annual contribution of at least 10
percent of the Employee's 415 Compensation, and (ii) leased employees do not
constitute more than 20 percent of the Employer's total work force (including
leased employees, but excluding Highly Paid Employees and any other employees
who have not performed
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services for the Employer on a substantially full-time basis for at least one
year). Employees of P.F. Service will not be eligible to participate in this
Plan.
"Employer" means the Association or any affiliate within the purview of
Section 414(b), (c) or (m) and 415(h) of the Code, any other corporation,
partnership, or proprietorship which adopts this Plan with the Association's
consent pursuant to Section 13.1, and any entity which succeeds to the business
of any Employer and adopts the Plan pursuant to Section 13.2.
"Entry Date" means each October 1 and April 1 of each Plan Year following
the date the Employee meets the eligibility requirements.
"ERISA" means the Employee Retirement Income Security Act of 1974 (P.L.
93-406, as amended).
"ESOP" means the portion of the Plan intended to constitute an "employee
stock ownership plan" pursuant to Section 4975(e)(7) of the Code.
"ESOP Account" means the ESOP Stock Account and ESOP Cash Account
maintained to reflect a Participant's interest in the ESOP.
"ESOP Cash Account" means that portion of the ESOP Account consisting of
all assets of the ESOP Account other than Stock.
"ESOP Contributions" means the contributions made by the Employer to the
ESOP pursuant to Section 4.4.
"ESOP Stock Account" means that portion of the ESOP Account consisting of
Stock.
"Forfeiture" means any portion of a Participant's Matching Contribution
Account, Discretionary Contribution Account, or ESOP Account that is forfeited
by the Participant and reallocated, pursuant to Section 9.5, as a result of the
Participant's termination of employment prior to full vesting.
"415 Compensation"
(a) shall mean wages, as defined in Code Section 3401(a) for
purposes of income tax withholding at the source.
(b) For Plan Years beginning after December 31, 1997, any elective
deferral as defined in Code Section 402(g)(3) (any Employer contributions
made on behalf of a Participant to the extent not includible in gross
income and any Employer contributions to purchase an annuity contract
under Code Section 403(b) under a salary reduction agreement) and any
amount which is contributed or deferred by the Employer at the election of
the
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Participant and which is not includible in gross income of the Participant
by reason of Code Section 125 (Cafeteria Plan) shall also be included in
the definition of 415 Compensation.
(c) 415 Compensation in excess of $160,000 (as indexed) shall be
disregarded for all Participants. For purposes of this sub-section, the
$160,000 limit shall be referred to as the "applicable limit" for the Plan
Year in question. The $160,000 limit shall be adjusted for increases in
the cost of living in accordance with Section 401(a)(17)(B) of the Code,
effective for the Plan Year which begins within the applicable calendar
year. For purposes of the applicable limit, 415 Compensation shall be
prorated over short Plan Years.
"Highly Compensated Employee" for Plan Years commencing after December 31,
1996, means an Employee who, during either of that or the immediately preceding
Plan Year was at any time a five percent owner (as defined in Code Section
416(i)(1)) of the Employer or had 415 Compensation exceeding $80,000 (adjusted
in accordance with Code Section 414(q)(1)) and, if elected by the Employer, was
among the most highly compensated one-fifth of all Employees. For this purpose:
(a) "415 Compensation" shall include any amount which is excludable
from the Employee's gross income for tax purposes pursuant to Sections
125, 402(a)(8), 402(h)(1)(B), or 403(b) of the Code.
(b) The number of Employees in "the most highly compensated
one-fifth of all Employees" shall be determined by taking into account all
individuals working for all related Employer entities described in the
definition of "Service", but excluding any individual who has not
completed six months of Service, who normally works fewer than 17-1/2
hours per week or in fewer than six months per year, who has not reached
age 21, whose employment is covered by a collective bargaining agreement,
or who is a nonresident alien who receives no earned income from United
States sources.
"Hours of Service" means hours to be credited to an Employee under the
following rules:
(a) Each hour for which an Employee is paid or is entitled to be
paid for services to an Employer is an Hour of Service.
(b) Each hour for which an Employee is directly or indirectly paid
or is entitled to be paid for a period of vacation, holidays, illness,
disability, lay-off, jury duty, temporary military duty, or leave of
absence is an Hour of Service. However, except as otherwise specifically
provided, no more than 501 Hours of Service shall be credited for any
single continuous period which an Employee performs no duties. Further, no
Hours of Service shall be credited on account of payments made solely
under a plan maintained to comply with worker's compensation, unemployment
compensation, or disability insurance laws, or to reimburse an Employee
for medical expenses.
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(c) Each hour for which back pay (ignoring any mitigation of
damages) is either awarded or agreed to by an Employer is an Hour of
Service. However, no more than 501 Hours of Service shall be credited for
any single continuous period during which an Employee would not have
performed any duties.
(d) Hours of Service shall be credited in any one period only under
one of the foregoing paragraphs (a), (b) and (c); an Employee may not get
double credit for the same period.
(e) If an Employer finds it impractical to count the actual Hours of
Service for any class or group of non-hourly Employees, each Employee in
that class or group shall be credited with 45 Hours of Service for each
weekly pay period in which he has at least one Hour of Service. However,
an Employee shall be credited only for his normal working hours during a
paid absence.
(f) Hours of Service to be credited on account of a payment to an
Employee (including back pay) shall be recorded in the period of Service
for which the payment was made. If the period overlaps two or more Plan
Years, the Hours of Service credit shall be allocated in proportion to the
respective portions of the period included in the several Plan Years.
However, in the case of periods of 31 days or less, the Administrator may
apply a uniform policy of crediting the Hours of Service to either the
first Plan Year or the second.
(g) In all respects an Employee's Hours of Service shall be counted
as required by Section 2530.200b-2(b) and (c) of the Department of Labor's
regulations under Title I of ERISA.
"Investment Fund" means such one or more separate investment vehicles as
the Trustee may from time to time, and in its sole discretion, specify as being
available for the investment of Trust assets, other than assets held in the ESOP
Stock Account or ESOP Cash Account.
"Matching Contribution Account" means the Account maintained to reflect
the Matching Contributions made by the Employer on behalf of a Participant and
the investment experience, expenses, distributions and forfeitures pertaining
thereto.
"Matching Contributions" means the matching contributions made by the
Employer pursuant to Section 4.2.
"Normal Retirement" means retirement on or after the later of a
Participant's 60th birthday or fifth year of Service with the Employer.
"Participant" means any Employee who is participating in the Plan, or who
has previously participated in the Plan and still has a balance credited to his
Account.
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"Plan Year" means the twelve month period commencing October 1, 1997 and
ending September 30, 1998 and each succeeding 12 consecutive month period.
"Qualified Matching Contributions" means the Employer's contributions to
the Plan that are made pursuant to Section 4.2(b). Such contributions shall be
considered a Matching Contribution for the purposes of the Plan and used to
satisfy the "Average Contribution Percentage Test."
"Qualified Matching Contribution Account" means the Account maintained to
reflect the Qualified Matching Contributions made by the Employer on behalf of a
Participant and the investment experience, expenses and distributions pertaining
thereto.
"Qualified Nonelective Contributions" means the Employer's contributions
to the Plan that are made pursuant to Section 4.3(b). Such contributions shall
be considered a Discretionary Contribution for the purposes of the Plan and used
to satisfy, at the election of the Employer, either the "Average Deferral
Percentage Test" or the "Average Contribution Percentage Test."
"Qualified Nonelective Contribution Account" means the Account maintained
to reflect the Qualified Nonelective Contributions made by the Employer on
behalf of a Participant and the investment experience, expenses and
distributions pertaining thereto.
"Recognized Absence" means a period for which --
(a) an Employer grants an Employee a leave of absence for a limited
period, but only if an Employer grants such leave on a nondiscriminatory
basis; or
(b) an Employee is temporarily laid off by an Employer because of a
change in business conditions; or
(c) an Employee is on active military duty, but only to the extent
that his employment rights are protected by the Military Selective Service
Act of 1967 (38 U.S.C. Sec. 2021).
"Rollover Account" means the Account maintained to reflect the Rollover
Contributions made by a Participant and the investment experience, expenses and
distributions pertaining thereto.
"Rollover Contributions" means the contributions made pursuant to Section
4.8.
"Service" means an Employee's period(s) of employment or self-employment
with an Employer, excluding for initial eligibility purposes any period in which
the individual was a nonresident alien and did not receive from an Employer any
earned income which constituted income from sources within the United States. An
Employee's Service shall include any service which constitutes service with a
predecessor Employer within the meaning of Section 414(a) of the
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Code. An Employee's Service shall also include any service with an entity which
is not an Employer, but only either (i) for a period after 1975 in which the
other entity is a member of a controlled group of corporations or is under
common control with other trades and businesses within the meaning of Section
414(b) or 414(c) of the Code, and a member of the controlled group or one of the
trades and businesses is an Employer, (ii) for a period after 1979 in which the
other entity is a member of an affiliated service group within the meaning of
Section 414(m) of the Code, and a member of the affiliated service group is an
Employer, or (iii) all employers aggregated with the Employer under Section
414(o) of the Code (but not until the Proposed Regulations under Section 414(o)
become effective). An Employee's Service shall also include any service with the
branches of NationsBank located in Hardy, Walnut Ridge and Lake City, Arkansas,
if such branches are acquired by, or are merged into, the Employer.
"Spouse" means the individual, if any, to whom a Participant is lawfully
married on the date benefit payments to the Participant are to begin, or on the
date of the Participant's death, if earlier. A former Spouse shall be treated as
the Spouse or surviving Spouse to the extent provided under a qualified domestic
relations order as described in section 414(p) of the Code.
"Stock" means shares of the Association's voting common stock or preferred
stock meeting the requirements of Section 409(e)(3) of the Code issued by an
Employer or an affiliated corporation.
"Stock Obligation" means an indebtedness arising from any extension of
credit to the Plan or the Trust which was obtained for the purpose of buying
Stock and which satisfies the requirements set forth in Section 6.3.
"Trust" or "Trust Fund" means the trust fund created under this Plan.
"Trust Agreement" means the agreement between the Association and the
Trustee concerning the Trust Fund. If any assets of the Trust Fund are held in a
co-mingled trust fund with assets of other qualified retirement plans, "Trust
Agreement" shall be deemed to include the trust agreement governing that
co-mingled trust fund. With respect to the allocation of investment
responsibility for the assets of the Trust Fund, the provisions of the Trust
Agreement are incorporated herein by reference.
"Trustee" means one or more corporate persons or individuals selected from
time to time by the Association to serve as trustee or co-trustees of the Trust
Fund.
"Unallocated Stock Fund" means that portion of the Stock Fund consisting
of the Plan's holding of Stock which have been acquired in exchange for one or
more Stock Obligations and which have not yet been allocated to the
Participant's Accounts in accordance with Section 4.4.
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"Valuation Date" means the last day of the Plan Year and each other date
as of which the Committee shall determine the investment experience of the Trust
Fund and adjust the Participants' Accounts accordingly.
"Valuation Period" means the period following a Valuation Date and ending
with the next Valuation Date.
"Vesting Year" means a unit of Service credited to a Participant pursuant
to Section 9.2 for purposes of determining his vested interest in his Account.
Section 3. Eligibility for Participation.
3.1 Initial Eligibility. Each Employee who was a Participant in the
Pocahontas Federal Savings & Loan Association 401(k) Profit Sharing Plan and/or
the Pocahontas Federal Savings & Loan Association Employee Stock Ownership Plan
on September 30, 1997 shall continue to be a Participant in this Plan on the
Effective Date. Each other Employee, including each future Employee, shall
become a Participant on the Entry Date coinciding with or next following the
later of the following dates:
(a) For purposes of participation in any ESOP, Matching or Discretionary
Contributions:
(A) the last day of the Employee's first Eligibility Year, and
(B) the Employee's 21st birthday. However, if an Employee is not in
active Service with an Employer on the date he would otherwise first enter the
Plan, his entry shall be deferred until the next day he is in Service.
(b) For purposes of participation in any Elective Deferral Contributions:
(A) completion of one Hour of Service for the Employer.
3.2 Definition of Eligibility Year. An "Eligibility Year" means an
applicable eligibility period (as defined below) in which the Employee has
completed 1,000 Hours of Service for the Employer. For this purpose:
(a) an Employee's first "eligibility period" is the 12-consecutive
month period beginning on the first day on which he has an Hour of
Service, and
(b) his subsequent eligibility periods will be 12-consecutive month
periods beginning on each October 1 after that first day of Service.
3.3 Termination of Participation. A Participant shall cease to be a
Participant: (a) upon his or her death; (b) upon the payment to him or her of
all nonforfeitable benefits due to him or her
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under the Plan; or (c) upon his or her termination of employment if such
Employee's vested percentage in his Discretionary Contribution Account, ESOP
Account and Matching Contributions Account is zero.
3.4 Certain Employees Ineligible. No Employee shall participate in the
Plan while his Service is covered by a collective bargaining agreement between
an Employer and the Employee's collective bargaining representative if (i)
retirement benefits have been the subject of good faith bargaining between the
Employer and the representative and (ii) the collective bargaining agreement
does not provide for the Employee's participation in the Plan.
3.5 Participation and Reparticipation. Subject to the satisfaction of the
foregoing requirements, an Employee shall participate in the Plan during each
period of his Service from the date on which he first becomes eligible until his
termination. For this purpose, an Employee returning within five years of his or
her termination who previously satisfied the initial eligibility requirements
shall re-enter the Plan as of the date of his return to Service with an
Employer.
3.6 Elective Deferral Agreement. Each Eligible Participant may, but shall
not be required to, enter into an Elective Deferral Agreement with the Employer
under which the Participant agrees to reduce his Cash Compensation by a
specified percentage and the Employer agrees to contribute such amounts on the
Participant's behalf to the Trust. The terms of such Elective Deferral Agreement
shall:
(a) specify the percentage of such Participant's Cash Compensation
to be paid by the Employer on the Participant's behalf each pay period to the
Trust;
(b) provide that the Committee may reduce the percentage in
paragraph (a) if necessary to assure that the applicable limitations on
contributions and allocations set forth in Section 5 are satisfied for each Plan
Year;
(c) specify the date as of which the Elective Deferral Agreement
becomes effective, which date shall be the first day of a future pay period; and
(d) set forth such other or additional information as in the opinion
of the Committee is desirable or necessary for the operation of the Plan.
The Committee shall notify each Employee of his eligibility to enter into
an Elective Deferral Agreement and shall forward to such individual a form of
Elective Deferral Agreement to complete. Elective deferral shall commence on
behalf of such Employee with the first Entry Date after he becomes eligible to
participate if such Employee enters into the Elective Deferral Agreement with
the Employer at least fifteen (15) days (or such shorter period as the
Administrator allows) prior to the Entry Date. In the case of an Employee who
does not commence elective deferral at the earliest date possible, such Employee
may commence elective deferral on any date permitted by the Committee by
entering into an Elective Deferral Agreement at least fifteen (15) days (or such
shorter
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period as the Committee allows) prior to said date. In all cases, the initiative
for applying for elective deferral rests with the individual Employee.
A Participant shall be entitled to increase, decrease or resume his or her
Elective Deferral percentage quarterly during the Plan Year. Any such increase,
decrease or resumption shall be effective as of the first payroll period
coincident with or next following the first day of such quarter. A Participant
may completely discontinue making Elective Deferrals at any time effective for
the payroll period after written notice is provided to the Committee.
Section 4. Contributions and Credits.
4.1 Elective Deferral Contributions. Subject to the provisions of Section
5, for each pay period the Employer shall contribute to the Trust on behalf of
each Participant an amount equal to the dollar amount or a percentage of such
Participant's Cash Compensation specified in the Elective Deferral Agreement
between the Employer and such Participant, up to a maximum of 15% of such
Participant's Cash Compensation for the Plan Year. Each Participant may elect to
increase or decrease the amount rate of his elective deferral or suspend
completely his elective deferral by filing a written request with the Employer.
All elections under this Section 4.1 shall be pursuant to rules of the
Administrator, which shall be consistently applied and which may be changed from
time to time. The Administrator may reduce the amount of any elective deferral,
or make such other modification as necessary, so that the Plan complies with the
provisions of the Code.
4.2 Matching Contributions.
(a) Subject to the provisions of Section 5, for each Plan Year the
Employer shall contribute to the Trust that amount of Matching Contributions as
may be voted by the Board in its sole discretion. Matching Contributions for
each Plan Year shall be credited as of the last day of the Plan Year to the
Accounts of the Active Participants, for whom Elective Deferral Contributions
have been made for such Plan Year. The amount of the Matching Contributions to
be allocated to such an Active Participant shall bear the same ratio to the
total Matching Contributions as the Elective Deferral Contributions of such
Active Participant on or after the Entry Date (for purposes of participation in
Matching Contributions) bears to the total Elective Deferral Contributions of
all such Active Participants.
(b) Qualified Matching Contributions. Notwithstanding the foregoing
provisions of this Section 4.2, for the purposes of allocations made pursuant to
this Section 4.2, if and to the extent necessary for the Plan to satisfy the
requirements of the Average Contribution Percentage Test at Section 5.4 for a
Plan Year, Qualified Matching Contributions may be made to certain Active
Participants who make an Elective Deferral during such Plan Year, and are not
Highly Compensated Employees with respect to such Plan Year, in the smallest
percentage that, when added to the other contributions tested under the Average
Contribution Test will permit the Plan to pass such test. The Plan Committee
shall have complete discretion to determine those Active Participants
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that are not Highly Compensated who shall receive a Qualified Matching
Contribution and the amount of such Contribution.
4.3 Discretionary Contributions.
(a) Subject to the provisions of Section 5, the Employer shall from
time to time contribute, with respect to a Plan Year, such amounts as it may
determine from time to time. The Employer shall have no obligation to contribute
any amount under this Plan except as so determined in its sole discretion. The
Employer's contributions for a Plan Year shall be credited as of the last day of
the Plan Year to the Accounts of the Active Participants in proportion to their
amounts of Cash Compensation earned on or after the Participant's Entry Date for
participation in Discretionary Contributions.
(b) Qualified Nonelective Contributions. Notwithstanding the
foregoing provisions of this Section 4.3, for the purposes of allocations made
pursuant to this Section 4.3, if and to the extent necessary for the Plan to
satisfy the requirements of the Average Contribution Percentage Test of Section
5.4 or the Average Deferral Percentage Test of Section 5.2 for a Plan Year,
Qualified Nonelective Contributions may be made to certain Active Participants
who are not Highly Compensated Employees with respect to such Plan Year in the
smallest percentage that, when added to the other contributions tested under the
Deferral Percentage Test or Average Contribution Percentage Test will permit the
Plan to pass such test. The Plan Committee shall have complete discretion to
determine those Active Participants that are not Highly Compensated who shall
receive a Qualified Nonelective Contribution and the amount of such
contribution.
4.4 ESOP
(a) ESOP Contributions. Subject to the provisions of Section 5, the
Employer shall from time to time contribute, with respect to a Plan Year, such
amounts as it may determine from time to time. The Employer shall have no
obligation to contribute any amount under this section except as so determined
in its sole discretion. The ESOP contributions and available forfeitures for a
Plan Year shall be credited as of the last day of the Plan Year to the Accounts
of the Active Participants in proportion to their amounts of Cash Compensation
earned on or after the Participant's Entry Date for participation in ESOP
Contributions.
(b) Contributions for Stock Obligations. If the Trustee, upon
instructions from the Committee, incurs any Stock Obligation upon the purchase
of Stock, the Employer may contribute for each Plan Year an amount sufficient to
cover all payments of principal and interest as they come due under the terms of
the Stock Obligation. If there is more than one Stock Obligation, the Employer
shall designate the one to which any ESOP Contribution is to be applied.
Investment earnings realized on Employer ESOP Contributions and any dividends
paid by the Employer on Stock held in the Unallocated Stock Account shall be
applied to the Stock Obligation related to that Stock, subject to Section 7.2.
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In each Plan Year in which Employer ESOP Contributions, earnings on ESOP
Contributions, or dividends on unallocated Stock are used as payments under a
Stock Obligation, a certain number of shares of the Stock acquired with that
Stock Obligation which is then held in the Unallocated Stock Fund shall be
released for allocation among the Participants. The number of shares released
shall bear the same ratio to the total number of those shares then held in the
Unallocated Stock Fund (prior to the release) as (i) the principal and interest
payments made on the Stock Obligation in the current Plan Year bears to (ii) the
sum of (i) above, and the remaining principal and interest payments required (or
projected to be required on the basis of the interest rate in effect at the end
of the Plan Year) to satisfy the Stock Obligation.
At the direction of the Committee, the current and projected payments of
interest under a Stock Obligation may be ignored in calculating the number of
shares to be released in each year if (i) the Stock Obligation provides for
annual payments of principal and interest at a cumulative rate that is not less
rapid at any time than level annual payments of such amounts for 10 years, (ii)
the interest included in any payment is ignored only to the extent that it would
be determined to be interest under standard loan amortization tables, and (iii)
the term of the Stock Obligation, by reason of renewal, extension, or
refinancing, has not exceeded 10 years from the original acquisition of the
Stock.
4.5 Voluntary Contributions. No voluntary after-tax contributions are
permitted under this Plan.
4.6 Definitions Related to Contributions. For the purposes of this Plan,
the following terms have the meanings specified:
"Active Participant" means a Participant who has satisfied the
eligibility requirements under Section 3.1(a) and who has at least 1,000 Hours
of Service during the current Plan Year. However, a Participant shall not
qualify as an Active Participant unless (i) he is in active Service with an
Employer as of the last day of the Plan Year, or (ii) he is on a Recognized
Absence as of that date, or (iii) his Service terminated during the Plan Year by
reason of Early Retirement, Normal Retirement, Disability or death.
"Cash Compensation" means a Participant's 415 Compensation as
defined in Section 2 of the Plan, and shall also include amounts contributed
under an Elective Deferral Agreement pursuant to Section 401(k) or a salary
reduction agreement pursuant to Section 125 of the Code.
4.7 Conditions as to Contributions. Employers' contributions shall in all
events be subject to the limitations set forth in Section 5. Contributions may
be made in the form of cash, or securities and other property to the extent
permissible under ERISA, including Stock, and shall be held by the Trustee in
accordance with the Trust Agreement. Any contributions of Stock shall be made to
Participants' ESOP Stock Accounts. In addition to the provisions of Section 13.3
for the return of an Employer's contributions in connection with a failure of
the Plan to qualify initially
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under the Code, any amount contributed by an Employer due to a good faith
mistake of fact, or based upon a good faith but erroneous determination of its
deductibility under Section 404 of the Code, shall be returned to the Employer
within one year after the date on which the contribution was originally made, or
within one year after its nondeductibility has been finally determined. However,
the amount to be returned shall be reduced to take account of any adverse
investment experience within the Trust Fund in order that the balance credited
to each Participant's Account is not less that it would have been if the
contribution had never been made.
4.8 Rollover Contributions.
Rollover Contributions. Any Participant may make a Rollover
Contribution under the Plan. A Rollover Contribution shall be in cash or in
other property acceptable to the Trustee and shall be a contribution
attributable to an "eligible rollover distribution" (as defined in Code Section
401(a)(31)), distributed to the contributing Employee under Code Section
401(a)(31) from an eligible retirement plan (as defined in Code Section
401(a)(31).
The Trustee may condition acceptance of a Rollover Contribution upon
receipt of such documents as it may require. In the event that an Employee makes
a contribution pursuant to this Section 3.3 intended to be a Rollover
Contribution but which did not qualify as a Rollover Contribution, the Trustee
shall distribute to the Employee as soon as practicable after that conclusion is
reached the entire Account balance in his or her Rollover Contributions Account
deriving from such contributions determined as of the Valuation Date coincident
with or immediately preceding such discovery.
4.9 Determination of Contributions. The amounts of any Matching
Contributions, Qualified Matching Contributions, Discretionary Contributions,
Qualified Non-Elective Contributions and ESOP Contributions for each Plan Year
shall be subject to final determination by the Board. The amounts of such
contributions, as determined by the Board, shall be conclusive and binding on
all persons.
4.10 Payment of Contributions. Elective Deferral Contributions made by the
Employer with respect to a pay period shall be paid into the Trust by the
Employer no later than fifteen (15) days after the last day of the month in
which such pay period ends. Matching Contributions, Qualified Matching
Contributions, Discretionary Contributions, Qualified Non-Elective Contributions
and ESOP Contributions made by the Employer to the Trust for each Plan Year
shall be made at such time or times as the Employer determines, but not later
than the time required by law in order for the Employer to obtain a deduction of
the amount of such payment for Federal income tax purposes for such Plan Year
(including extensions thereof), as determined under the applicable provisions of
the Code.
4.11 Participant-Directed Investment of Elective Deferral, Qualified
Non-Elective Contribution, Discretionary Contribution, Matching Contribution,
Qualified Matching Contribution and Rollover Accounts.
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(a) Each Participant shall elect the manner of investment of his
Elective Deferral Contribution, Qualified Non-Elective Contribution,
Discretionary Contribution, Matching Contribution, Qualified Matching
Contribution and Rollover Accounts among the Investment Funds established under
the Trust. By such election, the Participant shall direct the portion of the
aggregate amount then credited or amounts thereafter to be credited to such
Accounts that is to be invested by the Trustee in each of the Investment Funds.
The Trustee shall maintain records at all times adequately reflecting the
interest of each Account in each of the Investment Funds.
(b) Each Participant may revoke his investment election as to any
amounts then standing in or thereafter to be credited to his Elective Deferral
Contribution, Qualified Non-Elective Contribution, Discretionary Contribution,
Matching Contribution, Qualified Matching Contribution and Rollover Accounts and
may make a new investment election in accordance with this Section 4.11 only in
accordance with rules established from time to time by the Committee.
(c) To make an investment election, each Participant shall give
written notice to the Committee, which notice shall be in such form and given at
such time as the Committee may reasonably require. To be effective, such an
investment election must be in accordance with any and all rules and regulations
established by the Committee for this purpose.
(d) Any investment election made hereunder shall continue to be
effective until properly revoked by the Participant. If, at any time, there
shall be no investment election in effect with respect to a Participant, the
Committee shall direct the Trustee to invest all amounts then standing in or
thereafter to be credited to such Participant's Elective Deferral and Matching
Contribution Accounts in such one or more of the Investment Funds as the Trustee
shall, in its sole discretion, select on a uniform basis for all such
Participants.
(e) The Employer, the Committee and the Trustee shall have no
responsibility for the investment elections of the Participants and shall incur
no liability on account of investing the assets of the Trust in accordance with
such directions, and it is intended that Section 404(c) of ERISA will apply to a
Participant's exercise of investment responsibilities under this Section.
4.12 Valuation of Assets. As of each Valuation Date, the Trustee shall
determine the total net worth of each of the Investment Funds and the total net
worth of the Trust assets by evaluating all of such assets and its liabilities
(other than liabilities covered by Section 6.3) as of that date. In determining
the net worth of such Trust assets, the Trustee shall value such Trust assets at
their fair market value and shall determine the fair market value of assets with
no readily ascertainable market value on any reasonable basis it deems
appropriate. There shall be included as of each Valuation Date income on hand,
income accrued, dividends payable but not paid, and uninvested cash, whether
income or principal; and there shall be deducted as of the Valuation Date
liabilities accrued (other than liabilities covered by Section 6.3). A
determination by the Trustee of the fair market value of
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any of the Trust assets, or of the net worth of said Trust assets, or of any
Investment Fund, shall be conclusive and binding upon all persons.
4.13 Allocation of Trust Assets. As of each Valuation Date, the Trustee
shall adjust the Participants' Accounts in accordance with the following
subsections (a), (b), (c) or (d) below to reflect any increase or decrease in
the net worth of the Trust assets.
(a) Adjustment of Elective Deferral, Qualified Non-Elective
Contribution, Matching Contribution, Qualified Matching Contribution,
Discretionary Contribution, and Rollover Accounts. Each Elective Deferral
Account, Qualified Non-Elective Contributions Account, Matching Contribution
Account, Qualified Matching Contributions Account, and Rollover Account shall be
adjusted as of each Valuation Date to reflect its pro rata share of the effect
of income collected and accrued, realized and unrealized profits and losses, and
expenses of each Investment Fund in which such Accounts have been invested
during the period since the last Valuation Date. Such adjustments shall be made
so as to preserve for each such Account its beneficial interest in the Trust.
Unless otherwise paid by the Employer, the expenses of each Investment Fund
shall be charged to the Accounts invested in such Investment Fund.
(b) Adjustment of ESOP Accounts. Each ESOP Account (i.e., ESOP Stock
Account and ESOP Cash Account) shall be adjusted as of each Valuation Date to
reflect its pro rata share of the effect of income collected and accrued,
realized and unrealized profits and losses and expenses of the ESOP portion of
the Plan since the last Valuation Date. Such adjustment shall be made so as to
preserve for each ESOP Account its beneficial interest in the ESOP portion of
the Plan.
(c) The Trustee may cause each Account to be adjusted for interim
investment experience related to any distributions from or contributions to the
Account since the last Valuation Date either on the basis of the average Account
balance for the period since the last Valuation Date, or by some other
reasonable and consistently applied method. Adjustment of Accounts for
investment experience shall be deemed to be made as of the Valuation Date to
which the adjustment relates, even if actually made at a later date. The Trustee
shall have no investment responsibility for the ESOP Accounts, but shall accept
any Employer contributions made in the form of Stock, and shall acquire, sell,
exchange, distribute, and otherwise deal with and dispose of Stock in accordance
with the instructions of the Committee.
Section 5. Limitations on Contributions and Allocations.
5.1 Maximum Amount of Elective Deferral Contributions. For each Plan Year,
the Elective Deferral Contributions made on behalf of any Participant under this
Plan and all other plans of the Employer and any Affiliated Employers with a
cash or deferred feature shall not exceed $9,500 (or such greater dollar amount
as may be established by the Secretary of the Treasury under Section 402(g) of
the Code). If, during any Plan Year, more than the maximum permissible amount
under Section 402(g) of the Code is allocated pursuant to one or more cash or
deferred arrangements
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to a Participant's Accounts under the Plan and any other plan described in
Sections 401(k), 408(k), or 403(b) of the Code, the following provisions shall
apply:
(a) No later than March 1 of the next succeeding Plan Year, the
Participant may, but is not required to, submit a statement to the
Committee that all or part of such contributions in excess of the maximum
permissible amount ("excess deferrals") shall be deemed to have been
allocated to this Plan. To be effective, such statement must be in writing
and state that excess deferrals have been made to this Plan on behalf of
such Participant for the preceding Plan Year; and
(b) No later than April 1 of the next succeeding Plan Year, the
Committee may return such excess deferrals, adjusted for income or loss
allocable thereto, to the Participant.
5.2 Limitation on Elective Deferral Contributions.
(a) For each Plan Year, the Elective Deferral Contributions of
Participants who are Highly Compensated Employees for such Plan Year shall be
limited to the extent determined to be necessary by the Committee so as to
insure that the test in either (i) or (ii) below (the "ADP Test") is met for
such Plan Year.
(i) The Average Deferral Percentage of the Participants who
are considered Highly Compensated Employees for the Plan Year is not
more than the Average Deferral Percentage of all other Participants
for the preceding Plan Year multiplied by 1.25.
(ii) The Average Deferral Percentage of the Participants who
are considered Highly Compensated Employees for the Plan Year is not
more than two (2) percentage points greater than the Average
Deferral Percentage of all other Participants for the preceding Plan
Year, and the Average Deferral Percentage of the Participants who
are considered Highly Compensated Employees is not more than the
Average Deferral Percentage of all other Participants for the
preceding Plan Year multiplied by two (2).
For purposes of this Section 5.2(a), "Average Deferral Percentage" of a
specified group of Participants for a Plan Year shall be the average of the
ratios (calculated separately for each Participant in such group) of (1) the
amount of the Participant's Elective Deferral Contributions and any Qualified
Nonelective Contributions made under this Section for such Participant for such
Plan Year to (2) the Participant's compensation for the Plan Year.
(b) In the event the rate of deferrals made by eligible Participants
who are Highly Compensated Employees is in excess of the deferral rate allowed
by this Section, the Employer, in its discretion, may make a special Qualified
Nonelective Contribution for certain Active Participants who are not Highly
Compensated Employees, to be allocated among their Qualified Non-Elective
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Contribution Accounts, in order to cause the Plan to satisfy the ADP Test.
Alternatively, the Employer may elect to return excess deferrals to Highly
Compensated Employees in order that the Plan satisfies the ADP Test. Excess
deferrals shall be returned in accordance with the procedure set forth in Code
Section 401(k)(8)(C). Specifically, excess deferrals shall be returned first to
those Highly Compensated Employees with the greatest dollar amount of deferrals,
and so on, until the Plan satisfies the ADP Test. Any income attributable to
excess deferrals shall also be distributed.
(c) All determinations required under this Section 5.2 shall be made
by the Administrator, and its determination shall be final and binding on all
persons.
5.3 Contributions to be Deductible. For each Plan Year, the Elective
Deferral Contribution under Section 4.1, Qualified Non-Elective Contributions
under Section 4.3(b), Matching Contributions under Section 4.2, Qualified
Matching Contributions under Section 4.2(b), Discretionary Contributions under
Section 4.3, and ESOP Contributions under Section 4.4 shall not exceed that
amount which, when added to the contributions made by the Employer for that Plan
Year to all other qualified pension or profit sharing plans maintained by the
Employer, equals the maximum amount which is deductible by the Employer pursuant
to Section 404 of the Code with respect to such Plan Year.
5.4 Limitation on Matching Contributions.
(a) For each Plan Year, the Matching Contributions that are
allocated to Participants who are considered Highly Compensated Employees for
such Plan Year shall be limited to the extent determined to be necessary by the
Committee so as to insure that the Average Contribution Percentage for the
Participants who are considered Highly Compensated Employees is not more than
the greater of (i) 1.25 times the Average Contribution Percentage of all other
Participants for the preceding Plan Year and (ii) the lesser of two (2) times
the Average Contribution Percentage of all other Participants for the preceding
Plan Year and such Average Contribution Percentage plus two (2) percentage
points. The above test shall be referred to herein as the "ACP Test."
As used in this Section 5.4, "Average Contribution Percentage" of a
specified group of Participants for a Plan Year shall be the average of the
ratios (calculated separately for each Participant in such group) of (i) the
amount of the Matching Contributions allocated to the Participant for such Plan
Year to (ii) the Participant's compensation for the Plan Year.
(b) If the Committee determines that the Matching Contributions
allocated to Participants who are Highly Compensated Employees exceed the
limitation set forth above, the Employer may, in its discretion, make a special
Qualified Matching Contribution for certain Active Participants who are not
Highly Compensated Employees, to be allocated among their Qualified Matching
Contribution Accounts, in order to cause the Plan to satisfy the ACP Test.
Alternatively, the Committee shall reduce the Matching Contributions allocated
to such Participants to the extent necessary to cause the Plan to meet such
limitation. The vested portion of such Matching
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Contributions so reduced ("Excess Aggregate Contributions"), adjusted for income
or loss allocable thereto, shall be distributed by December 31 of the following
Plan Year to the extent practicable, and in no event later than September 30 of
the following year to the Participants to whose Accounts such contributions were
allocated. The non-vested portion of the Excess Aggregate Contributions,
adjusted for income or loss allocable thereto, shall be forfeited and shall be
applied to reduce subsequent Matching Contributions.
(c) All determinations required under this Section 5.4 shall be made
by the Committee, and its determination shall be final and binding on all
persons.
5.5 Multiple Use Test. If one or more Highly Compensated Employees
participates in an Elective Deferral Agreement and the sum of the Actual
Deferral Percentage and the Actual Contribution Percentage of those Highly
Compensated Employees exceeds the "aggregate limit," then the Actual
Contribution Percentage of those Highly Compensated Employees will be reduced,
to the extent necessary so that the limit is not exceeded.
The amount by which each Highly Compensated Employee's Contribution
Percentage is reduced shall be treated as an Excess Aggregate Contribution. The
Actual Deferral Percentage and Actual Contribution Percentage of the Highly
Compensated Employees are determined after any corrections required to meet the
ADP Test and the ACP Test. Multiple use does not occur if either the Average
Deferral Percentage or Actual Contribution Percentage of the Highly Compensated
Employees does not exceed 1.25 multiplied by the Actual Deferral Percentage and
the Actual Contribution Percentage of the Nonhighly Compensated Employees. (i)
The "aggregate limit" is the sum of (1) 125% of the greater of the Actual
Deferral Percentage for Participants who are Nonhighly Compensated Employees for
the Plan Year or the Actual Deferral Percentage for Participants who are
Nonhighly Compensated Employees for the Plan Year beginning with or within the
Plan Year and (2) the lesser of 200% or two plus the lesser of such Actual
Deferral Percentage or Actual Contribution Percentage. "Lesser" is substituted
for "greater" in "(1)," above, and "greater" is substituted for "lesser" after
"two plus the" in "(2)" if it would result in a larger aggregate limit.
5.6 Limitation on Annual Additions. Notwithstanding anything herein to the
contrary, allocation of Employer contributions for any Plan Year shall be
subject to the following:
5.6-1 If allocation of ESOP Contributions in accordance with Section
4.4 will result in an allocation of more than one-third the total ESOP
contributions for a Plan Year to the accounts of Highly Compensated
Employees, then allocation of such amount shall be adjusted so that such
excess will not occur.
5.6-2 After adjustment, if any, required by the preceding paragraph,
the annual additions during any Plan Year to any Participant's Account
under this and any other defined contribution plans maintained by the
Employer or an affiliate (within the purview of Section 414(b), (c) and
(m) and Section 415(h) of the Code, which affiliate shall be deemed the
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Employer for this purpose) shall not exceed the lesser of $30,000 (or such
other dollar amount which results from cost-of-living adjustments under
Section 415(d) of the Code) or 25 percent of the Participant's 415
Compensation for such limitation year. In the event that annual additions
exceed the aforesaid limitations, they shall be reduced in the following
priority:
(i) Any reductions required pursuant to the foregoing
limitations shall be made first with respect to the Participant's
Elective Deferral Contributions, and such reduction shall be
returned to the Participant.
(ii) Any further reduction shall then be made, in the
following sequence, with respect to (a) Matching Contributions and
Forfeitures from Matching Contribution Accounts, (b) Discretionary
Contributions and Forfeitures from Discretionary Contribution
Accounts, and finally (c) ESOP Contributions and Forfeitures from
ESOP Accounts. The amount of such reduction shall be allocated and
credited pursuant to the procedures outlined in Sections 4.2, 4.3
and 4.4 to the Accounts of remaining Participants, exclusive of any
other Participant for whom a reduction in Matching Contributions,
Discretionary Contributions, ESOP Contributions and Forfeitures for
such Plan Year has been required pursuant to this Section 5.6-2.
This process shall be repeated until no Participant has been
allocated excess annual additions. Any amount which cannot be
allocated pursuant to the preceding sentence shall be held
unallocated in a suspense account by the Committee and shall be
allocated in the succeeding limitation year.
(iii) If a suspense account is in existence at any time during
a limitation year, it will not participate in any allocation of
investment gains and losses. All amounts held in suspense accounts
must be allocated to Participants' Accounts before any contributions
may be made to the Plan for the limitation year.
(iv) If a suspense account exists at the time of Plan
termination, amounts held in the suspense account that cannot be
allocated shall revert to the Employer.
5.6-3 For purposes of this Section 5.6 and the following Section
5.7, the "annual addition" to a Participant's Accounts means the sum of
(i) Employer contributions, (ii) Employee contributions, if any, and (iii)
forfeitures. Annual additions to a defined contribution plan also include
amounts allocated, after March 31, 1984, to an individual medical account,
as defined in Section 415(l)(2) of the Internal Revenue Code, which is
part of a pension or annuity plan maintained by the Employer, amounts
derived from contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a
Key Employee under a welfare benefit fund, as defined in Section 419A(d)
of the Internal Revenue Code, maintained by the Employer. The $30,000
limitations referred to shall, for each limitation year ending after 1988,
be automatically adjusted to the new
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dollar limitations determined by the Commissioner of Internal Revenue for
the calendar year beginning in that limitation year.
5.6-4 Notwithstanding the foregoing, if no more than one-third of
the ESOP Contributions to the Plan for a year which are deductible under
Section 404(a)(9) of the Code are allocated to Highly Compensated
Employees, the limitations imposed herein shall not apply to:
(i) forfeitures of Employer securities (within the meaning of
Section 409 of the Code) under the Plan if such securities were
acquired with the proceeds of a loan described in Section
404(a)(9)(A) of the Code), or
(ii) ESOP Contributions applied to the repayment of interest
on an ESOP loan.
5.6-5 If the Employer contributes amounts, on behalf of Employees
covered by this Plan, to other "defined contribution plans" as defined in
Section 3(34) of ERISA, the limitation on annual additions provided in
this Section shall be applied to annual additions in the aggregate to this
Plan and to such other plans. Reduction of annual additions, where
required, shall be accomplished first by reductions under such other plan
pursuant to the directions of the named fiduciary for administration of
such other plans or under priorities, if any, established under the terms
of such other plans and then by allocating any remaining excess for this
Plan in the manner and priority set out above with respect to this Plan.
5.6-6 A limitation year shall mean each 12 consecutive month period
beginning each October 1.
5.7 Coordinated Limitation With Other Plans. Aside from the limitation
prescribed by Section 5.6 with respect to the annual addition to a Participant's
Accounts for any single limitation year, for Plan Years beginning before the
year 2000, if a Participant has ever participated in one or more defined benefit
plans maintained by an Employer or an affiliate, then the annual additions to
his Accounts shall be limited on a cumulative basis so that the sum of his
defined contribution plan fraction and his defined benefit plan fraction does
not exceed one. For this purpose:
5.7-1 A Participant's defined contribution plan fraction with
respect to a Plan Year shall be a fraction, (i) the numerator of which is
the sum of the annual additions to his Accounts through the current year,
and (ii) the denominator of which is the sum of the lesser of the
following amounts -A- and -B- determined for the current limitation year
and each prior limitation year of Service with an Employer: -A- is 1.25
times the dollar limit in effect for the year under Section 415(c)(1)(A)
of the Code, or 1.0 times such dollar limitation if the Plan is top-heavy,
and -B- is 35 percent of the Participant's 415 Compensation for such year.
Further, if the Participant participated in any related defined
contribution plan in any years
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beginning before 1976, any excess of the sum of the actual annual
additions to the Participant's Accounts for those years over the maximum
annual additions which could have been made in accordance with Section 5.6
shall be ignored, and voluntary contributions by the Participant during
those years shall be taken into account as to each such year only to the
extent that his average annual voluntary contribution in those years
exceeded 10 percent of his average annual 415 Compensation in those years.
5.7-2 A Participant's defined benefit plan fraction with respect to
a limitation year shall be a fraction, (i) the numerator of which is his
projected annual benefit payable at normal retirement under the Employers'
defined benefit plans, and (ii) the denominator of which is the lesser of
(a) 1.25 times $90,000, or 1.0 times such dollar limitation if the Plan is
top-heavy, and (b) 1.4 times the Participant's average 415 Compensation
during his highest-paid three consecutive limitation years.
5.8 Effect of Limitations. The Committee shall take whatever action may be
necessary from time to time to assure compliance with the limitations set forth
in Sections 5.6 and 5.7. Specifically, the Committee shall see that each
Employer restrict its contributions for any Plan Year to an amount which, taking
into account the amount of available forfeitures, may be completely allocated to
the Participants consistent with those limitations. Where the limitations would
otherwise be exceeded by any Participant, further allocations to the Participant
shall be curtailed to the extent necessary to satisfy the limitations. Where an
excessive amount is contributed on account of a mistake as to one or more
Participants' compensation, or there is an amount of forfeitures which may not
be credited in the Plan Year in which it becomes available, the amount shall be
corrected in accordance with Section 5.6-2 of the Plan.
5.9 Limitations as to Certain Participants. Aside from the limitations set
forth in Section 5.6 and 5.7, if the Plan acquires any Stock in a transaction as
to which a selling shareholder or the estate of a deceased shareholder is
claiming the benefit of Section 1042 of the Code, the Committee shall see that
none of such Stock, and no other assets in lieu of such Stock, are allocated to
the Accounts of certain Participants in order to comply with Section 409(n) of
the Code.
This restriction shall apply at all times to a Participant who owns
(taking into account the attribution rules under Section 318(a) of the Code,
without regard to the exception for employee plan trusts in Section
318(a)(2)(B)(i)) more than 25 percent of any class of stock of a corporation
which issued the Stock acquired by the Plan, or another corporation within the
same controlled group, as defined in Section 409(l)(4) of the Code (any such
class of stock hereafter called a "Related Class"). For this purpose, a
Participant who owns more than 25 percent of any Related Class at any time
within the one year preceding the Plan's purchase of the Stock shall be subject
to the restriction as to all allocations of the Stock, but any other Participant
shall be subject to the restriction only as to allocations which occur at a time
when he owns more than 25 percent of any Related Class.
Further, this restriction shall apply to the selling shareholder claiming
the benefit of Section 1042 and any other Participant who is related to such a
shareholder within the meaning of Section
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267(b) of the Code, during the period beginning on the date of sale and ending
on the later of (1) the date that is ten years after the date of sale, or (2)
the date of the Plan allocation attributable to the final payment of acquisition
indebtedness incurred in connection with the sale.
This restriction shall not apply to any Participant who is a lineal
descendant of a selling shareholder if the aggregate amounts allocated under the
Plan for the benefit of all such descendants do not exceed five percent of the
Stock acquired from the shareholder.
Section 6. Trust Fund and Its Investment.
6.1 Creation of Trust Fund. All amounts received under the Plan from
Employers and investments shall be held in the Trust Fund pursuant to the terms
of this Plan and of the Trust Agreement between the Association and the Trustee.
The benefits described in this Plan shall be payable only from the assets of the
Trust Fund, and none of the Association, any other Employer, its board of
directors or trustees, its stockholders, its officers, its employees, the
Committee, and the Trustee shall be liable for payment of any benefit under this
Plan except from the Trust Fund.
6.2 Investments.
(a) Except as otherwise provided in (b), (c) and (d) below, the
Trustee shall invest and reinvest the funds of the Trust and keep the same
invested, without distinction between principal and income, in such stocks,
bonds or other securities, certificates of participation or shares of any mutual
investment company, individual or group investment or annuity contracts issued
by any insurance company, bank deposits which bear a reasonable rate of
interest, including deposits with the Employer, or any other property of any
kind, real or personal, tangible or intangible, as it may deem advisable;
provided that the Trustee may hold funds uninvested if and to the extent that it
deems advisable from time to time. The Trustee is authorized to commingle part
or all of the assets of the Trust in one or more trusts, whether now existing or
hereafter created, for the collective investment of funds held under employees'
pension or profit sharing plans or trusts which are qualified within the meaning
of and exempt from tax under the revenue laws of the United States and permitted
by existing or future rulings of the United States Treasury Department to pool
their respective funds in a group trust.
(b) Investment Funds. The Trustee shall establish and maintain one or more
Investment Funds within the Trust and shall invest assets allocated to the
Participants' Elective Deferral, Qualified Non-Elective Contribution,
Discretionary Contribution, Matching Contribution, Qualified Matching
Contribution and Rollover Accounts, and all amounts as to which an election to
diversify under Section 6.4 applies, among the Investment Funds in accordance
with the provisions of Section 4.11 and the investment elections submitted by
the Participants in accordance with such Section. All dividends, capital gains,
or other similar distributions received with respect to an Investment Fund
(unless received in additional shares or investment units of such Investment
Fund) shall be reinvested in the same Investment Fund. If any distribution with
respect to an Investment Fund may be received at the election of the holder of
shares or investment units in such Investment Fund in the
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form of additional shares or investment units or in cash or other property, the
Trustee shall elect to receive it in additional shares or investment units of
the Investment Fund.
(c) The Trustee shall, at the discretion of the Committee, invest and
reinvest the funds held under the ESOP Accounts (except portions invested
pursuant to Section 6.4) exclusively in shares of Stock. The Trustee shall, in
investing and reinvesting the Trust, comply with all the requirements of ERISA.
To the extent permitted by applicable law and regulations, the Trustee may
invest the funds held in the ESOP Cash Account, on an interim basis, in
short-term fixed income securities, including any pooled fund which it maintains
and which is primarily invested in such securities (and in such event, the
instrument establishing such pooled fund shall be deemed a part of this Plan).
(d) Appointment of Investment Managers. The Employer from time to time may
appoint one or more Investment Managers (as that term is defined in Section
3(38) of ERISA) to manage (including the power to acquire and dispose of) all or
any portion or portions of the Trust. The Employer may enter into such
agreements setting forth the terms and conditions of any such appointment as it
determines to be appropriate. The Employer shall retain the right to remove and
discharge any Investment Manager. The compensation of such Investment Managers
shall be an expense that may be charged to the Trust. The Employer shall notify
the Trustee of the appointment of any Investment Manager by delivering to the
Trustee an executed copy of the agreement under which such Investment Manager
was appointed together with a written acknowledgment by such Investment Manager
that it (a) is a fiduciary with respect to the Plan, (b) is bonded as required
by ERISA, and (c) either (i) is registered as an investment advisor under the
Investment Advisors Act of 1940, or (ii) is a bank as defined in said Act, or
(iii) is an insurance company qualified to perform investment management
services under the laws of more than one state of the United States. The Trustee
shall be entitled to rely upon such notice until such time as the Employer shall
notify and direct the Trustee in writing that another Investment Manager has
been appointed in the place and stead of the first-named Investment Manager, or
in the alternative, that the Investment Manager has been removed. The Trustee
shall carry out the written instructions of any Investment Manager with respect
to the management and investment of the assets then under the control of such
Investment Manager and shall not incur any liability on account of its
compliance with such instructions. Purchase and sale orders may be placed by
such Investment Manager directly with brokers and dealers without the
intervention of the Trustee and, in such event, the Trustee's sole obligation
shall be to make payment for purchased securities and deliver those that have
been sold when advised of the transaction. The Trustee shall not incur any
liability on account of its failure to exercise any of the powers delegated to
any Investment Manager because of the failure of such Investment Manager to give
instructions for the management of the assets under the control of such
Investment Manager. The Trustee shall be under no duty to question any
Investment Manager, nor to review any securities or other property acquired or
retained at the direction of any Investment Manager, nor to make any suggestions
to any Investment Manager in connection therewith.
Each Investment Manager shall have the authority to exercise all of the
powers of the Trustee hereunder with respect to assets under its control but
only to the extent that such powers relate to the
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investment of such assets. In addition, each Investment Manager appointed
hereunder is hereby authorized to direct the investment of any part or all of
the assets of the Trust in any one or more trusts, now or hereafter maintained
by the Investment Manager or by a bank or trust company which is an affiliate of
the Investment Manager for the collective investment of funds held in trust,
including but not limited to trusts for the investment of funds held under
employees' pension or profit sharing plans or trusts which are qualified within
the meaning of and exempt from tax under the revenue laws of the United States,
and permitted by existing or future rulings of the United States Treasury
Department to pool their respective funds in a group trust. In the event that
trust assets are invested in any such collective investment trust, then the
instrument pursuant to which such collective investment trust is established
shall be deemed a part of this Plan and is specifically incorporated herein.
6.3 Acquisition of Stock. From time to time the Committee may, in its sole
discretion, direct the Trustee to acquire Stock from the issuing Employer or
from shareholders, including shareholders who are or have been Employees,
Participants, or fiduciaries with respect to the Plan. The Trustee shall pay for
such Stock no more than its fair market value, which shall be determined
conclusively by the Committee pursuant to Section 12.4. The Committee may direct
the Trustee to finance the acquisition of Stock by incurring or assuming
indebtedness to the seller or another party which indebtedness shall be called a
"Stock Obligation". The term "Stock Obligation" shall refer to a loan made to
the Plan by a disqualified person within the meaning of Section 4975(e)(2) of
the Code, or a loan to the Plan which is guaranteed by a disqualified person. A
Stock Obligation includes a direct loan of cash, a purchase-money transaction,
and an assumption of an obligation of a tax-qualified employee stock ownership
plan under Section 4975(e)(7) of the Code ("ESOP"). For these purposes, the term
"guarantee" shall include an unsecured guarantee and the use of assets of a
disqualified person as collateral for a loan, even though the use of assets may
not be a guarantee under applicable state law. An amendment of a Stock
Obligation in order to qualify as an "exempt loan" is not a refinancing of the
Stock Obligation or the making of another Stock Obligation. The term "exempt
loan" refers to a loan that satisfies the provisions of this paragraph. A
"non-exempt loan" fails to satisfy this paragraph. Any Stock Obligation shall be
subject to the following conditions and limitations:
6.3-1 A Stock Obligation shall be for a specific term, shall not be
payable on demand except in the event of default, and shall bear a
reasonable rate of interest.
6.3-2 A Stock Obligation may, but need not, be secured by a
collateral pledge of either the Stock acquired in exchange for the Stock
Obligation, or the Stock previously pledged in connection with a prior
Stock Obligation which is being repaid with the proceeds of the current
Stock Obligation. No other assets of the Plan and Trust may be used as
collateral for a Stock Obligation, and no creditor under a Stock
Obligation shall have any right or recourse to any Plan and Trust assets
other than Stock remaining subject to a collateral pledge.
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6.3-3 Any pledge of Stock to secure a Stock Obligation must provide
for the release of pledged Stock in connection with payments on the Stock
obligations in the ratio prescribed in Section 4.4.
6.3-4 Repayments of principal and interest on any Stock Obligation
shall be made by the Trustee only from Employer cash contributions
designated for such payments, from earnings on such contributions, and
from cash dividends received on Stock held in the Unallocated Stock Fund.
6.3-5 In the event of default of a Stock Obligation, the value of
Plan assets transferred in satisfaction of the Stock Obligation must not
exceed the amount of the default. If the lender is a disqualified person
within the meaning of Section 4975 of the Code, a Stock Obligation must
provide for a transfer of Plan assets upon default only upon and to the
extent of the failure of the Plan to meet the payment schedule of said
Stock Obligation. For purposes of this paragraph, the making of a
guarantee does not make a person a lender.
6.4 Participants' Option to Diversify. The Committee shall provide for a
procedure under which each Participant may, during the qualified election
period, elect to "diversify" a portion of the Employer Stock allocated to his
ESOP Stock Account, as provided in Section 401(a)(28)(B) of the Code. An
election to diversify must be made on the prescribed form and filed with the
Committee within the period specified herein. For each of the first five (5)
Plan years in the qualified election period, the Participant may elect to
diversify an amount which does not exceed 25% of the number of shares allocated
to his ESOP Stock Account since the inception of the Plan, less all shares with
respect to which an election under this Section has already been made. For the
last year of the qualified election period, the Participant may elect to have up
to 50 % of the value of his ESOP Stock Account committed to other investments,
less all shares with respect to which an election under this Section has already
been made. The term "qualified election period" shall mean the six (6) Plan Year
period beginning with the first Plan Year in which a Participant has both
attained age 55 and completed 10 years of participation in the Plan. A
Participant's election to diversify his Account may be made within each year of
the qualified election period and shall continue for the 90-day period
immediately following the last day of each year in the qualified election
period. Once a Participant makes such election, the Plan must complete
diversification in accordance with such election within 90 days after the end of
the period during which the election could be made for the Plan Year. In the
discretion of the Committee, the Plan may satisfy the diversification
requirement by any of the following methods:
6.4-1 The Plan may distribute all or part of the amount subject to
the diversification election.
6.4-2 The Plan may offer the Participant at least three other
distinct investment options, if available under the Plan. The other
investment options shall satisfy the requirements of Regulations under
Section 404(c) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
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6.4-3 The Plan may transfer the portion of the Participant's ESOP
Stock Account subject to the diversification election to another qualified
defined contribution plan of the Employer that offers at least three
investment options satisfying the requirements of the Regulations under
Section 404(c) of ERISA.
Section 7. Voting Rights and Dividends on Stock.
7.1 Voting and Tendering of Stock. The Trustee generally shall vote all
shares of Stock held under the Plan in accordance with the written instructions
of the Committee. However, if any Employer has registration-type class of
securities within the meaning of Section 409(e)(4) of the Code, or if a matter
submitted to the holders of the Stock involves a merger, consolidation,
recapitalization, reclassification, liquidation, dissolution, or sale of
substantially all assets of an entity, then (i) the shares of Stock which have
been allocated to Participants' Accounts shall be voted by the Trustee in
accordance with the Participants' written instructions, and (ii) the Trustee
shall vote any unallocated Stock in a manner calculated to most accurately
reflect the instructions it has received from Participants regarding the
allocated Stock. In the event no shares of Stock have been allocated to
Participants' Accounts at the time Stock is to be voted, each Participant shall
be deemed to have one share of Stock allocated to his or her Account for the
sole purpose of providing the Trustee with voting instructions.
Notwithstanding any provision hereunder to the contrary, all unallocated
shares of Stock must be voted by the Trustee in a manner determined by the
Trustee to be for the exclusive benefit of the Participants and Beneficiaries.
Whenever such voting rights are to be exercised, the Employers, the Committee,
and the Trustee shall see that all Participants are provided with the same
notices and other materials as are provided to other holders of the Stock, and
are provided with adequate opportunity to deliver their instructions to the
Trustee regarding the voting of Stock allocated to their Accounts. The
instructions of the Participants' with respect to the voting of allocated shares
hereunder shall be confidential.
7.1-1 In the event of a tender offer, Stock shall be tendered by the
Trustee in the same manner as set forth above with respect to the voting
of Stock. Notwithstanding any provision hereunder to the contrary, Stock
must be tendered by the Trustee in a manner determined by the Trustee to
be for the exclusive benefit of the Participants and Beneficiaries.
7.2 Dividends on Stock. Dividends on Stock which are received by the
Trustee in the form of additional Stock shall be retained in the ESOP Stock
Account, and shall be allocated among the Participant's Accounts and the
Unallocated Stock Fund in accordance with their holdings of the Stock on which
the dividends have been paid. Dividends on Stock credited to Participants' ESOP
Stock Accounts which are received by the Trustee in the form of cash shall, at
the direction of the Employer paying the dividends, either (i) be credited to
the ESOP Cash Account in accordance with Section 4.13 and invested in accordance
with Section 6.2(c), (ii) be distributed immediately to the Participants in
proportion with the Participants' ESOP Stock Account balance, (iii) be
distributed to the Participants within 90 days of the close of the Plan Year in
which paid in proportion with the
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Participants' ESOP Stock Account balance, or (iv) be used to make payment on the
Stock Obligation. If dividends on Stock allocated to a Participant's ESOP Stock
Account are used to repay the Stock Obligation, Stock with a fair market value
equal to the dividends so used must be allocated to such Participant's ESOP
Stock Account in lieu of the dividends. Dividends on Stock held in the
Unallocated Stock Fund which are received by the Trustee in the form of cash
shall be allocated to Participants' ESOP Cash Accounts (pro rata based on the
Participant's ESOP Cash Account balance in relation to all Participants' ESOP
Cash Account balances) and shall be applied as soon as practicable to payments
of principal and interest under the Stock Obligation incurred with the purchase
of the Stock.
Section 8. Adjustments to Accounts.
8.1 Adjustments for Transactions. An Employer contribution pursuant to
Section 4.3 shall be credited to the Participants' Accounts as of the last day
of the Plan Year for which it is contributed in accordance with Section 4.3.
Stock released from the Unallocated Stock Fund upon the Trust's repayment of a
Stock Obligation pursuant to Section 4.4 shall be credited to the Participants'
ESOP Stock Accounts as of the last day of the Plan Year in which the repayment
occurred, pro rata based on the cash applied from such Participant's ESOP Cash
Account relative to the cash applied from all Participants' ESOP Cash Accounts.
Any excess amounts remaining from the use of proceeds of a sale of Stock from
the Unallocated Stock Fund to repay a Stock Obligation shall be allocated as
earnings of the Plan as of the last day of the Plan Year in which the repayment
occurred among the Participants' ESOP Cash Accounts in proportion to the opening
balance in each Account. Any benefit which is paid to a Participant or
Beneficiary pursuant to Section 10 shall be charged to the Participant's Account
as of the first day of the Valuation Period in which it is paid. Any forfeiture
or restoral shall be charged or credited to the Participant's Account as of the
first day of the Valuation Period in which the forfeiture or restoral occurs
pursuant to Section 9.6.
Section 9. Vesting of Participants' Interests.
9.1 Deferred Vesting in Accounts. A Participant's vested interest in his
ESOP, Discretionary Contribution and Matching Contribution Accounts shall be
based on his Vesting Years in accordance with the following Table, subject to
the balance of this Section 9:
Vesting Percentage of
Years Interest Vested
------- ---------------
Fewer than 5 0%
5 or more 100%
A Participant shall be entitled to a vested benefit equal to the entire
amount standing to the credit of his Elective Deferral Account, Qualified
Non-Elective Contribution Account, Qualified Matching Contribution Account and
Rollover Account.
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9.2 Computation of Vesting Years. For purposes of this Plan, a "Vesting
Year" means a Plan Year in which an Employee has at least 1,000 Hours of
Service, beginning with the first Plan Year in which the Employee has completed
an Hour of Service with the Employer, and including Service with other employers
as provided in the definition of "Service". However, a Participant's Vesting
Years shall be computed subject to the following conditions and qualifications:
(a) A Participant's vested interest in his Account accumulated
before five (5) consecutive Breaks in Service shall be determined without
regard to any Service after such five consecutive Breaks in Service.
Further, if a Participant has five (5) consecutive Breaks in Service
before his interest in his Account has become vested to some extent,
pre-Break years of Service shall not be required to be taken into account
for purposes of determining his post-Break vested percentage.
(b) Unless otherwise specifically excluded, a Participant's Vesting
Years shall include any period of active military duty to the extent
required by the Military Selective Service Act of 1967 (38 U.S.C. Section
2021).
9.3.1 Full Vesting Upon Certain Events. Notwithstanding Section 9.1, a
Participant's interest in his Account shall fully vest on the Participant's
Normal Retirement Date, provided the Participant is in Service on or after that
date. The Participant's interest shall also fully vest in the event that his
Service is terminated by Early Retirement, Disability or by death.
9.3.2 Full Vesting Upon a Change in Control. The Participant's interest in
his Account shall also fully vest in the event of a Change in Control of the
Association, or the Company. For these purposes "Change in Control" means an
event of a nature that: (i) would be required to be reported in response to Item
1 of the current report on Form 8-K, as in effect on the date hereof, pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"); or (ii) results in a Change in Control of the Association or the Company
within the meaning of the Home Owners' Loan Act of 1933 and the Rules and
Regulations promulgated by the Office of Thrift Supervision, as in effect on the
date hereof; or (iii) without limitation such a Change in Control shall be
deemed to have occurred at such time as (a) any "Person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Association or the Company representing 25% or
more of the Association's or the Company's outstanding securities except that
securities issued by the bank, in connection with its initial public offering,
to the Company and/or the Association's employee benefit plans and that continue
to be held by such Company or plans shall not be counted in determining whether
such Company or plans are the beneficial owner of more than 25% of the
Association's securities; or (b) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any person becoming a director subsequent to
the date hereof whose election was approved by a vote of at least two-thirds of
the directors comprising the Incumbent Board or whose nomination for election by
the Company's stockholders was approved by the same Nominating Committee serving
under an Incumbent Board, shall be, for purposes of this clause (b), considered
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as though he were a member of the Incumbent Board; or (c) a reorganization,
merger, consolidation, sale of all or substantially all the assets of the
Association or the Company or similar transaction in which the Association or
Company is not the resulting entity occurs; or (d) a tender offer is made for
25% or more of the outstanding securities of the Association or Company and
shareholders owning beneficially or of record 25% or more of the outstanding
securities of the Association or Company have tendered or offered to sell their
shares pursuant to such tender offer. Notwithstanding the foregoing, a "Change
in Control" of the Association or the Company shall not be deemed to have
occurred if the Company ceases to own at least 51% of all outstanding shares of
stock of the Association in connection with a conversion of the Company from
mutual to stock form.
9.4 Full Vesting Upon Plan Termination. Notwithstanding Section 9.1, a
Participant's interest in his Account shall fully vest if he is in active
Service upon termination of this Plan or upon the permanent and complete
discontinuance of contributions by his Employer. In the event of a partial
termination, the interest of each affected Participant who is in Service shall
fully vest with respect to that part of the Plan which is terminated.
9.5 Forfeiture, Repayment, and Restoral. If a Participant's Service
terminates before his interest in his Matching Contribution Account,
Discretionary Contribution Account, and ESOP Account is fully vested, that
portion which has not vested shall be forfeited if he either (i) receives a
distribution of his entire vested interest pursuant to Section 10.1, or (ii)
incurs five (5) consecutive one year Breaks In Service. If a Participant's
Service terminates prior to having any portion of his Account become vested,
such Participant shall be deemed to have a received a distribution of his vested
interest as of the Valuation Date next following his termination of Service.
If a Participant who has received his entire vested interest returns to
Service before he has five consecutive Breaks in Service, he may repay to the
Trustee an amount equal to the distribution. The Participant may repay such
amount at any time within five years after he has returned to Service. The
amount shall be credited to his Account at the time it is repaid; an additional
amount equal to that portion of his Matching Contribution, Discretionary
Contribution, and ESOP Accounts which were previously forfeited shall be
restored to such Accounts at the same time from other Employees' forfeitures
and, if such forfeitures are insufficient, from a special contribution by his
Employer for that year. A Participant who was deemed to have received a
distribution of his vested interest in the Plan shall have his Accounts restored
as of the first day on which he performs an Hour of Service after his return.
9.6 Accounting for Forfeitures.
(a) Matching Contributions. If a portion of a Participant's Matching
Contribution Account is forfeited, the forfeitures shall be used to reduce
Matching Contributions for the succeeding Plan Year, subject to the restoral
provisions of Section 9.5.
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(b) Discretionary Contributions. If a portion of a Participant's
Discretionary Contribution Account is forfeited, the forfeitures shall be used
to reduce Discretionary Contributions for the succeeding Plan Year, subject to
the restoral provisions of Section 9.5.
(c) ESOP Contributions. If a portion of a Participant's ESOP Account
is forfeited, Stock allocated to said Participant's ESOP Stock Account shall be
forfeited only after other assets are forfeited. If interests in more than one
class of Stock have been allocated to a Participant's ESOP Stock Account, the
Participant must be treated as forfeiting the same proportion of each class of
Stock. A forfeiture shall be charged to the Participant's ESOP Account as of the
first day of the first Valuation Period in which the forfeiture becomes certain
pursuant to Section 9.5. Except as otherwise provided in that Section, a
forfeiture shall be added to the contributions of the terminated Participant's
Employer which are to be credited to other Participants pursuant to Section 4.4
as of the last day of the Plan Year in which the forfeiture becomes certain.
9.7 Vesting and Nonforfeitability. A Participant's interest in his Account
which has become vested shall be nonforfeitable for any reason.
Section 10. Payment of Benefits.
10.1 Benefits for Participants. For a Participant whose Service ends for
any reason, distribution will be made to or for the benefit of the Participant
or, in the case of the Participant's death, his Beneficiary, by either, or a
combination of the following methods:
10.1-1 By payment in a lump sum, in accordance with Section 10.2; or
10.1-2 By payment in a series of substantially equal annual
installments over a period not to exceed five (5) years, provided the
maximum period over which the distribution of a Participant's Account may
be made shall be extended by 1 year, up to five (5) additional years, for
each $140,000 (or fraction thereof) by which such Participant's Account
balance exceeds $710,000 (the aforementioned figures are subject to
cost-of-living adjustments prescribed by the Secretary of the Treasury
pursuant to Section 409(o)(2) of the Code).
The Participant shall elect the manner in which his vested Account balance
will be distributed to him. If a Participant so desires, he may direct how his
benefits are to be paid to his Beneficiary. If a deceased Participant did not
file a direction with the Committee, the Participant's benefits shall be
distributed to his Beneficiary in a lump sum. Notwithstanding the foregoing, if
the balance credited to his Account exceeds $5,000, his benefits shall not be
paid before the latest of his 65th birthday or the tenth anniversary of the year
in which he commenced participation in the Plan unless he elects an early
payment date in a written election filed with the Committee. A Participant may
modify such an election at any time, provided any new benefit payment date is at
least 30 days after a modified election is delivered to the Committee, subject
to the provisions of Section 10.12 hereof.
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10.2 Time for Distribution.
10.2-1 Distribution of the balance of a Participant's Account
generally shall commence as soon as practicable after the last day of the
Plan Year next following his termination of Service for any reason, but no
later than one year after the close of the Plan Year :
(i) in which the Participant separates from Service by reason
of attainment of his Normal Retirement Date under the Plan,
Disability, or death; or
(ii) which is the fifth Plan Year following the year in which
the Participant resigns or is dismissed, unless he is reemployed
before such date.
10.2-2 Unless the Participant elects otherwise, the distribution of
the balance of a Participant's Account shall commence not later than the
60th day after the latest of the close of the Plan Year in which -
(i) the Participant attains the age of 65;
(ii) occurs the tenth anniversary of the year in which the
Participant commenced participation in the Plan; or
(iii) the Participant terminates his Service with the
Employer.
10.2-3 Notwithstanding any other provision in this Section 10.2 to
the contrary, (1) with respect to a five percent owner (as defined in Code
Section 416), distribution of a Participant's Account shall commence
(whether or not he remains in the employ of the Employer) not later than
the April 1 of the calendar year next following the calendar year in which
the Participant attains age 70-1/2, and (2) with respect to all other
Participants, payment of a Participant's benefit will commence no later
than April 1 of the calendar year following the calendar year in which the
Participant attains age 70-1/2, or, if later, the year in which the
Participant retires. A Participant's benefit from that portion of his
Account committed to the Investment Fund shall be calculated on the basis
of the most recent Valuation Date before the date of payment.
10.2-4 Distribution of a Participant's Account balance after his
death shall comply with the following requirements:
(i) If a Participant dies before his distributions have
commenced, distribution of his Account to his Beneficiary shall
commence not later than one year after the end of the Plan Year in
which the Participant died; however, if the Participant's
Beneficiary is his surviving Spouse, distributions may commence on
the
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date on which the Participant would have attained age 70-1/2. In
either case, distributions shall be completed within five years
after the they commence.
(ii) If the Participant dies after distribution has commenced
pursuant to Section 10.1-2 but before his entire interest in the
Plan has been distributed to him, then the remaining portion of that
interest shall, in accordance with Section 401(a)(9) of the Code, be
distributed at least as rapidly as under the method of distribution
being used under Section 10.1-2 at the date of his death.
(iii) If a married Participant dies before his benefit
payments begin, then unless he has specifically elected otherwise
the Committee shall cause the balance in his Account to be paid to
his Spouse. No election by a married Participant of a different
Beneficiary shall be valid unless the election is accompanied by the
Spouse's written consent, which (i) must acknowledge the effect of
the election, (ii) must explicitly provide either that the
designated Beneficiary may not subsequently be changed by the
Participant without the Spouse's further consent, or that it may be
changed without such consent, and (iii) must be witnessed by the
Committee, its representative, or a notary public. (This requirement
shall not apply if the Participant establishes to the Committee's
satisfaction that the Spouse may not be located.)
10.3 Marital Status. The Committee shall from time to time take whatever
steps it deems appropriate to keep informed of each Participant's marital
status. Each Employer shall provide the Committee with the most reliable
information in the Employer's possession regarding its Participants' marital
status, and the Committee may, in its discretion, require a notarized affidavit
from any Participant as to his marital status. The Committee, the Plan, the
Trustee, and the Employers shall be fully protected and discharged from any
liability to the extent of any benefit payments made as a result of the
Committee's good faith and reasonable reliance upon information obtained from a
Participant and his Employer as to his marital status.
10.4 Delay in Benefit Determination. If the Committee is unable to
determine the benefits payable to a Participant or Beneficiary on or before the
latest date prescribed for payment pursuant to Section 10.1 or 10.2, the
benefits shall in any event be paid within 60 days after they can first be
determined, with whatever makeup payments may be appropriate in view of the
delay.
10.5 Accounting for Benefit Payments. Any benefit payment shall be charged
to the Participant's Account as of the first day of the Valuation Period in
which the payment is made.
10.6 Options to Receive and Sell Stock. Unless ownership of virtually all
Stock is restricted to active Employees and qualified retirement plans for the
benefit of Employees pursuant to the certificates of incorporation or by-laws of
the Employers issuing Stock, a terminated Participant or the Beneficiary of a
deceased Participant may instruct the Committee to distribute the Participant's
entire vested interest in his ESOP Account in the form of Stock or partially in
cash and partially in shares of Stock; provided, further that the Committee
shall direct the Trustee to distribute
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cash in lieu of fractional shares. If cash is to be distributed in lieu of
shares of Stock, the Trustee may either sell such shares at their fair market
value and distribute the cash proceeds (net of selling expenses) or utilize cash
already held in the Trust. If the Trustee utilizes cash already held in the
Trust, the Trustee shall select the date on which the fair market value of Stock
shall be determined. Such date shall be selected on a uniform basis for all
Participants.
Any Participant who receives Stock pursuant to Section 10.1, and any
person who has received Stock from the Plan or from such a Participant by reason
of the Participant's death or incompetency, by reason of divorce or separation
from the Participant, or by reason of a rollover contribution described in
Section 402(a)(5) of the Code, shall have the right to require the Employer
which issued the Stock to purchase the Stock for its current fair market value
(hereinafter referred to as the "put right"). The put right shall be exercisable
by written notice to the Committee during the first 60 days after the Stock is
distributed by the Plan, and, if not exercised in that period, during the first
60 days in the following Plan Year after the Committee has communicated to the
Participant its determination as to the Stock's current fair market value.
However, the put right shall not apply to the extent that the Stock, at the time
the put right would otherwise be exercisable, may be sold on an established
market in accordance with federal and state securities laws and regulations.
Similarly, the put right shall not apply with respect to the portion of a
Participant's Account which the Participant elected to have reinvested under
Code Section 401(a)(28)(B). If the put right is exercised, the Trustee may, if
so directed by the Committee in its sole discretion, assume the Employer's
rights and obligations with respect to purchasing the Stock. Notwithstanding
anything herein to the contrary, in the case of a plan established by a Bank (as
defined in Code Section 581), the put right shall not apply if prohibited by a
federal or state law and Participants are entitled to elect that their benefits
be distributed in cash.
If a Participant elects to receive his distribution in the form of a lump
sum pursuant to Section 10.1-1 of the Plan, the Employer or the Trustee, as the
case may be, may elect to pay for the Stock in equal periodic installments, not
less frequently than annually, over a period not longer than five years from the
day after the put right is exercised, with adequate security and interest at a
reasonable rate on the unpaid balance, all such terms to be set forth in a
promissory note delivered to the seller with normal terms as to acceleration
upon any uncured default.
If a Participant elects to receive his distribution in the form of an
installment payment pursuant to Section 10.1-2 of the Plan, the Employer or the
Trustee, as the case may be, shall pay for the Stock distributed in the
installment distribution over a period which shall not exceed 30 days after the
exercise of the put right.
Nothing contained herein shall be deemed to obligate any Employer to
register any Stock under any federal or state securities law or to create or
maintain a public market to facilitate the transfer or disposition of any Stock.
