<PAGE>
As filed with the Securities and Exchange Commission on April 2, 1998
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HOMESTEAD BANCORP, INC.
(Exact name of registrant as specified in its articles of incorporation)
<TABLE>
<CAPTION>
<S> <C> <C>
Louisiana 6711 (Being Applied For)
------------------------------- ------------------------- --------------------
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
</TABLE>
195 North Sixth Street
Ponchatoula, Louisiana 70454
(504) 386-3379
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Lawrence J. Caldwell, Jr.
President and Chief Executive Officer
195 North Sixth Street
Ponchatoula, Louisiana 70454
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copy to:
Gerald F. Heupel, Jr., Esq.
Kevin M. Houlihan, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
12th Floor
Washington, D.C. 20005
(202) 347-0300
___________
Approximate date of commencement of proposed sale to 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 under the Securities Act of
1933, check the following box. [ X ]
<TABLE>
<CAPTION>
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Title of each
Class of Amount Purchase Aggregate
Securities to to be Price Offering Registration
be Registered Registered Per Share Price Fee
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<S> <C> <C> <C> <C>
Common Stock,
$.01 par value
per share 1,124,125 shares $10.00 $11,241,250(1) $4,461
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- -------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that the Registration Statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said section 8(a)
may determine.
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<PAGE>
PROSPECTUS
HOMESTEAD BANCORP, INC.
(Proposed Holding Company for Ponchatoula Homestead Savings, F.A.)
Up to 1,285,170 Shares of Common Stock
Homestead Bancorp, Inc. (the "Company"), a Louisiana corporation, is
offering up to 1,285,170 shares (which may be increased to up to 1,477,945
shares under certain circumstances described below) of its common stock, par
value $.01 per share (the "Common Stock"), in connection with the Exchange and
the Offerings described herein.
The Exchange. Pursuant to a Plan of Conversion of Homestead Mutual Holding
Company (the "Mutual Holding Company") and Agreement and Plan of Reorganization
between the Company and Ponchatoula Homestead Savings, F.A. ("Ponchatoula" or
the "Association") (the "Plan" or "Plan of Conversion"), Ponchatoula will become
a subsidiary of the Company upon consummation of the transactions described
herein (collectively, with the Offerings, the "Conversion"). As a result of the
Conversion, (i) each share of common stock, par value $.10 per share, of
Ponchatoula ("Ponchatoula Common Stock") held by the Mutual Holding Company,
which currently holds 76.06% of the outstanding Ponchatoula Common Stock as
adjusted for dividends waived by the Mutual Holding Company, will be cancelled,
and (ii) each share of Ponchatoula Common Stock held by Ponchatoula's public
stockholders (the "Public Ponchatoula Shares"), which amounted to 23.94% of the
outstanding Ponchatoula Common Stock as adjusted at March 31, 1998, will be
converted into shares of Common Stock (the "Exchange Shares") pursuant to a
ratio (the "Exchange Ratio") that will result in the holders of such shares (the
"Public Stockholders") owning in the aggregate approximately the same percentage
of the Company as they owned of Ponchatoula (as adjusted for waived dividends)
before giving effect to such stockholders purchasing additional shares,
receiving cash in lieu of fractional shares or exercising dissenters' rights
(the "Exchange"). As discussed under "Independent Valuation" below and herein,
the final Exchange Ratio will be determined based on the Public Stockholders'
adjusted ownership interest and not on the market value of the Public
Ponchatoula Shares.
The Offerings. In addition to the Exchange, nontransferable subscription
rights to subscribe for up to 977,500 shares (which may be increased to up to
1,124,125 shares under certain circumstances described below) of Common Stock
(the "Conversion Stock") have been granted to certain depositors and borrowers
of Ponchatoula as of specified record dates, the Company's Employee Stock
Ownership Plan ("ESOP"), directors, officers and employees of the Mutual Holding
Company and Ponchatoula, and the Public Stockholders, subject to the limitations
described herein (the "Subscription Offering"). Commencing concurrently with the
Subscription Offering, and subject to the prior rights of holders of
subscription rights, the right of the Company, the Mutual Holding Company and
Ponchatoula (the "Primary Parties") to reject such orders in whole or in part
and the other limitations described herein, the Company is offering the shares
of Conversion Stock not
<PAGE>
subscribed for in the Subscription Offering, if any, for sale in a community
offering (the "Community Offering") to certain members of the general public to
whom a copy of this Prospectus is delivered by or on behalf of the Company, with
preference given to natural persons residing in Tangipahoa Parish, Louisiana.
It is anticipated that shares of Conversion Stock not subscribed for in the
Subscription and Community Offerings, if any, will be offered in a syndicated
community offering (the "Syndicated Community Offering") (the Subscription
Offering, Community Offering and any Syndicated Community Offering are referred
to collectively as the "Offerings"). The Primary Parties have engaged Trident
Securities, Inc., ("Trident") to consult with and advise them in the Conversion,
and Trident has agreed to use its best efforts to solicit subscriptions and
purchase orders for shares of Conversion Stock in the Offerings. Trident is not
obligated to take or purchase any shares of Conversion Stock in the Offerings.
See "The Conversion - Marketing Arrangements."
The Subscription Offering will terminate at noon, Central Time, on
________, 1998 (the "Expiration Date"), unless extended by the Primary Parties,
with approval of the Office of Thrift Supervision ("OTS"), if necessary. The
Community Offering is expected to terminate at the same time as the Subscription
Offering. The Community Offering and/or any Syndicated Community Offering must
be completed within 45 days after the close of the Subscription Offering, or
_____, 1998, unless extended by the Primary Parties with the approval of the
OTS, if necessary. Orders submitted are irrevocable until the completion of the
Conversion; provided that, if the Conversion is not completed within the 45-day
period referred to above, unless such period has been extended with the consent
of the OTS, if necessary, all subscribers will have their funds returned
promptly with interest, and all withdrawal authorizations will be cancelled. See
"The Conversion - The Offerings Subscription Offering."
Independent Valuation. RP Financial, Inc. ("RP Financial") has prepared an
independent appraisal, which states that the estimated pro forma market value of
Ponchatoula and the Mutual Holding Company on a combined basis was $11,175,390
as of March 20, 1998 (the "Appraisal"). The Appraisal was multiplied by the
Mutual Holding Company's adjusted percentage interest in Ponchatoula (i.e.,
76.06%), to determine a midpoint ($8,500,000), and the minimum and maximum range
were set at 15% below and above the midpoint, respectively, resulting in a range
of $7,225,000 to $9,775,000 (the "Estimated Valuation Range").
The Boards of Directors of the Primary Parties determined that the
Conversion Stock would be sold at $10.00 per share (the "Purchase Price"),
resulting in a range of 722,500 to 977,500 shares of Conversion Stock being
offered. Upon consummation of the Conversion, the Conversion Stock and the
Exchange Shares will represent approximately 76.06% and 23.94%, respectively, of
the Company's total outstanding shares. Based upon the Estimated Valuation
Range, the Exchange Ratio is expected to range from 1.51499 Exchange Shares to
2.04970 Exchange Shares for each Public Ponchatoula Share outstanding.
Accordingly,
2
<PAGE>
the value of the Exchange Shares is expected to range from $2,274,080 to
$3,076,700, or between 227,408 and 307,670 Exchange Shares. The Estimated
Valuation Range may be increased or decreased to reflect changes in market and
economic conditions prior to completion of the Conversion, and under certain
circumstances specified herein subscribers will be resolicited and given the
right to modify or cancel their orders. See "The Conversion - Stock Pricing,
Exchange Ratio and Number of Shares to be Issued."
In addition to Conversion Stock and Exchange Shares, the Company's
Board of Directors may determine to issue additional shares in an amount equal
to up to 3% of the Conversion Stock to address allocation oversights, lost or
misplaced orders which should have been filled, and subscription orders
initially rejected but later found to be legitimate ("Contingent Shares"). All
references herein to Conversion Stock shall be deemed to exclude Contingent
Shares. See "The Summary - Contingent Shares."
Purchase Limitations. The Plan sets forth various purchase limitations
which are applicable in the Offerings. See "The Conversion - The Offerings -
Subscription Offering," "- Community Offering," "-Syndicated Community Offering"
and "- Limitations on Conversion Stock Purchases."
Required Approvals. The consummation of the Conversion is subject to
the receipt of various regulatory approvals and the approval of the members of
the Mutual Holding Company and the stockholders of Ponchatoula in the manner set
forth herein.
It is unlikely that an active and liquid market for the Common Stock
will develop. See "Risk Factors - Market for Common Stock."
For a discussion of certain factors that should be considered by
prospective investors, 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 STATE
SECURITIES COMMISSION, NOR HAS SUCH COMMIS-
SION, OFFICE OR OTHER AGENCY PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
3
<PAGE>
<TABLE>
<CAPTION>
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Estimated
Underwriting
Subscription Fees and Other Estimated Net
Price(1) Expenses(2) Proceeds(3)
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<S> <C> <C> <C>
Minimum Per Share $ 10.00 $ .58 $ 9.42
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Midpoint Per Share $ 10.00 $ .51 $ 9.49
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Maximum Per Share $ 10.00 $ .46 $ 9.54
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Maximum Per Share, as adjusted $ 10.00 $ .41 $ 9.59
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Total Minimum(1) $ 7,225,000 $ 421,179 $ 6,803,821
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Total Midpoint(1) $ 8,500,000 $ 434,375 $ 8,065,625
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Total Maximum(1) $ 9,775,000 $ 447,571 $ 9,327,429
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Total Maximum, as adjusted(1) $ 11,241,250 $ 462,747 $ 10,778,503
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</TABLE>
(1) Based upon the minimum, midpoint, maximum and 15% above the maximum of
the Estimated Valuation Range, respectively, excluding any Contingent
Shares.
(2) Consists of the estimated costs to be incurred by the Primary Parties
in connection with the Conversion, including estimated fixed expenses
of $350,000 and marketing fees to be paid to Trident in connection with
the Offerings, which fees are estimated to be $71,179 and $97,571 based
on the minimum and the maximum of the Estimated Valuation Range,
respectively. Trident will not receive a fee on any Contingent Shares.
See "The Conversion - Marketing Arrangements." The actual fees and
expenses may vary from the estimates. Such fees paid to Trident may be
deemed to be underwriting fees. See "Pro Forma Data."
(3) Actual net proceeds may vary substantially from estimated amounts
depending on the number of shares sold in the Offerings and other
factors. Does not give effect to purchases of shares of Conversion
Stock by the ESOP, which initially will be deducted from the Company's
stockholders' equity. For the effects of such purchases, see
"Capitalization" and "Pro Forma Data."
TRIDENT SECURITIES, INC.
The date of this Prospectus is __________, 1998.
4
<PAGE>
[map]
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY.
5
<PAGE>
SUMMARY
This summary is qualified in its entirety by the more detailed
information regarding Ponchatoula and the Mutual Holding Company and the
Financial Statements of Ponchatoula appearing elsewhere in this Prospectus.
Homestead Bancorp, Inc.
Homestead Bancorp, Inc. is a Louisiana corporation organized in February
1998 by Ponchatoula for the purpose of holding all of the capital stock of
Ponchatoula and in order to facilitate the Conversion. Upon completion of the
Conversion, the only significant assets of the Company will be all of the
outstanding Ponchatoula Common Stock, the note evidencing the Company's loan to
the ESOP and the portion of the net proceeds from the Offerings retained by the
Company. The business of the Company will initially consist of the business of
Ponchatoula. See "Business" and "Regulation - The Company."
Ponchatoula Homestead Savings, F.A.
Ponchatoula Homestead Savings, F.A. is a federally chartered stock
savings institution that was organized on August 31, 1994 as a subsidiary of the
Mutual Holding Company. Prior to that date, Ponchatoula Homestead Association
("Ponchatoula Homestead"), the predecessor to Ponchatoula in its mutual form,
had operated in the market area now served by Ponchatoula. In connection with
the organization of the Mutual Holding Company (the "MHC Reorganization"),
Ponchatoula Homestead transferred substantially all of its assets and
liabilities to Ponchatoula in exchange for 456,240 shares of Ponchatoula Common
Stock and converted its charter to that of a federal mutual holding company
known as Homestead Mutual Holding Company. As part of the MHC Reorganization,
Ponchatoula also sold an additional 143,760 shares of Ponchatoula Common Stock
to certain members of the general public. After taking into account the issuance
of 6,345 shares pursuant to stock benefit plans, Ponchatoula has 150,105
outstanding shares of Ponchatoula Common Stock that are held by persons other
than the Mutual Holding Company.
Ponchatoula is primarily engaged in attracting deposits from the
general public through its offices and using such funds to originate loans
secured by single-family residences located primarily in Tangipahoa, Livingston
and St. Helena Parishes, Louisiana and to purchase mortgage-backed securities.
Ponchatoula's single-family residential loans amounted to $20.1 million or 63.9%
of Ponchatoula's total loan and lease portfolio (including loans held for sale)
and 33.8% of total assets at December 31, 1997, and mortgage-backed securities
amounted to $24.6 million or 41.2% of total assets at December 31, 1997. To a
much lesser extent, Ponchatoula originates construction loans secured by
single-family residential real estate, which amounted to $3.2 million or 10.3%
of the total loan and lease portfolio (including loans held for sale) at
December 31, 1997, as well as consumer loans, which amounted to $7.2 million or
22.8% of the total loan and lease
6
<PAGE>
portfolio (including loans held for sale) at such date. Ponchatoula also
originates commercial real estate loans and land loans to a limited extent and
invests in interest-bearing deposits in other financial institutions and U.S.
Government and federal agency obligations.
Ponchatoula's leases are bond for deed contracts in which Ponchatoula
retains title to the property until all payments are made on the contract, at
which time Ponchatoula transfers the title to the lessee. Total leases amounted
to $301,000 at December 31, 1997, and Ponchatoula has not originated any leases
since 1995.
Ponchatoula is a community-oriented savings institution which
emphasizes customer service and convenience. As part of this strategy,
Ponchatoula has developed a variety of products and services which meet the
needs of its retail customers. Ponchatoula generally has sought to achieve
long-term financial strength and stability by (i) increasing the amount and
stability of its net interest income, (ii) managing its assets and liabilities
to reduce its vulnerability to changes in interest rates, and (iii) maintaining
a high level of regulatory capital. In pursuit of these goals, Ponchatoula has
adopted a number of complementary business strategies which emphasize retail
lending and deposit products and services traditionally offered by savings
institutions. Highlights of Ponchatoula's business strategy include the
following:
Emphasis on Traditional Lending and Investment Activities. Management
believes that Ponchatoula is more likely to achieve its goals of long-term
financial strength and profitability by emphasizing retail products and
services, as opposed to wholesale or commercial activities. Ponchatoula's
primary lending emphasis is the origination of loans secured by first liens on
single-family (one-to-four units) residences and, to a lesser extent, consumer
loans, such as second mortgages and home equity and improvement loans. At
December 31, 1997, Ponchatoula's net loans and leases (including loans held for
sale) amounted to $29.5 million or 49.5% of Ponchatoula's total assets. In
addition, $24.6 million or 41.2% of Ponchatoula's total assets at December 31,
1997 consisted of adjustable-rate mortgage-backed securities, which are backed
by single-family residential loans.
Interest Rate Risk Management. Ponchatoula has implemented a strategy
designed to maintain the interest rate maturity of its assets relative to its
liabilities. The primary elements of the strategy include (i) purchasing
adjustable-rate mortgage-backed securities and short-term investment securities,
(ii) emphasizing the origination of 15-year, fixed-rate single-family
residential loans and, to the extent possible, adjustable-rate mortgages
("ARMs"), (iii) selling newly-originated, 30-year, fixed-rate single-family
residential loans in the secondary market, except that commencing February 1998
Ponchatoula began retaining a portion of such loans and matching them with
long-term FHLB advances, and (iv) managing interest rate expense. Based upon
certain repricing assumptions, Ponchatoula's interest-bearing liabilities
repricing or maturing within one year exceeded its interest-earning assets with
similar characteristics by $2.3 million or 3.8% of total assets at December 31,
1997.
7
<PAGE>
Emphasis on Retail Deposits. Ponchatoula's liability strategy
emphasizes retail deposits obtained through its offices. This strategy is
facilitated by Ponchatoula's emphasis on lower-costing passbook savings,
negotiable order of withdrawal ("NOW") and money market accounts, which in the
aggregate amounted to $10.7 million or 25.3% of Ponchatoula's total deposits at
December 31, 1997. At December 31, 1997, the weighted average rate paid on
Ponchatoula's passbook savings, NOW and money market accounts amounted to 2.41%,
as compared to a weighted average rate paid of 5.24% on Ponchatoula's
certificates of deposits at such date.
High Asset Quality. Total non-performing assets have declined from .76%
of total assets at December 31, 1995 to .29% of total assets at December 31,
1997. Non-accruing single-family residential loans and leases represented 100%
of the total non-performing assets at December 31, 1997 and 1995, and these
non-accruing loans have steadily declined in recent years. Single-family real
estate owned accounted for 27.9% of total non-performing assets at December 31,
1996, but all of such real estate owned was sold in 1997. At December 31, 1997,
Ponchatoula's allowance for loan and lease losses equalled $265,000 or .84% of
total loans and leases outstanding.
Maintain High Levels of Regulatory Capital. Ponchatoula seeks to
maintain high levels of regulatory capital to give it maximum flexibility in the
changing regulatory environment and to respond to changes in market and economic
conditions. At December 31, 1997, Ponchatoula's tangible, core and risk-based
capital ratios amounted to 9.68%, 9.68% and 23.69%, respectively, which exceeded
the minimum requirements of 1.5%, 3.0% and 8.0% by $4.9 million, $4.0 million
and $4.0 million, respectively. The Conversion will further increase
Ponchatoula's regulatory capital, as Ponchatoula's pro forma tangible capital
ratio will increase to 14.01% if Conversion Shares are sold at the midpoint of
the Estimated Valuation Range. The pro forma capital levels may initially result
in the Company's return on equity being below the industry average. See "Risk
Factors - Potential Low Return on Equity Following the Conversion; Uncertainty
as to Future Growth Opportunities." To manage its capital levels, the Company
intends to consider stock repurchases and/or returns of capital as soon as
permissible following the Conversion. See "Use of Proceeds."
Ponchatoula is subject to extensive regulation, supervision and
examination by the Office of Thrift Supervision ("OTS"), its primary federal
regulator, and by the Federal Deposit Insurance Corporation ("FDIC"), which
insures its deposits up to applicable limits. Such regulation and supervision
establishes a comprehensive framework of activities in which an institution may
engage and is intended primarily for the protection of depositors and the
Savings Association Insurance Fund ("SAIF") administered by the FDIC.
Ponchatoula is also a member of the Federal Home Loan Bank ("FHLB") of Dallas,
which is one of the 12 banks which comprise the FHLB System. Ponchatoula is
further subject to regulations of the Board of Governors of the Federal Reserve
System ("Federal Reserve Board") governing reserves required to be maintained
against deposits and certain other matters.
8
<PAGE>
Ponchatoula's executive offices are located at 195 North Sixth Street,
Ponchatoula, Louisiana 70454, and its telephone number is (504) 386-3379.
Homestead Mutual Holding Company
Homestead Mutual Holding Company is a federally chartered mutual
holding company chartered on August 31, 1994 in connection with the MHC
Reorganization. The Mutual Holding Company's primary asset is 456,240 shares of
Ponchatoula Common Stock, which represents 75.2% of the shares of Ponchatoula
Common Stock outstanding as of the date of this Prospectus. The Mutual Holding
Company's only other asset consists of a deposit account in the amount of
$101,675 as of December 31, 1997 (which will become an asset of Ponchatoula upon
consummation of the Conversion). As part of the Conversion, the Mutual Holding
Company will convert from mutual form to a federal interim stock savings
institution and simultaneously merge with and into Ponchatoula, with Ponchatoula
being the surviving entity.
The Conversion
On February 25, 1998, the Boards of Directors of Ponchatoula and the
Mutual Holding Company adopted the Plan, and as of February 27, 1998 Ponchatoula
incorporated the Company under Louisiana law as a first-tier wholly owned
subsidiary of Ponchatoula. Pursuant to the Plan, (i) the Mutual Holding Company
will convert to an interim federal stock savings institution and simultaneously
merge with and into Ponchatoula, pursuant to which the Mutual Holding Company
will cease to exist and the 456,240 shares of Ponchatoula Common Stock held by
the Mutual Holding Company will be cancelled, and (ii) an interim savings
institution ("Interim") to be formed as a wholly owned subsidiary of the Company
solely for such purpose will then merge with and into Ponchatoula. As a result
of the merger of Interim with and into Ponchatoula, Ponchatoula will become a
wholly owned subsidiary of the Company and the 150,105 outstanding Public
Ponchatoula Shares will be converted into Exchange Shares pursuant to the
Exchange Ratio, which will result in the holders of such shares owning in the
aggregate approximately the same percentage of the Common Stock to be
outstanding upon completion of the Conversion (i.e., the Conversion Stock and
the Exchange Shares) as the percentage of Ponchatoula Common Stock owned by them
in the aggregate immediately prior to consummation of the Conversion (as
adjusted to reflect the dividends previously waived by the Mutual Holding
Company), before giving effect to (a) the payment of cash in lieu of issuing
fractional Exchange Shares, (b) any shares of Conversion Stock purchased by
Ponchatoula's stockholders in the Offerings, (c) any exercise of dissenters'
rights, and (d) any Contingent Shares.
Because the Mutual Holding Company has previously waived dividends
declared by Ponchatoula and paid to the Public Stockholders, for purposes of the
Conversion the respective percentage ownership interests of the Mutual Holding
Company and the Public Stockholders were adjusted to reflect the waived
dividends. As a result, the Mutual Holding
9
<PAGE>
Company's percentage interest increased from 75.2% to 76.06%, and the
aggregate percentage interest of the Public Stockholders decreased from 24.8% to
23.94%.
In addition to the Exchange Shares to be issued to the Public
Stockholders pursuant to the Exchange, pursuant to the Plan, the Company is
offering shares of Conversion Stock in the Offerings as part of the Conversion.
See "- The Offerings" below and "The Conversion - The Offerings."
Under OTS regulations, Public Stockholders of Ponchatoula have
dissenters' rights of appraisal in connection with the Conversion. Holders of
Ponchatoula Common Stock who elect to exercise such rights must carefully
satisfy certain requirements as described under "The Conversion - Dissenters'
Rights of Appraisal," in which event the holders of such shares ("Dissenting
Shares") will receive cash for their shares rather than Exchange Shares. Because
the Board of Directors of Ponchatoula recommends that Public Stockholders vote
in favor of the Conversion, the Board of Directors does not recommend that
Public Stockholders exercise dissenters' rights.
10
<PAGE>
The following diagram outlines the current organizational structure of
the parties' ownership interests:
Homestead Mutual Holding Company Holders of Public Ponchatoula
Shares
75.2% 24.8%
Ponchatoula Homestead Savings, F.A.
100%
Homestead Bancorp, Inc.
100%
Interim (to be formed)
11
<PAGE>
The following diagram reflects the resulting structure of the parties
upon consummation of the Conversion, including (i) the merger of the Mutual
Holding Company (following its conversion into an interim federal stock savings
institution) with and into Ponchatoula, (ii) the merger of Interim with and into
Ponchatoula, pursuant to which the Public Ponchatoula Shares will be converted
into Exchange Shares, and (iii) the offering of Conversion Stock. The aggregate
percentage interest of the holders of Public Ponchatoula Shares was decreased
from 24.8% to 23.94% to reflect the dividends that were previously paid to the
Pubic Stockholders but waived by the Mutual Holding Company. The diagram assumes
that there are no fractional Exchange Shares and does not give effect to (i)
purchases of Conversion Stock by holders of Public Ponchatoula Shares, (ii) the
exercise of outstanding stock options, (iii) any exercise of dissenters' rights,
or (iv) the issuance of any Contingent Shares.
Purchasers of Conversion Stock Holders of Public
Ponchatoula Shares
76.06% 23.94%
Homestead Bancorp, Inc.
100%
Ponchatoula Homestead Savings, F.A.
Pursuant to OTS regulations, consummation of the Conversion is
conditioned upon the approval of the Plan by the OTS, as well as (1) the
approval of the holders of at least a majority of the total number of votes
eligible to be cast by the members of the Mutual Holding Company ("Members") as
of the close of business on __________, 1998 (the "Voting Record Date") at a
special meeting of Members called for the purpose of submitting the Plan for
approval (the "Members' Meeting"), and (2) the approval of the holders of at
least two-thirds of the outstanding shares of Ponchatoula Common Stock held by
the Mutual Holding Company and the Public Stockholders (collectively, the
"Stockholders"), as of the Voting Record Date at a special meeting of
Stockholders called for the purpose of considering the Plan (the "Stockholders'
Meeting"). The Mutual Holding Company intends
12
<PAGE>
to vote its shares of Ponchatoula Common Stock, which amount to 75.2% of the
outstanding shares, in favor of the Plan at the Stockholders' Meeting. In
addition, the Primary Parties have conditioned the consummation of the
Conversion on the approval of the Plan by at least a majority of the votes cast,
in person or by proxy, by the Public Stockholders at the Stockholders' Meeting.
Purposes of the Conversion
A principal purpose of the Conversion is to structure the Company in a
form used by most other holding companies of savings institutions and commercial
banks and most other business entities, which, with the increased capital
resulting from the Offerings, will support the future expansion of operations of
Ponchatoula, as well as possible diversification into other banking-related
businesses and for other business or investment purposes. Although there are no
current arrangements, understandings or agreements regarding such opportunities,
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
additional opportunities for such expansion that may arise in the future.
The Offerings will also result in more shares of Common Stock
outstanding, which should result in a more active and liquid market for the
Common Stock than currently exists for the Ponchatoula Common Stock, although
there can be no assurances that this will be the case. See "Risk Factors -
Market for Common Stock."
If Ponchatoula had undertaken a standard conversion involving the
formation of a stock holding company in 1994, applicable OTS regulations would
have required a greater amount of common stock to be sold than the $1.2 million
of net proceeds raised in the MHC Reorganization. Management of Ponchatoula
believed that it may have been difficult to prudently invest in a timely manner
the larger amount of capital that would have been raised in a standard
conversion, when compared to the net proceeds raised in connection with the MHC
Reorganization. A standard conversion in 1994 also would have immediately
eliminated all aspects of the mutual form of organization.
The Offerings will further increase the capital of the Company and
Ponchatoula and provide them with additional flexibility to grow and increase
net income.
In light of the foregoing, the Boards of Directors of Ponchatoula and
the Mutual Holding Company believe that the Conversion is in the best interests
of such companies and their respective Stockholders and Members. See "The
Conversion."
The Offerings
Pursuant to the Plan and in connection with the Conversion, the Company
is offering up to 977,500 shares of Conversion Stock in the Offerings, which may
be increased to up to 1,124,125 shares of Conversion Stock if the Estimated
Valuation Range is increased by up
13
<PAGE>
to 15%, excluding any Contingent Shares. Conversion Stock is first being offered
in the Subscription Offering with nontransferable subscription rights being
granted, in the following order of priority, to (i) depositors of Ponchatoula
with account balances of $50.00 or more as of the close of business on December
31, 1996 ("Eligible Account Holders"); (ii) the ESOP; (iii) depositors of
Ponchatoula with account balances of $50.00 or more as of the close of business
on March 31, 1998 ("Supplemental Eligible Account Holders"); (iv) depositors and
borrowers of Ponchatoula as of the Voting Record Date, __________, 1998 (other
than Eligible Account Holders and Supplemental Eligible Account Holders) ("Other
Members"); (v) directors, officers and employees of the Mutual Holding Company
and Ponchatoula; and (vi) Public Stockholders. Subscription rights will expire
if not exercised by noon, Central Time, on ________, 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 this Prospectus is delivered, with preference given to natural
persons residing in Tangipahoa Parish, Louisiana. It is anticipated that shares
not subscribed for in the Subscription and Community Offerings will be offered
to certain members of the general public in a Syndicated Community Offering. The
Primary Parties reserve the absolute right to reject or accept any orders in the
Community Offering or the Syndicated 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 Primary Parties have retained Trident as a consultant and advisor
in connection with the Offerings and to assist in soliciting subscriptions in
the Offerings. See "The Conversion - The Offerings - Subscription Offering," "-
Community Offering," "- Syndicated Community Offering" and "- Marketing
Arrangements."
Restrictions on Transfer of Subscription Rights
Prior to the completion of the Conversion, 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 or the shares of
Common Stock to be issued upon their exercise. Each person exercising
subscription rights will be required to certify that the 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."
Subscription rights are nontransferable and persons found to be attempting to
transfer subscription rights will be subject to the forfeiture of such rights
and possible further sanctions and penalties imposed by the OTS. The Company and
Ponchatoula intend to 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.
14
<PAGE>
Purchase Limitations
With the exception of the ESOP, which intends to purchase up to an
aggregate of 8% of the number of shares of Conversion Stock to be issued in the
Offerings (excluding any Contingent Shares), no Eligible Account Holder,
Supplemental Eligible Account Holder, Other Member, director, officer or
employee or Public Stockholder may purchase in their capacity as such in the
Subscription Offering more than 1% of the Conversion Stock sold in the Offerings
(9,775 shares of Conversion Stock at the maximum of the Estimated Valuation
Range); no person may purchase in each of the Community Offering and any
Syndicated Community Offering more than 1% of the Conversion Stock; and no
person, together with associates of or persons acting in concert with such
person, may purchase in the Offerings more than the number of shares of
Conversion Stock that when combined with Exchange Shares received by such
person, together with associates of and persons acting in concert with such
person, aggregate more than 3% of the total number of shares of Common Stock
issued in the Conversion (28,497 shares and 38,555 shares at the minimum and
maximum of the Estimated Valuation Range, respectively). At any time during the
Offerings, and without further approval by the Members or the Stockholders, the
Primary Parties may in their sole discretion decrease or increase any of the
purchase limitations up to 5% of the Common Stock issued in the Conversion.
Under certain circumstances, certain subscribers may be resolicited in the event
of such an increase. The minimum purchase is 25 shares. See "The Conversion -
Limitations on Conversion Stock Purchases." In the event of an oversubscription,
shares will be allocated in accordance with the Plan, as described under "The
Conversion - The Offerings - Subscription Offering" and "- Community Offering."
Because the overall purchase limitation contained in the Plan of Conversion
includes Exchange Shares to be issued to Public Stockholders for their Public
Ponchatoula Shares, certain holders of Public Ponchatoula Shares may be limited
in their ability to purchase Conversion Stock in the Offerings.
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. The Company and Ponchatoula may
presume that certain persons are acting in concert based upon, among other
things, joint account relationships and the fact that such persons have filed
joint Schedule 13Ds with the Securities and Exchange Commission ("SEC") with
respect to other companies. The term "associate" of a person is defined in the
Plan of Conversion to mean (i) any corporation or organization (other than the
Mutual Holding Company, Ponchatoula or a majority-owned subsidiary of
Ponchatoula or the Company) of which such person is a director, officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities; (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity (excluding tax-qualified employee
benefit plans of the Company or Ponchatoula); and (iii) any relative or spouse
of such person, or any relative
15
<PAGE>
of such spouse, who either has the same home as such person or who is a director
or officer of the Company or Ponchatoula or any of their subsidiaries.
Stock Pricing, Exchange Ratio and Number of Shares to be Issued in the
Conversion
Federal regulations require the aggregate purchase price of the Conversion
Stock to be consistent with RP Financial's pro forma appraisal of Ponchatoula
and the Mutual Holding Company, which was $11,175,390 as of March 20, 1998. The
holders of the Public Ponchatoula Shares will continue to hold the same
aggregate percentage ownership interest in the Company as they held in
Ponchatoula as adjusted to reflect the dividends waived by the Mutual Holding
Company and before giving effect to any shares of Common Stock purchased by
Ponchatoula's stockholders in the Offerings, the payment of cash in lieu of
issuing fractional Exchange Shares, any Dissenting Shares and any Contingent
Shares. As a result, the Appraisal was multiplied by the Mutual Holding
Company's adjusted percentage interest in Ponchatoula, which corresponds with
the amount of Conversion Stock to be sold in the Offerings (i.e., 76.06%), to
determine the midpoint of the Estimated Valuation Range, which was $8,500,000.
In accordance with OTS regulations, the minimum and maximum of the Estimated
Valuation Range were set at 15% below and above the midpoint, respectively,
resulting in an offering range for the Conversion Stock of $7,225,000 to
$9,775,000. The full text of the appraisal report of RP Financial describes the
procedures followed, the assumptions made, limitations on the review undertaken
and matters considered. The appraisal report has been filed as an exhibit to the
Registration Statement and Application for Conversion of which this Prospectus
is a part, and is available in the manner set forth under "Additional
Information." This appraisal of the Conversion Stock is not intended and should
not be construed as a recommendation of any kind as to the advisability of
purchasing such stock.
All shares of Conversion Stock will be sold at the Purchase Price of $10.00
per share, which was established by the Boards of Directors of the Primary
Parties. The actual number of shares to be issued in the Offerings will be
determined by the Primary Parties based upon the final updated valuation of the
estimated pro forma market value of the Conversion Stock at the completion of
the Offerings. The number of shares of Conversion Stock to be issued is expected
to range from a minimum of 722,500 shares to a maximum of 977,500 shares.
Subject to approval of the OTS, the Estimated Valuation Range may be increased
or decreased to reflect market and economic conditions prior to the completion
of the Offerings, and under such circumstances the Primary Parties may increase
or decrease the number of shares of Conversion Stock. No resolicitation of
subscribers will be made and subscribers will not be permitted to modify or
cancel their subscriptions unless (i) the gross proceeds from the sale of the
Conversion Stock are less than the minimum or more than 15% above the maximum of
the current Estimated Valuation Range (excluding any Contingent Shares) or (ii)
the Offerings are extended beyond _____, 1998. Any increase or decrease in the
number of shares of Conversion Stock will result in a corresponding change in
the number of Exchange Shares, so that upon consummation of the Conversion, the
Conversion Stock and the Exchange Shares will represent approximately 76.06% and
16
<PAGE>
23.94%, respectively, of the Company's total outstanding shares (excluding cash
in lieu of fractional Exchange Shares as well as any Dissenting Shares or
Contingent Shares). See "Pro Forma Data," "Risk Factors - Possible Dilutive
Effect of Issuance of Additional Shares" and "The Conversion - Stock Pricing,
Exchange Ratio and Number of Shares to be Issued."
Based on the 150,105 Public Ponchatoula Shares outstanding at March 31,
1998, and assuming a minimum of 722,500 and a maximum of 977,500 shares of
Conversion Stock are issued in the Offerings, the Exchange Ratio is expected to
range from approximately 1.51499 Exchange Shares to 2.04970 Exchange Shares for
each Public Ponchatoula Share outstanding immediately prior to the consummation
of the Conversion. The Exchange Ratio will be affected if any stock options to
purchase shares of Ponchatoula Common Stock are exercised after March 31, 1998
and prior to consummation of the Conversion. If any of such stock options are
outstanding immediately prior to consummation of the Conversion, they will be
converted into options to purchase shares of Common Stock, with the number of
shares subject to the option and the exercise price per share to be adjusted
based upon the Exchange Ratio so that the aggregate exercise price remains
unchanged, and with the duration of the option remaining unchanged. At March 31,
1998, there were options to purchase 13,643 shares of Ponchatoula Common Stock
outstanding, all of which had an exercise price of $10.00 per share, and
Ponchatoula has no plans to grant additional stock options prior to the
consummation of the Conversion.
The following table sets forth, based upon the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range, the
following: (i) the total number of shares of Conversion Stock and Exchange
Shares to be issued in the Conversion, (ii) the percentage of the total Common
Stock represented by the Conversion Stock and the Exchange Shares, and (iii) the
Exchange Ratio. The table assumes that there are no Dissenting Shares,
Contingent Shares or fractional Exchange Shares.
<TABLE>
<CAPTION>
Conversion Stock to Be
Issued(1) Exchange Shares to be Issued(1) Total Shares of
-------------------------- ------------------------------- Common Stock to Exchange
Amount Percent Amount Percent be Outstanding(1) Ratio(1)
------------ ------------ ----------- -------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Minimum 722,500 76.06% 227,408 23.94% 949,908 1.51499
Midpoint 850,000 76.06 267,539 23.94 1,117,539 1.78235
Maximum 977,500 76.06 307,670 23.94 1,285,170 2.04970
15% above maximum 1,124,125 76.06 353,820 23.94 1,477,945 2.35715
</TABLE>
- ----------
(1) Assumes that outstanding options to purchase 13,643 shares of
Ponchatoula Common Stock at March 31, 1998 are not exercised prior to
consummation of the Conversion. Assuming that all of such shares are
exercised prior to such consummation, the percentages represented by
the Conversion Stock and the Exchange Shares would amount to ____% and
____%, respectively, and the Exchange Ratio would amount to ______,
______, ______ and ______, at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range, respectively,
excluding the effects of any Contingent Shares.
17
<PAGE>
The final Exchange Ratio will be determined based upon the number of
shares issued in the Offerings in order to maintain the Public Stockholders'
adjusted 23.94% ownership interest in Ponchatoula and will not be based upon the
market value of the Public Ponchatoula Shares. As an example of the Exchange
Ratio, at the minimum, midpoint and maximum of the Estimated Valuation Range,
1,000 Public Ponchatoula Shares will be exchanged for 1,514, 1,782 and 2,049
whole shares of Common Stock, respectively, plus cash in lieu of any fractional
share at the rate of $10.00 per whole share (which shares and cash have a
calculated equivalent estimated value of $15,149.90, $17,823.50 and $20,497.70
based on the $10.00 Purchase Price of a share of Common Stock in the Offerings
and the aforementioned Exchange Ratios). However, there can be no assurance as
to the actual market value of a share of Common Stock after the Conversion or
that such shares could be sold at or above the $10.00 Purchase Price.
Contingent Shares
For a period of 30 days following the closing of the Conversion, the
Company's Board of Directors may determine to issue additional shares equal to
up to 3% of the Conversion Stock sold in the Conversion. These Contingent Shares
may be issued, if necessary in the discretion of the Company's Board of
Directors, to fill orders resulting from (i) any allocation oversights in the
event of an oversubscription, (ii) lost or damaged stock order forms which the
Board determines legitimately should have been filled during the Conversion, or
(iii) orders initially rejected but later found to be legitimate. Any Contingent
Shares issued will not be included in the total number of shares for purposes of
determining any individual or maximum purchase limitations or the level of stock
to be purchased by the ESOP or other benefit plans. In addition, commissions
will not be payable to Trident on any Contingent Shares. These shares will be
allocated to a subscriber based on the allocation of shares to persons who had
the same or similar deposit account balance as that subscriber.
Benefits of Conversion to Directors and Officers
The Company intends to adopt certain stock benefit plans for the
benefit of directors, officers and employees of the Company and Ponchatoula and
to submit such plans to stockholders for approval at an annual or special
meeting of stockholders of the Company to be held at least six months following
the consummation of the Conversion. The proposed benefit plans are as follows:
(i) a 1998 Stock Option Plan, pursuant to which a number of authorized but
unissued shares of Common Stock equal to 10% of the Conversion Stock to be sold
in the Offerings (exclusive of any Contingent Shares) (97,750 shares at the
maximum of the Estimated Valuation Range) will be reserved for issuance pursuant
to stock options and stock appreciation rights to directors, officers and
employees; and (ii) a 1998 Management Recognition Plan and Trust Agreement (the
"1998 Recognition Plan"), which will, following the receipt of stockholder
approval, purchase a number of shares of Common Stock, with funds contributed by
the Company, either from the Company or in the open market equal to 4% of the
Conversion Stock to be sold in the Offerings (excluding of any
18
<PAGE>
Contingent Shares) (39,100 shares at the maximum of the Estimated Valuation
Range) for distribution to directors, officers and employees. For stock option
and restricted stock plans implemented within one year following the Conversion,
current OTS regulations provide that individual members of management may
receive a maximum of 25% of the shares granted pursuant to any stock option or
non-tax qualified stock benefit plan and directors who are not employees may
receive a maximum of 5% of such stock (or stock options) individually and a
maximum of 30% in the aggregate under any such plan. In the event that the 1998
Recognition Plan purchases shares of Common Stock in the open market with funds
contributed by the Company, the cost of such shares initially will be deducted
from the Company's stockholders' equity, but the number of outstanding shares of
Common Stock will not increase and stockholders accordingly will not experience
dilution of their ownership interest. In the event that the 1998 Recognition
Plan purchases shares of Common Stock from the Company with funds contributed by
the Company, total shareholders' equity would neither increase nor decrease, but
under such circumstances stockholders would experience dilution of their
ownership interests (by 3.0% at the maximum of the Estimated Valuation Range)
and per share stockholders' equity and per share net earnings would decrease as
a result of an increase in the number of outstanding shares of Common Stock. In
either case, the Company will incur operating expense and increases in
stockholders' equity as the shares held by the 1998 Recognition Plan are granted
and issued in accordance with the terms thereof. For a presentation of the
effects of anticipated purchases of Common Stock by the 1998 Recognition Plan,
see "Pro Forma Data."
Although no specific award determinations have been made, upon receipt
of stockholder approval of the 1998 Stock Option Plan, the Company anticipates
granting stock options for shares of Common Stock to directors, executive
officers and other key personnel. A total of 70% of the Common Stock to be
reserved for issuance pursuant to the 1998 Stock Option Plan will be available
for the grant of stock options to executive officers and key employees of
Ponchatoula. The 1998 Stock Option Plan will be administered by a committee of
two or more non-employee members of the Board of Directors of the Company within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
("Exchange Act"). In addition, pursuant to the 1998 Stock Option Plan, 30% of
the shares of Common Stock to be reserved for issuance pursuant to the 1998
Stock Option Plan will be available for the grant of compensatory stock options
to outside directors of the Company. All of the stock options will be granted at
no cost to the recipients, although the recipients will be required to pay the
applicable exercise price at the time of exercise in order to receive the
underlying shares of Common Stock. Following receipt of stockholder approval of
the 1998 Recognition Plan, the Company intends to award shares of Common Stock
pursuant to such plan to certain directors, officers and employees. See
"Management - New Stock Benefit Plans" and "Risk Factors - Possible Dilutive
Effect of Issuance of Additional Shares."