The put right described herein may only be exercised by a person described in
the second preceding paragraph, and may not be transferred with any Stock to any
other person. As to all Stock purchased by the Plan in exchange for any Stock
Obligation, the put right shall be nonterminable. The put right for Stock
acquired through a Stock Obligation shall
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continue with respect to such Stock after the Stock Obligation is repaid or the
Plan ceases to be an employee stock ownership plan.
10.7 Restrictions on Disposition of Stock. Except in the case of Stock
which is traded on an established market, a Participant who receives Stock
pursuant to Section 10.1, and any person who has received Stock from the Plan or
from such a Participant by reason of the Participant's death or incompetency, by
reason of divorce or separation from the Participant, or by reason of a rollover
contribution described in Section 402(a)(5) of the Code, shall, prior to any
sale or other transfer of the Stock to any other person, first offer the Stock
to the issuing Employer and to the Plan at the greater of (i) its current fair
market value, or (ii) the purchase price offered in good faith by an independent
third party purchaser. This restriction shall apply to any transfer, whether
voluntary, involuntary, or by operation of law, and whether for consideration or
gratuitous. Either the Employer or the Trustee may accept the offer within 14
days after it is delivered. Any Stock distributed by the Plan shall bear a
conspicuous legend describing the right of first refusal under this Section
10.7, as well as any other restrictions upon the transfer of the Stock imposed
by federal and state securities laws and regulations.
10.8 Continuing Loan Provisions; Creations of Protections and Rights.
Except as otherwise provided in Sections 10.6 and 10.7 and this Section, no
shares of Employer Stock held or distributed by the Trustee may be subject to a
put, call or other option, or buy-sell arrangement. The provisions of this
Section shall continue to by applicable to such Stock even if the Plan ceases to
be an employee stock ownership plan under Section 4975(e)(7) of the Code.
10.9 Direct Rollover of Eligible Distribution. A Participant or
distributee may elect, at the time and in the manner prescribed by the Trustee
or the Committee, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the Participant or
distributee in a direct rollover.
10.9-1 An "eligible rollover" is any distribution that does not
include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the distributee or the joint lives (or joint life
expectancies) of the Participant and the Participant's Beneficiary, or for
a specified period of ten years or more; any distribution to the extent
such distribution is required under Code Section 401(a)(9); and the
portion of any distribution that is not included in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
10.9-2 An "eligible retirement plan" is an individual retirement
account described in Code Section 401(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in Code
Section 403(a), or a qualified trust described in Code Section 401(a),
that accepts the distributee's eligible rollover distribution. However, in
the case of an eligible rollover distribution to the surviving Spouse, an
eligible retirement plan is an individual retirement account or individual
retirement annuity.
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10.9-3 A "direct rollover" is a payment by the Plan to the eligible
retirement plan specified by the distributee.
10.9-4 The term "distributee" shall refer to a deceased
Participant's Spouse or a Participant's former Spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code
Section 414(p).
10.10 Withdrawals During Employment.
(a) Upon written notice to the Committee at least 30 days (or such
shorter period as the Committee allows) prior to a Valuation Date, a Participant
may at any time during his employment with the Company withdraw all or any
portion of the vested amount standing to the credit of the Participant's
Discretionary Contribution Account, Elective Deferral Account, Qualified
Non-Elective Contribution Account, Matching Contribution Account, Qualified
Matching Contribution Account or Rollover Account, but only in order, and to the
extent necessary, to meet a "Financial Hardship" and to pay the amount of any
taxes reasonably anticipated to result from such withdrawal. The determination
that the Participant is faced with a Financial Hardship and of the amount
required to meet such Financial Hardship which is not reasonably available from
other resources of the Participant shall be made by the Administrator in
accordance with uniform and nondiscriminatory standards and policies which shall
be adopted by the Administrator and consistently applied to each application for
a withdrawal pursuant to this Section 10.10. For purposes of this Section 10.10,
"Financial Hardship" shall mean an immediate and heavy financial need which such
Participant is not able to meet from any other reasonably available resources.
Subject to the foregoing and the requirements of Section 401(k) of the Code and
any regulations thereunder, the term "Financial Hardship" shall mean and include
the following:
(i) the purchase (excluding mortgage payments) of a principal
residence of the Participant;
(ii) the payment of the tuition for the next twelve months of
post-secondary education for the Participant, his Spouse, children, or
dependents;
(iii) the payment of medical expenses described in Section 213(d) of
the Code which are incurred by the Participant, his Spouse or any
dependent, and which are not covered by insurance; or
(iv) the need to prevent an eviction or mortgage foreclosure on the
Participant's principal residence.
If a Participant has an immediate and heavy financial need as described
above, he may receive a hardship withdrawal not in excess of the amount of the
immediate and heavy financial need (including amounts necessary to pay any
federal, state or local income taxes or penalties reasonably anticipated to
result from the distribution) provided the Committee determines that such
Participant
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is not able to meet such need from any other reasonably available resources. In
determining that such Participant is not able to meet such Financial Hardship
from any other sources, the Committee may reasonably rely upon the written
certification of the Participant given in accordance with the regulations under
Section 401(k) of the Code.
(b) The Committee may authorize a hardship distribution to a
Participant only after the Participant has obtained all distributions, other
than hardship distributions, and all nontaxable loans currently available under
all plans maintained by the Employer.
(c) A Participant may specify that a withdrawal under this Section
10.10 is to be charged to his interest in one or more specific Investment Funds
in which the Account charged with the withdrawal is invested. Unless so
specified, distribution will be made out of the interests of such Account in
each Investment Fund in accordance with the proportion which the interest of
such Account in such Investment Fund bears to the total value of such account,
subject however to such restrictions as may be applicable to the particular
Investment Funds.
(d) Notwithstanding the foregoing, a Participant who has attained
age 59-1/2 may withdraw a cash amount equal to all or a specified portion of his
vested Accounts without the need to seek the consent of the Committee.
(e) All withdrawals under this Section 10.10 shall be made as soon
as practicable after the Valuation Date next following timely receipt by the
Committee of the Participant's written notice.
(f) The Participant's Elective Deferrals and Participant Voluntary
Nondeductible Contributions will be suspended for at least 12 months after
receipt of the hardship distribution in this Plan and all other plans maintained
by the Employer.
(g) If the distribution is made from any Account other than the
Elective Deferral Account, a distribution due to hardship may be made without
application of Section 10.10(f).
(h) Notwithstanding the foregoing, prior to termination of
employment, each Participant with a Rollover Contributions Account may elect to
withdraw, as of the Valuation Date next following receipt of an election by the
Committee, and upon such notice as the Committee may require, all or any such
Account, as of such Valuation Date.
10.11 Participant Loans. Upon written application of a Participant, the
Committee may direct the Trustee to lend to the Participant such amount or
amounts as the Committee may determine, provided that the aggregate amount of
all outstanding loans to the Participant from this Plan and from any other
qualified plan maintained by the Employer or any affiliated Employer, including
accrued interest thereon, shall not exceed the lesser of (a) $50,000, reduced by
any loan repayment made during the one (1) year period ending on the day before
the date such loan is made, and (b) fifty percent (50%) of such Participant's
vested Discretionary Contribution Account, Elective
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Deferral Account, Qualified Non-Elective Contribution Account, Matching
Contribution Account, Qualified Matching Contribution Account or Rollover
Account balances, from which the borrowing is made, determined at the time the
loan is made. The Participant's request must be made in writing to the Committee
and must specify the amount requested, the reason for the loan and such
additional information as the Committee shall require.
Loans shall be made available to Participants on a reasonably equivalent
basis in accordance with uniform and nondiscriminatory standards and policies,
which shall be consistently applied to each application for a loan pursuant to
this Section 10.11.
Each such loan shall be made at a reasonable interest rate determined by
the Committee from time to time, shall be amortized in substantially level
payments made not less than quarterly over the term of the loan and shall be
subject to such other terms and conditions as the Committee may deem proper.
Each loan shall be evidenced by the promissory note of the Participant and shall
be adequately secured. Such loan shall be secured by fifty percent (50%) of the
aggregate of the Participant's vested Account balances from which the borrowing
is made. In the event of default, foreclosure on the note and attachment of
security may be made by the Trustee. Each such loan shall be repaid within five
(5) years unless such loan is used to acquire a dwelling unit which within a
reasonable time is to be used (determined at the time such loan is made) as the
principal residence of the Participant.
Each loan made hereunder shall be deemed to be a separate investment and
shall be credited to a separate loan account for the benefit of the borrowing
Participant. All payments of interest and principal shall be through payroll
deduction and shall be credited to such Participant's loan account, and such
account shall be adjusted for any applicable administrative expenses. In
connection with the making of the loan, the Committee shall direct the Trustee
to reduce the investment by the borrowing Participant's Accounts in the
Investment Funds pursuant to the written direction of the Participant. The
Trustee shall reinvest payments on the loan as soon as practicable in accordance
with the most recent investment election filed by the Participant pursuant to
Section 4.11.
If any part of all of the amount standing to the Discretionary
Contribution Account, Elective Deferral Account, Qualified Non-Elective
Contribution Account, Matching Contribution Account, Qualified Matching
Contribution Account or Rollover Account of a Participant shall become
distributable to such Participant or his Beneficiary while a loan to such
Participant under this Section 10.11 is outstanding, the Trustee shall apply the
amount of such distribution in payment of any outstanding loan principal,
whether or not then due, and any interest theretofore accrued, before
distributing the balance, if any, to the Participant or his Beneficiary.
10.12 Waiver of 30-Day Period. If a distribution is one to which Sections
401(a)(11) and 417 of the Code do not apply, such distribution may commence less
than 30 days after the notice required under Section 411(a)-11(c) of the Income
Tax Regulations is given, provided that:
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(i) the Trustee or Committee, as applicable, clearly informs the
Participant that the Participant has a right to a period of at least 30
days after receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular option), and
(ii) the Participant, after receiving the notice, affirmatively
elects a distribution.
Section 11. Rules Governing Benefit Claims and Review of Appeals.
11.1 Claim for Benefits. Any Participant or Beneficiary who qualifies for
the payment of benefits shall file a claim for his benefits with the Committee
on a form provided by the Committee. The claim, including any election of an
alternative benefit form, shall be filed at least 30 days before the date on
which the benefits are to begin. If a Participant or Beneficiary fails to file a
claim by the day before the date on which benefits become payable, he shall be
presumed to have filed a claim for payment for the Participant's benefits in the
standard form prescribed by Sections 10.1 or 10.2
11.2 Notification by Committee. Within 90 days after receiving a claim for
benefits (or within 180 days, if special circumstances require an extension of
time and written notice of the extension is given to the Participant or
Beneficiary within 90 days after receiving the claim for benefits), the
Committee shall notify the Participant or Beneficiary whether the claim has been
approved or denied. If the Committee denies a claim in any respect, the
Committee shall set forth in a written notice to the Participant or Beneficiary:
(i) each specific reason for the denial;
(ii) specific references to the pertinent Plan provisions on which
the denial is based;
(iii) a description of any additional material or information which
could be submitted by the Participant or Beneficiary to support his claim,
with an explanation of the relevance of such information; and
(iv) an explanation of the claims review procedures set forth in
Section 11.3.
11.3 Claims Review Procedure. Within 60 days after a Participant or
Beneficiary receives notice from the Committee that his claim for benefits has
been denied in any respect, he may file with the Committee a written notice of
appeal setting forth his reasons for disputing the Committee's determination. In
connection with his appeal the Participant or Beneficiary or his representative
may inspect or purchase copies of pertinent documents and records to the extent
not inconsistent with other Participants' and Beneficiaries' rights of privacy.
Within 60 days after receiving a notice of appeal from a prior determination (or
within 120 days, if special circumstances require an extension of time and
written notice of the extension is given to the Participant or
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Beneficiary and his representative within 60 days after receiving the notice of
appeal), the Committee shall furnish to the Participant or Beneficiary and his
representative, if any, a written statement of the Committee's final decision
with respect to his claim, including the reasons for such decision and the
particular Plan provisions upon which it is based.
Section 12. The Committee and Its Functions.
12.1 Authority of Committee. The Committee shall be the "plan
administrator" within the meaning of ERISA and shall have exclusive
responsibility and authority to control and manage the operation and
administration of the Plan, including the interpretation and application of its
provisions, except to the extent such responsibility and authority are otherwise
specifically (i) allocated to the Association, the Employers, or the Trustee
under the Plan and Trust Agreement, (ii) delegated in writing to other persons
by the Association, the Employers, the Committee, or the Trustee, or (iii)
allocated to other parties by operation of law. The Committee shall have
exclusive responsibility regarding decisions concerning the payment of benefits
under the Plan. The Committee shall have no investment responsibility with
respect to the Investment Fund except to the extent, if any, specifically
provided in the Trust Agreement. In the discharge of its duties, the Committee
may employ accountants, actuaries, legal counsel, and other agents (who also may
be employed by an Employer or the Trustee in the same or some other capacity)
and may pay their reasonable expenses and compensation.
12.2 Identity of Committee. The Committee shall consists of three or more
individuals selected by the Association. Any individual, including a director,
trustee, shareholder, officer, or Employee of an Employer, shall be eligible to
serve as a member of the Committee. The Association shall have the power to
remove any individual serving on the Committee at any time without cause upon 10
days written notice, and any individual may resign from the Committee at any
time upon 10 days written notice to the Association. The Association shall
notify the Trustee of any change in membership of the Committee.
12.3 Duties of Committee. The Committee shall keep whatever records may be
necessary to implement the Plan and shall furnish whatever reports may be
required from time to time by the Association. The Committee shall furnish to
the Trustee whatever information may be necessary to properly administer the
Trust. The Committee shall see to the filing with the appropriate government
agencies of all reports and returns required of the plan Committee under ERISA
and other laws.
Further, the Committee shall have exclusive responsibility and authority
with respect to the Plan's holdings of Stock and shall direct the Trustee in all
respects regarding the purchase, retention, sale, exchange, and pledge of Stock
and the creation and satisfaction of Stock Obligations. Subject to the direction
of the Board as to the application of Employer contributions to Stock
Obligations, and subject to the provisions of Sections 6.4 and 10.6 as to
Participants' rights under certain circumstances to have their Accounts invested
in Stock or in assets other than Stock, the Committee shall determine in its
sole discretion the extent to which assets of the Trust shall be used to repay
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Stock Obligations, to purchase Stock, or to invest in other assets to be
selected by the Trustee or an investment manager. No provision of the Plan
relating to the allocation or vesting of any interests in the Stock Fund or the
Investment Fund shall restrict the Committee from changing any holdings of the
Trust, whether the changes involve an increase or a decrease in the Stock or
other assets credited to Participants' Accounts. In determining the proper
extent of the Trust's investment in Stock, the Committee shall be authorized to
employ investment counsel, legal counsel, appraisers, and other agents to pay
their reasonable expenses and compensation.
12.4 Valuation of Stock. If the valuation of any Stock is not established
by reported trading on a generally recognized public market, the Committee shall
have the exclusive authority and responsibility to determine its value for all
purposes under the Plan. Such value shall be determined as of each Valuation
Date, and on any other date as of which the Plan purchases or sells such Stock.
The Committee shall use generally accepted methods of valuing stock of similar
corporations for purposes of arm's length business and investment transactions,
and in this connection the Committee shall obtain, and shall be protected in
relying upon, the valuation of such Stock as determined by an independent
appraiser experienced in preparing valuations of similar businesses.
12.5 Compliance with ERISA. The Committee shall perform all acts necessary
to comply with ERISA. Each individual member or employee of the Committee shall
discharge his duties in good faith and in accordance with the applicable
requirements of ERISA.
12.6 Action by Committee. All actions of the Committee shall be governed
by the affirmative vote of a number of members which is a majority of the total
number of members currently appointed, including vacancies. The members of the
Committee may meet informally and may take any action without meeting as a
group.
12.7 Execution of Documents. Any instrument executed by the Committee
shall be signed by any member or employee of the Committee.
12.8 Adoption of Rules. The Committee shall adopt such rules and
regulations of uniform applicability as it deems necessary or appropriate for
the proper administration and interpretation of the Plan.
12.9 Responsibilities to Participants. The Committee shall determine which
Employees qualify to enter the Plan. The Committee shall furnish to each
eligible Employee whatever summary plan descriptions, summary annual reports,
and other notices and information may be required under ERISA. The Committee
also shall determine when a Participant or his Beneficiary qualifies for the
payment of benefits under the Plan. The Committee shall furnish to each such
Participant or Beneficiary whatever information is required under ERISA (or is
otherwise appropriate) to enable the Participant or Beneficiary to make whatever
elections may be available pursuant to Sections 6 and 10, and the Committee
shall provide for the payment of benefits in the proper form and amount from the
assets of the Trust Fund. The Committee may decide in its sole discretion to
permit
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modifications of elections and to defer or accelerate benefits to the extent
consistent with applicable law and the best interests of the individuals
concerned.
12.10 Alternative Payees in Event of Incapacity. If the Committee finds at
any time that an individual qualifying for benefits under this Plan is a minor
or is incompetent, the Committee may direct the benefits to be paid, in the case
of a minor, to his parents, his legal guardian, or a custodian for him under the
Uniform Gifts to Minors Act, or, in the case of an incompetent, to his spouse,
or his legal guardian, the payments to be used for the individual's benefit. The
Committee and the Trustee shall not be obligated to inquire as to the actual use
of the funds by the person receiving them under this Section 12.10, and any such
payment shall completely discharge the obligations of the Plan, the Trustee, the
Committee, and the Employers to the extent of the payment.
12.11 Indemnification by Employers. Except as separately agreed in
writing, the Committee, and any member or employee of the Committee, shall be
indemnified and held harmless by the Employer, jointly and severally, to the
fullest extent permitted by law against any and all costs, damages, expenses,
and liabilities reasonably incurred by or imposed upon it or him in connection
with any claim made against it or him or in which it or he may be involved by
reason of its or his being, or having been, the Committee, or a member or
employee of the Committee, to the extent such amounts are not paid by insurance.
12.12 Nonparticipation by Interested Member. Any member of the Committee
who also is a Participant in the Plan shall take no part in any determination
specifically relating to his own participation or benefits, unless his
abstention would leave the Committee incapable of acting on the matter.
Section 13. Adoption, Amendment, or Termination of the Plan.
13.1 Adoption of Plan by Other Employers. With the consent of the
Association, any entity may become a participating Employer under the Plan by
(i) taking such action as shall be necessary to adopt the Plan, (ii) becoming a
party to the Trust Agreement establishing the Trust Fund, and (iii) executing
and delivering such instruments and taking such other action as may be necessary
or desirable to put the Plan into effect with respect to the entity's Employees.
13.2 Adoption of Plan by Successor. In the event that any Employer shall
be reorganized by way of merger, consolidation, transfer of assets or otherwise,
so that an entity other than an Employer shall succeed to all or substantially
all of the Employer's business, the successor entity may be substituted for the
Employer under the Plan by adopting the Plan and becoming a party to the Trust
Agreement. Contributions by the Employer shall be automatically suspended from
the effective date of any such reorganization until the date upon which the
substitution of the successor entity for the Employer under the Plan becomes
effective. If, within 90 days following the effective date of any such
reorganization, the successor entity shall not have elected to become a party to
the Plan, or if the Employer shall adopt a plan of complete liquidation other
than in connection with a reorganization, the Plan shall be automatically
terminated with respect to Employees of the
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Employer as of the close of business on the 90th day following the effective
date of the reorganization, or as of the close of business on the date of
adoption of a plan of complete liquidation, as the case may be.
13.3 Plan Adoption Subject to Qualification. Notwithstanding any other
provision of the Plan, the adoption of the Plan and the execution of the Trust
Agreement are conditioned upon their being determined initially by the Internal
Revenue Service to meet the qualification requirements of Section 401(a) of the
Code, so that the Employers may deduct currently for federal income tax purposes
their contributions to the Trust and so that the Participants may exclude the
contributions from their gross income and recognize income only when they
receive benefits. In the event that this Plan is held by the Internal Revenue
Service not to qualify initially under Section 401(a), the Plan may be amended
retroactively to the earliest date permitted by U.S. Treasury Regulations in
order to secure qualification under Section 401(a). If this Plan is held by the
Internal Revenue Service not to qualify initially under Section 401(a) either as
originally adopted or as amended, each Employer's contributions to the Trust
under this Plan (including any earnings thereon) shall be returned to it and
this Plan shall be terminated. In the event that this Plan is amended after its
initial qualification and the Plan as amended is held by the Internal Revenue
Service not to qualify under Section 401(a), the amendment may be modified
retroactively to the earliest date permitted by U.S. Treasury Regulations in
order to secure approval of the amendment under Section 401(a).
13.4 Right to Amend or Terminate. The Association intends to continue this
Plan as a permanent program. However, each participating Employer separately
reserves the right to suspend, supersede, or terminate the Plan at any time and
for any reason, as it applies to that Employer's Employees, and the Association
reserves the right to amend, suspend, supersede, merge, consolidate, or
terminate the Plan at any time and for any reason, as it applies to the
Employees of each Employer. No amendment, suspension, supersession, merger,
consolidation, or termination of the Plan shall (i) reduce any Participant's or
Beneficiary's proportionate interest in the Trust Fund, (ii) reduce or restrict,
either directly or indirectly, the benefit provided any Participant prior to the
amendment, or (iii) divert any portion of the Trust Fund to purposes other than
the exclusive benefit of the Participants and their Beneficiaries prior to the
satisfaction of all liabilities under the Plan. Moreover, there shall not be any
transfer of assets to a successor plan or merger or consolidation with another
plan unless, in the event of the termination of the successor plan or the
surviving plan immediately following such transfer, merger, or consolidation,
each participant or beneficiary would be entitled to a benefit equal to or
greater than the benefit he would have been entitled to if the plan in which he
was previously a participant or beneficiary had terminated immediately prior to
such transfer, merger, or consolidation. Following a termination of this Plan by
the Association, the Trustee shall continue to administer the Trust and pay
benefits in accordance with the Plan as amended from time to time and the
Committee's instructions.
If any amendment changes the vesting schedule, including an automatic
change to or from a top-heavy vesting schedule, any Participant with three (3)
or more Vesting Years may, by filing a written request with the Employer, elect
to have his vested percentage computed under the vesting
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schedule in effect prior to the amendment. The election period must begin not
later than the later of sixty (60) days after the amendment is adopted, the
amendment becomes effective, or the Participant is issued written notice of the
amendment by the Employer or the Committee.
Section 14. Miscellaneous Provisions.
14.1 Plan Creates No Employment Rights. Nothing in this Plan shall be
interpreted as giving any Employee the right to be retained as an Employee by an
Employer, or as limiting or affecting the rights of an Employer to control its
Employees or to terminate the Service of any Employee at any time and for any
reason, subject to any applicable employment or collective bargaining
agreements.
14.2 Nonassignability of Benefits. No assignment, pledge, or other
anticipation of benefits from the Plan will be permitted or recognized by the
Employer, the Committee, or the Trustee. Moreover, benefits from the Plan shall
not be subject to attachment, garnishment, or other legal process for debts or
liabilities of any Participant or Beneficiary, to the extent permitted by law.
This prohibition on assignment or alienation shall apply to any judgment,
decree, or order (including approval of a property settlement agreement) which
relates to the provision of child support, alimony, or property rights to a
present or former Spouse, child or other dependent of a Participant pursuant to
a state domestic relations or community property law, unless the judgment,
decree, or order is determined by the Committee to be a qualified domestic
relations order within the meaning of Section 414(p) of the Code, as more fully
set forth in Section 14.12 hereof.
14.3 Limit of Employer Liability. The liability of the Employer with
respect to Participants under this Plan shall be limited to making contributions
to the Trust from time to time, in accordance with Section 4.
14.4 Treatment of Expenses. All expenses incurred by the Committee and the
Trustee in connection with administering this Plan and Trust Fund shall be paid
by the Trustee from the Trust Fund to the extent the expenses have not been paid
or assumed by the Employer or by the Trustee.
14.5 Number and Gender. Any use of the singular shall be interpreted to
include the plural, and the plural the singular. Any use of the masculine,
feminine, or neuter shall be interpreted to include the masculine, feminine, or
neuter, as the context shall require.
14.6 Nondiversion of Assets. Except as provided in Sections 5.8 and 13.3,
under no circumstances shall any portion of the Trust Fund be diverted to or
used for any purpose other than the exclusive benefit of the Participants and
their Beneficiaries prior to the satisfaction of all liabilities under the Plan.
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14.7 Separability of Provisions. If any provision of this Plan is held to
be invalid or unenforceable, the other provisions of the Plan shall not be
affected but shall be applied as if the invalid or unenforceable provision had
not been included in the Plan.
14.8 Service of Process. The agent for the service of process upon the
Plan shall be the president of the Association, or such other person as may be
designated from time to time by the Association.
14.9 Governing State Law. This Plan shall be interpreted in accordance
with the laws of the State of Arkansas to the extent those laws are applicable
under the provisions of ERISA.
14.10 Employer Contributions Conditioned on Deductibility. Employer
Contributions to the Plan are conditioned on deductibility under Code Section
404. In the event that the Internal Revenue Service shall determine that all or
any portion of an Employer Contribution is not deductible under that Section,
the nondeductible portion shall be returned to the Employer within one year of
the disallowance of the deduction.
14.11 Unclaimed Accounts. Neither the Employer nor the Trustees shall be
under any obligation to search for, or ascertain the whereabouts of, any
Participant or Beneficiary. The Employer or the Trustees, by certified or
registered mail addressed to his last known address of record with the Employer,
shall notify any Participant or Beneficiary that he is entitled to a
distribution under this Plan, and the notice shall quote the provisions of this
Section. If the Participant or Beneficiary fails to claim his benefits or make
his whereabouts known in writing to the Employer or the Trustees within seven
(7) calendar years after the date of notification, the benefits of the
Participant or Beneficiary under the Plan will be disposed of as follows:
(a) If the whereabouts of the Participant is unknown but the
whereabouts of the Participant's Beneficiary is known to the Trustees,
distribution will be made to the Beneficiary.
(b) If the whereabouts of the Participant and his Beneficiary are
unknown to the Trustees, the Plan will forfeit the benefit, provided that
the benefit is subject to a claim for reinstatement if the Participant or
Beneficiary make a claim for the forfeited benefit.
Any payment made pursuant to the power herein conferred upon the Trustees
shall operate as a complete discharge of all obligations of the Trustees, to the
extent of the distributions so made.
14.12 Qualified Domestic Relations Order. Section 14.2 shall not apply to
a "qualified domestic relations order" defined in Code Section 414(p), and such
other domestic relations orders permitted to be so treated by Administrator
under the provisions of the Retirement Equity Act of 1984. Further, to the
extent provided under a "qualified domestic relations order", a former Spouse of
a Participant shall be treated as the Spouse or surviving Spouse for all
purposes under the Plan.
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In the case of any domestic relations order received by the Plan:
(a) The Employer or the Plan Committee shall promptly notify the
Participant and any other alternate payee of the receipt of such order and
the Plan's procedures for determining the qualified status of domestic
relations orders, and
(b) Within a reasonable period after receipt of such order, the
Employer or the Plan Committee shall determine whether such order is a
qualified domestic relations order and notify the Participant and each
alternate payee of such determination. The Employer or the Plan Committee
shall establish reasonable procedures to determine the qualified status of
domestic relations orders and to administer distributions under such
qualified orders.
During any period in which the issue of whether a domestic relations order
is a qualified domestic relations order is being determined (by the Employer or
Plan Committee, by a court of competent jurisdiction, or otherwise), the
Employer or the Plan Committee shall segregate in a separate account in the Plan
or in an escrow account the amounts which would have been payable to the
alternate payee during such period if the order had been determined to be a
qualified domestic relations order. If within eighteen (18) months the order (or
modification thereof) is determined to be a qualified domestic relations order,
the Employer or the Plan Committee shall pay the segregated amounts (plus any
interest thereon) to the person or persons entitled thereto. If within eighteen
(18) months it is determined that the o'er is not a qualified domestic relations
order, or the issue as to whether such order is a qualified domestic relations
order is not resolved, then the Employer or the Plan Committee shall pay the
segregated amounts (plus any interest thereon) to the person or persons who
would have been entitled to such amounts if there had been no order. Any
determination that an order is a qualified domestic relations order which is
made after the close of the eighteen (18) month period shall be applied
prospectively only. The term "alternate payee" means any Spouse, former spouse,
child or other dependent of a Participant who is recognized by a domestic
relations order as having a right to receive all, or a portion of, the benefit
payable under a Plan with respect to such Participant.
Section 15. Top-Heavy Provisions.
15.1 Top-Heavy Plan. For any Plan Year beginning after December 31, 1983,
this Plan is top-heavy if any of the following conditions exist:
(a) If the top-heavy ratio for this Plan exceeds sixty percent (60%)
and this Plan is not part of any required aggregation group or permissive
aggregation group;
(b) If this Plan is a part of a required aggregation group (but is
not part of a permissive aggregation group) and the aggregate top-heavy ratio
for the group of Plans exceeds sixty percent (60%); or
-46-
<PAGE>
(c) If this Plan is a part of a required aggregation group and part
of a permissive aggregation group and the aggregate top-heavy ratio for the
permissive aggregation group exceeds sixty percent (60%).
15.2 Super Top-Heavy Plan For any Plan Year beginning after December 31,
1983, this Plan will be a super top-heavy Plan if any of the following
conditions exist:
(a) If the top-heavy ratio for this Plan exceeds ninety percent
(90%) and this Plan is not part of any required aggregation group or permissive
aggregation group.
(b) If this Plan is a part of a required aggregation group (but is
not part of a permissive aggregation group) and the aggregate top-heavy ratio
for the group of Plans exceeds ninety percent (90%), or
(c) If this Plan is a part of a required aggregation group and part
of a permissive aggregation group and the aggregate top-heavy ratio for the
permissive aggregation group exceeds ninety percent (90%).
15.3 Definitions.
In making this determination, the Committee shall use the following
definitions and principles:
15.3-1 The "Determination Date", with respect to the first Plan Year
of any plan, means the last day of that Plan Year, and with respect to
each subsequent Plan Year, means the last day of the preceding Plan Year.
If any other plan has a Determination Date which differs from this Plan's
Determination Date, the top-heaviness of this Plan shall be determined on
the basis of the other plan's Determination Date falling within the same
calendar years as this Plan's Determination Date.
15.3-2 A "Key Employee", with respect to a Plan Year, means an
Employee who at any time during the five years ending on the top-heavy
Determination Date for the Plan Year has received compensation from an
Employer and has been (i) an officer of the Employer having 415
Compensation greater than 50 percent of the limit then in effect under
Section 415(b)(1)(A) of the Code, (ii) one of the 10 Employees owning the
largest interests in the Employer having 415 Compensation greater than the
limit then in effect under Section 415(c)(1)(A), (iii) an owner of more
than five percent of the outstanding equity interest or the outstanding
voting interest in any Employer, or (iv) an owner of more than one percent
of the outstanding equity interest or the outstanding voting interest in
an Employer whose annual compensation exceeds $150,000. For purposes of
determining which individuals are Key Employees, annual compensation means
compensation as defined in Section 415(c)(3) of the Code, but including
amounts contributed by the Employer pursuant to an Elective Deferral
Agreement which are excludible from the Employee's gross income under Code
-47-
<PAGE>
Section 125, Code Section 402(a)(8), Code Section 402(h) or Code Section
403(b). The Beneficiary of a Key Employee shall also be considered a Key
Employee.
15.3-3 A "Non-key Employee" means an Employee who at any time during
the five years ending on the top-heavy Determination Date for the Plan
Year has received compensation from an Employer and who has never been a
Key Employee, and the Beneficiary of any such Employee.
15.3-4 A "required aggregation group" includes (a) each qualified
Plan of the Employer in which at least one Key Employee participates in
the Plan Year containing the Determination Date and any of the four (4)
preceding Plan Years, and (b) any other qualified Plan of the Employer
which enables a Plan described in (a) to meet the requirements of Code
Sections 401(a)(4) and 410. For purposes of the preceding sentence, a
qualified Plan of the Employer includes a terminated Plan maintained by
the Employer within the five (5) year period ending on the Determination
Date. In the case of a required aggregation group, each Plan in the group
will be considered a top-heavy Plan if the required aggregation group is a
top-heavy group. No Plan in the required aggregation group will be
considered a top-heavy Plan if the required aggregation group is not a
top-heavy group. All Employers aggregated under Code Sections 414(b), (c)
or (m) or (o) (but only after the Code Section 414(o) regulations become
effective) are considered a single Employer.
15.3-5 A "permissive aggregation group" includes the required
aggregation group of Plans plus any other qualified Plan(s) of the
Employer that are not required to be aggregated but which, when considered
as a group with the required aggregation group, satisfy the requirements
of Code Sections 401(a)(4) and 410 and are comparable to the Plans in the
required aggregation group. No Plan in the permissive aggregation group
will be considered a top-heavy Plan if the permissive aggregation group is
not a top-heavy group. Only a Plan that is part of the required
aggregation group will be considered a top-heavy Plan if the permissive
aggregation group is top-heavy.
15.4 Top-Heavy Rules of Application.
For purposes of determining the value of Account balances and the
present value of accrued benefits the following provisions shall apply:
15.4-1 The value of Account balances and the present value of
accrued benefits will be determined as of the most recent Valuation Date
that falls within or ends with the twelve (12) month period ending on the
Determination Date.
15.4-2 For purposes of testing whether this Plan is top-heavy, the
present value of an individual's accrued benefits and an individual's
Account balances is counted only once each year.
-48-
<PAGE>
15.4-3 The Account balances and accrued benefits of a Participant
who is not presently a Key Employee but who was a Key Employee in a Plan
Year beginning on or after January 1, 1984 will be disregarded.
15.4-4 Employer contributions attributable to a salary reduction or
similar arrangement will be taken into account.
15.4-5 When aggregating Plans, the value of Account balances and
accrued benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year.
15.4-6 The present value of the accrued benefits or the amount of
the Account balances of an Employee shall be increased by the aggregate
distributions made to such Employee from a Plan of the Employer. No
distribution, however, made from the Plan to an individual (other than the
beneficiary of a deceased Employee who was an Employee within the five (5)
year period ending on the Determination Date) who has not been an Employee
at any time during the five (5) year period ending on the Determination
Date shall be taken into account in determining whether the Plan is
top-heavy. Also, any amounts recontributed by an Employee upon becoming a
Participant in the Plan shall no longer be counted as a distribution under
this paragraph.
15.4-7 The present value of the accrued benefits or the amount of
the Account balances of an Employee shall be increased by the aggregate
distributions made to such Employee from a terminated Plan of the
Employer, provided that such Plan (if not terminated) would have been
required to be included in the aggregation group.
15.4-8 Accrued benefits and Account balances of an individual shall
not be taken into account for purposes of determining the top-heavy ratios
if the individual has performed no services for the Employer during the
five (5) year period ending on the applicable Determination Date.
Compensation for purposes of this subparagraph shall not include any
payments made to an individual by the Employer pursuant to a qualified or
non-qualified deferred compensation plan.
15.4-9 The present value of the accrued benefits or the amount of
the Account balances of any Employee participating in this Plan shall not
include any rollover contributions or other transfers voluntarily
initiated by the Employee except as described below. If a rollover was
received by this Plan after December 31, 1983, the rollover or transfer
voluntarily initiated by the Employee was received prior to January 1,
1984, then the rollover or transfer shall be considered as part of the
accrued benefit by the Plan receiving such rollover or transfer. If this
Plan transfers or rolls over funds to another Plan in a transaction
voluntarily initiated by the Employee after December 31, 1983, then this
Plan shall count the distribution for purposes of determining Account
balances or the present value of accrued benefits. A transfer incident to
a merger or consolidation of two or more
-49-
<PAGE>
Plans of the Employer (including Plans of related Employers treated as a
single Employer under Code Section 414), or a transfer or rollover between
Plans of the Employer, shall not be considered as voluntarily initiated by
the Employee.
15.5 Top-Heavy Ratio.
If the Employer maintains one (1) or more defined contribution plans
(including any simplified Employee pension plan) and the Employer has never
maintained any defined benefit plans which have covered or could cover a
Participant in this Plan, the top-heavy ratio is a fraction, the numerator of
which is the sum of the Account balances of all Key Employees as of the
Determination Date, and the denominator of which is the sum of the Account
balances of all Employees as of the Determination Date. Both the numerator and
denominator of the top-heavy ratio shall be increased to reflect any
contribution which is due but unpaid as of the Determination Date.
If the Employer maintains one (1) or more defined contribution plans
(including any simplified Employee pension plan) and the Employer maintains or
has maintained one (1) or more defined benefit plans which have covered or could
cover a Participant in this Plan, the top-heavy ratio is a fraction, the
numerator of which is the sum of Account balances under the defined contribution
plans for all Key Employees and the present value of accrued benefits under the
defined benefit plans for all Key Employees, and the denominator of which is the
sum of the Account balances under the defined contribution plans for all
Employees and the present value of accrued benefits under the defined benefit
plans for all Employees. For purposes of establishing present value to compute
the top-heavy ratio, any benefit shall be discounted only for mortality and
interest based on an interest rate of 8% and using the UP'84 Mortality Table.
15.6 Minimum Contributions. For any Top-Heavy Year, each Employer shall
make a special contribution on behalf of each Participant to the extent that the
total allocations to his Account pursuant to Section 4 is less than the lesser
of:
(i) three percent of his 415 Compensation for that year, or
(ii) the highest ratio of such allocation to 415 Compensation
received by any Key Employee for that year. For purposes of the special
contribution of this Section 15.6, a Key Employee's 415 Compensation shall
include amounts the Key Employee elected to defer under a qualified 401(k)
arrangement. Such a special contribution shall be made on behalf of each
Participant who is employed by an Employer on the last day of the Plan
Year, regardless of the number of his Hours of Service, and shall be
allocated to his Account.
For any Plan Year when (1) the Plan is top-heavy and (2) a Non-key
Employee is a Participant in both this Plan and a defined benefit plan included
in the plan aggregation group which is top heavy, the sum of the Employer
contributions and forfeitures allocated to the Account of each
-50-
<PAGE>
such Non-key Employee shall be equal to at least five percent (5%) of such
Non-key Employee's 415 Compensation for that year.
15.7 Minimum Vesting. If a Participant's vested interest in his Matching
and ESOP Accounts is to be determined in a Top-Heavy Year, it shall be based on
the following "top-heavy table":
Vesting Percentage of
Years Interest Vested
------- ---------------
Fewer than 3 years 0%
3 100%
A Participant shall be vested in his entire Discretionary Contribution
Account in a Top-Heavy Year.
15.8 Top-Heavy Provisions Control in Top-Heavy Plan. In the event this
Plan becomes top-heavy and a conflict arises between the top-heavy provisions
herein set forth and the remaining provisions set forth in this Plan, the
top-heavy provisions shall control.
-51-
<PAGE>
EXHIBIT 21
<PAGE>
Subsidiaries of Pocahontas Bancorp, Inc.
Pocahontas Federal Savings and Loan Association
Indirect Subsidiaries of Pocahontas Bancorp, Inc.
Sun Realty, Inc.
P.F. Service, Inc.
<PAGE>
EXHIBIT 23.2
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Application for Conversion of Pocahontas Federal
Savings and Loan Association and Pocahontas Federal Mutual Holding Company, Inc.
on Form AC of our report dated October 30, 1997, appearing in the Prospectus,
which is part of this Application for Conversion.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Deloitte & Touche LLP
Little Rock, Arkansas
December 18, 1997
<PAGE>
EXHIBIT 23.3
<PAGE>
[Letterhead of RP Financial, LC.]
December 17, 1997
Board of Directors
Pocahontas Federal Mutual Holding Company, Inc.
Pocahontas Federal Savings and Loan Association
203 West Broadway Street
Pocahontas, Arkansas 72455
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of Pocahontas Federal Mutual Holding Company, Inc., the mutual
holding company for Pocahontas Federal Savings and Loan Association, Pocahontas,
Arkansas and any amendments thereto, in the Form S-1 Registration Statement and
any amendments thereto, and in the Form H(e)1-s for Pocahontas Bancorp, Inc. We
also hereby consent to the inclusion of, summary of and references to our
Appraisal Report in such filings including the Prospectus of Pocahontas Bancorp,
Inc.
Sincerely,
RP FINANCIAL, LC.
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 735,579
<INT-BEARING-DEPOSITS> 2,069,694
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 200,552,569
<INVESTMENTS-MARKET> 202,897,745
<LOANS> 161,381,208
<ALLOWANCE> 1,691,007
<TOTAL-ASSETS> 383,417,214
<DEPOSITS> 143,354,096
<SHORT-TERM> 157,601,038
<LIABILITIES-OTHER> 4,530,811
<LONG-TERM> 33,000,000
0
0
<COMMON> 163,242
<OTHER-SE> 24,083,027
<TOTAL-LIABILITIES-AND-EQUITY> 383,417,214
<INTEREST-LOAN> 12,006,825
<INTEREST-INVEST> 14,086,352
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 26,093,177
<INTEREST-DEPOSIT> 5,939,098
<INTEREST-EXPENSE> 18,698,802
<INTEREST-INCOME-NET> 7,394,375
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 7,334,375
<EXPENSE-OTHER> 4,965,550
<INCOME-PRETAX> 3,720,007
<INCOME-PRE-EXTRAORDINARY> 3,720,007
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,375,517
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.20
<LOANS-NON> 453,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,665,000
<ALLOWANCE-OPEN> 1,733,980
<CHARGE-OFFS> 102,973
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,691,007
<ALLOWANCE-DOMESTIC> 1,691,007
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
September 24, 1997
Mr. Skip Martin
President and Chief Executive Officer
Pocahontas Federal Savings and Loan Association
203 West Broadway
Pocahontas, Arkansas 72455-3420
Dear Mr. Martin:
This letter sets forth the agreement between Pocahontas Federal Savings
and Loan Association, Pocahontas, Arkansas ("Pocahontas Federal" or the
"Association") and RP Financial, LC. ("RP Financial") for certain conversion
appraisal services pertaining to the mutual-to-stock conversion of Pocahontas
Federal Mutual Holding Company (the "MHC"), a federal mutual holding company and
the majority shareholder of Pocahontas Federal, and the Plan of Reorganization
between the MHC and Pocahontas Federal. The specific services to be rendered by
RP Financial are described below. These services will be rendered by a team of
two senior consultants on staff.
Description of Conversion Appraisal Services
RP Financial will prepare a written detailed valuation report which will
be fully consistent with applicable regulatory guidelines and standard valuation
practices. The valuation report will conclude with an estimate of the pro forma
market value of the shares of stock to be offered and sold in the conversion. RP
Financial understands that as part of the conversion, the shares of Pocahontas
Federal which are held by public shareholders (i.e. stockholders other than the
MHC) will be exchanged for newly issued shares of common stock of a newly
organized stock holding company ("SHC") and that shares offered in the
conversion will be SHC shares. The valuation report will incorporate such key
transaction parameters as the financial strength and operations of Pocahontas
Federal, the proposed treatment in the conversion of the publicly-traded shares
of Pocahontas Federal (including the proposed exchange), and the financial
strength and operations of the MHC unconsolidated. The estimate of pro forma
market value will be a preliminary value, subject to confirmation by RP
Financial at the closing of the offering.
Prior to preparing the valuation report, RP Financial will conduct a
financial due diligence, including on-site interviews of senior management and
reviews of financial and other documents and records, to gain insight into the
operations, financial condition, profitability, risks and external factors which
impact the Association. The valuation will include an in-depth analysis of the
Association's financial condition and operating results, as well as assess the
Association's interest rate risk, credit risk and liquidity risk. The valuation
report will describe the Association's business strategies and market area and
prospects for the future. A peer group analysis relative to publicly-traded
savings institutions will be conducted for the purpose of determining
appropriate valuation adjustments relative to the group. The valuation report
will conclude with a midpoint pro forma valuation for the shares to be offered
in the conversion, as well as a range of value around the midpoint value. The
valuation report may be periodically updated throughout the conversion process
and there will be at least one updated valuation prepared at the time of the
closing of the stock offering.
<PAGE>
RP Financial, LC.
Mr. Skip Martin
September 24, 1997
Page 2
RP Financial agrees to deliver the valuation appraisal and subsequent
updates, in writing, to Pocahontas Federal at the above address in conjunction
with the filing of the regulatory application. Subsequent updates will be filed
promptly as certain events occur which would warrant the preparation and filing
of such valuation updates. Further, RP Financial agrees to perform such other
services as are necessary or required in connection with the regulatory review
of the appraisal and respond to the regulatory comments, if any, regarding the
valuation appraisal and subsequent updates.
Fee Structure and Payment Schedule
Pocahontas Federal agrees to pay RP Financial a fixed fee of $30,000 for
these services, plus reimbursable expenses. Payment of these fees shall be made
according to the following schedule:
o $5,000 upon execution of the letter of agreement engaging RP
Financial's services as outlined herein;
o $22,500 upon delivery of the completed original appraisal
report; and
o $2,500 upon completion of the conversion to cover all subsequent
valuation updates that may be required.
The Association will reimburse RP Financial for out-of-pocket expenses
incurred in the preparation of the appraisal report. Such out-of-pocket
expenses, which are not expected to exceed $5,000 inclusive of expenses for the
business plan and appraisal, will include travel, telephone, facsimile, copying,
shipping, computer and data. RP Financial will make all attempts to keep
out-of-pocket expenses to a minimum.
In the event Pocahontas Federal or the MHC shall, for any reason,
discontinue the proposed conversion prior to delivery of the completed documents
set forth above and payment of the respective progress payment fees, Pocahontas
Federal agrees to compensate RP Financial according to RP Financial's standard
billing rates for consulting services based on accumulated and verifiable time
expenses, not to exceed the respective fee caps noted above, after giving full
credit to the initial retainer fee. RP Financial's standard billing rates range
from $75 per hour for research associates to $250 per hour for managing
consultants.
If during the course of the proposed transaction, unforeseen events occur
so as to materially change the nature or the work content of the services
described in this contract, the terms of said contract shall be subject to
renegotiation by Pocahontas Federal and RP Financial. Such unforeseen events
shall include, but not be limited to, major changes in the conversion
regulations, appraisal guidelines or processing procedures as they relate to
conversion appraisals, major changes in management or procedures, operating
policies or philosophies, and excessive delays or suspension of processing of
conversion applications by the regulators such that completion of the conversion
transaction requires the preparation by RP Financial of a new appraisal.
Representations and Warranties
Pocahontas Federal and RP Financial agree to the following:
1. The Association agrees to make available or to supply to RP Financial
such information with respect to its business and financial condition as RP
Financial may reasonably request in order to provide the aforesaid valuation.
Such information heretofore or hereafter supplied or made available to RP
Financial shall
<PAGE>
RP Financial, LC.
Mr. Skip Martin
September 24, 1997
Page 3
include: annual financial statements, periodic regulatory filings and material
agreements, debt instruments, off balance sheet assets or liabilities,
commitments and contingencies, unrealized gains or losses and corporate books
and records. All information provided by the Association to RP Financial shall
remain strictly confidential (unless such information is otherwise made
available to the public), and if conversion is not consummated or the services
of RP Financial are terminated hereunder, RP Financial shall upon request
promptly return to the Association the original and any copies of such
information.
2. The Association hereby represents and warrants to RP Financial that any
information provided to RP Financial does not and will not, to the best of the
Association's knowledge, at the times it is provided to RP Financial, contain
any untrue statement of a material fact or fail to state a material fact
necessary to make the statements therein not false or misleading in light of the
circumstances under which they were made.
3. (a) The Association agrees that it will indemnify and hold harmless RP
Financial, any affiliates of RP Financial, the respective directors, officers,
agents and employees of RP Financial or their successors and assigns who act for
or on behalf of RP Financial in connection with the services called for under
this agreement (hereinafter referred to as "RP Financial"), from and against any
and all losses, claims, damages and liabilities (including, but not limited to,
all losses and expenses in connection with claims under the federal securities
laws) attributable to (i) any untrue statement or alleged untrue statement of a
material fact contained in the financial statements or other information
furnished or otherwise provided by Pocahontas Federal to RP Financial, either
orally or in writing, (ii) the omission or alleged omission of a material fact
from the financial statements or other information furnished or otherwise made
available by Pocahontas Federal to RP Financial or (iii) any action or omission
to act by Pocahontas Federal, or Pocahontas Federal's respective officers,
directors, employees or agents which action or omission is willful or negligent.
Pocahontas Federal will be under no obligation to indemnify RP Financial
hereunder if a court determines that RP Financial was negligent or acted in bad
faith with respect to any actions or omissions of RP Financial related to a
matter for which indemnification is sought hereunder. Any time devoted by
employees of RP Financial to situations for which indemnification is provided
hereunder, shall be an indemnifiable cost payable by Pocahontas Federal at the
normal hourly professional rate chargeable by such employee.
(b) RP Financial shall give written notice to the Association of such
claim or facts within thirty days of the assertion of any claim or discovery of
material facts upon which the RP Financial intends to base a claim for
indemnification hereunder. In the event the Association elects, within seven
days of the receipt of the original notice thereof, to contest such claim by
written notice to RP Financial, RP Financial will be entitled to be paid any
amounts payable by the Association hereunder, together with interest on such
costs from the date incurred at the rate of fifteen percent (15%) per annum
within five days after the final determination of such contest either by written
acknowledgement of the Association or a final judgment of a court of competent
jurisdiction. If the Association does not so elect, RP Financial shall be paid
promptly and in any event within thirty days after receipt by the Association of
the notice of the claim.
(c) The Association shall pay for or reimburse the reasonable expenses,
including attorneys' fees, incurred by RP Financial in advance of the final
disposition of any proceeding within thirty days of the receipt of such request
if RP Financial furnishes the Association: (1) a written statement of RP
Financial's good faith belief that it is entitled to indemnification hereunder;
and (2) a written undertaking to repay the advance if it ultimately is
determined in a final adjudication of such proceeding that it or he is not
entitled to such indemnification.
(d) In the event the Association does not pay any indemnified loss or make
advance reimbursements of expenses in accordance with the terms of this
agreement, RP Financial shall have all remedies available at law or in equity to
enforce such obligation.
<PAGE>
RP Financial, LC.
Mr. Skip Martin
September 24, 1997
Page 4
It is understood that, in connection with RP Financial's above-mentioned
engagement, RP Financial may also be engaged to act for the Association in one
or more additional capacities, and that the terms of the original engagement may
be embodied in one or more separate agreements. The provisions of Paragraph 3
herein shall apply to the original engagement, any such additional engagement,
any modification of the original engagement or such additional engagement and
shall remain in full force and effect following the completion or termination of
RP Financial's engagement(s). This agreement constitutes the entire
understanding of the Association and RP Financial concerning the subject matter
addressed herein, and such contract shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia. This agreement may not
be modified, supplemented or amended except by written agreement executed by
both parties.
Pocahontas Federal and RP Financial are not affiliated, and neither
Pocahontas Federal nor RP Financial has an economic interest in, or is held in
common with, the other and has not derived a significant portion of its gross
revenues, receipts or net income for any period from transactions with the
other.
The MHC and RP Financial are not affiliated, and neither the MHC nor RP
Financial has an economic interest in, or is held in common with, the other and
has not derived a significant portion of its gross revenues, receipts or net
income for any period from transactions with the other.
* * * * * * * * * * *
Please acknowledge your agreement to the foregoing by signing as indicated
below and returning to RP Financial a signed copy of this letter, together with
the initial retainer fee of $5,000.
Sincerely,
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
and Managing Director
Agreed To and Accepted By: Mr. Skip Martin /s/ Skip Martin
-------------------------------------
President and Chief Executive Officer
For: Pocahontas Federal Savings and Loan Association
Pocahontas, Arkansas
Date Executed: October 8, 1997
---------------
<PAGE>
Exhibit 99.2
=========================================================
CONVERSION APPRAISAL REPORT
POCAHONTAS BANCORP, INC.
PROPOSED HOLDING COMPANY FOR
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
Pocahontas, Arkansas
Dated As Of:
December 12, 1997
=========================================================
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
[Letterhead of RP Financial, LC.]
December 12, 1997
Board of Directors
Pocahontas Federal Mutual Holding Company, Inc.
Pocahontas Federal Savings and Loan Association
203 West Broadway Street
Pocahontas, Arkansas 72455
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal of the estimated pro forma market value of the common stock which is
to be issued by Pocahontas Bancorp, Inc., Pocahontas, Arkansas ("Pocahontas
Bancorp" or the "Holding Company"), in connection with the mutual-to-stock
conversion of Pocahontas Federal Mutual Holding Company, Inc. (the "Mutual
Holding Company" or the "MHC"). The Mutual Holding Company currently has a
majority ownership interest in, and its principal asset consists of, the common
stock of Pocahontas Federal Savings and Loan Association, Pocahontas, Arkansas
("Pocahontas Federal" or the "Association"). The conversion involves the
offering of shares of common stock to depositors, employee stock benefit plans,
minority stockholders and to certain members of the general public (the
"Subscription and Community offerings").
This Appraisal is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). This Appraisal has been
prepared in accordance with the written valuation guidelines promulgated by the
OTS, most recently updated as of October 21, 1994. Specifically, this Appraisal
has been prepared in accordance with the "Guidelines for Appraisal Reports for
the Valuation of Savings and Loan Associations Converting from Mutual to Stock
Form of Organization" of the OTS, as successor to the Federal Home Loan Bank
Board ("FHLBB"), dated as of October 21, 1994; and applicable regulatory
interpretations thereof.
Description of Reorganization
On October 14, 1997, the Board of Directors of the MHC adopted the Plan of
Conversion and Reorganization (the "Plan"), pursuant to which the MHC will
convert from a federally chartered mutual holding company to a
Delaware-chartered stock corporation. In the reorganization process: (1) the
MHC, which currently owns approximately 52.8 percent of the Association's common
stock, will convert to a federally-chartered interim stock savings bank and
simultaneously merge with and into the Association, pursuant to which all shares
of the Association's common stock held by the MHC will be canceled; (2) as a
result of the merger of the interim stock savings bank into the Association, the
Association will become a wholly-owned subsidiary of Pocahontas Bancorp; and (3)
the outstanding shares of the Association's common stock held by the Minority
Stockholders will be converted automatically into and become shares of common
stock of the Holding Company (the "Share Exchange") pursuant to
<PAGE>
RP Financial, LC.
Board of Directors
December 12, 1997
Page 2
a ratio that will result in the holders of such shares owning the same
percentage of the Holding Company as they currently own of the Association (the
"Exchange Ratio").
Pursuant to the reorganization, shares of Pocahontas Bancorp stock will be
offered in Subscription and Community offerings that will represent an ownership
interest in the Holding Company of approximately 52.8 percent (the same
percentage ownership that the MHC currently maintains in the Association).
RP Financial, LC.
RP Financial, LC. ("RP Financial") is a financial consulting firm that
specializes in financial valuations and analyses of business enterprises and
securities. The background and experience of RP Financial are detailed in
Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal of the shares to be issued by the Holding Company and assisting the
Association in the preparation of its business plan, we are independent of the
Association, the Mutual Holding Company, the Holding Company and other parties
engaged by the Association to assist in the stock issuance process.
Valuation Methodology
In preparing our appraisal, we have reviewed the Mutual Holding Company's
Application for Approval of Conversion, including the Proxy Statement, as filed
with the OTS and the Holding Company's Form S-1 registration statement as filed
with the Securities and Exchange Commission ("SEC"). We have conducted an
analysis of the Association and the Mutual Holding Company (hereinafter,
collectively referred to as the "Association"), that has included due diligence
related discussions with the Association's management; Deloitte & Touche LLP,
the Association's independent auditor; Luse Lehman Gorman Pomerenk & Schick, the
Association's conversion counsel; and Friedman, Billings, Ramsey & Co., Inc.,
which has been retained by the Association as financial and marketing advisor in
connection with the Holding Company's stock offering. All conclusions set forth
in the appraisal were reached independently from such discussions. In addition,
where appropriate, we have considered information based on other available
published sources that we believe are reliable. While we believe the information
and data gathered from all these sources are reliable, we cannot guarantee the
accuracy and completeness of such information.
We have investigated the competitive environment within which the
Association operates and have assessed the Association's relative strengths and
weaknesses. We have kept abreast of the changing regulatory and legislative
environment and analyzed the potential impact on the Association and the
industry as a whole. We have analyzed the potential effects of conversion on the
Association's operating characteristics and financial performance as they relate
to the pro forma market value of Pocahontas Federal. We have reviewed the
economy in the Association's primary market area and have compared the
Association's financial performance and condition with selected publicly-traded
thrift institutions with similar characteristics as the Association's, as well
as all publicly-traded thrifts. We have reviewed conditions in the securities
markets in general and in the market for thrift stocks in particular,
<PAGE>
RP Financial, LC.
Board of Directors
December 12, 1997
Page 3
including the market for existing thrift issues and the market for initial
public offerings by thrifts.
Our appraisal is based on the Association's representation that the
information contained in the regulatory applications and additional information
furnished to us by the Association and its independent auditors are truthful,
accurate and complete. We did not independently verify the financial statements
and other information provided by the Association and its independent auditors,
nor did we independently value the assets or liabilities of the Association. The
valuation considers the Association only as a going concern and should not be
considered as an indication of the liquidation value of Pocahontas Federal.
Our appraised value is predicated on a continuation of the current
operating environment for the Association and for all thrifts. Changes in the
local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or significant world events) may occur from time to time, often with
great unpredictability, and may materially impact the value of thrift stocks as
a whole or the Association's value alone. It is our understanding Pocahontas
Federal intends to remain an independent institution and there are no current
plans for selling control of the Association as a converted institution. To the
extent that such factors can be foreseen, they have been factored into our
analysis.
Pro forma market value is defined as the price at which the Holding
Company's stock, immediately upon completion of the conversion offering, would
change hands between a willing buyer and a willing seller, neither being under
any compulsion to buy or sell and both having reasonable knowledge of relevant
facts.
Valuation Conclusion
It is our opinion that, as of December 12, 1997, the aggregate pro forma
market value of the Association and the Mutual Holding Company was $47,316,670
at the midpoint. Based on this valuation and the approximate 52.84 percent
ownership interest being sold to the public, the midpoint of the Holding
Company's stock offering was $25,000,000, equal to 2,500,000 shares offered at a
per share value of $10.00. Pursuant to OTS conversion guidelines, the 15 percent
offering range includes a minimum of $21,250,000 and a maximum of $28,750,000.
Based on the $10.00 per share offering price, this range equates to an offering
of 2,125,000 shares at the minimum to 2,875,000 shares at the maximum. In the
event that the appraised value is subject to an increase, up to 3,306,250 shares
may be sold at an issue price of $10.00 per share, for an aggregate offering
size of $33,062,500, without a resolicitation.
Establishment of Exchange Ratio
OTS regulations provide that in a conversion of a mutual holding company,
the minority stockholders are entitled to exchange their shares of the
Association's common stock for common stock of the Holding Company. The proposed
Exchange Ratio has been designed to preserve the current aggregate percentage
ownership in the Association represented by the
<PAGE>
RP Financial, LC.
Board of Directors
December 12, 1997
Page 4
Minority Stockholders. The Exchange Ratio will be determined at the end of the
Holding Company's stock offering based on the total number of shares sold in the
Subscription and Community offerings. Based upon the valuation conclusion and
offering range concluded above, the Exchange Ratio would be 2.4638 shares,
2.8986 shares, 3.3333 shares and 3.8333 shares of Pocahontas Bancorp stock
issued for each share of common stock held by the Minority Stockholders, at the
minimum, midpoint, maximum and super range of the offering, respectively.
Limiting Factors and Considerations
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. 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 initial offering will thereafter be able to sell
such shares at prices related to the foregoing valuation of the pro forma market
value. The appraisal does not take into account any trading activity with
respect to the purchase and sale of common stock in the secondary market, and
reflects only a valuation range as of this date for the pro forma market value
of the Association immediately upon issuance of the stock.
RP Financial's valuation was determined based on the financial condition,
operations and shares outstanding as of September 30, 1997, the date of the
financial data included in the Holding Company's Prospectus. The proposed
Exchange Ratio and the exchange of the Minority Stockholders' shares for newly
issued Holding Company shares was determined independently. RP Financial
expresses no opinion on the proposed Exchange Ratio and the exchange of shares
held by the Minority Stockholders for newly issued Holding Company shares.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated should market conditions or changes in
Pocahontas Federal operating results warrant. The valuation will also be updated
at the completion of the Holding Company's stock offering. These updates will
consider, among other things, any developments or changes in the Association's
financial performance and condition, management policies, and current conditions
in the equity markets for thrift shares, both existing issues and new issues.
Also, these updates will consider changes in other external factors which impact
value including, but not limited to: various changes in the legislative and
regulatory environment (including changes in the appraisal guidelines), the
stock market and the market for thrift stocks, and interest rates. Should any
such new developments or changes be material, in our opinion, to the valuation
of the shares, appropriate adjustments to the
<PAGE>
RP Financial, LC.
Board of Directors
December 12, 1997
Page 5
estimated pro forma market value will be made. The reasons for any such
adjustments will be explained in the update at the date of the release of the
update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ William E. Pommerening
William E. Pommerening
Chief Executive Officer
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
Pocahontas, Arkansas
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
Introduction 1.1
Plan of Conversion and Reorganization 1.1
Strategic Overview 1.2
Balance Sheet Trends 1.5
Income and Expense Trends 1.10
Interest Rate Risk Management 1.14
Lending Activities and Strategy 1.15
Asset Quality 1.18
Funding Composition and Strategy 1.18
Subsidiary 1.19
Legal Proceedings 1.20
CHAPTER TWO MARKET AREA
Introduction 2.1
Market Area Demographics 2.1
National Economic Factors 2.3
Local Economy 2.7
Competition 2.9
CHAPTER THREE PEER GROUP ANALYSIS
Selection of Peer Group 3.1
Financial Condition 3.5
Income and Expense Components 3.8
Loan Composition 3.12
Interest Rate Risk 3.14
Credit Risk 3.14
Summary 3.16
<PAGE>
TABLE OF CONTENTS
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
Pocahontas, Arkansas
(continued)
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER FOUR VALUATION ANALYSIS
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.3
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.6
4. Primary Market Area 4.7
5. Dividends 4.9
6. Liquidity of the Shares 4.10
7. Marketing of the Issue 4.10
A. The Public Market 4.11
B. The New Issue Market 4.16
C. The Acquisition Market 4.20
D. The Market for Pocahontas Federal's Stock 4.20
8. Management 4.21
9. Effect of Government Regulation and Regulatory Reform 4.21
Summary of Adjustments 4.21
Valuation Approaches 4.22
1. Price-to-Earnings ("P/E") 4.23
2. Price-to-Book ("P/B") 4.24
3. Price-to-Assets ("P/A") 4.25
Valuation Conclusion 4.25
Establishment of Exchange Ratio 4.26
<PAGE>
RP Financial, LC.
LIST OF TABLES
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
Pocahontas, Arkansas
TABLE
NUMBER DESCRIPTION PAGE
------ ----------- ----
1.1 Historical Balance Sheets 1.6
1.2 Historical Income Statements 1.11
2.1 Summary Demographic Data 2.2
2.2 Market Area Unemployment Trends 2.8
2.3 Deposit Summary 2.10
3.1 Peer Group of Publicly-Traded Thrifts 3.3
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields,
Costs, Spreads 3.10
3.4 Loan Portfolio Composition Comparative Analysis 3.13
3.5 Interest Rate Risk Comparative Analysis 3.15
3.6 Credit Risk Measures and Related Information 3.17
4.1 Market Area Unemployment Rates 4.8
4.2 Conversion Pricing Characteristics 4.18
4.3 Market Pricing Comparatives 4.19
4.4 Public Market Pricing 4.27
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
Pocahontas Federal Savings and Loan Association ("Pocahontas Federal" or
the "Association") is a federally chartered mutual savings and loan association
headquartered in Pocahontas, Arkansas. Pocahontas Federal serves the
Northeastern Arkansas region through six full service branch offices located in
the Arkansas counties of Randolph, Lawrence, Clay, Sharp and Craighead. Most of
the markets served by Pocahontas Federal have fairly rural characteristics and,
thus, while the Association's branches cover a relatively large geographic area,
opportunities for retail growth are somewhat contained by the relatively small
size of the population base served. Pocahontas Federal was organized in 1935 as
a federally insured institution. Pocahontas Federal is a member of the Federal
Home Loan Bank ("FHLB") system, with its deposits insured up to the regulatory
maximums by the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation ("FDIC"). At September 30, 1997, Pocahontas
Federal had $383.4 million in assets, $143.3 million in deposits and total
equity of $24.2 million or 6.3 percent of total assets. Pocahontas Federal's key
operating ratios for past five fiscal years are shown in Exhibit I-3.
The Association was reorganized as a stock savings and loan association on
December 31, 1991. As part of that reorganization, a mutual holding company was
formed. The mutual holding company is a federal corporation, chartered and
regulated by the OTS, and is named Pocahontas Federal Mutual Holding Company,
Inc. (the "MHC"). In April 1994, the Association issued 747,500 shares of its
common stock in Subscription and Community offerings, with the remaining shares
of its common stock (862,500)) issued to the MHC. As of September 30, 1997,
there were 1,632,424 total shares of the Association's common stock issued and
outstanding, of which 862,500 shares, or 52.84 percent, were owned by the MHC
and 769,924 shares, or 47.16 percent, were owned by the public.
Plan of Conversion and Reorganization
On October 14, 1997, the Board of Directors of the MHC adopted the Plan of
Conversion and Reorganization (the "Plan"), pursuant to which the MHC will
convert from a federally chartered mutual holding company to a
Delaware-chartered stock corporation. In the reorganization process: (1) the
MHC, which currently owns approximately 52.8 percent of the
<PAGE>
RP Financial, LC.
Page 1.2
Association's common stock, will convert to a federally-chartered interim stock
savings bank and simultaneously merge with and into the Association, pursuant to
which all shares of the Association's common stock held by the MHC will be
canceled; (2) as a result of the merger of the interim stock savings bank into
the Association, the Association will become a wholly-owned subsidiary of
Pocahontas Bancorp, Inc. ("Pocahontas Bancorp" or the "Holding Company"); and
(3) the outstanding shares of the Association's common stock held by the
Minority Stockholders will be converted automatically into and become shares of
common stock of the Holding Company (the "Share Exchange") pursuant to a ratio
that will result in the holders of such shares owning the same percentage of the
Holding Company as they currently own of the Association (the "Exchange Ratio").
Pursuant to the reorganization, shares of Pocahontas Bancorp stock will be
offered in Subscription and Community offerings that will represent an ownership
interest in the Holding Company of approximately 52.8 percent (the same
percentage ownership that the MHC currently maintains in the Association).
Going forward, Pocahontas Bancorp will own 100 percent of the
Association's stock, and the Association will be Pocahontas Bancorp's sole
subsidiary. At this time, no other activities are contemplated for Pocahontas
Bancorp other than the ownership of the Association, a loan to the newly-formed
401(k) savings and employee stock ownership plan ("KSOP") and investment of
Holding Company cash. In the future, Pocahontas Bancorp may acquire or organize
other operating subsidiaries, although there are no specific plans at present.
Strategic Overview
Throughout most of its history, Pocahontas Federal has maintained a
strategic focus of operating as a traditional thrift, placing an emphasis on 1-4
family permanent mortgage lending funded by retail deposits. However, following
the minority stock offering, the Association implemented a wholesale leveraging
strategy to complement its retail banking activities. The wholesale leveraging
strategy was largely implemented through purchasing floating rate collateralized
mortgage obligations ("CMOs") funded by short-term borrowings. Pocahontas
Federal elected to pursue a wholesale leveraging strategy to generate a
competitive return on equity ("ROE") that could not be achieved by strictly
maintaining a retail strategy, given the limitations of the market area in terms
of providing opportunities for loan growth.
<PAGE>
RP Financial, LC.
Page 1.3
Most notably, opportunities for loan growth are limited by the primarily rural
characteristics of the Association's market area, in which the markets served by
Pocahontas Federal tend to be sparsely populated.
The wholesale leveraging strategy has effectively served to enhance the
Association's ROE, although such growth is achieved at a relatively narrow
interest rate spread. While such growth provides a narrower interest rate spread
than loan growth, it also serves to leverage operating expenses given the
limited servicing costs associated with wholesale growth as compared to retail
growth. Also, offsetting the narrow interest rate spread of the wholesale
leveraging strategy is the very limited credit risk associated with growing the
balance sheet through investment securities which are insured or guaranteed by
federal agencies. At the same time, the Association's wholesale leveraging has
added to its interest rate risk exposure, in the event interest rates spike
higher. Specifically, the interest rate risk results from the Association's
investment in long term floating rate CMOs with interest caps, which are funded
by short-term borrowings with no interest rate caps. To support management of
the interest rate risk associated with the wholesale leveraging, Pocahontas
Federal has engaged in a limited amount of off-balance sheet hedging. The
only-off balance sheet hedges currently held by the Association consist of
interest rate caps, which were purchased to limit the Association's interest
rate risk exposure on the short-term borrowings utilized to fund the floating
rate CMOs. Interest rate caps held by the Association are tied to the
three-month LIBOR, with a cap rate of 6.0 percent. As of September 30, 1997, the
Association was party to four interest rate cap positions, with each cap
position having a notional amount of $10.0 million.
It is the Association's strategy to gradually replace or "backfill" the
wholesale growth with more profitable loan growth; however, given the
limitations of the market area, such growth is expected to occur over an
extended period of time. The Association's lending activities are reflective of
a traditional thrift operating strategy, with the concentration of the loan
portfolio being comprised of 1-4 family permanent mortgage loans. Commercial
real estate and commercial business loans represent the primary areas of lending
diversification for the Association, with all such lending conducted within
Pocahontas Federal's local market area.
As the result of the wholesale leveraging strategy, deposits constitute
less than half of the Association's interest-bearing liabilities. Local retail
deposits comprise the major portion of Pocahontas Federal's deposit base,
although a portion of the CD portfolio includes funds raised in the national
market through posting CD rates with a national rate service. The
<PAGE>
RP Financial, LC.
Page 1.4
deposits obtained in the national market are not brokered CDs. Deposit growth
will be facilitated by the acquisition of three commercial bank branch offices
located in Hardy, Lake City and Walnut Ridge, Arkansas. The acquisition of three
branches will serve to increase Pocahontas Federal's market presence in markets
currently served by the Association's existing branch network. Management is
estimating that the acquisition will add approximately $20.0 million to the
Association's deposit base, which would result in a core deposit intangible of
approximately $1.2 million.
In recent years, the Association's operating strategy has resulted in
strong asset growth, which has been primarily realized through funding
investments with borrowings. Pocahontas Federal's wholesale leveraging strategy
has been effective in leveraging capital and generating a competitive ROE. As
the result of the growth, the Association's capital position has declined to a
level that will not support further leveraging of the balance sheet.
Accordingly, the Association is currently in the position of "backfilling" the
wholesale growth with more profitable retail growth. Pocahontas Federal's
leveraging strategy has served to enhance core earnings through building net
interest income and leveraging operating expenses, although the Association has
incurred some additional interest rate risk in conjunction with the leveraging
strategy. Notwithstanding the additional interest rate risk assumed through the
leveraging strategy, Pocahontas Federal has implemented strategies to control
interest risk exposure which include selling longer term fixed rate loans to the
secondary market, maintaining investments in short-term and floating rate
instruments, utilizing off-balance sheet hedges, and lending diversification
which consists primarily of short-term and adjustable rate loans. Credit risk
has been effectively controlled through the Association's 1-4 family lending
emphasis and maintenance of a high concentration of assets in low risk
investments.
The Association's Board of Directors has elected to convert to the full
stock form of ownership to improve the competitive position of Pocahontas
Federal. A full stock conversion will also provide existing public shareholders
with greater liquidity in their shares by more than doubling the number of
shares outstanding to the public, which is expected to facilitate a NASDAQ
National Market listing for the stock (Pocahontas Federal's stock is currently
listed on the NASDAQ Small-Cap Issues). The additional capital realized from
conversion proceeds will increase liquidity to support funding of future loan
growth and other interest-earning assets, as well as the growth resulting from
the acquisition of three commercial bank branch offices, including the deposits,
which is expected to be consummated in January 1998. Pocahontas Federal's higher
capital position resulting from the infusion of conversion proceeds
<PAGE>
RP Financial, LC.
Page 1.5
will also serve to reduce interest rate risk, through enhancing the
Association's interest-earnings assets/interest-bearing liabilities ratio
("IEA/IBL") ratio. The additional funds realized from the stock offering will
provide an alternative funding source to deposits and borrowings in meeting the
Association's future funding needs, which may facilitate a reduction in the
Association's funding costs. Additionally, Pocahontas Federal's higher
equity-to-assets ratio will also better position the Association to take
advantage of expansion opportunities as they arise and further leveraging of the
balance sheet. Such expansion would most likely occur through acquiring
additional branches or other financial institutions in areas that would provide
for further penetration in the markets currently served by the Association or
nearby surrounding markets. At this time, other than the acquisition of the
three commercial bank branch offices, the Association has no other specific
plans for expansion other than internal growth. The Association's projected
internal use of proceeds are highlighted below.
The proceeds from the conversion are expected to be deployed as follows:
o Holding Company. Up to 50 percent of the net conversion proceeds
will be retained by Pocahontas Bancorp. The Holding Company intends
to use a portion of the net proceeds to loan funds to the
Association's KSOP to enable the KSOP to purchase 8.0 percent of the
gross offering amount. The balance of the funds retained by the
Holding Company will be invested initially into short-term
investments. Over time, the Holding Company funds may be utilized
for various corporate purposes, including payment of dividends and
possible repurchases of common stock consistent with OTS
limitations.
o Pocahontas Federal. The Holding Company is expected to contribute to
the Association a portion of the net proceeds of the offering
sufficient to increase the Association's tangible capital to 10
percent of its adjustable total assets. Proceeds infused into the
Association will initially be held in short-term investments. Over
time, the proceeds are expected to be redeployed into the
Association's loan growth and normal investment activities.