In addition, the Company's ESOP intends to purchase 8% of the
Conversion Stock to be sold in the Offerings (exclusive of any Contingent
Shares) (78,200 shares or $782,000 of Conversion Stock at the maximum of the
Estimated Valuation Range) with a loan funded
19
<PAGE>
by the Company. See "Use of Proceeds." In the event that the total number of
shares of Conversion Stock sold in the Offerings is increased to an amount
greater than the number of shares representing the maximum of the Estimated
Valuation Range, the ESOP will have a priority right to purchase such increased
number up to an aggregate of 8% of the Conversion Stock, excluding any
Contingent Shares. See "Management - New Stock Benefit Plans - Employee Stock
Ownership Plan" and "The Conversion - The Offerings Subscription Offering."
For presentations of the pro forma effects of the 1998 Recognition Plan
and the ESOP on the net income of the Company (which was estimated to aggregate
$.08 per share during the year ended December 31, 1997 at the midpoint of the
Estimated Valuation Range) and its stockholders' equity, see "Capitalization"
and "Pro Forma Data."
The foregoing plans are in addition to a 1996 Stock Option Plan and a
1996 Management Recognition Plan which were adopted by Ponchatoula following the
MHC Reorganization and subsequently approved by the stockholders of Ponchatoula.
These plans will continue in existence after the Conversion as plans of the
Company, with appropriate changes to reflect the Exchange Ratio. See "Management
- - Existing Stock Options" and "The Conversion - Effects of the Conversion -
Effect on Existing Compensation Plans."
Prospectus Delivery and Procedure for Purchasing Shares
To ensure that each purchaser receives a Prospectus at least 48 hours
prior to the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of the order
form will confirm receipt or delivery of the Prospectus in accordance with Rule
15c2-8. Order forms will only be distributed with a Prospectus.
The Primary Parties will accept for processing only orders submitted on
original order forms. Copies of order forms will not be accepted nor will order
forms unaccompanied by an executed certification form. Payment by check, money
order, cash or debit authorization to an existing account at Ponchatoula must
accompany the order form.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the close of business on the Eligibility
Record Date (December 31, 1996) or the Supplemental Eligibility Record Date
(March 31, 1998), and/or depositors and certain borrowers as of the close of
business on the Voting Record Date, __________, 1998, must list all accounts on
the stock order form giving all names on each account and the account numbers.
See "The Conversion - Procedure for Purchasing Shares in the Offerings."
20
<PAGE>
Use of Proceeds
Net proceeds from the sale of the Conversion Stock are estimated to be
between $6.8 million and $9.3 million ($10.8 million assuming an increase in the
Estimated Valuation Range by 15%). See "Pro Forma Data." The Company plans to
contribute to Ponchatoula 50% of the net proceeds from the Offerings and retain
the remainder of the net proceeds. The Company intends to use a portion of the
net proceeds retained by it to make a loan directly to the ESOP to enable the
ESOP to purchase 8% of the Conversion Stock. The amount of the loan is expected
to be between $578,000 and $782,000 at the minimum and maximum of the Estimated
Valuation Range, respectively. It is anticipated that the loan to the ESOP will
have a term of not less than ten years and a fixed interest rate at the prime
rate as of the date of the loan. See "Management - New Stock Benefit Plans
Employee Stock Ownership Plan." Funds retained by the Company may be used to
support the future expansion of operations or diversification into other
banking-related businesses and for other business or investment purposes,
including the opening or acquisition of other branch offices. There are no
current plans, arrangements, understandings or agreements regarding such
diversification or acquisitions. Subject to applicable limitations and
then-existing circumstances, such funds also may be used in the future to
repurchase shares of Common Stock. See "The Conversion - Certain Restrictions on
Purchases or Transfer of Shares after the Conversion." Funds contributed to
Ponchatoula from the Company will be used for general business purposes. The
proceeds will be used to support Ponchatoula's lending and investment activities
and thereby enhance Ponchatoula's capabilities to serve the borrowing and other
financial needs of the communities it serves. See "Use of Proceeds."
Dividend Policy
Following consummation of the Conversion, the Board of Directors of the
Company intends to declare cash dividends on the Common Stock at an initial
quarterly rate equal to $.05 per share, commencing with the first full quarter
following consummation of the Conversion. 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 Offerings retained by the Company,
investment opportunities available to the Company or Ponchatoula, capital
requirements, regulatory limitations, the Company's and Ponchatoula's financial
condition and results of operations, 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. Ponchatoula intends to continue to pay regular
quarterly dividends through either the date of consummation of the Conversion
(on a pro rata basis) or the end of the fiscal quarter during which the
consummation of the Conversion occurs. See "Dividend Policy."
Risk Factors
See "Risk Factors" for a discussion of certain factors that should be
considered by prospective investors.
21
<PAGE>
SELECTED FINANCIAL DATA
(Dollars in Thousands, except per share data)
The following selected financial and other data of Ponchatoula does not
purport to be complete and is qualified in its entirety by reference to the more
detailed financial information contained elsewhere herein.
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Selected Financial
Condition and Other Data:
Total assets $59,580 $60,691 $56,876 $50,146 $49,740
Cash and cash equivalents(1) 1,254 1,298 2,244 920 3,388
Securities available for sale 16,866 18,871 19,207 17,671 --
Securities held to maturity 10,301 10,254 6,259 3,114 15,048
Loans held for sale 1,414 2,290 1,766 1,275 2,588
Loans and leases receivable, net 28,069 26,150 25,860 25,471 27,427
Real estate owned, net -- 141 -- 63 299
Deposits 42,111 44,427 44,889 41,961 45,913
Stockholders' equity 5,735 5,443 5,484 4,779 3,697
Full service offices 2 2 2 2 2
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Selected Operating Data:
Total interest income $4,247 $ 4,276 $ 3,988 $ 3,147 $3,343
Total interest expense 2,515 2,591 2,342 1,518 1,799
------ ------- ------- ------- ------
Net interest income 1,732 1,685 1,646 1,629 1,544
Provision for (recovery of)
loan and lease losses (16) 3 (6) (7) (4)
------ ------- ------- ------- ------
Net interest income after provision for
(recovery of) losses 1,748 1,682 1,652 1,636 1,548
Noninterest income 373 434 378 417 695
Noninterest expenses 1,620 1,910 1,571 1,423 1,567
------ ------- ------- ------- ------
Income before provision for income taxes 501 206 459 630 676
Income taxes 185 60 150 184 218
------ ------- ------- ------- ------
Net income $ 316 $ 146 $ 309 $ 446 $ 458
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Fully diluted earnings per share $ .51 $ .23 $ .51 $ .74 N/A
------ ------- ------- -------
------ ------- ------- -------
Cash dividends declared per share $ .70 $ .51 $ .40 $ .10 N/A
------ ------- ------- -------
------ ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Selected Ratios (3):
Return on average assets .53% .25% .57% .92% .91%
Return on average equity 5.67 2.63 5.85 11.04 13.28
Average equity to average assets 9.40 9.50 9.78 8.29 6.82
Equity to assets at end of period 9.63 8.97 9.64 9.53 7.43
Interest rate spread(4) 2.65 2.54 2.73 3.20 2.92
Net interest margin(4) 3.00 2.95 3.12 3.43 3.12
Non-performing loans and leases to total
loans and leases at end of period(5) .55 1.38 1.66 2.60 4.12
Non-performing assets to total assets at
end of period(5) .29 .83 .76 1.53 3.09
Average interest-earning assets to
average interest-bearing liabilities 108.26 109.01 108.75 107.02 105.38
Net interest income after provision for
(recovery of) loan and lease losses to
total noninterest expenses 107.90 88.06 105.16 114.97 98.79
Noninterest expenses to average total
assets 2.73 3.27 2.91 2.92 3.10
Dividend payout ratio(6) 134.49 211.64 77.67 13.45 N/A
</TABLE>
- ------------------------
(1) Includes cash and due from banks as well as interest-bearing deposits
in other institutions.
(2) The per share amounts do not reflect the Conversion or the Exchange
Ratio.
(3) With the exception of end of period ratios, all ratios are based on
average monthly balances during 1997, 1996 and 1995 and average
quarterly balances during the prior years.
(4) Interest rate spread represents the difference between the average
yield on interest-earning assets and the average rate on
interest-bearing liabilities. Net interest margin represents net
interest income as a percentage of average interest-earning assets.
(5) Non-performing loans and leases consist of non-accrual loans and
leases, and non-performing assets consist of non-performing loans and
leases and real estate acquired by foreclosure or deed-in lieu thereof.
(6) Ratio based upon total dividends declared, including dividends waived
by the Mutual Holding Company.
22
<PAGE>
RISK FACTORS
The following risk factors, in addition to those discussed elsewhere in
this Prospectus, should be carefully considered by investors in deciding whether
to purchase the Common Stock offered hereby.
Potential Low Return on Equity Following the Conversion; Uncertainty as to
Future Growth Opportunities
At December 31, 1997, Ponchatoula's ratio of equity to assets was 9.6%.
The Company's equity position will be significantly increased as a result of the
Conversion. On a pro forma basis as of December 31, 1997, assuming the sale of
Common Stock at the midpoint of the Estimated Valuation Range, the Company's
ratio of equity to assets would be 20.3%. 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. As a result, the Company's return on equity initially is
expected to be below the industry average after the Conversion.
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 opening new branches. The Company's ability to
expand by establishing new branch offices will be dependent on its ability to
identify advantageous branch office locations and generate new deposits and
loans from those locations that will create an acceptable level of return to the
Company. There can be no assurance the Company will be able to generate internal
growth or successfully integrate any new or acquired branches into the Company.
Neither the Company nor Ponchatoula has any specific plans, arrangements or
understandings regarding any such expansions or acquisitions at this time.
Potential Effects of Changes in Interest Rates and the Current Interest Rate
Environment
The operations of Ponchatoula 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, Ponchatoula's
earnings are affected by changes in market interest rates, and other economic
factors beyond its control. While Ponchatoula's average interest rate spread
increased from 2.54% for 1996 to 2.65% for 1997, no assurance can be given that
Ponchatoula's average interest rate spread will not decrease in future periods.
The average interest rate decreased in 1996 from 2.73% in 1995, resulting in
only a 2.4% increase in net interest income in 1996. Any future decrease in
Ponchatoula's average interest rate spread could adversely affect Ponchatoula'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 effective
maturities than its interest-bearing liabilities, the yield on the institution's
interest-earning assets generally will
23
<PAGE>
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. Ponchatoula attempts to
reduce the vulnerability of its operations to changes in interest rates by
maintaining significant amounts of assets with relatively short terms and/or
adjustable rates of interest. Based upon certain repricing assumptions,
Ponchatoula's interest-bearing liabilities repricing or maturing within one year
exceeded its interest-earning assets with similar characteristics by $2.3
million or 3.8% of total assets. Accordingly, an increase in interest rates
generally would result in a decrease in Ponchatoula's average interest rate
spread and net interest income. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Asset and Liability Management."
In addition to affecting interest income and expense, changes in
interest rates also can affect the value of Ponchatoula's interest-earning
assets, which are comprised of fixed and adjustable-rate instruments, and the
ability to realize gains from the sale of such assets. Generally, the value of
fixed-rate instruments fluctuates inversely with changes in interest rates. At
December 31, 1997, Ponchatoula had $16.9 million of investment and
mortgage-backed securities available for sale ($2.6 million of which had
fixed-rates of interest). Ponchatoula had $53,000 of net unrealized losses with
respect to such securities, which were included as a separate component in
Ponchatoula's total net worth, net of tax benefit, as of such date.
The OTS has implemented an interest rate risk component into its
risk-based capital rules, which is designed to calculate on a quarterly basis
the extent to which the value of an institution's assets and liabilities would
change if interest rates increase or decrease. If the net portfolio value of an
institution would decline by more than 2% of the estimated market value of the
institution's assets in the event of a 200 basis point increase or decrease in
interest rates, then the institution is deemed to be subject to a greater than
"normal" interest rate risk and must deduct from its capital 50% of the amount
by which the decline in net portfolio value exceeds 2% of the estimated market
value of the institution's assets, as of an effective date to be determined. As
of December 31, 1997, if interest rates increased by 200 basis points,
Ponchatoula's net portfolio value would decrease by $692,000, or 1.1% of the
estimated portfolio value of Ponchatoula's assets, as calculated by the OTS. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations Asset and Liability Management."
Changes in interest rates also can affect the average life of loans and
mortgage-related securities. Decreases in interest rates in recent periods have
resulted in increased prepayments of loans and mortgage-backed securities, as
borrowers refinanced to reduce borrowing costs. Under these circumstances,
Ponchatoula is subject to reinvestment risk to the extent that it is not able to
reinvest such prepayments at rates which are comparable to the rates on the
maturing loans or securities. See "Business - Lending Activities."
24
<PAGE>
In addition, at December 31, 1997, Ponchatoula had $42.1 million of
deposits, of which $28.6 million or 67.9% consisted of certificates of deposit
maturing in one year or less. An increase in interest rates could result in a
decline in deposits, a higher average cost of deposits, or both.
High Percentage of Assets in Mortgage-Backed Securities
At December 31, 1997, Ponchatoula had $24.6 million of adjustable-rate
mortgage-backed securities, representing 41.2% of its assets. Mortgage-backed
securities generally yield less than the loans which underlie such securities.
In 1997, the average yield on Ponchatoula's mortgage-backed securities was
6.24%, compared to an average yield of 8.55% on its loan and lease portfolio.
The high percentage of assets in mortgage-backed securities adversely affects
the average yield on Ponchatoula's total interest-earning assets.
Despite the lower yields, Ponchatoula intends to maintain a high
percentage of its assets in mortgage-backed securities. These securities offer
nominal credit risk due to payment guarantees or credit enhancements, are an
integral part of Ponchatoula's strategy of reducing its risk exposure to
increases in interest rates, are more liquid than individual loans and may be
used to collateralize Ponchatoula's FHLB advances.
Reduced Gains on Sales of Loans
In 1997, 1996 and 1995, Ponchatoula's gain on sale of loans was
$167,000, $240,000 and $210,000, respectively. During this period, Ponchatoula
sold all of its newly-originated, 30-year fixed-rate mortgages into the
secondary market. Commencing February 1998, Ponchatoula began retaining a
portion of such originations, with the 30-year mortgages being matched with
long-term FHLB advances. As a result of this recent change in policy, the amount
of loans sold and the related gains on sales are expected to decline. It is
anticipated that the average yield earned on the 30-year mortgages will exceed
the average rate paid on the long-term FHLB advances, thus generating additional
net interest income that will offset the lower gains on sales. However, there
can be no assurance that additional net interest income will be generated or
that it will be sufficient to offset the lower gains on sales of loans.
Risks Related to Consumer Loans
At December 31, 1997, Ponchatoula had $7.2 million or 22.8% of its
total loan and lease portfolio in consumer loans. These loans generally involve
more risk than mortgage loans because of the type and nature of the collateral
and, in certain cases, the absence of collateral. The consumer loan portfolio
includes $1.1 million of unsecured loans and loans secured by personal property
at December 31, 1997. For a further discussion of the risks associated with
consumer loans, see "Business - Lending Activities - Consumer Loans." A total of
$41,000 of consumer loans were delinquent 30 or more days at December 31, 1997.
See "Business - Asset Quality - Delinquent Loans and Leases."
25
<PAGE>
Risks Related to Commercial Real Estate Loans, Construction and Land Loans
Commercial real estate, construction and land lending generally is
considered to involve a higher degree of risk than single-family residential
lending due to a variety of factors, including generally larger loan balances,
the dependency on successful operation of the project for repayment, loan terms
which often do not require full amortization of the loan over its term, and the
need to successfully develop and/or sell the property. In addition, risk of loss
on a construction loan is dependent largely upon the accuracy of the initial
estimate of the property's value at completion of construction or development
and the estimated cost (including interest) of construction. During the
construction phase, a number of factors could result in delays and cost
overruns. If the estimate of value proves to be inaccurate, Ponchatoula may be
confronted, at or prior to the maturity of the loan, with a project, when
completed, having a value which is insufficient to assure full repayment.
Commercial real estate loans may involve large loan balances to single borrowers
or groups of related borrowers, with the repayment of such loans typically
dependent on the successful operations and income stream of the borrower. Such
risks can be significantly affected by economic conditions. In addition,
commercial real estate lending generally requires substantially greater
oversight efforts compared to residential real estate lending. See "Business -
Lending Activities - Commercial Real Estate and Land Loans." As of December 31,
1997, Ponchatoula had $3.2 million of construction loans, $521,000 of commercial
real estate loans, and $126,000 of land loans, none of which were non-performing
at December 31, 1997. See "Business - Asset Quality - Non-Performing Assets."
Strong Competition Within Ponchatoula's Market Area
Competition in the banking and financial services industry is intense.
In its market area, Ponchatoula competes with commercial banks, savings
institutions, mortgage brokerage firms, credit unions, finance companies, mutual
funds, insurance companies, and brokerage and investment banking firms operating
locally and elsewhere. Many of these competitors have substantially greater
resources and lending limits than Ponchatoula and may offer certain services
that Ponchatoula does not or cannot provide. The profitability of Ponchatoula
depends upon its continued ability to successfully compete in its market area.
Geographic Concentration of Loans
Ponchatoula's market area consists primarily of Tangipahoa and
Livingston Parishes and, to a lesser extent, St. Helena Parish. Ponchatoula's
real estate loans are primarily secured by properties located in its market
area, and all of Ponchatoula's loans are primarily made to residents of its
market area. Accordingly, the asset quality of Ponchatoula's loan portfolio is
highly dependent upon the economy and the unemployment rate in its market area.
No assurance can be given that downturns in the economy in Ponchatoula's market
area may not adversely affect Ponchatoula's operations in the future.
26
<PAGE>
Reliance on Key Officers
Ponchatoula's executive officers consist of Lawrence C. Caldwell, Jr.,
President and Chief Executive Officer, and Barbara B. Theriot, Secretary and
Treasury. These officers each have 14 years of experience with Ponchatoula. The
loss of one or both of the executive officers could have an adverse effect on
Ponchatoula, particularly the loss of the President and Chief Executive Officer.
While the Company and Ponchatoula intend to enter into three-year employment
agreements with Mr. Caldwell and Ms. Theriot upon consummation of the
Conversion, the Company and Ponchatoula do not have and currently do not intend
to obtain key-man life insurance policies on these officers.
Certain Anti-Takeover Provisions
Provisions in the Company's Governing Instruments and Louisiana Law.
Certain provisions of the Company's Articles of Incorporation and Bylaws, as
well as certain provisions in Louisiana law, will assist the Company in
maintaining its status as an independent publicly owned corporation. Provisions
in the Company's Articles of Incorporation and Bylaws provide, among other
things, (i) that the Board of Directors of the Company shall be divided into
three classes; (ii) that special meetings of stockholders may only be called by
the Board of Directors or the President of the Company or by holders of at least
50% of the outstanding Common Stock; (iii) that stockholders generally must
provide the Company advance notice of stockholder proposals and nominations for
director and provide certain specified related information; (iv) noncumulative
voting for the election of directors; (v) for a period of five years following
the Conversion, that no person may acquire more than 10% of the issued and
outstanding shares of any class of equity security of the Company except under
certain circumstances; (vi) the authority to issue shares of authorized but
unissued Common Stock and preferred stock and to establish the terms of any one
or more series of Preferred Stock, including voting rights; and (vii)
supermajority voting requirements to remove directors without cause or to amend
various provisions in the Articles of Incorporation or Bylaws. Provisions under
Louisiana law applicable to the Company, among other things, establish certain
uniform price provisions for certain business combinations and provide that
persons who acquire more than 20% of the outstanding voting stock may not vote
such shares unless the disinterested stockholders approve such shares having
voting rights. The above provisions may discourage potential proxy contests and
other potential takeover attempts, particularly those which have not been
negotiated with the Board of Directors, and thus generally may serve to
perpetuate current management. Based on the proposed purchases of directors and
executive officers in the Conversion, the shares to be acquired by the ESOP, and
the proposed purchase of shares by the Recognition Plan assuming stockholder
approval is received, the directors and officers may be in a position to block
certain transactions requiring a supermajority vote, even if a majority of the
stockholders believe such transactions are in their best interest. See "Proposed
Management Purchases" and "Restrictions on Acquisition of the Company and
Ponchatoula."
27
<PAGE>
Voting Control of Officers and Directors. Directors and executive
officers of the Company expect to purchase approximately ___% or ___% of the
shares of Common Stock outstanding based upon the issuance of (i) the Exchange
Shares and (ii) shares of Conversion Stock at the minimum and the maximum of the
Estimated Valuation Range, respectively. See "Proposed Management Purchases."