Balance Sheet Trends
From September 30, 1993 through September 30, 1997, Pocahontas Federal
exhibited annual asset growth of 22.6 percent (see Table 1.1), with the most
notable growth occurring during fiscal 1994. Pocahontas Federal recorded asset
growth of $141.6 million, or 83.4 percent, during fiscal 1994, reflecting the
implementation of the Association's wholesale leveraging strategy following the
increase in capital realized from the minority stock offering. Accordingly,
asset growth during fiscal 1994 consisted substantially of investment
securities, which were funded by short-term borrowings. Further leveraging was
pursued during fiscal
<PAGE>
RP Financial, LC
Page 1.6
Table 1.1
Pocahontas Federal Savings and Loan Association
Historical Balance Sheets(1)
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
At Fiscal Year End September 30,
---------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
------------------ ----------------- ---------------- ----------------- -----------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $169,787 100.0% $311,416 100.0% $348,554 100.0% $381,562 100.0% $383,417 100.0%
Cash and cash equivalents 2,116 1.2% 2,318 0.7% 1,860 0.5% 2,046 0.5% 2,805 0.7%
Cash surrender value of life insurance --- 0.0% --- 0.0% --- 0.0% 5,439 1.4% 5,639 1.5%
Investment securities 61,179 36.0% 197,668 63.5% 214,425 61.5% 219,690 57.6% 200,553 52.3%
FHLB stock 1,831 1.1% 2,496 0.8% 10,549 3.0% 11,608 3.0% 10,053 2.6%
Loans receivable, net 100,695 59.3% 104,083 33.4% 116,447 33.4% 136,872 35.9% 159,690 41.6%
Deposits 119,115 70.2% 113,407 36.4% 112,458 32.3% 116,283 30.5% 143,354 37.4%
Borrowings 37,666 22.2% 168,652 54.2% 210,987 60.5% 237,321 62.2% 211,286 55.1%
Total equity 11,287 6.6% 19,420 6.2% 21,008 6.0% 22,689 5.9% 24,246 6.3%
Full service branches 5 5 5 5 6
<CAPTION>
Annual
Growth
Rate
----
Pct
---
(%)
<S> <C>
Total Amount of:
Assets 22.59%
Cash and cash equivalents 7.30%
Cash surrender value of life insurance N.M.
Investment securities 34.56%
FHLB stock 53.07%
Loans receivable, net 12.22%
Deposits 4.74%
Borrowings 53.90%
Total equity 21.06%
Full service branches
</TABLE>
- ----------
(1) Ratios are as a percent of ending assets.
Sources: Pocahontas Federal's prospectus and RP Financial calculations.
<PAGE>
RP Financial, LC.
Page 1.7
years 1995 and 1996, which was supported by both growth in loans and investment
securities. Asset growth was modest in fiscal 1997, given the Association's
capital position and resulting limited capacity to leverage further. As the
result of Pocahontas Federal's strategy of leveraging through investments, the
concentration of loans comprising total assets has declined during the past five
years. However, the Association's strategy of "backfilling" the wholesale growth
with loan growth has been evident during the past two fiscal years, as
Pocahontas Federal's concentration of loans increased from 33.4 percent of
assets at fiscal year end 1995 to 41.6 percent of assets at fiscal year end
1997. Asset growth has been primarily funded by borrowings, with borrowings
constituting the major portion of the Association's interest-bearing funding
composition over the past four fiscal years.
The Association's loan portfolio increased at an annual rate of 12.2
percent from fiscal year 1993 through fiscal year end 1997, exhibiting positive
loan growth throughout the period shown in Table 1.1. Loan growth has been most
notable during the past two fiscal years, as the loans receivable balance
increased from $116.4 million, or 33.4 percent, of assets at fiscal year end
1995, to $159.7 million, or 41.6 percent, of assets at fiscal year end 1997.
Overall, as the result of the wholesale leveraging strategy, the concentration
of loans comprising total assets decreased from 59.3 percent at fiscal year end
1993 to 41.6 percent at fiscal year end 1997.
Pocahontas Federal's emphasis on 1-4 family lending is readily apparent,
as the 1-4 family loan portfolio, including construction loans, comprised 84.1
percent of gross loans outstanding at September 30, 1997. Similarly, at fiscal
year end 1993, 1-4 family loans, including construction loans, comprised 80.8
percent of total loans outstanding. The balance of the loan portfolio is
diversified among commercial real estate, agricultural, multi-family, consumer
and commercial business loans, with commercial real estate loans accounting for
the Association's most notable area of lending diversification. As of September
30, 1997, commercial real estate loans comprised $9.6 million, or 5.8 percent,
of the Association's loan portfolio, versus comparative measures of $5.7
million, or 5.5 percent, of the Association's loan portfolio at fiscal year end
1993. Commercial business loans represented the next largest type of lending
diversification, totaling $6.5 million, or 4.0 percent, of total loans
outstanding at September 30, 1997, versus comparative measures of $4.1 million,
or 4.0 percent, of total loans outstanding at fiscal year end 1993. The
Association's plan is to continue to emphasize lending diversification growth in
commercial business and commercial real estate loans, with
<PAGE>
RP Financial, LC.
Page 1.8
loans secured by 1-4 family properties remaining the primary lending activity
for Pocahontas Federal.
In connection with the wholesale leveraging strategy, growth in investment
securities has accounted for the largest portion of the Association's asset
growth during the period shown in Table 1.1. From fiscal year end 1993 to fiscal
year end 1997, the investment securities balance increased from $61.2 million,
or 36.0 percent, of assets to $200.5 million, or 52.3 percent, of assets. The
investment securities balance peaked at $219.7 million, or 57.6 percent, of
assets at fiscal year end 1996. During fiscal 1997, a portion of the investment
securities balance was replaced with loan growth. Growth of the investment
securities portfolio, in connection with the wholesale leveraging strategy, has
consisted primarily of mortgage-backed and mortgage-related securities, with
such securities totaling $168.8 million, or 84.2 percent, of the investment
securities portfolio at September 30, 1997. Floating rate CMOs tied to LIBOR
account for the largest concentration of the Association's mortgage-backed and
mortgage-related securities portfolio. As the result of the floating rate CMOs
being subject to interest rate caps, Pocahontas Federal has assumed some
additional interest rate risk for the purposes of improving earnings, given that
the short-term borrowings utilized to fund the floating rate CMOs are not
subject to interest rate caps. The balance of the investment securities
portfolio consists of U.S. Government and agency securities and municipal bonds,
which totaled $26.9 million and $4.9 million, respectively, at September 30,
1997. As of September 30, 1997, the entire investment securities portfolio was
classified as held to maturity.
In addition to the investment securities portfolio, Pocahontas Federal
also maintains an investment in a single premium life insurance annuity, which
equaled $5.6 million at September 30, 1997. The annuity was purchased to
informally fund deferred compensation plans of certain key executive offices and
board members. As of September 30, 1997, the balance of the Association's
remaining investments consisted of cash and cash equivalents ($2.8 million) and
FHLB stock ($10.0 million).
For purposes of limiting the interest rate risk associated with the
wholesale leveraging strategy, the Association maintains off-balance sheet
investments in the form of interest rate caps. The interest rate caps were
purchased to limit the Association's interest rate risk exposure on the
short-term borrowings utilized to fund floating rate CMO investments that have
interest rate caps. Interest rate caps held by the Association are tied to the
three-month LIBOR, with a cap rate of 6.0 percent. As of September 30, 1997, the
Association was party
<PAGE>
RP Financial, LC.
Page 1.9
to four interest rate positions, with each cap position having a notional amount
of $10.0 million. The expiration of the interest rate caps ranged from December
20, 1998 to December 31, 1999. Based on the three-month LIBOR rate as of
September 30, 1997, the Association's annualized cost for maintaining the four
cap positions approximated $252,000.
Borrowings constitute the largest component of the Association's funding
composition, reflecting the use of borrowings for purposes of leveraging the
Association's balance sheet. Pocahontas Federal's balance of borrowings
increased from $37.7 million, or 22.2 percent, of assets, at fiscal year end
1993 to $211.3 million, or 55.1 percent, of assets at fiscal year end 1997. The
Association's use of borrowings peaked at $237.3 million, or 62.2 percent, of
assets at fiscal year end 1996. Deposit growth during fiscal 1997 adequately
funded the Association's modest asset growth and repayment of a portion of the
borrowings. Short-term FHLB advances constitute the major portion of the
Association's borrowings, with the balance of the borrowings consisting of
Reverse Repurchase Agreements. As of September 30, 1997, the Association held
$190.6 million of FHLB advances and $20.7 million of Reverse Repurchase
Agreements.
Deposits comprise the balance of the Association's interest-bearing funds,
increasing at an annual rate of 4.7 percent during the past five fiscal years.
Most of the deposit growth was realized during fiscal 1997, as the result of CDs
obtained in the national market. Comparatively, from fiscal year end 1993
through fiscal year end 1996, the Association recorded limited or negative
deposit growth. The Association's ratio of deposits-to-assets equaled 37.4
percent at fiscal year end 1997, versus a comparative ratio of 70.2 percent at
fiscal year end 1993. CDs represent the largest component of the Association's
deposit composition, accounting for 75.5 percent of total deposits at fiscal
year end 1997. Transaction and savings accounts comprised the remaining 24.5
percent of the Association's deposit composition at fiscal year end 1997.
Positive earnings over the past four fiscal years, along with the sale of
minority stock in fiscal 1994, translated into an annual capital growth rate of
21.1 percent from fiscal year end 1993 through fiscal year end 1997. Reflecting
the impact of the Association's leveraging strategy, Pocahontas Federal's
equity-to-assets ratio declined from a peak of 6.6 percent at fiscal year end
1993 to a low of 5.9 percent at fiscal year end 1996. As of September 30, 1997,
the Association maintained total equity of $24.2 million, which provided for an
equity-to-assets ratio of 6.3 percent. All of the Association's capital is
tangible capital. Pocahontas Federal maintains capital surpluses relative to all
of its regulatory capital requirements. The
<PAGE>
RP Financial, LC.
Page 1.10
addition of conversion proceeds will serve to strengthen Pocahontas Federal's
capital position and competitive posture within its primary market area, as well
as possibly support expansion in existing or other nearby markets. At this time,
the Association's only expansion plans are to purchase three commercial bank
branches, which will increase Pocahontas Federal's presence in existing markets
served by the Association's branch network.
Income and Expense Trends
The Association has reported positive earnings over the last five fiscal
years (see Table 1.2), ranging from a low of 0.54 percent of average assets in
fiscal 1996 to a high of 1.16 percent of average assets in fiscal 1993. For
fiscal 1997, the Association reported net income of $2.4 million, equal to 0.63
percent of average assets. Earnings during fiscal 1996 were depressed by the one
time special assessment to recapitalize the SAIF. Notwithstanding the negative
earnings impact of the SAIF assessment, the Association's return on average
assets ratio has in general declined since fiscal 1993. The decline in the
return on average assets ratio has been largely attributable to the wholesale
leveraging strategy, in which interest-earning assets have been added at a
relatively narrow interest rate spread. Net interest income and operating
expenses represent the major components of Pocahontas Federal's core earnings,
while non-interest operating income has been a fairly limited contributor to the
Association's earnings. Loss provisions established by the Association have
typically been limited, which has been consistent with Pocahontas Federal's
maintenance of favorable credit quality measures in general.
Pocahontas Federal's net interest income to average asset ratio has been
maintained at a relatively low level following the implementation of the
wholesale leveraging strategy in fiscal 1994. The Association's net interest
income to average assets ratio declined from 3.84 percent in fiscal 1993 to a
low of 1.89 percent in fiscal 1995, as the investment securities portfolio
increased from 36.0 percent of assets to 61.5 percent of assets at fiscal year
ends 1993 and 1995, respectively. Comparatively, over the same time period, the
Association's loans-to-assets ratio declined from 59.3 percent to 33.4 percent.
Pocahontas Federal's net interest income to average assets ratio has increased
during the past two fiscal years, reflecting the favorable impact on yield
resulting from loans comprising a larger portion of the Association's
interest-earning asset composition and the favorable impact on funding costs
resulting from deposits comprising a larger portion of the Association's
interest-bearing funding composition. For fiscal 1997, the Association's net
interest income to average assets ratio equaled 2.13
<PAGE>
RP Financial, LC
Page 1.11
Table 1.2
Pocahontas Federal Savings and Loan Association
Historical Income Statements(1)
Equality Savings and Loan Association(Amount and Percent of Average Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 30,
----------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
------------------ ----------------- --------------- ---------------- ------------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income $12,255 7.51% $15,049 6.60% $23,571 7.04% $26,246 7.21% $26,720 7.08%
Interest Expense (5,995) -3.67% (8,354) -3.67% (17,241) -5.15% (18,628) -5.11% (18,699) -4.96%
------- ------ ------- ------ -------- ------ -------- ------ -------- ------
Net Interest Income $6,260 3.84% $6,695 2.94% $6,330 1.89% $7,618 2.09% $8,021 2.13%
Provision for Loan Losses (193) -0.12% 0 0.00% 0 0.00% (411) -0.11% (60) -0.02%
----- ------ - ----- - ----- ----- ------ ---- ------
Net Interest Income after Provisions $6,067 3.72% $6,695 2.94% $6,330 1.89% $7,207 1.98% $7,961 2.11%
Other Income 509 0.31% 489 0.21% 640 0.19% 697 0.19% 725 0.19%
Operating Expense (3,539) -2.17% (3,908) -1.71% (4,026) -1.20% (4,614) -1.27% (4,966) -1.32%
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Net Operating Income $3,037 1.86% $3,276 1.44% $2,944 0.88% $3,290 0.90% $3,720 0.99%
Non-Operating Income
- --------------------
Net gain(loss) on sales of loans & invest. $7 0.00% $0 0.00% $0 0.00% $0 0.00% $0 0.00%
Net gain(loss) on loan sales 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Other non-operating income(loss) 0 0.00% 0 0.00% 0 0.00% (937) -0.26% 0 0.00%
- ----- - ----- - ----- ----- ------ - -----
Net Non-Operating Income 7 0.00% 0 0.00% 0 0.00% (937) -0.26% 0 0.00%
Net Income Before Tax $3,044 1.87% $3,276 1.44% $2,944 0.88% $2,353 0.65% $3,720 0.99%
Income Taxes (1,151) -0.71% (1,339) -0.59% (1,001) -0.30% (386) -0.11% (1,344) -0.36%
Change in Acctg. Principle -- --- -- --- -- -- -- --- -- ---
-- --- -- --- -- -- -- --- -- ---
Net Income (Loss) $1,893 1.16% $1,937 0.85% $1,943 0.58% $1,967 0.54% $2,376 0.63%
Core Earnings
- -------------
Net Income Before Ext. Items $1,893 1.16% $1,937 0.85% $1,943 0.58% $1,967 0.54% $2,376 0.63%
Addback: Non-Operating Losses 0 0.00% 0 0.00% 0 0.00% 937 0.26% 0 0.00%
Deduct: Non-Operating Gains (7) -0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Tax Effect Non-Op. Items(2) 3 0.00% 0 -0.00% 0 -0.00% (359) -0.10% 0 -0.00%
- ----- - ------ - ------ ----- ------ - ------
Core Net Income $1,889 1.16% $1,937 0.85% $1,943 0.58% $2,545 0.70% $2,377 0.63%
</TABLE>
- ----------
(1) Ratios are as a percent of average assets.
(2) Assumes tax rate of 38.3 percent.
Sources: Pocahontas Federal's prospectus, audited financial statements and RP
Financial calculations.
<PAGE>
RP Financial, LC.
Page 1.12
percent. Trends in the Association's net interest margin generally paralleled
the widening and narrowing of the yield-cost spread. As set forth in Exhibits
I-3 and I-5, the decline exhibited in the net interest margin between fiscal
years 1993 and 1995 coincided with the narrowing of the Association's interest
rate spread from 3.78 percent during fiscal 1993 to 1.57 percent during fiscal
1995. The narrowing of the interest rate spread was primarily attributable to
higher funding costs resulting from the Association's increased utilization of
borrowings; although, compression on the yield side was also factor, as a
decline in the concentration of loans comprising interest-earning assets
negatively impacted Pocahontas Federal's yield earned on interest-earning
assets. The higher net interest margin posted during fiscal 1997 was supported
by an increase in the Association's interest rate spread to 1.83 percent, as
retail growth, consisting of loans and deposits, provided for both an increase
in the yield earned on interest-earning assets and a decline in funding costs.
Consistent with the Association's limited retail diversification, sources
of non-interest operating income have not been a significant contributor to the
Association's earnings. The wholesale leveraging of the balance sheet has also
reduced the impact of non-interest operating income on earnings, as such growth
does not generate non-interest operating income. Throughout the period shown in
Table 1.2, sources of non-interest operating income ranged from 0.31 percent to
0.19 percent of average assets. For the twelve months ended September 30, 1997,
Pocahontas Federal's non-interest operating income equaled 0.19 percent of
average assets. Sources of non-interest operating income consist substantially
of fees and service charges. At this time, the Association has no plans to
further diversify into activities that would generate additional non-interest
operating income, and, thus, Pocahontas Federal's earnings can be expected to
remain highly dependent upon the net interest margin.
The Association's wholesale leveraging has also served to effectively
leverage operating expenses, as Pocahontas Federal's operating expense to
average assets ratio declined from 2.17 percent during fiscal 1993 to 1.20
percent during fiscal 1995. As asset growth slowed during the past two fiscal
years, the Association's operating expense to average assets ratio increased to
1.32 percent during fiscal 1997. The low servicing costs associated with
Pocahontas Federal's wholesale leveraging is indicated by the Association's
assets per full time equivalent employee measure of $6.3 million, which was well
above the comparative measure of $4.2 million for all publicly-traded
SAIF-insured thrifts. Upward pressure will be placed on the Association's
operating expense ratio following the conversion, due to expenses associated
with operating as a publicly-traded company, including expenses related to the
stock benefit
<PAGE>
RP Financial, LC.
Page 1.13
plans. However, at the same time, the increase in capital provided by the
conversion proceeds will allow for further leveraging of the Association's
balance sheet. Overall, the Association's operating expense ratio and net
interest margin have supported maintenance of a relatively favorable expense
coverage ratio (net interest income divided by operating expenses) over the past
five fiscal years. For the twelve months ended September 30, 1997, Pocahontas
Federal's expense coverage ratio equaled 1.61 times, indicating favorable core
earnings strength for the Association. When factoring in non-interest operating
income, Pocahontas Federal's efficiency ratio (operating expenses, net of
goodwill amortization, as a percent of net interest income and non-interest
operating income) equaled 56.8 percent, which was slightly more favorable than
the efficiency ratio for all publicly-traded SAIF-insured thrifts of 59.1
percent
The one time special assessment to recapitalize the SAIF has been the only
significant non-recurring item to impact the Association's earnings in recent
years, as gains and losses resulting from the sale of investments and other
assets typically have not been a material factor in the Association's earnings.
The special assessment to recapitalize the SAIF is shown as a non-operating loss
during fiscal 1996, amounting to $937,000, or 0.26 percent of average assets.
Loss provisions established by the Association have not had a significant
impact on earnings over the past five fiscal years, which has been supported by
Pocahontas Federal's maintenance of favorable credit quality measures, a lending
emphasis on relatively low risk 1-4 family permanent mortgage loans, and
maintenance of an interest-earning asset composition with a relatively high
concentration of low risk investments. During fiscal 1997, the Association
established loss provisions of $60,000, or 0.02 percent of average assets, which
was lower compared to loss provisions of $411,000, or 0.11 percent of average
assets, established during fiscal 1996. The decline in loss provisions
established during fiscal 1997 was supported by a reduction in non-performing
assets, as well as the payoff of a large commercial loan that had consistently
been on the Association's classified asset list. As of September 30, 1997, the
Association maintained valuation allowances of $1.7 million, equal to 1.06
percent of net loans receivable and 359.8 percent of non-performing assets.
Exhibit I-6 sets forth the Association's loan loss allowance activity during the
past five fiscal years.
<PAGE>
RP Financial, LC.
Page 1.14
Interest Rate Risk Management
Pocahontas Federal's balance sheet is liability-sensitive, as the
Association's interest-earning assets are primarily funded with borrowings and
deposits that mature or are subject to repricing within one year. Comparatively,
a relatively higher concentration of Pocahontas Federal's interest-earning
assets mature or reprice in more than one year; particularly, with respect to
the Association's mortgage loan portfolio. While adjustable rate loans
constitute the bulk of the Association's loan portfolio, most of the adjustable
rate loan portfolio has repricing terms of more than one year. As of September
30, 1997, of the total loans due after one year from September 30, 1997,
adjustable rate loans comprised 72.2 percent of those loans (see Exhibit I-7).
However, as of September 30, 1997, only 27.0 percent of the Association's
adjustable rate loans were scheduled to reprice or mature within one year (see
Exhibit I-8).
Pocahontas Federal pursues management of interest rate risk primarily from
the asset side of the balance sheet, through such strategies as emphasizing the
origination of adjustable rate and short-term loans, selling longer term fixed
rate 1-4 family loan originations to the secondary market, and maintaining
investments in short-term and floating rate instruments. The Association also
utilizes off-balance sheet hedges, in form of interest rate caps, to help limit
the interest rate risk associated with its short-term borrowings. While the
Association maintains a relatively high concentration of the investment
securities portfolio in floating rate CMOs, there is a degree of interest rate
risk exposure associated with the floating CMOs to the extent market interest
rates result in the CMOs repricing above the cap rate. As of September 30, 1997,
the Net Portfolio Value ("NPV") analysis provided by the OTS indicated that a
2.0 percent instantaneous and sustained increase in interest rates would result
in a 41 percent decline in the Association's NPV (see Exhibit I-9). The
significant decline in the NPV can be largely attributed to the floating rate
CMOs which are subject to interest rate caps and are funded by short-term
borrowings which are not capped. The infusion of stock proceeds will help to
limit the Association's interest rate risk exposure, as most of the net proceeds
will be redeployed into interest-earning assets and the increase in capital
realized from the proceeds will lessen the proportion of interest-sensitive
liabilities meeting the Association's funding needs.
<PAGE>
RP Financial, LC.
Page 1.15
Lending Activities and Strategy
The Association's lending activities have emphasized the origination of
1-4 family permanent mortgage loans (see Exhibits I-10 and I-11, which reflect
loan composition and lending activity, respectively). As of September 30, 1997,
1-4 family mortgage loans accounted for $138.5 million, or 84.1 percent, of
Pocahontas Federal's total loan portfolio. Included in the 1-4 family loan
balance were construction loans which approximated $8.0 million, or 4.9 percent,
of total loans outstanding. The Association's second and third largest category
of loans were commercial real estate loans and commercial business loans, which
totaled $9.6 million, or 5.8 percent, and $6.5 million, or 4.0 percent, of total
loans outstanding, respectively, at September 30, 1997. Included in the
commercial real estate loan portfolio are land loans, which amounted to $1.5
million at September 30, 1997. The balance of the loan portfolio reflects
diversification into multi-family, agricultural and consumer loans. The largest
portion of the Association lending activities are conducted in the more populous
Jonesboro market.
In the current market environment, Pocahontas Federal's 1-4 family lending
activities have emphasized the origination of adjustable rate mortgage ("ARM")
loans and 15-year fixed rate loans. Currently all originations are being
retained for portfolio, with the exception of FHA/VA loans which are sold to the
secondary market on a servicing released basis. To the extent the Association
originates conventional fixed rate loans with terms of greater than 15 years,
those loans are typically sold to the secondary market; however, the Association
is presently not active in the origination of longer term fixed rate loans.
To enhance the attractiveness of ARM loans, the Association offers a
variety of ARM loan products and initial rates are discounted from the
fully-indexed rate. In addition to the standard one year ARM loan, Pocahontas
Federal offers ARM loans which have an initial fixed rate of interest for three
or five years and then convert to a one-year ARM following the initial repricing
period. ARM loans are indexed to the constant maturity treasury ("CMT") rate,
with the initial rate of interest being dependent upon the length of the initial
repricing term (i.e., a higher rate is charged for loans with a longer initial
repricing term). Substantially all 1-4 family loans are originated with
loan-to-value ("LTV") ratios of 85.0 percent or less, although the Association
will allow up to an 89.0 percent LTV ratio for qualifying first time home
buyers. Loans currently being originated by the Association do not require
private mortgage insurance, as Pocahontas Federal does not offer 1-4 family
loans with LTV ratios
<PAGE>
RP Financial, LC.
Page 1.16
above 85.0 percent other than the first time home buyer loans which are limited
to an LTV ratio of 89.0 percent.
Construction loans are included in the 1-4 family loan balance, as they
consist substantially of loans to finance the construction of 1-4 family
residences. Most of the Association's construction lending activities are for
the construction of pre-sold homes, which convert to permanent loans upon
completion of the construction. To a lesser extent, Pocahontas Federal
originates speculative construction loans. To control the credit risk associated
with speculative construction lending, the Association typically limits the
builder to one or two spec loans at a time and generally confines originations
to builders who have maintained a favorable credit quality history with
Pocahontas Federal. Construction loans require payment of interest only during
the construction period, which is typically 12 months. For construction loans,
the Association will lend up to a maximum LTV ratio of 80.0 percent.
The balance of the mortgage loan portfolio at September 30, 1997 consisted
of commercial real estate loans ($9.6 million), multi-family loans ($1.6
million), and agricultural loans ($4.6 million), which are collateralized by
properties in the Association's normal lending territory. Such loans are
typically extended up to a LTV ratio of 75.0 percent, with loan terms typically
providing for up to 25-year amortizations and a balloon payment in 5 to 7 years.
In light of the higher credit risk associated with commercial real estate,
agriculture and multi-family loans, loan rates offered on those loans are at a
premium to the Association's 1-4 family loan rates. Properties securing the
commercial real estate, agriculture, and multi-family loan portfolio include
apartments, office buildings, medical buildings, farmland, undeveloped land and
other non-residential properties. Commercial real estate, agriculture and
multi-family lending are expected to be areas of gradual lending growth for the
Association, with most of the growth expected to consist of commercial real
estate loans which includes loans secured by farmland.
To date, diversification into consumer lending has been relatively limited
for the Association, with the consumer loan balance totaling $3.7 million, or
2.3 percent, of total loans outstanding at September 30, 1997. Consumer loans
held by the Association include a mix of loans secured by deposits, direct auto
loans and miscellaneous other closed-end loans such as second-mortgage loans.
Consumer lending is a desired growth area for the Association, with such growth
expected to consist primarily of the same type of consumer loans that are
currently being offered by the Association.
<PAGE>
RP Financial, LC.
Page 1.17
The balance of the non-mortgage loan portfolio is comprised of commercial
business loans, which totaled $6.5 million, or 4.0 percent, of total loans
outstanding at September 30, 1997. Commercial business loans held by the
Association consist substantially of secured loans, which principally include
agriculture-related loans to finance the purchase of livestock, farm machinery
and equipment, seed, fertilizer and other farm-related products. Commercial
business loans are generally short-term loans and are extended up to an LTV
ratio of 75.0 percent. Growth of the commercial business loan portfolio, as well
as the commercial real estate loan portfolio, is expected to be facilitated by
the recent hiring of an experienced commercial lending officer who is based in
Jonesboro.
Exhibit I-11, which shows the Association's loan originations, sales,
purchases and repayments over the past five fiscal years, further highlights
Pocahontas Federal's emphasis on 1-4 family lending. Originations of 1-4 family
permanent mortgage loans have accounted for more than 77.1 percent of the
Association's total lending volume over the past five fiscal years. Supported by
increased originations of 1-4 family loans, total loans originated by Pocahontas
Federal amounted to $59.1 million and $65.9 million in fiscal years 1996 and
1997, respectively, versus total originations of $37.3 million, $28.7 million
and $29.9 million in fiscal years 1995, 1994 and 1993, respectively. Most loans
originated during the five year period have been held in-portfolio by the
Association, as loans sold ranged from a low of $263,000 in fiscal 1993 to a
high of $2.2 million in fiscal 1997. Loans purchased by the Association over the
past five fiscal years have been minimal. Loan originations other than 1-4
family loans have consisted primarily of commercial business loans, which has
been an area of lending growth for the Association. Commercial business loan
originations have shown a steady increase over the past five fiscal years, with
such originations increasing from $3.0 million in fiscal 1993 to $6.7 million in
fiscal 1997. The balance of the Association's lending activities have consisted
primarily of agriculture loan originations and, to a somewhat lesser extent,
consumer and commercial real estate loans. Multi-family lending has not been an
active lending area for the Association over the past five fiscal years. Going
forward, the Association's lending strategy is to place a greater emphasis on
the origination of commercial business and commercial real estate loans,
although the origination of 1-4 family permanent mortgage loans is expected to
continue to dominate the Association's lending activities.
<PAGE>
RP Financial, LC.
Page 1.18
Asset Quality
The Association's historical 1-4 family lending emphasis and relatively
low level of loans comprising interest-earning assets has supported favorable
credit quality measures in recent years. Over the past five fiscal years,
Pocahontas Federal's non-performing assets-to-assets ratio has ranged from a low
of 0.12 percent at fiscal year end 1997 to a high of 1.09 percent at fiscal year
end 1993. The relatively high balance of non-performing assets held by the
Association at fiscal year consisted largely of real estate owned, reflecting
the deterioration that occurred in the Association's local real estate market
during the late-1980s and early-1990s. As shown in Exhibit I-12, non-performing
assets held by the Association at September 30, 1997 totaled $470,000 and
consisted of $453,000 of non-accruing loans and $17,000 of real estate owned.
Non-accruing loans held by the Association at September 30. 1997 consisted
substantially of 1-4 family loans.
The Association reviews and classifies assets on a regular basis and
establishes loan loss provisions based on the overall quality, size and
composition of the loan portfolio, as well other factors such as historical loss
experience, industry trends and local real estate market and economic
conditions. At September 30, 1997, the Association had $1.6 million of assets
classified as Substandard and $25,000 of assets classified as Loss. The
Association maintained valuation allowances of $1.7 million at September 30,
1997, equal to 1.06 percent of net loans receivable and 359.8 percent of
non-performing assets.
Funding Composition and Strategy
Borrowings have constituted the largest portion of the Association's
interest-bearing funding composition following the implementation of the
wholesale leveraging strategy in fiscal 1994. Borrowings totaled $211.2 million
at September 30, 1997, consisting of $190.6 million of FHLB advances and $20.7
million of Reverse Repurchase Agreements. The Association's use of borrowings
has been primarily utilized to leverage the balance sheet through funding
purchases of investment securities. Borrowings have also funded loan growth, as
the Association's deposit growth has been fairly limited over the past five
fiscal years. Exhibit I-13 provides detail of the Association's use of
borrowings over the past five fiscal years. To the extent additional borrowings
are utilized by the Association, such borrowings are expected to consist
primarily of FHLB advances.
<PAGE>
RP Financial, LC.
Page 1.19
Deposits maintained by the Association largely consist of funds raised
through the Association's six branch office locations, although a portion of the
CD portfolio includes funds raised in the national market. As of September 30,
1997, deposits accounted for 40.4 percent of the Association's interest-bearing
funding composition. Exhibit I-14 provides the interest rate and maturity
composition of the CD portfolio at September 30, 1997. The Association's deposit
composition has consistently been concentrated in CDs, with Pocahontas Federal's
current CD composition reflecting a higher concentration of shorter term CDs
(maturities of one year or less). As of September 30, 1997, the CD portfolio
totaled $108.3 million, with 82.5 percent of those CDs having maturities of one
year or less. As of September 30, 1997, jumbo CDs (CD accounts with balances of
$100,000 or more) amounted to $20.4 million, or 18.9 percent, of total CDs.
Deposit rates offered by the Association are generally in the middle-to-upper
end of the range of rates offered by local competitors.
Lower costing savings and transaction accounts comprise the remainder of
Pocahontas Federal's deposits, amounting to $35.1 million, or 24.5 percent, of
total deposits at September 30, 1997. Over the past five fiscal years, the
Association's concentration of transaction and savings accounts comprising total
deposits has declined slightly (28.7 percent at fiscal year end 1993 versus 24.5
percent at fiscal year end 1997). Growth in CDs has accounted for the declining
ratio of transaction and savings accounts maintained by the Association, as the
balance of transaction and savings accounts was slightly higher at fiscal year
end 1997 compared to fiscal year end 1993 ($35.1 million versus $34.2 million).
Most of the Association's CD growth occurred during fiscal 1997, as the result
of obtaining CDs in the national market.
Subsidiary
The Association has two wholly-owned subsidiaries, Sun Realty, Inc.
("Sun") and P.F. Service, Inc. ("P.F. Service"). Both are Arkansas corporations.
Sun, incorporated in 1985, engages in the management and disposition of real
estate. Sun was formed to hold title to foreclosed properties of the Association
to take advantage of deductions for depreciation expenses and other tax
attributes not available to the Association. The Association has begun to phase
out its investment in Sun and expects to dissolve Sun. All of the properties
held by Sun have been repurchased by the Association.
<PAGE>
RP Financial, LC.
Page 1.20
P.F. Service, incorporated in 1985, is a service corporation which is
substantially inactive.
At September 30, 1997, the Association had a $18,723 equity investment in
Sun, and a $363,428 equity investment in P.F. Service. For the fiscal year ended
September 30, 1997, Sun had net loss of $1,117 and P.F. Service had net income
of $1,665. At September 30, 1997, Sun had $19,223 in total assets, $500 in total
liabilities and $18,723 in stockholder's equity. At September 30, 1997, P.F.
Service had $383,228 in total assets, $19,800 in total liabilities and $363,428
in stockholder's equity.
Legal Proceedings
The Association is involved in routine legal proceedings occurring in the
ordinary course of business which, in the aggregate, are believed by management
to be immaterial to the financial condition of the Association.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
Pocahontas Federal serves the Northeastern Arkansas region through six
full service branch offices, which are located in the towns of Pocahontas
(Randolph County), Waltnut Ridge (Lawrence County), Corning (Clay County), Hardy
(Sharp County), and Jonesboro (Craighead County). The Association's main office
is located in Pocahontas and includes a full service branch. Jonesboro is the
only location where the Association maintains two branches, although one of the
branches has a minimal amount of deposits and is used primarily as a loan
production office. To a lesser extent, the Association also conducts business in
the counties adjacent to the primary market area counties. The three commercial
bank branches being acquired by the Association are located in Hardy, Lake City
and Walnut Ridge, Arkansas, which are in counties where the Association
currently maintains a presence with a full service branch. Exhibit II-1 provides
information on the Association's office facilities.
The Association's primary market area can be characterized as being
somewhat rural in nature, as indicated by low population density and relative
isolation from major metropolitan areas. Pocahontas Federal's market area has a
fairly diversified economy, with light manufacturing, wholesale/retail trade,
agriculture and services constituting the basis of Association's local economy.
Despite operating in a fairly rural setting, competition for financial services
in the Association's primary market area is notable for the size of the
population served.
Future business and growth opportunities will be partially influenced by
economic and demographic characteristics of the market served, particularly the
future growth and stability of the regional economy, demographic growth trends,
and the nature and intensity of the competitive environment for financial
institutions. These factors have been examined to help determine the growth
potential that exists for the Association and the relative economic health of
the Association's market area.
Market Area Demographics
Demographic and economic growth trends, measured by changes in population,
number of households, age distribution and median household income, provide key
insight into the health of the Association's market area (see Table 2.1). The
Association's market area
<PAGE>
RP Financial, LC.
Page 2.2
Table 2.1
Pocahontas FS&LA
Summary Demographic Data
<TABLE>
<CAPTION>
Year
--------------------------------- Growth Rate Growth Rate
Population (000) 1990 1997 2002 1990-97 1997-2002
- ---------------- ---- ---- ---- ------- ---------
<S> <C> <C> <C> <C> <C>
United States 248,710 267,805 281,209 1.1% 1.0%
Arkansas 2,351 2,537 2,672 1.1% 1.0%
Clay County 18 18 17 -0.5% -0.4%
Craighead County 69 77 83 1.7% 1.5%
Lawrence County 17 17 17 -0.0% -0.0%
Randolph County 17 18 19 0.9% 1.5%
Sharp County 14 17 19 2.5% 2.1%
Households (000)
- ----------------
United States 91,947 99,020 104,001 1.1% 1.0%
Arkansas 891 964 1,015 1.1% 1.1%
Clay County 8 7 7 -0.5% -0.5%
Craighead County 26 29 32 1.6% 1.4%
Lawrence County 7 7 7 -0.0% -0.0%
Randolph County 6 7 7 1.2% 1.1%
Sharp County 6 7 8 2.7% 2.2%
Median Household Income ($)
- ---------------------------
United States $29,199 $36,961 $42,042 3.4% 2.6%
Arkansas 21,686 27,008 31,599 3.2% 3.2%
Clay County 17,181 21,533 26,575 3.3% 4.3%
Craighead County 22,864 27,877 32,212 2.9% 2.9%
Lawrence County 17,256 19,893 25,147 2.1% 4.8%
Randolph County 18,514 19,250 23,277 0.6% 3.9%
Sharp County 17,224 19,216 24,399 1.6% 4.9%
Per Capita Income - ($)
- -----------------------
United States $13,179 $18,100 ---- 4.6% N/A
Arkansas 10,318 13,501 ---- 3.9% N/A
Clay County 9,350 11,895 ---- 3.5% N/A
Craighead County 10,800 14,063 ---- 3.8% N/A
Lawrence County 8,583 11,125 ---- 3.8% N/A
Randolph County 9,168 9,998 ---- 1.2% N/A
Sharp County 8,893 10,323 ---- 2.2% N/A
<CAPTION>
1997 Age Distribution(%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Years Median Age
- ------------------------ ---------- ----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States 21.7 13.6 31.4 20.5 12.7 34.8
Arkansas 21.1 14.2 28.7 21.0 15.2 35.6
Clay County 18.0 12.3 26.1 22.5 20.0 40.1
Craighead County 20.7 16.0 31.1 20.3 11.9 33.6
Lawrence County 19.6 13.0 27.0 22.1 18.2 37.8
Randolph County 20.3 13.1 26.8 22.0 17.7 37.6
Sharp County 15.7 11.7 21.3 22.1 29.0 46.0
<CAPTION>
Less Than $15,000 to $25,000 to $50,000 to $100,000 to
1997 HH Income Dist.(%) $15,000 25,000 $50,000 $100,000 $150,000 $150,000+
- ----------------------- ------- ------ ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
United States 17.7 14.4 33.5 26.5 5.4 2.6
Arkansas 26.1 19.5 33.8 17.2 2.5 1.0
Clay County 32.5 23.3 31.9 10.5 1.1 0.7
Craighead County 24.7 18.8 34.9 18.0 2.3 1.2
Lawrence County 36.7 22.0 30.5 9.0 1.4 0.4
Randolph County 37.4 23.1 28.8 9.5 0.7 0.5
Sharp County 36.1 25.3 29.8 7.8 0.7 0.2
</TABLE>
Source: CACI.
<PAGE>
RP Financial, LC.
Page 2.3
exhibited mixed growth characteristics, as measured by population and household
growth, with the strongest growth being recorded in Craighead and Sharp
Counties. However, the favorable growth rates exhibited by those two counties
needs to be viewed in the context of the relatively small population bases
constituting each county, in which only a slight increase in population
translates into a relatively high growth rate. For example, the 1.7 percent and
2.5 percent annual population growth rates posted for Craighead and Sharp
Counties, respectively, from 1990 to 1997, was the result of respective
population increases totaling 8,000 and 3,000 over the seven year period.
Opportunities for growth appear to be most favorable in Craighead County,
which contains more than half of the population base served by the Association.
The city of Jonesboro is located in Craighead County and is the largest
metropolitan area in the Association's primary market area. Overall, the low
population density of the market area served by Pocahontas Federal is reflective
of its rural characteristics, which somewhat limits opportunities for loan and
deposit growth.
Median household and per capita income levels in the Association's primary
market area are generally lower than the comparative medians for Arkansas and
the U.S., which is also indicative of the market area's rural nature that
provides for a lower cost of living than more heavily populated market areas.
Income levels are highest in Craighead County, reflecting the relative affluence
of the Jonesboro economy. Age and household income distribution measures further
imply opportunities for growth are more conducive in Craighead County, with the
other four market area counties exhibiting age and household income distribution
measures that would suggest opportunities for growth will be somewhat limited in
those markets. In particular, the age and household distribution measures for
Clay, Lawrence, Randolph and Sharp Counties reflect an older and lower earning
population bases compared to Craighead County, as well as compared to Arkansas
and the U.S.
National Economic Factors
Over the past year, national economic growth has been mixed. GDP growth
for the fourth quarter of 1996 came in at a stronger than expected 4.7 percent
annual growth rate (subsequently revised to 3.9 percent), although most of the
economic data released during the beginning of the first quarter of 1997
indicated a continuation of moderate economic growth. Such measures as a 1.9
percent decline in December 1996 durable goods orders and a modest
<PAGE>
RP Financial, LC.
Page 2.4
uptick in the January 1997 unemployment rate to 5.4 percent, versus 5.3 percent
in December 1996, eased concerns that the economy was overheating. However, the
increase in the unemployment rate was attributable to more people entering the
job force, and some markets began to experience labor shortages. In
congressional testimony at the end of February 1997, the Federal Reserve
Chairman indicated that he anticipated recent signs of lower job insecurity
among workers would lead to upward pressure in wages, which could possibly
trigger the Federal Reserve to boost interest rates. Signs of inflation became
more notable during March and April, as many of the first quarter economic
indicators showed signs of a strengthening economy. Most notably, during
February, industrial production increased 0.5 percent, housing starts rose 12.2
percent and the sale of existing homes jumped 9.0 percent. Accelerating economic
growth was further indicated by a decline in the March unemployment rate to 5.2
percent, versus 5.3 percent for February, and a higher than expected rise in the
March "core" producer price index, which posted its largest increase in 18
months. However, inflation measures showed that the "Goldilocks Economy"
remained in effect, based on lower producer prices and a lower than expected
increase in the employment cost index. Some of the reasons cited for the low
inflation were a larger labor force, a measurable increase in productivity, and
an increasingly global economy. First quarter 1997 GDP growth was measured at
5.9 percent, far exceeding analysts' projections.
Second quarter economic data generally reflected a less robust pace of
growth than maintained during the first quarter. Most notably, a lower than
anticipated National Association of Purchasing Managers index in April 1997
indicated a slowdown of expansion in the manufacturing sector. New home sales
also dropped by 7.7 percent in April 1997, the sharpest decline in six months.
Automobile sales for April and May declined from year earlier levels, and
discounting became more common by automakers. A rise in the June unemployment
rate and GDP growth slowing to an annual rate of 2.2 percent in the second
quarter, which was well below the revised 4.9 percent rate recorded in the first
quarter, further signaled that the economy was slowing to a more sustainable
pace.
Economic data released in August 1997 provided mixed signals of economic
growth, as a decline in the July unemployment rate and an unexpectedly sharp
decline in the U.S. trade deficit provided indications of a strengthening
economy. At the same time, a modest increase in the July consumer price index
and a decline in July wholesale prices suggested that inflation remained
non-threatening. At the end of August, the second quarter GDP was revised upward
to a 3.6 percent annual growth rate compared to a 2.2 percent original estimate.
In early-
<PAGE>
RP Financial, LC.
Page 2.5
September, a slight increase in the August unemployment rate did little to
alleviate inflation concerns, as the employment data indicated that the job
market remained tight and wages continued to rise. Comparatively, only a slight
increase in the August consumer price index provided evidence that inflation
remained tame at the end of the third quarter. September unemployment data
served to further calm inflation fears in early-October, as the unemployment
rate was unchanged at 4.9 percent and fewer jobs than expected were added to the
economy.
At the beginning of the fourth quarter of 1997, inflation concerns became
more notable following congressional testimony by the Federal Reserve Chairman,
as he indicated that it would be difficult for the U.S. economy to maintain the
current balance between tight labor markets and low inflation. However, economic
data released in October and November provided mixed signals on the strength of
the economy. For example, a decline in the October unemployment rate to a
24-year low of 4.7 percent indicated a rapidly expanding economy, while,
comparatively, a decline in October retail sales suggested that the economy may
be slowing. Economic growth was also viewed as being contained by the upheaval
in Asian markets, based on expectations that international turmoil would result
in a drop in demand for U.S. exports. Fears of a revival in inflation were
further limited by tumbling oil prices. However, the threat of inflation was
rekindled in early-December on news of the November unemployment rate dropping
to a 24-year low of 4.6 percent, as the tight labor market pushed hourly wages
higher. Economic data released in mid-December provided for a more favorable
inflation outlook, as the increase in November retail sales was well below
economists expectations and producer prices declined in November.
Consistent with the mixed economic activity, interest rate trends have
been varied as well over the past year. Interest rates edged lower in November
1996, as the October economic data suggested that inflationary pressures were
non-threatening. Bond prices declined slightly in early-December, as investors
focused on weakness in the dollar and rising oil prices. Concern over Japanese
investors slowing their buying of U.S. Treasury notes caused bond prices to
slide in mid-December, despite economic data which continued to indicate mild
inflation. Interest rates were somewhat trendless at the close of 1996, as the
Federal Reserve elected not to change interest rates at its December meeting.
With few inflationary signs, interest rates held steady at the beginning
of 1997, which was followed by a mild easing in interest rates during the first
half of February. Indications of slowing economic growth and the Federal
Reserve's decision to leave rates unchanged at its
<PAGE>
RP Financial, LC.
Page 2.6
early-February meeting spurred the downward trend in interest rates. However,
interest rates edged higher in late-February, following renewed concerns by the
Federal Reserve Chairman over the sharp rise in the stock market during the past
two years. After stabilizing briefly, the strengthening economy and growing
expectations of a rate increase by the Federal Reserve propelled interest rates
higher in late-March. The Federal Reserve increased short-term interest rates by
0.25 percent in late-March, which was followed by a sharp sell-off in the bond
market. For the first time in six months, the rate on the 30-year benchmark bond
moved above 7.0 percent in late-March.
Inflation concerns pushed interest rates higher during the first half of
April 1997, which was followed by a slight decline in interest rates on rumors
of a national budget accord. News of the budget agreement and favorable
inflation data sustained the rally in bond prices through early-May. Interest
rates stabilized in mid-May, as the Federal Reserve opted not to raise interest
rates at its May meeting. The high level of consumer confidence indicated by the
May reading caused the 30-year bond yield to edge above 7.0 percent in late-May.
However, the increase was short-lived, as signs of slowing economic growth
provided for a lower interest rate environment during June.
The downward trend in interest rates became more pronounced during July
1997, following the Federal Reserve's decision to leave rates unchanged at its
early-July meeting and the release of new economic data that indicated inflation
was under control. Slower economic growth indicated by a second quarter GDP
growth rate of 2.2 percent sustained the rally in bond prices at the end of
July. However, in early-August, the stronger than expected job growth reflected
in the July employment data and a falling U.S. dollar against the yen and mark
caused bond prices to tumble. After recovering briefly on the favorable
inflation readings reflected in the July wholesale and retail prices, bond
prices declined in late-August on news of the narrower than expected June trade
deficit. Bond prices rallied briefly at the end August and in early-September,
due to technical pressures and economic data that showed manufacturing growth
cooled in August. Interest rates increased slightly in mid-September, reflecting
investor fears that the August economic data would show a strengthening economy
and higher prices. However, the low inflation reading indicated by the August
consumer price report ignited a bond market rally, with the yield on the 30-year
bond posting its second largest decline in the 1990s on September 16, 1997. Bond
prices approached their highest level in two years in early-October, reflecting
the stable inflation environment as confirmed by the September unemployment
data.
<PAGE>
RP Financial, LC.
Page 2.7
In mid-October 1997, renewed inflation fears raised by the tight labor
markets and growing expectations of a rate hike by the Federal Reserve provided
for an easing in bond prices. The sell-off in the global markets at the end of
October served to abbreviate the decline in bond prices, as skittish investors
dumped stocks in favor of bonds. The Federal Reserve's decision to leave
interest rates unchanged at its mid-November meeting, along with signs of
slowing economic growth indicated by a decline in October retail sales, served
to strengthen the advance in bond prices in mid-November as the yield on the
bellwether 30-year Treasury bond approached 6.0 percent. Renewed interest in
U.S. Treasury bonds by Japanese investors and fading concerns of inflation
provided for a stable bond market in late-November. The rally in bond prices was
not sustained in early-December, as bond prices declined on news of the
surprisingly strong jobs report for November. However, positive inflation news
indicated by the lower than expected increase in November retail sales and the
decline in November producer prices, as well as world market turmoil, served to
push the yield on the 30-year Treasury bond below 6.0 percent in mid-December.
As of December 12, 1997, one- and thirty-year U.S. Government bonds were
yielding 5.39 percent and 5.92 percent, respectively, versus comparative year
ago rates of 5.46 percent and 6.63 percent, respectively. Exhibit II-2 provides
historical interest rate trends from 1991 through December 12, 1997.
Local Economy
The northeastern section of Arkansas has an economy based on agriculture,
manufacturing, services and wholesale/retail trade. Agriculture and related
industries, which constitute the historical basis of the market area's economy,
continue to be a prominent factor throughout the market area, particularly in
the eastern portions of the market area in the plains near the Mississippi
River. Manufacturing employment in the market area is fairly diverse and
represents a relatively high portion of the earnings in the market area. Notably
the largest manufacturer in the market area, Brown Shoe Company, went out of
business in 1995, which resulted in the loss of more than 600 jobs. The loss of
jobs resulting from the closing of the Brown Shoe Company is gradually being
absorbed by the local economy, which will be aided by the planned opening of two
factories in Pocahontas that will add approximately 250 jobs to the local
economy. The Jonesboro's economy is more diverse and vibrant compared to the
other markets served by the Association, with the relative affluence of the
Jonesboro economy being supported a regional medical center, Arkansas State
University and a variety of manufacturing companies.
<PAGE>
RP Financial, LC.
Page 2.8
Overall, Pocahontas Federal's market area is fairly diverse in that there
is no single employer or industry that dominates the local economy. The slow
growth characteristics of the market area tend to limit fluctuations in real
estate values and speculative building activity, which has been favorable in
terms of limiting the Association's credit risk exposure. At the same time, the
rural nature of the market area represents a negative in terms of growth
potential that can be realized through establishing new customer relationships.
Opportunities for retail growth are viewed as being most favorable in Craighead
County, where the city of Jonesboro serves as the hub of economic activity for
the Northeastern Arkansas region.
Comparative unemployment rates for the primary market area, as well as for
the U.S. and Arkansas, are shown in Table 2.2. The unemployment data for the
market area further implies that growth opportunities are more favorable in
Craighead County, which exhibited the lowest unemployment rate among the five
primary market area counties. Unemployment was highest in Randolph County, which
could in part be related to the loss of jobs resulting from the closing of the
Brown Shoe Company. Three of the five market area counties posted declines in
unemployment compared to a year ago, which was consistent with the comparative
unemployment rates exhibited by the U.S. and Arkansas. Sharp County was the only
county where the unemployment rate increased from a year ago, while Craighead
County's unemployment rate did not change from a year ago.
Table 2.2
Market Area Unemployment Trends
Region September 1996 September 1997
------ -------------- --------------
United States 5.0% 4.7%
Arkansas 5.2 4.8
Clay County 5.7 4.2
Craighead County 4.0 4.0
Lawrence County 7.1 5.3
Randolph County 11.6 8.4
Sharp County 5.5 6.0
Source: U.S. Bureau of Labor Statistics.
<PAGE>
RP Financial, LC.
Page 2.9
Competition
Competition among financial institutions in the Association's market area
is significant, and, as larger institutions compete for market share to achieve
economies of scale, the market environment for the Association's products and
services is expected to become increasingly competitive in the future. Smaller
institutions such as Pocahontas Federal will be forced to either compete with
larger institutions on pricing, or to identify and operate in a "niche" that
will allow for operating margins to be maintained at profitable levels.
The Association's retail deposit base is closely tied to the economic
fortunes of the Northeastern Arkansas region and, in particular, the areas of
the region that are nearby to one of Pocahontas Federal's six branches. Table
2.3 displays deposit market trends from June 30, 1994 through June 30, 1996 for
the five counties where the Association maintained branches during that period.
Additional data is also presented for the State of Arkansas. The data indicates
that deposit growth in the Association's primary market area was positive, with
commercial banks accounting for most of the growth. As of June 30, 1996,
Pocahontas Federal was the only thrift institution that maintained a branch
presence in four out of the five counties served by the Association's branches.
The exception was Clay County, where one branch was maintained by another thrift
institution. During the period covered in Table 2.3, Clay County was the only
county where positive deposit growth was recorded by the Association.
Pocahontas Federal's largest concentration and largest market share of
deposits is maintained at the headquarters office in Randolph County. The
Association's $51.4 million of deposits at the Randolph County branch
represented a 29.7 percent market share of thrift and bank deposits at June 30,
1996, which was down from a 32.7 percent market share at June 30, 1994.
Likewise, from June 30, 1994 to June 30, 1996, the Association experienced
erosion in deposit market share in the other four counties where branches were
maintained. Beyond Randolph County, the Association's most notable market
presence for deposits was in Lawrence County, where the Association maintained a
15.5 percent market share of commercial bank and thrift deposits at June 30,
1996. Indicative of the rural nature of the Association's market area were the
relatively low balances of total deposits maintained in each of the market area
counties, except for Craighead County which had total bank and thrift deposits
of slightly greater than $1.0 billion as of June 30, 1996. Accordingly,
prospects for future deposit growth are viewed as being somewhat constrained by
the demographics of the market area, particularly in light of the high degree of
competition the Association is facing
<PAGE>
RP Financial, LC.
Page 2.10
Table 2.3
Pocahontas FS&LA
Deposit Summary
<TABLE>
<CAPTION>
As of June 30,
---------------------------------------------------------------
1994 1996
-------------------------------- ------------------------------ Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1994-1996
-------- ----- -------- -------- ----- -------- ---------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
State of Arkansas $25,229,147 100.0% 1,004 $27,973,585 100.0% 1,067 5.3%
Commercial Banks 22,878,368 90.7% 908 25,631,125 91.6% 969 5.8%
Savings Institutions 2,350,779 9.3% 96 2,342,460 8.4% 98 -0.2%
Clay County $175,302 100.0% 10 $190,098 100.0% 10 4.1%
Commercial Banks 149,330 85.2% 8 163,107 85.8% 8 4.5%
Savings Institutions 25,972 14.8% 2 26,991 14.2% 2 1.9%
Pocahontas FS&LA (1) 15,207 58.6% 1 15,807 58.6% 1 2.0%
Pocahontas FS&LA (2) 8.7% 8.3%
Craighead County $818,873 100.0% 38 $1,007,852 100.0% 35 10.9%
Commercial Banks 745,683 91.1% 34 998,328 99.1% 34 15.7%
Savings Institutions 73,190 8.9% 4 9,524 0.9% 1 -63.9%
Pocahontas FS&LA (1) 10,464 14.3% 1 9,524 100.0% 1 -4.6%
Pocahontas FS&LA (2) 1.3% 0.9%
Lawrence County $180,723 100.0% 11 $199,265 100.0% 13 5.0%
Commercial Banks 147,553 81.6% 10 168,355 84.5% 12 6.8%
Savings Institutions 33,170 18.4% 1 30,910 15.5% 1 -3.5%
Pocahontas FS&LA (1) 33,170 100.0% 1 30,910 100.0% 1 -3.5%
Pocahontas FS&LA (2) 18.4% 15.5%
Randolph County $159,610 100.0% 8 $172,936 100.0% 6 4.1%
Commercial Banks 107,452 67.3% 7 121,489 70.3% 5 6.3%
Savings Institutions 52,158 32.7% 1 51,447 29.7% 1 -0.7%
Pocahontas FS&LA (1) 52,158 100.0% 1 51,447 100.0% 1 -0.7%
Pocahontas FS&LA (2) 32.7% 29.7%
Sharp County $190,089 100.0% 11 $223,109 100.0% 9 8.3%
Commercial Banks 183,341 96.5% 10 216,988 97.3% 8 8.8%
Savings Institutions 6,748 3.5% 1 6,121 2.7% 1 -4.8%
Pocahontas FS&LA (1) 6,748 100.0% 1 6,121 100.0% 1 -4.8%
Pocahontas FS&LA (2) 3.5% 2.7%
</TABLE>
(1) Percent of thrift deposits.
(2) Percent of total deposits.
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 2.11
for those deposits, which includes a number of financial institutions with
greater resources than maintained by the Association. While fairly strong
deposit growth was recorded by the Association subsequent to the period shown in
Table 2.3, most of the growth was realized through the national CD market rather
than the Association's local customer base. Such growth was realized through
offering attractive market rates for certain CD terms and, thus, those funds are
viewed as being highly rate sensitive.
Future deposit growth may be enhanced by the infusion of the conversion
proceeds, as the additional capital will improve Pocahontas Federal's
competitive position and leverage capacity. The Association should also continue
to benefit from its favorable image as a locally-owned and community-oriented
institution, as the trend of consolidation among financial institutions is
expected to provide Pocahontas Federal with additional opportunities to acquire
customers, facilities and key personnel that become available as the result of
community banks being acquired. However, given the competition faced by
Pocahontas Federal, it will be difficult for the Association to realize notable
gains in deposit market share without paying above market rates for deposits or
further expanding Pocahontas Federal's branch network. As noted previously, the
Association will be expanding its branch network through the acquisition of
three commercial bank branches, which will serve to increase Pocahontas
Federal's presence in markets currently served by one of the Association's
branches.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Pocahontas Federal's operations
versus a group of comparable savings institutions (the "Peer Group") selected
from the universe of all publicly-traded savings institutions. The basis of the
pro forma market valuation of Pocahontas Federal is provided by these
institutions. Factors affecting the Association's pro forma value such as
financial condition, credit risk, interest rate risk, loan composition and
recent operating results can be readily assessed in relation to the Peer Group.
Current market pricing of the Peer Group, subject to appropriate adjustments to
account for differences between Pocahontas Federal and the Peer Group, will then
be used as a basis for the pro forma valuation of Pocahontas Federal's
to-be-issued common stock.
Selection of Peer Group
We consider the appropriate Peer Group to be comprised of only those
publicly-traded savings institutions whose common stock is either listed on a
national exchange or is NASDAQ listed, since the market for companies trading in
this fashion is regular and reported. We believe non-listed institutions are
inappropriate since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have also excluded from the Peer Group those
companies under acquisition, mutual holding companies and recent conversions,
since their pricing ratios are subject to distortion and/or do not have a
seasoned trading history.
From the universe of publicly-traded thrifts, we selected eleven
institutions with characteristics similar to those of Pocahontas Federal. In the
selection process, we applied two primary "screens" to the universe of all
public companies:
o Screen #1. Arkansas institutions with assets of $150 million to $600
million, equity-to-assets ratios between 6.0 percent and 16.0
percent, and positive core return on average assets of less than 1.5
percent. One out of the three publicly-traded Arkansas institutions
met the criteria for Screen #1 and was included for the Peer Group:
First Federal Bancshares of Arkansas. Exhibit III-2 details the
financial characteristics of all publicly-traded Arkansas
institutions.
o Screen #2. Mid-West and Southeast institutions with assets of $100
million to $600 million, equity-to-assets ratios between 6.0 percent
and 16.0 percent, positive core return on average assets of less
than 1.5 percent, and net interest income to average assets ratios
of less than 3.0 percent. Nineteen institutions met the selection
criteria for Screen #2 (see Exhibit III-3), and ten were
<PAGE>
RP Financial, LC.
Page 3.2
included as part of Pocahontas Federal's Peer Group: 1st Bancorp of
Vincennes Indiana, Eagle BancGroup of Illinois, Enterprise Federal
Bancorp of Ohio, FSF Financial Corp. of Minnesota, HMN Financial,
Inc. of Minnesota, Hallmark Capital Corp. of Wisconsin, MBLA
Financial Corp. of Missouri, Midwest Bancshares, Inc. of Iowa,
Milton Federal Financial Corp. of Ohio, Permanent Bancorp of
Indiana.
Of the nine institutions excluded, five were excluded on the basis
of maintaining an interest-earning asset composition with a
relatively high concentration of loans. The loans-to-assets ratios
for the five companies excluded have been noted parenthetically:
Cooperative Bank for Savings of North Carolina (80.0 percent),
Fidelity Bancorp of Chicago (78.0 percent), Fidelity Federal Bancorp
of Indiana (83.6 percent), Home Bancorp of Fort Wayne Indiana (81.4
percent), and Perpetual Midwest Financial of Iowa (82.4 percent).
Comparatively, Pocahontas Federal's loans-to-assets ratio equaled
41.6 percent.
Of the remaining three companies that were not selected for the Peer
Group, two were excluded on the basis of maintaining relatively high
operating expenses. First Mutual Bancorp of Illinois and SuburbFed
Financial Corp. of Illinois posted operating expense to average
assets ratios of 2.76 percent and 2.60 percent, respectively.
Comparative, Pocahontas Federal's operating expense to average
assets ratio equaled 1.32 percent. First Franklin Corp. of Ohio was
the other candidate excluded from the Peer Group, as the result of
maintaining a relatively low level of borrowings. First Franklin's
borrowings-to-assets ratio equaled 2.6 percent, versus a comparative
ratio of 55.1 percent for Pocahontas Federal.
Table 3.1 on the following page shows the general characteristics of each
of the Peer Group companies and Exhibit III-4 provides summary demographic data
for the primary market areas served by each of the Peer Group companies. While
there are some differences between the Peer Group companies and Pocahontas
Federal, we believe that the Peer Group provides a good representation of
publicly-traded thrifts with operations comparable to those of the Association
and, thus, will provide a good basis for valuation. The following sections
present a comparison of Pocahontas Federal's financial condition, income and
expense trends, loan composition, interest rate risk and credit risk versus the
Peer Group. The conclusions drawn from the comparative analysis are then
factored into the valuation analysis discussed in the final chapter.
A summary description of the key characteristics of each of the Peer Group
companies, which we determined warranted their inclusion as a comparable
institution to Pocahontas Federal, is detailed below.
o 1st Bancorp of Vincennes IN. Selected due to high use of borrowings,
relatively low net interest margin, and high concentration of MBS and 1-4
family permanent mortgage loans comprising the MBS and loan portfolio.
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
December 19, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 569 7 12-31 06/94 26.25 111
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 547 12 12-31 05/96 23.75 116
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 434 12 03-31 04/94 26.06 55
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 418 3 06-30 01/94 15.25 44
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 388 11 09-30 10/94 19.12 58
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 275 5 09-30 10/94 28.25 56
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 261 1 06-30 04/87 26.00 27
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 224 2 06-30 06/93 27.25 35
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 210 2 09-30 10/94 15.12 35
EGLB Eagle BancGroup of IL OTC Central IL Thrift 172 3 12-31 07/96 19.25 23
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 150 4 12-31 11/92 17.75 18
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift,
M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information
published in SNL Securities Quarterly Thrift Report, and financial
reports of publicly-traded thrifts.
Date of Last Update: 12/19/97
<PAGE>
RP Financial, LC.
Page 3.4
o Eagle BancGroup of IL. Selected due to comparable asset size, similar
capital position as the Association's pro forma capital position, and
relatively low net interest margin.
o Enterprise Federal Bancorp of OH. Selected due to similar size of branch
network, similar capital position as the Association's pro forma capital
position, high use of borrowings, relatively low net interest margin,
comparable level of operating expenses, and favorable credit quality
measures.
o FSF Financial Corp. of MN. Selected due to similar asset size, similar
capital position as the Association's pro forma capital position, high use
of borrowings, and favorable credit quality measures.
o First Fed. Bancshares of AR. Selected due to Arkansas market area,
relatively low level of operating expenses, and high concentration of MBS
and 1-4 family permanent mortgage loans comprising the MBS and loan
portfolio.
o HMN Financial, Inc. of MN. Selected due to similar size of branch network,
relatively low level of operating expenses, high concentration of MBS and
1-4 family permanent mortgage loans comprising the MBS and loan portfolio,
and favorable credit quality measures.
o Hallmark Capital Corp. of WI. Selected due to comparable asset size,
relatively low net interest margin, relatively low level of operating
expenses, and favorable credit quality measures.
o MBLA Financial Corp. of MO. Selected due to low level of loans comprising
interest-earning assets, high use of borrowings, similar capital position
as the Association's pro forma capital position, relatively low net
interest margin, low level of operating expenses, high concentration of
MBS and 1-4 family permanent mortgage loans comprising the MBS and loan
portfolio, and favorable credit quality measures.
o Midwest Bancshares, Inc. of IA. Selected due to low level of loans
comprising interest-earning assets, relatively low level of operating
expenses, and relatively high concentration of MBS comprising the MBS and
loan portfolio.
o Milton Fed. Fin. Corp. of OH. Selected due to low level of loans
comprising interest-earning assets, similar capital position as the
Association's pro forma capital position, high concentration of MBS and
1-4 family permanent mortgage loans comprising the MBS and loan portfolio,
and favorable credit quality measures.
o Permanent Bancorp of IN. Selected due to low level of loans comprising
interest-earning assets, high concentration of MBS and 1-4 family
permanent mortgage loans comprising the MBS and loan portfolio, and
favorable credit quality measures.
In aggregate, the Peer Group companies are not as highly capitalized as
the industry average (11.07 percent of assets versus 13.00 percent for the all
SAIF average), generate
<PAGE>
RP Financial, LC.
Page 3.5
lower earnings as a percent of average assets (0.69 percent core ROAA versus
0.87 percent for the all SAIF average), and generate a lower ROE (6.31 percent
core ROE versus 7.81 percent for the all SAIF average). Overall, the Peer
Group's average P/B ratio and core P/E multiple were below and above the
respective comparable SAIF averages.
As of Dec. 12, 1997
-------------------
Peer All SAIF
Group Insured
----- -------
Equity-to-Assets 11.07% 13.00%
Core Return on Assets ("ROA") 0.69 0.87
Core Return on Equity ("ROE") 6.31 7.81
Price-to-Book ratio ("P/B") 138.46% 159.37%
Core Price-to-Earnings multiple ("P/E") 22.24x 20.43x
Price-to-Assets ratio ("P/A") 15.17% 19.33%
Source: Table 4.4 - Chapter IV Valuation Analysis.
Ideally, the Peer Group companies would be comparable to Pocahontas
Federal in terms of all of the selection criteria, but the universe of
publicly-traded thrifts does not provide for an appropriate number of such
companies. However, in general, the companies selected for the Peer Group were
fairly comparable to Pocahontas Federal, as will be highlighted in the following
comparative analysis.
Financial Condition
Table 3.2 shows comparative balance sheet measures for Pocahontas Federal
and the Peer Group, reflecting the expected similarities and some differences
given the selection procedures outlined above. The Association's and the Peer
Group's ratios reflect balances as of September 30, 1997. Pocahontas Federal's
net worth base of 6.3 percent was below the Peer Group's average net worth ratio
of 11.1 percent; however, with the addition of stock proceeds, the Association's
pro forma capital position (consolidated with the holding company) will be
comparable to the Peer Group's ratio. All of Pocahontas Federal's capital
consisted of tangible capital, while the Peer Group's equity-to-assets ratio
included a nominal amount of intangible net worth. Both the Association's and
the Peer Group's capital ratios reflected capital surpluses with respect to the
regulatory capital requirements, with the Peer Group's
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of September 30, 1997
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pocahontas Federal
- ------------------
September 30, 1997 13.1 41.6 44.0 37.4 55.1 0.0 6.3 0.0 6.3 0.0
SAIF-Insured Thrifts 17.6 68.1 11.1 70.1 15.2 0.2 12.9 0.2 12.6 0.0
State of AR 17.9 69.7 9.6 79.3 3.3 0.0 16.3 0.2 16.1 0.0
Comparable Group Average 22.3 64.8 10.4 63.5 24.5 0.0 11.1 0.0 11.0 0.0
Mid-West Companies 22.3 64.8 10.4 63.5 24.5 0.0 11.1 0.0 11.0 0.0
Comparable Group
- ----------------
Mid-West Companies
- ------------------
FBCV 1st Bancorp of Vincennes IN 26.6 68.5 1.0 51.7 38.4 0.0 8.7 0.2 8.5 0.0
EGLB Eagle BancGroup of IL 18.0 72.1 7.0 76.5 10.9 0.0 11.9 0.0 11.9 0.0
EFBI Enterprise Fed. Bancorp of OH 10.9 69.5 17.7 53.2 34.6 0.0 11.4 0.0 11.4 0.0
FFHH FSF Financial Corp. of MN 30.8 67.1 0.0 53.7 34.5 0.0 11.2 0.0 11.2 0.0
FFBH First Fed. Bancshares of AR 20.7 77.5 0.0 82.4 1.8 0.0 14.9 0.0 14.9 0.0
HMNF HMN Financial, Inc. of MN 15.6 62.4 19.5 64.5 19.7 0.0 14.9 0.0 14.9 0.0
HALL Hallmark Capital Corp. of WI 19.8 67.4 11.3 67.2 23.6 0.0 7.3 0.0 7.3 0.0
MBLF MBLA Financial Corp. of MO 34.5 57.7 7.0 46.6 40.1 0.0 12.7 0.0 12.7 0.0
MWBI Midwest Bancshares, Inc. of IA 18.2 60.7 18.2 70.6 21.7 0.0 6.9 0.0 6.9 0.0
MFFC Milton Fed. Fin. Corp. of OH 27.9 60.7 8.5 68.0 18.8 0.0 12.6 0.0 12.6 0.0
PERM Permanent Bancorp of IN 22.3 49.7 24.6 64.3 25.2 0.0 9.5 0.1 9.3 0.0
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
------------------------------------------------------------ -------------------------
Cash and Loans Borrows. Net Tng Net
Assets Investments & MBS Deposits &Subdebt Worth Worth Tangible Core Reg.Cap.
------ ----------- ------ -------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pocahontas Federal
- ------------------
September 30, 1997 0.49 -15.50 3.89 23.28 -11.00 6.86 6.86 6.32 6.32 16.22
SAIF-Insured Thrifts 11.67 5.08 13.14 8.10 14.45 3.29 2.57 11.01 11.05 22.66
State of AR 14.08 -9.60 7.07 4.85 37.28 0.69 0.69 13.55 13.55 24.15
Comparable Group Average 6.80 -1.26 11.58 6.92 11.48 -0.47 -0.67 9.85 9.56 20.18
Mid-West Companies 6.80 -1.26 11.58 6.92 11.48 -0.47 -0.67 9.85 9.56 20.18
Comparable Group
- ----------------
Mid-West Companies
- ------------------
FBCV 1st Bancorp of Vincennes IN 1.15 -0.94 10.31 0.64 1.36 6.73 4.70 8.76 8.76 15.96
EGLB Eagle BancGroup of IL 5.14 -16.00 12.70 -0.27 NM -6.54 -6.54 9.89 9.89 17.31
EFBI Enterprise Fed. Bancorp of OH 16.88 -43.89 35.56 4.91 58.33 -4.94 -4.85 10.46 10.46 19.04
FFHH FSF Financial Corp. of MN 9.45 -7.47 20.22 10.14 16.67 -9.00 -9.00 10.10 10.10 19.20
FFBH First Fed. Bancshares of AR 7.36 -1.76 10.14 7.00 NM -2.25 -2.25 11.81 11.81 22.48
HMNF HMN Financial, Inc. of MN 0.61 16.53 -3.14 0.75 9.99 1.14 1.14 10.68 10.68 24.62
HALL Hallmark Capital Corp. of WI 7.94 3.67 9.23 13.40 -4.57 12.41 12.41 NM 6.59 12.64
MBLF MBLA Financial Corp. of MO -1.49 -17.98 10.27 21.36 -19.83 1.29 1.29 12.01 12.01 32.63
MWBI Midwest Bancshares, Inc. of IA 8.82 26.66 5.60 4.47 25.48 14.31 14.31 6.09 6.09 14.23
MFFC Milton Fed. Fin. Corp. of OH 16.11 38.32 8.45 11.11 NM -21.19 -21.19 10.34 10.34 22.83
PERM Permanent Bancorp of IN 2.82 -11.03 8.04 2.65 4.39 2.80 2.61 8.38 8.44 21.01
</TABLE>
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.7
ratios currently indicating greater capital surpluses. Again, on a pro forma
basis, the Association's capital surpluses will be more comparable to the Peer
Group's ratios.
The interest-earning asset compositions for the Association and the Peer
Group reflected some differences, in light of the relatively high concentration
of mortgage-backed securities and relatively low concentration of loans
maintained by Pocahontas Federal. Pocahontas Federal's combined level of
mortgage-backed securities and cash and investments equaled 57.1 percent of
assets, versus a comparative ratio of 32.7 percent for the Peer Group.
Conversely, Pocahontas Federal's ratio of loans-to-assets was well below the
Peer Group's ratio, based on comparative ratios of 41.6 percent and 64.8
percent, respectively. The differences in the Association's and Peer Group's
interest-asset compositions can be largely attributed to Pocahontas Federal's
wholesale leveraging strategy, in which the Association utilized borrowings to
invest in mortgage-backed securities. Overall, Pocahontas Federal's
interest-earning assets amounted to 98.7 percent of assets, which was slightly
above the Peer Group's comparative ratio of 97.5 percent.
Pocahontas Federal's wholesale leveraging strategy was also evident in its
funding composition, as borrowings accounted for the largest portion of the
Association's interest-bearing liabilities. The Association's
borrowings-to-assets ratio of 55.1 percent was well above the comparative Peer
Group ratio of 24.5 percent. Comparatively, retail deposits constituted the
major source of interest-bearing funds utilized by the Peer Group, with the Peer
Group's deposits-to-assets ratio of 63.5 percent being well above the
Association's comparative ratio of 37.4 percent. Accordingly, the Peer Group was
considered to have greater borrowing capacity than the Association. Total
interest-bearing liabilities maintained by the Association and the Peer Group,
as a percent of assets, equaled 92.5 percent and 88.0 percent, respectively,
with the Peer Group's lower ratio being supported by maintenance of a higher
capital position.
A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Association's IEA/IBL ratio is lower than the Peer
Group's ratio, based on respective ratios of 106.7 percent and 110.8 percent.
The additional capital realized from stock proceeds should serve to address the
lower IEA/IBL ratio currently maintained by the Association, as the interest
free capital realized in Pocahontas Federal's stock offering will be deployed
into interest-earning assets.
<PAGE>
RP Financial, LC.
Page 3.8
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. Pocahontas Federal's and the Peer Group's growth rates are
based on annual growth for the twelve months ended September 30, 1997. Asset
growth rates of positive 0.5 percent and positive 6.8 percent were posted by the
Association and the Peer Group, respectively. Pocahontas Federal's asset growth
measures reflect the Association's limited capacity to realize further growth in
total assets following the implementation of the wholesale leveraging strategy
in prior fiscal years and the Association's current strategy of gradually
replacing investments with more favorable yielding loan growth. Overall, loan
growth of approximately 16.7 percent was in part funded by redeployment of cash
and investments, as well as cash flow generated from mortgage-backed securities
repayments. The Peer Group's stronger asset growth was realized through growth
in loans and mortgage-backed securities (growth rate of 11.6 percent), which was
slightly negated by a 1.3 percent decline in cash and investments. Overall, the
Peer Group's asset growth measures would tend to support greater earnings growth
relative to the Association's measures. However, following the conversion,
Pocahontas Federal's leverage capacity will be more comparable to the Peer
Group's.
Deposit growth, which was mostly related to CD growth realized in the
national CD market, funded the Association's asset growth, as well as the
paydown of borrowings. Comparatively, the Peer Group's asset growth was funded
by deposits and borrowings, with the Peer Group's lower balance of borrowings
exhibiting a higher growth rate than deposits. In fact, the Peer Group's
borrowings growth rate shown in Table 3.2 was somewhat understated, as the "NM"
borrowings growth rate shown for three of the Peer Group companies included
companies with borrowings growth rates in excess of 100 percent. For the period
shown in Table 3.2, all three of the Peer Group companies showing "NM" borrowing
growth rates posted borrowing growth rates in excess of 100 percent. Capital
growth rates of positive 6.9 percent and negative 0.5 percent were posted by the
Association and the Peer Group, respectively, with the Peer Group's higher
return on assets ratio being more than offset by maintenance of a high level of
capital, dividend payments, stock repurchases and possible negative SFAS 115
adjustments. Pocahontas Federal's positive capital growth rate resulted from
earnings being partially offset by dividend payments.