The directors who act as trustees of the ESOP are also expected to immediately
control the voting of 8% of the shares of Conversion Stock issued in the
Conversion through the ESOP, at least until an allocation has been made under
the ESOP. Under the terms of the ESOP, after an allocation has been made, the
unallocated shares will generally be voted by the trustees in the same
proportion as the allocated shares are voted by the ESOP participants.
The Company intends to seek stockholder approval of the Company's
proposed 1998 Recognition Plan, which is a non-tax-qualified restricted stock
plan for the benefit of directors, officers and employees of the Company and
Ponchatoula. Assuming the receipt of stockholder approval, which stockholder
approval cannot be obtained earlier than six months following the Conversion
pursuant to OTS regulations, the Company expects to acquire Common Stock on
behalf of the 1998 Recognition Plan in an amount equal to 4% of the Conversion
Stock sold in the Offerings, or 28,900 shares and 39,100 shares at the minimum
and maximum of the Estimated Valuation Range, respectively. These shares will be
acquired either through open market purchases, if permissible, or from
authorized but unissued Common Stock. Under the terms of the 1998 Recognition
Plan, recipients of awards will be entitled to instruct the trustees of the 1998
Recognition Plan as to how the underlying shares should be voted, and the
trustees will be entitled to vote all unallocated shares in their discretion. If
the shares are purchased in the open market, directors and executive officers
would have effective control over ___% or ___% of the Common Stock outstanding
at such time based upon the issuance of the (i) Exchange Shares and (ii) shares
of Conversion Stock at the minimum and the maximum of the Estimated Valuation
Range, respectively, before giving effect to the potential exercise of any stock
options by directors and officers of the Company and Ponchatoula, and shares
held by the ESOP. If approved by stockholders at a meeting held no earlier than
six months following the Conversion, the Company intends to reserve for future
issuance pursuant to the 1998 Stock Option Plan a number of authorized shares of
Common Stock equal to an aggregate of 10% of the Conversion Stock sold in the
Offerings (97,750 shares, based on the issuance of the maximum 977,500 shares).
See "Management - New Stock Benefit Plans." Management's potential voting
control could, together with additional stockholder support, preclude or make
more difficult takeover attempts that certain stockholders deem to be in their
best interest and may tend to perpetuate existing management.
Provisions of Stock Benefit Plans and Employment Agreements. The ESOP
provides for accelerated vesting in the event of a change in control. In
addition, upon consummation of the Conversion, the Company and Ponchatoula will
enter into employment agreements with Ponchatoula's President and Chief
Executive Officer and its Secretary and Treasurer, which agreements will provide
for severance pay in the event of a change in control. These provisions may have
the effect of increasing the cost of acquiring the Company, thereby
28
<PAGE>
discouraging future attempts to take over the Company or Ponchatoula. In
addition, it is possible that the 1998 Stock Option Plan and the 1998
Recognition Plan may not be implemented until more than one year following
completion of the Conversion, and, in such event, such plans could provide for
accelerated vesting in the event of a change in control of the Company. See
"Restrictions on Acquisition of the Company and Ponchatoula Restrictions in the
Company's Articles of Incorporation and Bylaws," "Management - New Stock Benefit
Plans" and "Management - Employment Agreements."
Legislation Limiting Deduction of Bad Debt Reserves
Under Section 593 of the Internal Revenue Code of 1986, as amended (the
"Code"), until the first tax year beginning on or after January 1, 1996, savings
institutions such as Ponchatoula generally were permitted to establish a tax
reserve for bad debts and to make annual additions thereto, which additions,
within specified limitations, could be deducted in arriving at their taxable
income. Ponchatoula's deduction with respect to "qualifying loans" was computed
using an amount based on Ponchatoula's actual loss experience (the "Experience
Method") or a percentage equal to 8% of Ponchatoula's taxable income (the "PTI
Method"). Under recently enacted legislation, the PTI Method was repealed. As a
result, Ponchatoula is permitted to deduct only actual bad debts as they occur
and cannot utilize the percentage of taxable income method to make additions to
its bad debt reserves in the future to reduce its effective tax rate. In
addition, Ponchatoula is required to recapture for tax purposes (i.e., take into
income) over a six-year period commencing January 1, 1996, the excess of the
balance of its bad debt reserves as of December 31, 1995 over the balance of
such reserves as of December 31, 1987. Ponchatoula's excess amounted to $68,000
(for which deferred taxes have been provided). See "Taxation - Federal
Taxation."
Regulatory Oversight and Legislation
Ponchatoula 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. Ponchatoula is a member of the FHLB
System and is subject to certain limited regulations promulgated by the Federal
Reserve Board. As the holding company of Ponchatoula, 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,
Ponchatoula and their respective operations. See "Regulation."
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<PAGE>
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 institutions. 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 Ponchatoula. See "Regulation - The Association."
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 institutions 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
Ponchatoula.
Absence of Market for the Common Stock
The Company has never issued capital stock (other than 100 shares
issued to Ponchatoula, which will be cancelled upon consummation of the
Conversion), and to date an active and liquid trading market has not developed
for the 150,105 Public Ponchatoula Shares outstanding prior to the Offerings.
The Company has applied to have its Common Stock quoted on the Nasdaq SmallCap
System under the symbol "HSTD" upon completion of the Conversion and will seek
to encourage and assist at least three market makers to make a market in its
Common Stock. Trident has advised the Company that it intends to make a market
in the Company's Common Stock. While the Company intends to seek commitments
from 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.
Making a market in securities involves maintaining bid and ask
quotations and being able, as principal, to effect transactions in reasonable
quantities at those quoted prices, subject to various securities laws and other
regulatory requirements. The development of a public trading market depends upon
the existence of willing buyers and sellers, the presence of which is not within
the control of the Company, Ponchatoula, or any market maker. There can be no
assurance that purchasers of the Common Stock will be able to sell their shares
at or above the Purchase Price. The absence of a liquid and active trading
market, or the discontinuance thereof, may have an adverse effect on both the
price and the liquidity of the Common Stock. See "Market for Common Stock."
30
<PAGE>
Possible Increase in Number of Shares Issued in the Conversion
The number of shares to be sold in the Conversion may be increased as a
result of an increase in the Estimated Valuation Range of up to 15% to reflect
changes in market and financial conditions prior to completion of the Conversion
or to fill the order of the ESOP. In the event that the Estimated Valuation
Range is so increased, it is expected that the Company will issue up to
1,124,125 shares of Conversion Stock at the Purchase Price for an aggregate
price of up to $11,241,250. An increase in the number of shares will decrease
net income per share and stockholders' equity per share on a pro forma basis and
will increase the Company's consolidated stockholders' equity and net income.
Such an increase will also increase the Purchase Price as a percentage of pro
forma stockholders' equity per share and net income per share.
The ESOP currently intends to purchase 8% of the Conversion Stock sold
in the Offerings. In the event that the number of shares to be sold in the
Conversion are increased as a result of an increase in the Estimated Valuation
Range, the ESOP shall have a first priority to purchase all shares of Conversion
Stock sold in the Offerings in excess of 977,500 shares, up to a maximum of 8%
of the total number of shares of Conversion Stock sold in the Offerings. See
"Pro Forma Data" and "The Conversion - Stock Pricing, Exchange Ratio and Number
of Shares to be Issued."
Furthermore, an additional number of shares equal to 3% of the
Conversion Stock sold in the Offerings may be issued as Contingent Shares during
the first 30 days following consummation of the Conversion. See "The Summary -
Contingent Shares."
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 Conversion
Stock equal to 4% of the shares of Conversion Stock sold in the Offerings. If
such shares are acquired at a per share price equal to the Purchase Price, the
cost of such shares would be $391,000, assuming the Conversion Stock sold in the
Offerings is equal to the maximum of the Estimated Valuation Range. Such shares
of Common Stock may be acquired in the open market with funds provided by the
Company, if permissible, 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. The issuance of authorized but unissued shares of Common Stock
to such plan in an amount equal to 4% of the Conversion Stock sold in the
Offerings would dilute the voting interests of existing stockholders by
approximately 3.0%, and net income per share and stockholders' equity per share
would be decreased by a corresponding amount. See "Pro Forma Data" and
"Management - New Stock Benefit Plans - Recognition Plan."
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
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<PAGE>
of Common Stock equal to an aggregate of 10% of the Conversion Stock sold in the
Offerings (97,750 shares, based on the issuance of the maximum 977,500 shares).
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 existing stockholders by approximately 7.1%, and net
income per share and stockholders' equity per share would be decreased by a
corresponding amount. See "Pro Forma Data" and "Management - New Stock Benefit
Plans - Stock Option Plan."
Any issuance of Contingent Shares would also have a dilutive effect. If
the maximum number of Contingent Shares were issued, such issuance would dilute
the voting interests of existing stockholders by approximately 2.2%, and net
income per share and stockholders' equity per share would be decreased by a
corresponding amount.
Increased Compensation Expense After the Conversion
In November 1993, the American Institute of Certified Public
Accountants ("AICPA") issued Statement of Position 93-6 entitled "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 instead of an amount equal to the cost basis of such shares. If the shares
of Common Stock appreciate in value over time, SOP 93- 6 will result in
increased compensation expense with respect to the ESOP as compared with prior
guidance which required the recognition of compensation expense based on the
cost of shares acquired by the ESOP. It is impossible to determine at this time
the extent of such impact on future net income. See "Pro Forma Data." In
addition, after consummation of the Conversion, the Company intends to
implement, subject to stockholder approval (which approval cannot be obtained
earlier than six months subsequent to the Conversion), the 1998 Recognition
Plan. Upon implementation, the release of shares of Common Stock from the 1998
Recognition Plan will result in additional compensation expense. See "Pro Forma
Data" and "Management - New Stock Benefit Plans - Recognition Plan."
Possible Adverse Income Tax Consequences of the Distribution of Subscription
Rights
The Company and Ponchatoula have received a letter from RP Financial
advising them of its belief that subscription rights granted to Eligible Account
Holders, Supplemental Eligible Account Holders, Other Members and Public
Stockholders have no value. However, this opinion is not binding on the Internal
Revenue Service ("IRS"). If the subscription rights granted to Eligible Account
Holders, Supplemental Eligible Account Holders, Other Members and Public
Stockholders are deemed to have an ascertainable value, receipt of such rights
would be taxable probably only to those Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members who exercise the subscription rights
(either as capital gain or ordinary income) in an amount equal to such
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<PAGE>
value. Whether subscription rights are considered to have ascertainable value is
an inherently factual determination. See "The Conversion - Effects of
Conversion" and "- Tax Aspects."
Irrevocability of Orders; Potential Delay in Completion of Offerings
Orders submitted in the Subscription Offering, Community Offering
and/or any Syndicated Community Offering are irrevocable. Funds submitted in
connection with any purchase of Conversion Stock in the Offerings will be held
by the Company until the completion or termination of the Conversion, including
any extension of the Expiration Date. Because, among other factors, completion
of the Conversion will be subject to an update of the independent appraisal
prepared by RP Financial, there may be one or more delays in the completion of
the Conversion. Subscribers will have no access to subscription funds and/or
shares of Conversion Stock until the Conversion is completed or terminated.
PROPOSED MANAGEMENT PURCHASES
The following table sets forth, for each of the Company's directors and
for all of the directors and executive officers as a group, (1) the number of
Exchange Shares to be held upon consummation of the Conversion, based upon their
beneficial ownership of Ponchatoula Common Stock as of March 31, 1998, (2) the
proposed purchases of Conversion Stock, assuming sufficient shares are available
to satisfy their subscriptions, and (3) the total amount of Common Stock to be
held upon consummation of the Conversion, in each case assuming that 850,000
shares of Conversion Stock are sold, which is the midpoint of the Estimated
Valuation Range.
<TABLE>
<CAPTION>
Proposed Purchase of Total Common Stock
Conversion Stock to be Held
---------------------------- ----------------------------
Number of
Exchange Shares to Number Number Percentage
Name be Held(1)(2)(3) Amount of Shares of Shares of Total
- -------------------------- ---------------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
John C. Bohning 4,881 25,000 2,500 7,381 .7%
Lawrence C. Caldwell, Jr. 13,317 150,000 15,000(4) 28,317 2.5
Robert H. Gabriel 1,778 25,000 2,500 4,278 .4
Dennis E. James 987 20,000 2,000 2,987 .3
Allen B. Pierson, Jr. 15,196 20,000 2,000 17,196 1.5
Milton J. Schanzbach 5,773 20,000 2,000 7,773 .7
Barbara B. Theriot 12,232 60,000 6,000 18,232 1.6
All directors and
executive officers
as a group (7 persons) 54,164 320,000 32,000 86,164 7.7
- -----------------
</TABLE>
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(1) Excludes shares which may be received upon the exercise of outstanding
stock options. Based upon the Exchange Ratio of 1.78235 Exchange Shares
for each Public Ponchatoula Share at the midpoint of the Estimated
Valuation Range, the persons named in the table would have options to
purchase Common Stock as follows: for each of Messrs. Bohning, Gabriel,
James and Schanzbach, 1,067 shares, for Mr. Caldwell, 1,345 shares; for
Ms. Theriot, 768 shares; and for all directors and executive officers
as a group 6,381 shares.
(2) Includes unvested shares awarded under the 1996 Recognition Plan, based
upon the above Exchange Ratio, in the following amounts: for each of
Messrs Bohning, James, Pierson and Schanzbach, 349 shares; for Mr.
Caldwell, 2,153 shares; for Mr. Gabriel, 85 shares; for Ms. Theriot,
1,231 shares; and for all directors and executive officers as a group,
4,865 shares.
(3) Excludes stock options and awards to be granted under the Company's
1998 Stock Option Plan and 1998 Recognition Plan if such plans are
approved by stockholders at an annual or special meeting of
stockholders at least six months following the Conversion and
Reorganization. See "Management - New Stock Benefit Plans."
(4) Assumes that Mr. Caldwell is able to purchase shares in more than one
priority category in the Subscription Offering.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock
cannot be determined until the Conversion is completed, it is presently
anticipated that the net proceeds from the sale of the Conversion Stock will be
between $6.8 million and $9.3 million ($10.8 million assuming an increase in the
Estimated Valuation Range by 15%). See "Pro Forma Data" and "The Conversion -
Stock Pricing, Exchange Ratio and Number of Shares to be Issued" as to the
assumptions used to arrive at such amounts.
The Company plans to contribute to Ponchatoula 50% of the net
Conversion proceeds and retain the remaining 50% of the net proceeds. The
Company intends to use a portion of the net proceeds to make a loan directly to
the ESOP to enable the ESOP to purchase up to 8% of the Conversion Stock sold in
the Offerings. Based upon the issuance of 722,500 shares or 977,500 shares at
the minimum and maximum of the Estimated Valuation Range, respectively, the loan
to the ESOP would be $578,000 and $782,000, respectively. See "Management - New
Stock Benefit Plans - Employee Stock Ownership Plan." The remaining net proceeds
retained by the Company initially may be used to invest in investment
securities, mortgage-backed securities, U.S. Government and federal agency
securities of various maturities, deposits in either Ponchatoula or other
financial institutions, or a combination thereof. The portion of the net
proceeds retained by the Company may ultimately be used to support Ponchatoula's
lending activities, to support the future expansion of operations, and for other
business and investment purposes, including the
34
<PAGE>
payment of regular or special cash dividends, possible repurchases of the Common
Stock or returns of capital (the Company and Ponchatoula have committed that no
return of capital will be made on the Common Stock during the one-year period
subsequent to consummation of the Conversion). Neither Ponchatoula nor the
Company has any specific plans, arrangements, or understandings regarding any
branch acquisitions or diversification of activities at this time.
Following the six-month anniversary of the completion of the Conversion
(to the extent permitted by the OTS), and based upon then existing facts and
circumstances, the Company's Board of Directors may determine to repurchase some
shares of Common Stock, subject to any applicable statutory and regulatory
requirements. 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 an improvement in the Company's return on
equity; (ii) the avoidance of dilution to stockholders by not having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Company and its stockholders. Any stock
repurchases will be subject to the determination of the Company's Board of
Directors that Ponchatoula will be capitalized in excess of all applicable
regulatory requirements after any such repurchases. The payment of dividends or
repurchase of stock, however, would be prohibited if Ponchatoula's net worth
would be reduced below the amount required for the liquidation account to be
established for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. As of the date of this Prospectus, the initial balance
of the liquidation account would be approximately $_____ million. See "Dividend
Policy," "The Conversion - Liquidation Rights" and "The Conversion - Certain
Restrictions on Purchase or Transfer of Shares After the Conversion."
The Company will be a unitary savings and loan holding company which,
under existing laws, would generally not be restricted as to the types of
business activities in which it may engage, provided that Ponchatoula continues
to be a qualified thrift lender ("QTL"). See "Regulation - The Company" for a
description of certain regulations applicable to the Company.
The portion of the net proceeds contributed by the Company to
Ponchatoula will be added to Ponchatoula's general funds to be used for general
corporate purposes, including increased lending activities and purchases of
securities. While the amount of net proceeds received by Ponchatoula will
further strengthen Ponchatoula's capital position, which already substantially
exceeds all regulatory requirements, it should be noted that Ponchatoula is not
converting primarily to raise capital. After the Conversion, Ponchatoula's
tangible capital ratio will be 14.01% (based upon the midpoint of the Estimated
Valuation Range). As a result, Ponchatoula will continue to be a
well-capitalized institution. After the Conversion, Ponchatoula intends to
emphasize capital strength and growth in assets and earnings.
35
<PAGE>
The net proceeds may vary because total expenses of the Conversion may
be more or less than those estimated. The net proceeds will also vary if the
number of shares to be issued in the Conversion is adjusted to reflect a change
in the estimated pro forma market value of Ponchatoula. Payments for shares made
through withdrawals from existing deposit accounts at Ponchatoula will not
result in the receipt of new funds for investment by Ponchatoula but will result
in a reduction of Ponchatoula's interest expense and liabilities as funds are
transferred from interest-bearing certificates or other deposit accounts.
DIVIDEND POLICY
Upon completion of the Conversion, the Board of Directors of the
Company will have the authority to declare dividends on the Common Stock,
subject to statutory and regulatory requirements. The Board of Directors intends
to pay quarterly cash dividends on the Common Stock at an initial rate of 2% of
the Purchase Price per annum. Declarations of dividends by the Board of
Directors will depend upon a number of factors, including the amount of net
proceeds retained by the Company in the Conversion, investment opportunities
available to the Company or Ponchatoula, capital requirements, the Company's and
Ponchatoula's financial condition and results of operations, tax considerations,
statutory and regulatory limitations, and general economic conditions. No
assurances can be given that any dividends will be paid or that, if paid, will
not be reduced or eliminated in future periods. Special cash dividends, stock
dividends or returns of capital may be paid in addition to, or in lieu of,
regular cash dividends (however, the Company and Ponchatoula have committed to
the OTS that they will take no action with respect to any return of capital
during the one-year period following consummation of the Conversion).
Dividends from the Company may eventually depend, in part, upon receipt
of dividends from Ponchatoula, because the Company initially will have no source
of income other than dividends from Ponchatoula, earnings from the investment of
proceeds from the sale of Conversion Stock retained by the Company, and interest
payments with respect to the Company's loan to the ESOP. A regulation of the OTS
imposes limitations on "capital distributions" by savings institutions,
including cash dividends, payments by a savings institution to repurchase or
otherwise acquire its stock, payments to stockholders of another savings
institution in a cash-out merger and other distributions charged against
capital. As of December 31, 1997, Ponchatoula was a Tier 1 savings institution
and is expected to continue to so qualify immediately following the consummation
of the Conversion. Based on the regulatory capital level of Ponchatoula at
December 31, 1997, Ponchatoula would have been permitted to make a capital
distribution to the Company of up to $____ million as of January 1, 1998. See
"Regulation - The Association - Capital Distribution Regulation." However,
because the accumulated earnings and profits tax attribute was retained by the
Mutual Holding Company in the MHC Reorganization, Ponchatoula's accumulated
earnings and profits at December 31, 1997 was only approximately $___ million.
Any dividends or other distributions paid in excess of Ponchatoula's accumulated
earnings and profits would require a recapture of a portion of Ponchatoula's bad
debt reserves, resulting in a tax
36
<PAGE>
liability as discussed below. The Conversion will re-unite the tax attribute
retained by the Mutual Holding Company with Ponchatoula's retained earnings and
thus increase Ponchatoula's ability to pay dividends.
Any payment of dividends by Ponchatoula to the Company which would be
deemed to be drawn out of Ponchatoula's bad debt reserves would require a
payment of taxes at the then-current tax rate by Ponchatoula on the amount of
earnings deemed to be removed from the reserves for such distribution.
Ponchatoula does not intend to make any distribution to the Company that would
create such a federal tax liability. See "Taxation."
Unlike Ponchatoula, the Company is not subject to the aforementioned
regulatory restrictions on the payment of dividends to its stockholders,
although the source of such dividends may eventually be dependent, in part, upon
dividends from Ponchatoula in addition to the net proceeds retained by the
Company and earnings thereon. The Company is subject, however, to the
requirements of Louisiana law, which generally permits the payment of dividends
out of surplus, except when (1) the corporation is insolvent or would thereby be
made insolvent, or (2) the declaration or payment thereof would be contrary to
any restrictions contained in the articles of incorporation. If there is no
surplus available for dividends, a Louisiana corporation may pay dividends out
of its net profits for the then current or the preceding fiscal year or both,
except that no dividend may be paid if the corporation's assets are exceeded by
its liabilities or if its net assets are less than the amount which would be
needed, under certain circumstances, to satisfy any preferential rights of
stockholders.
MARKET FOR COMMON STOCK
The Company has never issued capital stock (other than 100 shares
issued to Ponchatoula, which will be cancelled upon consummation of the
Conversion), and to date an active and liquid trading market has not developed
for the 150,105 Public Ponchatoula Shares outstanding prior to the Offerings.
Consequently, there is no established market for the Common Stock at this time.
The Company has applied to have its Common Stock quoted on the Nasdaq
SmallCap System under the symbol "HSTD." 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. Additionally, the development of a liquid
public market depends on the existence of willing buyers and sellers, the
presence of which is not within the control of the Company, Ponchatoula or any
market maker. Accordingly, there can be no assurance that an active and liquid
trading market for the Common Stock will develop or that, if developed, it will
continue, nor is there any assurance that persons purchasing shares of Common
Stock will be able to sell them at or above the Purchase Price. Therefore,
investors in the Common Stock could have difficulty disposing of their shares
and should not view the Common Stock
37
<PAGE>
as a short-term investment. The absence of an active and liquid trading market
for the Common Stock could adversely affect the price and liquidity of the
Common Stock.
Quotation on the Nasdaq SmallCap System is dependent upon the Company
having at least three market makers for the Common Stock and at least 300
stockholders of record. Based upon the minimum of 722,500 shares of Conversion
Stock being offered, the minimum of 227,408 Exchange Shares to be issued, and
the anticipated pro forma ownership of officers, directors and the ESOP, the
Company expects to have more than 300 stockholders of record. Trident has
advised the Company that it intends to make a market in the Common Stock. While
the Company intends to seek with the assistance of Trident 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 commitments 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.
In addition, there can be no assurance that an active and liquid trading market
for the Common Stock will develop or that, if developed, it will continue.
The Ponchatoula Common Stock is not currently traded on any exchange or
quoted on the Nasdaq SmallCap System. Since Ponchatoula's initial public
offering was consummated on August 31, 1994, Ponchatoula is aware of only a
limited number of trades with respect to the Ponchatoula Common Stock. At
_________, 1998, Ponchatoula had approximately ____ stockholders of record.
Upon consummation of the Conversion, all Public Ponchatoula Shares will
be automatically converted into Exchange Shares based upon the Exchange Ratio.
REGULATORY CAPITAL
At December 31, 1997, Ponchatoula exceeded all of the regulatory
capital requirements applicable to it. The table on the following page sets
forth Ponchatoula's historical regulatory capital at December 31, 1997 and the
pro forma regulatory capital of Ponchatoula after giving effect to the
Conversion, based upon the sale of the number of shares shown in the table. The
pro forma regulatory capital amounts reflect the receipt by Ponchatoula of 50%
of the net Conversion proceeds, minus the amounts to be loaned to the ESOP and
contributed to the RRP. The pro forma risk-based capital amounts assume the
investment of the net proceeds received by Ponchatoula in assets which have a
risk-weight of 50% under applicable regulations, as if such net proceeds had
been received and so applied at December 31, 1997.
38
<PAGE>
<TABLE>
<CAPTION>
Pro Forma at December 31, 1997 Based on
---------------------------------------------------------------------------
722,500 850,000 977,500 1,124,125
Shares Sold Shares Sold Shares Sold Shares Sold
Historical at at $10.00 at $10.00 at $10.00 at $10.00
December 31, 1997 Per Share Per Share Per Share Per Share
------------------ ------------------ ----------------- ------------------ ------------------
Percent Percent Percent Percent Percent
of of of of of
Amount Assets(1) Amount Assets(1) Amount Assets(1) Amount Assets(1) Amount Assets(1)
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tangible capital:
Actual................ $ 5,770 9.68% $ 8,407 13.38% $ 8,885 14.01% $ 9,363 14.63% $ 9,912 15.33%
Requirement........... 894 1.50 942 1.50 951 1.50 959 1.50 970 1.50
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
Excess................ $ 4,876 8.18% $ 7,465 11.88% $ 7,934 12.51 $ 8,404 13.13% $ 8,942 13.83%
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
Core capital(2):
Actual................ $ 5,770 9.68% $ 8,407 13.38% $ 8,885 14.01% $ 9,363 14.63% $ 9,912 15.33%
Requirement........... 1,788 3.00 1,885 3.00 1,902 3.00 1,918 3.00 1,940 3.00
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
Excess................ $ 3,982 6.68% $ 6,522 10.38% $ 6,983 11.01% $ 7,445 11.63% $ 7,972 12.33%
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
Risk-based capital(2):
Actual................ $ 6,020 23.69% $ 8,657 33.23% $ 9,135 34.91% $ 9,613 36.58% $10,162 38.47%
Requirement........... 2,033 8.00 2,084 8.00 2,093 8.00 2,103 8.00 2,113 8.00
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
Excess................ $ 3,987 15.69% $ 6,573 25.23% $ 7,042 26.91% $ 7,510 28.58% $ 8,049 30.47%
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
</TABLE>
- ---------------------------------
(1) Adjusted total or adjusted risk-weighted assets, as appropriate.
(2) Does not reflect the interest rate risk component to be added to the
risk-based capital requirements or, in the case of the core capital
requirement, the 4.0% requirement to be met in order for an institution
to be "adequately capitalized" under applicable laws and regulations.
See "Regulation - The Association - Regulatory Capital Requirements."
39
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of
Ponchatoula at December 31, 1997, and the pro forma consolidated capitalization
of the Company after giving effect to the Conversion, based upon the sale of the
number of shares shown below and the other assumptions set forth under "Pro
Forma Data."
<TABLE>
<CAPTION>
The Company - Pro Forma
Based Upon Sale at $10.00 Per Share
-------------------------------------------------------------------
Ponchatoula- 722,500 Shares 850,000 Shares 977,500 Shares 1,124,125 Shares(1)
Historical (Minimum of (Midpoint of (Maximum of (15% above
Capitalization Range) Range) Range) Maximum of Range)
------------ -------------- -------------- -------------- -------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2)....................................... $ 42,111 $ 42,111 $ 42,111 $ 42,111 $ 42,111
Borrowings........................................ 11,500 11,500 11,500 11,500 11,500
---------- ---------- ---------- ---------- ----------
Total deposits and borrowings..................... $ 53,611 $ 53,611 $ 53,611 $ 53,611 $ 53,611
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Stockholders' equity:
Preferred Stock, par value $.01, 5,000,000
shares authorized; none to be issued......... $ -- $ -- $ -- $ -- $ --
Common Stock, par value $.01,
10,000,000 shares authorized; shares to
be issued as reflected(3)................... 61 9 11 13 15
Additional paid-in capital(4).................. 2,017 8,975 10,235 11,494 12,943
Retained earnings(5)........................... 3,734 3,734 3,734 3,734 3,734
Net unrealized loss on securities available
for sale................................... (35) (35) (35) (35) (35)
Less:
Common Stock to be acquired by the
ESOP(6).................................... -- (578) (680) (782) (899)
Common Stock acquired or to be acquired
by Recognition Plans(7).................... (42) (331) (382) (433) (492)
---------- ---------- ---------- ---------- ----------
Total stockholders' equity........................ $ 5,735 $ 11,774 $ 12,883 $ 13,991 $ 15,266
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
(Footnotes on following page)
40
<PAGE>
- ----------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions following
the commencement of the Offerings.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Conversion Stock in the Offerings. Such withdrawals would reduce pro
forma deposits by the amount of such withdrawals.
(3) Assumes that (i) the 150,105 Public Ponchatoula Shares currently
outstanding are converted into 227,408, 267,539, 307,670 and 353,820
Exchange Shares at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively, (ii) there are
no fractional Exchange Shares or Dissenting Shares, and (iii) the
number of shares of Conversion Stock shown are sold in the Offerings.
No effect has been given to the issuance of additional shares of Common
Stock pursuant to the proposed 1998 Option Plan. See "Pro Forma Data"
and "Management - New Stock Benefit Plans - Stock Option Plan."
(4) The pro forma additional paid-in capital includes the $101,675 to be
acquired by Ponchatoula upon the merger of the Mutual Holding Company
into Ponchatoula.
(5) The retained earnings of Ponchatoula will be substantially restricted
after the Conversion by virtue of the liquidation account to be
established in connection with the Conversion. See "The Conversion -
Liquidation Rights." In addition, certain distributions from
Ponchatoula's retained earnings may be treated as being from its
accumulated bad debt reserve for tax purposes, which would cause
Ponchatoula to have additional taxable income. See "Taxation."
(6) Assumes that 8% of the Conversion Stock sold in the Offerings will be
purchased by the ESOP, which is reflected as a reduction of
stockholders' equity. The ESOP shares will be purchased with funds
loaned to the ESOP by the Company. See "Pro Forma Data" and "Management
- New Stock Benefit Plans - Employee Stock Ownership Plan."
(7) The Company intends to adopt the 1998 Recognition Plan and to submit
such plan to stockholders at an annual or special meeting of
stockholders held at least six months following the consummation of the
Conversion. If the plan is approved by stockholders, the Company
intends to contribute sufficient funds to the trust created under the
1998 Recognition Plan to enable the trust to purchase a number of
shares of Common Stock equal to 4% of the Conversion Stock sold in the
Offerings. Assumes that stockholder approval has been obtained and that
the shares have been purchased in the open market at the Purchase
Price. However, in the event the Company issues authorized but unissued
shares of Common Stock to the 1998 Recognition Plan in the amount of 4%
of the Conversion Stock sold in the Offerings, the voting interests of
existing stockholders would be diluted by approximately 3.0%. The
shares are reflected as a reduction of stockholders' equity. See "Pro
Forma Data" and "Management - New Stock Benefit Plans - Recognition
Plan."
41
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the Conversion Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $6.8 million and $9.3 million (or $10.8
million in the event the Estimated Valuation Range is increased by 15%) based
upon the following assumptions: (i) all shares of Conversion Stock will be sold
in the Subscription Offering; (ii) no fees will be paid to Trident on shares
purchased by (x) the ESOP and any other employee benefit plan of the Company or
Ponchatoula or (y) officers, directors, employees and members of their immediate
families, which purchases are estimated to aggregate 32,000 shares of Conversion
Stock at the midpoint of the Estimated Valuation Range; (iii) Trident will
receive a fee equal to 1.125% of the aggregate Purchase Price for sales in the
Subscription Offering (excluding the sale of shares to the ESOP, employee
benefit plans, and officers, directors, employees and their immediate families),
with such fee estimated to be $71,179 and $97,571 at the minimum and maximum of
the Estimated Valuation Range (or $112,747 in the event the Estimated Valuation
Range is increased by 15%); (iv) total other expenses, excluding the marketing
fees paid to Trident, will be $350,000; and (v) no Contingent Shares are issued.
Actual expenses may vary from those estimated. If any Contingent Shares are
issued, Trident will not receive a fee with respect to such shares.
Pro forma consolidated net income and stockholders' equity of the
Company have been calculated for the year ended December 31, 1997 as if the
Conversion Stock to be issued in the Offerings had been sold at the beginning of
the period and the net proceeds had been invested at 5.48%, which represents the
yield on one-year U.S. Government securities at December 31, 1997 (which, in
light of changes in interest rates in recent periods, are deemed by the Company
and Ponchatoula to more accurately reflect pro forma reinvestment rates than the
arithmetic average method). The effect of withdrawals from deposit accounts for
the purchase of Conversion Stock has not been reflected. A marginal tax rate of
34% has been assumed for the period, resulting in an after-tax yield of 3.62%
for the year ended December 31, 1997. 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. See Note 4 to the tables below. No
effect has been given in the pro forma stockholders' equity calculations for the
assumed earnings on the net proceeds. As discussed under "Use of Proceeds," the
Company intends to make a loan to fund the purchase of 8% of the Conversion
Stock by the ESOP and retain 50% of the net proceeds from the Offerings.
No effect has been given in the tables to the issuance of additional
shares of Common Stock equal to 10% of the Conversion Stock pursuant to the
proposed 1998 Option Plan. See "Management - New Stock Benefit Plans - Stock
Option Plan." The table below gives effect to the 1998 Recognition Plan, which
is expected to be adopted by the Company following the Conversion and presented
(together with the 1998 Stock Option Plan) to stockholders for approval at an
annual or special meeting of stockholders to be held at least six months
following the consummation of the Conversion. If the 1998 Recognition Plan is
approved by stockholders, the 1998 Recognition Plan intends to acquire an amount
of Common Stock equal to 4% of the shares of Conversion Stock sold in the
Offerings, either through open market purchases or from
42
<PAGE>
authorized but unissued shares of Common Stock. The table below assumes that
stockholder approval has been obtained, as to which there can be no assurance,
and that the shares acquired by the 1998 Recognition Plan are purchased in the
open market at the Purchase Price. No effect has been given to (i) the Company's
results of operations after the Conversion, (ii) the market price of the Common
Stock after the Conversion, or (iii) a less than 4% purchase by the 1998
Recognition Plan.
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 stockholders' equity represents the difference
between the stated amount of assets and liabilities of the Company computed in
accordance with GAAP.
The pro forma stockholders' equity is not intended to represent the
fair market value of the Common Stock and may be different than amounts that
would be available for distribution to stockholders in the event of liquidation.
43
<PAGE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31, 1997
-------------------------------------------------------------------------
722,500 850,000 977,500 1,124,125
Shares Sold Shares Sold Shares Sold Shares Sold
at $10.00 at $10.00 at $10.00 at $10.00 Per
Per Share Per Share Per Share Share (15%
(Minimum of (Midpoint (Maximum of above Maximum
Range) of Range) Range) of Range)(9)
-------------- ------------- ------------- ----------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds............................. $ 7,225 $ 8,500 $ 9,775 $11,241
Less offering expenses and commissions..... (421) (434) (448) (463)
-------- -------- -------- --------
Estimated net proceeds................... 6,804 8,066 9,327 10,778
Less: Shares purchased by the ESOP......... (578) (680) (782) (899)
Shares to be purchased by the
1998 Recognition Plan.............. (289) (340) (391) (450)
Plus assets from MHC....................... 102 102 102 102
-------- -------- -------- --------
Total estimated net proceeds, as adjusted(1) $ 6,039 $ 7,148 $ 8,256 $ 9,531
-------- -------- -------- --------
-------- -------- -------- --------
Net income:
Historical............................... $ 316 $ 316 $ 316 $ 316
Pro forma income on net proceeds,
as adjusted(2)......................... 164 200 234 275
Pro forma ESOP adjustment(3)............. (38) (45) (52) (59)
Pro forma 1998 Recognition Plan
adjustment(4).......................... (38) (45) (52) (59)
-------- -------- -------- --------
Pro forma net income..................... $ 404 $ 426 $ 446 $ 473
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share(5)(6):
Historical............................... $ .35 $ .30 $ .26 $ .23
Pro forma income on net proceeds, as adjusted .18 .18 .19 .19
Pro forma ESOP adjustment(3)............. (.04) (.04) (.04) (.04)
Pro forma 1998 Recognition Plan
adjustment(4).......................... (.04) (.04) (.04) (.04)
-------- -------- -------- --------
Pro forma net income per share(5)(6)..... $ .45 $ .40 $ .37 $ .34
-------- -------- -------- --------
-------- -------- -------- --------
Offering price to pro forma net
income per share (5)..................... 22.2x 25.0x 27.0x 29.4x
-------- -------- -------- --------
-------- -------- -------- --------
Stockholders' equity:
Historical(7)............................ $ 5,837 $ 5,837 $ 5,837 $ 5,837
Estimated net proceeds................... 6,804 8,066 9,327 10,778
Less: Common Stock acquired
by the ESOP(3)................... (578) (680) (782) (899)
Common Stock to be acquired by
the 1998 Recognition Plan(4)..... (289) (340) (391) (450)
-------- -------- -------- --------
Pro forma stockholders' equity(6)(7)(8).. $ 11,774 $ 12,883 $ 13,991 $ 15,266
-------- -------- -------- --------
-------- -------- -------- --------
Stockholders' equity per share(5):
Historical............................... $ 6.14 $ 5.22 $ 4.54 $ 3.95
Estimated net proceeds................... 7.16 7.22 7.26 7.29
Less: Common Stock acquired
by the ESOP(3)................... (.61) (.61) (.61) (.61)
Common Stock to be acquired by
the 1998 Recognition Plan(4)..... (.30) (.30) (.30) (.30)
-------- -------- -------- --------
Pro forma stockholders' equity
per share(6)(7)(8)..................... $12.39 $11.53 $10.89 $10.33
-------- -------- -------- --------
-------- -------- -------- --------
Offering price as a percentage of pro
forma stockholders' equity per share(5).. 80.7% 86.7% 91.8% 96.8%
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
(Footnotes on following page)
44
<PAGE>
- ---------------
(1) Estimated net proceeds, as adjusted, consist of the estimated net
proceeds from the Offerings minus (i) the proceeds attributable to the
purchase by the ESOP and (ii) the value of the shares to be purchased
by the 1998 Recognition Plan, subject to stockholder approval, after
the Conversion at an assumed purchase price of $10.00 per share.
(2) Net of the impact of state franchise/share taxes, which are estimated
to be $54,000, $59,000, $65,000 and $70,000 at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively.
(3) It is assumed that 8% of the shares of Conversion Stock sold in the
Offerings will be purchased by the ESOP with funds loaned by the
Company. The Company and Ponchatoula intend to make annual
contributions to the ESOP in an amount at least equal to the principal
and interest requirement of the debt. The pro forma net income assumes
(i) that the loan to the ESOP is payable over 10 years, with the ESOP
shares having an average fair value of $10.00 per share in accordance
with SOP 93-6, entitled "Employers' Accounting for Employee Stock
Ownership Plans," of the AICPA, and (ii) the effective tax rate was 34%
for the period. See "Management - New Stock Benefit Plans - Employee
Stock Ownership Plan."
(4) It is assumed that the 1998 Recognition Plan will purchase, following
stockholder approval of such plan, a number of shares of Common Stock
equal to 4% of the shares of Conversion Stock sold in the Offerings for
issuance to directors, officers and employees. Funds used by the 1998
Recognition Plan to purchase the shares initially will be contributed
to the 1998 Recognition Plan by the Company. It is further assumed that
the shares were acquired by the 1998 Recognition Plan at the beginning
of the period presented in open market purchases at the Purchase Price
and that 20% of the amount contributed, net of taxes, was an amortized
expense during the year ended December 31, 1997. The issuance of
authorized but unissued shares of Common Stock pursuant to the 1998
Recognition Plan in the amount of 4% of the Conversion Stock sold in
the Offerings would dilute the voting interests of existing
stockholders by approximately 3.0% and under such circumstances pro
forma net income per share for the year ended December 31, 1997 would
be $.45 $.40, $.37 and $.34 at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range, respectively, and
pro forma stockholders' equity per share at December 31, 1997 would be
$12.32, $11.48, $10.86 and $10.32 at the minimum, midpoint, maximum and
15% above the maximum of such range, respectively. There can be no
assurance that the actual purchase price of shares purchased by or
issued to the 1998 Recognition Plan will be equal to the Purchase
Price. See "Management - New Stock Benefit Plans - Recognition Plan."
(5) The net income per share calculations are based upon 894,998,
1,052,939, 1,210,880 and 1,392,512 shares of Common Stock at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively, which amounts include 227,408, 267,539,
307,670 and 353,820 Exchange Shares, respectively, and exclude, in
accordance with SOP 93-6, 54,910, 64,600, 74,290 and 85,434 shares,
respectively, representing the ESOP shares which have not been
committed for release during the year ended December 31, 1997. Assuming
the uncommitted ESOP shares were not subtracted from the number of
shares of Common Stock outstanding at December 31, 1997, the offering
price as a multiple of pro forma net income per share would be 23.5x,
26.2x, 28.8x and 31.3x at the minimum, midpoint, maximum and 15%
45
<PAGE>
above the maximum of the Estimated Valuation Range, respectively. The
historical net income per share and historical stockholders' equity per
share figures represent Ponchatoula's historical per share amounts
divided by the Exchange Ratio. For a description of the Exchange Ratio,
see "The Conversion - Stock Pricing, Exchange Ratio and Number of
Shares to be Issued in the Conversion." For purposes of calculating pro
forma stockholders' equity per share, it is assumed that the number of
shares of Common Stock outstanding total 949,908, 1,117,539, 1,285,170
and 1,477,945 shares at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range.
(6) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the 1998 Option Plan, which will be adopted by the
Company following the Conversion and presented for approval by
stockholders at an annual or special meeting of stockholders of the
Company held at least six months following the consummation of the
Conversion. If the 1998 Option Plan is approved by stockholders, an
amount equal to 10% of the Conversion Stock sold in the Offerings, or
72,250, 85,000, 97,750 and 112,412 shares at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively, will be reserved for future issuance upon the exercise of
options to be granted under the 1998 Option Plan. The issuance of
Common Stock pursuant to the exercise of options under the 1998 Option
Plan will result in the dilution of existing stockholders' interests.