Income and Expense Components
Pocahontas Federal and the Peer Group reported net income to average
assets ratios of 0.63 percent and 0.78 percent, respectively, based on earnings
for the twelve months ended
<PAGE>
RP Financial, LC.
Page 3.9
September 30, 1997 (see Table 3.3). The Peer Group's higher profitability was
supported by maintenance of a higher net interest margin, which was partially
offset by Pocahontas Federal's lower level of operating expenses. Loan loss
provisions and gains were a slightly larger factor in the Peer Group's earnings.
The Peer Group's more favorable net interest income ratio resulted from
both a higher interest income ratio and a lower interest expense ratio. The Peer
Group's higher interest income ratio was supported by a higher yield earned on
interest-earning assets (7.55 percent versus 7.20 percent for the Peer Group),
which was consistent with the Peer Group's high concentration of loans
comprising interest-earning assets and greater diversification into higher
yielding types of loans. Likewise, the Peer Group's lower interest expense ratio
was realized through maintaining a slightly lower a lower cost of funds (5.32
percent versus 5.37 percent for the Association), as well as a lower level of
interest-bearing liabilities. The Association's higher funding costs could
largely be attributed to its funding composition, which consisted of a higher
concentration of borrowings than deposits and a deposits composition which was
concentrated in CDs, including relatively high costing CDs obtained in the
national market. Following the infusion of conversion proceeds, the level of
interest-bearing liabilities maintained by the Association should be more
comparable to the Peer Group's ratio. Overall, Pocahontas Federal and the Peer
Group reported net interest income to average assets ratios of 2.12 percent and
2.69 percent, respectively.
In another key area of core earnings strength, the Association maintained
a lower level of operating expenses than the Peer Group. For the period covered
in Table 3.3, the Association and the Peer Group recorded operating expense to
average assets ratios of 1.32 percent and 1.78 percent, respectively. Pocahontas
Federal's lower operating expense ratio is supported by its implementation of a
wholesale leveraging strategy, in which the incremental increase in the cost to
service asset growth consisting substantially of investments is very limited.
The leveraging impact on compensation expenses resulting from the Association's
wholesale leveraging strategy is further indicated by the Association's assets
per full time equivalent employee measure of $6.4 million, which was above the
Peer Group average of $5.5 million. On a post-conversion basis, the
Association's operating expenses can be expected to increase with the addition
of public company reporting expenses and stock benefit plans, with such expenses
already impacting the Peer Group's operating expenses.
When viewed together, net interest income and operating expenses provide
considerable insight into a thrift's earnings strength, since those sources of
income and expenses are
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
<TABLE>
<CAPTION>
Net Interest Income Other Income
---------------------------- -------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pocahontas Federal
- ------------------
September 30, 1997 0.63 7.08 4.96 2.12 0.02 2.10 0.00 0.00 0.19 0.19
SAIF-Insured Thrifts 0.90 7.41 4.13 3.29 0.13 3.16 0.12 0.01 0.30 0.43
State of AR 0.92 7.62 4.29 3.33 0.04 3.29 0.06 0.03 0.22 0.30
Comparable Group Average 0.78 7.35 4.66 2.69 0.07 2.62 0.05 0.00 0.18 0.23
Mid-West Companies 0.78 7.35 4.66 2.69 0.07 2.62 0.05 0.00 0.18 0.23
Comparable Group
- ----------------
Mid-West Companies
- ------------------
FBCV 1st Bancorp of Vincennes IN 0.72 7.54 5.07 2.47 0.16 2.31 0.13 -0.03 0.26 0.36
EGLB Eagle BancGroup of IL 0.32 7.18 4.74 2.44 0.13 2.31 0.09 0.02 0.12 0.22
EFBI Enterprise Fed. Bancorp of OH 0.93 7.46 4.66 2.79 0.06 2.73 0.00 0.00 0.05 0.05
FFHH FSF Financial Corp. of MN 0.84 7.38 4.42 2.96 0.03 2.93 0.08 0.00 0.32 0.39
FFBH First Fed. Bancshares of AR 1.06 7.57 4.42 3.15 0.01 3.14 0.00 0.03 0.25 0.28
HMNF HMN Financial, Inc. of MN 1.00 7.21 4.44 2.77 0.05 2.71 0.00 0.00 0.18 0.18
HALL Hallmark Capital Corp. of WI 0.65 7.61 5.16 2.45 0.16 2.28 0.03 0.00 0.20 0.23
MBLF MBLA Financial Corp. of MO 0.83 7.03 4.89 2.13 0.04 2.09 0.00 -0.01 0.01 0.00
MWBI Midwest Bancshares, Inc. of IA 0.87 7.41 4.61 2.80 0.03 2.77 0.00 0.02 0.23 0.25
MFFC Milton Fed. Fin. Corp. of OH 0.73 7.28 4.31 2.97 0.04 2.93 0.02 0.01 0.11 0.14
PERM Permanent Bancorp of IN 0.62 7.17 4.54 2.63 0.03 2.60 0.21 0.01 0.21 0.43
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- -------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pocahontas Federal
- ------------------
September 30, 1997 1.32 0.00 0.00 0.00 7.20 5.37 1.83 6,390 36.13
SAIF-Insured Thrifts 2.20 0.02 0.03 0.00 7.68 4.84 2.85 4,267 37.00
State of AR 2.08 0.03 0.03 0.00 7.84 5.11 2.73 3,899 36.23
Comparable Group Average 1.77 0.01 0.14 0.00 7.55 5.32 2.23 5,473 34.57
Mid-West Companies 1.77 0.01 0.14 0.00 7.55 5.32 2.23 5,473 34.57
Comparable Group
- ----------------
Mid-West Companies
- ------------------
FBCV 1st Bancorp of Vincennes IN 2.34 0.03 0.55 0.00 8.07 5.60 2.47 3,070 15.13
EGLB Eagle BancGroup of IL 2.18 0.00 0.11 0.00 7.42 5.46 1.96 3,311 30.87
EFBI Enterprise Fed. Bancorp of OH 1.58 0.01 0.23 0.00 7.60 5.38 2.22 7,234 34.65
FFHH FSF Financial Corp. of MN 1.93 0.00 0.01 0.00 7.55 5.06 2.49 4,313 40.26
FFBH First Fed. Bancshares of AR 1.85 0.00 0.08 0.00 7.71 5.29 2.42 3,507 35.36
HMNF HMN Financial, Inc. of MN 1.53 0.00 0.23 0.00 7.36 5.28 2.08 4,904 36.91
HALL Hallmark Capital Corp. of WI 1.53 0.00 0.02 0.00 7.73 5.65 2.08 5,732 34.87
MBLF MBLA Financial Corp. of MO 0.65 0.00 -0.03 0.00 7.08 5.65 1.43 17,232 41.16
MWBI Midwest Bancshares, Inc. of IA 1.80 0.00 0.16 0.00 7.63 4.99 2.64 3,842 36.83
MFFC Milton Fed. Fin. Corp. of OH 2.09 0.00 0.12 0.00 7.49 5.09 2.40 3,620 33.96
PERM Permanent Bancorp of IN 1.95 0.05 0.00 0.00 7.42 5.06 2.35 3,441 40.30
</TABLE>
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.11
typically the most prominent components of earnings and are generally more
predictable than losses and gains realized from the sale of assets or other
non-recurring activities. In this regard, as measured by their expense coverage
ratios (net interest income divided by operating expenses), Pocahontas Federal's
earnings strength was slightly more favorable than the Peer Group's. Expense
coverage ratios posted by Pocahontas Federal and the Peer Group equaled 1.61x
and 1.51x, respectively. An expense coverage ratio of greater than 1.0x
indicates that an institution is able to sustain pre-tax profitability without
having to rely on non-interest sources of income.
Sources of non-interest operating income made minor contributions to
Pocahontas Federal's and the Peer Group's earnings, with such income amounting
to 0.19 percent and 0.23 percent of Pocahontas Federal's and the Peer Group's
average assets, respectively. The modest amount of the Association's and the
Peer Group's earnings realized from non-interest operating income is consistent
with their traditional thrift operating strategies, which typically provides for
limited diversification into services that generate non-interest operating
income. Further constraining non-interest operating income for the Association
is a deposit base which contains a relatively low concentration of fee oriented
transaction accounts and the wholesale leveraging strategy which results in
growth without adding to the retail customer base that accounts for the bulk of
the Association's non-interest operating income in the form of fees and service
and charges. Taking non-interest operating income into account in comparing the
Association's and the Peer Group's earnings, Pocahontas Federal's efficiency
ratio (operating expenses, net of goodwill amortization, as a percent of
non-interest operating income and net interest income) of 57.1 percent compared
favorably to the Peer Group's efficiency ratio of 60.6 percent.
Favorable credit quality measures and low risk operating strategies served
to limit the impact of loss provisions on Pocahontas Federal's and the Peer
Group's earnings, with loss provisions established by the Association and the
Peer Group amounting to 0.02 percent and 0.07 percent of average assets,
respectively.
Gains and losses realized from the sale of loans and investments were not
a factor in the Association's earnings, while, comparatively, the Peer Group
recorded net gains amounting to 0.14 percent of average assets. Given the
generally non-recurring nature of gains realized from the sale of loans and
investments, the net gains reflected in the Peer Group's earnings will be
discounted in evaluating the relative strengths and weaknesses of the
Association's and the Peer Group's respective earnings.
<PAGE>
RP Financial, LC.
Page 3.12
Both the Association and the Peer Group exhibited effective tax rates
which indicated earnings were being fully taxed, with Pocahontas Federal
recording a slightly higher effective tax rate than the Peer Group (36.13
percent versus 34.57 percent for the Peer Group). Overall, the Association's and
the Peer Group's reported earnings were considered to be fairly representative
of their core earnings.
Loan Composition
Table 3.4 presents data related to the loan composition of Pocahontas
Federal and the Peer Group. The Peer Group's loan portfolio composition
reflected greater diversification into higher risk types of lending, with low
risk 1-4 family permanent mortgage loans and mortgage-backed securities
accounting for 89.8 percent and 82.2 percent of Pocahontas Federal's and the
Peer Group's loan and MBS portfolios, respectively. Pocahontas Federal's higher
ratio was attributable to its significantly higher concentration of
mortgage-backed securities, which was somewhat offset by the Peer Group's
significantly higher concentration of 1-4 family permanent mortgage loans. The
Association did not maintain any loans serviced for others, reflecting
Pocahontas Federal's general philosophy of either retaining loan originations
for portfolio or selling loans on a servicing released basis. Comparatively,
loans serviced for others was a more notable off-balance sheet item for some of
the Peer Group companies, as indicated by the Peer Group's average loans
serviced for others balance of $23.3 million, or approximately 7.0 percent of
the Peer Group's average assets. The Peer Group's off-balance sheet loan
servicing represents a positive valuation consideration in terms of recurring
earnings strength and, thus, was factored into our comparative analysis of
income and expense components. Loans servicing intangibles were not a
significant balance sheet item for the Peer Group, averaging $102,000 or 0.44
percent of the loans serviced for others portfolio.
As indicated by the higher percentage of 1-4 family loans and
mortgage-backed securities maintained by the Association, lending
diversification was more extensive for the Peer Group. The Peer Group's lending
diversification consisted substantially of commercial business loans (8.0
percent of loans and MBS), followed by commercial real estate and multi-family
loans (6.5 percent of loans and MBS). Comparatively, the Association's primary
area of lending diversification consisted of commercial real estate and
multi-family loans (4.8 percent of loans and MBS), followed by construction
loans (2.4 percent of loans and MBS) and commercial business loans (2.0 percent
of loans and MBS). Construction loans
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of September 30, 1997
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
----------- ------ ------ ------ ------ ------ -------- ------ ---------- ------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pocahontas Federal 50.62 39.19 2.35 4.76 1.96 1.12 41.66 0 0
SAIF-Insured Thrifts 14.95 62.12 5.31 11.80 6.30 1.67 52.63 401,148 3,376
State of AR 0.58 77.93 5.91 9.59 7.24 1.70 53.46 8,791 9
Comparable Group Average 12.56 69.62 4.70 6.51 7.99 0.83 49.74 23,268 102
Comparable Group
----------------
FBCV 1st Bancorp of Vincennes IN 1.48 86.64 3.04 3.90 5.83 0.08 56.44 102,921 813
EGLB Eagle BancGroup of IL 13.33 53.75 1.17 3.98 27.20 0.96 59.23 36,765 73
EFBI Enterprise Fed. Bancorp of OH 15.39 59.90 10.40 16.17 3.60 0.58 55.91 0 0
FFHH FSF Financial Corp. of MN 0.04 68.10 12.73 6.58 15.53 2.79 52.95 38,429 34
FFBH First Fed. Bancshares of AR 0.06 84.99 4.73 5.23 7.18 1.04 53.32 3,011 0
HMNF HMN Financial, Inc. of MN 3.84 88.51 1.48 2.30 5.29 0.26 43.13 1,418 0
HALL Hallmark Capital Corp. of WI 19.47 61.04 7.89 9.48 2.15 0.00 55.38 30,967 88
MBLF MBLA Financial Corp. of MO 15.56 78.14 0.00 5.74 0.24 0.31 37.48 0 0
MWBI Midwest Bancshares, Inc. of IA 27.54 55.86 1.48 7.95 4.98 3.08 45.90 0 0
MFFC Milton Fed. Fin. Corp. of OH 11.69 78.68 7.02 5.52 1.70 0.00 45.47 9,843 109
PERM Permanent Bancorp of IN 29.80 50.27 1.80 4.79 14.20 0.02 41.98 32,597 0
</TABLE>
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.14
accounted for 4.7 percent of the Peer Group's loan and MBS portfolio, while
consumer loans represented a minor area of lending diversification for both the
Association and the Peer Group. The Peer Group's greater diversification into
higher risk types of lending translated into a higher risk weighted
assets-to-assets ratio than maintained by the Association (49.7 percent versus
41.7 percent for the Association). Overall, both the Association's and the Peer
Group's risk weighted assets ratios were indicative of relatively low risk
operating strategies, as both ratios fell below the comparative average ratio
for all publicly-traded SAIF-insured thrifts which equaled 52.6 percent.
Interest Rate Risk
Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Association versus the Peer Group companies. In terms
of balance sheet composition, Pocahontas Federal's interest rate risk
characteristics were considered to be less favorable than the Peer Group's. In
particular, Pocahontas Federal's lower capital position and lower IEA/IBL ratio
indicate a greater dependence on the yield-cost spread to sustain the net
interest margin. However, Pocahontas Federal's lower level of non-interest
earning assets was a positive consideration in terms of capacity to generate
interest income. On a pro forma basis, the infusion of stock proceeds should
serve to increase the Association's equity-to-assets ratio and IEA/IBL ratio to
levels that are more comparable to the comparative Peer Group ratios.
To analyze interest rate risk associated with the net interest margin, we
reviewed quarterly changes in net interest income as a percent of average assets
for Pocahontas Federal and the Peer Group. In general, the relative fluctuations
in both the Association's and the Peer Group's net interest income to average
assets ratios were considered to be fairly limited and, thus, based on the
interest rate environment that prevailed during the period covered in Table 3.5,
neither Pocahontas Federal or the Peer Group were viewed as having significant
interest rate risk exposure in their respective net interest margins. The
stability of the Association's net interest margin should be enhanced by the
infusion of stock proceeds, as interest-rate sensitive liabilities will be
funding a lower portion of Pocahontas Federal's assets.
Credit Risk
Overall, Pocahontas Federal's credit risk exposure appeared to be slightly
less than the Peer Group's, with both the Association's and the Peer Group's
credit quality measures being
<PAGE>
RP Financial, LC.
Page 3.15
Table 3.5
Pocahontas Federal Savings and Loan Association and the Peer Group
Interest Rate Risk Comparative Analysis
Interest-Earning Non Interest-
Assets/ Earning
Equity/ Interest-Bearing Assets(2)/
Assets Liabilities(1) Assets
---------- ---------------- -------------
(%) (%) (%)
Pocahontas Federal(3) 6.3% 106.7% 1.3%
Peer Group Average 11.1% 111.0% 3.0%
Peer Group(4)
- -------------
1st Bancorp of Vincennes IN 8.7% 106.7% 6.3%
Eagle BancGroup of IL 11.9% 111.1% 4.0%
Enterprise Fed. Bancorp of OH 11.4% 111.7% 2.1%
FSF Financial Corp. of MN 11.2% 111.0% 2.1%
First Fed. Bancshares of AR 14.9% 116.6% 1.9%
HMN Financial, Inc. of MN 14.9% 115.8% 2.5%
Hallmark Capital Corp. of WI 7.3% 108.5% 1.7%
MBLA Financial Corp. of MO 12.7% 114.4% 1.1%
Midwest Bancshares, Inc. of IA 6.9% 105.2% 3.2%
Milton Fed. Fin. Corp. of OH 12.6% 111.9% 3.0%
Permanent Bancorp of IN 9.5% 107.9% 4.5%
Net Interest Income Analysis
Change Change Change Change
During in Assoc.'s in Peer Group's in 1 Year in 30 Year
Quarter Ended Net Int. Inc.(5) Net Int. Inc.(5) T-Bill T-Bond
------------- ---------------- ---------------- ------ ------
(Basis Points)
9/30/96 16 -1 1 5
12/31/96 -2 4 -20 -28
3/31/97 -4 -3 51 46
6/30/97 6 3 -34 -32
9/30/97 -5 -16 -22 -38
(1) Interest-earning assets includes cash; interest-bearing liabilities
includes non-interest bearing deposits but excludes escrows.
(2) Comprised of REO, non-accruing loans, and other non interest-earning
assets.
(3) Pocahontas Federal's data is as of September 30, 1997.
(4) Peer Group data is as of September 30, 1997 or most recent date available.
(5) Calculated as quarterly change in net interest income as a percent of
average assets, annualized.
Source: SNL Securities.
<PAGE>
RP Financial, LC.
Page 3.16
representative of limited credit risk exposure. As shown in Table 3.6,
Pocahontas Federal's ratio of non-performing assets- (REO, non-accruing loans
and accruing loans more than 90 days past due) to-assets was lower than Peer
Group's ratio (0.12 percent versus 0.63 percent for the Peer Group). Similarly,
Pocahontas Federal's non-performing loans-to-loans ratio was lower than the Peer
Group's ratio (0.28 percent versus 0.79 percent for the Peer Group). Similarly,
loss reserve ratios were stronger for the Association, as Pocahontas Federal
maintained a higher level of loss reserves as a percent of non-performing assets
(359.8 percent versus 146.4 percent for the Peer Group) and as percent of loans
(1.06 percent versus 0.58 percent for the Peer Group). Net loan charge-offs were
not a material factor for either the Association or the Peer Group during the
period covered in Table 3.6.
Summary
Based on the above analysis and the criteria employed by RP Financial in
the selection of the companies for the Peer Group, RP Financial concluded that
the Peer Group forms a reasonable basis for determining the pro forma market
value of Pocahontas Federal. Such general characteristics as asset size, capital
position, interest-earning asset composition, funding composition, core earnings
strength, credit quality, interest rate risk and loan composition all tend to
support the reasonability of the Peer Group from a financial standpoint.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of September 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
----------- ------ ------ ------ ------ ------ -------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pocahontas Federal 0.00 0.12 0.28 1.06 373.29 359.79 103 0.06
SAIF-Insured Thrifts 0.26 0.77 0.85 0.78 160.37 123.06 309 0.09
State of AR 0.12 0.60 1.18 0.83 24.28 149.78 12 0.03
Comparable Group Average 0.09 0.63 0.79 0.58 238.32 146.37 25 0.06
Comparable Group
----------------
FBCV 1st Bancorp of Vincennes IN 0.16 1.30 1.40 0.65 46.55 34.59 74 0.17
EGLB Eagle BancGroup of IL 0.38 1.48 1.52 0.73 47.89 35.66 74 0.24
EFBI Enterprise Fed. Bancorp of OH 0.00 0.07 0.10 0.30 297.93 297.93 0 0.00
FFHH FSF Financial Corp. of MN 0.02 0.15 0.19 0.33 170.40 148.95 11 0.02
FFBH First Fed. Bancshares of AR 0.04 0.96 1.18 0.29 24.28 23.38 16 0.02
HMNF HMN Financial, Inc. of MN 0.02 0.10 0.08 0.71 922.02 465.21 1 0.00
HALL Hallmark Capital Corp. of WI 0.06 0.13 0.09 0.67 741.02 355.91 65 0.09
MBLF MBLA Financial Corp. of MO 0.00 0.57 0.99 0.50 50.27 50.27 0 0.00
MWBI Midwest Bancshares, Inc. of IA 0.32 0.81 0.81 0.79 96.78 59.23 0 0.00
MFFC Milton Fed. Fin. Corp. of OH 0.00 0.29 0.25 0.44 176.18 91.98 0 0.00
PERM Permanent Bancorp of IN 0.01 1.07 2.08 1.00 48.17 47.01 36 0.07
</TABLE>
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
This chapter presents the valuation analysis, prepared pursuant to the
approved valuation methodology promulgated by the OTS, and valuation factors
used to determine the estimated pro forma market value of the common stock of
the Holding Company. The common stock will be issued in conjunction with the
conversion of the MHC. The valuation has been prepared utilizing the pro forma
valuation methodology promulgated by the OTS, most recently set forth in their
1994 valuation guidelines.
Appraisal Guidelines
The OTS appraisal guidelines, originally released in October 1983 and
amended October 1994, specify the methodology for estimating the pro forma
market value of an institution. The methodology provides for: (1) selection of a
peer group of comparable publicly-traded institutions, subsequent guidance from
the OTS limited eligibility to only seasoned public companies in the peer group;
(2) a financial and operational comparison of the subject company to the peer
group; and (3) a valuation analysis in which the pro forma market value of the
subject company is determined based on the market pricing of the peer group as
of the date of valuation. The current valuation guidelines limit the amount of a
new issue discount which may be incorporated into the valuation, thereby
curtailing the potential price appreciation in the after-market.
RP Financial Approach to the Valuation
RP Financial's valuation analysis complies with the appraisal guidelines
as revised and issued as of October 21, 1994. Accordingly, the valuation
incorporates a detailed analysis based on the Peer Group discussed in Chapter
III, incorporating "fundamental analysis" techniques. Additionally, the
valuation incorporates a "technical analysis" of recently completed stock
conversions, including closing pricing and aftermarket trading of such
conversions. It should be noted that such analysis cannot possibly fully account
for all the market forces which impact trading activity and pricing
characteristics of a stock on a given day.
<PAGE>
RP Financial, LC.
Page 4.2
The pro forma market value determined herein is a preliminary value for
the Holding Company's to-be-issued stock. Throughout the conversion process, RP
Financial will: (1) review changes in the Association's operations and financial
condition; (2) monitor the Association's operations and financial condition
relative to the Peer Group to identify any fundamental changes; (3) monitor the
external factors affecting value including, but not limited to, local and
national economic conditions, interest rates, and the stock market environment,
including the market for thrift stocks; and (4) monitor pending conversion
offerings (including those in the offering phase) both regionally and
nationally. If material changes should occur during the conversion process, RP
Financial will prepare updated valuation reports reflecting such changes and
their related impact on value, if any, over the course of the conversion
process. RP Financial will also prepare a final valuation update at the closing
of the conversion offering to determine if the preliminary range of value
continues to be appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Association and for all thrifts. Subsequent
changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or major world events), which may occur from time to time
(often with great unpredictability) may materially impact the market value of
all thrift stocks, including Pocahontas Federal, or Pocahontas Federal's value
alone. To the extent a change in factors impacting the Association's value can
be reasonably anticipated and/or quantified, RP Financial has incorporated the
estimated impact into the valuation analysis.
Valuation Analysis
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections focus on
differences between the Association and the Peer Group and how those differences
affect our pro forma valuation. Emphasis is placed on the specific strengths and
weaknesses of the Association relative to the Peer Group in such key areas as
financial condition, profitability, growth and viability of earnings, asset
growth, primary market area, dividends, liquidity of the issue, marketing of the
issue, management, and the effect of government regulations and/or regulatory
reform. We have also considered the market for thrift stocks, and in particular
new issues, to assess the impact on value of Pocahontas Federal coming to market
at this time.
<PAGE>
RP Financial, LC.
Page 4.3
1. Financial Condition
The financial condition of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Association's and the Peer Group's financial strengths are noted as follows:
o Overall A/L Composition. The Peer Group's interest-earning asset
composition exhibited a higher concentration of loans and a greater
degree of diversification into higher risk types of loans, which
provided the Peer Group with a higher yielding interest-earning
asset composition. The Association's and the Peer Group's credit
quality measures indicated limited credit risk exposure, while the
interest rate risk characteristics associated with Pocahontas
Federal's balance sheet are currently considered to be less
favorable than the Peer Group's. However, the infusion of stock
proceeds will provide the Association with equity-to-assets and
IEA/IBL ratios that are more comparable to the Peer Group's ratios.
Pocahontas Federal's funding composition reflected a lower
concentration of deposits and a higher concentration of borrowings
than the comparative Peer Group ratios, indicating greater future
borrowing capacity for the Peer Group. For valuation purposes, RP
Financial concluded a slight downward adjustment was warranted for
the Association's asset/liability composition.
o Credit Quality. Both the Association's and the Peer Group's credit
quality measures were indicative of limited credit risk exposure.
Pocahontas Federal maintained a lower non-performing
assets-to-assets ratio than the Peer Group and higher loss reserves
as a percent of non-performing assets, non-performing loans and
total loans than the comparative ratios for the Peer Group. The Peer
Group's higher concentration of loans and greater diversification
into higher risk types of lending translated into a higher risk
weighted assets-to-assets ratio than maintained by the Association.
Overall, the Association's and the Peer Group's credit quality
measures were considered to be indicative of limited credit risk
exposure, although Pocahontas Federal's measures tended to reflect
more limited credit exposure than maintained by the Peer Group.
Therefore, RP Financial concluded that a slight upward adjustment
was warranted for the Association's credit quality.
o Balance Sheet Liquidity. The Association's asset composition
reflected a higher concentration of investment securities and a
lower concentration of loans compared to the Peer Group, thereby
indicating a potentially greater degree of liquidity for the
Association on the asset size of the balance sheet. Borrowings were
utilized to a greater degree by the Association, which suggests that
the Association's future borrowing capacity is more limited than the
Peer Group's. The infusion of conversion proceeds will serve to
increase the Association's balance sheet liquidity, as the proceeds
will initially be deployed into short-term investments. Overall, RP
Financial concluded no adjustment was warranted for balance sheet
liquidity.
<PAGE>
RP Financial, LC.
Page 4.4
o Funding Liabilities. Retail deposits served as the primary
interest-bearing source of funds for the Peer Group, while
borrowings constituted the largest portion of the Association
interest-bearing liabilities. Overall, the Association currently
maintains a higher level of interest-bearing liabilities than the
Peer Group (92.5 percent of assets versus 88.0 percent for the Peer
Group), which was attributable to Pocahontas Federal's lower capital
position. Following the conversion, the increase in Pocahontas
Federal's Savings' capital position will provide for a level of
interest-bearing liabilities that is comparable to the Peer Group's
ratio. Accordingly, primarily as the result of the Association's
greater utilization of borrowings, which tend to be a higher costing
source of funds than retail deposits, RP Financial concluded that a
slight downward adjustment was warranted for Pocahontas Federal's
funding composition.
o Capital. The Association operates with a lower pre-conversion
capital ratio than the Peer Group, 6.3 percent and 11.1 percent of
assets, respectively. This disadvantage will be addressed by the
stock offering, which will provide Pocahontas Federal with a pro
forma capital position that can be expected to be comparable to the
Peer Group's equity-to-assets ratio. Accordingly, RP Financial
concluded that no adjustment was warranted for the Association's
capital position.
Overall, we concluded that a slight downward valuation adjustment was
warranted for the Association's financial strength.
2. Profitability, Growth and Viability of Earnings
Earnings are an important factor in determining pro forma market value, as
the level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings are typically heavily factored
into an investment decision. Consistent with most thrifts, net interest income
and operating expenses were the major determinants of the Association's and the
Peer Group's earnings. The specific factors considered in the valuation include:
o Reported Earnings. The Association recorded lower earnings on a ROAA
basis (0.63 percent versus 0.78 percent for the Peer Group). The
Peer Group's more favorable reported earnings resulted primarily
from maintenance of a stronger net interest margin and, to a lesser
extent, larger earnings contributions realized from non-interest
operating income and net gains realized on the sale of loans and
investments. Lower operating expenses and lower loss provisions
represented earnings advantages for the Association. Reinvestment of
conversion proceeds into interest-earning assets will serve to
increase the Association's earnings, with the benefit of reinvesting
proceeds expected to be partially offset by higher operating
expenses associated with operating as a fully converted
publicly-traded company and the implementation of the stock benefit
plans. Overall, no adjustment was warranted for this factor.
<PAGE>
RP Financial, LC.
Page 4.5
o Core Earnings. Both the Association's and the Peer Group's earnings
were derived largely from recurring sources, including net interest
income, operating expenses, and non-interest operating income. In
these measures, the Association operated with a lower net interest
margin, a lower operating expense ratio and a lower level of
non-interest operating income. The Association's lower net interest
margin and lower level of operating expenses translated into a
slightly higher expense coverage ratio (1.61x versus 1.51x for the
Peer Group). The Association's lower operating expense ratio also
supported a more favorable efficiency ratio (57.1 percent versus
60.6 percent for the Peer Group), despite the higher non-interest
operating income recorded by the Peer Group. The Peer Group's
earnings reflected the benefit of a modest amount of gains, which
were not a factor in the Association's earnings. Typically, gains
generated from the sale of loans and investments are viewed as
earnings with a relatively high degree of volatility, and, thus, are
substantially discounted in the evaluation of an institution's core
earnings. Indicative of their favorable credit quality measures,
loss provisions were not a significant factor in either the
Association's or the Peer Group' earnings. The Association's core
earnings will realize the benefit of redeploying the conversion
proceeds into interest-earning assets, which will somewhat be
negated by expenses associated with stock benefit plans and
operating as a fully converted publicly-traded company. Accordingly,
we concluded that Association's core earnings were comparable to the
Peer Group's and, thus, no valuation adjustment was warranted for
the Association's core earnings.
o Interest Rate Risk. Quarterly changes in the Association's and the
Peer Group's net interest income to average assets ratios indicated
a similar degree of interest rate risk exposure in their respective
net interest margins, with both the Association's and the Peer
Group's net interest margins exhibiting fairly limited quarterly
fluctuations during the twelve month period ending September 30,
1997. Other measures of interest rate risk, such as capital ratios,
IEA/IBL ratios, and the level of non-interest earning
assets-to-total assets were generally more favorable for the Peer
Group, although the Association maintained a lower level of
non-interest earning assets as compared to the Peer Group's ratio.
On a pro forma basis, the infusion of stock proceeds can be expected
to address the Association's lower capital position and lower
IEA/IBL ratio, as well as enhance the stability of the Association's
net interest margin through the reinvestment of stock proceeds into
interest-earning assets. Accordingly, RP Financial concluded that
the interest rate risk associated with the Association's earnings
was comparable to the Peer Group's, and no adjustment was warranted
for valuation purposes.
o Credit Risk. Loan loss provisions were not a significant factor in
either Pocahontas Federal's or the Peer Group's earnings. In terms
of future exposure to credit quality related losses, both the
Association's and the Peer Group's operating strategies and credit
quality measures indicated relatively limited credit risk exposure.
Lending diversification into higher risk types of loans was more
notable for the Peer Group and the Peer Group maintained a higher
concentration of loans as a percent of assets, which translated into
a higher risk weighted assets-to-assets ratio for the Peer Group.
However, both the Association's and the Peer Group's risk weighted
assets-to-assets ratios were lower than the comparative average for
all publicly-traded SAIF-insured thrifts, thereby indicating
relatively low credit risk operating strategies for both the
<PAGE>
RP Financial, LC.
Page 4.6
Association and the Peer Group. Pocahontas Federal's credit quality
measures tended be slightly more favorable than Peer Group's, based
on the Association's lower non-performing assets/assets ratio and
higher reserve coverage ratios with respect to loans and
non-performing assets. Overall, RP Financial concluded that the
credit risk exposure associated with the Association's earnings was
less than the Peer Group's and a slight upward adjustment was
warranted for valuation purposes.
o Earnings Growth Potential. Several factors were considered in
assessing earnings growth potential. First, the Association's recent
historical growth has been less than the Peer Group's, with the
Association's current capital position limiting further leveraging
of the balance sheet. However, the infusion of stock proceeds will
increase the Association's earnings growth potential, with respect
to maintaining a comparable degree of leverage capacity as the Peer
Group. Second, growth recorded by the Association previously was
largely realized through a wholesale leveraging strategy, which
provides the Association with a relatively narrow interest rate
spread compared to loan growth. The wholesale leverage strategy
implemented by the Association was due to the limitations of the
market area in terms of providing loan growth opportunities.
Comparatively, as shown in Exhibit III-4, opportunities for lending
growth are considered to be more favorable in the primary market
areas served by the Peer Group companies, based on the more populous
markets served by the Peer Group companies in general. On balance,
given the limitations of the Association's market area for providing
retail growth opportunities, the Association's earnings growth
potential was considered to be not quite as favorable as the Peer
Group's and a slight down adjustment was warranted for valuation
purposes.
o Return on Equity. Following the infusion of stock proceeds, the
Association's pro forma capital position will be comparable to the
Peer Group's equity-to-assets ratio. Likewise, as the result of the
increase in the Association's capital position, Pocahontas Federal's
pro forma ROE is expected to be comparable to the Peer Group's ROE.
Therefore, RP Financial concluded that no adjustment was warranted
for the Association's ROE.
Overall, Pocahontas Federal's credit risk exposure represented a positive
valuation consideration, which was more than offset by the Association's less
favorable earnings growth potential. Therefore, RP Financial concluded that a
slight downward valuation adjustment was warranted for profitability, growth and
viability of the Association's earnings relative to the Peer Group's.
3. Asset Growth
Pocahontas Federal's asset growth was lower than the Peer Group's, during
the period covered in our comparative analysis (positive 0.5 percent versus
positive 6.8 percent for the Peer Group). This characteristic would normally be
considered as a negative, but was
<PAGE>
RP Financial, LC.
Page 4.7
somewhat offset by the potential asset growth the Association will be able to
realize following the infusion of stock proceeds. On a pro forma basis, the
Association's equity-to-assets ratio will be comparable to the Peer Group's,
resulting in comparable leverage capacity for Pocahontas Federal and the Peer
Group. However, in light of rural characteristics of the Association's market
area, opportunities for loan growth do not appear to be as favorable for
Pocahontas Federal as compared to the majority of the Peer Group companies,
which generally operate in more populous markets. Accordingly, as in the past,
the Association's future asset growth will likely include leveraging through
funding investments with borrowings, which is less profitable growth compared to
funding loan growth with retail deposits as reflected in the Peer Group's
balance sheet growth rates. On balance, we believe a slight downward adjustment
is warranted for this factor, primarily on the basis of the limitations of the
Association's market area in terms of supporting loan growth potential.
4. Primary Market Area
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. Pocahontas Federal serves
somewhat of a limited population base in light of the rural characteristics of
the market area, with some markets experiencing declines in population. A
notable portion of the Association's lending activities are dependent upon the
Craighead County market area, which is supported by the expanding Jonesboro
economy. Jonesboro is the largest population center in the Association's primary
market area and the Association faces significant competition for loans and
deposits in that market. Generally low household and per capita income measures
were also consistent with the rural characteristics of the Association's market
area. Unemployment in the Association's primary market area was mixed, with
three out of the five primary market area counties posting unemployment rates
that were above the comparative unemployment rates for Arkansas and the U.S.
In general, many of the Peer Group companies also operate in fairly rural
markets, although, on average, the Peer Group companies operated in more
populous markets than served by the Association. Population growth in the
markets served by the Peer Group companies was also mixed, but on average was
positive. Average per capita income in the primary market areas served by the
Peer Group companies exceeded per capita income reflected for all five of the
Association's primary market area counties. On average, the Peer Group companies
maintained a slightly larger deposit market share than the Association,
<PAGE>
RP Financial, LC.
Page 4.8
indicating a competitive advantage for the Peer Group companies in terms of the
degree of competition faced for deposits. Summary demographic and deposit market
share data for the Association and the Peer Group companies is provided in
Exhibit III-4. As shown in Table 4.1, September 1997 unemployment rates in the
markets served by the Peer Group companies were generally lower than Randolph
County's unemployment rate and comparable to or lower than the unemployment
rates exhibited by the other primary market area counties served by Pocahontas
Federal. Overall, the primary market areas served by the Peer Group companies
appeared to represent an advantage with respect to retail growth potential, as
compared to the primary market area served by Pocahontas Federal. Therefore, we
concluded a moderate downward adjustment was appropriate for the Association's
market area.
Table 4.1
Market Area Unemployment Rates
Pocahontas Federal and the Peer Group Companies (1)
Sept. 1997
County Unemployment
------ ------------
Pocahontas Federal - AR Randolph 8.4%
Clay 4.2
Craighead 4.0
Lawrence 5.3
Sharp 6.0
The Peer Group
1st Bancorp of Vincennes - IN Knox 3.6%
Eagle BancGroup - IL McLean 2.2
Enterprise Fed. Bancorp - OH Butler 3.4
FSF Financial Corp. - MN McLeod 3.0
First Fed. Bancshares - AR Boone 5.1
HMN Financial, Inc. - MN Fillmore 2.7
Hallmark Capital Corp. - WI Milwaukee 4.3
MBLA Financial Corp. - MO Macon 3.8
Midwest Bancshares, Inc. - IA Des Moines 2.0
Milton Fed. Fin. Corp. - OH Miami 3.9
Permanent Bancorp - IN Vanderburgh 3.8
(1) Unemployment rates are not seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
<PAGE>
RP Financial, LC.
Page 4.9
5. Dividends
The Holding Company has indicated its intentions to pay an annual cash
dividend. At this time, the Association has indicated that the annual dividend
payment will approximate $0.32 per share at the midpoint of the valuation range,
which would provide for a yield of 3.2 percent based on the initial offering
price of $10.00 per share, and a pro forma payout ratio of approximately 50
percent. As set forth in the prospectus, the indicated annual dividend payment
will range from $0.37 per share at the minimum of the valuation range to $0.24
per share at the supermaximum of the valuation range. However, future
declarations of dividends by the Board of Directors will depend upon a number of
factors, including investment opportunities available to the Holding Company or
the Association, capital requirements, regulatory limitations, the Holding
Company's and the Association's financial condition and results of operations,
tax considerations and general economic conditions.
Historically, thrifts typically have not established dividend policies at
the time of their conversion to stock ownership. Newly converted institutions,
in general, have preferred to gain market seasoning, establish an earnings track
record and fully invest the conversion proceeds before establishing a dividend
policy. However, during the late-1980s and early-1990s, with negative publicity
surrounding the thrift industry, there was a tendency for more thrifts to
initiate moderate dividend policies concurrent with their conversion as a means
of increasing the attractiveness of the stock offering. Today, fewer
institutions are compelled to initially establish dividend policies at the time
of their conversion offering to increase the attractiveness of the stock issue
as (1) industry profitability has improved, (2) the number of problem thrift
institutions has declined, and (3) the stock market cycle for thrift stocks is
generally more favorable than in the early-1990s. At the same time, with ROE
ratios under pressure, due to high equity levels, well-capitalized institutions
are subject to increased competitive pressures to offer dividends.
As publicly-traded thrifts' capital levels and profitability have improved
and as weakened institutions have been resolved, the proportion of institutions
with cash dividend policies has increased. Eight out of the eleven institutions
in the Peer Group presently pay regular cash dividends, with implied dividend
yields ranging from 1.01 percent to 3.97 percent. The average dividend yield on
the stocks of the Peer Group institutions was 1.51 percent as of December 12,
1997, representing an average earnings payout ratio of 20.33 percent. As of
December 12, 1997, approximately 85 percent of all publicly-traded SAIF-insured
thrifts had adopted cash dividend policies (see Exhibit IV-1), exhibiting an
<PAGE>
RP Financial, LC.
Page 4.10
average yield of 1.83 percent and an average payout ratio of 35.18 percent. The
dividend paying thrifts generally maintain higher than average profitability
ratios, facilitating their ability to pay cash dividends, which supports a
market pricing premium on average relative to non-dividend paying thrifts.
The Holding Company's indicated dividend yield is slightly higher than the
Peer Group's average dividend yield; however, based on the Peer Group's earnings
and capital position, the Peer Group's capacity to pay dividends is comparable
to the Association's. In particular, the Association's payout ratio of 51.7
percent was well above the Peer Group's payout ratio of 20.3 percent.
Accordingly, given the comparability of the Association's and the Peer Group's
dividend paying capacities, no adjustment was necessary for this valuation.
6. Liquidity of the Shares
The Peer Group is by definition composed of companies that are traded in
the public markets, all of which trade on the NASDAQ system. Typically, the
number of shares outstanding and market capitalization provides an indication of
how much liquidity there will be in a particular stock. The market
capitalization of the Peer Group companies ranged from $18.1 million to $116.3
million as of December 12, 1997, with an average market value of $52.4 million.
The shares outstanding of the Peer Group members ranged from 1.0 million to 4.9
million, with average shares outstanding of approximately 12.4 million. The
Association's conversion offering will result in a market value and shares
outstanding that are similar to and greater than the comparative Peer Group
averages. While the Association's shares outstanding exceeds the Peer Group
average, it is within the range of shares outstanding exhibited by the Peer
Group companies and is not viewed as being materially different in terms of
providing a more liquid trading market for the Association's stock. Furthermore,
like the stocks of all of the Peer Group companies, it is anticipated the
Holding Company's stock will be listed on the NASDAQ National Market.
Accordingly, in comparison to the Peer Group companies, we do not anticipate
that the liquidity characteristics of the Holding Company's stock will be
materially different and, thus, no adjustment was required for this factor.
7. Marketing of the Issue
We believe that four separate markets exists for thrift stocks coming to
market such as Pocahontas Federal's: (1) the after-market for public companies,
in which trading activity is
<PAGE>
RP Financial, LC.
Page 4.11
regular and investment decisions are made based upon financial condition,
earnings, capital, ROE and dividends; (2) the new issue market in which
converting thrifts are evaluated on the basis of the same factors but on a pro
forma basis without the benefit of a stock trading history and reporting
quarterly operating results as a publicly-held company; (3) the acquisition
market for thrift franchises in Arkansas; and (4) the market for the public
stock of Pocahontas Federal. All of these markets were considered in the
valuation of the Association's to-be-issued stock.
A. The Public Market
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. Following the rapid rise
in the stock market during November 1996, which was supported by the "status
quo" election results, stocks retreated during the first half of December.
Profit taking, concern about speculative excesses in the stock market and higher
interest rates all contributed to the decline in the stock market.
The stock market resumed an upward trend during the end of 1996 and
the first three weeks of 1997, with the DJIA establishing several new highs in
the process. Factors contributing to the rally in the stock market included the
Federal Reserve's decision to leave rates unchanged at its December meeting,
economic data which reflected moderate growth and low inflation, and favorable
fourth quarter earnings particularly in the technology sector. However, a
disappointing fourth quarter earnings report by IBM ignited a sell-off in the
stock market in late-January. Higher interest rates extended the downturn, as
the 30-year bond approached 7.0 percent at the end of January. A high degree of
market volatility was evident throughout most of February 1997, reflecting
concern over speculative excesses in the stock market; particularly, as the DJIA
closed above the 7000 mark in mid-February. Profit taking, growing expectations
of a correction and comments by the Federal Reserve Chairman pulled the market
lower in late-February.
<PAGE>
RP Financial, LC.
Page 4.12
Following a downturn in late-February 1997, the market recovered in
early-March. Despite increasing expectations of an interest rate hike by the
Federal Reserve, the Dow Jones Industrial Average ("DJIA") closed to a new
record high of 7085.16 on March 11, 1997. However, an upward revision to the
January retail sales figure triggered a one day sell-off in stocks and bonds on
March 13, 1997, as the stronger than expected growth heightened expectations of
an interest rate increase by the Federal Reserve. Unease over higher interest
rates, profitability concerns in the technology sector and litigation concerns
for tobacco stocks pulled the stock market lower in mid-March. As expected, the
Federal Reserve increased the rate on short-term funds by 0.25 percent at its
late-March meeting. Following the rate increase, the sell-off in the stock
market became more severe amid further signs of an accelerating economy. Stocks
bottomed-out on news of a stronger than expected rise in core producer prices
for March, with the DJIA closing at 6391.69 on April 11, 1997, or 9.8 percent
below the all-time high recorded a month ago.
Some favorable first quarter earnings reports and news of a possible
settlement by tobacco companies to resolve the threat of liability lawsuits
provided for a modest recovery in the stock market in mid-April 1997. In
late-April, the release of economic data which indicated mild inflationary
pressures furthered the rally in bond and stock prices. News of a budget
agreement and a favorable ruling for tobacco companies sent the stock market
soaring to record highs in early-May. Mixed economic data and the Federal
Reserve's decision to leave its target for the federal funds rate unchanged at
its May meeting sustained a positive trend in the stock market through the end
of May. Profit worries caused a sell-off in technology stocks in early-June,
while declining interest rates served to stabilize the broader market.
Technology stocks rallied the stock market to new highs in mid-July, as a number
of technology companies posted favorable second quarter earnings. Favorable
inflation data, including second quarter GDP growth slowing to an annual rate of
2.2 percent, versus 4.9 percent in the first quarter, and comments by the
Federal Reserve Chairman which indicated that an increase in interest rates was
not imminent, spurred bond and stock prices strongly higher during the second
half of July.
A decline in the July 1997 unemployment rate reversed the positive
bond and stock market trends in early-August, as inflation concerns became more
prominent. A declining dollar against the yen and mark sharpened the decline in
bond prices, with the 30-year U.S. Treasury bond increasing from 6.32 percent at
the end of July to 6.66 percent as of August 8, 1997. The sell-off in bonds
pulled stock prices lower as well. While bond prices
<PAGE>
RP Financial, LC.
Page 4.13
firmed in mid-August, notable volatility was evident in the stock market. The
DJIA moved at least 100 points for five consecutive days from August 18, 1997
through August 21, 1997, which set a record for volatility. Profit worries among
some of the large blue chip companies and mixed inflation readings were factors
contributing to the roller-coaster performance of the stock market. Despite
strengthening bond prices, stocks traded lower through the end of August. Bond
prices moved higher on inflation data which showed that prices stayed low during
the second quarter, even though second quarter GDP growth was revised upward to
annual rate of 3.6 percent compared to an original estimate of 2.2 percent.
Volatility returned to the stock market in early-September, with the
DJIA posting a record breaking point increase of 257.36 on September 2, 1997.
The rally was sparked by economic data that indicated manufacturing growth
slowed in August, thereby easing investors' inflation worries. However, the
rally was not sustained, as the DJIA pulled back following the one day rally.
The pull back was largely attributed to profit worries, which more than offset
favorable inflation news indicated by a slight increase in the national
unemployment rate for August (4.9 percent in August versus 4.8 percent in July).
Stocks fluctuated in a narrow trading range in mid-September, in anticipation of
third quarter earnings and August economic data. The low inflation reading
indicated by the August consumer price index sent stock and bond prices sharply
higher on September 16, 1997, with the DJIA posting a 175 point increase and the
yield on the 30-year U.S. Treasury bond posting its second largest decline in
the 1990s. Uncertainty over third quarter earnings provided for a mixed stock
market performance towards the end of September, while generally favorable
inflation readings pushed interest rates to their lowest level in two years. The
release of September employment data on October 3, 1997 caused bond and stock
prices to soar in early trading activity, as the September unemployment rate was
unchanged at 4.9 percent and fewer jobs than expected were added to the economy
during September. However, most of the initial gains were erased by news of
rising tensions between Iraq and Iran.
Congressional testimony by the Federal Reserve Chairman, in which he
indicated that it would be difficult to maintain the current balance between
tight labor markets and low inflation, caused stock and bond prices to skid in
mid-October 1997. Disappointing third quarter earnings in the technology sector
sharpened the sell-off in the stock market, with the Dow Jones Industrial
Average ("DJIA") posting consecutive losses of more than 1.0 percent on October
16 and 17.
<PAGE>
RP Financial, LC.
Page 4.14
Stocks bounced back in early-week trading the following week,
reflecting positive third quarter earnings surprises posted by some of the blue
chip stocks. However, the recovery was abbreviated by global selling pressure
led by the decline in the Hong Kong stock market, as the DJIA posted a two-day
loss approximating 320 points on October 23 and 24, 1997. The sell-off in the
world financial markets turned into a rout on the following Monday, with a 5.8
percent decline in the Hong Kong stock market fueling the largest ever point
decline in the DJIA. On October 24, the DJIA declined 554 points or 7.2 percent.
While the selling was broad based, technology stocks sensitive to Asian demand
experienced some of the sharpest declines. The turmoil in the stock market
provided for a sharp rally in U.S. Treasury bonds, reflecting a flight to
quality by skittish investors. The stock market recovered strongly the day after
the record breaking point decline, as the DJIA surged a record breaking 337
points on October 28. Comparatively, bond prices declined sharply on October 28,
as investors pulled out of the Treasury market to reinvest into the stock
market.
Market conditions remained uneven through the week ended October 31,
1997, which was followed by a soaring stock market on November 3, 1997. The DJIA
posted a 232 point increase on November 3, which was supported by a resurgence
in the Hong Kong market. Following the one day rally, volatility returned to the
stock market through mid-November. The market's uneven performance was largely
attributable to the ongoing influence of the international markets, particularly
the Asian and Latin American markets. In mid-November, the yield on the 30-year
bellwether Treasury issue approached 6.0 percent, its lowest level since
February 1996. Advances in the bond market provided for a generally positive
stock market environment in the second half of November, with bank and
technology issues being among the strongest performers. Renewed confidence that
the Asian governments would control the region's financial problems furthered
the stock market rally in early-December. Despite a sell off in the bond market
caused by the November unemployment rate dropping to its lowest level since
October 1973, the Dow Jones Industrial showed surprising strength and closed
almost 99 points higher on December 5, 1997. Stocks declined the following week,
as earnings concerns, particularly in the technology sector, overshadowed a
rally in the bond market. Positive inflation news and world market turmoil
caused investors to dump stocks in favor of bonds, which served to push the
yield on the bellwether 30-year Treasury bond below 6.0 percent in mid-December.
On December 12, 1997, the DJIA closed at 7838.30, an increase of 24.3 percent
from year a year ago.
<PAGE>
RP Financial, LC.
Page 4.15
Similar to the overall stock market, the market for thrift stocks
has generally been favorable during the past twelve months. Similar to the
overall stock market, thrift prices traded lower in early-December 1996. Profit
taking and expectations of higher interest rates were factors contributing to
the pull back in thrift issues. However, bullish sentiment for thrift stocks
heightened at the beginning of 1997, as investors reacted positively to
favorable inflation data and generally strong fourth quarter earnings. The rally
in thrift issues was driven by the large California institutions, reflecting
expectations that there would be further consolidation among the large
California thrifts. The acquisition speculation for the large California thrifts
became a reality in mid-February, as H.F. Ahmanson's unsolicited offer to
acquire Great Western Financial sent the SNL Index soaring in mid-February.
Stable interest rates and acquisition activity supported higher
thrift prices in early-March 1997; however, like the stock market in general,
the peak in thrift prices was followed by a sharp sell-off in mid-March. In
fact, interest-rate sensitive issues were among the sectors hardest hit by the
revised January retail sales report, as the 30-year bond approached 7.0 percent.
Interest-rate sensitive issues continued to experience selling pressure in
late-March and early-April, as signs of a strengthening economy pushed interest
rates higher. The sell-off in thrift stocks culminated on April 11, 1997, as
interest rates increased sharply on news of the higher than expected rise in
core producer prices for March. Thrift prices edged modestly higher in
mid-April, reflecting generally favorable first quarter earnings and a slight
decline in interest rates following the release of economic data which showed
that inflation was low. Favorable inflation data and the budget agreement
provided for a more substantial rally in thrift stocks in late-April and
early-May, as interest-rate sensitive issues were bolstered by declining
interest rates.
Thrift stocks continued to trend higher through June and early-July
1997, based on the improved interest rate outlook and an overall positive
outlook for the economy. Generally favorable second quarter earnings and the
30-year U.S. Treasury bond yield declining below 6.50 percent served to further
boost thrift prices in mid-July, with the declining interest rate environment
serving to sustain the rally in thrift prices through the end of July. Thrift
prices generally declined during the first half of August, due to higher
interest rates and profit taking. From July 31, 1997 to August 15, 1997, the SNL
Index declined by 3.7 percent. Thrift prices recovered modestly during the
second half of August, as the Federal Reserve left short-term interest rates
unchanged at its August meeting. Thrift stocks participated in the one day stock
market rally on September 2, 1997, as evidenced by a 1.95
<PAGE>
RP Financial, LC.
Page 4.16
percent increase in the SNL Index. News of NationsBank's proposed acquisition of
Barnett Banks for more than four times its book value appears to have further
contributed to the one day run-up in thrift prices. In contrast to the overall
stock market, thrift prices continued to move higher following the one day rally
in the DJIA. Stable interest rates and acquisition news sustained the positive
market for thrift issues. The decline in interest rates following the release of
the August consumer price index in mid-September served to further the rally in
thrift prices. During late-September and early-October, interest-rate sensitive
issues in general benefited from the declining interest rate environment and
expectations of strong third quarter earnings.
The upward trend in thrift prices stalled in mid-October 1997, as
interest rates moved higher following warnings by the Federal Reserve Chairman
of inflation creeping back into the economy due to the tight labor markets.
Thrift stocks gyrated in conjunction with the overall market in late-October,
with the SNL index declining by 5.2 percent on October 27 and increasing by 2.4
percent on October 28. Thrift prices further recovered on October 29, which was
supported by a rally in the bond market. Aided by the favorable interest rate
climate, thrift stocks posted further gains in early-November and then retreated
modestly in mid-November. Thrift and bank issues declined on concerns that a
slowing U.S. economy could lead to weaker loan demand and higher delinquency
rates. However, led by the strengthening bond market, thrift and bank issues
moved higher during late-November and early-December. Acquisition news also
contributed to the upturn in bank and thrift prices, as two major bank
acquisitions were announced for relatively high price-to-book multiples. First
Union Corp.'s proposed acquisition of CoreStates Financial ($47 billion in
assets) was for 539 percent of book value, while First American Corporation's
proposed acquisition for Deposit Guaranty Corporation ($6.8 billion in assets)
was for 419 percent of book value. Those deals, along with speculation of
possible other major thrift and bank acquisitions, filtered into the prices of
bank and thrift issues in general. Concern of relatively high valuations and
speculation of weaker economic growth leading to an increase in commercial loan
problems somewhat offset the declining interest rate environment, as thrift
issues traded in a narrow range in mid-December. The SNL Index for all
publicly-traded thrifts closed at 783.3 on December 12, 1997, an increase of
66.2 percent from one year ago.
B. The New Issue Market
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Association's pro forma
<PAGE>
RP Financial, LC.
Page 4.17
market value. Over the past year, the market for converting thrift issues has
generally been favorable. Fewer offerings, more attractive pricing, lower
interest rates, and the general positive trend in thrift prices facilitated a
healthy market for converting thrift issues during the fourth quarter of 1996.
In general, the market environment for converting thrift issues has been highly
receptive throughout 1997, with the most recently completed conversions
experiencing very strong market interest. Since mid-September 1997, conversion
issues that have been completed and began trading exhibited an average price
increase of 40.7 percent on the first day of trading. As shown in Table 4.2, the
average one week change in price for publicly-traded conversion offerings
completed during the latest three month period ending December 12, 1997 equaled
positive 45.3 percent. The average pro forma price/tangible book and
price/earnings ratios of the recent conversions was 80.5 percent and 18.1 times,
generally reflecting closings at the top of the super range.
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios compared to the
universe of all publicly-traded thrifts. Specifically, the current average P/B
ratio of the conversions completed in the most recent three month period of
135.02 percent reflects a discount of 15.3 percent from the average P/B ratio of
all publicly-traded SAIF-insured thrifts (equal to 159.37 percent), and the core
P/E ratio of the recent conversions was at a notable premium to the all
SAIF-insured public average core P/E ratio of 20.43 times. Only three out of the
five recently converted companies were trading at a core P/E multiple of less
than 30 times. The pricing ratios of the better capitalized but lower earning
(based on return on equity measures) recently converted thrifts suggest that the
investment community has determined to discount their stocks on a book basis
until the earnings improve through redeployment and leveraging of the proceeds
over the longer term.
In determining our valuation adjustment for marketing of the issue,
we considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as thrift
stocks are currently exhibiting pricing ratios that are approaching historically
high levels. Investor interest in the new issue market has been favorable, as
most of the recently completed offerings have been oversubscribed and have
recorded healthy price increases in initial post-conversion trading activity.
<PAGE>
RP Financial, LC.
December 15, 1997
- --------------------------------------------------------------------------------
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data
----------------------------------- Offering
Financial Info. Asset Quality Information
- -----------------------------------------------------------------------------------------------------------------------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc.
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- -----
($Mil) (%) (%)(2) (%) ($Mil) (%) (%)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Community Natl Corp(8,9) TN 12/12/97 CNLK 27 14.83% 0.69% 103% 4.5 132% 7.2%
High County Bancorp CO 12/10/97 HCBC 76 7.81% 0.23% 286% 12.6 132% 4.4%
Equality Bancorp, Inc. (8) MO * 12/02/97 EBI 239 5.82% 0.29% 41% 13.2 115% 3.9%
Landmark Financial Corp. NY 12/01/97 P.Sheet 14 6.66% 1.38% 55% 1.5 132% 9.9%
First Security Fed Fin., Inc IL 10/31/97 FSFF 260 11.52% 0.87% 74% 64.1 132% 1.7%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 220 10.08% 0.12% 280% 46.9 132% 2.3%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 230 11.24% 0.14% 245% 35.7 132% 2.8%
SHS Bancorp, Inc. PA 10/01/97 SHSB 83 5.52% 1.41% 36% 8.2 132% 5.7%
Ohio State Financial Serv OH * 09/29/97 P. Sheet 34 14.45% 0.47% 86% 6.3 94% 5.7%
Citizens Bancorp IN 09/19/97 P. Sheet 46 12.28% 0.45% 84% 10.6 132% 4.6%
Averages: $123 10.02% 0.61% 129% 20.4 128% 4.8%
Medians: 80 10.66% 0.46% 85% 11.6 132% 4.5%
Averages, Excluding 2nd Steps $105 9.76% 0.70% 150% $21.5 127% 4.9%
Medians, Excluding 2nd Steps $76 10.08% 0.47% 84% $10.6 132% 4.6%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pro Forma Data
Insider Purchases ---------------------------------------------
Pricing Ratios(4) Fin. Characteristics
- ------------------------------------------------------------------------------------------------------------------------------------
Benefit Plans
------------
Conversion Recog. Mgmt.
Institution State Date Ticker ESOP Plans & Dirs. P/TB P/E(5) P/A ROA TE/A ROE
- ----------- ----- ---- ------ ---- ----- ------ ---- ------ --- --- ---- ---
(%) (%) (%)(3) (%) (x) (%) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Community Natl Corp(8,9) TN 12/12/97 CNLK 0.0% 4.0% 17.6% 85.9% 17.1 22.9% 1.3% 26.7% 5.0%
High County Bancorp CO 12/10/97 HCBC 8.0% 4.0% 11.0% 77.8% 26.1 15.1% 0.6% 19.5% 3.0%
Equality Bancorp, Inc. (8) MO * 12/02/97 EBI 9.0% 5.0% 10.6% 100.5% 18.8 10.0% 0.5% 9.9% 5.4%
Landmark Financial Corp. NY 12/01/97 P.Sheet 8.0% 4.0% 8.2% 70.9% NM 9.8% 0.7% 13.8% -6.8%
First Security Fed Fin., Inc IL 10/31/97 FSFF 8.0% 4.0% 4.4% 78.1% 16.5 21.1% 1.3% 27.0% 4.7%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 8.0% 4.0% 3.9% 75.3% 13.6 18.1% 1.0% 20.7% 5.1%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 8.0% 4.0% 2.9% 109.0% 17.7 23.6% 1.3% 21.6% 6.2%
SHS Bancorp, Inc. PA 10/01/97 SHSB 8.0% 4.0% 5.2% 72.3% 24.5 9.1% 0.4% 12.6% 3.0%
Ohio State Financial Serv OH * 09/29/97 P. Sheet 8.0% 4.0% 8.3% 62.3% 13.4 16.0% 1.2% 25.7% 4.6%
Citizens Bancorp IN 09/19/97 P. Sheet 8.0% 4.0% 16.1% 72.9% 14.8 14.8% 1.1% 46.3% 2.4%
Averages: 7.3% 4.1% 8.8% 80.5% 18.1 16.1% 0.9% 22.4% 3.3%
Medians: 8.0% 4.0% 8.3% 76.5% 17.1 15.6% 1.1% 21.2% 4.7%
Averages, Excluding 2nd Steps 8.0% 4.0% 8.2% 72.8% 18.1 14.9% 0.9% 23.7% 2.3%
Medians, Excluding 2nd Steps 8.0% 4.0% 8.2% 72.9% 15.6 15.1% 1.0% 20.7% 3.0%
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
-----------------------------------------------------------
Closing Price:
- -------------------------------------------------------------- ----------------------------------------------------
First After After
Conversion IPO Trading % First % First %
Institution State Date Ticker Price Day Chg. Week(6) Chg. Month(7) Chg.
- ----------- ----- ---- ------ ------ --- ---- ------ ---- -------- ------
($) ($) (%) ($) (%) ($) (%)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Community Natl Corp(8,9) TN 12/12/97 CNLK 10.00 $11.56 15.6% $11.88 18.8% NA NA
High County Bancorp CO 12/10/97 HCBC 10.00 14.44 44.4% 14.81 48.1% NA NA
Equality Bancorp, Inc. (8) MO * 12/02/97 EBI 10.00 13.50 35.0% 15.38 53.8% 14.88 48.8%
Landmark Financial Corp. NY 12/01/97 P.Sheet 10.00 11.88 18.8% 12.00 20.0% 12.06 20.6%
First Security Fed Fin., Inc IL 10/31/97 FSFF 10.00 15.06 50.6% 15.13 51.3% 16.06 60.6%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 10.00 16.75 67.5% 16.75 67.5% 15.88 58.8%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 10.00 13.25 32.5% 13.63 36.3% 13.25 32.5%
SHS Bancorp, Inc. PA 10/01/97 SHSB 10.00 14.75 47.5% 16.25 62.5% 16.00 60.0%
Ohio State Financial Serv OH * 09/29/97 P. Sheet 10.00 15.50 55.0% 15.50 55.0% 14.88 48.8%
Citizens Bancorp IN 09/19/97 P. Sheet 10.00 14.00 40.0% 14.00 40.0% 15.38 53.8%
Averages: $10.00 $14.07 40.7% $14.53 45.3% $14.80 48.0%
Medians: $10.00 $14.22 42.2% $14.97 49.7% $15.13 51.3%
Averages, Excluding 2nd Steps $10.00 $14.63 46.3% $14.92 49.2% $15.04 50.4%
Medians, Excluding 2nd Steps $10.00 $14.75 47.5% $15.13 51.3% $15.63 56.3%
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded; "NA" - Not
Applicable, Not Available.
(1) Non-OTS regulated thrifts. December 15, 1997
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Second-step conversions.
(9) Simultaneously converted to commercial bank charter.
- --------------------------------------------------------------------------------
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Table 4.3
Market Pricing Comparatives
Prices As of December 12, 1997
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3) Dividends(4)
--------------- -------------- --------------------------------------- -----------------------
Core Book
Price/ Market 12-Mth Value/ Amount/ Payout
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ------ -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.89 181.59 1.12 15.13 19.50 159.37 19.33 162.79 20.43 0.37 1.58 30.13
Converted Last 3 Mths (no MHC) 15.80 63.96 0.52 11.89 27.14 135.02 25.11 136.24 27.14 0.00 0.00 0.00
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
EBI Equality Bancorp of St Louis 14.87 36.97 0.53 9.95 28.06 149.45 14.82 149.45 28.06 0.00 0.00 0.00
FSFF First SecurityFed Fin of IL 15.94 102.14 0.61 12.80 26.13 124.53 33.66 124.53 26.13 0.00 0.00 0.00
OTFC Oregon Trail Fin. Corp of OR 16.06 75.40 0.59 13.29 27.22 120.84 29.02 120.84 27.22 0.00 0.00 0.00
RVSB Riverview Bancorp of WA 14.87 91.12 0.45 9.56 NM 155.54 32.28 161.63 NM 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA 17.25 14.15 0.41 13.83 NM 124.73 15.76 124.73 NM 0.00 0.00 0.00
<CAPTION>
Financial Characteristics(6)
-------------------------------------------------------
Reported Core
Total Equity/ NPAs/ --------------- ---------------
Financial Institution Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------ ------- ------- ------- ------- ------- -------
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 1,195 13.00 0.77 0.89 8.05 0.87 7.81
Converted Last 3 Mths (no MHC) 237 18.87 0.48 0.90 5.33 0.89 5.25
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
EBI Equality Bancorp of St Louis 249 9.92 0.29 0.53 5.33 0.53 5.33
FSFF First SecurityFed Fin of IL 303 27.03 NA 1.29 4.77 1.29 4.77
OTFC Oregon Trail Fin. Corp of OR 260 24.02 0.07 1.07 4.44 1.07 4.44
RVSB Riverview Bancorp of WA 282 20.76 0.14 1.22 9.14 1.17 8.75
SHSB SHS Bancorp, Inc. of PA 90 12.64 1.43 0.37 2.96 0.37 2.96
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB
= Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.20
C. The Acquisition Market
Also considered in the valuation was the potential impact on
Pocahontas Federal's stock price of recently completed and pending acquisitions
of other thrifts operating in Pocahontas Federal's market area. As shown in
Exhibit IV-4, there were five Arkansas thrifts acquired between 1994 and
year-to-date 1997, and one acquisition of an Arkansas thrift is currently
pending. The recent acquisition activity involving Arkansas thrifts may imply a
certain degree of acquisition speculation for the Association's stock. To the
extent that acquisition speculation may impact the Association's offering, we
have largely taken this into account in selecting Arkansas and other Mid-West
based companies, which operate in markets that have experienced a comparable
level of acquisition activity as the Association's market and, thus, are subject
to the same type of acquisition speculation that may influence Pocahontas
Federal's trading price.
D. The Market for Pocahontas Federal's Stock
Since Pocahontas Federal's minority stock currently trades under the
symbol "PFSL" on the NASDAQ Small-Cap Market, RP Financial also considered the
recent trading activity in its valuation analysis. Pocahontas Federal had a
total of 1,632,424 shares issued and outstanding at September 30, 1997, of which
769,924 were held by Public Stockholders and were traded as public securities.
As of December 12, 1997, the Association's stock price was $36.50 per share.
There are significant differences between the Association's minority stock
(currently being traded) and the conversion stock that will be issued by the
Holding Company. In addition to the liquidity differences between the minority
shares currently traded and the new conversion stock (the new conversion stock
will more liquid owing to the greater number of public shares outstanding and
expected NASDAQ National Market listing), there are other differences between
the Association's minority stock and the conversion stock that will be issued by
the Holding Company. Such differences include a lower return on equity for the
Holding Company's conversion stock, and dividend payments will be made on all
shares outstanding; thereby requiring a higher payout ratio to sustain the
current level of dividends paid to non-MHC shareholders. Since the pro forma
impact has not been publicly disseminated to date, it is appropriate to discount
the current trading level. As the pro forma impact is made known publicly, the
trading level will become more informative.
Taking these factors and trends into account, primarily recent
trends in the new issue market, market conditions overall, and recent trends in
the acquisition market, as well as
<PAGE>
RP Financial, LC.
Page 4.21
considering recent trades in the Association's minority stock, RP Financial
concluded that no adjustment was appropriate in the valuation analysis for
purposes of marketing of the issue.
8. Management
Pocahontas Federal's management team has experience and expertise in all
of the key areas of the Association's operations. Exhibit IV-5 provides summary
resumes of Pocahontas Federal's Board of Directors and executive management.
While the Association does not have the resources to develop a great deal of
management depth, given its asset size and the impact it would have on operating
expenses, management and the Board have been effective in implementing an
operating strategy that can be well managed by the Association's present
management structure.
Similarly, the returns, capital positions, and other operating measures of
the Peer Group companies are indicative of well-managed financial institutions,
which have Boards and management teams that have been effective in implementing
competitive operating strategies. Therefore, on balance, we concluded no
valuation adjustment relative to the Peer Group was appropriate for this factor.
9. Effect of Government Regulation and Regulatory Reform
As a fully converted SAIF-insured savings institution, Pocahontas Federal
will be operating in substantially the same regulatory environment as the Peer
Group members. The Association and the Peer Group companies are profitable and
well capitalized, operating with no apparent operating restrictions. Exhibit
IV-6 reflects the Association's pro forma regulatory capital ratios. All eleven
of the Peer Group companies are SAIF-insured institutions and, thus, were
subject to the same one time assessment. Likewise, the Association and all of
the Peer Group companies' deposits will be assessed at the same rate going
forward. On balance, RP Financial concluded that no adjustment to the
Association's value was warranted for this factor.
Summary of Adjustments
Overall, we believe the Association's pro forma market value should be
discounted relative to the Peer Group as follows:
<PAGE>
RP Financial, LC.
Page 4.22
Key Valuation Parameters: Valuation Adjustment
------------------------- --------------------
Financial Condition Slight Downward
Profitability, Growth and Viability of Earnings Slight Downward
Asset Growth Slight Downward
Primary Market Area Moderate Downward
Dividends No Adjustment
Liquidity of the Shares No Adjustment
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and
Regulatory Reform No Adjustment
Valuation Approaches
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing Pocahontas Federal's to-be-issued stock
- -- price/earnings ("P/E"), price/book ("P/B"), and price/assets ("P/A")
approaches -- all performed on a pro forma basis including the effects of
selling the MHC's interest to the public. In computing the pro forma impact of
the conversion and the related pricing ratios, we have incorporated the
valuation parameters disclosed in Pocahontas Federal's prospectus for offering
expenses, the effective tax rate, and stock benefit plan assumptions (summarized
in Exhibits IV-7 and IV-8). A reinvestment rate of 5.93 percent was utilized,
equal to the arithmetic average of the Association's average yield on
interest-earnings assets and cost of deposits for the fiscal year ended
September 30, 1997 (the reinvestment rate calculation specified by OTS
conversion guidelines). The 5.93 percent reinvestment rate is believed to be
representative of the blended rate reflecting the Association's business plan as
converted and incorporating the impact of deposit withdrawals to fund a portion
of the stock issued in conversion. In our estimate of value, we assessed the
relationship of the pro forma pricing ratios relative to the Peer Group and the
recent conversions.
In addition to the three valuation methodologies specified by the OTS, RP
Financial also considered recent trades in the Association's stock. However such
trades were not given significant weight, in light of the differences between
the characteristics of the Association's minority stock and the fully-converted
stock of the Association.
o P/E Approach. The P/E approach is generally the best indicator of
long-term value for a stock and, thus, was carefully considered in
this valuation.
o P/B Approach. P/B ratios have generally served as a useful benchmark
in the valuation of thrift stocks, with the greater determinant of
long term value being
<PAGE>
RP Financial, LC.
Page 4.23
earnings. RP Financial considered the P/B approach to be a reliable
indicator of value given current market conditions, particularly the
market for new conversions where the P/B approach tends to be more
highly emphasized.
o P/A Approach. P/A ratios are generally a less reliable indicator of
market value, as investors do not place significant weight on total
assets as a determinant of market value. Investors place
significantly greater weight on book value and earnings -- which
have received greater weight in our valuation analysis.
o Trading of Pocahontas Federal's Stock. Converting institutions
generally do not have stock outstanding. Pocahontas Federal,
however, has public shares outstanding due to the mutual holding
company form of ownership. Since Pocahontas Federal's stock is
currently traded, it is an indicator of investor interest in the
Association's conversion stock and therefore received some weight in
our valuation. Based on the December 12, 1997 stock price of $36.50
per share and the 1,632,424 shares of the Association's stock issued
and outstanding, the implied value of $59.6 million was considered
in the valuation process. However, since the conversion stock will
have different characteristics than the minority shares and since
pro forma information has not been publicly disseminated to date,
the current trading price of Pocahontas Federal's stock was somewhat
discounted herein but will become more important towards the close
of the offering.
The Association has adopted Statement of Position ("SOP") 93-6, which will
cause earnings per share computations to be based on shares issued and
outstanding excluding unreleased ESOP shares. For purposes of preparing the pro
forma pricing analyses, we have reflected all shares issued in the offering,
including all ESOP shares, to capture the full dilutive impact, particularly
since the ESOP shares are economically dilutive, receive dividends and can be
voted. However, we did consider the impact of the adoption of SOP 93-6 in the
valuation.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, and placing the
greatest weight on the P/E and P/B approaches, RP Financial concluded that the
pro forma market value of the Association's conversion stock is $47,316,670 at
the midpoint at this time. The midpoint value and resulting valuation range is
based on the sale of a 52.8 percent ownership interest to the public, which
provides for a $25.0 million public offering at the midpoint value.
1. Price-to-Earnings ("P/E"). The application of the P/E valuation method
requires calculating the Association's pro forma market value by applying a
valuation P/E multiple times the pro forma earnings base. Ideally, the pro forma
earnings base is composed principally of the Association's recurring earnings
base, that is, earnings adjusted to exclude
<PAGE>
RP Financial, LC.
Page 4.24
any one-time non-operating items, plus the estimated after-tax earnings benefit
of the reinvestment of net conversion proceeds. Pocahontas Federal's reported
earnings equaled $2.376 million for the twelve months ended September 30, 1997.
In deriving Pocahontas Federal's core earnings, the only adjustment made to
reported earnings was to take into account the reinvestment of the $461,000 of
assets currently held at the MHC, which will be consolidated with the
Association as the result of the conversion. Reinvestment of the MHC assets at
the 5.93 percent reinvestment rate added approximately $17,000 to Pocahontas
Federal's after tax earnings. As shown below, Pocahontas Federal's core earnings
were determined to equal $2.393 million for the twelve months ended September
30, 1997. (Note: see Exhibit IV-9 for the adjustments applied to the Peer
Group's earnings in the calculation of core earnings).
Amount
------
($000)
Net income $2,376
Reinvestment of MHC assets(1) 17
--
Core earnings estimate $2,393
(1) Tax effected at 38.3 percent.
Based on Pocahontas Federal's trailing twelve month estimated core
earnings, and incorporating the impact of the pro forma assumptions discussed
previously, the Association's pro forma P/E multiple at the $47.3 million
midpoint value was 16.16 times, resulting in a discount of 27.3 percent from the
Peer Group average of 22.24 times core earnings. At the top of the super range,
the discount under the core P/E approach narrowed to 9.4 percent. The discounted
earnings multiple was consistent with valuation adjustments outlined earlier.