Assuming stockholder approval of the 1998 Option Plan, that all these
options were exercised at the beginning of the period at an exercise
price of $10.00 per share and that the shares to fund the 1998
Recognition Plan are acquired through open market purchases at the
Purchase Price, pro forma net income per share for the year ended
December 31, 1997 would be $.44, $.40, $.37 and $.34 at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, respectively, and pro forma stockholders' equity per share at
December 31, 1997 would be $12.22, $11.42, $10.82 and $10.31 at the
minimum, midpoint, maximum and 15% above the maximum of such range,
respectively. See "Management - New Stock Benefit Plans - Stock Option
Plan."
(7) Includes the $101,675 to be acquired by Ponchatoula upon the merger of
the Mutual Holding Company into Ponchatoula.
(8) The retained earnings of Ponchatoula will be substantially restricted
after the Conversion by virtue of the liquidation account to be
established in connection with the Conversion. See "Dividend Policy"
and "The Conversion - Liquidation Rights." In addition, certain
distributions from Ponchatoula's retained earnings may be treated as
being from its accumulated bad debt reserve for tax purposes, which
would cause Ponchatoula to have additional taxable income. See
"Taxation - Federal Taxation." Pro forma stockholders' equity and pro
forma stockholders' equity per share do not give effect to the
liquidation account or the bad debt reserves established by Ponchatoula
for federal income tax purposes in the event of a liquidation of
Ponchatoula.
(9) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions following
the commencement of the Offerings.
46
<PAGE>
PONCHATOULA HOMESTEAD SAVINGS, F.A.
STATEMENTS OF INCOME
The following Statements of Income of Ponchatoula for each of the three
years in the period ended December 31, 1997 have been audited by Hannis T.
Bourgeois, L.L.P., independent certified public accountants, whose report
thereon appears elsewhere herein. The Statements of Income should be read in
conjunction with the Financial Statements and related Notes included elsewhere
herein.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1997 1996 1995
------- ------- -------
(In Thousands, except per share data)
<S> <C> <C> <C>
Interest income:
Loan and leases $ 2,429 $ 2,384 $ 2,348
Mortgage-backed securities 1,576 1,621 1,353
Investment securities 145 155 138
Other 97 116 149
------- ------- -------
Total interest income 4,247 4,276 3,988
------- ------- -------
Interest expense:
Deposits 1,971 2,158 2,007
Borrowings 544 433 335
------- ------- -------
Total interest expense 2,515 2,591 2,342
------- ------- -------
Net interest income 1,732 1,685 1,646
Provision for (recovery of) loan and lease
losses (16) 3 (6)
------- ------- -------
Net interest income after provision for
(recovery of) loan and lease losses 1,748 1,682 1,652
------- ------- -------
Noninterest income:
Gain on sale of loans 167 240 210
Loan fees and service charges 189 186 157
Other income 17 8 11
------- ------- -------
Total noninterest income 373 434 378
------- ------- -------
Noninterest expenses:
Compensation and benefits 869 818 793
Occupancy and equipment expense 140 151 152
Federal insurance premium 23 92 97
Special SAIF assessment -- 284 --
Net real estate owned expense (income) 27 (3) (11)
Other expenses 561 568 540
------- ------- -------
Total noninterest expenses 1,620 1,910 1,571
------- ------- -------
Income before provision for income taxes 501 206 459
Income taxes 185 60 150
------- ------- -------
Net income $ 316 $ 146 $ 309
------- ------- -------
------- ------- -------
Per share:
Earnings per common share $ .52 $ .24 $ .51
------- ------- -------
------- ------- -------
Earnings per common share -
assuming dilution $ .51 $ .23 $ .51
------- ------- -------
------- ------- -------
Cash dividends declared $ .70 $ .51 $ .40
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
47
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Ponchatoula's results of operations depend primarily on its net
interest income, which is the difference between interest and dividend income on
interest-earning assets, which principally consist of loans, mortgage-backed
securities and investment securities, and interest expense on interest-bearing
deposits and borrowings. Ponchatoula's results of operations also are affected
by the provision for losses on loans and leases (or recoveries of prior
provisions for losses); the level of its noninterest income, including gain on
sale of loans; its general, administrative and other expenses, including
compensation and benefits, occupancy and equipment expense, federal insurance
premiums, net real estate owned expense and miscellaneous other expenses; and
its income tax expense.
Asset and Liability Management
In order to minimize the potential for adverse effects of material
fluctuations in interest rates on Ponchatoula's results of operations,
Ponchatoula has implemented and continues to monitor its asset and liability
management policies to better match the maturities and repricing terms of
Ponchatoula's interest-earning assets and interest-bearing liabilities. Such
policies have consisted primarily of (i) purchasing adjustable-rate
mortgage-backed securities and short-term investment securities; (ii)
emphasizing the origination of 15-year, fixed-rate single-family residential
loans and, to the extent possible, ARMs; (iii) selling newly-originated,
30-year, fixed-rate single-family residential loans in the secondary market,
except that commencing February 1998 Ponchatoula began retaining a portion of
such loans and matching them with long-term FHLB advances; and (iv) managing
interest rate expense.
Currently, Ponchatoula only purchases mortgage-backed securities with
adjustable interest rates and investment securities with terms of two years or
less. In 1995 and 1996, Ponchatoula purchased approximately $10 million of
adjustable-rate mortgage-backed securities (which reprice either monthly,
semi-annually or annually) and funded the purchases with FHLB advances with
interest rates that adjust monthly. These mortgage-backed securities were
purchased in order to earn a positive spread above the average rate on the FHLB
advances, and the average interest rate spread on these linked mortgage-backed
securities and FHLB advances was 1.31% for 1997. The maturities of the
investment securities are staggered so that a portion matures every quarter.
From 1982 to 1994, Ponchatoula originated fixed-rate single-family
residential mortgage loans to meet the needs of its customers and to generate
fee income when the loans were sold. Upon origination, the fixed-rate loans were
mainly sold to institutional investors in the secondary market in order to
eliminate the interest rate risk associated with such loans, as well as to
generate additional funds for lending and other purposes. These
48
<PAGE>
loans are accounted for as held for sale and are carried at the lower of cost or
estimated market value in the aggregate. Loans held for sale were $1.4 million
and $2.3 million at December 31, 1997 and 1996, respectively.
Beginning in 1995, Ponchatoula began offering 15-year, fixed-rate
residential mortgage loans for retention in its portfolio. These fixed-rate
loans retained in the portfolio have interest rates of 8% or above as of
December 31, 1997 and a loan-to-value ratio of 70% or below. Commencing February
1998, Ponchatoula amended its policy to provide for the retention of 30-year,
fixed-rate residential mortgage loans, with such loans to be funded with
long-term advances from the FHLB of Dallas. While loan sales are expected to
continue, the amount of loans sold is expected to decline.
From 1982 through 1994, the only single-family residential loans which
Ponchatoula had originated for retention in its portfolio had been ARMs. All of
the ARMs currently offered by Ponchatoula have interest rates which adjust
annually, although the portfolio contains some ARMs which were originated in the
mid 1980s with interest rates adjusting every three years. Ponchatoula's
origination of ARMs has decreased due to the preference of Ponchatoula's
customers for fixed-rate residential mortgage loans. Ponchatoula's portfolio of
adjustable-rate, single-family residential mortgage loans and leases amounted to
$9.5 million or 90.5% of all ARMs at December 31, 1997.
In order to match the maturity of its interest-bearing liabilities with
the maturity of its interest-earning assets, Ponchatoula offers certificates of
deposit with terms in excess of one year; however, the rates paid are the same
as the one-year certificate. At December 31, 1997, $28.6 million or 91.0% of
Ponchatoula's certificates of deposit mature in one year or less.
Ponchatoula considers its passbook accounts to be core deposits that
are less likely to be withdrawn if interest rates rise, although the amount of
passbook accounts has been steadily declining in recent years. The passbook
accounts have variable interest rates, and Ponchatoula believes that it can
adjust the interest rate on the accounts to retain a substantial portion of
these deposits. Passbook accounts amounted to $8.3 million or 19.6% of total
deposits at December 31, 1997, compared to $10.2 million or 22.7% of total
deposits at December 31, 1995.
Finally, in order to manage its interest expense more effectively,
Ponchatoula has elected to offer rates on its deposit accounts that are
moderately lower than certain of its competitors' rates, and as a result has
occasionally experienced deposit outflows. Pursuant to this policy, Ponchatoula
has generally neither engaged in sporadic increases or decreases in interest
rates paid nor offered the highest rates available in its deposit market. This
policy has assisted Ponchatoula in controlling its cost of funds.
49
<PAGE>
The following table presents the difference between Ponchatoula's
interest-earning assets and interest-bearing liabilities within specified
maturities at December 31, 1997. This table does not necessarily indicate the
impact of general interest rate movements on Ponchatoula'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.
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------------------------------------
0 Months Over Three Over One Over Three Over Five
Through Through Through Through Through Over Ten
Three Months 12 Months Three Years Five Years Ten Years Years Total
------------ ---------- ----------- ---------- --------- --------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable(1)(2):
One- to four-family residential:
Adjustable-rate $ 2,478 $ 6,368 $ 101 $ 637 $ -- $ -- $ 9,584
Fixed-rate 318 55 132 86 434 9,628 10,653
Construction 1,801 1,427 -- -- -- -- 3,228
Commercial real estate -- -- 255 -- 266 -- 521
Consumer 824 372 962 1,095 576 3,346 7,175
Leases receivable -- 4 3 7 93 194 301
Adjustable-rate mortgage-backed
securities 8,978 15,584 -- -- -- -- 24,562
Investment securities 300 900 1,405 -- -- -- 2,605
FHLB stock 584 -- -- -- -- -- 584
-------- -------- -------- -------- -------- -------- --------
Total interest-earning assets 15,283 24,710 2,858 1,825 1,369 13,168 59,213
-------- -------- -------- -------- -------- -------- --------
Interest-bearing liabilities:
Passbook, money market and NOW
accounts (3) 534 1,602 4,271 4,271 -- -- 10,678
Certificates of deposit (4) 10,530 18,078 2,421 404 -- -- 31,433
FHLB advances 11,500 -- -- -- -- -- 11,500
-------- -------- -------- -------- -------- -------- --------
Total interest-bearing liabilities 22,564 19,680 6,692 4,675 -- -- 53,611
-------- -------- -------- -------- -------- -------- --------
Interest rate sensitivity gap $ (7,281) $ 5,030 $ (3,834) $ (2,850) $ 1,369 $ 13,168 $ 5,602
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Cumulative interest rate sensitivity gap $ (7,281) $ (2,251) $ (6,085) $ (8,935) $ (7,566) $ 5,602
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Percentage of cumulative gap
to total assets (12.2)% (3.8)% (10.2)% (15.0)% (12.7)% 9.4%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Cumulative ratio of interest-
earning assets to interest-
bearing liabilities 67.73% 94.67% 87.57% 83.33% 85.89% 110.45%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
(Footnotes are on following page)
50
<PAGE>
- --------------------------
(1) Loans receivable are gross of loans in process, deferred fees, unearned
discounts, and allowance for loan losses.
(2) Adjustable-rate assets are included in the period in which interest
rates are next scheduled to adjust rather than in the period in which
they are due, and fixed-rate assets are included in the periods in
which they are scheduled to mature, without reflecting scheduled
amortization or any estimated prepayments.
(3) Although Ponchatoula's passbook, money market and NOW accounts are
generally subject to immediate withdrawal, management considers a
substantial amount of these accounts to be core deposits having
significantly longer effective maturities based on Ponchatoula's
retention of such deposits in changing interest rate environments. The
decay rate used on these accounts was 20% per year over the first five
years, which is faster than the actual withdrawals experienced by
Ponchatoula in the last two years. If all of Ponchatoula's passbook,
money market and NOW accounts had been assumed to be subject to
repricing within one year, interest-bearing liabilities which were
estimated to mature or reprice within one year would have exceeded
interest-earning assets with comparable characteristics by $10.8
million or 18.1% of total assets.
(4) It is assumed that certificates of deposit will not be withdrawn prior
to maturity.
Management also presently monitors and evaluates the potential impact
of interest rate changes upon the market value of Ponchatoula's portfolio equity
on a quarterly basis, in an attempt to ensure that interest rate risk is
maintained within limits established by the Board of Directors. The OTS adopted
a final rule in August 1993 incorporating an interest rate risk component into
the risk-based capital rules. Under the rule, an institution with a greater than
"normal" level of interest rate risk will be subject to a deduction of its
interest rate risk component from total capital for purposes of calculating the
risk-based capital requirement, although the OTS has indicated that no
institution will be required to deduct capital for interest rate risk until
further notice. An institution with a greater than "normal" interest rate risk
is defined as an institution that would suffer a loss of net portfolio value
("NPV") exceeding 2.0% of the estimated market value of its assets in the event
of a 200 basis point increase or decrease in interest rates. NPV is the
difference between incoming and outgoing discounted cash flows from assets,
liabilities, and off-balance sheet contracts. A resulting change in NPV of more
than 2% of the estimated market value of an institution's assets will require
the institution to deduct from its risk-based capital 50% of that excess change.
The rule provides that the OTS will calculate the interest rate risk component
quarterly for each institution. Because a 200 basis point increase in interest
rates would have resulted in less than a 2% decrease in Ponchatoula's NPV as a
percentage of the estimated market value of its assets as of December 31, 1997,
Ponchatoula would not have been subject to any capital deduction as of December
31, 1997 if the regulation had
51
<PAGE>
been effective as of such date. The following table presents Ponchatoula's NPV
as of December 31, 1997, as calculated by the OTS, based on information provided
to the OTS by Ponchatoula.
<TABLE>
<CAPTION>
Change in Change in
Interest Rates Net Portfolio Value NPV as % of NPV as % of
in Basis Points ------------------------------ Portfolio Value Portfolio Value
(Rate Shock) Amount $ Change % Change of Assets of Assets(1)
--------------- ------- --------- --------- --------------- ---------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
400 $4,591 $(2,047) (30.8)% 8.0% (3.4)%
300 5,345 (1,293) (19.5) 9.1 (2.1)
200 5,946 (692) (10.4) 10.0 (1.1)
100 6,385 (253) (3.8) 10.6 (.4)
Static 6,638 -- -- 11.0 --
(100) 6,764 126 1.9 11.1 .2
(200) 6,854 216 3.3 11.2 .4
(300) 7,039 401 6.0 11.5 .7
(400) 7,368 730 11.0 11.9 1.2
</TABLE>
- --------------
(1) Based on the portfolio value of Ponchatoula's assets assuming no change
in interest rates.
As shown by the table above, increases in interest rates will result in
declines in Ponchatoula's net portfolio value, while decreases in interest rates
will result in increases in Ponchatoula's net portfolio value.
Changes in Financial Condition
Ponchatoula's total assets decreased to $59.6 million at December 31,
1997 from $60.7 million at December 31, 1996.
At December 31, 1997, net loans and leases receivable (including loans
held for sale) were $29.5 million or 49.5% of total assets. Of the total loan
and lease portfolio, $23.6 million or 74.9% consisted of single-family
residential loans or leases (including construction of single-family
residences). Consumer loans accounted for $7.2 million or 22.9% of the total
loan and lease portfolio at December 31, 1997, while the remainder of the
portfolio consisted of $598,000 of commercial real estate loans and leases and
$126,000 of unimproved land loans.
Mortgage-backed securities and investment securities represented 41.2%
and 4.4% of total assets, respectively, at December 31, 1997, and cash and cash
equivalents amounted to 2.1% of total assets at such date.
52
<PAGE>
Non-performing assets have decreased from .83% of total assets at
December 31, 1996 to .29% of total assets at December 31, 1997. Non-accruing
single-family residential loans and leases represented 97.7% of the total
non-performing assets at December 31, 1997. At December 31, 1997, Ponchatoula's
allowance for loan and lease losses equaled $265,000, representing .84% of total
loans and leases outstanding and 153.2% of total non-performing assets.
Ponchatoula's total deposits decreased during 1997 to $42.1 million at
December 31, 1997 from $44.4 million at December 31, 1996. Certificate accounts
decreased by $728,000 or 2.3% during 1997, while transaction accounts decreased
by $1.6 million or 12.9% during 1997. The decrease in total deposits is
attributable to the increased competition which offers higher interest rates.
Total stockholders' equity was $5.7 million at December 31, 1997, an
increase of $292,000 from December 31, 1996. The increase was due to net income
of $316,000 in 1997, less dividends of $105,000 combined with the change in
unrealized gain (loss) on securities available for sale during 1997 of $66,000.
The Mutual Holding Company waived the receipt of $320,000 in dividends during
1997 on the shares owned by it.
Results of Operations
Ponchatoula's net income increased by $170,000 or 116.4% in 1997 and
decreased by $163,000 or 52.8% in 1996 over the respective prior periods. The
fluctuation is primarily due to the $284,000 special SAIF assessment paid by
Ponchatoula on September 30, 1996, which amounted to $187,000 on an after-tax
basis. Excluding the after-tax effects of the special SAIF assessment in 1996,
net income decreased by $17,000 or 5.1% in 1997 and increased by $24,000 or 7.8%
in 1996 over the respective prior periods. The adjusted decrease for 1997 was
primarily due to a $73,000 or 30.4% decline in the gain on sale of loans,
partially offset by a $47,000 or 2.8% increase in net interest income. The
adjusted increase for 1996 was primarily due to increases in net interest
income, gain on sale of loans, and loan fees and service charges, partially
offset by a $55,000 or 3.5% increase in total noninterest expenses (excluding
the special SAIF assessment).
Net Interest Income
Ponchatoula's net interest income is determined by its average interest
rate spread (i.e., the difference between the average yields earned on its
interest-earning assets and the average rates paid on its interest-bearing
liabilities), the relative amounts of interest-earning assets and
interest-bearing liabilities and the degree of mismatch in the maturity and
repricing characteristics of its interest-earning assets and interest-bearing
liabilities.
With the decrease in market interest rates in 1997, Ponchatoula's
average interest rate spread increased to 2.65% for 1997 from 2.54% for 1996, as
the average yield on total interest-earning assets declined by 13 basis points
compared to a decline of 24 basis points
53
<PAGE>
in the average rate paid on total interest-bearing liabilities. The benefit of
this increased spread was partially offset by a decrease in the ratio of average
interest-earning assets to average interest-bearing liabilities to 108.20% for
1997 from 109.01% for 1996.
In 1996, the average interest rate spread declined to 2.54% from 2.73%
in 1995, as the average yield on total interest-earning assets decreased by six
basis points and the average rate paid on total interest-bearing liabilities
increased by 13 basis points. The higher rate on interest-bearing liabilities in
1996 was due to an increase in the average balance of certificates of deposit.
The lower spread in 1996 was more than offset by an increase in the ratio of
average interest-earning assets to average interest-bearing liabilities to
109.01% from 108.75% for 1995.
Net interest income increased by $47,000 or 2.8% in 1997 and by $39,000
or 2.4% in 1996, over the respective prior periods. The increases were due to
increases in the average interest rate spread for 1997 and in the ratio of
average interest-earning assets to average interest-bearing liabilities for
1996.
54
<PAGE>
Average Balances, Net Interest Income and Yields Earned and Rates Paid.
The following table presents for the periods indicated the total dollar amount
of interest income from Ponchatoula's average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates, and the net interest margin.
All average balances are based on monthly balances.
<TABLE>
<CAPTION>
1997 1996 1995
------------------------- ---------------------------- -------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate(1) Balance Interest Rate Balance Interest Rate
------- ------------------------ -------- ---- ------- -------------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans and leases receivable(2) $28,403 $ 2,429 8.55% $27,597 $ 2,384 8.64% $27,129 $ 2,348 8.65%
Mortgage-backed securities 25,246 1,576 6.24 24,861 1,621 6.52 20,986 1,353 6.45
Investment securities 2,469 145 5.87 2,293 155 6.76 2,356 138 5.86
Other interest-earning assets 1,621 97 5.98 2,328 116 4.98 2,319 149 6.43
----- ----- ---- ----- ----- ---- ----- --- ----
Total interest-earning assets 57,739 4,247 7.36 57,079 4,276 7.49 52,790 3,988 7.55
----- ---- ----- ---- ----- ----
Noninterest-earning assets 1,591 1,278 1,279
----- ----- -----
Total assets $59,330 $58,357 $54,069
------- ------- -------
------- ------- -------
Interest-bearing liabilities:
Deposits $43,607 1,971 4.52 $44,733 2,158 4.82 $42,980 2,007 4.67
FHLB advances 9,755 544 5.58 7,630 433 5.67 5,562 335 6.02
----- --- ---- ----- --- ---- ----- --- ----
Total interest-bearing liabilities 53,362 2,515 4.71 52,363 2,591 4.95 48,542 2,342 4.82
----- ---- ----- ---- ----- ----
Noninterest-bearing liabilities 391 452 241
------- ------- -------
Total liabilities 53,753 52,815 48,783
Stockholders' equity 5,577 5,542 5,286
------- ------- -------
Total liabilities and
stockholders' equity $59,330 $58,357 $54,069
------- ------- -------
------- ------- -------
Net interest income; average
interest rate spread $ 1,732 2.65% $1,685 2.54% $ 1,646 2.73%
------- ---- ------ ---- ------- ----
------- ---- ------ ---- ------- ----
Net interest margin(3) 3.00% 2.95% 3.12%
------ ------ ------
------ ------ ------
Average interest-earning assets to
average interest-bearing liabilities 108.20% 109.01% 108.75%
------ ------ ------
------ ------ ------
</TABLE>
- -------------------
(1) At December 31, 1997, the weighted average yields earned and rates paid
were as follows: loans and leases receivable, 7.99%; mortgage-backed
securities, 6.40%; investment securities, 6.02%; other interest-earning
assets, 5.68%, total interest-earning assets, 7.55%; deposits, 4.52%;
FHLB advances, 5.85; total interest-bearing liabilities, 4.90%; and
average interest rate spread, 2.65%.
(2) Includes loans classified as held for sale.
(3) Equals net interest income divided by average interest-earning assets.
55
<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 Ponchatoula'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), and (ii) changes in rate (change in
rate multiplied by prior year volume). The combined effect of changes in both
rate and volume has been allocated proportionately to the change due to rate and
the change due to volume.
<TABLE>
<CAPTION>
1997 vs. 1996 1996 vs. 1995
------------------------------ ------------------------------
Increase(Decrease) Increase(Decrease)
Due to Total Due to Total
---------------- Increase ----------------- Increase
Rate Volume (Decrease) Rate Volume (Decrease)
---- ------ ---------- ---- ------ ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans and leases receivable(1) $(23) $68 $45 $ (3) $ 39 $ 36
Mortgage-backed securities (69) 24 (45) 15 253 268
Investment securities (21) 11 (10) 21 (4) 17
Other interest-earning assets 21 (40) (19) (34) 1 (33)
---- --- --- ---- --- ----
Total interest-earning assets (92) 63 (29) (1) 289 288
---- --- ---- ---- --- ---
Interest-bearing liabilities:
Deposits (134) (53) (187) 66 85 151
FHLB advances (8) 119 111 (20) 118 98
----- --- --- ---- --- ---
Total interest-bearing liabilities (142) 66 (76) 46 203 249
--- --- ---- --- --- ---
Increase (decrease) in net interest income $ 50 $(3) $47 $(47) $ 86 $ 39
---- --- ---- ---- --- ---
---- --- ---- ---- --- ---
</TABLE>
- ----------------
(1) Includes loans classified as held for sale.
Interest Income
Interest on loans and leases increased by $45,000 or 1.9% in 1997 and
by $36,000 or 1.5% in 1996 from the respective prior periods. The increases in
1997 and 1996 were due to increases of 2.9% and 1.7%, respectively, in the
average balance of loans and leases receivable. The increase in the average
balance in 1997 was the result of an increase in single-family residential loans
and consumer loans, offset by a decrease in construction loans and single-family
residential leases. The increase in the average balance in 1996 was due to
increases in single-family residential loans, construction loans and consumer
loans, offset
56
<PAGE>
by a significant decrease in single-family residential leases as Ponchatoula
offered most of its lessees the option of converting their leases to loans in
1996. The increased average balances were partially offset by decreases in the
average yield to 8.55% in 1997 from 8.64% in 1996 and 8.65% in 1997.
Interest on mortgage-backed securities decreased by $45,000 or 2.8% in
1997 and increased by $268,000 or 19.8% in 1996 from the respective prior
periods. The decrease in 1997 was due to a decrease in the average yield to
6.24% from 6.52% in 1996, partially offset by an increase of $385,000 or 1.5% in
the average balance. The increase in 1996 is a result of a $3.9 million or 18.5%
increase in the average balance of mortgage-backed securities over 1995 and, to
a lesser extent, an increase of seven basis points in the average yield. In 1996
and 1995, the amount of mortgage-backed securities purchased exceeded the amount
called or matured by $3.9 million and $4.0 million, respectively. However, in
1997 the amount of mortgage-backed securities purchased substantially declined,
resulting in a decrease in the average balance. Because Ponchatoula implemented
its strategy of having $10 million of mortgage-backed securities linked to FHLB
advances in 1996, fewer mortgage-backed securities were purchased in 1997.
Interest on investment securities decreased by $10,000 or 6.4% in 1997
and increased by $17,000 or 12.3% in 1996, from the respective prior periods.
The decrease in 1997 was due to a decrease in the average yield to 5.87% from
6.76% in 1996, offset by an increase in the average balance of $176,000 or 7.7%.
The increase in 1996 was due to an increase in the average yield to 6.76% from
5.86% in 1995, partially offset by a decrease in the average balance of
investment securities of $63,000 or 2.7%. The fluctuation in the average yields
was primarily due to the maturity in 1996 of higher yielding, two-year U.S.
government agency securities, with the proceeds invested in similar securities
with lower yields.
Other interest income, which consists of interest on interest-bearing
deposits in other institutions and dividends on FHLB stock, decreased by $19,000
or 16.4% in 1997 and by $33,000 or 22.1% in 1996 from the respective prior
periods. The decrease in 1997 is the result of a $707,000 or 30.4% decrease in
the average balance, partially offset by an increase in the average yield to
5.98% from 4.98% in 1996. The decrease in 1996 was due to a significant decrease
in the average yield to 4.98% from 6.43% in 1995. The fluctuation in the average
yields was due to changes in the yields on FHLB stock and interest-bearing
deposits in other institutions.
Total interest income decreased by $29,000 or .7% in 1997 and increased
by $288,000 or 7.2% in 1996 from the respective prior periods. The decrease in
1997 was primarily attributable to the overall decrease of 13 basis points in
the average yield, offset by an increase of $660,000 or 1.2% in the average
balance. The increase in 1996 was the result of an increase of $4.3 million or
8.1% in the average balance of interest-earning assets, partially offset by a
decrease in the average yield of six basis points.
57
<PAGE>
Interest Expense
Interest on deposits decreased by $187,000 or 8.7% in 1997 and
increased by $151,000 or 7.5% in 1996 from the respective prior periods. The
decrease in 1997 was due to a decrease in the average balance of deposits of
$1.1 million or 2.5% and a decrease in the average yield to 4.52% from 4.82% for
1996. The increase in 1996 was due to an increase in the average balance of $1.8
million or 4.1%, as well as an increase in the average rate paid of 15 basis
points.
Interest on FHLB advances increased by $111,000 or 25.6% in 1997 and by
$98,000 or 29.3% in 1996. The increases in 1997 and 1996 were due to increases
in the average balance of FHLB advances of $2.1 million for both years with the
increases being slightly offset by decreases in the average yield to 5.58% in
1997 from 5.67% in 1996 and 6.02% in 1995. Specific mortgage-backed securities,
with a fair value of $11.7 million, were pledged to the FHLB as collateral
securing the advances at December 31, 1997.
Provision for (Recovery of) Loan and Lease Losses
Provision for (recovery of) loan and lease losses was $(16,000), $3,000
and $(6,000) for 1997, 1996 and 1995, respectively. These provisions were based
upon, among other variables, non-accruing loans totaling $173,000, $365,000 and
$434,000 at December 31, 1997, 1996 and 1995, respectively. The recovery in 1997
was primarily due to the $192,000 or 52.6% decline in non-accruing loans during
1997.
Noninterest Income
Gains on sales of loans decreased by $73,000 or 30.4% in 1997 and
increased by $30,000 or 14.3% in 1996, over the respective prior periods. The
fluctuations are based primarily upon changes in the amount of loans sold. The
decrease in the amount of loans sold in 1997 was primarily due to decreased loan
demand. The amounts of loans sold were $8.7 million in 1997, $9.9 million in
1996 and $6.5 million in 1995. At the time the loan is sold, income is
recognized in the amount of loan fees that were deferred at the time of
origination. Because Ponchatoula has decided to retain at least a portion of
newly originated, 30-year fixed-rate mortgages commencing February 1998, it is
expected that the amount of loans sold and the related gains on sales will
decline.
Loan fees and service charges increased by $3,000 or 1.6% in 1997 and
by $29,000 or 18.5% during 1996. These increases are attributable to more
in-house loans being originated and an increase in late charges on mortgage and
consumer loans.
Other income, which primarily consists of service fees on deposit
accounts and withdrawal penalties on certificates of deposit, decreased by
$9,000 or 112.5% in 1997 and by $3,000 or 27.3% in 1996 from the respective
prior periods.
58
<PAGE>
Noninterest Expenses
Compensation and benefits increased by $51,000 or 6.2% in 1997 and by
$25,000 or 3.2% in 1996 over the respective prior periods. The increase in 1997
is primarily attributable to an increase in salaries of $27,000 or 4.7% and an
increase in health insurance of $13,000 or 24.8%. The increase in 1996 was due
primarily to an increase in salaries and officers compensation, the result of
annual raises during 1996, as well as the addition of one full-time employee. At
December 31, 1997 and 1996, Ponchatoula had 21 full-time employees and one
part-time employee. For periods subsequent to the Conversion, the shares of
Common Stock to be purchased by the ESOP and the 1998 Recognition Plan will
result in additional compensation expense being recognized over periods of 10
and five years, respectively. Based on the assumptions set forth under "Pro
Forma Data," the increased compensation expense before taxes is estimated to be
$52,000 per year for each of the ESOP and the 1998 Recognition Plan at the
maximum of the Estimated Valuation Range. However, the amount for the ESP may
vary significantly depending upon the impact of SOP 93-6. See "Risk Factors -
Increased Compensation Expense After the Conversion." In addition, the exercise
of compensatory or non-qualified stock options in the future would result in
additional compensation expense for federal income tax purposes (but not for
financial statement purposes) equal to the difference between the aggregate
market value of the Common Stock received and the aggregate exercise price.
Occupancy and equipment expense decreased by $11,000 or 7.3% in 1997
and by $1,000 or .7% in 1996, compared to the respective prior periods. As of
1997, all new assets purchased are being depreciated using the straight-line
method instead of accelerated methods. As a result, depreciation expense
decreased by $13,000 or 31.6% in 1997. During 1996, depreciation expense
decreased by $9,000 or 17.3% as a result of certain assets becoming fully
depreciated in 1995 and less assets acquired during 1996.
Federal insurance premiums decreased by $353,000 or 93.9% in 1997 and
increased by $279,000 or 287.6% in 1996, compared to the respective prior
periods. These fluctuations were primarily due to the special SAIF assessment
imposed on all SAIF-insured institutions as of September 30, 1996, which
amounted to $284,000 on a pre-tax basis for Ponchatoula. Excluding this special
SAIF assessment, federal insurance premiums decreased by $69,000 or 75.0% in
1997 and by $5,000 or 5.2% in 1996 over the respective prior periods. The
decrease in 1997 reflects a decrease in the deposit insurance assessment rates
as of January 1, 1997. In addition, average outstanding deposits decreased by
2.5% in 1997 and increased by 4.1% in 1996.
Ponchatoula incurred $27,000 of net real estate owned expense in 1997
after recognizing net income from its real estate owned of $3,000 in 1996 and
$11,000 in 1995. Net (gains) losses on the sale of real estate owned which are
included in such expense amounted to $23,000, $(7,000) and $(17,000) in 1997,
1996, and 1995, respectively.
Other expenses, which consist of professional fees, data processing
fees, postage and supplies and other miscellaneous items, decreased by $7,000 or
1.2% in 1997 and increased
59
<PAGE>
by $28,000 or 5.2% in 1996. The decrease in 1997 was a result of a decrease in
professional fees and data processing fees, offset by an increase in postage and
supplies and other expenses. The increase in 1996 was a result of an increase in
professional fees and other expenses, offset by a reduction in the data
processing fees.
Total noninterest expenses decreased by $290,000 or 15.2% in 1997 and
increased by $339,000 or 21.6% in 1996 over the respective prior periods. These
fluctuations were primarily due to the $284,000 special SAIF assessment in 1996.
Excluding the special SAIF assessment, total noninterest expenses decreased by
$6,000 or .4% in 1997 and increased by $55,000 or 3.5% in 1996 over the
respective prior periods.
Federal Income Taxes
Federal income taxes increased by $125,000 or 208.3% in 1997 and
decreased by $90,000 or 60.0% in 1996, compared to the respective prior periods.
The increase in 1997 resulted from a 143.2% increase in pre-tax income and an
increase in the effective tax rate to 36.9% in 1997 from 29.1% in 1996. See Note
10 of Notes to Financial Statements. The decrease in 1996 resulted primarily
from a 55.1% decrease in pre-tax income.
Liquidity and Capital Resources
Ponchatoula is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of U.S.
Government, federal agency and other investments having maturities of five years
or less. Current OTS regulations require that a savings institution maintain
liquid assets of not less than 4% of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less.
Ponchatoula's liquidity amounted to 7.5% and 7.3% at December 31, 1997 and 1996,
respectively.
In 1997, cash was provided by Ponchatoula's operating activities by net
income and the sale of loans in excess of the amount of loans originated for
sale. In 1996, cash was used by Ponchatoula's operating activities as the loans
originated for sale exceeded the amount of loans sold. Other adjustments to
reconcile net income to net cash provided by operations during 1997 and 1996
consisted primarily of net amortization of premiums on securities, depreciation,
and increases or decreases in various receivable and payable accounts. The
primary investing activities of Ponchatoula are the origination of loans and the
purchase of mortgage-backed securities and investment securities. In 1997,
investing activities provided $184,000 of cash, as the amount of mortgage-backed
securities maturing or called exceeded the amount purchased by $2.2 million,
offset by a $1.8 million increase in loans and leases. In 1996, investing
activities used $4.3 million of cash, as the amount of mortgage-backed
securities purchased exceeded the amount maturing by $3.9 million and loans and
leases increased by $432,000. The primary financing activities in 1997 and 1996
consisted of deposits and FHLB advances. Financing activities used $1.6 million
of cash in 1997 and provided $3.9 million of cash in 1996. Overall, cash and
cash equivalents declined
60
<PAGE>
by $44,000 and $946,000 in 1997 and 1996, respectively. See the Statements of
Cash Flows in the Financial Statements.
At December 31, 1997, Ponchatoula had unfunded loan commitments and
lines of credit aggregating $463,000. At the same date, scheduled maturities of
certificates of deposit during the succeeding 12 months amounted to $28.6
million. Management of Ponchatoula believes that Ponchatoula has adequate
resources to fund all of its commitments and that it can adjust the rates on
certificates of deposit to retain deposits in changed interest rate
environments. If Ponchatoula requires funds beyond its internal funding
capacities, advances from the FHLB of Dallas are available as an additional
source of funds.
Under applicable OTS regulations, Ponchatoula is required to maintain
regulatory capital sufficient to meet tangible, core and risk-based capital
ratios of at least 1.5%, 3.0% and 8.0%, respectively. At December 31, 1997,
Ponchatoula had tangible, core and risk-based capital ratios of 9.68%, 9.68% and
23.69%, respectively. See Note 14 of Notes to Financial Statements.
Impact of Inflation and Changing Prices
The financial statements and related financial data presented herein
have been prepared in accordance with generally accepted accounting principles,
which generally require the measurement of financial position and operating
results in terms of historical dollars, without considering changes in relative
purchasing power over time due to inflation. Unlike most industrial companies,
virtually all of Ponchatoula's assets and liabilities are monetary in nature. As
a result, interest rates generally have a more significant impact on
Ponchatoula's performance than does the effect of inflation.
The Year 2000
Ponchatoula is currently addressing the computer and data processing
issues relating to the Year 2000. While only in the assessment phase, management
believes that most of Ponchatoula's hardware and terminals will not need to be
replaced but that the software will need to be upgraded. Management does not
believe that issues related to the Year 2000 are likely to have or will have a
material adverse effect on Ponchatoula's liquidity, capital resources or results
of operations.
BUSINESS
Lending Activities
General. At December 31, 1997, Ponchatoula's net loans and leases
receivable (including loans classified as held for sale) totalled $29.5 million,
which represented 49.5% of Ponchatoula's $59.6 million of total assets at that
date. The principal lending activity of
61
<PAGE>
Ponchatoula is the origination of single-family residential loans, consumer
loans and, to a lesser extent, construction loans. At December 31, 1997, $20.1
million or 63.9% of Ponchatoula's total loans and leases (including loans held
for sale) consisted of single-family residential loans. Consumer loans totalled
$7.2 million at such date, representing 22.8% of the total loan and lease
portfolio and 12.8% of total assets. Commercial real estate loans and unimproved
land loans aggregated $647,000 at December 31, 1997.
The types of loans that Ponchatoula may originate are subject to
federal and state laws and regulations. Interest rates charged by Ponchatoula on
loans are affected principally by the demand for such loans and the supply of
money available for lending purposes and the rates offered by its competitors.
These factors are, in turn, affected by general and economic conditions, the
monetary policy of the federal government, including the Federal Reserve Board,
legislative and tax policies, and governmental budgetary matters.
A federal savings institution generally may not make loans to one
borrower and related entities in an amount which exceeds 15% of its unimpaired
capital and surplus, although loans in an amount equal to an additional 10% of
unimpaired capital and surplus may be made to a borrower if the loans are fully
secured by readily marketable securities. At December 31, 1997, Ponchatoula's
limit on loans-to-one borrower was $860,000 and its five largest loans or groups
of loans-to-one borrower, including related entities, aggregated $522,000,
$265,000, $220,000, $184,000 and $179,000. All of Ponchatoula's five largest
loans or groups of loans were performing in accordance with their terms at
December 31, 1997. The $522,000 borrowing relationship consists of 14 loans,
including a $168,000 loan secured by the borrower's personal residence and
$354,000 of loans secured by 13 single-family rental properties.
62
<PAGE>
Loan and Lease Portfolio Composition. The following table sets forth
the composition of Ponchatoula's loan and lease portfolio by type of loan at the
dates indicated.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
Amount % Amount % Amount %
------- ------ ------- ----- ------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single-family residential(1) $20,111 63.9% $19,159 62.9% $17,666 60.1%
Construction(2) 3,228 10.3 3,820 12.5 3,041 10.3
Commercial real estate 521 1.6 52 .2 56 .2
Land 126 .4 158 .5 197 .7
------- ------ ------- ----- ------- -----
Total real estate loans 23,986 76.2 23,189 76.1 20,960 71.3
------- ------ ------- ----- ------- -----
Consumer loans:
Home equity and improvement 4,411 14.0 4,275 14.0 3,517 12.0
Loans secured by savings accounts 824 2.6 841 2.8 870 3.0
Automobile 611 2.0 414 1.4 419 1.4
Mobile home 257 .8 182 .6 87 .3
Other 1,072 3.4 1,100 3.6 1,157 3.9
------- ------ ------- ----- ------- -----
Total consumer loans 7,175 22.8 6,812 22.4 6,050 20.6
------- ------ ------- ----- ------- -----
Total loans 31,161 99.1 30,001 98.5 27,010 91.9
------- ------ ------- ----- ------- -----
Leases receivable(3):
Single-family residential leases 224 .7 380 1.2 2,285 7.8
Commercial real estate leases 77 .3 79 .3 78 .3
------- ------ ------- ----- ------- -----
Total leases 301 1.0 459 1.5 2,363 8.1
------- ------ ------- ----- ------- -----
Total loans and leases 31,462 100.0% 30,460 100.0% 29,373 100.0%
------ ----- -----
------ ----- -----
Less:
Loans in process 1,706 1,721 1,450
Deferred loan origination fees 8 17 17
Allowance for loan and lease losses 265 282 280
------- ------- -------
Net loans and leases $29,483 $28,440 $27,626
------- ------- -------
------- ------- -------
</TABLE>
- -------------------
(1) At December 31, 1997, 1996 and 1995, includes $318,000, $699,000 and
$440,000 of loans classified as held for sale, respectively, and second
mortgages of $164,000, $317,000 and $398,000, respectively.
(2) At December 31, 1997, 1996 and 1995, includes $1.1 million, $1.6
million and $1.3 million of loans classified as held for sale,
respectively. Consists solely of single-family residential construction
loans.
(3) Consists of bond for deed contracts in which Ponchatoula retains title
to the property until all payments are made on the contract.
63
<PAGE>
Contractual Terms to Final Maturities. The following table sets forth
certain information at December 31, 1997 regarding the dollar amount of loans
and leases maturing in Ponchatoula's portfolio, based on the contractual date of
the loan's or lease's final maturity, before giving effect to net items. Demand
loans, loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as due in one year or less. Amounts shown below do not
reflect normal principal amortization; rather, the balance of each loan or lease
outstanding at December 31, 1997 is shown in the appropriate year of the loan's
or lease's final maturity.