2. Price-to-Book ("P/B"). The application of the P/B valuation method
requires calculating the Association's pro forma market value by applying a
valuation P/B ratio to Pocahontas Federal's pro forma book value. The
pre-conversion book value for Pocahontas Federal of $24,707,,000 was equal to
the Association's reported capital at September 30, 1997, plus the $461,000 of
mutual holding company assets at September 30, 1997 which will be consolidated
with the Association's capital as a result of the conversion. Based on the $47.3
million midpoint valuation, Pocahontas Federal's pro forma P/B ratio was 102.74
percent. In comparison to the average P/B ratio for the Peer Group of 138.46
percent, Pocahontas Federal's valuation reflected a discount of 25.8 percent. At
the top of the super range, the discount under the P/B approach narrowed to 14.8
percent. RP Financial
<PAGE>
RP Financial, LC.
Page 4.25
considered the discount under the P/B approach to be reasonable in light of the
valuation adjustments referenced earlier.
As indicated at the beginning of this chapter, RP Financial's analysis of
recent conversion pricing characteristics at conversion and in the aftermarket
has been limited to a "technical" analysis and, thus, the pricing
characteristics of recent conversions is not the primary determinate of value
herein. Particular focus was placed on the P/B approach in this analysis since
the P/E multiples do not reflect the actual impact of reinvestment and the
source of the conversion funds (i.e., external funds vs. deposit withdrawals).
At the midpoint value of $47.3 million, Pocahontas Federal's pro forma P/B ratio
of 102.74 percent represented a premium of 27.6 percent from the average P/B
ratio of the recently completed stock conversions at closing of 80.5 percent
(see Table 4.2). The Association's pro forma P/B ratio at the midpoint reflected
a discount of 23.9 percent from the 135.02 percent average P/B ratio of the
recently completed stock conversions in the after market (see Table 4.3).
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
market value by applying a valuation P/A ratio to the Association's pro forma
asset base, conservatively assuming no deposit withdrawals are made to fund
stock purchases. In all likelihood there will be deposit withdrawals, which
results in understating the pro forma P/A ratio which is computed herein. At the
midpoint of the valuation range, Pocahontas Federal's value equaled 11.68
percent of pro forma assets. Comparatively, the Peer Group companies exhibited
an average P/A ratio of 15.17 percent, which implies a 23.0 percent discount
being applied to the Association's pro forma P/A ratio.
Valuation Conclusion
It is our opinion that, as of December 12, 1997, the aggregate pro forma
market value of the Association, inclusive of the sale of the Mutual Holding
Company's ownership interest to public shareholders was $47,316,670 at the
midpoint. Based on this valuation and the approximate 52.8 percent ownership
interest being sold in the public offering, the midpoint value of the Holding
Company's stock offering was 25,000,000, equal to 2,500,000 shares at a per
share value of $10.00. Pursuant to OTS conversion guidelines, the 15 percent
offering range includes a minimum value of $21,250,000 and a maximum value of
$28,750,000. Based on the $10.00 per share offering price, this range equates to
an offering of 2,125,000 shares at the minimum to 2,875,000 shares at the
maximum. The Holding Company's
<PAGE>
RP Financial, LC.
Page 4.26
offering also includes a provision for a super range, which if exercised, would
result in an offering size of $33,062,500, equal to 3,306,250 shares at the
$10.00 per share offering price. The comparative pro forma valuation ratios
relative to the Peer Group are shown in Table 4.4, and the key valuation
assumptions are detailed in Exhibit IV-7. The pro forma calculations for the
range are detailed in Exhibit IV-8.
Establishment of Exchange Ratio
OTS regulations provide that in a conversion of a mutual holding company,
the minority stockholders are entitled to exchange their shares of the
Association's common stock for common stock of the Holding Company. The Board of
Directors of the Mutual Holding Company has independently established a formula
to determine the exchange ratio. The formula has been designed to preserve the
current aggregate percentage ownership in the Association represented by the
Public Stockholders, which is an approximate 47.2 percent ownership interest.
Pursuant to the formula, the Exchange Ratio will be determined at the end of the
Holding Company's stock offering based on the total number of shares sold in the
Subscription and Community offerings. Based upon this formula, and the valuation
conclusion and offering range concluded above, the Exchange Ratio would be
2.4638 shares, 2.8986 shares, 3.3333 shares and 3.8333 shares of Pocahontas
Bancorp stock issued for each share of stock held by the Public Stockholders, at
the minimum, midpoint, maximum and supermaximum of the offering, respectively.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Table 4.4
Public Market Pricing
Pocahontas Federal and the Comparables
As of December 12, 1997
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3) Dividends(4)
--------------- -------------- --------------------------------------- -----------------------
Core Book
Price/ Market 12-Mth Value/ Amount/ Payout
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
------- ------- ------- ------- ------- ------- ------- ------- -------- ------- ------ -------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pocahontas Federal
- ------------------
Superrange 10.00 62.58 0.50 8.48 20.15 117.90 15.18 117.90 20.15 0.24 2.40 48.37
Range Maximum 10.00 54.41 0.55 9.06 18.08 110.33 13.32 110.33 18.08 0.27 2.70 48.81
Range Midpoint 10.00 47.32 0.62 9.73 16.16 102.74 11.66 102.74 16.16 0.32 3.20 51.72
Range Minimum 10.00 40.22 0.71 10.64 14.14 93.99 10.01 93.99 14.14 0.37 3.70 52.31
SAIF-Insured Thrifts(7)
Averages 23.19 181.59 1.12 15.13 19.50 159.37 19.33 162.79 20.43 0.37 1.58 30.13
Medians --- --- --- --- 19.18 150.78 17.84 154.00 20.03 --- --- ---
All Non-MHC State of AR(7)
- --------------------------
Averages 21.04 66.11 0.93 15.41 18.51 135.42 21.66 136.67 18.99 0.27 1.06 19.00
Medians --- --- --- --- 18.51 142.73 21.25 142.73 18.99 --- --- ---
Comparable Group Averages
- -------------------------
Averages 22.19 52.44 0.97 16.35 19.30 138.46 15.17 138.85 22.24 0.33 1.51 20.33
Medians --- --- --- --- 19.19 132.69 14.83 132.69 21.42 --- --- ---
State of AR
- -----------
FFBH First Fed. Bancshares of AR 23.75 116.28 1.08 16.64 21.02 142.73 21.25 142.73 21.99 0.24 1.01 22.22
HCBB HCB Bancshares of AR 13.62 36.02 0.10 14.27 NM 95.44 17.98 99.20 NM 0.00 0.00 0.00
FTF Texarkana Fst. Fin. Corp of AR 25.75 46.02 1.61 15.32 15.99 168.08 25.75 168.08 15.99 0.56 2.17 34.78
Comparable Group
- ----------------
FBCV 1st Bancorp of Vincennes IL 26.00 26.99 0.91 21.75 14.13 119.54 10.34 121.89 28.57 0.28 1.08 30.77
EGLI Eagle Bancorp of IL 19.25 23.06 0.36 17.03 NM 113.04 13.40 113.04 NM 0.00 0.00 0.00
EFBI Enterprise Fed. Bancorp of OH 28.25 56.10 0.99 15.82 23.74 178.57 20.41 178.68 28.54 1.00 3.54 NM
FFHH FSF Financial Corp. of MN 19.12 57.55 1.03 14.41 18.38 132.69 14.83 132.69 18.56 0.50 2.62 48.54
FFBH First Fed. Bancshares of AR 23.75 116.28 1.08 16.64 21.02 142.73 21.25 142.73 21.99 0.24 1.01 22.22
HMNF HMN Financial, Inc. of MN 26.25 110.57 1.13 20.09 19.59 130.66 19.44 130.66 23.23 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 15.25 44.01 0.89 10.59 16.76 144.00 10.52 144.00 17.13 0.00 0.00 0.00
MBLF MBLA Financial Corp. of MO 27.25 34.55 1.48 22.36 18.79 121.87 15.42 121.87 18.41 0.40 1.47 27.03
MWBI Midwest Bancshares Inc. of IA 17.75 18.07 1.07 10.18 14.67 174.36 12.06 174.36 16.59 0.24 1.35 22.43
MFFC Milton Fed. Fin. Corp. of OH 15.12 34.85 0.53 11.45 25.20 132.05 16.60 132.05 28.53 0.60 3.97 NM
PERM Permanent Bancorp of IN 26.06 54.80 1.25 19.51 20.68 133.57 12.64 135.38 20.85 0.40 1.53 32.00
<CAPTION>
Financial Characteristics(6)
-------------------------------------------------------
Reported Core Memo: Memo:
Total Equity/ NPAs/ --------------- --------------- Exchange Offering
Financial Institution Assets Assets Assets ROA ROE ROA ROE Ratio Size
- --------------------- ------ ------- ------- ------- ------- ------- ------- ($Mil)
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
Pocahontas Federal
- ------------------
Superrange 412 12.87 0.17 0.75 5.85 0.75 5.85 3.8333 33.06
Range Maximum 408 12.07 0.17 0.74 6.10 0.74 6.10 3.3333 28.75
Range Midpoint 405 11.37 0.17 0.72 6.36 0.72 6.36 2.8986 25.00
Range Minimum 402 10.65 0.18 0.71 6.65 0.71 6.55 2.4638 21.25
SAIF-Insured Thrifts(7)
- --------------------
Averages 1,195 13.00 0.77 0.19 8.05 0.87 7.81
Medians --- --- --- --- --- --- ---
All Non-MHC State of AR(7)
- --------------------------
Averages 309 16.35 0.60 0.96 6.15 0.95 6.08
Medians --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 332 11.07 0.63 0.78 7.21 0.69 6.31
Medians --- --- --- --- --- --- ---
State of AR
- -----------
FFBH First Fed. Bancshares of AR 547 14.89 0.96 1.06 6.78 1.01 6.48
HCBB HCB Bancshares of AR 200 18.84 NA 0.13 0.92 0.14 1.02
FTF Texarkana Fst. Fin. Corp of AR 179 15.32 0.23 1.70 10.74 1.70 10.74
Comparable Group
- ----------------
FBCV 1st Bancorp of Vincennes IL 261 8.65 1.30 0.72 8.75 0.36 4.33
EGLI Eagle Bancorp of IL 172 11.85 1.48 0.32 2.61 0.25 2.04
EFBI Enterprise Fed. Bancorp of OH 275 11.43 0.07 0.92 7.43 0.77 6.18
FFHH FSF Financial Corp. of MN 388 11.17 0.15 0.85 7.05 0.84 6.98
FFBH First Fed. Bancshares of AR 547 14.89 0.96 1.06 6.78 1.01 6.48
HMNF HMN Financial, Inc. of MN 569 14.88 0.10 1.00 6.87 0.85 5.79
HALL Hallmark Capital Corp. of WI 418 7.30 0.13 0.65 9.11 0.64 8.91
MBLF MBLA Financial Corp. of MO 224 12.66 0.57 0.83 6.49 0.85 6.62
MWBI Midwest Bancshares Inc. of IA 150 6.92 0.81 0.87 12.62 0.77 11.16
MFFC Milton Fed. Fin. Corp. of OH 210 12.57 0.29 0.73 4.95 0.65 4.38
PERM Permanent Bancorp of IN 434 9.46 1.07 0.62 6.63 0.62 6.58
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month data, adjusted
to omit the impact of non-operating items (including the SAIF assessment)
on a tax effected basis, and is shown on a pro forma basis where appropr
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets; P/TB
= Price to Tangible Book; and P/CORE = Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and total assets balances.
(7) Excludes from averages and medians those companies the subject of actual
or rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
- ------ -----------
I-1 Map of Office Locations
I-2 Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Fixed Rate and Adjustable Rate Loans
I-8 Contractual Maturity By Loan Type
I-9 NPV Analysis
I-10 Loan Portfolio Composition
I-11 Loan Originations, Purchases, and Sales
I-12 Non-Performing Assets
I-13 Borrowings
I-14 Time Deposit Rate/Maturity
II-1 List of Branch Offices
II-2 Historical Interest Rates
III-1 General Characteristics of Publicly-Traded
Institutions
III-2 Financial Analysis of Arkansas Institutions
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS(continued)
III-3 Financial Analysis of Midwest and Southeast Peer Group
Candidates
III-4 Peer Group Market Area Comparative Analysis
IV-1 Stock Prices: December 12, 1997
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Director and Senior Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet
IV-8 Pro Forma Effect of Conversion Proceeds
IV-9 Peer Group Core Earnings Analysis
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Pocahontas Federal Savings and Loan Association
Map of Office Locations
<PAGE>
[MAP OMITTED]
- ----------------
Pocahontas FS&LA
Branch Locations
- ----------------
<PAGE>
EXHIBIT I-2
Pocahontas Federal Savings and Loan Association
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Pocahontas Federal Savings and Loan Association
Key Operating Ratios
See Page 14 in Prospectus
<PAGE>
EXHIBIT I-4
Pocahontas Federal Savings and Loan Association
Investment Portfolio Composition
See Page 58 in Prospectus
<PAGE>
EXHIBIT I-5
Pocahontas Federal Savings and Loan Association
Yields and Costs
See Page 38 in Prospectus
<PAGE>
EXHIBIT I-6
Pocahontas Federal Savings and Loan Association
Loan Loss Allowance Activity
See Page 53 in Prospectus
<PAGE>
EXHIBIT I-7
Pocahontas Federal Savings and Loan Association
Fixed Rate and Adjustable Rate Loans
See Page 47 in Prospectus
<PAGE>
EXHIBIT I-8
Pocahontas Federal Savings and Loan Association
Contractual Maturity By Loan Type
See Page 47 in Prospectus
<PAGE>
EXHIBIT I-9
Pocahontas Federal Savings and Loan Association
NPV Analysis
See Page 35 in Prospectus
<PAGE>
EXHIBIT I-10
Pocahontas Federal Savings and Loan Association
Loan Portfolio Composition
See Page 46 in Prospectus
<PAGE>
EXHIBIT I-11
Pocahontas Federal Savings and Loan Association
Loan Origination, Purchases, and Sales
See Page 50 in Prospectus
<PAGE>
EXHIBIT I-12
Pocahontas Federal Savings and Loan Association
Non-Performing Assets
See Page 51 in Prospectus
<PAGE>
EXHIBIT I-13
Pocahontas Federal Savings and Loan Association
Borrowings
See Page 60 in Prospectus
<PAGE>
EXHIBIT I-14
Pocahontas Federal Savings and Loan Association
Time Deposit Rate/Maturity
See Page 59 in Prospectus
<PAGE>
EXHIBIT II-1
Pocahontas Federal Savings and Loan Association
List of Branch Offices
See Page 61 in Prospectus
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
Exhibit II-2
Historical Interest Rates(1)
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
- --------------- ----- ------ -------- -------
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 8.25% 5.14% 5.38% 6.67%
Quarter 2 8.25% 5.16% 5.68% 6.87%
Quarter 3 8.25% 5.03% 5.69% 6.92%
Quarter 4 8.25% 5.18% 5.49% 6.64%
1997: Quarter 1 8.50% 5.32% 6.00% 7.10%
Quarter 2 8.50% 5.17% 5.66% 6.78%
Quarter 3 8.50% 5.10% 5.44% 6.40%
December 12, 1997 8.50% 5.17% 5.39% 5.92%
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California Companies
--------------------
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 46,800 368 12-31 10/72 61.69 5,824
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,229 246 12-31 05/59 91.31 5,184
GSB Glendale Fed. Bk, FSB of CA NYSE CA Div. 16,433 154 06-30 10/83 34.25 1,728
CSA Coast Savings Financial of CA NYSE California R.E. 9,040 92 12-31 12/85 62.50 1,165
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,854 85 12-31 01/71 28.13 753
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,105 25 12-31 12/83 38.37 406
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,920 37 12-31 / 12.50 242
WES Westcorp Inc. of Orange CA NYSE California Div. 3,757 26 12-31 05/86 17.19 451
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,162 41 12-31 05/86 34.87 433
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,615 23 03-31 03/96 19.12 342
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,305 18 12-31 10/91 41.62 248
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,251 36 12-31 / 49.50 298
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 1,050 19 06-30 06/95 17.12 108
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 967 14 12-31 04/94 19.87 143
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 902 9 12-31 / 17.75 139
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 891 6 12-31 / 19.87 61
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 847 8 06-30 12/93 21.37 100
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 641 9 06-30 06/96 21.50 104
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 516 8 12-31 / 32.87 76
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 410 7 12-31 02/95 19.00 61
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 409 8 06-30 06/95 17.25 40
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 125 3 12-31 01/96 13.25 11
Florida Companies
-----------------
OCN Ocwen Financial Corp. of FL OTC Southeast FL Div. 2,956 1 12-31 / 24.37 1,475
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,845 60 12-31 11/83 15.50 345
BKUNA BankUnited SA of FL OTC Miami FL Thrift 2,145 14 09-30 12/85 13.50 129
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,808 40 09-30 09/93 38.75 196
HARB Harbor FSB, MHC of FL (46.6) OTC Eastern FL Thrift 1,131 23 09-30 01/94 67.00 333
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Florida Companies (continued)
-----------------------------
FFFL Fidelity FSB, MHC of FL (47.7) OTC Southeast FL Thrift 1,046 20 12-31 01/94 29.00 197
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 709 20 12-31 10/94 34.87 178
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 383 9 12-31 01/94 22.25 85
Mid-Atlantic Companies
----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 19,413 91 12-31 08/86 26.00 2,639
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 14,601 120 12-31 08/86 21.62 1,930
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,094 74 12-31 01/94 67.19 2,877
ASFC Astoria Financial Corp. of NY OTC NY Thrift 7,904 45 12-31 11/93 57.37 1,186
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,931 36 09-30 04/94 46.25 1,111
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 3,717 72 12-30 04/92 46.00 592
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,692 15 12-31 06/93 33.50 589
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,474 6 12-31 01/97 21.88 955
NYB New York Bancorp, Inc. of NY NYSE Southeastern NY Thrift 3,244 29 09-30 01/88 38.31 817
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,316 18 03-31 08/94 30.75 365
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,278 56 06-30 06/96 21.50 349
HARS Harris SB, MHC of PA (24.3) OTC Southeast PA Thrift 2,110 31 12-31 01/94 19.25 650
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,101 53 06-30 11/94 14.75 690
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 2,035 28 06-30 03/94 34.00 296
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,833 20 12-31 09/93 21.75 191
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,541 13 12-31 11/93 36.50 551
JSB JSB Financial, Inc. of NY NYSE New York City NY Thrift 1,531 13 12-31 06/90 48.50 480
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,496 16 12-31 11/86 20.75 258
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,489 10 12-31 07/96 37.25 305
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,385 15 06-30 06/96 23.37 295
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,364 17 06-30 07/94 33.50 162
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,157 J 25 02-28 06/87 27.00 175
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,156 22 06-30 02/84 24.87 219
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,045 16 12-31 07/92 41.62 333
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 1,005 28 06-30 07/87 28.75 147
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 960 7 12-31 11/95 23.00 184
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
----------------------------------
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 885 17 12-31 08/84 36.00 138
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 884 13 12-31 11/85 10.37 131
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 822 9 12-31 06/90 18.62 99
MBB MSB Bancorp of Middletown NY (3) AMEX Southeastern NY Thrift 814 J 16 12-31 09/92 30.50 87
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 802 13 12-31 03/96 18.62 148
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 735 10 09-30 10/94 17.37 190
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 703 16 12-31 10/95 22.50 103
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 681 7 12-31 06/95 18.62 121
TSBS Peoples Bcrp, MHC of NJ (35.9) OTC Central NJ Thrift 639 14 12-31 08/95 39.25 355
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 625 14 06-30 07/94 29.75 122
FSNJ Bayonne Banchsares of NJ OTC Northern NJ Thrift 609 4 03-31 08/97 12.25 110
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 582 18 12-31 12/88 32.75 78
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 526 4 09-30 09/86 26.75 82
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 525 10 12-31 04/87 28.75 78
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 506 J 8 07-31 12/93 24.87 112
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 485 J 12 12-31 12/95 18.00 78
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 437 9 12-31 07/83 15.50 62
CNY Carver Bancorp, Inc. of NY AMEX New York, NY Thrift 416 7 03-31 10/94 16.87 39
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 407 6 12-31 03/87 27.50 65
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 401 4 12-31 04/93 34.00 70
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 381 8 09-30 06/88 27.50 43
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 373 5 09-30 01/95 37.37 46
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 372 8 12-31 11/89 24.87 71
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 358 9 12-31 01/95 26.62 63
HARL Harleysville SA of PA OTC Southeastern PA Thrift 345 4 09-30 08/87 29.37 49
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 324 6 12-31 01/96 20.25 53
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 322 7 06-30 03/87 26.25 57
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 313 4 09-30 04/96 18.75 57
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 308 J 4 09-30 09/93 48.50 29
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 297 5 09-30 08/94 24.50 42
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 290 4 09-30 04/96 17.37 81
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 285 1 06-30 05/94 23.50 122
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 285 4 09-30 04/96 19.50 56
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
----------------------------------
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 282 5 06-30 11/93 32.00 56
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 273 6 09-30 04/96 17.75 35
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 268 J 4 07-31 / 7.12 31
WYNE Wayne Bancorp of NJ OTC Northern NJ Thrift 267 0 12-31 06/96 22.75 46
IFSB Independence FSB of DC OTC Washington DC Ret. 258 J 2 12-31 06/85 14.00 18
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 249 7 12-31 03/95 29.00 95
SKAN Skaneateles Bancorp Inc of NY (3) OTC Northwest NY Thrift 248 9 12-31 06/86 18.87 27
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY,PA Thrift 228 6 12-31 03/85 30.00 22
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 228 4 04-30 11/94 30.00 54
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 217 9 03-31 08/94 23.75 40
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 210 6 06-30 02/87 28.13 41
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 206 9 12-31 07/97 18.75 52
PBHC OswegoCity SB, MHC of NY (46.) (3) OTC NY Thrift 193 5 12-31 11/95 30.00 58
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 181 3 06-30 12/95 17.50 56
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 179 6 12-31 04/97 20.00 41
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 174 3 12-31 06/95 24.50 30
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 159 J 5 12-31 10/96 18.75 27
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 147 J 3 03-31 04/97 18.87 43
PRBC Prestige Bancorp of PA OTC Thrift 138 0 12-31 06/96 19.25 18
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 124 J 1 03-31 10/95 20.00 30
GOSB GSB Financial Corp. of NY OTC Southeast NY Thrift 114 P 2 09-30 07/97 17.12 38
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 110 2 03-31 06/96 27.62 18
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 106 2 06-30 01/97 17.75 19
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 100 J 5 09-30 04/96 15.87 23
SHSB SHS Bancorp, Inc. of PA OTC Pittsburgh Thrift 90 P 4 12/31 10/97 17.25 14
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 71 2 09-30 07/93 28.00 7
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 3 12-31 07/96 18.50 11
Mid-West Companies
------------------
COFI Charter One Financial of OH OTC OH,MI Div. 15,197 221 12-31 01/88 62.00 3,073
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,207 107 06-30 12/84 52.87 1,141
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,549 52 12-31 05/87 25.25 862
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,371 20 12-31 01/90 34.06 519
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,295 35 03-31 01/92 38.62 501
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,894 45 12-31 03/94 50.25 695
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 2,033 15 12/31 / 19.12 261
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,955 35 03-31 07/92 35.00 317
DNFC D&N Financial Corp. of MI OTC MI Ret. 1,754 37 12-31 02/85 27.75 229
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,661 23 09-30 06/93 41.50 217
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,560 44 12-31 11/89 30.25 277
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,547 28 12-31 08/83 31.00 327
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,371 14 09-30 07/92 26.50 213
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,292 J 32 12-31 04/93 43.00 215
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,037 15 09-30 03/92 66.50 215
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 867 26 12-31 08/94 28.37 152
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 860 17 12-31 06/90 34.87 177
NASB North American SB of MO OTC KS,MO M.B. 737 J 7 09-30 09/85 54.00 120
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 728 25 06-30 12/89 24.75 200
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 694 16 06-30 01/88 26.00 133
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 681 13 03-31 01/88 20.50 156
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 657 20 12-31 12/83 14.00 124
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 654 22 12-31 07/92 12.75 55
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 611 10 06-30 06/93 32.25 133
EMLD Emerald Financial Corp of OH OTC Cleveland OH Thrift 604 13 12-31 / 18.50 94
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 597 5 12-31 04/95 16.37 57
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 575 19 06-30 04/92 26.25 74
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 574 9 06-30 10/95 14.75 132
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 569 7 12-31 06/94 26.25 111
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 547 12 12-31 05/96 23.75 116
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 529 4 12-31 03/96 14.75 82
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 523 J 6 03-31 09/93 28.25 110
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 521 3 06-30 / 12.62 41
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 502 11 12-31 / 25.00 80
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 498 5 09-30 12/93 23.00 64
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 488 5 06-30 02/92 32.00 101
FFSX First FS&LA. MHC of IA (46.1) OTC Western IA Thrift 457 13 06-30 07/92 32.37 92
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 434 12 03-31 04/94 26.06 55
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 427 J 12 12-31 03/92 36.00 45
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 418 3 06-30 01/94 15.25 44
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 405 9 09-30 06/94 44.75 88
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 405 12 09-30 09/93 21.37 58
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 402 12 12-31 07/95 20.25 71
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 402 5 12-31 03/94 27.75 52
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 397 6 12-31 07/94 26.62 63
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 393 J 8 09-30 12/95 23.75 99
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 393 8 12-31 03/87 20.25 65
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 388 11 09-30 10/94 19.12 58
PFSL Pocahnts Fed, MHC of AR (47.0) OTC Northeast AR Thrift 383 6 09-30 04/94 36.50 60
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 383 9 06-30 12/92 20.75 54
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 383 8 06-30 07/87 22.00 91
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 375 6 12-31 06/92 25.50 68
INBI Industrial Bancorp of OH OTC Northern OH Thrift 354 10 12-31 08/95 18.12 94
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 345 8 12-31 07/94 49.31 74
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 343 5 12-31 09/96 18.25 125
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 340 9 12-31 01/93 34.38 49
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 335 J 9 09-30 03/95 27.12 68
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 327 9 12-31 06/90 27.19 46
WFI Winton Financial Corp. of OH OTC Cincinnati OH R.E. 317 J 5 09-30 08/88 19.75 39
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 309 1 12-31 06/92 26.50 66
FSFF First SecurityFed Fin of IL OTC Chicago Thrift 303 P 5 12-31 10/97 15.94 102
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 293 6 06-30 11/90 18.50 42
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 291 6 09-30 07/87 24.00 81
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 278 7 12-31 05/96 18.00 47
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 275 5 09-30 10/94 28.25 56
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 261 1 06-30 04/87 26.00 27
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 256 4 09-30 03/94 23.50 39
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 250 6 03-31 06/93 30.25 68
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
EBI Equality Bancorp of St Louis NYSE St Louis Thrift 249 P 3 03-31 12/97 14.87 37
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 242 8 06-30 12/93 23.25 44
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 235 4 06-30 08/87 10.37 29
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 235 4 12-31 02/93 26.50 33
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 231 7 12-31 01/88 27.37 33
LARK Landmark Bancshares of KS OTC Central KS Thrift 228 J 5 09-30 03/94 23.25 39
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 224 2 06-30 06/93 27.25 35
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 215 3 07-31 12/96 18.75 47
FFFD North Central Bancshares of IA OTC Central IA Thrift 215 4 12-31 03/96 19.12 62
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 212 3 09-30 04/95 20.12 52
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 210 4 06-30 04/95 26.00 81
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 210 2 09-30 10/94 15.12 35
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 207 J 9 12-31 07/92 27.75 45
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 205 7 12-31 04/95 18.50 36
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 204 6 09-30 06/92 21.00 33
HCBB HCB Bancshares of AR OTC Southern AR Thrift 200 J 6 06-30 05/97 13.62 36
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 200 4 12-31 02/95 27.75 25
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 190 3 12-31 06/95 20.50 36
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 181 3 06-30 04/93 41.75 30
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 180 J 5 09-30 05/94 30.00 63
MARN Marion Capital Holdings of IN OTC Central IN Thrift 180 2 06-30 03/93 27.50 49
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 175 3 12-31 08/96 17.75 43
EGLB Eagle BancGroup of IL OTC Central IL Thrift 172 3 12-31 07/96 19.25 23
FFWD Wood Bancorp of OH OTC Northern OH Thrift 167 6 06-30 08/93 18.50 39
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 165 3 06-30 03/95 16.00 42
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 164 4 12-31 04/95 28.50 36
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 163 8 06-30 04/94 19.75 32
FBSI First Bancshares of MO OTC Southcentral MO Thrift 163 6 06-30 12/93 26.00 28
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 162 3 12-31 04/97 17.37 36
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 157 J 2 06-30 04/95 28.50 39
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 150 4 12-31 11/92 17.75 18
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 143 2 12-31 09/96 14.25 40
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 140 J 3 12-31 12/96 18.12 22
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
GTPS Great American Bancorp of IL OTC East Central IL Thrift 140 3 12-31 06/95 18.50 31
FKKYD Frankfort First Bancorp of KY OTC Frankfort KY Thrift 133 3 06-30 07/95 18.62 31
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 130 J 3 03-31 12/95 16.25 21
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 126 J 6 09-30 10/92 11.25 19
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 123 4 12-31 12/93 18.50 18
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 122 2 12-31 12/93 25.87 25
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 117 3 03-31 09/95 17.75 15
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 113 2 09-30 10/93 14.87 15
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 13.50 23
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 111 5 09-30 04/95 28.00 19
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 J 2 09-30 10/95 17.25 35
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 108 1 09-30 11/96 17.25 34
CBES CBES Bancorp of MO OTC Western MO Thrift 107 2 06-30 09/96 21.88 22
FTNB Fulton Bancorp of MO OTC Central MO Thrift 104 2 06-30 10/96 21.37 37
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 103 4 12-31 04/96 16.50 16
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 103 2 06-30 04/97 17.25 31
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 102 4 06-30 07/97 12.50 21
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 98 2 09-30 06/95 15.50 23
CNSB CNS Bancorp of MO OTC Central MO Thrift 97 5 12-31 06/96 21.50 36
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 97 3 03-31 10/94 19.25 16
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 96 3 06-30 12/94 20.50 19
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 95 J 4 06-30 08/95 20.25 17
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 94 1 06-30 01/94 17.06 17
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 94 1 12-31 08/94 21.25 45
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 94 3 06-30 02/95 15.75 14
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 88 1 06-30 04/96 18.62 27
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 88 2 06-30 08/95 14.69 19
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 88 3 06-30 06/94 11.75 10
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 88 2 06-30 01/94 13.37 21
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 86 J 2 09-30 09/96 13.75 21
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 86 1 12-31 06/95 15.25 19
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 86 1 12-31 11/96 18.50 40
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 84 3 06-30 03/95 19.37 15
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 84 2 12-31 10/93 21.00 9
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 83 M 3 09-30 10/94 14.75 13
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 81 J 1 09-30 02/95 23.25 19
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 77 2 06-30 02/95 19.50 24
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 70 1 06-30 12/96 17.25 16
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 J 1 09-30 03/95 17.50 13
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 70 2 06-30 03/95 13.75 7
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 63 2 12-31 01/95 18.75 20
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 60 1 12-31 01/95 18.50 17
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 60 J 2 09-30 06/95 18.50 13
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 J 1 09-30 06/96 17.12 19
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 56 2 09-30 03/97 15.44 21
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 49 J 2 09-30 10/95 13.25 12
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 47 1 06-30 07/96 15.75 15
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 47 1 06-30 04/96 8.87 22
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 42 2 09-30 02/95 21.25 7
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 41 1 06-30 07/96 17.62 8
LONF London Financial Corp. of OH OTC Central OH Thrift 38 1 09-30 04/96 15.25 8
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 35 1 03-31 12/95 15.00 11
New England Companies
---------------------
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 7,731 97 12-31 07/88 35.00 2,139
WBST Webster Financial Corp. of CT OTC Central CT Thrift 6,811 77 12-31 12/86 63.50 861
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 6,056 132 12-31 12/86 43.44 1,194
CFX CFX Corp of NH (3) AMEX NH,MA M.B. 2,821 43 12-31 02/87 28.37 680
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,097 19 09-30 02/87 52.25 330
SISB SIS Bancorp Inc of MA (3) OTC Central MA Div. 1,453 24 12-31 02/95 37.37 209
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,281 12 12-31 05/86 37.25 192
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,210 15 12-31 08/87 20.75 156
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,129 12 12-31 10/95 32.62 212
MDBK Medford Bank of Medford, MA (3) OTC Eastern MA Thrift 1,106 16 12-31 03/86 37.75 171
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New England Companies (continued)
---------------------------------
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,036 12 03-31 01/97 20.37 177
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 987 12 12-31 06/87 37.12 100
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 961 10 12-31 10/95 19.87 112
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 933 14 12-31 05/86 46.62 166
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 922 11 12-31 07/86 30.50 157
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 831 14 12-31 06/96 27.37 145
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 717 14 12-31 10/86 23.00 76
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 701 19 12-31 11/86 30.31 165
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 M 7 12-31 06/94 38.00 92
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 610 15 12-31 12/81 49.00 113
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 586 11 12-31 10/86 8.75 122
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 520 5 12-31 07/86 5.03 84
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 512 11 12-31 07/86 43.00 83
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 502 8 12-31 06/86 38.00 70
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 443 9 02-31 09/86 32.00 72
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 424 3 12-31 07/86 24.75 126
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 364 6 12-31 07/86 21.62 82
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 353 5 12-31 05/86 15.75 67
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 344 J 8 03-31 10/86 26.81 53
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 319 10 12-31 05/86 21.25 44
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 317 13 06-30 02/86 13.50 52
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 265 8 06-30 08/87 27.62 36
ANE Alliance Bancorp of New Englan (3) AMEX Northern CT Thrift 242 7 12-31 12/86 16.87 27
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 216 5 12-31 12/88 27.87 36
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 203 5 12-31 05/93 12.75 30
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 201 2 12-31 08/88 22.87 42
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 183 5 12-31 11/86 6.25 41
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 149 7 12-31 / 15.00 20
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 146 J 8 12-31 06/93 21.00 26
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 129 4 04-30 12/87 23.75 21
NTMG Nutmeg FS&LA of CT OTC CT M.B. 105 3 12-31 / 10.75 11
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 94 J 2 09-30 03/96 20.00 29
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 61 2 03-31 11/89 28.75 7
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 95,608 290 12-31 03/83 68.62 17,647
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,720 89 09-30 11/82 31.87 1,514
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 2,047 31 12-31 / 39.25 316
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,870 41 06-30 / 21.25 161
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 1,074 J 16 03-31 11/95 26.25 269
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 980 7 09-30 10/95 21.50 215
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 531 12 03-31 08/86 17.12 127
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 451 6 12-31 12/85 17.00 69
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 426 11 06-30 08/92 12.75 43
RVSB Riverview Bancorp of WA OTC Southwest WA Thrift 282 9 03-31 10/97 14.87 91
OTFC Oregon Trail Fin. Corp of OR OTC Baker City Thrift 260 P 2 06-30 10/97 16.06 75
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 178 5 03-31 07/97 17.75 35
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 12-31 01/97 16.50 43
South-East Companies
--------------------
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,713 32 09-30 11/83 48.00 306
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,486 20 12-31 10/94 36.00 355
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,289 J 31 9-30 12/83 30.50 236
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 956 27 12-31 04/95 27.87 192
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 873 14 03-31 04/86 19.00 108
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 867 8 06-30 12/95 14.75 254
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 702 19 12-31 08/92 64.75 107
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 669 19 12-31 12/85 28.62 152
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 605 12 12-31 11/80 16.62 83
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 567 11 12-31 10/94 33.75 153
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 494 9 09-30 09/90 21.00 98
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 482 5 06-30 07/97 37.00 164
TSH Teche Holding Company of LA AMEX Southern LA Thrift 404 9 09-30 04/95 21.00 72
CFBC Community First Bnkg Co. of GA OTC Westcentral GA Thrift 395 12 12-31 07/97 39.50 95
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 360 16 03-31 08/91 18.75 56
FSTC First Citizens Corp of GA OTC Western GA M.B. 337 9 03-31 03/86 26.75 73
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 295 5 06-30 01/94 22.75 84
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 286 9 12-31 07/80 10.62 33
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-East Companies (continued)
--------------------------------
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 274 4 12-31 07/96 23.62 64
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 256 J 6 09-30 10/93 60.62 91
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 241 2 09-30 10/96 18.87 85
FLAG Flag Financial Corp of GA OTC Western GA M.B. 238 4 12-31 12/86 19.37 39
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 233 8 12-31 / 69.00 53
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 216 2 09-30 03/96 20.00 93
ESX Essex Bancorp of VA AMEX VA,NC M.B. 192 4 12-31 07/90 4.50 5
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 183 4 03-31 03/88 26.50 34
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 179 5 09-30 07/95 25.75 46
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 178 3 09-30 04/96 18.00 77
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 156 J 9 09-30 02/87 8.25 25
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 139 3 09-30 08/94 28.25 32
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 135 3 06-30 07/93 22.25 35
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 131 3 12-31 04/97 18.00 62
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 127 2 06-30 12/95 10.37 29
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 114 4 06-30 11/96 17.62 33
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 110 3 12-31 12/93 22.50 20
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 109 5 12-31 07/95 19.75 16
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 14.12 18
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 J 4 06-30 10/95 17.75 22
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 105 2 12-31 04/96 22.12 42
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 101 1 06-30 12/96 83.00 34
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 97 J 2 09-30 02/95 20.62 17
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 70 J 1 09-30 12/96 19.00 22
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 64 2 09-30 04/96 10.25 20
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 1 06-30 07/94 22.50 16
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 35 1 12-31 07/96 17.25 16
South-West Companies
--------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,930 37 12-31 / 29.00 145
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 319 5 03-31 06/93 20.25 34
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 18, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-West Companies (continued)
--------------------------------
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 226 J 6 09-30 04/96 18.87 47
FFDB FirstFed Bancorp of AL OTC Central AL Thrift 176 7 03-31 11/91 21.28 24
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 116 2 09-30 01/95 20.62 21
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 110 1 06-30 06/95 20.25 16
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 106 3 12-31 08/86 10.75 13
Western Companies (Excl CA)
---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,513 26 12-31 01/96 24.00 396
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 999 35 06-30 01/94 25.25 141
GBCI Glacier Bancorp of MT OTC Western MT Div. 574 16 12-31 03/84 22.25 152
UBMT United Fin. Corp. of MT OTC Central MT Thrift 103 4 12-31 09/86 25.25 31
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 88 2 12-31 09/93 14.75 17
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 60 1 09-30 03/96 15.37 15
Other Areas
-----------
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 12/18/97
<PAGE>
EXHIBIT III-2
Financial Analysis of Arkansas Institutions
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-2
Market Pricing Comparatives
Prices As of December 12, 1997
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3)
--------------- --------------- ---------------------------------------
Core Book
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- --------
Financial Institution
- ---------------------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.89 181.59 1.12 15.13 19.50 159.37 19.33 162.79 20.43
State of AR 21.04 66.11 0.93 15.41 18.51 135.42 21.66 136.67 18.99
Comparable Group
- ----------------
State of AR
- -----------
FFBH First Fed. Bancshares of AR 23.75 116.28 1.08 16.64 21.02 142.73 21.25 142.73 21.99
HCBB HCB Bancshares of AR 13.62 36.02 0.10 14.27 NM 95.44 17.98 99.20 NM
PFSL Pocahnts Fed, MHC of AR (47.0)(7) 36.50 28.07 1.44 14.86 25.00 245.63 15.54 245.63 25.35
FTF Texarkana Fst. Fin. Corp of AR 25.75 46.02 1.61 15.32 15.99 168.08 25.75 168.08 15.99
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------ ------- ------ ------- ------- ------- ------- ------- -------
Financial Institution
- ---------------------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.37 1.58 30.13 1,195 13.00 0.77 0.89 8.05 0.87 7.81
State of AR 0.27 1.06 19.00 309 16.35 0.60 0.96 6.15 0.95 6.08
Comparable Group
- ----------------
State of AR
- -----------
FFBH First Fed. Bancshares of AR 0.24 1.01 22.22 547 14.89 0.96 1.06 6.78 1.01 6.48
HCBB HCB Bancshares of AR 0.00 0.00 0.00 200 18.84 NA 0.13 0.92 0.14 1.02
PFSL Pocahnts Fed, MHC of AR (47.0)(7) 0.90 2.47 29.45 383 6.33 0.16 0.63 10.08 0.62 9.94
FTF Texarkana Fst. Fin. Corp of AR 0.56 2.17 34.78 179 15.32 0.23 1.70 10.74 1.70 10.74
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB
= Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-3
Financial Analysis of Midwest and Southeast Peer Group Candidates
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit III-3
Market Pricing Comparatives
Prices As of December 12, 1997
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data Pricing Ratios(3)
--------------- --------------- ---------------------------------------
Core Book
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------- ------- ------- ------- ------- ------- ------- --------
Financial Institution
- ---------------------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.89 181.59 1.12 15.13 19.50 159.37 19.33 162.79 20.43
Comparable Group Average 22.47 48.49 0.92 15.57 21.11 149.81 15.14 152.28 22.00
Mid-West Companies 22.68 48.08 0.93 15.92 20.76 146.89 15.12 149.50 21.73
South-East Companies 18.75 55.93 0.73 9.27 25.68 202.27 15.56 202.27 25.68
Comparable Group
- ----------------
Mid-West Companies
- ------------------
FBCV 1st Bancorp of Vincennes IN 26.00 26.99 0.91 21.75 14.13 119.54 10.34 121.89 28.57
BWFC Bank West Fin. Corp. of MI 16.00 42.08 0.32 8.87 27.12 180.38 25.53 180.38 NM
EGLB Eagle BancGroup of IL 19.25 23.06 0.36 17.03 NM 113.04 13.40 113.04 NM
EFBI Enterprise Fed. Bancorp of OH 28.25 56.10 0.99 15.82 23.74 178.57 20.41 178.68 28.54
FFHH FSF Financial Corp. of MN 19.12 57.55 1.03 14.41 18.38 132.69 14.83 132.69 18.56
FBCI Fidelity Bancorp of Chicago IL 23.00 64.29 1.04 18.66 NM 123.26 12.91 123.46 22.12
FFED Fidelity Fed. Bancorp of IN 10.37 28.94 0.65 5.15 15.48 201.36 12.30 201.36 15.95
FFHS First Franklin Corp. of OH 27.37 32.63 1.24 17.49 26.07 156.49 14.11 157.39 22.07
FMBD First Mutual Bancorp of IL 20.25 71.02 0.32 15.37 NM 131.75 17.65 172.78 NM
HMNF HMN Financial, Inc. of MN 26.25 110.57 1.13 20.09 19.59 130.66 19.44 130.66 23.23
HALL Hallmark Capital Corp. of WI 15.25 44.01 0.89 10.59 16.76 144.00 10.52 144.00 17.13
HBFW Home Bancorp of Fort Wayne IN 27.12 68.48 1.15 17.62 NM 153.92 20.45 153.92 23.58
MBLF MBLA Financial Corp. of MO 27.25 34.55 1.48 22.36 18.79 121.87 15.42 121.87 18.41
MWBI Midwest Bancshares, Inc. of IA 17.75 18.07 1.07 10.18 14.67 174.36 12.06 174.36 16.59
MFFC Milton Fed. Fin. Corp. of OH 15.12 34.85 0.53 11.45 25.20 132.05 16.60 132.05 28.53
PERM Permanent Bancorp of IN 26.06 54.80 1.25 19.51 20.68 133.57 12.64 135.38 20.85
PMFI Perpetual Midwest Fin. of IA 27.75 51.98 0.68 18.24 NM 152.14 12.94 152.14 NM
SFSB SuburbFed Fin. Corp. of IL 36.00 45.47 1.79 21.90 29.27 164.38 10.66 164.99 20.11
South-East Companies
- --------------------
COOP Cooperative Bk.for Svgs. of NC 18.75 55.93 0.73 9.27 25.68 202.27 15.56 202.27 25.68
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- ---------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ------ ------- ------ ------- ------- ------- ------- ------- -------
Financial Institution
- ---------------------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.37 1.58 30.13 1,195 13.00 0.77 0.89 8.05 0.87 7.81
Comparable Group Average 0.31 1.47 26.90 324 10.32 0.45 0.65 6.66 0.62 6.45
Mid-West Companies 0.33 1.55 28.69 322 10.46 0.46 0.65 6.56 0.62 6.34
South-East Companies 0.00 0.00 0.00 360 7.69 0.21 0.63 8.30 0.63 8.30
Comparable Group
- ----------------
Mid-West Companies
- ------------------
FBCV 1st Bancorp of Vincennes IN 0.28 1.08 30.77 261 8.65 1.30 0.72 8.75 0.36 4.33
BWFC Bank West Fin. Corp. of MI 0.21 1.31 65.63 165 14.15 0.21 1.03 6.73 0.56 3.65
EGLB Eagle BancGroup of IL 0.00 0.00 0.00 172 11.85 1.48 0.32 2.61 0.25 2.04
EFBI Enterprise Fed. Bancorp of OH 1.00 3.54 NM 275 11.43 0.07 0.92 7.43 0.77 6.18
FFHH FSF Financial Corp. of MN 0.50 2.62 48.54 388 11.17 0.15 0.85 7.05 0.84 6.98
FBCI Fidelity Bancorp of Chicago IL 0.32 1.39 30.77 498 10.48 0.41 0.19 1.84 0.60 5.80
FFED Fidelity Fed. Bancorp of IN 0.40 3.86 61.54 235 6.11 0.13 0.75 14.32 0.73 13.89
FFHS First Franklin Corp. of OH 0.40 1.46 32.26 231 9.02 0.47 0.56 6.21 0.66 7.33
FMBD First Mutual Bancorp of IL 0.32 1.58 NM 402 13.40 0.26 0.32 2.12 0.30 1.94
HMNF HMN Financial, Inc. of MN 0.00 0.00 0.00 569 14.88 0.10 1.00 6.87 0.85 5.79
HALL Hallmark Capital Corp. of WI 0.00 0.00 0.00 418 7.30 0.13 0.65 9.11 0.64 8.91
HBFW Home Bancorp of Fort Wayne IN 0.20 0.74 17.39 335 13.29 0.05 0.56 3.93 0.89 6.27
MBLF MBLA Financial Corp. of MO 0.40 1.47 27.03 224 12.66 0.57 0.83 6.49 0.85 6.62
MWBI Midwest Bancshares, Inc. of IA 0.24 1.35 22.43 150 6.92 0.81 0.87 12.62 0.77 11.16
MFFC Milton Fed. Fin. Corp. of OH 0.60 3.97 NM 210 12.57 0.29 0.73 4.95 0.65 4.38
PERM Permanent Bancorp of IN 0.40 1.53 32.00 434 9.46 1.07 0.62 6.63 0.62 6.58
PMFI Perpetual Midwest Fin. of IA 0.30 1.08 44.12 402 8.51 0.30 0.40 4.65 0.32 3.76
SFSB SuburbFed Fin. Corp. of IL 0.32 0.89 17.88 427 6.48 NA 0.39 5.88 0.56 8.56
South-East Companies
- --------------------
COOP Cooperative Bk.for Svgs. of NC 0.00 0.00 0.00 360 7.69 0.21 0.63 8.30 0.63 8.30
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB
= Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend
declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been
obtained from sources we believe are reliable, but we cannot guarantee
the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT III-4
Peer Group Market Area Comparative Analysis
<PAGE>
Exhibit III-4
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Per Capita Income
Population Proj. ---------------- Deposit
--------------- Pop. 1990-97 1997-2002 % State Market
Institution County 1990 1997 2002 % Change % Change Median Age Amount Average Share(1)
- ----------- ------ ---- ---- ---- -------- -------- ---------- ------ ------- --------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st Bancorp of Vincennes IN Knox 40 40 39 -0.8% -0.6% 35.4 14,723 83.1% 21.1%
Eagle BancGroup of IL McLean 129 140 148 8.7% 5.5% 30.3 19,722 100.0% 8.1%
Enterprise Fed. Bancorp of OH Butler 291 328 354 12.6% 7.7% 33.5 18,051 104.7% 1.8%
FSF Financial Corp. of MN McLeod 32 34 35 6.0% 3.9% 34.1 19,509 93.7% 22.1%
First Fed. Bancshares of AR Boone 28 33 35 14.9% 8.9% 37.7 12,967 96.0% 43.3%
HMN Financial, Inc. of MN Fillmore 21 21 21 0.8% 0.5% 38.2 12,986 62.3% 19.9%
Hallmark Capital Corp. of WI Milwaukee 959 916 887 -4.5% -3.2% 34.4 17,901 99.0% 1.4%
MBLA Financial Corp. of MO Macon 15 15 15 -1.2% -0.8% 40.2 13,799 78.1% 25.7%
Midwest Bancshares, Inc. of IA Des Moines 43 42 42 -0.3% -0.2% 37.7 16,607 101.2% 11.4%
Milton Fed. Fin. Corp. of OH Miami 93 97 100 4.4% 2.9% 36.4 19,314 112.0% 7.2%
Permanent Bancorp of IN Vanderburgh 165 168 170 1.7% 1.1% 36.6 17,626 99.5% 7.9%
--- --- --- ---- ---- ---- ------ ----- ----
Averages: 165 167 168 3.8% 2.4% 35.9 16,655 93.6% 15.4%
Medians: 43 42 42 1.7% 1.1% 36.4 17,626 99.0% 11.4%
Pochaontas Federal Randolph 17 18 19 8.4% 5.4% 37.6 9,998 74.1% 12.3%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total
county deposits. Excludes credit unions.
Sources: CACI, Inc; FDIC; OTS.
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of December 12, 1997
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(297) 23.83 5,850 187.9 25.16 15.47 23.80 0.27 255.94 48.53
NYSE Traded Companies(11) 44.36 30,833 1,635.1 46.19 26.88 44.50 0.02 355.51 51.63
AMEX Traded Companies(16) 18.15 3,147 56.1 19.97 12.91 18.21 -0.24 294.44 33.49
NASDAQ Listed OTC Companies(270) 23.27 4,917 132.3 24.55 15.13 23.22 0.31 242.22 49.28
California Companies(21) 31.18 18,713 874.0 33.00 18.91 31.53 -0.97 169.04 53.64
Florida Companies(5) 22.87 20,239 445.9 24.67 13.65 22.91 1.10 210.61 53.95
Mid-Atlantic Companies(59) 25.72 6,729 191.2 26.73 15.75 25.46 1.15 237.22 60.25
Mid-West Companies(144) 22.13 3,601 104.2 23.23 14.67 22.02 0.37 288.85 44.70
New England Companies(9) 29.28 5,048 190.4 30.43 17.29 29.31 0.55 451.80 67.18
North-West Companies(8) 23.45 11,774 337.1 25.33 17.45 23.91 -1.60 181.57 35.25
South-East Companies(38) 23.30 3,451 80.3 25.55 16.12 23.58 -0.91 231.78 39.40
South-West Companies(7) 20.15 1,905 42.9 22.04 13.72 19.91 1.60 59.26 48.28
Western Companies (Excl CA)(6) 21.15 5,371 125.1 22.22 14.70 21.24 0.23 376.14 39.82
Thrift Strategy(240) 22.62 3,708 95.4 23.89 15.04 22.59 0.16 229.81 46.26
Mortgage Banker Strategy(35) 29.29 14,739 629.5 30.76 17.47 29.22 0.93 332.49 62.04
Real Estate Strategy(9) 27.78 7,823 255.0 28.94 16.22 27.62 0.35 246.38 57.05
Diversified Strategy(9) 34.07 30,268 1,045.3 36.95 20.59 34.47 -0.75 224.49 49.45
Retail Banking Strategy(4) 19.37 4,340 101.3 20.58 11.83 18.54 4.40 408.57 45.43
Companies Issuing Dividends(252) 24.17 5,562 187.3 25.55 15.73 24.14 0.28 269.99 47.35
Companies Without Dividends(45) 21.87 7,508 191.2 22.96 14.01 21.82 0.23 168.42 56.43
Equity/Assets less than 6%(23) 30.20 19,226 696.3 31.56 17.43 29.94 1.42 222.79 64.03
Equity/Assets 6-12%(141) 26.21 5,722 206.5 27.46 15.93 26.15 0.39 272.81 57.39
Equity/Assets 12%(133) 20.51 3,725 84.8 21.92 14.72 20.54 -0.04 208.54 36.26
Converted Last greater than
3 Mths (no MHC)(4) 16.03 3,602 57.2 16.50 14.35 16.03 -0.03 0.00 21.39
Actively Traded Companies(39) 35.13 18,235 802.8 36.63 20.99 35.33 -0.36 293.98 62.88
Market Value Below $20 Million(50) 17.54 892 14.8 18.63 12.21 17.38 1.07 289.36 42.55
Holding Company Structure(264) 23.96 5,614 185.9 25.32 15.68 23.93 0.23 243.70 47.00
Assets Over $1 Billion(60) 34.59 19,090 736.3 36.14 20.85 34.58 0.35 291.42 56.74
Assets $500 Million-$1 Billion(48) 24.41 5,454 119.3 25.85 15.07 24.36 0.29 303.38 55.60
Assets $250-$500 Million(64) 23.38 2,779 61.1 24.74 15.32 23.46 -0.45 227.78 52.59
Assets less than $250 Million(125) 18.91 1,481 27.0 20.08 13.25 18.81 0.59 160.26 39.51
Goodwill Companies(120) 27.85 10,091 335.3 29.25 17.15 27.82 0.21 284.72 55.05
Non-Goodwill Companies(177) 21.18 3,057 90.8 22.47 14.37 21.15 0.31 215.36 44.00
Acquirors of FSLIC Cases(10) 44.10 35,626 1,932.5 45.80 26.79 44.51 -0.23 373.19 55.78
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(297) 1.16 1.14 15.35 14.93 147.63
NYSE Traded Companies(11) 2.59 2.45 21.10 20.39 317.10
AMEX Traded Companies(16) 0.60 0.71 14.05 13.85 107.51
NASDAQ Listed OTC Companies(270) 1.13 1.11 15.18 14.75 142.60
California Companies(21) 1.73 1.61 17.45 16.86 265.86
Florida Companies(5) 1.17 0.85 11.42 10.73 171.97
Mid-Atlantic Companies(59) 1.31 1.31 16.00 15.39 164.56
Mid-West Companies(144) 1.05 1.04 15.12 14.82 126.75
New England Companies(9) 1.28 1.45 17.22 16.46 232.24
North-West Companies(8) 1.13 1.07 14.49 13.93 129.56
South-East Companies(38) 0.99 0.96 14.52 14.22 112.14
South-West Companies(7) 1.30 1.30 15.15 14.39 194.42
Western Companies (Excl CA)(6) 1.04 1.03 14.36 13.68 96.29
Thrift Strategy(240) 1.07 1.08 15.49 15.14 132.41
Mortgage Banker Strategy(35) 1.60 1.47 15.06 14.14 219.04
Real Estate Strategy(9) 1.66 1.60 14.81 14.52 225.37
Diversified Strategy(9) 1.93 1.73 14.11 13.56 195.62
Retail Banking Strategy(4) -0.35 -0.45 12.75 12.17 195.11
Companies Issuing Dividends(252) 1.20 1.18 15.49 15.03 144.34
Companies Without Dividends(45) 0.90 0.91 14.59 14.36 166.56
Equity/Assets less than 6%(23) 1.66 1.68 14.11 13.15 285.90
Equity/Assets 6-12%(141) 1.38 1.34 15.35 14.74 181.81
Equity/Assets greater than 12%(133) 0.86 0.86 15.57 15.41 92.05
Converted Last 3 Mths (no MHC)(4) 0.53 0.53 12.47 12.47 78.11
Actively Traded Companies(39) 1.95 1.95 17.26 16.62 228.67
Market Value Below $20 Million(50) 0.79 0.80 14.31 14.27 111.17
Holding Company Structure(264) 1.14 1.12 15.63 15.21 145.10
Assets Over $1 Billion(60) 1.83 1.78 17.18 15.98 243.29
Assets $500 Million-$1 Billion(48) 1.25 1.17 14.44 13.93 154.37
Assets $250-$500 Million(64) 1.16 1.16 15.75 15.37 151.21
Assets less than $250 Million(125) 0.81 0.83 14.68 14.61 99.43
Goodwill Companies(120) 1.44 1.41 15.78 14.70 193.04
Non-Goodwill Companies(177) 0.97 0.97 15.07 15.07 117.72
Acquirors of FSLIC Cases(10) 2.56 2.52 20.88 19.72 332.65
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(61) 27.24 7,883 240.4 28.39 16.74 26.99 -0.33 265.65 59.51
NYSE Traded Companies(2) 46.60 72,159 2,758.1 47.88 30.12 47.00 -0.60 158.45 58.86
AMEX Traded Companies(6) 28.00 2,187 64.1 28.97 15.93 28.02 -0.41 166.34 65.84
NASDAQ Listed OTC Companies(53) 26.36 5,798 153.8 27.51 16.27 26.04 -0.31 281.23 58.87
California Companies(1) 17.75 7,847 139.3 21.25 14.00 18.00 -1.39 0.00 18.33
Mid-Atlantic Companies(16) 28.60 16,474 538.6 29.89 17.51 27.71 -1.31 192.45 59.80
Mid-West Companies(2) 11.06 1,707 17.2 11.31 8.25 11.06 -0.41 0.00 31.17
New England Companies(33) 27.87 4,521 133.3 28.91 16.20 27.78 0.64 297.07 68.32
North-West Companies(4) 20.12 7,249 155.1 21.56 13.30 20.58 -2.69 139.68 49.65
South-East Companies(5) 32.07 2,076 46.2 33.00 23.34 32.25 -0.94 0.00 34.83
Thrift Strategy(44) 27.20 4,834 165.0 28.30 16.76 26.82 -0.24 259.26 58.96
Mortgage Banker Strategy(7) 28.03 31,238 784.9 29.80 16.85 28.57 -2.55 277.11 69.19
Real Estate Strategy(5) 19.69 5,823 110.7 21.44 14.38 19.25 2.04 541.54 31.23
Diversified Strategy(5) 30.58 13,256 454.1 31.08 17.56 30.67 0.32 205.26 70.08
Companies Issuing Dividends(53) 28.74 8,311 261.6 29.93 17.71 28.53 -0.77 265.19 58.90
Companies Without Dividends(8) 16.96 4,948 94.9 17.82 10.13 16.43 2.72 272.03 63.62
Equity/Assets less than 6%(5) 20.63 29,899 750.7 20.97 10.20 19.91 3.22 210.62 102.24
Equity/Assets 6-12%(40) 29.70 6,232 233.2 30.95 17.47 29.21 -0.02 280.30 64.33
Equity/Assets greater than 12%(16) 23.54 5,990 128.4 24.64 16.80 23.90 -1.88 49.91 36.88
Actively Traded Companies(18) 30.24 11,760 343.8 31.21 18.26 30.00 1.51 306.04 61.30
Market Value Below $20 Million(3) 16.33 814 13.0 16.87 12.12 16.66 -1.60 0.00 28.84
Holding Company Structure(41) 26.29 6,428 177.3 27.36 16.42 25.80 -0.18 249.59 57.43
Assets Over $1 Billion(14) 34.05 24,469 838.4 35.22 20.72 34.32 -0.60 243.34 63.19
Assets $500 Million-$1 Billion(16) 30.59 5,008 124.2 31.74 18.07 30.35 0.92 250.39 61.96
Assets $250-$500 Million(13) 22.13 3,342 69.0 23.25 13.31 22.14 -0.02 305.22 63.11
Assets less than $250 Million(18) 22.83 1,544 29.3 23.97 15.09 21.97 -1.52 262.70 52.00
Goodwill Companies(31) 30.51 11,068 366.2 31.60 18.21 29.83 0.20 264.73 63.11
Non-Goodwill Companies(30) 23.85 4,580 109.9 25.05 15.22 24.04 -0.87 267.48 55.92
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(61) 1.58 1.51 15.76 14.91 153.16
NYSE Traded Companies(2) 2.34 2.29 20.01 12.88 248.52
AMEX Traded Companies(6) 1.34 1.15 17.59 15.21 172.94
NASDAQ Listed OTC Companies(53) 1.57 1.52 15.40 14.96 147.13
California Companies(1) 1.52 1.52 12.32 12.27 114.89
Mid-Atlantic Companies(16) 1.33 1.29 15.79 13.98 169.89
Mid-West Companies(2) 0.21 0.26 11.08 10.73 35.43
New England Companies(33) 1.91 1.80 14.67 14.10 168.95
North-West Companies(4) 1.05 1.02 11.21 10.83 95.73
South-East Companies(5) 1.42 1.41 27.07 27.07 100.38
Thrift Strategy(44) 1.55 1.48 16.33 15.41 148.82
Mortgage Banker Strategy(7) 1.58 1.55 14.32 13.84 180.63
Real Estate Strategy(5) 1.78 1.67 11.27 11.24 105.38
Diversified Strategy(5) 1.80 1.75 13.54 12.55 190.42
Companies Issuing Dividends(53) 1.57 1.49 16.48 15.52 161.86
Companies Without Dividends(8) 1.69 1.67 10.85 10.74 93.52
Equity/Assets less than 6%(5) 1.23 1.01 7.70 7.47 153.80
Equity/Assets 6-12%(40) 1.92 1.83 15.47 14.23 182.15
Equity/Assets greater than 12%(16) 0.93 0.95 18.43 18.26 89.58
Actively Traded Companies(18) 1.97 1.86 15.73 14.92 183.84
Market Value Below $20 Million(3) 0.53 0.59 14.56 14.32 57.53
Holding Company Structure(41) 1.51 1.45 15.91 15.20 137.18
Assets Over $1 Billion(14) 1.83 1.78 15.82 14.09 187.28
Assets $500 Million-$1 Billion(16) 1.93 1.81 16.83 15.48 191.21
Assets $250-$500 Million(13) 1.17 1.11 12.82 12.51 120.44
Assets less than $250 Million(18) 1.38 1.34 16.93 16.80 116.44
Goodwill Companies(31) 1.73 1.63 16.49 14.81 192.94
Non-Goodwill Companies(30) 1.43 1.39 15.01 15.01 111.90
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 25.10 8,362 57.3 27.07 13.05 25.05 0.30 385.31 103.34
BIF-Insured Thrifts(3) 31.33 22,105 300.4 33.29 12.38 31.71 -0.92 344.73 160.43
NASDAQ Listed OTC Companies(23) 26.20 10,787 100.2 28.17 12.93 26.23 0.09 365.02 115.58
Florida Companies(3) 31.94 5,939 89.8 36.13 17.63 32.31 -1.28 0.00 66.74
Mid-Atlantic Companies(11) 22.68 11,091 59.8 24.14 10.12 22.50 0.67 0.00 162.50
Mid-West Companies(7) 28.47 2,111 26.0 30.40 15.09 28.47 0.36 385.31 85.56
New England Companies(1) 35.00 61,126 855.9 37.37 18.00 36.37 -3.77 344.73 81.82
Thrift Strategy(22) 25.65 7,641 53.0 27.59 12.61 25.59 0.33 385.31 118.17
Diversified Strategy(1) 35.00 61,126 855.9 37.37 18.00 36.37 -3.77 344.73 81.82
Companies Issuing Dividends(22) 26.66 11,289 105.0 28.69 12.89 26.68 0.18 365.02 115.58
Companies Without Dividends(1) 18.75 2,760 23.3 19.75 13.62 19.00 -1.32 0.00 0.00
Equity/Assets 6-12%(16) 27.75 14,078 131.5 30.10 13.14 27.84 -0.09 365.02 121.49
Equity/Assets greater than 12%(7) 22.47 2,887 25.2 23.52 12.42 22.35 0.52 0.00 93.90
Holding Company Structure(2) 30.00 1,917 26.5 30.00 9.38 28.75 4.35 0.00 219.83
Assets Over $1 Billion(6) 24.50 37,110 329.6 26.75 11.94 25.25 -2.81 344.73 120.57
Assets $500 Million-$1 Billion(2) 34.87 5,095 86.1 39.75 18.00 34.75 0.35 0.00 70.10
Assets $250-$500 Million(5) 28.71 3,423 39.6 30.50 15.36 29.21 -1.16 385.31 90.50
Assets less than $250 Million(10) 25.15 2,174 20.0 26.74 12.00 24.72 1.76 0.00 132.37
Goodwill Companies(9) 26.73 25,532 231.2 28.67 12.98 26.94 -0.89 365.02 128.02
Non-Goodwill Companies(14) 25.91 2,744 28.8 27.90 12.90 25.84 0.62 0.00 106.24
MHC Institutions(23) 26.20 10,787 100.2 28.17 12.93 26.23 0.09 365.02 115.58
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 0.68 0.67 10.72 10.65 95.80
BIF-Insured Thrifts(3) 1.06 0.85 10.76 10.12 101.07
NASDAQ Listed OTC Companies(23) 0.75 0.70 10.73 10.55 96.73
Florida Companies(3) 1.00 0.89 14.22 14.18 146.68
Mid-Atlantic Companies(11) 0.57 0.56 9.17 8.86 76.90
Mid-West Companies(7) 0.82 0.85 12.01 11.98 106.48
New England Companies(1) 1.44 0.93 11.41 11.40 126.48
Thrift Strategy(22) 0.71 0.69 10.69 10.50 94.87
Diversified Strategy(1) 1.44 0.93 11.41 11.40 126.48
Companies Issuing Dividends(22) 0.76 0.71 10.76 10.58 98.10
Companies Without Dividends(1) 0.56 0.54 10.22 10.22 74.79
Equity/Assets 6-12%(16) 0.82 0.74 10.90 10.65 109.96
Equity/Assets greater than 12%(7) 0.57 0.61 10.33 10.33 64.98
Holding Company Structure(2) 1.05 0.94 12.02 10.10 100.68
Assets Over $1 Billion(6) 0.83 0.64 8.38 8.15 97.01
Assets $500 Million-$1 Billion(2) 1.07 0.98 15.79 15.79 139.20
Assets $250-$500 Million(5) 0.88 0.85 11.27 11.23 109.10
Assets less than $250 Million(10) 0.64 0.65 11.03 10.82 87.76
Goodwill Companies(9) 0.92 0.78 9.94 9.44 108.33
Non-Goodwill Companies(14) 0.65 0.67 11.16 11.16 90.40
MHC Institutions(23) 0.75 0.70 10.73 10.55 96.73
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 61.69 94,411 5,824.2 64.25 31.50 62.94 -1.99 229.01 89.82
CSA Coast Savings Financial of CA 62.50 18,644 1,165.3 64.00 35.00 62.75 -0.40 440.66 70.67
CFB Commercial Federal Corp. of NE 52.87 21,582 1,141.0 53.69 29.75 50.37 4.96 ***.** 65.22
DME Dime Bancorp, Inc. of NY* 26.00 101,492 2,638.8 26.00 14.62 26.00 0.00 158.45 76.27
DSL Downey Financial Corp. of CA 28.13 26,754 752.6 29.00 17.98 28.75 -2.16 159.02 50.51
EBI Equality Bancorp of St Louis 14.87 2,486 37.0 15.37 12.00 15.37 -3.25 N.A. 21.39
FED FirstFed Fin. Corp. of CA 38.37 10,585 406.1 39.50 21.50 37.75 1.64 137.59 74.41
GSB Glendale Fed. Bk, FSB of CA 34.25 50,456 1,728.1 36.12 22.00 34.31 -0.17 110.77 47.31
GDW Golden West Fin. Corp. of CA 91.31 56,770 5,183.7 94.75 59.87 94.75 -3.63 248.64 44.66
GPT GreenPoint Fin. Corp. of NY* 67.19 42,826 2,877.5 69.75 45.62 68.00 -1.19 N.A. 41.45
JSB JSB Financial, Inc. of NY 48.50 9,898 480.1 49.56 36.00 48.69 -0.39 321.74 27.63
NYB New York Bancorp, Inc. of NY 38.31 21,319 816.7 38.31 16.87 36.94 3.71 440.34 97.78
WES Westcorp Inc. of Orange CA 17.19 26,256 451.3 23.50 13.25 16.87 1.90 134.52 -21.44
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 23.62 2,697 63.7 24.75 14.19 23.75 -0.55 N.A. 58.84
ANE Alliance Bancorp of New Englan* 16.87 1,627 27.4 18.00 8.72 17.12 -1.46 132.69 87.44
BKC American Bank of Waterbury CT* 49.00 2,313 113.3 49.50 27.37 48.62 0.78 161.33 75.00
BFD BostonFed Bancorp of MA 19.87 5,650 112.3 22.31 14.37 20.37 -2.45 N.A. 34.71
CFX CFX Corp of NH(8)* 28.37 23,977 680.2 28.75 15.12 28.75 -1.32 138.40 83.03
CNY Carver Bancorp, Inc. of NY 16.87 2,314 39.0 17.06 7.75 16.25 3.82 169.92 104.48
CBK Citizens First Fin.Corp. of IL 18.00 2,584 46.5 19.50 13.75 18.00 0.00 N.A. 25.26
ESX Essex Bancorp of VA(8) 4.50 1,058 4.8 7.94 1.00 5.00 -10.00 -73.13 105.48
FCB Falmouth Co-Op Bank of MA* 20.00 1,455 29.1 22.00 13.00 20.25 -1.23 N.A. 52.44
FAB FirstFed America Bancorp of MA 20.37 8,707 177.4 22.12 13.62 21.00 -3.00 N.A. N.A.
GAF GA Financial Corp. of PA 18.62 7,973 148.5 19.81 14.50 19.56 -4.81 N.A. 23.15
KNK Kankakee Bancorp of IL 34.38 1,426 49.0 35.00 23.37 34.38 0.00 243.80 38.91
KYF Kentucky First Bancorp of KY 14.69 1,303 19.1 14.69 10.56 14.37 2.23 N.A. 35.14
MBB MSB Bancorp of Middletown NY* 30.50 2,844 86.7 30.62 16.37 30.37 0.43 205.00 55.45
PDB Piedmont Bancorp of NC 10.37 2,751 28.5 11.62 9.25 10.75 -3.53 N.A. -1.24
SSB Scotland Bancorp of NC 10.25 1,914 19.6 19.25 10.12 10.37 -1.16 N.A. -27.41
SZB SouthFirst Bancshares of AL 20.62 848 17.5 20.87 12.50 20.00 3.10 N.A. 55.62
SRN Southern Banc Company of AL 17.75 1,230 21.8 17.75 13.12 17.69 0.34 N.A. 35.29
SSM Stone Street Bancorp of NC 22.12 1,898 42.0 27.25 19.25 22.50 -1.69 N.A. 7.90
TSH Teche Holding Company of LA 21.00 3,438 72.2 23.50 13.00 20.50 2.44 N.A. 46.14
FTF Texarkana Fst. Fin. Corp of AR 25.75 1,787 46.0 27.00 14.37 25.50 0.98 N.A. 64.75
THR Three Rivers Fin. Corp. of MI 20.25 824 16.7 20.50 13.62 20.37 -0.59 N.A. 44.64
WSB Washington SB, FSB of MD 7.12 4,348 31.0 8.25 4.81 7.00 1.71 469.60 46.20
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 26.00 1,038 27.0 27.50 18.09 27.50 -5.45 N.A. 36.84
AFED AFSALA Bancorp, Inc. of NY 18.75 1,455 27.3 19.50 11.37 19.12 -1.94 N.A. 56.25
ALBK ALBANK Fin. Corp. of Albany NY 46.00 12,872 592.1 47.75 30.50 44.69 2.93 97.85 46.64
AMFC AMB Financial Corp. of IN 16.50 964 15.9 17.75 12.75 16.00 3.13 N.A. 24.53
ASBP ASB Financial Corp. of OH 13.50 1,700 23.0 17.50 11.50 13.37 0.97 N.A. 3.85
ABBK Abington Savings Bank of MA* 38.00 1,840 69.9 38.00 19.00 36.37 4.48 474.02 94.87
AABC Access Anytime Bancorp of NM 10.75 1,217 13.1 10.75 5.15 10.12 6.23 59.26 99.44
AFBC Advance Fin. Bancorp of WV 17.75 1,084 19.2 17.87 12.75 17.25 2.90 N.A. N.A.
AADV Advantage Bancorp of WI(8) 66.50 3,236 215.2 68.50 31.75 66.50 0.00 622.83 106.20
AFCB Affiliated Comm BC, Inc of MA 32.62 6,493 211.8 33.00 17.10 31.50 3.56 N.A. 90.76
ALBC Albion Banc Corp. of Albion NY 28.00 250 7.0 30.50 16.50 28.00 0.00 115.38 67.16
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 3.94 3.37 20.17 17.13 495.70
CSA Coast Savings Financial of CA 2.94 3.14 25.21 24.92 484.90
CFB Commercial Federal Corp. of NE 3.02 3.02 20.59 18.42 333.94
DME Dime Bancorp, Inc. of NY* 1.30 1.28 10.38 9.88 191.28
DSL Downey Financial Corp. of CA 1.49 1.43 15.61 15.41 218.81
EBI Equality Bancorp of St Louis 0.53 0.53 9.95 9.95 100.33
FED FirstFed Fin. Corp. of CA 2.19 2.18 20.01 19.82 387.78
GSB Glendale Fed. Bk, FSB of CA 1.76 2.11 18.39 16.46 325.68
GDW Golden West Fin. Corp. of CA 5.93 5.83 45.36 45.36 691.01
GPT GreenPoint Fin. Corp. of NY* 3.38 3.30 29.63 15.88 305.75
JSB JSB Financial, Inc. of NY 2.97 2.64 35.91 35.91 154.68
NYB New York Bancorp, Inc. of NY 2.40 2.46 7.93 7.93 152.17
WES Westcorp Inc. of Orange CA 1.31 0.28 13.00 12.97 143.10
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 0.97 0.94 17.22 17.22 101.60
ANE Alliance Bancorp of New Englan* 1.15 1.06 10.95 10.68 148.69
BKC American Bank of Waterbury CT* 3.27 2.76 23.23 22.38 263.69
BFD BostonFed Bancorp of MA 1.16 1.05 14.48 13.94 170.04
CFX CFX Corp of NH(8)* 0.58 0.78 10.25 9.88 117.66
CNY Carver Bancorp, Inc. of NY -0.26 0.02 15.09 14.50 179.59
CBK Citizens First Fin.Corp. of IL 0.63 0.56 14.79 14.79 107.57
ESX Essex Bancorp of VA(8) 0.20 0.18 0.03 -0.14 181.37
FCB Falmouth Co-Op Bank of MA* 0.52 0.49 15.40 15.40 64.55
FAB FirstFed America Bancorp of MA 0.06 0.54 14.52 14.52 118.99
GAF GA Financial Corp. of PA 0.94 0.91 14.72 14.58 100.63
KNK Kankakee Bancorp of IL 2.15 2.11 27.25 25.69 238.38
KYF Kentucky First Bancorp of KY 0.78 0.77 11.29 11.29 67.60
MBB MSB Bancorp of Middletown NY* 0.79 0.52 21.15 10.38 286.18
PDB Piedmont Bancorp of NC -0.11 0.25 7.56 7.56 46.00
SSB Scotland Bancorp of NC 0.66 0.65 7.61 7.61 33.65
SZB SouthFirst Bancshares of AL -0.03 0.25 16.06 16.06 114.72
SRN Southern Banc Company of AL 0.12 0.43 14.58 14.43 85.72
SSM Stone Street Bancorp of NC 0.86 0.86 16.32 16.32 55.20
TSH Teche Holding Company of LA 1.12 1.07 15.81 15.81 117.54
FTF Texarkana Fst. Fin. Corp of AR 1.61 1.61 15.32 15.32 100.01
THR Three Rivers Fin. Corp. of MI 0.62 0.90 15.54 15.48 115.45
WSB Washington SB, FSB of MD 0.25 0.35 5.16 5.16 61.61
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 1.84 0.91 21.75 21.33 251.38
AFED AFSALA Bancorp, Inc. of NY 0.82 0.82 14.74 14.74 109.40
ALBK ALBANK Fin. Corp. of Albany NY 2.89 2.87 26.69 23.51 288.76
AMFC AMB Financial Corp. of IN 0.98 0.69 14.95 14.95 107.25
ASBP ASB Financial Corp. of OH 0.64 0.60 10.30 10.30 66.15
ABBK Abington Savings Bank of MA* 2.29 2.04 19.43 17.61 272.62
AABC Access Anytime Bancorp of NM 1.26 1.17 7.51 7.51 86.80
AFBC Advance Fin. Bancorp of WV 0.83 0.81 15.02 15.02 97.52
AADV Advantage Bancorp of WI(8) 3.30 2.96 30.59 28.46 320.60
AFCB Affiliated Comm BC, Inc of MA 1.78 1.76 16.97 16.87 173.81
ALBC Albion Banc Corp. of Albion NY 1.31 1.29 24.26 24.26 283.24
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ABCL Allied Bancorp of IL 26.50 8,020 212.5 28.37 16.08 27.37 -3.18 297.30 58.97
ATSB AmTrust Capital Corp. of IN 13.75 526 7.2 14.50 10.00 14.00 -1.79 N.A. 37.50
AHCI Ambanc Holding Co., Inc. of NY* 18.00 4,306 77.5 19.50 11.00 19.37 -7.07 N.A. 60.00
ASBI Ameriana Bancorp of IN 20.25 3,231 65.4 22.00 15.25 20.37 -0.59 119.39 26.56
AFFFZ America First Fin. Fund of CA(8) 49.50 6,011 297.5 50.56 28.75 50.50 -1.98 164.00 63.64
ABCW Anchor Bancorp Wisconsin of WI 35.00 9,054 316.9 35.75 17.37 33.37 4.88 138.26 95.86
ANDB Andover Bancorp, Inc. of MA* 37.25 5,149 191.8 40.50 25.00 39.00 -4.49 246.51 45.39
ASFC Astoria Financial Corp. of NY 57.37 20,666 1,185.6 57.37 34.75 57.00 0.65 118.55 55.60
AVND Avondale Fin. Corp. of IL 16.37 3,495 57.2 18.87 12.75 16.00 2.31 N.A. -4.38
BKCT Bancorp Connecticut of CT* 24.75 5,086 125.9 25.00 10.75 24.25 2.06 328.20 120.00
BPLS Bank Plus Corp. of CA 12.50 19,341 241.8 13.75 9.62 13.12 -4.73 N.A. 8.70
BWFC Bank West Fin. Corp. of MI 16.00 2,630 42.1 17.50 7.00 17.25 -7.25 N.A. 125.99
BANC BankAtlantic Bancorp of FL 15.50 22,276 345.3 17.12 12.12 14.25 8.77 272.60 15.93
BKUNA BankUnited SA of FL 13.50 9,533 128.7 13.87 8.50 12.81 5.39 148.62 35.00
BVCC Bay View Capital Corp. of CA 34.87 12,421 433.1 36.12 19.94 36.12 -3.46 76.56 64.56
FSNJ Bayonne Banchsares of NJ 12.25 8,993 110.2 13.06 5.88 12.37 -0.97 N.A. 56.25
BFSB Bedford Bancshares of VA 28.25 1,142 32.3 29.00 17.50 29.00 -2.59 169.05 60.33
BFFC Big Foot Fin. Corp. of IL 18.75 2,513 47.1 19.62 12.31 18.87 -0.64 N.A. 44.23
BSBC Branford SB of CT(8)* 6.25 6,559 41.0 6.31 3.62 6.00 4.17 194.81 61.50
BYFC Broadway Fin. Corp. of CA 13.25 831 11.0 13.25 9.12 13.25 0.00 N.A. 43.24
CBES CBES Bancorp of MO 21.88 1,025 22.4 22.50 13.62 21.37 2.39 N.A. 53.54
CCFH CCF Holding Company of GA 19.75 820 16.2 21.00 14.75 20.00 -1.25 N.A. 33.90
CENF CENFED Financial Corp. of CA 41.62 5,959 248.0 42.25 25.45 39.75 4.70 165.43 56.53
CFSB CFSB Bancorp of Lansing MI 34.87 5,087 177.4 35.87 17.27 34.87 0.00 287.44 96.67
CKFB CKF Bancorp of Danville KY 18.50 903 16.7 20.50 17.50 18.50 0.00 N.A. -8.64
CNSB CNS Bancorp of MO 21.50 1,653 35.5 21.50 15.00 21.00 2.38 N.A. 42.20
CSBF CSB Financial Group Inc of IL* 13.25 942 12.5 13.50 10.00 13.00 1.92 N.A. 30.93
CBCI Calumet Bancorp of Chicago IL 32.00 3,166 101.3 34.00 21.67 32.50 -1.54 139.34 44.34
CAFI Camco Fin. Corp. of OH 25.00 3,214 80.3 25.50 14.05 24.00 4.17 N.A. 65.34
CMRN Cameron Fin. Corp. of MO 20.12 2,562 51.5 21.00 15.50 20.75 -3.04 N.A. 25.75
CAPS Capital Savings Bancorp of MO(8) 23.25 1,892 44.0 24.75 12.75 24.25 -4.12 75.47 78.85
CFNC Carolina Fincorp of NC* 17.62 1,851 32.6 18.25 13.00 17.62 0.00 N.A. 31.79
CASB Cascade SB of Everett WA(8) 12.75 3,387 43.2 16.80 10.40 12.75 0.00 -0.39 -1.16
CATB Catskill Fin. Corp. of NY* 17.37 4,657 80.9 19.12 13.75 18.25 -4.82 N.A. 24.07
CNIT Cenit Bancorp of Norfolk VA 64.75 1,654 107.1 71.00 39.25 68.00 -4.78 307.75 56.02
CEBK Central Co-Op. Bank of MA* 26.81 1,965 52.7 27.00 15.87 26.25 2.13 410.67 53.20
CENB Century Bancshares of NC* 83.00 407 33.8 84.00 62.00 83.00 0.00 N.A. 27.69
CBSB Charter Financial Inc. of IL(8) 23.75 4,150 98.6 24.25 12.50 23.12 2.72 N.A. 90.00
COFI Charter One Financial of OH 62.00 49,563 3,072.9 64.00 36.91 64.00 -3.13 254.29 55.00
CVAL Chester Valley Bancorp of PA 26.25 2,189 57.5 27.50 14.10 27.25 -3.67 131.69 86.17
CTZN CitFed Bancorp of Dayton OH 38.62 12,984 501.4 39.00 19.83 36.00 7.28 543.67 75.55
CLAS Classic Bancshares of KY 16.25 1,300 21.1 17.25 11.50 16.37 -0.73 N.A. 39.85
CMSB Cmnwealth Bancorp of PA 21.50 16,243 349.2 21.50 13.50 21.06 2.09 N.A. 43.33
CBSA Coastal Bancorp of Houston TX 29.00 4,992 144.8 33.25 22.37 29.00 0.00 N.A. 26.80
CFCP Coastal Fin. Corp. of SC 21.00 4,647 97.6 27.75 14.44 22.75 -7.69 110.00 33.33
CMSV Commty. Svgs, MHC of FL (48.5) 34.87 5,095 86.1 39.75 18.00 34.75 0.35 N.A. 70.10
CFTP Community Fed. Bancorp of MS 20.00 4,629 92.6 21.00 16.37 20.25 -1.23 N.A. 17.65
CFFC Community Fin. Corp. of VA 26.50 1,275 33.8 27.50 20.75 26.50 0.00 278.57 27.71
CFBC Community First Bnkg Co. of GA 39.50 2,414 95.4 40.00 31.87 39.50 0.00 N.A. N.A.
CIBI Community Inv. Bancorp of OH 15.75 916 14.4 17.00 10.33 16.25 -3.08 N.A. 39.01
COOP Cooperative Bk.for Svgs. of NC 18.75 2,983 55.9 18.75 10.00 18.25 2.74 275.00 85.28
CRZY Crazy Woman Creek Bncorp of WY 15.37 955 14.7 15.50 11.50 15.37 0.00 N.A. 28.08
DNFC D&N Financial Corp. of MI 27.75 8,244 228.8 27.75 15.37 26.37 5.23 217.14 65.67
DCBI Delphos Citizens Bancorp of OH 17.25 1,960 33.8 18.25 11.75 17.50 -1.43 N.A. 43.75
DIME Dime Community Bancorp of NY 23.37 12,625 295.0 25.50 14.31 25.50 -8.35 N.A. 58.44
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ABCL Allied Bancorp of IL 1.06 1.18 16.10 15.90 170.97
ATSB AmTrust Capital Corp. of IN 0.54 0.31 14.48 14.33 132.48
AHCI Ambanc Holding Co., Inc. of NY* -0.65 -0.68 14.57 14.57 112.63
ASBI Ameriana Bancorp of IN 1.13 1.03 13.63 13.63 121.64
AFFFZ America First Fin. Fund of CA(8) 7.31 7.39 31.32 30.99 374.40
ABCW Anchor Bancorp Wisconsin of WI 2.09 1.95 13.82 13.58 215.90
ANDB Andover Bancorp, Inc. of MA* 2.51 2.45 20.20 20.20 248.71
ASFC Astoria Financial Corp. of NY 2.96 2.80 29.51 24.96 382.48
AVND Avondale Fin. Corp. of IL -3.37 -3.43 13.18 13.18 170.79
BKCT Bancorp Connecticut of CT* 1.12 1.02 8.96 8.96 83.33
BPLS Bank Plus Corp. of CA 0.65 0.54 9.16 9.15 202.69
BWFC Bank West Fin. Corp. of MI 0.59 0.32 8.87 8.87 62.68
BANC BankAtlantic Bancorp of FL 1.22 0.64 7.03 5.81 127.72
BKUNA BankUnited SA of FL 0.49 0.44 7.03 5.53 225.05
BVCC Bay View Capital Corp. of CA 1.42 1.59 14.81 12.37 254.59
FSNJ Bayonne Banchsares of NJ 0.25 0.35 10.58 10.58 67.73
BFSB Bedford Bancshares of VA 1.39 1.38 17.18 17.18 121.87
BFFC Big Foot Fin. Corp. of IL 0.42 0.42 14.97 14.97 85.62
BSBC Branford SB of CT(8)* 0.31 0.31 2.69 2.69 27.88
BYFC Broadway Fin. Corp. of CA 0.38 0.48 14.77 14.77 150.11
CBES CBES Bancorp of MO 1.18 1.07 17.60 17.60 104.03
CCFH CCF Holding Company of GA 0.16 -0.18 14.21 14.21 133.34
CENF CENFED Financial Corp. of CA 2.41 2.17 21.51 21.48 386.76
CFSB CFSB Bancorp of Lansing MI 1.98 1.86 13.03 13.03 169.05
CKFB CKF Bancorp of Danville KY 1.22 0.91 15.69 15.69 66.30
CNSB CNS Bancorp of MO 0.47 0.47 14.34 14.34 58.93
CSBF CSB Financial Group Inc of IL* 0.16 0.26 12.98 12.27 51.85
CBCI Calumet Bancorp of Chicago IL 2.27 2.23 25.01 25.01 154.25
CAFI Camco Fin. Corp. of OH 1.73 1.46 14.98 13.87 156.25
CMRN Cameron Fin. Corp. of MO 0.98 0.98 17.43 17.43 82.94
CAPS Capital Savings Bancorp of MO(8) 1.20 1.18 11.70 11.70 128.04
CFNC Carolina Fincorp of NC* 0.70 0.68 13.92 13.92 61.63
CASB Cascade SB of Everett WA(8) 0.65 0.65 8.36 8.36 125.91
CATB Catskill Fin. Corp. of NY* 0.84 0.85 15.41 15.41 62.19
CNIT Cenit Bancorp of Norfolk VA 3.39 3.15 29.47 26.99 424.25
CEBK Central Co-Op. Bank of MA* 1.45 1.47 17.40 15.57 175.28
CENB Century Bancshares of NC* 4.19 4.20 75.12 75.12 248.00
CBSB Charter Financial Inc. of IL(8) 1.05 1.47 13.71 12.13 94.76
COFI Charter One Financial of OH 3.64 3.56 21.63 19.86 306.62
CVAL Chester Valley Bancorp of PA 1.36 1.30 12.75 12.75 147.25
CTZN CitFed Bancorp of Dayton OH 1.98 1.98 15.92 14.47 253.74
CLAS Classic Bancshares of KY 0.51 0.69 14.93 12.63 100.19
CMSB Cmnwealth Bancorp of PA 1.02 0.86 13.02 10.15 140.25
CBSA Coastal Bancorp of Houston TX 2.40 2.47 20.36 17.12 586.85
CFCP Coastal Fin. Corp. of SC 1.25 1.08 6.97 6.97 106.31
CMSV Commty. Svgs, MHC of FL (48.5) 1.07 0.98 15.79 15.79 139.20
CFTP Community Fed. Bancorp of MS 0.66 0.65 12.47 12.47 46.65
CFFC Community Fin. Corp. of VA 1.50 1.51 18.99 18.99 143.75
CFBC Community First Bnkg Co. of GA 1.29 1.29 29.10 28.71 163.45
CIBI Community Inv. Bancorp of OH 1.01 1.01 12.10 12.10 102.98
COOP Cooperative Bk.for Svgs. of NC 0.73 0.73 9.27 9.27 120.53
CRZY Crazy Woman Creek Bncorp of WY 0.72 0.73 14.88 14.88 62.78
DNFC D&N Financial Corp. of MI 1.68 1.55 11.18 11.06 212.77
DCBI Delphos Citizens Bancorp of OH 0.82 0.82 14.65 14.65 55.00
DIME Dime Community Bancorp of NY 1.10 1.07 14.81 12.76 109.73
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DIBK Dime Financial Corp. of CT* 30.50 5,162 157.4 32.00 16.50 30.00 1.67 190.48 76.81
EGLB Eagle BancGroup of IL 19.25 1,198 23.1 20.00 13.25 20.00 -3.75 N.A. 29.46
EBSI Eagle Bancshares of Tucker GA 19.00 5,666 107.7 20.94 13.62 19.00 0.00 162.07 22.58
EGFC Eagle Financial Corp. of CT(8) 52.25 6,316 330.0 52.75 26.75 51.81 0.85 497.14 71.31
ETFS East Texas Fin. Serv. of TX 20.62 1,026 21.2 21.50 16.25 20.00 3.10 N.A. 25.96
EMLD Emerald Financial Corp of OH 18.50 5,072 93.8 19.62 10.62 19.25 -3.90 N.A. 64.44
EIRE Emerald Island Bancorp, MA(8)* 32.00 2,250 72.0 32.62 14.20 32.00 0.00 319.95 100.00
EFBC Empire Federal Bancorp of MT 16.50 2,592 42.8 18.25 12.50 16.31 1.16 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 28.25 1,986 56.1 29.00 14.12 27.50 2.73 N.A. 94.83
EQSB Equitable FSB of Wheaton MD 48.50 602 29.2 48.50 26.75 45.78 5.94 N.A. 71.68
FCBF FCB Fin. Corp. of Neenah WI 28.25 3,879 109.6 28.37 18.50 28.00 0.89 N.A. 52.70
FFBS FFBS Bancorp of Columbus MS 22.25 1,572 35.0 26.00 18.00 22.50 -1.11 N.A. -3.26
FFDF FFD Financial Corp. of OH 18.62 1,445 26.9 19.50 13.00 18.00 3.44 N.A. 40.53
FFLC FFLC Bancorp of Leesburg FL 22.25 3,835 85.3 23.50 12.00 23.12 -3.76 N.A. 72.48
FFFC FFVA Financial Corp. of VA 33.75 4,522 152.6 35.12 20.00 33.75 0.00 N.A. 64.63
FFWC FFW Corporation of Wabash IN 41.75 715 29.9 41.75 21.50 40.50 3.09 N.A. 90.81
FFYF FFY Financial Corp. of OH 32.25 4,122 132.9 32.25 25.00 30.12 7.07 N.A. 27.42
FMCO FMS Financial Corp. of NJ 32.75 2,388 78.2 32.75 17.37 32.75 0.00 263.89 79.45
FFHH FSF Financial Corp. of MN 19.12 3,010 57.6 21.00 14.50 19.75 -3.19 N.A. 26.46
FOBC Fed One Bancorp of Wheeling WV 26.62 2,373 63.2 27.00 15.75 25.87 2.90 166.20 69.02
FBCI Fidelity Bancorp of Chicago IL 23.00 2,795 64.3 25.75 16.87 23.25 -1.08 N.A. 35.29
FSBI Fidelity Bancorp, Inc. of PA 27.50 1,555 42.8 28.00 16.82 27.50 0.00 255.76 51.27
FFFL Fidelity FSB, MHC of FL (47.7) 29.00 6,783 93.5 32.50 17.25 29.87 -2.91 N.A. 63.38
FFED Fidelity Fed. Bancorp of IN 10.37 2,791 28.9 10.50 7.50 10.00 3.70 47.09 6.36
FFOH Fidelity Financial of OH 14.75 5,580 82.3 16.37 11.25 15.37 -4.03 N.A. 28.26
FIBC Financial Bancorp, Inc. of NY 24.50 1,710 41.9 25.75 14.25 24.75 -1.01 N.A. 63.33
FBSI First Bancshares of MO 26.00 1,093 28.4 28.00 16.50 25.37 2.48 103.92 56.44
FBBC First Bell Bancorp of PA 18.62 6,511 121.2 18.62 13.12 18.12 2.76 N.A. 40.53
FBER First Bergen Bancorp of NJ 19.50 2,865 55.9 19.50 11.37 18.87 3.34 N.A. 69.57
SKBO First Carnegie,MHC of PA(45.0) 18.87 2,300 19.5 19.87 11.62 18.75 0.64 N.A. N.A.
FSTC First Citizens Corp of GA 26.75 2,742 73.3 29.25 14.17 29.25 -8.55 224.24 58.94
FCME First Coastal Corp. of ME* 15.00 1,359 20.4 15.75 7.25 14.62 2.60 N.A. 93.55
FFBA First Colorado Bancorp of Co 24.00 16,485 395.6 26.12 16.00 25.50 -5.88 627.27 41.18
FDEF First Defiance Fin.Corp. of OH 14.75 8,957 132.1 16.25 11.75 16.25 -9.23 N.A. 19.24
FESX First Essex Bancorp of MA* 20.75 7,527 156.2 21.12 13.12 20.62 0.63 245.83 58.16
FFES First FS&LA of E. Hartford CT 37.12 2,682 99.6 37.50 22.75 37.50 -1.01 471.08 61.39
FFSX First FS&LA. MHC of IA (46.1) 32.37 2,833 42.2 35.00 20.75 31.87 1.57 385.31 66.00
BDJI First Fed. Bancorp. of MN 28.00 673 18.8 28.00 17.50 27.00 3.70 N.A. 51.35
FFBH First Fed. Bancshares of AR 23.75 4,896 116.3 24.25 15.75 22.00 7.95 N.A. 49.65
FTFC First Fed. Capital Corp. of WI 30.25 9,165 277.2 31.25 15.50 30.75 -1.63 303.33 93.04
FFKY First Fed. Fin. Corp. of KY 22.00 4,159 91.5 23.50 17.75 22.37 -1.65 39.68 8.64
FFBZ First Federal Bancorp of OH 21.00 1,575 33.1 21.00 15.00 19.62 7.03 110.00 31.25
FFCH First Fin. Holdings Inc. of SC 48.00 6,368 305.7 49.00 22.25 48.00 0.00 291.84 113.33
FFBI First Financial Bancorp of IL 21.00 415 8.7 21.00 15.50 20.25 3.70 N.A. 32.33
FFHS First Franklin Corp. of OH 27.37 1,192 32.6 28.50 16.00 26.50 3.28 108.61 65.88
FGHC First Georgia Hold. Corp of GA 8.25 3,052 25.2 9.50 5.33 8.25 0.00 115.40 45.50
FSPG First Home Bancorp of NJ 28.75 2,708 77.9 30.50 13.87 23.75 21.05 379.17 107.28
FFSL First Independence Corp. of KS 14.87 978 14.5 15.00 9.81 15.00 -0.87 N.A. 43.39
FISB First Indiana Corp. of IN 31.00 10,561 327.4 31.00 17.37 27.50 12.73 129.63 44.86
FKFS First Keystone Fin. Corp of PA 37.37 1,228 45.9 37.37 19.00 35.87 4.18 N.A. 94.13
FLKY First Lancaster Bncshrs of KY 15.75 951 15.0 16.37 14.50 15.75 0.00 N.A. 7.73
FLFC First Liberty Fin. Corp. of GA 30.50 7,725 235.6 33.75 18.25 30.75 -0.81 500.39 66.03
CASH First Midwest Fin. Corp. of IA 21.37 2,699 57.7 22.00 15.00 21.25 0.56 N.A. 39.40
FMBD First Mutual Bancorp of IL 20.25 3,507 71.0 21.50 13.75 20.25 0.00 N.A. 35.00
FMSB First Mutual SB of Bellevue WA* 17.00 4,067 69.1 20.17 10.61 18.25 -6.85 229.46 60.23
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DIBK Dime Financial Corp. of CT* 3.05 3.04 14.54 14.12 178.52
EGLB Eagle BancGroup of IL 0.46 0.36 17.03 17.03 143.71
EBSI Eagle Bancshares of Tucker GA 0.88 0.89 12.59 12.59 154.03
EGFC Eagle Financial Corp. of CT(8) 0.90 1.30 22.91 18.23 332.04
ETFS East Texas Fin. Serv. of TX 0.75 0.70 20.35 20.35 113.01
EMLD Emerald Financial Corp of OH 1.20 1.11 9.28 9.15 118.99
EIRE Emerald Island Bancorp, MA(8)* 1.60 1.70 13.77 13.77 197.11
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 1.19 0.99 15.82 15.81 138.41
EQSB Equitable FSB of Wheaton MD 2.20 3.51 25.80 25.80 511.96
FCBF FCB Fin. Corp. of Neenah WI 0.61 0.47 19.74 19.74 134.88
FFBS FFBS Bancorp of Columbus MS 1.16 1.16 14.34 14.34 85.85
FFDF FFD Financial Corp. of OH 1.16 0.57 14.86 14.86 61.05
FFLC FFLC Bancorp of Leesburg FL 0.94 0.89 13.73 13.73 99.97
FFFC FFVA Financial Corp. of VA 1.70 1.63 16.70 16.36 125.45
FFWC FFW Corporation of Wabash IN 2.43 2.38 24.63 22.36 253.80
FFYF FFY Financial Corp. of OH 1.87 1.84 20.30 20.30 148.22
FMCO FMS Financial Corp. of NJ 2.34 2.32 15.80 15.57 243.58
FFHH FSF Financial Corp. of MN 1.04 1.03 14.41 14.41 128.95
FOBC Fed One Bancorp of Wheeling WV 1.38 1.38 16.85 16.10 150.75
FBCI Fidelity Bancorp of Chicago IL 0.33 1.04 18.66 18.63 178.13
FSBI Fidelity Bancorp, Inc. of PA 1.75 1.71 16.64 16.64 244.98
FFFL Fidelity FSB, MHC of FL (47.7) 0.93 0.79 12.65 12.57 154.16
FFED Fidelity Fed. Bancorp of IN 0.67 0.65 5.15 5.15 84.32
FFOH Fidelity Financial of OH 0.76 0.85 12.34 10.95 94.75
FIBC Financial Bancorp, Inc. of NY 1.46 1.56 15.71 15.63 173.66
FBSI First Bancshares of MO 1.74 1.57 20.73 20.73 148.91
FBBC First Bell Bancorp of PA 1.18 1.15 11.02 11.02 104.63
FBER First Bergen Bancorp of NJ 0.71 0.71 13.57 13.57 99.39
SKBO First Carnegie,MHC of PA(45.0) 0.33 0.33 10.52 10.52 63.97
FSTC First Citizens Corp of GA 2.17 1.94 12.44 9.81 122.97
FCME First Coastal Corp. of ME* 4.52 4.34 10.66 10.66 109.32
FFBA First Colorado Bancorp of Co 1.11 1.10 12.00 11.85 91.76
FDEF First Defiance Fin.Corp. of OH 0.63 0.61 12.61 12.61 64.12
FESX First Essex Bancorp of MA* 1.33 1.14 11.90 10.41 160.71
FFES First FS&LA of E. Hartford CT 1.92 2.18 24.40 24.40 368.16
FFSX First FS&LA. MHC of IA (46.1) 1.18 1.15 14.08 13.96 161.26
BDJI First Fed. Bancorp. of MN 1.05 1.03 17.74 17.74 165.66
FFBH First Fed. Bancshares of AR 1.13 1.08 16.64 16.64 111.75
FTFC First Fed. Capital Corp. of WI 1.80 1.49 11.46 10.80 170.18
FFKY First Fed. Fin. Corp. of KY 1.46 1.45 12.60 11.89 91.99
FFBZ First Federal Bancorp of OH 1.25 1.26 9.92 9.91 129.34
FFCH First Fin. Holdings Inc. of SC 2.22 2.16 16.45 16.45 268.99
FFBI First Financial Bancorp of IL -0.15 0.94 18.10 18.10 202.99
FFHS First Franklin Corp. of OH 1.05 1.24 17.49 17.39 193.95
FGHC First Georgia Hold. Corp of GA 0.32 0.25 4.21 3.86 51.24
FSPG First Home Bancorp of NJ 1.74 1.70 13.31 13.11 193.90
FFSL First Independence Corp. of KS 0.73 0.73 11.79 11.79 115.05
FISB First Indiana Corp. of IN 1.62 1.33 14.13 13.96 146.49
FKFS First Keystone Fin. Corp of PA 2.15 1.97 20.16 20.16 304.10
FLKY First Lancaster Bncshrs of KY 0.53 0.53 14.62 14.62 49.62
FLFC First Liberty Fin. Corp. of GA 1.32 1.08 12.30 11.09 166.85
CASH First Midwest Fin. Corp. of IA 1.35 1.29 16.11 14.31 149.90
FMBD First Mutual Bancorp of IL 0.35 0.32 15.37 11.72 114.74
FMSB First Mutual SB of Bellevue WA* 1.07 1.05 7.53 7.53 110.92
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FNGB First Northern Cap. Corp of WI 14.00 8,840 123.8 14.00 8.00 14.00 0.00 92.84 72.20
FFPB First Palm Beach Bancorp of FL 38.75 5,048 195.6 40.56 23.00 38.75 0.00 N.A. 64.06
FSLA First SB SLA MHC of NJ (47.5)(8) 41.62 8,007 141.7 47.50 16.36 43.00 -3.21 316.20 147.44
SOPN First SB, SSB, Moore Co. of NC 22.75 3,687 83.9 25.00 17.87 23.25 -2.15 N.A. 21.33
FWWB First Savings Bancorp of WA* 26.25 10,247 269.0 26.50 18.00 26.00 0.96 N.A. 42.90
FSFF First SecurityFed Fin of IL 15.94 6,408 102.1 16.62 15.00 16.50 -3.39 N.A. N.A.
SHEN First Shenango Bancorp of PA 34.00 2,069 70.3 35.00 21.75 33.00 3.03 N.A. 51.11
FBNW FirstBank Corp of Clarkston WA 17.75 1,984 35.2 19.00 15.50 18.12 -2.04 N.A. N.A.
FFDB FirstFed Bancorp of AL 21.28 1,151 24.5 22.75 12.50 21.28 0.00 N.A. 70.24
FSPT FirstSpartan Fin. Corp. of SC 37.00 4,430 163.9 39.00 35.00 37.87 -2.30 N.A. N.A.
FLAG Flag Financial Corp of GA 19.37 2,037 39.5 19.87 10.25 18.50 4.70 97.65 80.19
FLGS Flagstar Bancorp, Inc of MI 19.12 13,670 261.4 21.75 13.00 19.12 0.00 N.A. N.A.
FFIC Flushing Fin. Corp. of NY* 23.00 7,983 183.6 24.00 17.37 23.25 -1.08 N.A. 26.93
FBHC Fort Bend Holding Corp. of TX 20.25 1,656 33.5 24.00 11.00 19.62 3.21 N.A. 58.82
FTSB Fort Thomas Fin. Corp. of KY 15.50 1,495 23.2 15.50 9.25 14.75 5.08 N.A. 6.02
FKKYD Frankfort First Bancorp of KY 18.62 1,640 30.5 24.50 16.00 18.50 0.65 N.A. -18.15
FTNB Fulton Bancorp of MO 21.37 1,719 36.7 26.50 14.75 20.62 3.64 N.A. 39.04
GFSB GFS Bancorp of Grinnell IA 17.06 988 16.9 17.62 10.12 16.87 1.13 N.A. 60.64
GUPB GFSB Bancorp of Gallup NM 20.25 801 16.2 22.25 15.50 20.25 0.00 N.A. 27.60
GSLA GS Financial Corp. of LA 18.00 3,438 61.9 18.75 13.37 17.75 1.41 N.A. N.A.
GOSB GSB Financial Corp. of NY 17.12 2,248 38.5 17.12 14.25 16.12 6.20 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 18.75 1,076 20.2 19.69 14.12 19.62 -4.43 N.A. 31.58
GBCI Glacier Bancorp of MT 22.25 6,816 151.7 22.97 15.33 22.06 0.86 360.66 36.25
GFCO Glenway Financial Corp. of OH 18.50 2,280 42.2 19.00 9.50 18.50 0.00 N.A. 80.49
GTPS Great American Bancorp of IL 18.50 1,697 31.4 19.50 14.50 19.00 -2.63 N.A. 24.92
GTFN Great Financial Corp. of KY(8) 50.25 13,823 694.6 50.81 29.12 50.56 -0.61 N.A. 72.56
GSBC Great Southern Bancorp of MO 24.75 8,080 200.0 25.50 16.00 23.75 4.21 747.60 38.97
GDVS Greater DV SB,MHC of PA (19.9)* 29.00 3,272 18.9 32.50 9.75 30.00 -3.33 N.A. 179.65
GSFC Green Street Fin. Corp. of NC 18.00 4,298 77.4 20.75 15.12 18.25 -1.37 N.A. 16.13
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 26.00 3,125 25.2 27.87 11.25 25.37 2.48 N.A. 115.59
HCBB HCB Bancshares of AR 13.62 2,645 36.0 14.25 12.62 13.62 0.00 N.A. N.A.
HEMT HF Bancorp of Hemet CA 17.12 6,282 107.5 17.50 10.75 17.00 0.71 N.A. 53.96
HFFC HF Financial Corp. of SD 26.25 2,803 73.6 27.00 16.50 26.50 -0.94 425.00 51.65
HFNC HFNC Financial Corp. of NC 14.75 17,192 253.6 22.06 13.94 14.75 0.00 N.A. -17.46
HMNF HMN Financial, Inc. of MN 26.25 4,212 110.6 26.50 17.87 26.50 -0.94 N.A. 44.87
HALL Hallmark Capital Corp. of WI 15.25 2,886 44.0 15.37 8.50 15.00 1.67 N.A. 71.93
HARB Harbor FSB, MHC of FL (46.6)(8) 67.00 4,973 155.2 69.75 32.00 65.50 2.29 N.A. 87.41
HRBF Harbor Federal Bancorp of MD 23.75 1,693 40.2 25.00 15.12 25.00 -5.00 137.50 50.79
HFSA Hardin Bancorp of Hardin MO 17.75 859 15.2 18.62 12.00 17.87 -0.67 N.A. 42.00
HARL Harleysville SA of PA 29.37 1,662 48.8 30.25 15.00 28.50 3.05 65.46 85.89
HFGI Harrington Fin. Group of IN 12.62 3,257 41.1 13.75 9.75 12.12 4.13 N.A. 17.40
HARS Harris SB, MHC of PA (24.3) 19.25 33,779 157.3 20.75 6.00 19.50 -1.28 N.A. 216.61
HFFB Harrodsburg 1st Fin Bcrp of KY 17.25 2,025 34.9 18.87 14.75 17.87 -3.47 N.A. -8.59
HHFC Harvest Home Fin. Corp. of OH 14.75 915 13.5 14.75 9.25 14.75 0.00 N.A. 51.28
HAVN Haven Bancorp of Woodhaven NY 21.75 8,772 190.8 22.69 13.94 22.25 -2.25 N.A. 51.99
HTHR Hawthorne Fin. Corp. of CA 19.87 3,088 61.4 24.00 7.44 23.12 -14.06 -27.75 144.40
HMLK Hemlock Fed. Fin. Corp. of IL 17.37 2,076 36.1 17.50 12.50 17.12 1.46 N.A. N.A.
HBNK Highland Federal Bank of CA 32.87 2,300 75.6 33.12 17.00 32.00 2.72 N.A. 93.35
HIFS Hingham Inst. for Sav. of MA* 27.87 1,303 36.3 29.00 17.50 27.87 0.00 511.18 48.64
HBEI Home Bancorp of Elgin IL 18.25 6,856 125.1 19.31 12.81 18.50 -1.35 N.A. 35.19
HBFW Home Bancorp of Fort Wayne IN 27.12 2,525 68.5 27.75 18.50 27.12 0.00 N.A. 42.74
HBBI Home Building Bancorp of IN 21.25 312 6.6 23.75 18.00 21.25 0.00 N.A. 7.59
HCFC Home City Fin. Corp. of OH 17.25 905 15.6 18.00 12.00 17.37 -0.69 N.A. 30.19
HOMF Home Fed Bancorp of Seymour IN 26.00 5,102 132.7 28.25 15.33 26.50 -1.89 292.16 51.43
HWEN Home Financial Bancorp of IN 17.62 465 8.2 17.62 12.75 16.44 7.18 N.A. 38.20
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FNGB First Northern Cap. Corp of WI 0.66 0.63 8.24 8.24 74.29
FFPB First Palm Beach Bancorp of FL 1.85 1.55 22.39 21.87 358.24
FSLA First SB SLA MHC of NJ (47.5)(8) 1.14 1.19 12.39 11.26 130.45
SOPN First SB, SSB, Moore Co. of NC 1.32 1.32 18.43 18.43 80.10
FWWB First Savings Bancorp of WA* 0.99 0.94 14.92 13.78 104.83
FSFF First SecurityFed Fin of IL 0.61 0.61 12.80 12.80 47.35
SHEN First Shenango Bancorp of PA 2.26 2.25 22.55 22.55 194.02
FBNW FirstBank Corp of Clarkston WA 0.33 0.15 14.73 14.73 89.65
FFDB FirstFed Bancorp of AL 1.59 1.55 14.77 13.51 153.31
FSPT FirstSpartan Fin. Corp. of SC 1.25 1.25 29.17 29.17 108.87
FLAG Flag Financial Corp of GA 1.01 0.84 10.66 10.66 117.07
FLGS Flagstar Bancorp, Inc of MI 1.66 0.83 8.89 8.54 148.74
FFIC Flushing Fin. Corp. of NY* 0.99 1.04 17.08 16.40 120.27
FBHC Fort Bend Holding Corp. of TX 1.23 1.03 11.88 11.09 192.88
FTSB Fort Thomas Fin. Corp. of KY 0.76 0.76 10.56 10.56 65.45
FKKYD Frankfort First Bancorp of KY 0.07 0.51 13.67 13.67 81.25
FTNB Fulton Bancorp of MO 0.73 0.63 14.88 14.88 60.33
GFSB GFS Bancorp of Grinnell IA 1.15 1.15 11.01 11.01 95.64
GUPB GFSB Bancorp of Gallup NM 0.97 0.97 17.60 17.60 137.28
GSLA GS Financial Corp. of LA 0.41 0.41 16.44 16.44 38.12
GOSB GSB Financial Corp. of NY 0.52 0.44 13.78 13.78 50.92
GWBC Gateway Bancorp of KY(8) 0.59 0.59 16.14 16.14 58.19
GBCI Glacier Bancorp of MT 1.22 1.25 8.41 8.21 84.21
GFCO Glenway Financial Corp. of OH 0.99 0.96 12.17 12.03 128.62
GTPS Great American Bancorp of IL 0.42 0.47 16.80 16.80 82.24
GTFN Great Financial Corp. of KY(8) 2.20 1.62 21.08 20.23 209.33
GSBC Great Southern Bancorp of MO 1.57 1.48 7.79 7.79 90.04
GDVS Greater DV SB,MHC of PA (19.9)* 0.68 0.68 8.85 8.85 76.04
GSFC Green Street Fin. Corp. of NC 0.65 0.65 14.65 14.65 41.41
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 0.62 0.60 8.76 8.76 67.24
HCBB HCB Bancshares of AR 0.09 0.10 14.27 13.73 75.75
HEMT HF Bancorp of Hemet CA 0.05 0.28 13.26 11.05 167.20
HFFC HF Financial Corp. of SD 2.05 1.88 19.33 19.33 205.10
HFNC HFNC Financial Corp. of NC 0.62 0.53 9.48 9.48 50.42
HMNF HMN Financial, Inc. of MN 1.34 1.13 20.09 20.09 135.05
HALL Hallmark Capital Corp. of WI 0.91 0.89 10.59 10.59 145.00
HARB Harbor FSB, MHC of FL (46.6)(8) 2.68 2.66 19.47 18.85 227.43
HRBF Harbor Federal Bancorp of MD 0.91 0.91 16.75 16.75 128.29
HFSA Hardin Bancorp of Hardin MO 0.94 0.89 15.76 15.76 136.63
HARL Harleysville SA of PA 2.05 2.06 13.76 13.76 207.73
HFGI Harrington Fin. Group of IN 0.67 0.56 7.74 7.74 159.98
HARS Harris SB, MHC of PA (24.3) 0.52 0.43 5.12 4.53 62.47
HFFB Harrodsburg 1st Fin Bcrp of KY 0.55 0.73 14.49 14.49 53.80
HHFC Harvest Home Fin. Corp. of OH 0.23 0.50 11.35 11.35 90.82
HAVN Haven Bancorp of Woodhaven NY 1.31 1.32 12.53 12.49 208.99
HTHR Hawthorne Fin. Corp. of CA 2.37 2.28 14.01 14.01 288.59
HMLK Hemlock Fed. Fin. Corp. of IL 0.28 0.61 15.06 15.06 77.99
HBNK Highland Federal Bank of CA 2.41 1.83 17.20 17.20 224.34
HIFS Hingham Inst. for Sav. of MA* 1.98 1.98 16.11 16.11 165.96
HBEI Home Bancorp of Elgin IL 0.43 0.43 13.77 13.77 49.96
HBFW Home Bancorp of Fort Wayne IN 0.72 1.15 17.62 17.62 132.62
HBBI Home Building Bancorp of IN 1.05 1.03 18.89 18.89 133.80
HCFC Home City Fin. Corp. of OH 0.92 0.93 15.19 15.19 77.47
HOMF Home Fed Bancorp of Seymour IN 1.74 1.58 11.78 11.43 136.05
HWEN Home Financial Bancorp of IN 0.74 0.64 15.59 15.59 88.84
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 22.87 1,842 42.1 25.00 16.12 23.62 -3.18 185.88 38.61
HMCI Homecorp, Inc. of Rockford IL(8) 27.19 1,708 46.4 27.37 11.83 27.37 -0.66 171.90 113.25
HZFS Horizon Fin'l. Services of IA 11.75 851 10.0 13.00 7.25 11.50 2.17 N.A. 55.42
HRZB Horizon Financial Corp. of WA* 17.12 7,434 127.3 18.00 11.30 17.50 -2.17 49.91 45.83
IBSF IBS Financial Corp. of NJ 17.37 10,949 190.2 18.75 12.94 16.87 2.96 N.A. 27.81
ISBF ISB Financial Corp. of LA 27.87 6,901 192.3 29.00 17.50 27.62 0.91 N.A. 54.83
ITLA Imperial Thrift & Loan of CA* 17.75 7,847 139.3 21.25 14.00 18.00 -1.39 N.A. 18.33
IFSB Independence FSB of DC 14.00 1,281 17.9 15.12 7.37 13.25 5.66 600.00 75.00
INCB Indiana Comm. Bank, SB of IN(8) 20.50 922 18.9 20.50 15.00 20.50 0.00 N.A. 26.15
INBI Industrial Bancorp of OH 18.12 5,173 93.7 18.25 12.00 18.25 -0.71 N.A. 42.12
IWBK Interwest SB of Oak Harbor WA 39.25 8,050 316.0 43.25 27.62 39.87 -1.56 292.50 21.71
IPSW Ipswich SB of Ipswich MA* 12.75 2,378 30.3 14.12 5.81 13.25 -3.77 N.A. 112.50
JXVL Jacksonville Bancorp of TX 18.87 2,490 47.0 19.75 13.25 19.12 -1.31 N.A. 29.07
JXSB Jcksnville SB,MHC of IL (45.6) 28.50 1,272 16.5 29.50 12.50 26.25 8.57 N.A. 115.09
JSBA Jefferson Svgs Bancorp of MO 43.00 5,006 215.3 44.00 22.87 41.75 2.99 N.A. 65.38
JOAC Joachim Bancorp of MO 15.00 722 10.8 15.63 14.00 15.00 0.00 N.A. 3.45
KSAV KS Bancorp of Kenly NC 22.50 885 19.9 25.50 14.81 22.50 0.00 N.A. 50.91
KSBK KSB Bancorp of Kingfield ME(8)* 21.00 1,238 26.0 21.00 7.67 16.50 27.27 N.A. 173.79
KFBI Klamath First Bancorp of OR 21.50 10,019 215.4 24.25 14.87 22.31 -3.63 N.A. 36.51
LSBI LSB Fin. Corp. of Lafayette IN 27.75 916 25.4 27.75 17.86 27.75 0.00 N.A. 49.43
LVSB Lakeview SB of Paterson NJ 24.87 4,509 112.1 26.00 11.75 25.00 -0.52 N.A. 99.92
LARK Landmark Bancshares of KS 23.25 1,689 39.3 27.25 17.00 23.25 0.00 N.A. 29.17
LARL Laurel Capital Group of PA 28.13 1,446 40.7 29.25 15.87 27.75 1.37 119.77 70.48
LSBX Lawrence Savings Bank of MA* 15.75 4,284 67.5 16.37 7.94 14.50 8.62 357.85 93.73
LFED Leeds FSB, MHC of MD (36.3) 23.50 5,182 44.3 23.50 10.00 22.75 3.30 N.A. 120.24
LXMO Lexington B&L Fin. Corp. of MO 17.12 1,138 19.5 17.25 12.75 17.25 -0.75 N.A. 26.81
LIFB Life Bancorp of Norfolk VA(8) 36.00 9,848 354.5 36.37 16.75 35.12 2.51 N.A. 100.00
LFBI Little Falls Bancorp of NJ 20.25 2,608 52.8 20.50 12.19 20.37 -0.59 N.A. 58.82
LOGN Logansport Fin. Corp. of IN 15.25 1,261 19.2 16.00 11.12 15.25 0.00 N.A. 35.56
LONF London Financial Corp. of OH 15.25 515 7.9 21.00 13.50 15.75 -3.17 N.A. 8.00
LISB Long Island Bancorp, Inc of NY 46.25 24,023 1,111.1 48.75 30.62 48.50 -4.64 N.A. 32.14
MAFB MAF Bancorp of IL 34.06 15,249 519.4 34.75 22.25 34.00 0.18 300.71 47.00
MBLF MBLA Financial Corp. of MO 27.25 1,268 34.6 27.25 19.00 27.00 0.93 N.A. 43.42
MFBC MFB Corp. of Mishawaka IN 23.50 1,651 38.8 23.75 16.50 23.25 1.08 N.A. 41.40
MLBC ML Bancorp of Villanova PA(8) 30.75 11,866 364.9 30.75 13.75 29.75 3.36 N.A. 117.78
MSBF MSB Financial Corp. of MI 19.50 1,234 24.1 19.50 9.50 19.00 2.63 N.A. 105.26
MARN Marion Capital Holdings of IN 27.50 1,776 48.8 28.13 19.25 27.00 1.85 N.A. 42.86
MRKF Market Fin. Corp. of OH 15.44 1,336 20.6 15.75 12.25 15.44 0.00 N.A. N.A.
MFSL Maryland Fed. Bancorp of MD 27.00 6,467 174.6 27.25 16.87 26.50 1.89 414.29 55.44
MASB MassBank Corp. of Reading MA* 46.62 3,561 166.0 47.75 27.75 45.50 2.46 372.82 63.06
MFLR Mayflower Co-Op. Bank of MA* 23.75 890 21.1 26.25 14.75 24.75 -4.04 375.00 39.71
MECH Mechanics SB of Hartford CT* 27.37 5,293 144.9 28.00 15.37 25.75 6.29 N.A. 73.78
MDBK Medford Bank of Medford, MA* 37.75 4,541 171.4 38.50 24.50 36.75 2.72 439.29 46.60
MERI Meritrust FSB of Thibodaux LA(8) 69.00 774 53.4 69.00 31.50 69.00 0.00 N.A. 118.22
MWBX MetroWest Bank of MA* 8.75 13,956 122.1 9.31 4.62 9.00 -2.78 112.38 62.94
MCBS Mid Continent Bancshares of KS(8) 44.75 1,962 87.8 46.37 23.37 42.25 5.92 N.A. 91.48
MIFC Mid Iowa Financial Corp. of IA 11.25 1,678 18.9 11.75 6.25 11.75 -4.26 125.00 76.61
MCBN Mid-Coast Bancorp of ME 28.75 233 6.7 29.00 18.50 28.75 0.00 403.50 51.32
MWBI Midwest Bancshares, Inc. of IA 17.75 1,018 18.1 19.50 8.83 17.75 0.00 433.03 101.02
MWFD Midwest Fed. Fin. Corp of WI(8) 27.75 1,628 45.2 27.75 16.75 27.25 1.83 455.00 50.00
MFFC Milton Fed. Fin. Corp. of OH 15.12 2,305 34.9 15.94 13.25 15.37 -1.63 N.A. 4.28
MIVI Miss. View Hold. Co. of MN 17.50 740 13.0 19.75 11.75 17.50 0.00 N.A. 45.83
MBSP Mitchell Bancorp of NC* 17.25 931 16.1 18.00 13.75 17.87 -3.47 N.A. 21.05
MBBC Monterey Bay Bancorp of CA 19.00 3,230 61.4 20.50 14.62 18.75 1.33 N.A. 28.81
MONT Montgomery Fin. Corp. of IN 12.50 1,653 20.7 14.00 11.00 12.37 1.05 N.A. -3.85
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 1.75 1.74 11.65 11.65 109.13
HMCI Homecorp, Inc. of Rockford IL(8) 0.99 0.80 13.07 13.07 191.38
HZFS Horizon Fin'l. Services of IA 0.77 0.62 10.27 10.27 103.15
HRZB Horizon Financial Corp. of WA* 1.09 1.07 11.17 11.17 71.43
IBSF IBS Financial Corp. of NJ 0.53 0.53 11.69 11.69 67.11
ISBF ISB Financial Corp. of LA 0.97 0.96 16.70 14.29 138.54
ITLA Imperial Thrift & Loan of CA* 1.52 1.52 12.32 12.27 114.89
IFSB Independence FSB of DC 0.65 0.54 13.89 12.28 201.76
INCB Indiana Comm. Bank, SB of IN(8) 0.53 0.53 12.38 12.38 104.22
INBI Industrial Bancorp of OH 0.98 1.03 11.76 11.76 68.45
IWBK Interwest SB of Oak Harbor WA 2.52 2.32 16.13 15.84 254.25
IPSW Ipswich SB of Ipswich MA* 0.88 0.70 4.78 4.78 85.16
JXVL Jacksonville Bancorp of TX 0.90 1.18 13.55 13.55 90.84
JXSB Jcksnville SB,MHC of IL (45.6) 0.80 0.80 13.63 13.63 129.12
JSBA Jefferson Svgs Bancorp of MO 0.90 1.85 22.03 17.09 258.09
JOAC Joachim Bancorp of MO 0.39 0.39 13.67 13.67 48.58
KSAV KS Bancorp of Kenly NC 1.40 1.39 16.45 16.44 124.22
KSBK KSB Bancorp of Kingfield ME(8)* 1.08 1.10 8.46 8.00 117.84
KFBI Klamath First Bancorp of OR 0.85 0.85 14.42 13.11 97.82
LSBI LSB Fin. Corp. of Lafayette IN 1.61 1.42 18.88 18.88 218.63
LVSB Lakeview SB of Paterson NJ 1.34 0.97 13.71 11.74 112.19
LARK Landmark Bancshares of KS 1.14 1.35 18.62 18.62 135.05
LARL Laurel Capital Group of PA 2.09 2.02 15.20 15.20 145.21
LSBX Lawrence Savings Bank of MA* 1.42 1.41 7.84 7.84 82.39
LFED Leeds FSB, MHC of MD (36.3) 0.64 0.64 9.16 9.16 55.08
LXMO Lexington B&L Fin. Corp. of MO 0.55 0.71 14.74 14.74 52.05
LIFB Life Bancorp of Norfolk VA(8) 1.35 1.25 16.17 15.73 150.93
LFBI Little Falls Bancorp of NJ 0.66 0.60 14.53 13.40 124.40
LOGN Logansport Fin. Corp. of IN 0.91 0.95 12.86 12.86 68.04
LONF London Financial Corp. of OH 0.75 0.70 14.77 14.77 74.19
LISB Long Island Bancorp, Inc of NY 2.06 1.74 22.74 22.53 246.88
MAFB MAF Bancorp of IL 2.48 2.46 17.22 15.13 221.04
MBLF MBLA Financial Corp. of MO 1.45 1.48 22.36 22.36 176.67
MFBC MFB Corp. of Mishawaka IN 1.21 1.21 20.30 20.30 155.01
MLBC ML Bancorp of Villanova PA(8) 1.20 0.86 13.51 12.61 195.16
MSBF MSB Financial Corp. of MI 0.86 0.83 10.32 10.32 62.41
MARN Marion Capital Holdings of IN 1.67 1.65 22.22 22.22 101.25
MRKF Market Fin. Corp. of OH 0.38 0.38 14.89 14.89 42.01
MFSL Maryland Fed. Bancorp of MD 1.08 1.56 15.00 14.81 178.98
MASB MassBank Corp. of Reading MA* 2.78 2.61 28.24 27.82 261.94
MFLR Mayflower Co-Op. Bank of MA* 1.46 1.38 13.98 13.75 144.98
MECH Mechanics SB of Hartford CT* 2.64 2.63 16.33 16.33 156.95
MDBK Medford Bank of Medford, MA* 2.49 2.32 21.96 20.58 243.63
MERI Meritrust FSB of Thibodaux LA(8) 3.42 3.42 24.90 24.90 301.44
MWBX MetroWest Bank of MA* 0.54 0.54 3.13 3.13 41.97
MCBS Mid Continent Bancshares of KS(8) 2.13 2.21 20.38 20.38 206.56
MIFC Mid Iowa Financial Corp. of IA 0.71 1.00 7.00 6.99 74.82
MCBN Mid-Coast Bancorp of ME 1.92 1.82 22.65 22.65 263.83
MWBI Midwest Bancshares, Inc. of IA 1.21 1.07 10.18 10.18 147.20
MWFD Midwest Fed. Fin. Corp of WI(8) 1.39 1.37 11.21 10.81 127.18
MFFC Milton Fed. Fin. Corp. of OH 0.60 0.53 11.45 11.45 91.09
MIVI Miss. View Hold. Co. of MN 0.66 0.97 17.80 17.80 94.29
MBSP Mitchell Bancorp of NC* 0.59 0.59 15.36 15.36 37.15
MBBC Monterey Bay Bancorp of CA 0.58 0.53 14.59 13.53 126.83
MONT Montgomery Fin. Corp. of IN 0.42 0.42 11.81 11.81 61.70
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MSBK Mutual SB, FSB of Bay City MI 12.75 4,279 54.6 14.62 5.37 12.75 0.00 45.71 131.82
NHTB NH Thrift Bancshares of NH 21.25 2,075 44.1 22.75 11.62 21.50 -1.16 359.96 68.38
NSLB NS&L Bancorp of Neosho MO 18.50 707 13.1 19.50 13.62 18.50 0.00 N.A. 35.83
NMSB Newmil Bancorp. of CT* 13.50 3,835 51.8 14.50 8.75 13.37 0.97 111.93 38.46
NASB North American SB of MO 54.00 2,229 120.4 55.62 33.25 54.00 0.00 ***.** 57.66
NBSI North Bancshares of Chicago IL 25.87 962 24.9 27.12 15.75 26.25 -1.45 N.A. 56.79
FFFD North Central Bancshares of IA 19.12 3,258 62.3 19.25 13.37 18.50 3.35 N.A. 41.00
NBN Northeast Bancorp of ME* 27.62 1,294 35.7 27.94 13.25 27.94 -1.15 135.06 97.29
NEIB Northeast Indiana Bncrp of IN 20.50 1,763 36.1 21.12 13.25 20.00 2.50 N.A. 50.51
NWEQ Northwest Equity Corp. of WI 19.25 839 16.2 19.75 11.25 19.00 1.32 N.A. 58.83
NWSB Northwest SB, MHC of PA (30.7) 14.75 46,753 211.7 16.37 6.50 15.25 -3.28 N.A. 120.48
NSSY Norwalk Savings Society of CT* 38.00 2,427 92.2 40.12 22.94 39.25 -3.18 N.A. 62.60
NSSB Norwich Financial Corp. of CT* 30.31 5,432 164.6 31.62 18.00 31.25 -3.01 333.00 54.49
NTMG Nutmeg FS&LA of CT 10.75 986 10.6 10.75 5.25 9.84 9.25 N.A. 90.94
OHSL OHSL Financial Corp. of OH 26.50 1,235 32.7 28.25 20.75 27.75 -4.50 N.A. 24.01
OCFC Ocean Fin. Corp. of NJ 37.25 8,176 304.6 38.37 25.12 37.37 -0.32 N.A. 46.08
OCN Ocwen Financial Corp. of FL 24.37 60,505 1,474.5 28.28 12.62 25.62 -4.88 N.A. 82.27
OTFC Oregon Trail Fin. Corp of OR 16.06 4,695 75.4 16.75 15.63 16.00 0.37 N.A. N.A.
PBHC OswegoCity SB, MHC of NY (46.)* 30.00 1,917 26.5 30.00 9.38 28.75 4.35 N.A. 219.83
OFCP Ottawa Financial Corp. of MI 28.37 5,353 151.9 29.25 14.89 29.12 -2.58 N.A. 85.55
PFFB PFF Bancorp of Pomona CA 19.12 17,903 342.3 21.50 13.37 19.25 -0.68 N.A. 28.58
PSFI PS Financial of Chicago IL 18.50 2,167 40.1 18.50 11.75 17.87 3.53 N.A. 57.45
PVFC PVF Capital Corp. of OH 20.75 2,590 53.7 21.75 13.18 20.06 3.44 371.59 44.90
PALM Palfed, Inc. of Aiken SC(8) 28.62 5,299 151.7 28.81 13.75 28.62 0.00 86.21 104.43
PBCI Pamrapo Bancorp, Inc. of NJ 24.87 2,843 70.7 26.75 18.50 24.50 1.51 341.74 24.35
PFED Park Bancorp of Chicago IL 17.75 2,431 43.2 18.12 12.19 18.00 -1.39 N.A. 36.54
PVSA Parkvale Financial Corp of PA 28.75 5,106 146.8 29.75 19.60 29.00 -0.86 247.22 38.22
PEEK Peekskill Fin. Corp. of NY 17.50 3,193 55.9 18.25 13.37 17.75 -1.41 N.A. 22.81
PFSB PennFed Fin. Services of NJ 33.50 4,823 161.6 34.75 19.87 34.00 -1.47 N.A. 65.43
PWBC PennFirst Bancorp of PA 18.62 5,310 98.9 19.50 12.27 18.75 -0.69 133.33 50.28
PWBK Pennwood SB of PA* 18.50 570 10.5 19.12 12.62 19.12 -3.24 N.A. 34.55
PBKB People's SB of Brockton MA* 23.00 3,283 75.5 23.00 10.50 20.37 12.91 287.21 116.57
PFDC Peoples Bancorp of Auburn IN 24.00 3,392 81.4 25.00 13.00 25.00 -4.00 128.35 77.78
PBCT Peoples Bank, MHC of CT (40.1)* 35.00 61,126 855.9 37.37 18.00 36.37 -3.77 344.73 81.82
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 39.25 9,046 127.4 39.25 15.75 37.50 4.67 N.A. 145.31
PFFC Peoples Fin. Corp. of OH 13.75 1,491 20.5 19.00 12.75 14.25 -3.51 N.A. 1.85
PHBK Peoples Heritage Fin Grp of ME* 43.44 27,475 1,193.5 43.94 24.87 43.94 -1.14 183.74 55.14
PSFC Peoples Sidney Fin. Corp of OH 17.25 1,785 30.8 18.50 12.56 17.25 0.00 N.A. N.A.
PERM Permanent Bancorp of IN 26.06 2,103 54.8 27.37 20.25 26.12 -0.23 N.A. 28.69
PMFI Perpetual Midwest Fin. of IA 27.75 1,873 52.0 30.50 18.75 30.50 -9.02 N.A. 44.16
PERT Perpetual of SC, MHC (46.8)(8) 60.62 1,505 42.7 60.62 22.00 54.75 10.72 N.A. 149.98
PCBC Perry Co. Fin. Corp. of MO 23.25 828 19.3 25.00 17.00 23.25 0.00 N.A. 36.76
PHFC Pittsburgh Home Fin. of PA 17.75 1,969 34.9 20.81 12.87 19.00 -6.58 N.A. 32.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 36.50 1,632 28.1 37.12 16.25 34.87 4.67 N.A. 108.57
PTRS Potters Financial Corp of OH 18.50 965 17.9 18.50 9.38 17.62 4.99 N.A. 85.00
PKPS Poughkeepsie Fin. Corp. of NY(8) 10.37 12,595 130.6 10.62 5.12 10.50 -1.24 33.81 97.52
PHSB Ppls Home SB, MHC of PA (45.0) 18.75 2,760 23.3 19.75 13.62 19.00 -1.32 N.A. N.A.
PRBC Prestige Bancorp of PA 19.25 915 17.6 20.00 13.00 19.25 0.00 N.A. 42.59
PFNC Progress Financial Corp. of PA 15.50 4,010 62.2 16.37 7.68 15.50 0.00 40.78 94.24
PSBK Progressive Bank, Inc. of NY* 36.00 3,828 137.8 38.00 22.75 35.00 2.86 169.26 58.24
PROV Provident Fin. Holdings of CA 21.50 4,836 104.0 21.75 13.62 20.87 3.02 N.A. 53.57
PULB Pulaski SB, MHC of MO (29.8) 30.00 2,094 18.7 32.50 14.12 30.00 0.00 N.A. 106.90
PLSK Pulaski SB, MHC of NJ (46.0) 20.00 2,070 19.0 24.50 11.50 19.00 5.26 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 26.75 3,081 82.4 29.75 15.75 26.12 2.41 116.25 69.84
QCFB QCF Bancorp of Virginia MN 28.50 1,382 39.4 28.50 17.25 28.50 0.00 N.A. 56.16
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
MSBK Mutual SB, FSB of Bay City MI 0.15 0.08 9.73 9.73 152.87
NHTB NH Thrift Bancshares of NH 0.99 0.80 12.04 10.34 153.90
NSLB NS&L Bancorp of Neosho MO 0.41 0.64 16.52 16.52 84.46
NMSB Newmil Bancorp. of CT* 0.70 0.67 8.42 8.42 82.77
NASB North American SB of MO 4.10 3.86 25.37 24.52 330.46
NBSI North Bancshares of Chicago IL 0.79 0.69 17.04 17.04 126.90
FFFD North Central Bancshares of IA 1.16 1.16 15.13 15.13 66.03
NBN Northeast Bancorp of ME* 1.37 1.13 14.27 12.61 205.13
NEIB Northeast Indiana Bncrp of IN 1.18 1.18 15.51 15.51 107.95
NWEQ Northwest Equity Corp. of WI 1.17 1.13 13.51 13.51 115.56
NWSB Northwest SB, MHC of PA (30.7) 0.41 0.41 4.33 4.09 44.93
NSSY Norwalk Savings Society of CT* 2.40 2.74 20.49 19.76 254.37
NSSB Norwich Financial Corp. of CT* 1.47 1.36 15.05 13.67 129.02
NTMG Nutmeg FS&LA of CT 0.60 0.43 5.88 5.88 106.64
OHSL OHSL Financial Corp. of OH 1.65 1.60 20.74 20.74 189.96
OCFC Ocean Fin. Corp. of NJ 1.68 1.66 27.63 27.63 182.15
OCN Ocwen Financial Corp. of FL 1.34 0.75 6.91 6.73 48.86
OTFC Oregon Trail Fin. Corp of OR 0.59 0.59 13.29 13.29 55.34
PBHC OswegoCity SB, MHC of NY (46.)* 1.05 0.94 12.02 10.10 100.68
OFCP Ottawa Financial Corp. of MI 1.29 1.26 14.15 11.43 161.96
PFFB PFF Bancorp of Pomona CA 0.65 0.66 14.69 14.53 146.09
PSFI PS Financial of Chicago IL 0.72 0.73 14.76 14.76 39.55
PVFC PVF Capital Corp. of OH 1.90 1.82 10.63 10.63 147.98
PALM Palfed, Inc. of Aiken SC(8) 0.49 0.84 10.74 10.74 126.16
PBCI Pamrapo Bancorp, Inc. of NJ 1.73 1.71 16.89 16.77 130.83
PFED Park Bancorp of Chicago IL 0.80 0.83 16.61 16.61 71.79
PVSA Parkvale Financial Corp of PA 2.05 2.05 15.20 15.10 196.91
PEEK Peekskill Fin. Corp. of NY 0.66 0.66 14.81 14.81 56.76
PFSB PennFed Fin. Services of NJ 2.14 2.14 20.72 17.54 282.80
PWBC PennFirst Bancorp of PA 0.95 0.95 12.96 11.53 154.87
PWBK Pennwood SB of PA* 0.83 0.91 15.33 15.33 83.59
PBKB People's SB of Brockton MA* 1.44 0.75 8.96 8.59 218.54
PFDC Peoples Bancorp of Auburn IN 1.24 1.24 13.06 13.06 85.67
PBCT Peoples Bank, MHC of CT (40.1)* 1.44 0.93 11.41 11.40 126.48
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 0.87 0.61 11.97 10.77 70.63
PFFC Peoples Fin. Corp. of OH 0.53 0.53 15.78 15.78 58.01
PHBK Peoples Heritage Fin Grp of ME* 2.51 2.51 16.42 14.01 220.42
PSFC Peoples Sidney Fin. Corp of OH 0.56 0.56 14.57 14.57 57.61
PERM Permanent Bancorp of IN 1.26 1.25 19.51 19.25 206.17
PMFI Perpetual Midwest Fin. of IA 0.84 0.68 18.24 18.24 214.45
PERT Perpetual of SC, MHC (46.8)(8) 1.17 1.58 20.13 20.13 170.24
PCBC Perry Co. Fin. Corp. of MO 0.90 1.04 18.80 18.80 97.95
PHFC Pittsburgh Home Fin. of PA 1.01 0.90 14.63 14.48 138.80
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 1.46 1.44 14.86 14.86 234.94
PTRS Potters Financial Corp of OH 1.20 1.18 11.20 11.20 127.17
PKPS Poughkeepsie Fin. Corp. of NY(8) 0.37 0.37 5.91 5.91 70.19
PHSB Ppls Home SB, MHC of PA (45.0) 0.56 0.54 10.22 10.22 74.79
PRBC Prestige Bancorp of PA 0.85 0.85 16.88 16.88 150.64
PFNC Progress Financial Corp. of PA 0.90 0.71 5.81 5.18 108.91
PSBK Progressive Bank, Inc. of NY* 2.20 2.16 20.18 18.17 231.09
PROV Provident Fin. Holdings of CA 0.94 0.44 17.66 17.66 132.47
PULB Pulaski SB, MHC of MO (29.8) 0.68 0.90 11.23 11.23 86.07
PLSK Pulaski SB, MHC of NJ (46.0) 0.54 0.54 10.36 10.36 86.47
PULS Pulse Bancorp of S. River NJ 1.84 1.86 14.02 14.02 170.73
QCFB QCF Bancorp of Virginia MN 1.46 1.46 19.84 19.84 113.41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
QCBC Quaker City Bancorp of CA 21.37 4,673 99.9 24.56 13.00 21.25 0.56 184.93 40.59
QCSB Queens County Bancorp of NY* 36.50 15,108 551.4 37.75 20.22 36.19 0.86 N.A. 73.40
RARB Raritan Bancorp. of Raritan NJ* 27.50 2,372 65.2 29.00 15.33 27.25 0.92 327.02 77.42
REDF RedFed Bancorp of Redlands CA 19.87 7,179 142.6 21.12 12.37 20.00 -0.65 N.A. 47.19
RELY Reliance Bancorp, Inc. of NY 34.00 8,712 296.2 35.50 18.50 35.50 -4.23 N.A. 74.36
RELI Reliance Bancshares Inc of WI* 8.87 2,472 21.9 9.12 6.50 9.12 -2.74 N.A. 31.41
RIVR River Valley Bancorp of IN 18.12 1,190 21.6 18.87 13.25 18.62 -2.69 N.A. 31.78
RVSB Riverview Bancorp of WA 14.87 6,128 91.1 15.50 6.00 15.50 -4.06 N.A. 137.16
RSLN Roslyn Bancorp, Inc. of NY* 21.88 43,642 954.9 24.31 15.00 23.25 -5.89 N.A. N.A.
SCCB S. Carolina Comm. Bnshrs of SC 22.50 699 15.7 25.25 15.00 22.87 -1.62 N.A. 50.00
SBFL SB Fngr Lakes MHC of NY (33.1) 30.00 1,785 17.7 30.00 12.75 29.50 1.69 N.A. 118.18
SFED SFS Bancorp of Schenectady NY 24.50 1,231 30.2 24.50 14.75 22.62 8.31 N.A. 66.10
SGVB SGV Bancorp of W. Covina CA 17.25 2,342 40.4 19.37 10.75 18.00 -4.17 N.A. 53.33
SHSB SHS Bancorp, Inc. of PA 17.25 820 14.1 17.25 14.75 16.25 6.15 N.A. N.A.
SISB SIS Bancorp Inc of MA* 37.37 5,581 208.6 38.50 22.37 38.12 -1.97 N.A. 63.40
SWCB Sandwich Co-Op. Bank of MA* 43.00 1,919 82.5 45.00 27.25 45.00 -4.44 398.84 44.54
SFSL Security First Corp. of OH 20.50 7,591 155.6 21.25 10.17 20.37 0.64 97.12 69.70
SMFC Sho-Me Fin. Corp. of MO(8) 49.31 1,499 73.9 50.75 21.62 47.75 3.27 N.A. 126.71
SKAN Skaneateles Bancorp Inc of NY* 18.87 1,433 27.0 21.33 10.67 0.00 -1.00 N.A. 74.24
SOBI Sobieski Bancorp of S. Bend IN 19.37 779 15.1 19.75 13.75 19.50 -0.67 N.A. 33.59
SOSA Somerset Savings Bank of MA(8)* 5.03 16,652 83.8 5.94 1.97 4.75 5.89 -1.76 155.33
SSFC South Street Fin. Corp. of NC* 18.87 4,496 84.8 20.00 13.75 19.00 -0.68 N.A. 34.79
SCBS Southern Commun. Bncshrs of AL 19.00 1,137 21.6 19.00 13.00 18.00 5.56 N.A. 43.40
SMBC Southern Missouri Bncrp of MO 19.75 1,612 31.8 20.12 14.00 19.12 3.29 N.A. 31.67
SWBI Southwest Bancshares of IL 25.50 2,657 67.8 26.00 18.00 25.62 -0.47 155.00 39.73
SVRN Sovereign Bancorp of PA 21.62 89,275 1,930.1 21.62 10.62 19.31 11.96 383.67 97.62
STFR St. Francis Cap. Corp. of WI 41.50 5,238 217.4 41.50 26.00 40.63 2.14 N.A. 59.62
SPBC St. Paul Bancorp, Inc. of IL 25.25 34,133 861.9 28.50 14.73 25.00 1.00 126.86 61.14
SFFC StateFed Financial Corp. of IA 13.37 1,557 20.8 14.12 8.25 13.50 -0.96 N.A. 62.06
SFIN Statewide Fin. Corp. of NJ 22.50 4,591 103.3 23.37 13.87 23.12 -2.68 N.A. 56.58
STSA Sterling Financial Corp. of WA 21.25 7,567 160.8 22.50 13.62 21.62 -1.71 133.77 50.50
SFSB SuburbFed Fin. Corp. of IL 36.00 1,263 45.5 36.00 19.00 34.69 3.78 439.73 89.47
ROSE T R Financial Corp. of NY* 33.50 17,592 589.3 35.00 15.50 34.00 -1.47 N.A. 88.73
THRD TF Financial Corp. of PA 29.75 4,088 121.6 29.75 15.87 28.00 6.25 N.A. 83.08
TPNZ Tappan Zee Fin., Inc. of NY 20.00 1,488 29.8 22.62 13.62 19.75 1.27 N.A. 46.84
ESBK The Elmira SB FSB of Elmira NY* 30.00 742 22.3 30.00 15.95 31.25 -4.00 108.77 72.61
TRIC Tri-County Bancorp of WY 14.75 1,167 17.2 14.75 9.00 13.75 7.27 N.A. 63.89
TWIN Twin City Bancorp of TN 14.12 1,272 18.0 14.50 11.50 14.00 0.86 N.A. 22.78
UFRM United FS&LA of Rocky Mount NC 10.62 3,074 32.6 12.75 7.75 11.50 -7.65 226.77 24.94
UBMT United Fin. Corp. of MT 25.25 1,223 30.9 27.00 18.75 26.00 -2.88 140.48 31.17
VABF Va. Beach Fed. Fin. Corp of VA 16.62 4,979 82.8 17.62 9.25 17.25 -3.65 254.37 76.06
WHGB WHG Bancshares of MD 15.87 1,462 23.2 16.50 12.62 15.87 0.00 N.A. 20.96
WSFS WSFS Financial Corp. of DE* 20.75 12,442 258.2 20.75 9.87 20.00 3.75 186.21 103.63
WVFC WVS Financial Corp. of PA* 32.00 1,748 55.9 34.00 23.50 32.00 0.00 N.A. 29.98
WRNB Warren Bancorp of Peabody MA* 21.62 3,798 82.1 21.62 14.75 20.50 5.46 541.54 44.13
WFSL Washington FS&LA of Seattle WA 31.87 47,509 1,514.1 33.31 22.39 33.12 -3.77 118.44 32.30
WAMU Washington Mutual Inc. of WA(8)* 68.62 257,17617,647.4 72.37 41.25 71.37 -3.85 269.72 58.44
WYNE Wayne Bancorp of NJ 22.75 2,014 45.8 24.87 14.12 22.62 0.57 N.A. 49.18
WAYN Wayne S&L Co. MHC of OH (47.8) 30.25 2,255 32.5 33.00 15.33 33.00 -8.33 N.A. 85.24
WCFB Wbstr Cty FSB MHC of IA (45.2) 21.25 2,100 20.2 22.00 12.75 21.25 0.00 N.A. 54.55
WBST Webster Financial Corp. of CT 63.50 13,554 860.7 66.00 35.12 64.00 -0.78 572.67 72.79
WEFC Wells Fin. Corp. of Wells MN 18.50 1,959 36.2 19.00 12.62 17.50 5.71 N.A. 41.01
WCBI WestCo Bancorp of IL 26.50 2,474 65.6 29.25 20.00 26.50 0.00 165.00 23.26
WSTR WesterFed Fin. Corp. of MT 25.25 5,577 140.8 27.00 17.62 24.75 2.02 N.A. 38.36
WOFC Western Ohio Fin. Corp. of OH 26.62 2,356 62.7 29.25 20.62 26.87 -0.93 N.A. 22.39
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
QCBC Quaker City Bancorp of CA 1.20 1.15 15.33 15.33 181.26
QCSB Queens County Bancorp of NY* 1.44 1.45 11.44 11.44 102.00
RARB Raritan Bancorp. of Raritan NJ* 1.63 1.61 12.65 12.45 171.70
REDF RedFed Bancorp of Redlands CA 1.28 1.28 11.21 11.17 134.74
RELY Reliance Bancorp, Inc. of NY 1.96 2.07 19.29 14.17 233.56
RELI Reliance Bancshares Inc of WI* 0.25 0.26 9.18 9.18 19.01
RIVR River Valley Bancorp of IN 0.46 0.62 14.63 14.41 118.02
RVSB Riverview Bancorp of WA 0.47 0.45 9.56 9.20 46.06
RSLN Roslyn Bancorp, Inc. of NY* 0.73 0.93 14.04 13.97 79.61
SCCB S. Carolina Comm. Bnshrs of SC 0.75 0.75 17.35 17.35 65.26
SBFL SB Fngr Lakes MHC of NY (33.1) 0.44 0.51 11.92 11.92 127.71
SFED SFS Bancorp of Schenectady NY 0.94 0.94 17.64 17.64 141.42
SGVB SGV Bancorp of W. Covina CA 0.65 0.71 12.99 12.79 174.63
SHSB SHS Bancorp, Inc. of PA 0.41 0.41 13.83 13.83 109.44
SISB SIS Bancorp Inc of MA* 2.05 2.03 19.16 19.16 260.35
SWCB Sandwich Co-Op. Bank of MA* 2.44 2.39 21.16 20.34 266.68
SFSL Security First Corp. of OH 1.14 1.15 8.31 8.18 89.69
SMFC Sho-Me Fin. Corp. of MO(8) 2.71 2.57 20.77 20.77 230.05
SKAN Skaneateles Bancorp Inc of NY* 1.20 1.16 12.10 11.75 172.81
SOBI Sobieski Bancorp of S. Bend IN 0.64 0.59 15.99 15.99 108.19
SOSA Somerset Savings Bank of MA(8)* 0.32 0.31 2.06 2.06 31.25
SSFC South Street Fin. Corp. of NC* 0.63 0.65 13.73 13.73 53.50
SCBS Southern Commun. Bncshrs of AL 0.33 0.54 13.20 13.20 61.89
SMBC Southern Missouri Bncrp of MO 0.94 0.90 16.36 16.36 101.30
SWBI Southwest Bancshares of IL 1.50 1.45 16.01 16.01 141.14
SVRN Sovereign Bancorp of PA 0.51 0.74 7.24 5.91 163.55
STFR St. Francis Cap. Corp. of WI 2.24 2.21 24.54 21.71 317.04
SPBC St. Paul Bancorp, Inc. of IL 1.39 1.39 11.98 11.95 133.26
SFFC StateFed Financial Corp. of IA 0.69 0.69 9.86 9.86 56.22
SFIN Statewide Fin. Corp. of NJ 1.19 1.19 14.34 14.31 153.15
STSA Sterling Financial Corp. of WA 1.04 0.94 12.98 11.88 247.19
SFSB SuburbFed Fin. Corp. of IL 1.23 1.79 21.90 21.82 337.85
ROSE T R Financial Corp. of NY* 1.88 1.69 13.09 13.09 209.84
THRD TF Financial Corp. of PA 1.22 1.05 17.79 15.71 152.97
TPNZ Tappan Zee Fin., Inc. of NY 0.58 0.57 14.20 14.20 83.43
ESBK The Elmira SB FSB of Elmira NY* 1.27 1.03 19.55 19.03 307.64
TRIC Tri-County Bancorp of WY 0.78 0.79 11.57 11.57 75.56
TWIN Twin City Bancorp of TN 0.71 0.60 10.88 10.88 84.07
UFRM United FS&LA of Rocky Mount NC 0.63 0.50 6.82 6.82 92.96
UBMT United Fin. Corp. of MT 1.22 1.21 20.24 20.24 84.29
VABF Va. Beach Fed. Fin. Corp of VA 0.75 0.61 8.70 8.70 121.61
WHGB WHG Bancshares of MD 0.34 0.34 14.16 14.16 68.56
WSFS WSFS Financial Corp. of DE* 1.31 1.30 6.66 6.62 120.21
WVFC WVS Financial Corp. of PA* 2.08 2.09 19.38 19.38 161.46
WRNB Warren Bancorp of Peabody MA* 2.04 1.81 10.21 10.21 95.87
WFSL Washington FS&LA of Seattle WA 2.21 2.20 15.11 13.87 120.39
WAMU Washington Mutual Inc. of WA(8)* 0.01 1.51 19.65 18.20 371.76
WYNE Wayne Bancorp of NJ 1.07 1.07 16.49 16.49 132.71
WAYN Wayne S&L Co. MHC of OH (47.8) 0.81 0.76 10.58 10.58 110.97
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.64 0.64 10.52 10.52 44.99
WBST Webster Financial Corp. of CT 1.79 2.99 26.82 23.10 502.51
WEFC Wells Fin. Corp. of Wells MN 1.09 1.06 14.86 14.86 104.52
WCBI WestCo Bancorp of IL 1.88 1.78 19.41 19.41 124.93
WSTR WesterFed Fin. Corp. of MT 1.16 1.11 19.03 15.35 179.16
WOFC Western Ohio Fin. Corp. of OH 0.61 0.71 23.39 21.83 168.69
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market -------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
WWFC Westwood Fin. Corp. of NJ(8) 27.62 645 17.8 28.00 15.50 27.62 0.00 N.A. 67.39
WEHO Westwood Hmstd Fin Corp of OH 14.25 2,782 39.6 18.12 11.50 14.25 0.00 N.A. 17.57
WFI Winton Financial Corp. of OH 19.75 1,986 39.2 20.50 11.50 20.00 -1.25 N.A. 71.74
FFWD Wood Bancorp of OH 18.50 2,119 39.2 19.50 10.50 19.50 -5.13 N.A. 63.28
YFCB Yonkers Fin. Corp. of NY 18.75 3,021 56.6 22.00 12.75 19.00 -1.32 N.A. 45.69
YFED York Financial Corp. of PA 24.87 8,806 219.0 27.25 12.80 25.50 -2.47 163.17 91.31
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
WWFC Westwood Fin. Corp. of NJ(8) 1.20 1.28 15.95 14.27 171.20
WEHO Westwood Hmstd Fin Corp of OH 0.47 0.54 14.20 14.20 51.36
WFI Winton Financial Corp. of OH 1.14 1.33 11.36 11.12 159.81
FFWD Wood Bancorp of OH 1.07 0.98 9.77 9.77 78.58
YFCB Yonkers Fin. Corp. of NY 0.98 0.99 14.52 14.52 103.59
YFED York Financial Corp. of PA 1.26 1.06 11.62 11.62 131.24
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(297) 13.04 12.81 0.90 8.09 4.66 0.88 7.85 0.78 122.10 0.78
NYSE Traded Companies(11) 7.94 7.75 0.92 13.60 5.73 0.83 12.78 1.06 72.81 1.11
AMEX Traded Companies(16) 14.70 14.59 0.64 3.84 3.09 0.78 4.91 0.66 141.41 0.71
NASDAQ Listed OTC Companies(270) 13.17 12.93 0.91 8.11 4.71 0.88 7.81 0.78 123.34 0.77
California Companies(21) 7.41 7.17 0.64 9.66 5.27 0.57 8.90 1.72 69.82 1.26
Florida Companies(5) 8.55 8.12 1.20 14.66 5.20 0.80 9.61 1.62 86.80 0.76
Mid-Atlantic Companies(59) 11.12 10.79 0.86 8.74 4.85 0.85 8.75 0.80 92.52 0.91
Mid-West Companies(144) 14.23 14.06 0.92 7.41 4.53 0.91 7.27 0.62 136.73 0.65
New England Companies(9) 8.05 7.77 0.62 8.22 4.56 0.66 8.90 0.48 156.42 1.04
North-West Companies(8) 16.32 15.90 0.98 8.53 4.27 0.97 8.03 0.51 205.79 0.59
South-East Companies(38) 15.99 15.80 0.97 7.28 4.08 0.96 6.98 0.86 138.63 0.81
South-West Companies(7) 10.52 10.27 0.87 10.21 6.68 0.88 10.00 0.77 66.48 0.72
Western Companies (Excl CA)(6) 16.12 15.71 1.21 8.16 4.92 1.21 8.18 0.34 130.33 0.71
Thrift Strategy(240) 14.29 14.08 0.91 7.33 4.60 0.91 7.30 0.72 122.56 0.72
Mortgage Banker Strategy(35) 7.47 7.03 0.77 11.19 5.15 0.69 10.10 0.99 126.54 1.01
Real Estate Strategy(9) 7.26 7.08 0.87 12.03 6.15 0.84 11.61 1.23 98.78 1.32
Diversified Strategy(9) 8.42 8.18 1.31 16.29 5.77 1.04 13.52 1.36 117.46 1.05
Retail Banking Strategy(4) 6.62 6.33 -0.24 -0.25 -3.30 -0.29 -1.06 0.73 132.47 0.95
Companies Issuing Dividends(252) 13.33 13.08 0.93 8.21 4.81 0.92 8.00 0.70 122.79 0.75
Companies Without Dividends(45) 11.42 11.30 0.69 7.42 3.81 0.64 6.94 1.29 118.07 0.96
Equity/Assets less than 6%(23) 5.05 4.72 0.68 13.54 5.77 0.64 12.81 1.40 77.64 1.07
Equity/Assets 6-12%(141) 8.77 8.47 0.81 9.63 5.09 0.78 9.25 0.79 131.02 0.86
Equity/Assets greater than 12%(133) 18.43 18.28 1.01 5.73 4.07 1.01 5.68 0.67 121.01 0.66
Converted Last 3 Mths (no MHC)(4) 18.40 18.40 0.81 4.37 3.36 0.81 4.37 0.60 127.39 0.63
Actively Traded Companies(39) 8.95 8.71 1.00 12.43 5.52 0.99 12.41 0.98 123.47 0.95
Market Value Below $20 Million(50) 14.68 14.66 0.84 6.04 4.61 0.85 6.08 0.70 109.38 0.63
Holding Company Structure(264) 13.51 13.29 0.89 7.76 4.56 0.88 7.56 0.78 119.97 0.77
Assets Over $1 Billion(60) 7.90 7.40 0.89 12.03 5.23 0.83 11.33 0.94 108.45 0.98
Assets $500 Million-$1 Billion(48) 10.42 10.08 0.90 9.22 4.78 0.84 8.62 0.86 146.87 0.91
Assets $250-$500 Million(64) 11.78 11.52 0.87 8.04 4.89 0.86 7.92 0.67 136.29 0.73
Assets less than $250 Million(125) 17.05 17.00 0.92 5.88 4.25 0.93 5.92 0.73 110.86 0.67
Goodwill Companies(120) 9.15 8.56 0.85 10.02 5.07 0.81 9.55 0.87 108.14 0.86
Non-Goodwill Companies(177) 15.61 15.61 0.93 6.82 4.40 0.92 6.72 0.73 131.52 0.73
Acquirors of FSLIC Cases(10) 7.27 6.84 0.84 12.30 5.65 0.83 12.07 1.08 60.52 0.82
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(297) 19.46 155.82 18.85 160.01 20.40 0.36 1.56 29.79
NYSE Traded Companies(11) 18.10 198.68 15.55 193.38 18.69 0.40 0.96 15.08
AMEX Traded Companies(16) 20.98 130.16 19.22 131.53 19.86 0.32 1.85 37.14
NASDAQ Listed OTC Companies(270) 19.47 155.64 18.98 160.52 20.50 0.36 1.57 30.14
California Companies(21) 18.62 169.71 11.79 168.66 19.58 0.16 0.48 9.96
Florida Companies(5) 20.61 186.91 20.22 212.54 24.74 0.20 0.74 14.79
Mid-Atlantic Companies(59) 19.41 159.98 17.04 164.46 19.97 0.37 1.45 29.11
Mid-West Companies(144) 19.22 148.88 19.58 152.32 20.25 0.35 1.65 31.10
New England Companies(9) 18.19 168.11 13.13 177.31 20.44 0.43 1.46 29.55
North-West Companies(8) 20.59 160.03 22.90 167.65 21.31 0.35 1.34 20.93
South-East Companies(38) 21.32 164.28 23.73 168.93 22.52 0.45 2.02 41.25
South-West Companies(7) 17.11 136.54 13.64 144.04 17.23 0.35 1.65 29.63
Western Companies (Excl CA)(6) 20.43 158.80 23.44 165.59 20.49 0.54 2.54 45.82
Thrift Strategy(240) 19.91 146.72 19.76 150.78 20.45 0.37 1.67 32.38
Mortgage Banker Strategy(35) 18.00 196.58 14.09 203.81 21.33 0.31 1.08 20.14
Real Estate Strategy(9) 16.83 183.89 13.21 187.14 17.54 0.14 0.68 11.55
Diversified Strategy(9) 17.68 230.80 21.41 239.24 18.13 0.47 1.38 23.67
Retail Banking Strategy(4) 19.03 157.74 9.86 163.04 21.91 0.14 0.76 22.88
Companies Issuing Dividends(252) 19.35 157.33 19.31 161.66 20.43 0.42 1.83 35.18
Companies Without Dividends(45) 20.21 146.91 16.25 150.44 20.16 0.00 0.00 0.00
Equity/Assets less than 6%(23) 17.64 206.22 11.09 211.72 19.53 0.21 0.65 12.39
Equity/Assets 6-12%(141) 18.36 172.30 14.77 179.65 19.26 0.37 1.44 26.80
Equity/Assets greater than 12%(133) 21.21 131.95 24.03 133.73 21.93 0.37 1.82 36.59
Converted Last 3 Mths (no MHC)(4) 27.14 129.89 23.32 129.89 27.14 0.00 0.00 0.00
Actively Traded Companies(39) 17.94 204.55 17.35 206.53 18.69 0.50 1.50 26.31
Market Value Below $20 Million(50) 19.53 125.06 17.89 125.38 20.94 0.32 1.86 34.52
Holding Company Structure(264) 19.67 153.78 19.30 157.35 20.64 0.37 1.61 30.93
Assets Over $1 Billion(60) 18.60 200.09 15.87 211.87 20.00 0.41 1.13 21.88
Assets $500 Million-$1 Billion(48) 18.59 171.40 17.25 177.64 19.67 0.36 1.45 28.27
Assets $250-$500 Million(64) 19.42 153.42 17.26 158.16 19.90 0.36 1.54 28.29
Assets less than $250 Million(125) 20.43 131.43 21.64 132.09 21.22 0.34 1.80 35.61
Goodwill Companies(120) 18.69 177.28 15.68 188.39 19.88 0.38 1.38 26.18
Non-Goodwill Companies(177) 20.03 141.73 20.95 141.73 20.77 0.34 1.67 32.39
Acquirors of FSLIC Cases(10) 18.00 204.29 14.20 202.76 18.59 0.42 1.26 21.70
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(61) 12.56 12.18 1.15 11.57 5.90 1.12 11.01 0.84 139.24 1.42
NYSE Traded Companies(2) 7.56 5.18 0.89 11.54 5.02 0.87 11.31 1.95 40.15 1.04
AMEX Traded Companies(6) 12.87 12.02 0.84 8.02 4.56 0.75 7.01 1.42 104.14 1.60
NASDAQ Listed OTC Companies(53) 12.74 12.49 1.19 11.94 6.07 1.16 11.41 0.75 146.14 1.43
California Companies(1) 10.72 10.68 1.45 13.02 8.56 1.45 13.02 1.54 79.64 1.45
Mid-Atlantic Companies(16) 10.93 10.27 0.86 8.98 4.44 0.87 8.78 0.93 130.18 1.33
Mid-West Companies(2) 36.66 35.98 0.82 1.90 2.01 0.95 2.33 0.56 57.14 0.56
New England Companies(33) 9.23 8.94 1.29 14.94 7.30 1.21 13.95 0.85 144.76 1.70
North-West Companies(4) 12.22 11.86 1.22 10.73 5.48 1.19 10.46 0.17 241.66 1.04
South-East Companies(5) 27.37 27.37 1.33 5.08 3.98 1.33 5.05 0.69 145.62 0.74
Thrift Strategy(44) 13.56 13.15 1.16 10.98 5.79 1.12 10.39 0.86 132.73 1.36
Mortgage Banker Strategy(7) 9.02 8.82 0.91 11.72 5.48 0.94 11.57 0.48 171.40 1.35
Real Estate Strategy(5) 10.69 10.66 1.80 17.32 9.00 1.68 16.10 1.35 88.34 1.59
Diversified Strategy(5) 6.94 6.42 1.04 15.06 6.00 1.00 14.56 0.76 196.07 2.08
Companies Issuing Dividends(53) 11.91 11.50 1.07 10.68 5.35 1.03 10.06 0.80 141.81 1.36
Companies Without Dividends(8) 17.04 16.83 1.71 17.66 9.67 1.72 17.46 1.10 120.84 1.80
Equity/Assets less than 6%(5) 5.17 5.05 0.96 17.25 6.12 0.80 14.29 0.92 98.61 1.42
Equity/Assets 6-12%(40) 8.75 8.25 1.22 14.00 6.95 1.17 13.39 0.92 134.29 1.59
Equity/Assets greater than 12%(16) 22.74 22.54 1.05 4.83 3.53 1.08 4.96 0.60 163.94 1.04
Actively Traded Companies(18) 9.01 8.59 1.22 13.94 6.67 1.15 13.00 0.73 138.50 1.49
Market Value Below $20 Million(3) 28.24 27.78 0.97 3.40 3.04 1.07 3.82 1.43 40.96 0.75
Holding Company Structure(41) 14.26 13.90 1.21 11.16 5.84 1.18 10.74 0.77 148.17 1.47
Assets Over $1 Billion(14) 9.11 8.40 1.05 12.26 5.33 1.04 11.92 0.82 154.48 1.49
Assets $500 Million-$1 Billion(16) 9.41 8.85 1.16 12.86 6.37 1.11 12.02 0.85 146.86 1.55
Assets $250-$500 Million(13) 11.57 11.40 1.07 10.63 5.22 1.02 10.09 0.67 162.47 1.65
Assets less than $250 Million(18) 18.84 18.71 1.28 10.56 6.39 1.25 10.06 0.98 97.91 1.06
Goodwill Companies(31) 9.42 8.67 0.96 11.26 5.59 0.92 10.59 0.90 135.75 1.44
Non-Goodwill Companies(30) 15.82 15.82 1.35 11.90 6.21 1.32 11.43 0.76 143.53 1.41
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(61) 17.90 182.55 20.16 189.87 18.49 0.48 1.60 29.85
NYSE Traded Companies(2) 19.94 238.62 17.78 263.16 20.34 0.58 1.05 20.95
AMEX Traded Companies(6) 18.00 155.25 18.96 187.55 19.60 0.56 1.72 34.25
NASDAQ Listed OTC Companies(53) 17.80 183.06 20.38 188.59 18.33 0.46 1.61 29.85
California Companies(1) 11.68 144.07 15.45 144.66 11.68 0.00 0.00 0.00
Mid-Atlantic Companies(16) 20.22 189.11 18.75 200.11 20.18 0.49 1.63 32.81
Mid-West Companies(2) 0.00 99.35 36.11 102.31 0.00 0.00 0.00 0.00
New England Companies(33) 15.32 196.18 17.49 203.88 16.26 0.50 1.69 28.03
North-West Companies(4) 19.37 184.99 21.44 189.84 20.04 0.31 1.60 29.11
South-East Companies(5) 25.70 124.80 33.40 124.80 25.81 0.68 1.95 50.08
Thrift Strategy(44) 18.17 175.61 20.94 182.16 18.91 0.50 1.66 31.82
Mortgage Banker Strategy(7) 19.46 202.41 17.06 209.15 18.77 0.36 1.23 23.42
Real Estate Strategy(5) 11.14 177.91 19.00 178.21 11.81 0.26 1.20 12.75
Diversified Strategy(5) 16.74 236.38 16.06 254.47 17.47 0.49 1.53 25.72
Companies Issuing Dividends(53) 18.73 184.94 19.87 193.22 19.39 0.55 1.83 34.39
Companies Without Dividends(8) 10.46 166.22 22.17 167.42 10.53 0.00 0.00 0.00
Equity/Assets less than 6%(5) 16.58 271.37 14.09 277.77 18.16 0.18 0.87 14.12
Equity/Assets 6-12%(40) 16.07 196.02 17.16 206.49 16.96 0.53 1.70 28.55
Equity/Assets greater than 12%(16) 23.52 130.89 28.23 132.57 22.89 0.43 1.57 36.96
Actively Traded Companies(18) 15.64 197.08 17.19 208.38 16.24 0.58 1.84 29.07
Market Value Below $20 Million(3) 25.76 111.69 31.37 113.66 24.78 0.24 1.35 35.45
Holding Company Structure(41) 18.52 175.88 21.93 185.51 18.97 0.48 1.67 31.59
Assets Over $1 Billion(14) 19.71 223.82 19.55 233.72 19.87 0.55 1.55 30.02
Assets $500 Million-$1 Billion(16) 15.85 188.66 17.04 205.92 16.27 0.54 1.63 26.49
Assets $250-$500 Million(13) 17.72 181.54 19.56 185.47 18.58 0.40 1.69 31.12
Assets less than $250 Million(18) 18.59 146.64 24.00 147.98 19.36 0.42 1.54 31.78
Goodwill Companies(31) 17.91 187.90 16.62 202.74 18.68 0.51 1.54 27.06
Non-Goodwill Companies(30) 17.89 177.00 23.83 177.00 18.29 0.44 1.66 32.74
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 12.19 12.08 0.79 7.22 2.70 0.79 7.07 0.48 142.10 0.71
BIF-Insured Thrifts(3) 10.87 10.23 1.05 10.29 3.32 0.87 8.36 1.16 74.62 1.11
NASDAQ Listed OTC Companies(23) 11.96 11.75 0.84 7.76 2.81 0.80 7.30 0.61 129.45 0.78
Florida Companies(3) 9.77 9.75 0.74 7.34 3.14 0.65 6.47 0.41 71.26 0.45
Mid-Atlantic Companies(11) 12.16 11.79 0.81 7.62 2.55 0.79 7.33 0.73 109.28 0.89
Mid-West Companies(7) 13.05 13.04 0.87 7.00 2.88 0.91 7.26 0.46 181.63 0.52
New England Companies(1) 9.02 9.01 1.16 13.69 4.11 0.75 8.84 0.76 146.25 1.66
Thrift Strategy(22) 12.14 11.92 0.82 7.39 2.73 0.81 7.20 0.60 128.33 0.72
Diversified Strategy(1) 9.02 9.01 1.16 13.69 4.11 0.75 8.84 0.76 146.25 1.66
Companies Issuing Dividends(22) 11.85 11.63 0.85 7.82 2.80 0.81 7.35 0.62 128.20 0.74
Companies Without Dividends(1) 13.66 13.66 0.73 6.80 2.99 0.71 6.55 0.45 148.08 1.37
Equity/Assets 6-12%(16) 10.01 9.72 0.80 8.34 2.92 0.73 7.54 0.71 83.86 0.81
Equity/Assets greater than 12%(7) 16.63 16.63 0.93 6.38 2.55 0.98 6.73 0.31 266.20 0.71
Holding Company Structure(2) 11.94 10.03 1.06 9.22 3.50 0.95 8.25 0.91 43.96 0.67
Assets Over $1 Billion(6) 8.77 8.38 0.93 10.57 3.20 0.76 8.59 0.65 86.19 0.94
Assets $500 Million-$1 Billion(2) 11.34 11.34 0.80 7.04 3.07 0.73 6.45 0.41 90.57 0.62
Assets $250-$500 Million(5) 11.63 11.61 0.88 7.97 3.02 0.86 7.73 0.29 188.56 0.43
Assets less than $250 Million(10) 13.55 13.34 0.79 6.52 2.54 0.81 6.68 0.73 133.77 0.84
Goodwill Companies(9) 9.29 8.70 0.91 10.05 3.32 0.78 8.53 0.62 95.63 0.83
Non-Goodwill Companies(14) 13.41 13.41 0.80 6.51 2.53 0.81 6.63 0.60 149.74 0.75
MHC Institutions(23) 11.96 11.75 0.84 7.76 2.81 0.80 7.30 0.61 129.45 0.78
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 27.43 234.53 28.78 225.97 28.15 0.51 1.93 38.97
BIF-Insured Thrifts(3) 26.44 294.67 31.87 310.58 0.00 0.47 1.45 44.13
NASDAQ Listed OTC Companies(23) 26.77 245.81 29.32 242.89 28.15 0.50 1.85 40.69
Florida Companies(3) 0.00 225.04 21.93 225.77 0.00 0.90 2.84 0.00
Mid-Atlantic Companies(11) 28.57 247.75 30.60 241.26 0.00 0.28 1.22 36.08
Mid-West Companies(7) 27.43 238.81 30.30 239.21 28.15 0.69 2.51 48.46
New England Companies(1) 24.31 306.75 27.67 307.02 0.00 0.76 2.17 52.78
Thrift Strategy(22) 28.00 241.74 29.42 238.31 28.15 0.49 1.83 39.18
Diversified Strategy(1) 24.31 306.75 27.67 307.02 0.00 0.76 2.17 52.78
Companies Issuing Dividends(22) 26.77 249.96 29.59 247.14 28.15 0.53 1.96 45.78
Companies Without Dividends(1) 0.00 183.46 25.07 183.46 0.00 0.00 0.00 0.00
Equity/Assets 6-12%(16) 26.77 258.58 26.59 255.49 28.15 0.49 1.68 45.78
Equity/Assets greater than 12%(7) 0.00 217.70 35.86 217.70 0.00 0.54 2.24 0.00
Holding Company Structure(2) 28.57 249.58 29.80 297.03 0.00 0.28 0.93 26.67
Assets Over $1 Billion(6) 24.31 292.21 27.53 268.86 0.00 0.51 1.88 44.70
Assets $500 Million-$1 Billion(2) 0.00 220.84 25.05 220.84 0.00 0.90 2.58 0.00
Assets $250-$500 Million(5) 27.43 257.46 30.00 258.11 28.15 0.54 1.90 40.68
Assets less than $250 Million(10) 28.57 229.23 30.36 234.50 0.00 0.44 1.73 38.28
Goodwill Companies(9) 26.77 271.23 26.67 266.66 28.15 0.47 1.65 40.29
Non-Goodwill Companies(14) 0.00 234.25 30.77 234.25 0.00 0.52 1.95 41.19
MHC Institutions(23) 26.77 245.81 29.32 242.89 28.15 0.50 1.85 40.69
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 4.07 3.46 0.76 19.09 6.39 0.65 16.33 1.86 43.81 1.22
CSA Coast Savings Financial of CA 5.20 5.14 0.62 12.51 4.70 0.66 13.36 1.23 75.26 1.37
CFB Commercial Federal Corp. of NE 6.17 5.52 0.94 16.03 5.71 0.94 16.03 0.88 75.53 0.90
DME Dime Bancorp, Inc. of NY* 5.43 5.17 0.68 12.66 5.00 0.67 12.46 1.02 51.61 0.81
DSL Downey Financial Corp. of CA 7.13 7.04 0.73 9.96 5.30 0.70 9.56 0.95 55.50 0.58
EBI Equality Bancorp of St Louis 9.92 9.92 0.53 5.33 3.56 0.53 5.33 0.29 41.13 0.26
FED FirstFed Fin. Corp. of CA 5.16 5.11 0.56 11.73 5.71 0.56 11.68 1.20 168.73 2.57
GSB Glendale Fed. Bk, FSB of CA 5.65 5.05 0.57 10.24 5.14 0.68 12.27 1.36 70.96 1.30
GDW Golden West Fin. Corp. of CA 6.56 6.56 0.88 13.91 6.49 0.86 13.68 1.18 47.94 0.67
GPT GreenPoint Fin. Corp. of NY* 9.69 5.19 1.09 10.41 5.03 1.06 10.17 2.88 28.68 1.26
JSB JSB Financial, Inc. of NY 23.22 23.22 1.93 8.61 6.12 1.71 7.65 1.07 35.16 0.61
NYB New York Bancorp, Inc. of NY 5.21 5.21 1.62 31.66 6.26 1.66 32.45 0.88 65.33 0.92
WES Westcorp Inc. of Orange CA 9.08 9.06 0.99 10.57 7.62 0.21 2.26 0.76 121.61 1.78
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 16.95 16.95 0.98 5.64 4.11 0.95 5.46 0.50 201.03 1.32
ANE Alliance Bancorp of New Englan* 7.36 7.18 0.79 11.65 6.82 0.73 10.74 1.99 62.80 2.00
BKC American Bank of Waterbury CT* 8.81 8.49 1.30 15.51 6.67 1.10 13.09 1.77 48.58 1.48
BFD BostonFed Bancorp of MA 8.52 8.20 0.73 7.68 5.84 0.66 6.95 0.34 184.11 0.76
CFX CFX Corp of NH(8)* 8.71 8.40 0.73 8.91 2.04 0.99 11.98 0.55 137.87 1.10
CNY Carver Bancorp, Inc. of NY 8.40 8.07 -0.15 -1.74 -1.54 0.01 0.13 1.31 47.60 1.07
CBK Citizens First Fin.Corp. of IL 13.75 13.75 0.60 4.13 3.50 0.54 3.67 0.61 38.86 0.28
ESX Essex Bancorp of VA(8) 0.02 -0.08 0.12 NM 4.44 0.10 NM 2.11 51.58 1.27
FCB Falmouth Co-Op Bank of MA* 23.86 23.86 0.84 3.43 2.60 0.79 3.23 NA NA NA
FAB FirstFed America Bancorp of MA 12.20 12.20 0.05 0.56 0.29 0.48 5.03 0.39 259.57 1.16
GAF GA Financial Corp. of PA 14.63 14.49 1.09 6.28 5.05 1.05 6.08 0.24 63.36 0.41
KNK Kankakee Bancorp of IL 11.43 10.78 0.89 8.28 6.25 0.87 8.12 1.05 60.22 0.90
KYF Kentucky First Bancorp of KY 16.70 16.70 1.16 6.52 5.31 1.14 6.43 0.09 457.83 0.76
MBB MSB Bancorp of Middletown NY* 7.39 3.63 0.27 3.87 2.59 0.18 2.55 NA NA NA
PDB Piedmont Bancorp of NC 16.43 16.43 -0.24 -1.28 -1.06 0.55 2.91 0.89 75.98 0.81
SSB Scotland Bancorp of NC 22.62 22.62 1.86 5.47 6.44 1.83 5.39 NA NA 0.53
SZB SouthFirst Bancshares of AL 14.00 14.00 -0.03 -0.19 -0.15 0.23 1.62 0.75 39.15 0.40
SRN Southern Banc Company of AL 17.01 16.83 0.14 0.79 0.68 0.50 2.84 NA NA 0.20
SSM Stone Street Bancorp of NC 29.57 29.57 1.54 4.69 3.89 1.54 4.69 0.23 229.34 0.62
TSH Teche Holding Company of LA 13.45 13.45 0.98 7.29 5.33 0.93 6.97 0.28 291.99 0.96
FTF Texarkana Fst. Fin. Corp of AR 15.32 15.32 1.70 10.74 6.25 1.70 10.74 0.23 276.17 0.76
THR Three Rivers Fin. Corp. of MI 13.46 13.41 0.57 4.02 3.06 0.82 5.83 0.87 59.98 0.77
WSB Washington SB, FSB of MD 8.38 8.38 0.42 5.04 3.51 0.59 7.06 1.53 30.34 1.01
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.65 8.49 0.72 8.75 7.08 0.36 4.33 1.30 34.59 0.65
AFED AFSALA Bancorp, Inc. of NY 13.47 13.47 0.79 6.46 4.37 0.79 6.46 0.45 150.77 1.43
ALBK ALBANK Fin. Corp. of Albany NY 9.24 8.14 1.04 11.41 6.28 1.04 11.33 0.94 75.89 0.97
AMFC AMB Financial Corp. of IN 13.94 13.94 1.02 6.29 5.94 0.72 4.43 0.32 118.29 0.51
ASBP ASB Financial Corp. of OH 15.57 15.57 0.97 5.70 4.74 0.91 5.35 0.96 75.72 1.07
ABBK Abington Savings Bank of MA* 7.13 6.46 0.85 12.38 6.03 0.76 11.03 0.16 269.74 0.71
AABC Access Anytime Bancorp of NM 8.65 8.65 1.44 22.38 11.72 1.34 20.78 1.58 31.35 0.95
AFBC Advance Fin. Bancorp of WV 15.40 15.40 0.89 6.41 4.68 0.87 6.25 0.74 38.01 0.33
AADV Advantage Bancorp of WI(8) 9.54 8.88 1.04 11.55 4.96 0.93 10.36 0.48 117.02 1.02
AFCB Affiliated Comm BC, Inc of MA 9.76 9.71 1.09 11.13 5.46 1.08 11.00 0.34 218.65 1.18
ALBC Albion Banc Corp. of Albion NY 8.57 8.57 0.50 5.53 4.68 0.49 5.45 0.12 321.43 0.53
ABCL Allied Bancorp of IL 9.42 9.30 0.79 8.70 4.00 0.88 9.69 0.21 184.61 0.54
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 15.66 305.85 12.45 NM 18.31 0.88 1.43 22.34
CSA Coast Savings Financial of CA 21.26 247.92 12.89 250.80 19.90 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 17.51 256.78 15.83 287.02 17.51 0.33 0.62 10.93
DME Dime Bancorp, Inc. of NY* 20.00 250.48 13.59 263.16 20.31 0.16 0.62 12.31
DSL Downey Financial Corp. of CA 18.88 180.20 12.86 182.54 19.67 0.32 1.14 21.48
EBI Equality Bancorp of St Louis 28.06 149.45 14.82 149.45 28.06 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 17.52 191.75 9.89 193.59 17.60 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA 19.46 186.24 10.52 208.08 16.23 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 15.40 201.30 13.21 201.30 15.66 0.50 0.55 8.43
GPT GreenPoint Fin. Corp. of NY* 19.88 226.76 21.98 NM 20.36 1.00 1.49 29.59
JSB JSB Financial, Inc. of NY 16.33 135.06 31.36 135.06 18.37 1.40 2.89 47.14
NYB New York Bancorp, Inc. of NY 15.96 NM 25.18 NM 15.57 0.60 1.57 25.00
WES Westcorp Inc. of Orange CA 13.12 132.23 12.01 132.54 NM 0.40 2.33 30.53
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 24.35 137.17 23.25 137.17 25.13 0.36 1.52 37.11
ANE Alliance Bancorp of New Englan* 14.67 154.06 11.35 157.96 15.92 0.20 1.19 17.39
BKC American Bank of Waterbury CT* 14.98 210.93 18.58 218.95 17.75 1.44 2.94 44.04
BFD BostonFed Bancorp of MA 17.13 137.22 11.69 142.54 18.92 0.28 1.41 24.14
CFX CFX Corp of NH(8)* NM 276.78 24.11 287.15 NM 0.88 3.10 NM
CNY Carver Bancorp, Inc. of NY NM 111.80 9.39 116.34 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL 28.57 121.70 16.73 121.70 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) 22.50 NM 2.48 NM 25.00 0.00 0.00 0.00
FCB Falmouth Co-Op Bank of MA* NM 129.87 30.98 129.87 NM 0.20 1.00 38.46
FAB FirstFed America Bancorp of MA NM 140.29 17.12 140.29 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 19.81 126.49 18.50 127.71 20.46 0.48 2.58 51.06
KNK Kankakee Bancorp of IL 15.99 126.17 14.42 133.83 16.29 0.48 1.40 22.33
KYF Kentucky First Bancorp of KY 18.83 130.12 21.73 130.12 19.08 0.50 3.40 64.10
MBB MSB Bancorp of Middletown NY* NM 144.21 10.66 293.83 NM 0.60 1.97 NM
PDB Piedmont Bancorp of NC NM 137.17 22.54 137.17 NM 0.40 3.86 NM
SSB Scotland Bancorp of NC 15.53 134.69 30.46 134.69 15.77 0.30 2.93 45.45
SZB SouthFirst Bancshares of AL NM 128.39 17.97 128.39 NM 0.50 2.42 NM
SRN Southern Banc Company of AL NM 121.74 20.71 123.01 NM 0.35 1.97 NM
SSM Stone Street Bancorp of NC 25.72 135.54 40.07 135.54 25.72 0.45 2.03 52.33
TSH Teche Holding Company of LA 18.75 132.83 17.87 132.83 19.63 0.50 2.38 44.64
FTF Texarkana Fst. Fin. Corp of AR 15.99 168.08 25.75 168.08 15.99 0.56 2.17 34.78
THR Three Rivers Fin. Corp. of MI NM 130.31 17.54 130.81 22.50 0.40 1.98 64.52
WSB Washington SB, FSB of MD 28.48 137.98 11.56 137.98 20.34 0.10 1.40 40.00
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 14.13 119.54 10.34 121.89 28.57 0.28 1.08 15.22
AFED AFSALA Bancorp, Inc. of NY 22.87 127.20 17.14 127.20 22.87 0.24 1.28 29.27
ALBK ALBANK Fin. Corp. of Albany NY 15.92 172.35 15.93 195.66 16.03 0.72 1.57 24.91
AMFC AMB Financial Corp. of IN 16.84 110.37 15.38 110.37 23.91 0.28 1.70 28.57
ASBP ASB Financial Corp. of OH 21.09 131.07 20.41 131.07 22.50 0.40 2.96 62.50
ABBK Abington Savings Bank of MA* 16.59 195.57 13.94 215.79 18.63 0.40 1.05 17.47
AABC Access Anytime Bancorp of NM 8.53 143.14 12.38 143.14 9.19 0.00 0.00 0.00
AFBC Advance Fin. Bancorp of WV 21.39 118.18 18.20 118.18 21.91 0.32 1.80 38.55
AADV Advantage Bancorp of WI(8) 20.15 217.39 20.74 233.66 22.47 0.40 0.60 12.12
AFCB Affiliated Comm BC, Inc of MA 18.33 192.22 18.77 193.36 18.53 0.60 1.84 33.71
ALBC Albion Banc Corp. of Albion NY 21.37 115.42 9.89 115.42 21.71 0.32 1.14 24.43
ABCL Allied Bancorp of IL 25.00 164.60 15.50 166.67 22.46 0.44 1.66 41.51
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ATSB AmTrust Capital Corp. of IN 10.93 10.82 0.40 3.86 3.93 0.23 2.21 2.20 33.49 1.03
AHCI Ambanc Holding Co., Inc. of NY* 12.94 12.94 -0.59 -4.24 -3.61 -0.61 -4.43 0.73 107.99 1.48
ASBI Ameriana Bancorp of IN 11.21 11.21 0.92 8.35 5.58 0.84 7.61 0.52 53.03 0.37
AFFFZ America First Fin. Fund of CA(8) 8.37 8.28 1.99 24.83 14.77 2.01 25.10 0.35 94.92 0.48
ABCW Anchor Bancorp Wisconsin of WI 6.40 6.29 0.99 16.08 5.97 0.93 15.00 0.98 115.36 1.44
ANDB Andover Bancorp, Inc. of MA* 8.12 8.12 1.05 13.16 6.74 1.03 12.85 0.91 107.23 1.33
ASFC Astoria Financial Corp. of NY 7.72 6.53 0.81 10.37 5.16 0.77 9.81 0.46 39.39 0.43
AVND Avondale Fin. Corp. of IL 7.72 7.72 -1.93 -21.53 -20.59 -1.97 -21.92 1.11 86.78 1.65
BKCT Bancorp Connecticut of CT* 10.75 10.75 1.36 13.01 4.53 1.24 11.85 1.04 118.74 2.00
BPLS Bank Plus Corp. of CA 4.52 4.51 0.36 7.51 5.20 0.30 6.24 2.21 67.35 2.02
BWFC Bank West Fin. Corp. of MI 14.15 14.15 1.03 6.73 3.69 0.56 3.65 0.21 69.91 0.21
BANC BankAtlantic Bancorp of FL 5.50 4.55 1.04 18.10 7.87 0.54 9.50 0.92 108.06 1.42
BKUNA BankUnited SA of FL 3.12 2.46 0.31 7.68 3.63 0.28 6.90 0.62 27.63 0.21
BVCC Bay View Capital Corp. of CA 5.82 4.86 0.55 9.13 4.07 0.62 10.22 0.63 195.87 1.62
FSNJ Bayonne Banchsares of NJ 15.62 15.62 0.37 3.86 2.04 0.52 5.41 1.12 47.67 1.38
BFSB Bedford Bancshares of VA 14.10 14.10 1.20 8.41 4.92 1.19 8.35 0.52 92.88 0.58
BFFC Big Foot Fin. Corp. of IL 17.48 17.48 0.50 3.28 2.24 0.50 3.28 0.09 150.75 0.31
BSBC Branford SB of CT(8)* 9.65 9.65 1.12 12.06 4.96 1.12 12.06 1.56 131.46 3.09
BYFC Broadway Fin. Corp. of CA 9.84 9.84 0.26 2.49 2.87 0.33 3.14 1.62 52.84 1.02
CBES CBES Bancorp of MO 16.92 16.92 1.23 6.90 5.39 1.12 6.26 0.59 81.11 0.53
CCFH CCF Holding Company of GA 10.66 10.66 0.14 1.03 0.81 -0.16 -1.16 0.20 288.02 0.70
CENF CENFED Financial Corp. of CA 5.56 5.55 0.64 12.26 5.79 0.58 11.04 0.97 76.38 1.07
CFSB CFSB Bancorp of Lansing MI 7.71 7.71 1.20 15.75 5.68 1.13 14.80 0.19 283.10 0.61
CKFB CKF Bancorp of Danville KY 23.67 23.67 1.83 7.53 6.59 1.37 5.61 1.20 16.62 0.22
CNSB CNS Bancorp of MO 24.33 24.33 0.79 3.21 2.19 0.79 3.21 0.50 80.20 0.58
CSBF CSB Financial Group Inc of IL* 25.03 23.66 0.32 1.22 1.21 0.52 1.98 0.56 57.14 0.57
CBCI Calumet Bancorp of Chicago IL 16.21 16.21 1.45 9.07 7.09 1.42 8.91 1.27 96.64 1.55
CAFI Camco Fin. Corp. of OH 9.59 8.88 1.20 12.96 6.92 1.01 10.94 0.60 41.84 0.29
CMRN Cameron Fin. Corp. of MO 21.02 21.02 1.26 5.47 4.87 1.26 5.47 0.55 139.04 0.91
CAPS Capital Savings Bancorp of MO(8) 9.14 9.14 0.95 10.96 5.16 0.94 10.78 0.37 84.67 0.39
CFNC Carolina Fincorp of NC* 22.59 22.59 1.17 5.03 3.97 1.14 4.89 0.16 226.67 0.50
CASB Cascade SB of Everett WA(8) 6.64 6.64 0.60 9.62 5.10 0.60 9.62 0.28 332.14 1.12
CATB Catskill Fin. Corp. of NY* 24.78 24.78 1.39 5.20 4.84 1.41 5.26 0.40 162.15 1.50
CNIT Cenit Bancorp of Norfolk VA 6.95 6.36 0.80 11.30 5.24 0.74 10.50 0.52 103.38 0.77
CEBK Central Co-Op. Bank of MA* 9.93 8.88 0.87 8.67 5.41 0.88 8.79 0.53 151.19 1.15
CENB Century Bancshares of NC* 30.29 30.29 1.69 5.60 5.05 1.70 5.62 0.25 219.37 0.85
CBSB Charter Financial Inc. of IL(8) 14.47 12.80 1.13 7.49 4.42 1.59 10.49 0.56 104.84 0.79
COFI Charter One Financial of OH 7.05 6.48 1.26 18.64 5.87 1.23 18.23 0.27 159.82 0.68
CVAL Chester Valley Bancorp of PA 8.66 8.66 0.98 11.29 5.18 0.93 10.79 0.53 173.12 1.12
CTZN CitFed Bancorp of Dayton OH 6.27 5.70 0.86 13.53 5.13 0.86 13.53 0.40 136.26 0.86
CLAS Classic Bancshares of KY 14.90 12.61 0.56 3.44 3.14 0.75 4.66 0.67 93.71 0.94
CMSB Cmnwealth Bancorp of PA 9.28 7.24 0.75 7.49 4.74 0.63 6.32 0.47 85.46 0.71
CBSA Coastal Bancorp of Houston TX 3.47 2.92 0.41 12.41 8.28 0.43 12.77 0.62 38.71 0.54
CFCP Coastal Fin. Corp. of SC 6.56 6.56 1.21 19.41 5.95 1.05 16.77 0.10 966.86 1.18
CMSV Commty. Svgs, MHC of FL (48.5) 11.34 11.34 0.80 7.04 3.07 0.73 6.45 0.41 90.57 0.62
CFTP Community Fed. Bancorp of MS 26.73 26.73 1.47 4.77 3.30 1.45 4.70 0.50 54.53 0.46
CFFC Community Fin. Corp. of VA 13.21 13.21 1.12 8.18 5.66 1.13 8.23 0.56 105.58 0.67
CFBC Community First Bnkg Co. of GA 17.80 17.57 0.74 4.46 3.27 0.74 4.46 2.19 25.76 0.75
CIBI Community Inv. Bancorp of OH 11.75 11.75 0.97 8.31 6.41 0.97 8.31 0.53 94.97 0.59
COOP Cooperative Bk.for Svgs. of NC 7.69 7.69 0.63 8.30 3.89 0.63 8.30 0.21 109.36 0.29
CRZY Crazy Woman Creek Bncorp of WY 23.70 23.70 1.27 4.66 4.68 1.29 4.72 0.38 134.22 1.04
DNFC D&N Financial Corp. of MI 5.25 5.20 0.89 15.92 6.05 0.82 14.69 0.35 178.16 0.83
DCBI Delphos Citizens Bancorp of OH 26.64 26.64 1.54 6.13 4.75 1.54 6.13 0.45 21.81 0.13
DIME Dime Community Bancorp of NY 13.50 11.63 1.09 6.91 4.71 1.06 6.72 0.60 135.05 1.39
DIBK Dime Financial Corp. of CT* 8.14 7.91 1.94 23.83 10.00 1.94 23.75 0.37 353.73 3.21
EGLB Eagle BancGroup of IL 11.85 11.85 0.32 2.61 2.39 0.25 2.04 1.48 35.66 0.73
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ATSB AmTrust Capital Corp. of IN 25.46 94.96 10.38 95.95 NM 0.20 1.45 37.04
AHCI Ambanc Holding Co., Inc. of NY* NM 123.54 15.98 123.54 NM 0.20 1.11 NM
ASBI Ameriana Bancorp of IN 17.92 148.57 16.65 148.57 19.66 0.64 3.16 56.64
AFFFZ America First Fin. Fund of CA(8) 6.77 158.05 13.22 159.73 6.70 1.60 3.23 21.89
ABCW Anchor Bancorp Wisconsin of WI 16.75 253.26 16.21 257.73 17.95 0.32 0.91 15.31
ANDB Andover Bancorp, Inc. of MA* 14.84 184.41 14.98 184.41 15.20 0.76 2.04 30.28
ASFC Astoria Financial Corp. of NY 19.38 194.41 15.00 229.85 20.49 0.60 1.05 20.27
AVND Avondale Fin. Corp. of IL NM 124.20 9.58 124.20 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 22.10 276.23 29.70 276.23 24.26 0.50 2.02 44.64
BPLS Bank Plus Corp. of CA 19.23 136.46 6.17 136.61 23.15 0.00 0.00 0.00
BWFC Bank West Fin. Corp. of MI 27.12 180.38 25.53 180.38 NM 0.21 1.31 35.59
BANC BankAtlantic Bancorp of FL 12.70 220.48 12.14 266.78 24.22 0.13 0.84 10.66
BKUNA BankUnited SA of FL 27.55 192.03 6.00 244.12 NM 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 24.56 235.45 13.70 281.89 21.93 0.40 1.15 28.17
FSNJ Bayonne Banchsares of NJ NM 115.78 18.09 115.78 NM 0.17 1.39 68.00
BFSB Bedford Bancshares of VA 20.32 164.44 23.18 164.44 20.47 0.56 1.98 40.29
BFFC Big Foot Fin. Corp. of IL NM 125.25 21.90 125.25 NM 0.00 0.00 0.00
BSBC Branford SB of CT(8)* 20.16 232.34 22.42 232.34 20.16 0.08 1.28 25.81
BYFC Broadway Fin. Corp. of CA NM 89.71 8.83 89.71 27.60 0.20 1.51 52.63
CBES CBES Bancorp of MO 18.54 124.32 21.03 124.32 20.45 0.40 1.83 33.90
CCFH CCF Holding Company of GA NM 138.99 14.81 138.99 NM 0.55 2.78 NM
CENF CENFED Financial Corp. of CA 17.27 193.49 10.76 193.76 19.18 0.36 0.86 14.94
CFSB CFSB Bancorp of Lansing MI 17.61 267.61 20.63 267.61 18.75 0.68 1.95 34.34
CKFB CKF Bancorp of Danville KY 15.16 117.91 27.90 117.91 20.33 0.50 2.70 40.98
CNSB CNS Bancorp of MO NM 149.93 36.48 149.93 NM 0.24 1.12 51.06
CSBF CSB Financial Group Inc of IL* NM 102.08 25.55 107.99 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.10 127.95 20.75 127.95 14.35 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 14.45 166.89 16.00 180.25 17.12 0.54 2.16 31.21
CMRN Cameron Fin. Corp. of MO 20.53 115.43 24.26 115.43 20.53 0.28 1.39 28.57
CAPS Capital Savings Bancorp of MO(8) 19.38 198.72 18.16 198.72 19.70 0.24 1.03 20.00
CFNC Carolina Fincorp of NC* 25.17 126.58 28.59 126.58 25.91 0.24 1.36 34.29
CASB Cascade SB of Everett WA(8) 19.62 152.51 10.13 152.51 19.62 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 20.68 112.72 27.93 112.72 20.44 0.32 1.84 38.10
CNIT Cenit Bancorp of Norfolk VA 19.10 219.71 15.26 239.90 20.56 1.00 1.54 29.50
CEBK Central Co-Op. Bank of MA* 18.49 154.08 15.30 172.19 18.24 0.32 1.19 22.07
CENB Century Bancshares of NC* 19.81 110.49 33.47 110.49 19.76 2.00 2.41 47.73
CBSB Charter Financial Inc. of IL(8) 22.62 173.23 25.06 195.80 16.16 0.32 1.35 30.48
COFI Charter One Financial of OH 17.03 286.64 20.22 312.19 17.42 1.00 1.61 27.47
CVAL Chester Valley Bancorp of PA 19.30 205.88 17.83 205.88 20.19 0.44 1.68 32.35
CTZN CitFed Bancorp of Dayton OH 19.51 242.59 15.22 266.90 19.51 0.24 0.62 12.12
CLAS Classic Bancshares of KY NM 108.84 16.22 128.66 23.55 0.28 1.72 54.90
CMSB Cmnwealth Bancorp of PA 21.08 165.13 15.33 211.82 25.00 0.28 1.30 27.45
CBSA Coastal Bancorp of Houston TX 12.08 142.44 4.94 169.39 11.74 0.48 1.66 20.00
CFCP Coastal Fin. Corp. of SC 16.80 301.29 19.75 301.29 19.44 0.36 1.71 28.80
CMSV Commty. Svgs, MHC of FL (48.5) NM 220.84 25.05 220.84 NM 0.90 2.58 NM
CFTP Community Fed. Bancorp of MS NM 160.38 42.87 160.38 NM 0.30 1.50 45.45
CFFC Community Fin. Corp. of VA 17.67 139.55 18.43 139.55 17.55 0.56 2.11 37.33
CFBC Community First Bnkg Co. of GA NM 135.74 24.17 137.58 NM 0.60 1.52 46.51
CIBI Community Inv. Bancorp of OH 15.59 130.17 15.29 130.17 15.59 0.32 2.03 31.68
COOP Cooperative Bk.for Svgs. of NC 25.68 202.27 15.56 202.27 25.68 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 21.35 103.29 24.48 103.29 21.05 0.40 2.60 55.56
DNFC D&N Financial Corp. of MI 16.52 248.21 13.04 250.90 17.90 0.20 0.72 11.90
DCBI Delphos Citizens Bancorp of OH 21.04 117.75 31.36 117.75 21.04 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 21.25 157.80 21.30 183.15 21.84 0.24 1.03 21.82
DIBK Dime Financial Corp. of CT* 10.00 209.77 17.08 216.01 10.03 0.44 1.44 14.43
EGLB Eagle BancGroup of IL NM 113.04 13.40 113.04 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
EBSI Eagle Bancshares of Tucker GA 8.17 8.17 0.65 7.67 4.63 0.65 7.75 1.26 54.76 0.94
EGFC Eagle Financial Corp. of CT(8) 6.90 5.49 0.34 4.79 1.72 0.48 6.91 0.53 87.59 0.86
ETFS East Texas Fin. Serv. of TX 18.01 18.01 0.68 3.68 3.64 0.63 3.43 0.27 88.06 0.48
EMLD Emerald Financial Corp of OH 7.80 7.69 1.05 13.70 6.49 0.97 12.67 0.24 115.15 0.36
EIRE Emerald Island Bancorp, MA(8)* 6.99 6.99 0.86 12.46 5.00 0.92 13.24 0.17 416.26 0.97
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.12 1.09 3.12 0.05 357.14 0.45
EFBI Enterprise Fed. Bancorp of OH 11.43 11.42 0.92 7.43 4.21 0.77 6.18 0.07 297.93 0.30
EQSB Equitable FSB of Wheaton MD 5.04 5.04 0.46 9.09 4.54 0.74 14.50 0.49 36.72 0.26
FCBF FCB Fin. Corp. of Neenah WI 14.64 14.64 0.74 4.48 2.16 0.57 3.45 0.24 277.72 0.85
FFBS FFBS Bancorp of Columbus MS 16.70 16.70 1.41 7.48 5.21 1.41 7.48 0.58 72.88 0.59
FFDF FFD Financial Corp. of OH 24.34 24.34 1.94 7.84 6.23 0.95 3.85 NA NA 0.46
FFLC FFLC Bancorp of Leesburg FL 13.73 13.73 1.00 6.81 4.22 0.94 6.44 0.18 226.46 0.52
FFFC FFVA Financial Corp. of VA 13.31 13.04 1.40 10.28 5.04 1.35 9.86 0.16 361.92 0.99
FFWC FFW Corporation of Wabash IN 9.70 8.81 1.04 10.57 5.82 1.02 10.35 0.18 217.37 0.60
FFYF FFY Financial Corp. of OH 13.70 13.70 1.29 8.85 5.80 1.27 8.70 0.66 72.24 0.63
FMCO FMS Financial Corp. of NJ 6.49 6.39 1.02 15.82 7.15 1.01 15.69 1.15 43.53 0.94
FFHH FSF Financial Corp. of MN 11.17 11.17 0.85 7.05 5.44 0.84 6.98 0.15 148.95 0.33
FOBC Fed One Bancorp of Wheeling WV 11.18 10.68 0.94 8.21 5.18 0.94 8.21 0.45 91.97 0.88
FBCI Fidelity Bancorp of Chicago IL 10.48 10.46 0.19 1.84 1.43 0.60 5.80 0.41 22.74 0.12
FSBI Fidelity Bancorp, Inc. of PA 6.79 6.79 0.80 11.51 6.36 0.78 11.25 0.30 171.64 1.04
FFFL Fidelity FSB, MHC of FL (47.7) 8.21 8.15 0.67 7.64 3.21 0.57 6.49 0.40 51.95 0.28
FFED Fidelity Fed. Bancorp of IN 6.11 6.11 0.75 14.32 6.46 0.73 13.89 0.13 626.40 0.96
FFOH Fidelity Financial of OH 13.02 11.56 0.91 6.59 5.15 1.02 7.37 0.29 106.32 0.37
FIBC Financial Bancorp, Inc. of NY 9.05 9.00 0.91 9.52 5.96 0.97 10.18 1.75 27.02 0.91
FBSI First Bancshares of MO 13.92 13.92 1.19 8.36 6.69 1.08 7.54 0.67 45.57 0.36
FBBC First Bell Bancorp of PA 10.53 10.53 1.15 9.44 6.34 1.12 9.20 0.09 116.26 0.13
FBER First Bergen Bancorp of NJ 13.65 13.65 0.77 4.97 3.64 0.77 4.97 0.84 127.66 2.47
SKBO First Carnegie,MHC of PA(45.0) 16.45 16.45 0.52 5.53 1.75 0.52 5.53 NA NA 0.83
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.65 8.11 1.75 18.46 NA NA 1.43
FCME First Coastal Corp. of ME* 9.75 9.75 4.17 48.29 30.13 4.01 46.37 1.65 108.25 2.49
FFBA First Colorado Bancorp of Co 13.08 12.91 1.21 8.92 4.63 1.20 8.84 0.20 141.52 0.39
FDEF First Defiance Fin.Corp. of OH 19.67 19.67 1.03 4.82 4.27 1.00 4.67 0.45 99.07 0.59
FESX First Essex Bancorp of MA* 7.40 6.48 0.90 12.27 6.41 0.77 10.52 0.58 149.29 1.43
FFES First FS&LA of E. Hartford CT 6.63 6.63 0.53 8.37 5.17 0.60 9.51 0.31 87.85 1.44
FFSX First FS&LA. MHC of IA (46.1) 8.73 8.66 0.73 8.79 3.65 0.71 8.56 0.22 185.09 0.53
BDJI First Fed. Bancorp. of MN 10.71 10.71 0.65 5.81 3.75 0.63 5.70 0.32 120.28 0.79
FFBH First Fed. Bancshares of AR 14.89 14.89 1.06 6.78 4.76 1.01 6.48 0.96 23.38 0.29
FTFC First Fed. Capital Corp. of WI 6.73 6.35 1.08 16.76 5.95 0.89 13.87 0.13 395.30 0.64
FFKY First Fed. Fin. Corp. of KY 13.70 12.93 1.64 11.95 6.64 1.62 11.87 0.49 94.29 0.53
FFBZ First Federal Bancorp of OH 7.67 7.66 1.01 13.33 5.95 1.02 13.43 0.52 172.30 1.03
FFCH First Fin. Holdings Inc. of SC 6.12 6.12 0.87 14.24 4.63 0.85 13.86 1.49 45.68 0.82
FFBI First Financial Bancorp of IL 8.92 8.92 -0.07 -0.84 -0.71 0.43 5.28 0.33 178.83 0.87
FFHS First Franklin Corp. of OH 9.02 8.97 0.56 6.21 3.84 0.66 7.33 0.47 90.77 0.64
FGHC First Georgia Hold. Corp of GA 8.22 7.53 0.66 7.98 3.88 0.51 6.23 3.10 20.52 0.75
FSPG First Home Bancorp of NJ 6.86 6.76 0.93 13.99 6.05 0.91 13.67 0.77 95.63 1.36
FFSL First Independence Corp. of KS 10.25 10.25 0.65 5.99 4.91 0.65 5.99 1.25 47.61 0.89
FISB First Indiana Corp. of IN 9.65 9.53 1.14 12.04 5.23 0.93 9.89 1.39 103.20 1.70
FKFS First Keystone Fin. Corp of PA 6.63 6.63 0.82 11.30 5.75 0.75 10.35 1.11 39.39 0.84
FLKY First Lancaster Bncshrs of KY 29.46 29.46 1.23 3.65 3.37 1.23 3.65 2.28 13.93 0.35
FLFC First Liberty Fin. Corp. of GA 7.37 6.65 0.88 12.11 4.33 0.72 9.91 0.81 110.00 1.29
CASH First Midwest Fin. Corp. of IA 10.75 9.55 0.96 8.44 6.32 0.91 8.06 0.75 78.49 0.93
FMBD First Mutual Bancorp of IL 13.40 10.21 0.32 2.12 1.73 0.30 1.94 0.26 138.78 0.47
FMSB First Mutual SB of Bellevue WA* 6.79 6.79 1.02 15.29 6.29 1.00 15.00 0.06 NA 1.31
FNGB First Northern Cap. Corp of WI 11.09 11.09 0.93 8.21 4.71 0.89 7.84 0.08 574.86 0.53
FFPB First Palm Beach Bancorp of FL 6.25 6.10 0.58 8.65 4.77 0.49 7.25 0.57 58.39 0.53
FSLA First SB SLA MHC of NJ (47.5)(8) 9.50 8.63 0.90 9.64 2.74 0.94 10.06 0.54 105.63 1.04
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
EBSI Eagle Bancshares of Tucker GA 21.59 150.91 12.34 150.91 21.35 0.60 3.16 68.18
EGFC Eagle Financial Corp. of CT(8) NM 228.07 15.74 286.62 NM 1.00 1.91 NM
ETFS East Texas Fin. Serv. of TX 27.49 101.33 18.25 101.33 29.46 0.20 0.97 26.67
EMLD Emerald Financial Corp of OH 15.42 199.35 15.55 202.19 16.67 0.24 1.30 20.00
EIRE Emerald Island Bancorp, MA(8)* 20.00 232.39 16.23 232.39 18.82 0.28 0.88 17.50
EFBC Empire Federal Bancorp of MT NM 111.79 39.01 111.79 NM 0.30 1.82 NM
EFBI Enterprise Fed. Bancorp of OH 23.74 178.57 20.41 178.68 28.54 1.00 3.54 NM
EQSB Equitable FSB of Wheaton MD 22.05 187.98 9.47 187.98 13.82 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 143.11 20.94 143.11 NM 0.80 2.83 NM
FFBS FFBS Bancorp of Columbus MS 19.18 155.16 25.92 155.16 19.18 0.50 2.25 43.10
FFDF FFD Financial Corp. of OH 16.05 125.30 30.50 125.30 NM 0.30 1.61 25.86
FFLC FFLC Bancorp of Leesburg FL 23.67 162.05 22.26 162.05 25.00 0.29 1.30 30.85
FFFC FFVA Financial Corp. of VA 19.85 202.10 26.90 206.30 20.71 0.48 1.42 28.24
FFWC FFW Corporation of Wabash IN 17.18 169.51 16.45 186.72 17.54 0.72 1.72 29.63
FFYF FFY Financial Corp. of OH 17.25 158.87 21.76 158.87 17.53 0.80 2.48 42.78
FMCO FMS Financial Corp. of NJ 14.00 207.28 13.45 210.34 14.12 0.28 0.85 11.97
FFHH FSF Financial Corp. of MN 18.38 132.69 14.83 132.69 18.56 0.50 2.62 48.08
FOBC Fed One Bancorp of Wheeling WV 19.29 157.98 17.66 165.34 19.29 0.62 2.33 44.93
FBCI Fidelity Bancorp of Chicago IL NM 123.26 12.91 123.46 22.12 0.32 1.39 NM
FSBI Fidelity Bancorp, Inc. of PA 15.71 165.26 11.23 165.26 16.08 0.36 1.31 20.57
FFFL Fidelity FSB, MHC of FL (47.7) NM 229.25 18.81 230.71 NM 0.90 3.10 NM
FFED Fidelity Fed. Bancorp of IN 15.48 201.36 12.30 201.36 15.95 0.40 3.86 59.70
FFOH Fidelity Financial of OH 19.41 119.53 15.57 134.70 17.35 0.28 1.90 36.84
FIBC Financial Bancorp, Inc. of NY 16.78 155.95 14.11 156.75 15.71 0.40 1.63 27.40
FBSI First Bancshares of MO 14.94 125.42 17.46 125.42 16.56 0.20 0.77 11.49
FBBC First Bell Bancorp of PA 15.78 168.97 17.80 168.97 16.19 0.40 2.15 33.90
FBER First Bergen Bancorp of NJ 27.46 143.70 19.62 143.70 27.46 0.20 1.03 28.17
SKBO First Carnegie,MHC of PA(45.0) NM 179.37 29.50 179.37 NM 0.30 1.59 NM
FSTC First Citizens Corp of GA 12.33 215.03 21.75 272.68 13.79 0.29 1.08 13.36
FCME First Coastal Corp. of ME* 3.32 140.71 13.72 140.71 3.46 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 21.62 200.00 26.16 202.53 21.82 0.48 2.00 43.24
FDEF First Defiance Fin.Corp. of OH 23.41 116.97 23.00 116.97 24.18 0.32 2.17 50.79
FESX First Essex Bancorp of MA* 15.60 174.37 12.91 199.33 18.20 0.56 2.70 42.11
FFES First FS&LA of E. Hartford CT 19.33 152.13 10.08 152.13 17.03 0.60 1.62 31.25
FFSX First FS&LA. MHC of IA (46.1) 27.43 229.90 20.07 231.88 28.15 0.48 1.48 40.68
BDJI First Fed. Bancorp. of MN 26.67 157.84 16.90 157.84 27.18 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 21.02 142.73 21.25 142.73 21.99 0.24 1.01 21.24
FTFC First Fed. Capital Corp. of WI 16.81 263.96 17.78 280.09 20.30 0.48 1.59 26.67
FFKY First Fed. Fin. Corp. of KY 15.07 174.60 23.92 185.03 15.17 0.56 2.55 38.36
FFBZ First Federal Bancorp of OH 16.80 211.69 16.24 211.91 16.67 0.28 1.33 22.40
FFCH First Fin. Holdings Inc. of SC 21.62 291.79 17.84 291.79 22.22 0.84 1.75 37.84
FFBI First Financial Bancorp of IL NM 116.02 10.35 116.02 22.34 0.00 0.00 NM
FFHS First Franklin Corp. of OH 26.07 156.49 14.11 157.39 22.07 0.40 1.46 38.10
FGHC First Georgia Hold. Corp of GA 25.78 195.96 16.10 213.73 NM 0.05 0.61 15.63
FSPG First Home Bancorp of NJ 16.52 216.00 14.83 219.30 16.91 0.40 1.39 22.99
FFSL First Independence Corp. of KS 20.37 126.12 12.92 126.12 20.37 0.25 1.68 34.25
FISB First Indiana Corp. of IN 19.14 219.39 21.16 222.06 23.31 0.48 1.55 29.63
FKFS First Keystone Fin. Corp of PA 17.38 185.37 12.29 185.37 18.97 0.20 0.54 9.30
FLKY First Lancaster Bncshrs of KY 29.72 107.73 31.74 107.73 29.72 0.50 3.17 NM
FLFC First Liberty Fin. Corp. of GA 23.11 247.97 18.28 275.02 28.24 0.44 1.44 33.33
CASH First Midwest Fin. Corp. of IA 15.83 132.65 14.26 149.34 16.57 0.48 2.25 35.56
FMBD First Mutual Bancorp of IL NM 131.75 17.65 172.78 NM 0.32 1.58 NM
FMSB First Mutual SB of Bellevue WA* 15.89 225.76 15.33 225.76 16.19 0.20 1.18 18.69
FNGB First Northern Cap. Corp of WI 21.21 169.90 18.85 169.90 22.22 0.32 2.29 48.48
FFPB First Palm Beach Bancorp of FL 20.95 173.07 10.82 177.18 25.00 0.60 1.55 32.43
FSLA First SB SLA MHC of NJ (47.5)(8) NM 335.92 31.90 NM NM 0.48 1.15 42.11
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SOPN First SB, SSB, Moore Co. of NC 23.01 23.01 1.75 7.26 5.80 1.75 7.26 0.29 70.15 0.31
FWWB First Savings Bancorp of WA* 14.23 13.15 1.06 6.79 3.77 1.01 6.44 0.27 241.66 0.97
FSFF First SecurityFed Fin of IL 27.03 27.03 1.29 4.77 3.83 1.29 4.77 NA NA 0.98
SHEN First Shenango Bancorp of PA 11.62 11.62 1.17 10.45 6.65 1.16 10.40 0.51 149.56 1.17
FBNW FirstBank Corp of Clarkston WA 16.43 16.43 0.39 3.23 1.86 0.18 1.47 1.70 33.83 0.76
FFDB FirstFed Bancorp of AL 9.63 8.81 1.03 10.63 7.47 1.01 10.36 1.31 33.87 0.63
FSPT FirstSpartan Fin. Corp. of SC 26.79 26.79 0.96 6.28 3.38 0.96 6.28 0.69 56.19 0.49
FLAG Flag Financial Corp of GA 9.11 9.11 0.91 9.84 5.21 0.75 8.19 3.92 49.66 2.82
FLGS Flagstar Bancorp, Inc of MI 5.98 5.74 1.41 22.77 8.68 0.70 11.39 3.04 8.02 0.27
FFIC Flushing Fin. Corp. of NY* 14.20 13.64 0.95 5.92 4.30 0.99 6.22 0.39 172.94 1.12
FBHC Fort Bend Holding Corp. of TX 6.16 5.75 0.64 10.48 6.07 0.53 8.77 0.56 89.94 1.08
FTSB Fort Thomas Fin. Corp. of KY 16.13 16.13 1.21 7.27 4.90 1.21 7.27 1.98 24.60 0.53
FKKYD Frankfort First Bancorp of KY 16.82 16.82 0.09 0.39 0.38 0.64 2.86 0.09 80.00 0.08
FTNB Fulton Bancorp of MO 24.66 24.66 1.25 5.02 3.42 1.08 4.34 1.62 57.19 1.06
GFSB GFS Bancorp of Grinnell IA 11.51 11.51 1.27 11.03 6.74 1.27 11.03 0.98 67.81 0.78
GUPB GFSB Bancorp of Gallup NM 12.82 12.82 0.86 5.43 4.79 0.86 5.43 0.29 115.79 0.63
GSLA GS Financial Corp. of LA 43.13 43.13 1.25 3.81 2.28 1.25 3.81 0.14 211.96 0.81
GOSB GSB Financial Corp. of NY 27.06 27.06 1.02 3.77 3.04 0.86 3.19 NA NA NA
GWBC Gateway Bancorp of KY(8) 27.74 27.74 0.97 3.68 3.15 0.97 3.68 0.90 14.39 0.38
GBCI Glacier Bancorp of MT 9.99 9.75 1.50 15.56 5.48 1.53 15.94 0.25 243.94 0.84
GFCO Glenway Financial Corp. of OH 9.46 9.35 0.79 8.36 5.35 0.77 8.11 0.25 123.32 0.37
GTPS Great American Bancorp of IL 20.43 20.43 0.53 2.39 2.27 0.59 2.67 0.26 126.83 0.42
GTFN Great Financial Corp. of KY(8) 10.07 9.66 1.04 10.82 4.38 0.76 7.96 3.11 16.32 0.74
GSBC Great Southern Bancorp of MO 8.65 8.65 1.84 20.39 6.34 1.74 19.22 1.91 115.21 2.58
GDVS Greater DV SB,MHC of PA (19.9)* 11.64 11.64 0.93 7.97 2.34 0.93 7.97 1.82 33.64 1.00
GSFC Green Street Fin. Corp. of NC 35.38 35.38 1.59 4.45 3.61 1.59 4.45 0.10 147.40 0.20
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 13.03 13.03 0.99 7.17 2.38 0.96 6.94 0.64 162.46 1.29
HCBB HCB Bancshares of AR 18.84 18.13 0.13 0.92 0.66 0.14 1.02 NA NA 1.44
HEMT HF Bancorp of Hemet CA 7.93 6.61 0.03 0.39 0.29 0.17 2.17 1.65 24.89 0.81
HFFC HF Financial Corp. of SD 9.42 9.42 1.02 11.06 7.81 0.94 10.15 0.48 173.70 1.08
HFNC HFNC Financial Corp. of NC 18.80 18.80 1.23 5.43 4.20 1.05 4.64 0.92 92.55 1.06
HMNF HMN Financial, Inc. of MN 14.88 14.88 1.00 6.87 5.10 0.85 5.79 0.10 465.21 0.71
HALL Hallmark Capital Corp. of WI 7.30 7.30 0.65 9.11 5.97 0.64 8.91 0.13 355.91 0.67
HARB Harbor FSB, MHC of FL (46.6)(8) 8.56 8.29 1.22 14.68 4.00 1.21 14.58 0.43 238.88 1.38
HRBF Harbor Federal Bancorp of MD 13.06 13.06 0.71 5.50 3.83 0.71 5.50 0.10 189.19 0.28
HFSA Hardin Bancorp of Hardin MO 11.53 11.53 0.79 5.83 5.30 0.74 5.52 0.09 195.33 0.36
HARL Harleysville SA of PA 6.62 6.62 1.03 16.07 6.98 1.03 16.14 0.02 NA 0.78
HFGI Harrington Fin. Group of IN 4.84 4.84 0.43 8.95 5.31 0.36 7.48 0.20 20.13 0.21
HARS Harris SB, MHC of PA (24.3) 8.20 7.25 0.92 11.11 2.70 0.76 9.19 0.68 60.65 0.96
HFFB Harrodsburg 1st Fin Bcrp of KY 26.93 26.93 1.03 3.77 3.19 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 12.50 12.50 0.27 1.87 1.56 0.58 4.07 0.11 117.00 0.26
HAVN Haven Bancorp of Woodhaven NY 6.00 5.98 0.68 11.28 6.02 0.68 11.37 0.76 85.85 1.12
HTHR Hawthorne Fin. Corp. of CA 4.85 4.85 0.86 19.13 11.93 0.82 18.40 8.07 18.43 1.70
HMLK Hemlock Fed. Fin. Corp. of IL 19.31 19.31 0.37 2.51 1.61 0.81 5.47 NA NA 1.22
HBNK Highland Federal Bank of CA 7.67 7.67 1.13 15.28 7.33 0.86 11.60 2.52 63.92 2.00
HIFS Hingham Inst. for Sav. of MA* 9.71 9.71 1.25 13.03 7.10 1.25 13.03 0.89 78.90 0.91
HBEI Home Bancorp of Elgin IL 27.56 27.56 0.83 3.02 2.36 0.83 3.02 0.35 85.96 0.35
HBFW Home Bancorp of Fort Wayne IN 13.29 13.29 0.56 3.93 2.65 0.89 6.27 0.05 835.54 0.51
HBBI Home Building Bancorp of IN 14.12 14.12 0.74 5.77 4.94 0.73 5.66 0.44 44.51 0.28
HCFC Home City Fin. Corp. of OH 19.61 19.61 1.24 6.77 5.33 1.26 6.84 0.82 77.27 0.73
HOMF Home Fed Bancorp of Seymour IN 8.66 8.40 1.34 15.88 6.69 1.21 14.42 0.48 112.57 0.63
HWEN Home Financial Bancorp of IN 17.55 17.55 0.86 4.60 4.20 0.74 3.98 1.70 36.51 0.73
HPBC Home Port Bancorp, Inc. of MA* 10.68 10.68 1.67 15.71 7.65 1.66 15.62 0.13 NA 1.54
HMCI Homecorp, Inc. of Rockford IL(8) 6.83 6.83 0.51 7.94 3.64 0.41 6.42 2.16 22.97 0.61
HZFS Horizon Fin'l. Services of IA 9.96 9.96 0.81 7.86 6.55 0.65 6.33 0.94 44.31 0.67
HRZB Horizon Financial Corp. of WA* 15.64 15.64 1.58 10.12 6.37 1.55 9.94 NA NA 0.85
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
SOPN First SB, SSB, Moore Co. of NC 17.23 123.44 28.40 123.44 17.23 0.88 3.87 66.67
FWWB First Savings Bancorp of WA* 26.52 175.94 25.04 190.49 27.93 0.28 1.07 28.28
FSFF First SecurityFed Fin of IL 26.13 124.53 33.66 124.53 26.13 0.00 0.00 0.00
SHEN First Shenango Bancorp of PA 15.04 150.78 17.52 150.78 15.11 0.60 1.76 26.55
FBNW FirstBank Corp of Clarkston WA NM 120.50 19.80 120.50 NM 0.28 1.58 NM
FFDB FirstFed Bancorp of AL 13.38 144.08 13.88 157.51 13.73 0.50 2.35 31.45
FSPT FirstSpartan Fin. Corp. of SC 29.60 126.84 33.99 126.84 29.60 0.60 1.62 48.00
FLAG Flag Financial Corp of GA 19.18 181.71 16.55 181.71 23.06 0.34 1.76 33.66
FLGS Flagstar Bancorp, Inc of MI 11.52 215.07 12.85 223.89 23.04 0.00 0.00 0.00
FFIC Flushing Fin. Corp. of NY* 23.23 134.66 19.12 140.24 22.12 0.24 1.04 24.24
FBHC Fort Bend Holding Corp. of TX 16.46 170.45 10.50 182.60 19.66 0.40 1.98 32.52
FTSB Fort Thomas Fin. Corp. of KY 20.39 146.78 23.68 146.78 20.39 0.25 1.61 32.89
FKKYD Frankfort First Bancorp of KY NM 136.21 22.92 136.21 NM 0.80 4.30 NM
FTNB Fulton Bancorp of MO 29.27 143.62 35.42 143.62 NM 0.20 0.94 27.40
GFSB GFS Bancorp of Grinnell IA 14.83 154.95 17.84 154.95 14.83 0.26 1.52 22.61
GUPB GFSB Bancorp of Gallup NM 20.88 115.06 14.75 115.06 20.88 0.40 1.98 41.24
GSLA GS Financial Corp. of LA NM 109.49 47.22 109.49 NM 0.28 1.56 68.29
GOSB GSB Financial Corp. of NY NM 124.24 33.62 124.24 NM 0.00 0.00 0.00
GWBC Gateway Bancorp of KY(8) NM 116.17 32.22 116.17 NM 0.40 2.13 67.80
GBCI Glacier Bancorp of MT 18.24 264.57 26.42 271.01 17.80 0.48 2.16 39.34
GFCO Glenway Financial Corp. of OH 18.69 152.01 14.38 153.78 19.27 0.40 2.16 40.40
GTPS Great American Bancorp of IL NM 110.12 22.50 110.12 NM 0.40 2.16 NM
GTFN Great Financial Corp. of KY(8) 22.84 238.38 24.01 248.39 NM 0.60 1.19 27.27
GSBC Great Southern Bancorp of MO 15.76 317.72 27.49 317.72 16.72 0.44 1.78 28.03
GDVS Greater DV SB,MHC of PA (19.9)* NM 327.68 38.14 327.68 NM 0.36 1.24 52.94
GSFC Green Street Fin. Corp. of NC 27.69 122.87 43.47 122.87 27.69 0.44 2.44 67.69
GFED Guarnty FS&LA,MHC of MO (31.0)(8) NM 296.80 38.67 296.80 NM 0.44 1.69 70.97
HCBB HCB Bancshares of AR NM 95.44 17.98 99.20 NM 0.00 0.00 0.00
HEMT HF Bancorp of Hemet CA NM 129.11 10.24 154.93 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD 12.80 135.80 12.80 135.80 13.96 0.42 1.60 20.49
HFNC HFNC Financial Corp. of NC 23.79 155.59 29.25 155.59 27.83 0.28 1.90 45.16
HMNF HMN Financial, Inc. of MN 19.59 130.66 19.44 130.66 23.23 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 16.76 144.00 10.52 144.00 17.13 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.6)(8) 25.00 344.12 29.46 NM 25.19 1.40 2.09 52.24
HRBF Harbor Federal Bancorp of MD 26.10 141.79 18.51 141.79 26.10 0.48 2.02 52.75
HFSA Hardin Bancorp of Hardin MO 18.88 112.63 12.99 112.63 19.94 0.48 2.70 51.06
HARL Harleysville SA of PA 14.33 213.44 14.14 213.44 14.26 0.44 1.50 21.46
HFGI Harrington Fin. Group of IN 18.84 163.05 7.89 163.05 22.54 0.12 0.95 17.91
HARS Harris SB, MHC of PA (24.3) NM NM 30.81 NM NM 0.22 1.14 42.31
HFFB Harrodsburg 1st Fin Bcrp of KY NM 119.05 32.06 119.05 23.63 0.40 2.32 72.73
HHFC Harvest Home Fin. Corp. of OH NM 129.96 16.24 129.96 29.50 0.44 2.98 NM
HAVN Haven Bancorp of Woodhaven NY 16.60 173.58 10.41 174.14 16.48 0.30 1.38 22.90
HTHR Hawthorne Fin. Corp. of CA 8.38 141.83 6.89 141.83 8.71 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 115.34 22.27 115.34 28.48 0.24 1.38 NM
HBNK Highland Federal Bank of CA 13.64 191.10 14.65 191.10 17.96 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 14.08 173.00 16.79 173.00 14.08 0.48 1.72 24.24
HBEI Home Bancorp of Elgin IL NM 132.53 36.53 132.53 NM 0.40 2.19 NM
HBFW Home Bancorp of Fort Wayne IN NM 153.92 20.45 153.92 23.58 0.20 0.74 27.78
HBBI Home Building Bancorp of IN 20.24 112.49 15.88 112.49 20.63 0.30 1.41 28.57
HCFC Home City Fin. Corp. of OH 18.75 113.56 22.27 113.56 18.55 0.36 2.09 39.13
HOMF Home Fed Bancorp of Seymour IN 14.94 220.71 19.11 227.47 16.46 0.35 1.35 20.11
HWEN Home Financial Bancorp of IN 23.81 113.02 19.83 113.02 27.53 0.20 1.14 27.03
HPBC Home Port Bancorp, Inc. of MA* 13.07 196.31 20.96 196.31 13.14 0.80 3.50 45.71
HMCI Homecorp, Inc. of Rockford IL(8) 27.46 208.03 14.21 208.03 NM 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 15.26 114.41 11.39 114.41 18.95 0.18 1.53 23.38
HRZB Horizon Financial Corp. of WA* 15.71 153.27 23.97 153.27 16.00 0.44 2.57 40.37
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
IBSF IBS Financial Corp. of NJ 17.42 17.42 0.78 4.41 3.05 0.78 4.41 0.13 110.72 0.50
ISBF ISB Financial Corp. of LA 12.05 10.31 0.75 5.87 3.48 0.74 5.81 0.27 196.73 0.80
ITLA Imperial Thrift & Loan of CA* 10.72 10.68 1.45 13.02 8.56 1.45 13.02 1.54 79.64 1.45
IFSB Independence FSB of DC 6.88 6.09 0.32 4.85 4.64 0.27 4.03 NA NA 0.36
INCB Indiana Comm. Bank, SB of IN(8) 11.88 11.88 0.53 4.32 2.59 0.53 4.32 NA NA 0.93
INBI Industrial Bancorp of OH 17.18 17.18 1.51 8.26 5.41 1.58 8.68 0.25 193.84 0.54
IWBK Interwest SB of Oak Harbor WA 6.34 6.23 1.12 16.91 6.42 1.03 15.57 0.58 73.44 0.77
IPSW Ipswich SB of Ipswich MA* 5.61 5.61 1.20 20.28 6.90 0.95 16.13 0.84 97.31 1.09
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 4.77 1.34 8.46 0.78 67.63 0.70
JXSB Jcksnville SB,MHC of IL (45.6) 10.56 10.56 0.65 6.02 2.81 0.65 6.02 0.79 56.34 0.56
JSBA Jefferson Svgs Bancorp of MO 8.54 6.62 0.38 4.79 2.09 0.77 9.84 0.67 101.16 0.89
JOAC Joachim Bancorp of MO 28.14 28.14 0.80 2.74 2.60 0.80 2.74 0.24 95.24 0.32
KSAV KS Bancorp of Kenly NC 13.24 13.23 1.21 8.81 6.22 1.20 8.74 0.53 55.44 0.35
KSBK KSB Bancorp of Kingfield ME(8)* 7.18 6.79 0.97 13.74 5.14 0.99 13.99 1.59 52.04 1.07
KFBI Klamath First Bancorp of OR 14.74 13.40 1.14 5.81 3.95 1.14 5.81 0.03 510.24 0.23
LSBI LSB Fin. Corp. of Lafayette IN 8.64 8.64 0.78 8.67 5.80 0.69 7.65 1.05 69.89 0.83
LVSB Lakeview SB of Paterson NJ 12.22 10.46 1.26 12.10 5.39 0.92 8.76 1.13 59.43 1.50
LARK Landmark Bancshares of KS 13.79 13.79 0.88 5.93 4.90 1.05 7.02 NA NA NA
LARL Laurel Capital Group of PA 10.47 10.47 1.46 14.04 7.43 1.41 13.57 0.43 201.97 1.25
LSBX Lawrence Savings Bank of MA* 9.52 9.52 1.76 20.06 9.02 1.75 19.92 0.66 156.71 2.35
LFED Leeds FSB, MHC of MD (36.3) 16.63 16.63 1.18 7.24 2.72 1.18 7.24 0.06 315.29 0.30
LXMO Lexington B&L Fin. Corp. of MO 28.32 28.32 1.03 3.49 3.21 1.33 4.50 0.48 78.37 0.49
LIFB Life Bancorp of Norfolk VA(8) 10.71 10.42 0.92 8.70 3.75 0.85 8.05 0.41 141.46 1.32
LFBI Little Falls Bancorp of NJ 11.68 10.77 0.57 4.32 3.26 0.52 3.93 0.90 38.49 0.77
LOGN Logansport Fin. Corp. of IN 18.90 18.90 1.41 7.25 5.97 1.48 7.57 0.49 55.66 0.39
LONF London Financial Corp. of OH 19.91 19.91 1.02 5.01 4.92 0.96 4.68 NA NA 0.63
LISB Long Island Bancorp, Inc of NY 9.21 9.13 0.86 9.35 4.45 0.73 7.90 0.91 63.07 0.92
MAFB MAF Bancorp of IL 7.79 6.84 1.16 14.90 7.28 1.15 14.78 0.42 128.75 0.69
MBLF MBLA Financial Corp. of MO 12.66 12.66 0.83 6.49 5.32 0.85 6.62 0.57 50.27 0.50
MFBC MFB Corp. of Mishawaka IN 13.10 13.10 0.84 5.76 5.15 0.84 5.76 0.10 141.76 0.18
MLBC ML Bancorp of Villanova PA(8) 6.92 6.46 0.70 9.91 3.90 0.50 7.10 0.43 178.98 1.71
MSBF MSB Financial Corp. of MI 16.54 16.54 1.49 8.38 4.41 1.44 8.09 1.02 40.20 0.45
MARN Marion Capital Holdings of IN 21.95 21.95 1.69 7.48 6.07 1.67 7.39 1.08 104.36 1.32
MRKF Market Fin. Corp. of OH 35.44 35.44 0.98 3.41 2.46 0.98 3.41 0.34 27.23 0.20
MFSL Maryland Fed. Bancorp of MD 8.38 8.27 0.62 7.43 4.00 0.89 10.73 0.47 85.54 0.46
MASB MassBank Corp. of Reading MA* 10.78 10.62 1.10 10.61 5.96 1.03 9.96 0.21 113.84 0.84
MFLR Mayflower Co-Op. Bank of MA* 9.64 9.48 1.05 10.93 6.15 1.00 10.33 0.57 154.47 1.56
MECH Mechanics SB of Hartford CT* 10.40 10.40 1.79 17.75 9.65 1.78 17.69 0.91 188.34 2.53
MDBK Medford Bank of Medford, MA* 9.01 8.45 1.07 11.98 6.60 1.00 11.16 0.27 219.01 1.12
MERI Meritrust FSB of Thibodaux LA(8) 8.26 8.26 1.15 14.65 4.96 1.15 14.65 0.39 70.30 0.52
MWBX MetroWest Bank of MA* 7.46 7.46 1.38 18.49 6.17 1.38 18.49 0.90 131.24 1.55
MCBS Mid Continent Bancshares of KS(8) 9.87 9.87 1.11 10.98 4.76 1.15 11.39 0.24 47.79 0.19
MIFC Mid Iowa Financial Corp. of IA 9.36 9.34 1.00 10.77 6.31 1.40 15.17 NA NA 0.45
MCBN Mid-Coast Bancorp of ME 8.59 8.59 0.76 8.81 6.68 0.72 8.35 0.64 82.14 0.64
MWBI Midwest Bancshares, Inc. of IA 6.92 6.92 0.87 12.62 6.82 0.77 11.16 0.81 59.23 0.79
MWFD Midwest Fed. Fin. Corp of WI(8) 8.81 8.50 1.15 13.20 5.01 1.13 13.01 NA NA 1.02
MFFC Milton Fed. Fin. Corp. of OH 12.57 12.57 0.73 4.95 3.97 0.65 4.38 0.29 91.98 0.44
MIVI Miss. View Hold. Co. of MN 18.88 18.88 0.70 3.78 3.77 1.03 5.55 NA NA NA
MBSP Mitchell Bancorp of NC* 41.35 41.35 1.61 3.77 3.42 1.61 3.77 2.25 23.36 0.63
MBBC Monterey Bay Bancorp of CA 11.50 10.67 0.47 4.06 3.05 0.43 3.71 0.76 51.39 0.60
MONT Montgomery Fin. Corp. of IN 19.14 19.14 0.68 3.57 3.36 0.68 3.57 0.73 24.43 0.20
MSBK Mutual SB, FSB of Bay City MI 6.36 6.36 0.10 1.59 1.18 0.05 0.85 0.05 650.66 0.64
NHTB NH Thrift Bancshares of NH 7.82 6.72 0.70 9.26 4.66 0.56 7.48 0.61 151.10 1.14
NSLB NS&L Bancorp of Neosho MO 19.56 19.56 0.49 2.37 2.22 0.77 3.71 0.03 210.00 0.13
NMSB Newmil Bancorp. of CT* 10.17 10.17 0.85 8.36 5.19 0.82 8.00 1.36 128.18 3.26
NASB North American SB of MO 7.68 7.42 1.26 17.18 7.59 1.19 16.18 3.11 27.16 0.98
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
IBSF IBS Financial Corp. of NJ NM 148.59 25.88 148.59 NM 0.40 2.30 NM
ISBF ISB Financial Corp. of LA 28.73 166.89 20.12 195.03 29.03 0.50 1.79 51.55
ITLA Imperial Thrift & Loan of CA* 11.68 144.07 15.45 144.66 11.68 0.00 0.00 0.00
IFSB Independence FSB of DC 21.54 100.79 6.94 114.01 25.93 0.22 1.57 33.85
INCB Indiana Comm. Bank, SB of IN(8) NM 165.59 19.67 165.59 NM 0.36 1.76 67.92
INBI Industrial Bancorp of OH 18.49 154.08 26.47 154.08 17.59 0.56 3.09 57.14
IWBK Interwest SB of Oak Harbor WA 15.58 243.34 15.44 247.79 16.92 0.64 1.63 25.40
IPSW Ipswich SB of Ipswich MA* 14.49 266.74 14.97 266.74 18.21 0.12 0.94 13.64
JXVL Jacksonville Bancorp of TX 20.97 139.26 20.77 139.26 15.99 0.50 2.65 55.56
JXSB Jcksnville SB,MHC of IL (45.6) NM 209.10 22.07 209.10 NM 0.45 1.58 56.25
JSBA Jefferson Svgs Bancorp of MO NM 195.19 16.66 251.61 23.24 0.56 1.30 62.22
JOAC Joachim Bancorp of MO NM 109.73 30.88 109.73 NM 0.50 3.33 NM
KSAV KS Bancorp of Kenly NC 16.07 136.78 18.11 136.86 16.19 0.60 2.67 42.86
KSBK KSB Bancorp of Kingfield ME(8)* 19.44 248.23 17.82 262.50 19.09 0.08 0.38 7.41
KFBI Klamath First Bancorp of OR 25.29 149.10 21.98 164.00 25.29 0.32 1.49 37.65
LSBI LSB Fin. Corp. of Lafayette IN 17.24 146.98 12.69 146.98 19.54 0.34 1.23 21.12
LVSB Lakeview SB of Paterson NJ 18.56 181.40 22.17 211.84 25.64 0.13 0.52 9.70
LARK Landmark Bancshares of KS 20.39 124.87 17.22 124.87 17.22 0.40 1.72 35.09
LARL Laurel Capital Group of PA 13.46 185.07 19.37 185.07 13.93 0.52 1.85 24.88
LSBX Lawrence Savings Bank of MA* 11.09 200.89 19.12 200.89 11.17 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 256.55 42.67 256.55 NM 0.51 2.17 NM
LXMO Lexington B&L Fin. Corp. of MO NM 116.15 32.89 116.15 24.11 0.30 1.75 54.55
LIFB Life Bancorp of Norfolk VA(8) 26.67 222.63 23.85 228.86 28.80 0.48 1.33 35.56
LFBI Little Falls Bancorp of NJ NM 139.37 16.28 151.12 NM 0.20 0.99 30.30
LOGN Logansport Fin. Corp. of IN 16.76 118.58 22.41 118.58 16.05 0.40 2.62 43.96
LONF London Financial Corp. of OH 20.33 103.25 20.56 103.25 21.79 0.24 1.57 32.00
LISB Long Island Bancorp, Inc of NY 22.45 203.39 18.73 205.28 26.58 0.60 1.30 29.13
MAFB MAF Bancorp of IL 13.73 197.79 15.41 225.12 13.85 0.28 0.82 11.29
MBLF MBLA Financial Corp. of MO 18.79 121.87 15.42 121.87 18.41 0.40 1.47 27.59
MFBC MFB Corp. of Mishawaka IN 19.42 115.76 15.16 115.76 19.42 0.32 1.36 26.45
MLBC ML Bancorp of Villanova PA(8) 25.63 227.61 15.76 243.85 NM 0.40 1.30 33.33
MSBF MSB Financial Corp. of MI 22.67 188.95 31.24 188.95 23.49 0.28 1.44 32.56
MARN Marion Capital Holdings of IN 16.47 123.76 27.16 123.76 16.67 0.88 3.20 52.69
MRKF Market Fin. Corp. of OH NM 103.69 36.75 103.69 NM 0.28 1.81 73.68
MFSL Maryland Fed. Bancorp of MD 25.00 180.00 15.09 182.31 17.31 0.42 1.56 38.89
MASB MassBank Corp. of Reading MA* 16.77 165.08 17.80 167.58 17.86 0.96 2.06 34.53
MFLR Mayflower Co-Op. Bank of MA* 16.27 169.89 16.38 172.73 17.21 0.68 2.86 46.58
MECH Mechanics SB of Hartford CT* 10.37 167.61 17.44 167.61 10.41 0.00 0.00 0.00
MDBK Medford Bank of Medford, MA* 15.16 171.90 15.49 183.43 16.27 0.72 1.91 28.92
MERI Meritrust FSB of Thibodaux LA(8) 20.18 277.11 22.89 277.11 20.18 0.70 1.01 20.47
MWBX MetroWest Bank of MA* 16.20 279.55 20.85 279.55 16.20 0.12 1.37 22.22
MCBS Mid Continent Bancshares of KS(8) 21.01 219.58 21.66 219.58 20.25 0.40 0.89 18.78
MIFC Mid Iowa Financial Corp. of IA 15.85 160.71 15.04 160.94 11.25 0.08 0.71 11.27
MCBN Mid-Coast Bancorp of ME 14.97 126.93 10.90 126.93 15.80 0.52 1.81 27.08
MWBI Midwest Bancshares, Inc. of IA 14.67 174.36 12.06 174.36 16.59 0.24 1.35 19.83
MWFD Midwest Fed. Fin. Corp of WI(8) 19.96 247.55 21.82 256.71 20.26 0.34 1.23 24.46
MFFC Milton Fed. Fin. Corp. of OH 25.20 132.05 16.60 132.05 28.53 0.60 3.97 NM
MIVI Miss. View Hold. Co. of MN 26.52 98.31 18.56 98.31 18.04 0.16 0.91 24.24
MBSP Mitchell Bancorp of NC* 29.24 112.30 46.43 112.30 29.24 0.40 2.32 67.80
MBBC Monterey Bay Bancorp of CA NM 130.23 14.98 140.43 NM 0.12 0.63 20.69
MONT Montgomery Fin. Corp. of IN 29.76 105.84 20.26 105.84 29.76 0.22 1.76 52.38
MSBK Mutual SB, FSB of Bay City MI NM 131.04 8.34 131.04 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 21.46 176.50 13.81 205.51 26.56 0.50 2.35 50.51
NSLB NS&L Bancorp of Neosho MO NM 111.99 21.90 111.99 28.91 0.50 2.70 NM
NMSB Newmil Bancorp. of CT* 19.29 160.33 16.31 160.33 20.15 0.32 2.37 45.71
NASB North American SB of MO 13.17 212.85 16.34 220.23 13.99 0.80 1.48 19.51
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
NBSI North Bancshares of Chicago IL 13.43 13.43 0.64 4.40 3.05 0.56 3.85 NA NA 0.27
FFFD North Central Bancshares of IA 22.91 22.91 1.83 7.47 6.07 1.83 7.47 0.22 446.43 1.16
NBN Northeast Bancorp of ME* 6.96 6.15 0.71 10.01 4.96 0.59 8.26 1.03 93.77 1.22
NEIB Northeast Indiana Bncrp of IN 14.37 14.37 1.20 7.72 5.76 1.20 7.72 0.17 350.00 0.67
NWEQ Northwest Equity Corp. of WI 11.69 11.69 1.02 8.65 6.08 0.99 8.36 1.43 33.84 0.59
NWSB Northwest SB, MHC of PA (30.7) 9.64 9.10 0.96 9.86 2.78 0.96 9.86 0.77 85.90 0.87
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.43 6.32 1.10 14.19 1.31 73.30 1.46
NSSB Norwich Financial Corp. of CT* 11.66 10.60 1.14 10.24 4.85 1.06 9.48 1.20 158.13 2.71
NTMG Nutmeg FS&LA of CT 5.51 5.51 0.61 10.93 5.58 0.43 7.83 NA NA 0.55
OHSL OHSL Financial Corp. of OH 10.92 10.92 0.90 8.04 6.23 0.88 7.80 0.18 121.89 0.31
OCFC Ocean Fin. Corp. of NJ 15.17 15.17 1.01 5.69 4.51 1.00 5.62 0.52 83.85 0.86
OCN Ocwen Financial Corp. of FL 14.14 13.77 3.10 32.06 5.50 1.73 17.94 5.79 13.48 1.11
OTFC Oregon Trail Fin. Corp of OR 24.02 24.02 1.07 4.44 3.67 1.07 4.44 0.07 307.09 0.54
PBHC OswegoCity SB, MHC of NY (46.)* 11.94 10.03 1.06 9.22 3.50 0.95 8.25 0.91 43.96 0.67
OFCP Ottawa Financial Corp. of MI 8.74 7.06 0.81 9.10 4.55 0.79 8.89 0.35 106.15 0.43
PFFB PFF Bancorp of Pomona CA 10.06 9.95 0.45 4.25 3.40 0.46 4.32 1.62 64.39 1.44
PSFI PS Financial of Chicago IL 37.32 37.32 1.96 4.86 3.89 1.99 4.92 0.68 31.79 0.52
PVFC PVF Capital Corp. of OH 7.18 7.18 1.36 19.67 9.16 1.31 18.84 1.17 57.57 0.72
PALM Palfed, Inc. of Aiken SC(8) 8.51 8.51 0.39 4.82 1.71 0.67 8.26 2.04 53.36 1.30
PBCI Pamrapo Bancorp, Inc. of NJ 12.91 12.82 1.34 9.82 6.96 1.32 9.70 2.39 28.48 1.21
PFED Park Bancorp of Chicago IL 23.14 23.14 1.10 4.80 4.51 1.14 4.98 0.24 118.76 0.72
PVSA Parkvale Financial Corp of PA 7.72 7.67 1.08 14.34 7.13 1.08 14.34 0.26 547.66 1.91
PEEK Peekskill Fin. Corp. of NY 26.09 26.09 1.14 4.30 3.77 1.14 4.30 1.24 28.37 1.35
PFSB PennFed Fin. Services of NJ 7.33 6.20 0.82 10.90 6.39 0.82 10.90 0.61 32.20 0.28
PWBC PennFirst Bancorp of PA 8.37 7.44 0.67 8.85 5.10 0.67 8.85 0.68 87.79 1.45
PWBK Pennwood SB of PA* 18.34 18.34 0.99 5.21 4.49 1.09 5.71 1.49 42.39 1.04
PBKB People's SB of Brockton MA* 4.10 3.93 0.83 15.38 6.26 0.43 8.01 0.53 110.55 1.08
PFDC Peoples Bancorp of Auburn IN 15.24 15.24 1.48 9.70 5.17 1.48 9.70 0.29 106.74 0.38
PBCT Peoples Bank, MHC of CT (40.1)* 9.02 9.01 1.16 13.69 4.11 0.75 8.84 0.76 146.25 1.66
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 16.95 15.25 1.30 7.51 2.22 0.91 5.27 0.91 55.06 0.80
PFFC Peoples Fin. Corp. of OH 27.20 27.20 0.90 3.32 3.85 0.90 3.32 NA NA 0.39
PHBK Peoples Heritage Fin Grp of ME* 7.45 6.36 1.28 16.08 5.78 1.28 16.08 0.86 121.04 1.55
PSFC Peoples Sidney Fin. Corp of OH 25.29 25.29 1.04 6.27 3.25 1.04 6.27 1.00 40.10 0.45
PERM Permanent Bancorp of IN 9.46 9.34 0.62 6.63 4.83 0.62 6.58 1.07 47.01 1.00
PMFI Perpetual Midwest Fin. of IA 8.51 8.51 0.40 4.65 3.03 0.32 3.76 0.30 240.42 0.86
PERT Perpetual of SC, MHC (46.8)(8) 11.82 11.82 0.78 6.37 1.93 1.05 8.60 0.12 502.32 0.87
PCBC Perry Co. Fin. Corp. of MO 19.19 19.19 0.93 4.93 3.87 1.07 5.70 0.03 104.17 0.19
PHFC Pittsburgh Home Fin. of PA 10.54 10.43 0.84 6.97 5.69 0.75 6.21 1.69 30.77 0.78
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 6.33 6.33 0.63 10.08 4.00 0.62 9.94 0.16 274.52 1.07
PTRS Potters Financial Corp of OH 8.81 8.81 0.96 10.97 6.49 0.95 10.79 0.44 389.09 2.65
PKPS Poughkeepsie Fin. Corp. of NY(8) 8.42 8.42 0.54 6.43 3.57 0.54 6.43 4.19 23.86 1.34
PHSB Ppls Home SB, MHC of PA (45.0) 13.66 13.66 0.73 6.80 2.99 0.71 6.55 0.45 148.08 1.37
PRBC Prestige Bancorp of PA 11.21 11.21 0.63 5.12 4.42 0.63 5.12 0.33 82.34 0.40
PFNC Progress Financial Corp. of PA 5.33 4.76 0.90 17.21 5.81 0.71 13.58 2.07 37.27 1.11
PSBK Progressive Bank, Inc. of NY* 8.73 7.86 0.96 11.35 6.11 0.94 11.15 0.94 115.80 1.65
PROV Provident Fin. Holdings of CA 13.33 13.33 0.75 5.30 4.37 0.35 2.48 1.58 55.80 0.98
PULB Pulaski SB, MHC of MO (29.8) 13.05 13.05 0.80 6.20 2.27 1.06 8.20 0.64 41.41 0.33
PLSK Pulaski SB, MHC of NJ (46.0) 11.98 11.98 0.64 6.99 2.70 0.64 6.99 0.65 83.38 0.95
PULS Pulse Bancorp of S. River NJ 8.21 8.21 1.10 13.94 6.88 1.11 14.09 0.75 59.52 1.82
QCFB QCF Bancorp of Virginia MN 17.49 17.49 1.34 7.36 5.12 1.34 7.36 0.24 345.09 2.00
QCBC Quaker City Bancorp of CA 8.46 8.46 0.71 8.11 5.62 0.68 7.77 1.35 67.38 1.15
QCSB Queens County Bancorp of NY* 11.22 11.22 1.54 11.21 3.95 1.55 11.28 0.69 89.32 0.69
RARB Raritan Bancorp. of Raritan NJ* 7.37 7.25 1.02 13.34 5.93 1.01 13.18 0.39 208.57 1.26
REDF RedFed Bancorp of Redlands CA 8.32 8.29 1.01 12.28 6.44 1.01 12.28 1.80 44.74 0.92
RELY Reliance Bancorp, Inc. of NY 8.26 6.07 0.89 10.80 5.76 0.93 11.40 0.67 41.66 0.62
RELI Reliance Bancshares Inc of WI* 48.29 48.29 1.32 2.58 2.82 1.38 2.68 NA NA 0.56
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
NBSI North Bancshares of Chicago IL NM 151.82 20.39 151.82 NM 0.48 1.86 60.76
FFFD North Central Bancshares of IA 16.48 126.37 28.96 126.37 16.48 0.25 1.31 21.55
NBN Northeast Bancorp of ME* 20.16 193.55 13.46 219.03 24.44 0.32 1.16 23.36
NEIB Northeast Indiana Bncrp of IN 17.37 132.17 18.99 132.17 17.37 0.34 1.66 28.81
NWEQ Northwest Equity Corp. of WI 16.45 142.49 16.66 142.49 17.04 0.56 2.91 47.86
NWSB Northwest SB, MHC of PA (30.7) NM 340.65 32.83 NM NM 0.16 1.08 39.02
NSSY Norwalk Savings Society of CT* 15.83 185.46 14.94 192.31 13.87 0.40 1.05 16.67
NSSB Norwich Financial Corp. of CT* 20.62 201.40 23.49 221.73 22.29 0.56 1.85 38.10
NTMG Nutmeg FS&LA of CT 17.92 182.82 10.08 182.82 25.00 0.15 1.40 25.00
OHSL OHSL Financial Corp. of OH 16.06 127.77 13.95 127.77 16.56 0.88 3.32 53.33
OCFC Ocean Fin. Corp. of NJ 22.17 134.82 20.45 134.82 22.44 0.80 2.15 47.62
OCN Ocwen Financial Corp. of FL 18.19 NM 49.88 NM NM 0.00 0.00 0.00
OTFC Oregon Trail Fin. Corp of OR 27.22 120.84 29.02 120.84 27.22 0.00 0.00 0.00
PBHC OswegoCity SB, MHC of NY (46.)* 28.57 249.58 29.80 297.03 NM 0.28 0.93 26.67
OFCP Ottawa Financial Corp. of MI 21.99 200.49 17.52 248.21 22.52 0.40 1.41 31.01
PFFB PFF Bancorp of Pomona CA 29.42 130.16 13.09 131.59 28.97 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 25.69 125.34 46.78 125.34 25.34 0.48 2.59 66.67
PVFC PVF Capital Corp. of OH 10.92 195.20 14.02 195.20 11.40 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC(8) NM 266.48 22.69 266.48 NM 0.12 0.42 24.49
PBCI Pamrapo Bancorp, Inc. of NJ 14.38 147.25 19.01 148.30 14.54 1.00 4.02 57.80
PFED Park Bancorp of Chicago IL 22.19 106.86 24.72 106.86 21.39 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 14.02 189.14 14.60 190.40 14.02 0.52 1.81 25.37
PEEK Peekskill Fin. Corp. of NY 26.52 118.16 30.83 118.16 26.52 0.36 2.06 54.55
PFSB PennFed Fin. Services of NJ 15.65 161.68 11.85 190.99 15.65 0.28 0.84 13.08
PWBC PennFirst Bancorp of PA 19.60 143.67 12.02 161.49 19.60 0.36 1.93 37.89
PWBK Pennwood SB of PA* 22.29 120.68 22.13 120.68 20.33 0.32 1.73 38.55
PBKB People's SB of Brockton MA* 15.97 256.70 10.52 267.75 NM 0.44 1.91 30.56
PFDC Peoples Bancorp of Auburn IN 19.35 183.77 28.01 183.77 19.35 0.43 1.79 34.68
PBCT Peoples Bank, MHC of CT (40.1)* 24.31 306.75 27.67 307.02 NM 0.76 2.17 52.78
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) NM 327.90 55.57 NM NM 0.35 0.89 40.23
PFFC Peoples Fin. Corp. of OH 25.94 87.14 23.70 87.14 25.94 0.50 3.64 NM
PHBK Peoples Heritage Fin Grp of ME* 17.31 264.56 19.71 310.06 17.31 0.84 1.93 33.47
PSFC Peoples Sidney Fin. Corp of OH NM 118.39 29.94 118.39 NM 0.28 1.62 50.00
PERM Permanent Bancorp of IN 20.68 133.57 12.64 135.38 20.85 0.40 1.53 31.75
PMFI Perpetual Midwest Fin. of IA NM 152.14 12.94 152.14 NM 0.30 1.08 35.71
PERT Perpetual of SC, MHC (46.8)(8) NM 301.14 35.61 301.14 NM 1.40 2.31 NM
PCBC Perry Co. Fin. Corp. of MO 25.83 123.67 23.74 123.67 22.36 0.40 1.72 44.44
PHFC Pittsburgh Home Fin. of PA 17.57 121.33 12.79 122.58 19.72 0.24 1.35 23.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 25.00 245.63 15.54 245.63 25.35 0.90 2.47 61.64
PTRS Potters Financial Corp of OH 15.42 165.18 14.55 165.18 15.68 0.20 1.08 16.67
PKPS Poughkeepsie Fin. Corp. of NY(8) 28.03 175.47 14.77 175.47 28.03 0.20 1.93 54.05
PHSB Ppls Home SB, MHC of PA (45.0) NM 183.46 25.07 183.46 NM 0.00 0.00 0.00
PRBC Prestige Bancorp of PA 22.65 114.04 12.78 114.04 22.65 0.12 0.62 14.12
PFNC Progress Financial Corp. of PA 17.22 266.78 14.23 299.23 21.83 0.12 0.77 13.33
PSBK Progressive Bank, Inc. of NY* 16.36 178.39 15.58 198.13 16.67 0.68 1.89 30.91
PROV Provident Fin. Holdings of CA 22.87 121.74 16.23 121.74 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8) NM 267.14 34.86 267.14 NM 1.10 3.67 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 193.05 23.13 193.05 NM 0.30 1.50 55.56
PULS Pulse Bancorp of S. River NJ 14.54 190.80 15.67 190.80 14.38 0.70 2.62 38.04
QCFB QCF Bancorp of Virginia MN 19.52 143.65 25.13 143.65 19.52 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 17.81 139.40 11.79 139.40 18.58 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 25.35 319.06 35.78 319.06 25.17 0.80 2.19 55.56
RARB Raritan Bancorp. of Raritan NJ* 16.87 217.39 16.02 220.88 17.08 0.48 1.75 29.45
REDF RedFed Bancorp of Redlands CA 15.52 177.25 14.75 177.89 15.52 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 17.35 176.26 14.56 239.94 16.43 0.64 1.88 32.65
RELI Reliance Bancshares Inc of WI* NM 96.62 46.66 96.62 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of December 12, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
RIVR River Valley Bancorp of IN 12.40 12.21 0.46 4.24 2.54 0.62 5.72 0.71 122.47 1.05
RVSB Riverview Bancorp of WA 20.76 19.97 1.22 9.14 3.16 1.17 8.75 0.14 226.93 0.58
RSLN Roslyn Bancorp, Inc. of NY* 17.64 17.55 0.96 5.10 3.34 1.22 6.50 0.27 257.00 2.60
SCCB S. Carolina Comm. Bnshrs of SC 26.59 26.59 1.15 4.34 3.33 1.15 4.34 0.87 73.62 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 9.33 9.33 0.37 3.83 1.47 0.43 4.44 0.50 103.35 1.10
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.68 5.36 3.84 0.68 5.36 0.75 57.32 0.58
SGVB SGV Bancorp of W. Covina CA 7.44 7.32 0.39 5.02 3.77 0.43 5.48 1.06 29.26 0.41
SHSB SHS Bancorp, Inc. of PA 12.64 12.64 0.37 2.96 2.38 0.37 2.96 1.43 33.94 0.74
SISB SIS Bancorp Inc of MA* 7.36 7.36 0.83 11.20 5.49 0.82 11.09 0.33 379.00 2.67
SWCB Sandwich Co-Op. Bank of MA* 7.93 7.63 0.97 11.95 5.67 0.95 11.70 0.82 93.38 1.06
SFSL Security First Corp. of OH 9.27 9.12 1.36 14.56 5.56 1.37 14.69 0.33 226.25 0.84
SMFC Sho-Me Fin. Corp. of MO(8) 9.03 9.03 1.30 13.56 5.50 1.23 12.86 0.29 190.55 0.63
SKAN Skaneateles Bancorp Inc of NY* 7.00 6.80 0.70 10.25 6.36 0.68 9.91 2.04 41.25 0.98
SOBI Sobieski Bancorp of S. Bend IN 14.78 14.78 0.62 3.85 3.30 0.57 3.55 0.13 188.68 0.31
SOSA Somerset Savings Bank of MA(8)* 6.59 6.59 1.03 17.02 6.36 1.00 16.49 5.91 24.16 1.87
SSFC South Street Fin. Corp. of NC* 25.66 25.66 1.21 5.34 3.34 1.25 5.51 0.31 57.66 0.38
SCBS Southern Commun. Bncshrs of AL 21.33 21.33 0.55 3.24 1.74 0.90 5.30 2.48 46.17 1.94
SMBC Southern Missouri Bncrp of MO 16.15 16.15 0.94 5.84 4.76 0.90 5.59 0.88 51.46 0.66
SWBI Southwest Bancshares of IL 11.34 11.34 1.06 9.81 5.88 1.02 9.48 0.20 101.05 0.28
SVRN Sovereign Bancorp of PA 4.43 3.61 0.42 10.16 2.36 0.61 14.74 0.65 99.50 0.92
STFR St. Francis Cap. Corp. of WI 7.74 6.85 0.76 9.21 5.40 0.75 9.08 0.21 181.82 0.83
SPBC St. Paul Bancorp, Inc. of IL 8.99 8.97 1.06 12.12 5.50 1.06 12.12 0.36 210.72 1.10
SFFC StateFed Financial Corp. of IA 17.54 17.54 1.27 7.17 5.16 1.27 7.17 2.55 10.16 0.33
SFIN Statewide Fin. Corp. of NJ 9.36 9.34 0.81 8.36 5.29 0.81 8.36 0.38 104.03 0.84
STSA Sterling Financial Corp. of WA 5.25 4.81 0.48 11.12 4.89 0.43 10.05 0.47 96.70 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.88 3.42 0.56 8.56 NA NA 0.30
ROSE T R Financial Corp. of NY* 6.24 6.24 0.97 15.55 5.61 0.87 13.98 0.54 74.97 0.76
THRD TF Financial Corp. of PA 11.63 10.27 0.77 6.96 4.10 0.67 5.99 0.27 128.49 0.82
TPNZ Tappan Zee Fin., Inc. of NY 17.02 17.02 0.72 4.05 2.90 0.70 3.98 1.68 32.52 1.17
ESBK The Elmira SB FSB of Elmira NY* 6.35 6.19 0.42 6.63 4.23 0.34 5.38 0.64 103.23 0.86
TRIC Tri-County Bancorp of WY 15.31 15.31 1.06 6.88 5.29 1.07 6.97 NA NA 1.05
TWIN Twin City Bancorp of TN 12.94 12.94 0.85 6.65 5.03 0.72 5.62 0.16 88.17 0.20
UFRM United FS&LA of Rocky Mount NC 7.34 7.34 0.71 9.49 5.93 0.57 7.53 0.77 101.45 0.92
UBMT United Fin. Corp. of MT 24.01 24.01 1.41 6.09 4.83 1.40 6.04 0.48 15.21 0.22
VABF Va. Beach Fed. Fin. Corp of VA 7.15 7.15 0.61 8.99 4.51 0.50 7.31 1.24 59.40 0.95
WHGB WHG Bancshares of MD 20.65 20.65 0.51 2.23 2.14 0.51 2.23 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.54 5.51 1.14 20.70 6.31 1.13 20.54 1.27 134.95 2.68
WVFC WVS Financial Corp. of PA* 12.00 12.00 1.30 10.59 6.50 1.31 10.64 0.19 361.83 1.21
WRNB Warren Bancorp of Peabody MA* 10.65 10.65 2.16 21.61 9.44 1.91 19.17 1.15 97.04 1.73
WFSL Washington FS&LA of Seattle WA 12.55 11.52 1.86 15.80 6.93 1.85 15.73 0.69 62.10 0.58
WAMU Washington Mutual Inc. of WA(8)* 5.29 4.90 0.00 0.09 0.01 0.70 13.63 NA NA 0.98
WYNE Wayne Bancorp of NJ 12.43 12.43 0.86 6.10 4.70 0.86 6.10 0.89 88.41 1.18
WAYN Wayne S&L Co. MHC of OH (47.8) 9.53 9.53 0.73 7.89 2.68 0.68 7.40 0.58 65.29 0.46
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.38 23.38 1.43 6.14 3.01 1.43 6.14 0.07 560.00 0.72
WBST Webster Financial Corp. of CT 5.34 4.60 0.46 9.03 2.82 0.77 15.08 0.72 111.52 1.43
WEFC Wells Fin. Corp. of Wells MN 14.22 14.22 1.06 7.49 5.89 1.03 7.29 0.31 114.71 0.39
WCBI WestCo Bancorp of IL 15.54 15.54 1.50 9.72 7.09 1.42 9.20 0.21 139.06 0.37
WSTR WesterFed Fin. Corp. of MT 10.62 8.57 0.81 6.87 4.59 0.77 6.58 0.41 116.74 0.72
WOFC Western Ohio Fin. Corp. of OH 13.87 12.94 0.37 2.65 2.29 0.43 3.09 0.44 115.19 0.66
WWFC Westwood Fin. Corp. of NJ(8) 9.32 8.34 0.73 7.79 4.34 0.78 8.31 0.13 158.78 0.58
WEHO Westwood Hmstd Fin Corp of OH 27.65 27.65 1.01 3.29 3.30 1.16 3.78 0.22 77.88 0.22
WFI Winton Financial Corp. of OH 7.11 6.96 0.76 10.50 5.77 0.89 12.25 0.30 84.06 0.29
FFWD Wood Bancorp of OH 12.43 12.43 1.41 11.10 5.78 1.29 10.17 0.35 101.19 0.44
YFCB Yonkers Fin. Corp. of NY 14.02 14.02 1.05 6.64 5.23 1.06 6.71 0.48 72.05 0.78
YFED York Financial Corp. of PA 8.85 8.85 0.96 11.41 5.07 0.81 9.60 2.50 23.98 0.69
<CAPTION>
Pricing Ratios Dividend Data(6)
---------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
RIVR River Valley Bancorp of IN NM 123.86 15.35 125.75 29.23 0.16 0.88 34.78
RVSB Riverview Bancorp of WA NM 155.54 32.28 161.63 NM 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY* 29.97 155.84 27.48 156.62 23.53 0.28 1.28 38.36
SCCB S. Carolina Comm. Bnshrs of SC 30.00 129.68 34.48 129.68 30.00 0.60 2.67 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 251.68 23.49 251.68 NM 0.40 1.33 NM
SFED SFS Bancorp of Schenectady NY 26.06 138.89 17.32 138.89 26.06 0.28 1.14 29.79
SGVB SGV Bancorp of W. Covina CA 26.54 132.79 9.88 134.87 24.30 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA NM 124.73 15.76 124.73 NM 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 18.23 195.04 14.35 195.04 18.41 0.56 1.50 27.32
SWCB Sandwich Co-Op. Bank of MA* 17.62 203.21 16.12 211.41 17.99 1.40 3.26 57.38
SFSL Security First Corp. of OH 17.98 246.69 22.86 250.61 17.83 0.32 1.56 28.07
SMFC Sho-Me Fin. Corp. of MO(8) 18.20 237.41 21.43 237.41 19.19 0.00 0.00 0.00
SKAN Skaneateles Bancorp Inc of NY* 15.73 155.95 10.92 160.60 16.27 0.27 1.43 22.50
SOBI Sobieski Bancorp of S. Bend IN NM 121.14 17.90 121.14 NM 0.32 1.65 50.00
SOSA Somerset Savings Bank of MA(8)* 15.72 244.17 16.10 244.17 16.23 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* 29.95 137.44 35.27 137.44 29.03 0.40 2.12 63.49
SCBS Southern Commun. Bncshrs of AL NM 143.94 30.70 143.94 NM 0.30 1.58 NM
SMBC Southern Missouri Bncrp of MO 21.01 120.72 19.50 120.72 21.94 0.50 2.53 53.19
SWBI Southwest Bancshares of IL 17.00 159.28 18.07 159.28 17.59 0.80 3.14 53.33
SVRN Sovereign Bancorp of PA NM 298.62 13.22 NM 29.22 0.08 0.37 15.69
STFR St. Francis Cap. Corp. of WI 18.53 169.11 13.09 191.16 18.78 0.56 1.35 25.00
SPBC St. Paul Bancorp, Inc. of IL 18.17 210.77 18.95 211.30 18.17 0.40 1.58 28.78
SFFC StateFed Financial Corp. of IA 19.38 135.60 23.78 135.60 19.38 0.20 1.50 28.99
SFIN Statewide Fin. Corp. of NJ 18.91 156.90 14.69 157.23 18.91 0.44 1.96 36.97
STSA Sterling Financial Corp. of WA 20.43 163.71 8.60 178.87 22.61 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 29.27 164.38 10.66 164.99 20.11 0.32 0.89 26.02
ROSE T R Financial Corp. of NY* 17.82 255.92 15.96 255.92 19.82 0.64 1.91 34.04
THRD TF Financial Corp. of PA 24.39 167.23 19.45 189.37 28.33 0.40 1.34 32.79
TPNZ Tappan Zee Fin., Inc. of NY NM 140.85 23.97 140.85 NM 0.28 1.40 48.28
ESBK The Elmira SB FSB of Elmira NY* 23.62 153.45 9.75 157.65 29.13 0.61 2.03 48.03
TRIC Tri-County Bancorp of WY 18.91 127.48 19.52 127.48 18.67 0.40 2.71 51.28
TWIN Twin City Bancorp of TN 19.89 129.78 16.80 129.78 23.53 0.40 2.83 56.34
UFRM United FS&LA of Rocky Mount NC 16.86 155.72 11.42 155.72 21.24 0.24 2.26 38.10
UBMT United Fin. Corp. of MT 20.70 124.75 29.96 124.75 20.87 1.00 3.96 NM
VABF Va. Beach Fed. Fin. Corp of VA 22.16 191.03 13.67 191.03 27.25 0.20 1.20 26.67
WHGB WHG Bancshares of MD NM 112.08 23.15 112.08 NM 0.32 2.02 NM
WSFS WSFS Financial Corp. of DE* 15.84 311.56 17.26 313.44 15.96 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 15.38 165.12 19.82 165.12 15.31 1.20 3.75 57.69
WRNB Warren Bancorp of Peabody MA* 10.60 211.75 22.55 211.75 11.94 0.52 2.41 25.49
WFSL Washington FS&LA of Seattle WA 14.42 210.92 26.47 229.78 14.49 0.92 2.89 41.63
WAMU Washington Mutual Inc. of WA(8)* NM 349.21 18.46 NM NM 1.12 1.63 NM
WYNE Wayne Bancorp of NJ 21.26 137.96 17.14 137.96 21.26 0.20 0.88 18.69
WAYN Wayne S&L Co. MHC of OH (47.8) NM 285.92 27.26 285.92 NM 0.62 2.05 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 202.00 47.23 202.00 NM 0.80 3.76 NM
WBST Webster Financial Corp. of CT NM 236.76 12.64 274.89 21.24 0.80 1.26 44.69
WEFC Wells Fin. Corp. of Wells MN 16.97 124.50 17.70 124.50 17.45 0.48 2.59 44.04
WCBI WestCo Bancorp of IL 14.10 136.53 21.21 136.53 14.89 0.68 2.57 36.17
WSTR WesterFed Fin. Corp. of MT 21.77 132.69 14.09 164.50 22.75 0.46 1.82 39.66
WOFC Western Ohio Fin. Corp. of OH NM 113.81 15.78 121.94 NM 1.00 3.76 NM
WWFC Westwood Fin. Corp. of NJ(8) 23.02 173.17 16.13 193.55 21.58 0.20 0.72 16.67
WEHO Westwood Hmstd Fin Corp of OH NM 100.35 27.75 100.35 26.39 0.28 1.96 59.57
WFI Winton Financial Corp. of OH 17.32 173.86 12.36 177.61 14.85 0.46 2.33 40.35
FFWD Wood Bancorp of OH 17.29 189.36 23.54 189.36 18.88 0.40 2.16 37.38
YFCB Yonkers Fin. Corp. of NY 19.13 129.13 18.10 129.13 18.94 0.24 1.28 24.49
YFED York Financial Corp. of PA 19.74 214.03 18.95 214.03 23.46 0.48 1.93 38.10
</TABLE>
<PAGE>
EXHIBIT IV-2
Historical Stock Price Indices
<PAGE>
Exhibit IV-2
Historical Stock Price Indices(1)
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
- --------------- ---- ------- --------- ----- -----
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.6 670.6 1,185.0 387.2 224.7
Quarter 3 5882.2 687.3 1,226.9 429.3 249.2
Quarter 4 6442.5 737.0 1,280.7 483.6 280.1
1997: Quarter 1 6583.5 757.1 1,221.7 527.7 292.5
Quarter 2 7672.8 885.1 1,442.1 624.5 333.3
Quarter 3 7945.3 947.3 1,685.7 737.5 381.7
December 12, 1997 7838.3 953.4 1,536.6 787.3 417.7
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
[Illegible]
Index Values
<TABLE>
<CAPTION>
Index Values Percent Change Since
---------------------------------- ------------------------
11/28/97 1 Month YTD LTM 1 Month YTD LTM
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 767.4 752.4 483.6 485.8 1.98 58.67 57.95
MHC Index 1,065.9 1,065.7 538.0 520.4 0.02 98.12 104.82
Insurance Indices
- ----------------------------------------------------------------------------------------
SAIF Thrifts 703.7 689.6 439.2 441.9 2.08 60.22 59.25
BIF Thrifts 967.3 949.6 616.8 617.6 1.88 56.82 56.63
Stock Exchange Indices
- ----------------------------------------------------------------------------------------
AMEX Thrifts 238.4 225.8 156.2 156.5 5.58 52.63 52.32
NYSE Thrifts 466.9 464.0 277.3 285.1 0.62 68.40 63.80
OTC Thrifts 876.2 855.8 569.7 564.9 2.38 53.78 55.09
Geographic Indices
- ----------------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,575.5 1,533.7 970.7 967.8 2.72 62.31 62.80
Midwestern Thrifts 1,690.7 1,645.0 1,159.3 1,149.0 2.78 45.84 47.15
New England Thrifts 712.4 684.3 428.9 424.9 4.11 66.11 67.66
Southeastern Thrifts 704.5 718.1 447.2 454.5 -1.90 57.53 54.98
Southwestern Thrifts 468.2 455.4 315.9 318.9 2.81 48.22 46.82
Western Thrifts 770.7 759.8 474.7 484.6 1.43 62.35 59.02
Asset Size Indices
- ----------------------------------------------------------------------------------------
Less than $250M 815.4 795.7 586.6 586.6 2.46 39.00 39.00
$250M to $500M 1,215.8 1,188.6 789.8 778.0 2.29 53.94 56.28
$500M to $1B 778.8 783.2 521.0 517.5 2.05 49.27 50.50
$1B to $5B 877.9 867.3 546.0 541.9 1.22 60.78 62.00
Over $5B 491.5 480.8 305.8 310.8 2.21 60.71 58.13
Comparative Indices
- ----------------------------------------------------------------------------------------
Dow Jones Industrials 7,823.1 7,442.1 6,448.3 6,499.3 5.12 21.32 20.37
S & P 500 955.4 914.6 740.7 755.0 4.46 28.98 26.54
</TABLE>
All SNL indices are market-value weighted: i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201.082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1994, the S&P closed at 159.2 and the Dow Jones
Industrials stood at 1164.9.
Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR; Midwest: IA, IL, IN, KS, KY, MI, MN,
NO, ND, NE OH, SD, WI; New England: CT, MA, ME, NH, RI, VT; Southeast: AL, AR,
FL, GA, MS, NC, SC, TN, VA, WV; Southwest: CO, LA, NM, OK, TX, UT; West: AZ, AK,
CA, HI, ID, MT, NV, OR, WA, WY
Source: SNL Securities
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
RP Financial, LC.
Arkansas Thrift Merger and Acquisition Activity 1994 - Present
<TABLE>
<CAPTION>
Seller Financials at Completion (1)
=================================================
Total TgEq/ YTD YTD NPAs/ Rsrvs/
Ann'd Comp Assets Assts ROAA ROAE Assets NPLs
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/01/97 Pending First Commercial Crp AR Kemmons Wilson AR 449,155 5.82 1.21 20.45 0.64 169.74
02/22/96 05/03/96 First Federal S&LA AR Heritage Banc Holdng AR 28,006 7.20 0.74 10.77 0.00 NA
07/07/95 02/09/96 Mercantile Bancorp MO Security Bank Conway AR 95,245 8.36 0.91 10.86 0.00 NA
10/21/94 06/30/95 Capital Bancorp MO Home FS&LA AR 77,526 5.80 0.91 14.61 2.11 NA
03/31/94 08/31/94 FDH Bancshares AR Grant Federal Saving AR 41,164 6.74 1.58 23.58 1.50 NA
08/11/93 02/15/94 Bancshares of Est AR AR Wynbanc Savings FSB AR 34,082 7.15 1.05 15.45 0.75 NA
Average 120,863 6.85 1.07 15.95 0.83 169.74
Median 59,345 6.95 0.98 15.03 0.70 169.74
<CAPTION>
Deal Terms and Pricing at Completion (1)
===================================================================================
Deal Deal Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBkPr/
Ann'd Comp Value Pr/Shr Consid Pr/Bk Tg Bk 4-Qtr Assets CoreDp
Date Date Buyer ST ($M) ($) Type (%) (%) EPS (x) (%) (%)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/01/97 Pending First Commercial Crp AR 55.2 NA Com Stock 205.17 211.71 15.16 12.29 8.54
02/22/96 05/03/96 First Federal S&LA AR 3.3 3250.000 Cash 161.21 161.21 15.63 11.61 5.60
07/07/95 02/09/96 Mercantile Bancorp MO 14.8 1434.694 Com Stock 169.65 169.65 14.29 14.51 7.97
10/21/94 06/30/95 Capital Bancorp MO 6.9 5.610 Cash 138.25 139.20 18.09 8.74 3.35
03/31/94 08/31/94 FDH Bancshares AR 3.7 43.180 Cash 133.29 133.29 5.94 8.99 2.45
08/11/93 02/15/94 Bancshares of Est AR AR 3.4 NA Cash 127.58 127.58 7.78 10.21 2.74
Average 6.4 1183.371 146.00 146.19 12.35 10.81 4.42
Median 3.7 738.937 138.25 139.20 14.29 10.21 3.35
</TABLE>
(1) Pending deals reflect financials, terms and pricing as of announcement
Source: SNL Securities, LC
<PAGE>
EXHIBIT IV-5
Pocahontas Federal Savings and Loan Association
Director and Senior Management Summary Resumes
See Pages 72 & 73 in Prospectus
<PAGE>
EXHIBIT IV-6
Pocahontas Federal Savings and Loan Association
Pro Forma Regulatory Capital Ratios
See Page 22 in Prospectus
<PAGE>
EXHIBIT IV-7
Pocahontas Federal Savings and Loan Association
Pro Forma Analysis Sheet
<PAGE>
EXHIBIT IV-7
PRO FORMA ANALYSIS SHEET
Pocahontas Federal Savings and Loan Association
Prices as of December 12, 1997
<TABLE>
<CAPTION>
Peer Group Arkansas Companies All SAIF Insured
------------------ -------------------- ---------------------
Price Multiple Symbol Subject (1) Mean Median Mean Median Mean Median
- -------------- ------ ----------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio P/E 16.16 x 19.30x 19.19x 18.51x 18.51x 19.50x 19.18x
Price-book ratio = P/B 102.74% 138.46% 132.69% 135.42% 142.73% 159.37% 150.78%
Price-assets ratio = P/A 11.68% 15.17% 14.83% 21.66% 21.25% 19.33% 17.84%
</TABLE>
Valuation Parameters
- --------------------
Pre-Conversion Earnings (Y) $2,393,000 (2)
Pre-Conversion Book Value (B) $24,707,000 (3)
Pre-Conv. Tang. Book Value (B) $24,707,000 (3)
Pre-Conversion Assets (A) $383,878,000 (3)
Reinvestment Rate (2)(R) 3.66%
Est. Conversion Expenses (3)(X) 2.61%
Tax rate (TAX) 38.30%
ESOP Stock Purchases (E) 8.00%
Cost of ESOP Borrowings (S) 0.00%
ESOP Amortization (T) 10.00 years
RRP Amount (M) 4.00%
RRP Vesting (N) 5.00 years
Percentage Sold (PCT) 52.84%
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
1. V= P/E * Y V= $47,316,669
--------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M)*R - (1-TAX)*E/T - (1-TAX)*M/N)
2. V= P/B * B V= $47,316,668
-------------------------
1 - P/B * PCT * (1-X-E-M)
3. V= P/A * A V= $47,316,669
------------------------
1 - P/A * PCT * (1-X-E-M)
Full
Gross Exchange Conversion
Conclusion Proceeds Ratio Value
- ----------- -------- ------- -----
Minimum $21,250,000 2.4638 $40,219,169
Midpoint $25,000,000 2.8986 $47,316,670
Maximum $28,750,000 3.3333 $54,414,170
Super maximum value $33,062,500 3.8333 $62,576,290
- ----------
(1) Pricing ratios shown reflect the midpoint value.
(2) Includes impact of reinvesting $461,000 of MHC assets at an after-tax rate
of 3.63 percent.
(3) Includes $461,000 of MHC assets.
<PAGE>
EXHIBIT IV-8
Pocahontas Federal Savings and Loan Association
Pro Forma Effect of Conversion Proceeds
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Pocahontas Federal Savings and Loan Association
At the Minimum of the Range
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $40,219,169
Exchange Ratio 2.4638
Offering Proceeds $21,250,000
Less: Estimated Offering Expenses 618,000
-------
Net Conversion Proceeds $20,632,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $20,632,000
Less: Non-cash purchases(1) 2,550,000
---------
Net Proceeds Reinvested $18,082,000
Estimated net incremental rate of return 3.66%
-----
Earnings Increase $661,801
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings 104,890
Less: Recognition Plan Vesting 104,890
-------
Net Earnings Increase $452,021
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $2,393,000 $452,021 $2,845,021
12 Months ended September 30, 1997 (core) $2,393,000 $452,021 $2,845,021
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $24,707,000 $18,082,000 $42,789,000
September 30, 1997(Tangible) $24,707,000 $18,082,000 $42,789,000
<CAPTION>
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $383,878,000 $18,082,000 $401,960,000
</TABLE>
(1) Reflects ESOP borrowing of 8.0 percent of total offering and stock
purchased by Recognition Plans 4.0 percent of total offering.
(2) ESOP is financed by Holding Company.
(3) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(4) Stock purchased by Recognition Plans is amortized over 5 years,
amortization is tax-effected.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Pocahontas Federal Savings and Loan Association
At the Midpoint of the Range
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $47,316,670
Exchange Ratio 2.8986
Offering Proceeds $25,000,000
Less: Estimated Offering Expenses 653,000
-------
Net Conversion Proceeds $24,347,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $24,347,000
Less: Non-cash purchases(1) 3,000,000
---------
Net Proceeds Reinvested $21,347,000
Estimated net incremental rate of return 3.66%
-----
Earnings Increase $781,300
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings 123,400
Less: Recognition Plan Vesting 123,400
-------
Net Earnings Increase $534,500
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $2,393,000 $534,500 $2,927,500
12 Months ended September 30, 1997 (core) $2,393,000 $534,500 $2,927,500
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $24,707,000 $21,347,000 $46,054,000
September 30, 1997(Tangible) $24,707,000 $21,347,000 $46,054,000
<CAPTION>
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $383,878,000 $21,347,000 $405,225,000
</TABLE>
(1) Reflects ESOP borrowing of 8.0 percent of total offering and stock
purchased by Recognition Plans 4.0 percent of total offering.
(2) ESOP is financed by Holding Company.
(3) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(4) Stock purchased by Recognition Plans is amortized over 5 years,
amortization is tax-effected.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Pocahontas Federal Savings and Loan Association
At the Maximum of the Range
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $54,414,170
Exchange Ratio 3.3333
Offering Proceeds $28,750,000
Less: Estimated Offering Expenses 687,000
-------
Net Conversion Proceeds $28,063,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $28,063,000
Less: Non-cash purchases(1) 3,450,000
---------
Net Proceeds Reinvested $24,613,000
Estimated net incremental rate of return 3.66%
-----
Earnings Increase $900,836
Less: Estimated cost of ESOP borrowings 0
Less: Amortization of ESOP borrowings 141,910
Less: Recognition Plan Vesting 141,910
-------
Net Earnings Increase $617,016
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $2,393,000 $617,016 $3,010,016
12 Months ended September 30, 1997 (core) $2,393,000 $617,016 $3,010,016
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $24,707,000 $24,613,000 $49,320,000
September 30, 1997(Tangible) $24,707,000 $24,613,000 $49,320,000
<CAPTION>
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $383,878,000 $24,613,000 $408,491,000
</TABLE>
(1) Reflects ESOP borrowing of 8.0 percent of total offering and stock
purchased by Recognition Plans 4.0 percent of total offering.
(2) ESOP is financed by Holding Company.
(3) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(4) Stock purchased by Recognition Plans is amortized over 5 years,
amortization is tax-effected.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Pocahontas Federal Savings and Loan Association
At the Superrange Maximum
<TABLE>
<S> <C>
1. Conversion Proceeds
Full Conversion Value $62,576,290
Exchange Ratio 3.8333
Offering Proceeds $33,062,500
Less: Estimated Offering Expenses 727,000
-------
Net Conversion Proceeds $32,335,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $32,335,500
Less: Non-cash purchases(1) 3,967,500
---------
Net Proceeds Reinvested $28,368,000
Estimated net incremental rate of return 3.66%
-----
Earnings Increase $1,038,269
Less: Estimated cost of ESOP borrowings(2) 0
Less: Amortization of ESOP borrowings(3) 163,197
Less: Recognition Plan Vesting(4) 163,197
-------
Net Earnings Increase $711,876
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $2,393,000 $711,876 $3,104,876
12 Months ended September 30, 1997 (core) $2,393,000 $711,876 $3,104,876
<CAPTION>
Before Net Cash After
4. Pro Forma Net Worth Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $24,707,000 $28,368,000 $53,075,000
September 30, 1997(Tangible) $24,707,000 $28,368,000 $53,075,000
<CAPTION>
Before Net Cash After
5. Pro Forma Assets Conversion Proceeds Conversion
---------- -------- ----------
<S> <C> <C> <C>
September 30, 1997 $383,878,000 $28,368,000 $412,246,000
</TABLE>
(1) Reflects ESOP borrowing of 8.0 percent of total offering and stock
purchased by Recognition Plans 4.0 percent of total offering.
(2) ESOP is financed by Holding Company.
(3) ESOP borrowings are amortized over 10 years, amortization is tax-effected.
(4) Stock purchased by Recognition Plans is amortized over 5 years,
amortization is tax-effected.
<PAGE>
EXHIBIT IV-9
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains(Loss) @ 34% Items to Common Shares Core EPS
---------- ----------- ---------- ---------- ---------- ---------- -------
($000) ($000) $000) ($000) ($000) ($000) ($)
<C> <S> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
FBCV 1st Bancorp of Vincennes IN 1,907 -1,455 495 0 947 1,038 0.91
EGLB Eagle BancGroup of IL 551 -190 65 0 426 1,198 0.36
EFBI Enterprise Fed. Bancorp of OH 2,369 -597 203 0 1,975 1,986 0.99
FFHH FSF Financial Corp. of MN 3,124 -48 16 0 3,092 3,010 1.03
FFBH First Fed. Bancshares of AR 5,551 -394 134 0 5,291 4,896 1.08
HMNF HMN Financial, Inc. of MN 5,630 -1,297 441 0 4,774 4,212 1.13
HALL Hallmark Capital Corp. of WI 2,620 -70 24 0 2,574 2,886 0.89
MBLF MBLA Financial Corp. of MO 1,840 59 -20 0 1,879 1,268 1.48
MWBI Midwest Bancshares, Inc. of IA 1,235 -226 77 0 1,086 1,018 1.07
MFFC Milton Fed. Fin. Corp. of OH 1,379 -234 80 0 1,225 2,305 0.53
PERM Permanent Bancorp of IN 2,643 -16 5 0 2,632 2,103 1.25
</TABLE>
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
[Letterhead of RP Financial, LC.]
FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws from
backgrounds in consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are
complemented by our quantitative and computer skills. RP Financial'sconsulting
services are aided by its in-house data base resources for commercial banks and
savings institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (13)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Vice President (10)
<PAGE>
EXHIBIT 99.3
<PAGE>
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
203 West Broadway
Pocahontas, Arkansas 72455
(870) 892-4595
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held On _____________, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Special Meeting") of Pocahontas Federal Savings and Loan Association (the
"Bank") will be held at _____________________________________________________
___________________, located at _____________________________________________,
on _________________, 1998 at ____ __.m., Central time on ____________, 1998. As
of the date hereof, the Bank is majority-owned by Pocahontas Federal Mutual
Holding Company (the "Mutual Holding Company").
A Proxy Statement and Proxy Card(s) are enclosed. The Special Meeting is
for the purpose of considering and voting upon:
A Plan of Conversion and Reorganization (the "Plan" or the "Plan of
Conversion") pursuant to which (i) the Bank will organize Pocahontas
Bancorp, Inc. (the "Company") as a first tier Delaware chartered
subsidiary; (ii) the Company will organize an interim federal savings
association ("Interim") as a wholly owned subsidiary; (iii) the Mutual
Holding Company will convert into an interim federal stock savings
association and will simultaneously merge with and into the Bank with the
Bank as the resulting entity and with shares of Bank common stock held by
the Mutual Holding Company being canceled and each eligible account holder
and supplemental eligible account holder of the Bank receiving an interest
in the liquidation account of the Bank in exchange for such individual's
interest in the Mutual Holding Company; (iv) Interim will merge with and
into the Bank (the "Bank Merger") with the Bank as the resulting entity,
with each Minority Stockholder receiving common stock of the Company in
exchange for Minority Shares, based on the Exchange Ratio; (v) all of the
shares of common stock of Interim held by the Company shall be converted
into shares of common stock of the Bank; and (vi) contemporaneously with
the Bank Merger, the Company will offer for sale in the Offering shares of
common stock in a subscription and, if necessary, community offering; and
Such other business as may properly come before this Special Meeting or
any adjournment thereof. Management is not aware of any such other business.
The Board of Directors has fixed _______________, 1998 (the "Voting Record
Date") as the voting record date for the determination of stockholders entitled
to notice of and to vote at the Special Meeting. Only those stockholders of
record as of the close of business on that date will be entitled to vote at the
Special Meeting or at any such adjournment thereof. The following Proxy
Statement is a summary of information about the proposal to be voted on at the
Special Meeting. A more detailed description of the Mutual Holding Company, the
Company, the Bank and the proposal to be voted upon at the Special Meeting is
included in the Prospectus that you are receiving herewith and which is
incorporated into the Proxy Statement by reference. Capitalized terms used
herein without definition are defined in the Prospectus. Upon written request
addressed to the Secretary of the Bank at the address given above, members may
obtain an additional copy of the Prospectus, and/or a copy of the Plan of
Conversion and exhibits thereto, including the Certificate of Incorporation and
the Bylaws of the Company. In order to assure timely receipt of the additional
copy of the Prospectus and/or the Plan, the written request should be received
by the Bank by _______________, 1998. In addition, all such documents may be
obtained at any office of the Bank.
<PAGE>
By Order of the Board of Directors
James A. Edington
Secretary
________________, 1998
Pocahontas, Arkansas
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU SIGN, DATE AND MARK THE
ENCLOSED PROXY CARD IN FAVOR OF THE ADOPTION OF THE PLAN OF CONVERSION AND
RETURN IT PROMPTLY IN THE ENCLOSED SELF-ADDRESSED STAMPED ENVELOPE. PROXY CARDS
MUST BE RECEIVED PRIOR TO THE COMMENCEMENT OF THE SPECIAL MEETING. RETURNING
PROXY CARDS WILL NOT PREVENT YOU FROM VOTING IN PER-SON IF YOU ATTEND THE
SPECIAL MEETING.
YOUR VOTE IS VERY IMPORTANT. A FAILURE TO VOTE WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE PLAN.
<PAGE>
PROXY STATEMENT
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
203 West Broadway
Pocahontas, Arkansas 72455
(870) 892-4595
Special Meeting of Stockholders
To be Held on _____________, 1998
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Pocahontas Federal Savings
and Loan Association (the "Bank") for use at its Special Meeting of Stockholders
(the "Special Meeting") to be held at ___________________________ located at
_________________________ Arkansas, on _________________, 1998, at ____ __.m.,
Central time, and at any adjournments thereof, for the purposes set forth in the
Notice of Special Meeting of Stockholders. The accompanying Notice of Special
Meeting and this Proxy Statement is first being mailed to stockholders on or
about February ____, 1998.
REVOCATION OF PROXIES
Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Bank will be voted in accordance with the directions given thereon. Please
sign and return your Proxy to the Bank in order for your vote to be counted.
Proxies which are signed, but contain no instructions for voting, will be voted
"FOR" the proposal set forth in this Proxy Statement for consideration at the
Special Meeting.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Bank, James A. Edington, at the address of the Bank shown
above, or by filing a duly executed proxy bearing a later date. The presence at
the Meeting of any stockholder who has given a proxy shall not revoke such proxy
unless the stockholder delivers his or her ballot in person at the Meeting or
delivers a written revocation to the Secretary of the Bank prior to the voting
of such proxy.
Holders of record of the Bank common stock at the close of business on
_____________, 1998 (the "Voting Record Date") are entitled to one vote for each
share held . As of the Voting Record Date, there were 1,632,424 shares of Bank
common stock issued and outstanding, 862,500 of which were held by Pocahontas
Federal Mutual Holding Company (the "Mutual Holding Company") and 769,924 of
which were held by stockholders other than the Mutual Holding Company ("Minority
Stockholders"). The presence in person or by proxy of at least a majority of the
issued and outstanding shares of common stock entitled to vote is necessary to
constitute a quorum at the Special Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Pursuant to Office of Thrift Supervision ("OTS") regulations and the Plan
of Conversion, consummation of the Conversion is conditioned upon the approval
of the Plan by the OTS, as well as certain other conditions including: (1) the
approval of the holders of at least a majority of the total number of votes
eligible to be cast by Minority Stockholders at a special meeting of Members
called for the purpose of considering the Plan (the "Members' Meeting"), and (2)
the approval of the holders of at least two-thirds of the shares of the
outstanding Bank common stock. Accordingly, broker non-votes will have the same
effect as voting against the Plan of Conversion.
The Bank believes that the Mutual Holding Company will vote its shares of
common stock, which amount to approximately 52.8% of the outstanding shares, in
favor of the Plan of Conversion.
<PAGE>
PROPOSAL - APPROVAL OF THE PLAN OF CONVERSION
All persons receiving this proxy are also being given a prospectus (the
"Prospectus") that describes the Conversion. The Prospectus, in its entirety, is
incorporated herein and made a part hereof. Although the Prospectus is
incorporated herein, this proxy statement does not constitute an offer or a
solicitation of an offer to purchase the common stock offered thereby. The Bank
urges you to carefully read the Prospectus prior to voting on the proposal to be
presented at the Special Meeting.
DISSENTERS' AND APPRAISAL RIGHTS
Under OTS regulations, Minority Stockholders will not have dissenters'
rights or appraisal rights in connection with the exchange of their Bank common
stock for shares of common stock of the Company.
STOCKHOLDERS PROPOSALS
Any proposal which a stockholder wished to have included in the proxy
solicitation materials to be used in connection with the next annual meeting of
stockholders of the Bank which is expected to be held in January 1998, must have
been received at the main office of the Bank no later than ____________, 1998.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in the Proxy Statement. However,
if any matters should properly come before the Meeting, it is intended that
holders of the proxies will act in accordance with their best judgment.
The Plan of Conversion sets forth the terms, conditions and provisions of
the proposed Conversion. The proposed Certificate of Incorporation and Bylaws of
the Company are exhibits to the Plan of Conversion. The Order Form is the means
by which an order for the subscription and purchase of shares is placed. If you
would like to receive an additional copy of the Prospectus, or a copy of the
Plan of Conversion and the Certificate of Incorporation and Bylaws of the
Company, you must request such materials in writing, addressed to the Bank's
Secretary at the address given above. Such requests must be received by the Bank
no later than ________________, 1998. Requesting such materials does not
obligate you to purchase shares. If the Bank does not receive your request by
________________, 1998, you will not be entitled to have such materials mailed
to you.
To the extent necessary to permit approval of the Plan of Conversion,
proxies may be solicited by officers, directors or employees of the Bank, in
person, by telephone or through other forms of communication and, if necessary,
the Special Meeting may be adjourned to a later date. Such persons will be
reimbursed by the Bank for their reasonable out-of-pocket expenses, including,
but not limited to, de minimis telephone and postage expenses incurred in
connection with such solicitation. The Bank has not retained a proxy
solicitation firm to provide advisory services in connection with the
solicitation of proxies, although Friedman, Billings, Ramsey & Co., Inc.
("FBR"), the broker-dealer retained to assist in the marketing of Pocahontas
Bancorp, Inc.'s common stock, has also agreed to assist in the proxy
solicitations. FBR will receive compensation for their services as described in
the section of the Prospectus titled "The Conversion--Plan of Distribution and
Selling Commissions." The Bank will bear all costs of this solicitation.
2
<PAGE>
YOUR VOTE IS IMPORTANT! THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR THE PLAN OF CONVERSION.
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUBSCRIPTION SHARES. THE OFFER WILL BE MADE ONLY BY THE
PROSPECTUS.
3
<PAGE>
REVOCABLE PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
POCAHONTAS FEDERAL SAVINGS AND LOAN ASSOCIATION
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON _________________, 1998
The undersigned members of Pocahontas Federal Savings and Loan Association
(the "Bank), hereby appoint the full Board of Directors, 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 vote at
the Special Meeting of Members of the Bank to be held at _____________________
located at ______________________________, on _____________, 1998, at ____ _.m.,
Central time, and at any and all adjournments thereof. They are authorized to
cast all votes to which the undersigned is entitled as follows:
FOR AGAINST
--- -------
A Plan of Conversion and Reorganization (the "Plan" or |_| |_|
the "Plan of Conversion") pursuant to which (i) the Bank
will organize Pocahontas Bancorp, Inc. (the "Company")
as a first tier Delaware chartered subsidiary; (ii) the
Company will organize an interim federal savings
association ("Interim") as a wholly owned subsidiary;
(iii) the Mutual Holding Company will convert into an
interim federal stock savings association and will
simultaneously merge with and into the Bank with the
Bank as the resulting entity and with shares of Bank
common stock held by the Mutual Holding Company being
canceled and each eligible account holder and
supplemental eligible account holder of the Bank
receiving an interest in the liquidation account of the
Bank in exchange for such individual's interest in the
Mutual Holding Company; (iv) Interim will merge with and
into the Bank (the "Bank Merger") with the Bank as the
resulting entity, with each Minority Stockholder
receiving common stock of the Company in exchange for
Minority Shares, based on the Exchange Ratio; (v) all of
the shares of common stock of Interim held by the
Company shall be converted into shares of common stock
of the Bank; and (vi) contemporaneously with the Bank
Merger, the Company will offer for sale in the Offering
shares of common stock in a subscription and, if
necessary, community offering.
<PAGE>
Such other business as may properly come before the Special Meeting of any
adjournment thereof.
NOTE: The Board of Directors is not aware of any other matter that may
come before the Special Meeting of Members.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THE BOARD OF DIRECTORS IN
ITS BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING.
2
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PROPOSITION
STATED IF NO CHOICE IS MADE HEREON
Votes will be cast in accordance with the Proxy. Should the undersigned be
present and elect to vote at the Special Meeting or at any adjournment thereof
and after notification to the Secretary of the Bank at said Special Meeting of
the undersigned's decision to terminate this Proxy, then the power of said
attorney-in-fact or agents shall be deemed terminated and of no further force
and effect.
The undersigned acknowledges receipt of a Notice of Meeting of Members and
a Proxy Statement dated _____________, 1998, prior to the execution of this
Proxy.
- ------------------------------------
Date
- ------------------------------------
Signature
NOTE: Only one signature is required
in the case of a joint account.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