<TABLE>
<CAPTION>
Due More
Due 3-5 Due 5-10 Due 10-15 Than 15
Years After Years After Years After Years After
1998 1999 2000 12/31/97 12/31/97 12/31/97 12/31/97 Total
---- ---- ---- -------- -------- -------- -------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Single-family residential
loans $ 67 $ 42 $ 145 $ 340 $ 2,401 $14,403 $ 2,713 $20,111
Single-family residential
leases 1 3 -- 7 97 81 35 224
Commercial real estate
loans and leases -- 255 -- -- 47 219 77 598
Construction loans 3,228 -- -- -- -- -- -- 3,228
Land loans 2 5 6 3 110 -- -- 126
Consumer loans 1,305 324 641 1,097 797 3,011 -- 7,175
------- ------- ------- ------- ------- ------- ------ -------
Total(1) $ 4,603 $ 629 $ 792 $ 1,447 $ 3,452 $17,714 $ 2,825 $31,462
------- ------- ------- ------- ------- ------- ------ -------
------- ------- ------- ------- ------- ------- ------ -------
</TABLE>
- --------------
(1) Gross of loans in process, deferred loan origination fees and the
allowance for loan and lease losses.
64
<PAGE>
The following table sets forth the dollar amount of all loans and
leases, before net items, due after one year from December 31, 1997 as shown in
the preceding table, which have fixed interest rates or which have floating or
adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Floating or
Rates Adjustable Rates Total
----- ---------------- -----
(In Thousands)
<S> <C> <C> <C>
Single-family residential
loans $10,596 $ 9,448 $20,044
Single-family residential
leases 142 81 223
Commercial real estate
loans and leases 521 77 598
Land loans -- 124 124
Consumer loans 5,755 115 5,870
------- ------- -------
Total $17,014 $ 9,845 $26,859
------- ------- -------
------- ------- -------
</TABLE>
Scheduled contractual maturities of loans do not reflect the actual
expected term of Ponchatoula's loan and lease portfolio. The average life of
loans and leases is substantially less than their average contractual terms
because of prepayments and due-on-sale clauses, which give Ponchatoula the right
to declare a conventional loan immediately due and payable in the event, among
other things, that the borrower sells the real property subject to the mortgage
and the loan is not repaid. The average life of mortgage loans tends to increase
when current mortgage loans rates are higher than rates on existing mortgage
loans and, conversely, decrease when rates on existing mortgage loans are lower
than current mortgage loan rates (due to refinancing of adjustable-rate and
fixed-rate loans at lower rates). Under the latter circumstance, the weighted
average yield on loans decreases as higher yielding loans are repaid or
refinanced at lower rates.
Origination, Purchase and Sale of Loans. The lending activities of
Ponchatoula are subject to the written, non-discriminatory, underwriting
standards and loan origination procedures established by Ponchatoula's Board of
Directors and management. Loan originations are obtained by a variety of
sources, including referrals from real estate brokers, developers, builders,
existing customers, newspaper, radio and walk-in customers. Loan applications
are taken by lending personnel, and the loan department supervises the
procurement of credit reports, appraisals and other documentation involved with
a loan. Property valuations are generally performed by independent outside
appraisers approved by Ponchatoula's Board of Directors. Title and hazard
insurance are required on all security property.
Ponchatoula's loan approval process is intended to assess the
borrower's ability to repay the loan, the viability of the loan and the adequacy
of the value of the property that will secure the loan. A loan application file
is first reviewed by a loan officer. If the
65
<PAGE>
mortgage loan is to be retained in Ponchatoula's portfolio, it must be approved
by either the Board of Directors or the Executive Committee. If the mortgage
loan is being originated for sale into the secondary market, the manager of the
mortgage loan department may approve the loan after obtaining a written
commitment from an investor in the secondary market to purchase the loan upon
origination. With respect to consumer loans, the consumer loan manager has the
authority to approve unsecured loans up to $10,000 and secured loans up to
$50,000. Consumer loans in excess of these amounts must be approved by either
the Board of Directors or the Executive Committee.
Historically, prior to 1990, Ponchatoula had originated substantially
all of the loans in its portfolio and held them until maturity. However,
beginning in October 1990, Ponchatoula began selling all of its newly-originated
fixed-rate residential mortgage loans in the secondary market in order to manage
its interest rate risk. The residential loans are generally made on terms,
conditions and documentation which permit the sale to the Federal Home Loan
Mortgage Corporation ("FHLMC"), the Federal National Mortgage Association
("FNMA"), the Government National Mortgage Association ("GNMA") and other
institutional investors in the secondary market. Loans originated with the
intention of being sold are accounted for as "loans held for sale" and are
carried on the statement of financial condition at the lower of cost or
estimated market value in the aggregate. The amount of loans sold totalled $8.7
million, $9.9 million and $6.5 million in 1997, 1996 and 1995, respectively. At
December 31, 1997, the amount of loans held for sale was $1.4 million. Because
Ponchatoula has decided to retain at least a portion of newly originated,
30-year fixed-rate mortgages commencing February 1998, it is expected that the
amount of loans sold or held for sale will decline.
Ponchatoula has entered into agreements with outside third parties to
sell loans that it originates on a servicing released basis. The origination of
the loans are not approved by Ponchatoula until it has obtained a written
commitment from a third party to purchase the loan when it is originated.
Ponchatoula may be required to repurchase a loan if it becomes 60 days or more
delinquent within four to six months following the date of sale, as specified in
the agreement, or if any representations and warranties regarding the loans are
not accurate. The total amount of loans sold with recourse to Ponchatoula
pursuant to these agreements totalled $2.4 million at December 31, 1997. As of
December 31, 1997, Ponchatoula has not been required to repurchase any of the
loans sold with recourse, and as a result no allowance for losses has been
established with respect to these loans.
Ponchatoula has not sold loans on a servicing retained basis since
1984, when it sold loans to the FHLMC. At December 31, 1997, Ponchatoula was
servicing $91,000 of loans for others.
Historically, Ponchatoula has not purchased loans or participation
interests in loans (excluding mortgage-backed securities), and Ponchatoula does
not currently intend to become an active purchaser of loans in the foreseeable
future.
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<PAGE>
The following table shows total loans and leases originated, sold and
repaid during the periods indicated. No loans have been purchased during the
periods shown.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Loan and lease originations:
Single-family residential:
Loans for portfolio $ 4,348 $ 4,393 $ 3,678
Loans for sale 7,835 10,464 7,018
Leases -- -- 100
Construction(1) 941 1,450 927
Commercial real estate 474 -- --
Consumer 4,007 4,106 3,478
------ ------ ------
Total loans and leases originated 17,605 20,413 15,201
------ ------ ------
Sales and principal reductions:
Loans sold 8,711 9,940 6,527
Loan principal reductions 7,652 9,747 8,758
Lease principal reductions 158 185 322
------ ------ ------
Total loans sold and principal reductions 16,521 19,872 15,607
------ ------ ------
Increase (decrease) due to other items, net(2) (41) 273 1,286
------ ------ ------
Net increase in loan portfolio $ 1,043 $ 814 $ 880
------ ------ ------
------ ------ ------
</TABLE>
- ------------------
(1) Consists solely of single-family residential construction loans.
(2) Other items, net include the increase relating to loans in process,
deferred loan origination fees and the allowance for loan and lease
losses.
Single-Family Residential Real Estate Loans. Historically, Ponchatoula
has concentrated its lending activities on the origination of loans secured
primarily by first mortgage liens on existing single-family residences. At
December 31, 1997, $19.9 million or 63.4% of Ponchatoula's total loan and lease
portfolio consisted of such loans (including loans held for sale but excluding
leases receivable and construction loans). In addition, single-family
residential loans included $164,000 of second mortgages at December 31, 1997,
representing .5% of the total loan and lease portfolio at such date.
Ponchatoula originates long-term, fixed-rate single-family residential
loans in order to provide a full range of products to its customers, but
generally only under terms, conditions and documentation which permit the sale
thereof in the secondary market. From
67
<PAGE>
1982 to 1994, all of the newly-originated, fixed-rate single-family residential
loans were classified as held for sale. The amount of such originations totalled
$7.8 million, $10.5 million and $7.0 million in 1997, 1996 and 1995,
respectively, and the amount of such loans sold totalled $8.7 million, $9.9
million and $6.5 million in 1997, 1996 and 1995, respectively. At December 31,
1997, approximately $10.6 million or 52.7% of the permanent single-family
residential loans in Ponchatoula's loan portfolio (including loans held for
sale) consisted of loans which provide for fixed rates of interest. Although
these loans provide for repayments of principal over a fixed period of up to 30
years, it is Ponchatoula's experience that such loans remain outstanding for a
substantially shorter period of time.
In 1995, Ponchatoula began offering 15-year fixed-rate residential
mortgage loans for retention in its portfolio. These fixed-rate loans retained
in the portfolio have interest rates of 8% or above as of December 31, 1997 and
a loan-to-value ("LTV") ratio of 70% or below. Commencing February 1998,
Ponchatoula amended its policy to provide for the retention of 30-year,
fixed-rate residential mortgage loans, with such loans to be funded with
long-term FHLB advances.
From 1982 to 1994, Ponchatoula emphasized for its portfolio
single-family residential mortgage loans which provide for periodic adjustments
to the interest rate. The loans emphasized by Ponchatoula during this period had
15- to 30-year terms and an interest rate which adjusts every year in accordance
with a designated index (currently the weekly average yield on U.S. Treasury
securities adjusted to a constant comparable maturity of one year, as made
available by the Federal Reserve Board). Ponchatoula generally does not offer
discounted interest rates on its ARMs. There is a cap on the amount of any
increase or decrease in the interest rate per year, and various caps, depending
on when the loan was originated, on the amount which the interest rate can
increase or decrease over the life of the loan. Ponchatoula's adjustable-rate
loans currently being originated are not assumable and do not contain prepayment
penalties. Ponchatoula has not engaged in the practice of using a cap on the
payments that could allow the loan balance to increase rather than decrease,
resulting in negative amortization, although it has on a limited basis extended
the maturity of the loan. Approximately $9.5 million or 47.3% of the permanent
single-family residential loans in Ponchatoula's loan and lease portfolio at
December 31, 1997 (including loans held for sale) had adjustable interest rates.
The demand for adjustable-rate loans in Ponchatoula's primary market
area has been a function of several factors, including the level of interest
rates, the expectations of changes in the level of interest rates and the
difference between the interest rates and loan fees offered for fixed-rate loans
and adjustable-rate loans. The relative amount of fixed-rate and adjustable-rate
residential loans that can be originated at any time is largely determined by
the demand for each in a competitive environment. Due to the generally lower
rates of interest prevailing in recent periods, Ponchatoula's originations of
adjustable-rate, single-family residential loans decreased as consumer
preference for fixed-rate loans increased.
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<PAGE>
Adjustable-rate loans decrease the risks associated with changes in
interest rates but involve other risks, primarily because as interest rates
rise, the payment by the borrower rises to the extent permitted by the terms of
the loan, thereby increasing the potential for default. At the same time, the
marketability of the underlying property may be adversely affected by higher
interest rates. Ponchatoula believes that these risks, which have not had a
material adverse effect on Ponchatoula to date, generally are less than the
risks associated with holding fixed-rate loans in an increasing interest rate
environment. In addition, Ponchatoula minimizes the credit risks associated with
ARMs by (i) imposing a maximum LTV ratio of 75% on such loans and (ii) requiring
that the borrower's payments based on the initial interest rate not exceed 20%
of the borrower's income.
Ponchatoula is permitted to lend up to 100% of the appraised value of
the real property securing a residential loan; however, if the amount of a
residential loan originated or refinanced exceeds 90% of the appraised value,
Ponchatoula is required by federal regulations to obtain private mortgage
insurance on the portion of the principal amount that exceeds 80% of the
appraised value of the security property. Pursuant to underwriting guidelines
adopted by the Board of Directors, Ponchatoula will lend up to 95% of the
appraised value of the property securing a fixed-rate, single-family residential
loan which is being originated for sale, and generally requires borrowers to
obtain private mortgage insurance on the portion of the principal amount of the
loan that exceeds 80% of the appraised value of the security property. The
maximum LTV ratio for ARMs is 75% of the appraised value of the property.
Ponchatoula generally requires title insurance insuring the priority
and validity of its mortgage lien, as well as fire and extended coverage
casualty insurance in order to protect the properties securing its residential
and other mortgage loans. Borrowers may be required to advance funds, with each
monthly payment of principal and interest, to a loan escrow account from which
Ponchatoula makes disbursements for items such as real estate taxes, hazard
insurance premiums and mortgage insurance premiums as they become due. The
properties securing all of Ponchatoula's mortgage loans are appraised by
independent appraisers approved by the Board of Directors.
Construction Loans. Ponchatoula makes construction loans to individuals
for the construction of their residences, provided that the borrower has also
been approved for permanent financing in accordance with Ponchatoula's
underwriting policies for single-family residential loans. The funds are
disbursed as various phases of the construction are completed, subject to
written approval of on-site inspections by building inspectors. Upon completion
of the construction, the loan is transferred to permanent financing status. If
the permanent financing is at a fixed interest rate, the loan is generally sold
into the secondary market upon completion of the construction pursuant to a
written commitment obtained prior to origination of the construction loan. At
December 31, 1997, construction loans amounted to $3.2 million or 10.3% of
Ponchatoula's total loan and lease portfolio (including loans held for sale).
69
<PAGE>
Construction lending is generally limited to Ponchatoula's primary
lending area. Construction loans are structured to be converted to permanent
loans at the end of the construction phase, which typically does not exceed six
months. Construction loans have rates and terms which generally match the
non-construction loans then offered by Ponchatoula, except that during the
construction phase the borrower only pays interest on the loan. Advances are
made on a percentage of completion basis. Construction loans are underwritten
pursuant to the same general guidelines used for originating permanent loans.
Construction financing is generally considered to involve a higher degree of
risk of loss than long-term financing on improved, owner-occupied real estate
because of the uncertainties of construction, including the possibility of costs
exceeding the initial estimates and the need to obtain a tenant or purchaser if
the property will not be owner-occupied. Ponchatoula generally attempts to
mitigate the risks associated with construction lending by, among other things,
lending primarily in its market area and using low loan-to-value ratios in the
underwriting process.
Consumer Loans. Subject to restrictions contained in applicable federal
laws and regulations, Ponchatoula is authorized to make loans for a wide variety
of personal or consumer purposes. At December 31, 1997, $7.2 million or 22.8% of
Ponchatoula's total loan and lease portfolio (including loans held for sale)
consisted of consumer loans.
Ponchatoula originates consumer loans in order to provide a full range
of financial services to its customers and because such loans generally have
shorter terms and higher interest rates than residential mortgage loans. The
consumer loans offered by Ponchatoula include home equity and improvement loans,
loans secured by deposit accounts in Ponchatoula, automobile loans, mobile home
loans and other miscellaneous loans. In addition, Ponchatoula began offering
home equity lines of credit in November 1995.
Home equity and improvement loans are originated by Ponchatoula for up
to 80% of the appraised value, less the amount of any existing prior liens on
the property. Ponchatoula secures the loan with a mortgage on the property
(generally a second mortgage) and will originate the loan even if another
institution holds the first mortgage. Second mortgages originated through the
consumer loan department generally have fixed interest rates and shorter terms
than the second mortgages originated through the mortgage loan department, which
are included in single-family residential loans. The loans have a maximum term
of 12 years. Ponchatoula has increased its emphasis on these loans in recent
years. The home equity lines of credit have a 10-year term and an interest rate
equal to the prime rate published in the Wall Street Journal plus 1%, adjustable
monthly. At December 31, 1997, home equity and improvement loans totalled $4.4
million or 14.1% of Ponchatoula's total loan and lease portfolio (including
loans held for sale).
Ponchatoula offers loans secured by deposit accounts in Ponchatoula,
which amounted to $824,000 or 2.6% of Ponchatoula's total loan and lease
portfolio (including loans held for sale) at December 31, 1997. Such loans are
originated for up to 100% of the account balance, with a hold placed on the
account restricting the withdrawal of the account
70
<PAGE>
balance. The interest rate on the loan is equal to the interest rate paid on the
account plus 2.5%.
Ponchatoula offers automobile loans on both new and used vehicles, with
most of the loans secured by used vehicles. The automobile loans have terms of
up to five years and have fixed interest rates. Automobile loans amounted to
$611,000 or 2.0% of the total loan and lease portfolio (including loans held for
sale) at December 31, 1997, compared to $414,000 at December 31, 1996.
Ponchatoula originates mobile home loans, which have increased in
recent years to $257,000 or .8% of the total loan and lease portfolio (including
loans classified as held for sale) at December 31, 1997 from $87,000 or .3% of
the total loan and lease portfolio (including loans held for sale) at December
31, 1995.
Other consumer loans primarily consist of unsecured loans and loans
secured by personal property. These loans amounted to $1.1 million or 3.4% of
the total loan and lease portfolio (including loans held for sale) at December
31, 1997.
Consumer loans generally have shorter terms and higher interest rates
than mortgage loans but generally involve more credit risk than mortgage loans
because of the type and nature of the collateral and, in certain cases, the
absence of collateral. In addition, consumer lending collections are dependent
on the borrower's continuing financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness and personal bankruptcy. In
most cases, any repossessed collateral for a defaulted consumer loan will not
provide an adequate source of repayment of the outstanding loan balance because
of improper repair and maintenance of the underlying security. The remaining
deficiency often does not warrant further substantial collection efforts against
the borrower. Ponchatoula believes that the generally higher yields earned on
consumer loans compensate for the increased credit risk associated with such
loans and that consumer loans are important to its efforts to increase rate
sensitivity, shorten the average maturity of its loan portfolio and provide a
full range of services to its customers.
Commercial Real Estate and Land Loans. At December 31, 1997, $521,000
or 1.6% and $126,000 or .4% of Ponchatoula's total loan and lease portfolio
(including loans held for sale) consisted of commercial real estate loans and
land loans, respectively. At December 31, 1997, Ponchatoula's commercial real
estate loan portfolio consisted of three loan secured by real estate located
within Ponchatoula's market area, consisting of a health club, a church and a
retail establishment. The loans secured by the health club and church are
fixed-rate loans, and the loan secured by the retail establishment has an
interest rate which adjusts annually. At December 31, 1997, Ponchatoula had 14
land loans secured by unimproved property located within Ponchatoula's market
area. The average balance of Ponchatoula's land loans was approximately $9,000
at December 31, 1997.
71
<PAGE>
Commercial real estate lending is generally considered to involve a
higher degree of risk than single-family residential lending. Such lending
typically involves large loan balances concentrated in a single borrower or
groups of related borrowers. In addition, the payment experience on loans
secured by income-producing properties is typically dependent on the successful
operation of the related real estate project and thus may be subject to a
greater extent to adverse conditions in the real estate market or in the economy
generally.
Leases Receivable. At December 31, 1997, Ponchatoula had leases
totalling $301,000 or .9% of the total loan and lease portfolio (including loans
held for sale), a decrease of $158,000 from December 31, 1996. The leases
receivable are bond for deed contracts in which Ponchatoula retains title to the
property until all payments are made on the contract, at which time Ponchatoula
transfers the title to the lessee. The lease terms range from 15 to 30 years,
and the leases are classified as sales-type leases. During 1996, with respect to
bond for deed contracts which met Ponchatoula's lending requirements,
Ponchatoula offered the lessees the option of converting their leases to
contract deed loans at which time title passed to the mortgagee. Ponchatoula has
not originated any leases since 1995.
All of Ponchatoula's leases receivable were originated in connection
with the sale of real estate owned by Ponchatoula. Of the $301,000 of leases at
December 31, 1997, $224,000 74.4% of the total leases were on single-family
residences. The remaining amount consisted of one commercial real estate lease
totalling $77,000 at December 31, 1997, which was originated more than 10 years
ago. In order to facilitate the sale of the real estate owned, Ponchatoula
offers up to 100% financing on the leases to qualified borrowers. At December
31, 1997, no leases were delinquent 90 days or more.
From the lessee's standpoint, the lease receivable is very similar to a
mortgage on the property, except that the title to the property is retained by
Ponchatoula during the term of the lease. The lessee is responsible for the
payment of property taxes and insurance on the property. The advantage of a
lease receivable to Ponchatoula is that if the lessee defaults on the payments,
Ponchatoula does not have to institute foreclosure proceedings to obtain title
to the property.
Loan Origination and Other Fees. In addition to interest earned on
loans, Ponchatoula receives loan origination fees or "points" for originating
loans. Loan points are a percentage of the principal amount of the mortgage loan
and are charged to the borrower in connection with the origination of the loan.
In accordance with SFAS No. 91, which deals with the accounting for
non-refundable fees and costs associated with originating or acquiring loans,
Ponchatoula's loan origination fees and certain related direct loan origination
costs are offset, and the resulting net amount is deferred and amortized as
interest income over the contractual life of the related loans as an adjustment
to the yield of such loans. At December 31, 1997, Ponchatoula had $8,000 of loan
fees which had been deferred and are being recognized as income over the
contractual maturities of the related loans.
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<PAGE>
Asset Quality
General. When a borrower fails to make a required payment on a loan,
Ponchatoula attempts to cure the deficiency by contacting the borrower and
seeking payment. Late charges are generally imposed following the tenth day
after a payment is due. In most cases, deficiencies are cured promptly. If a
delinquency extends beyond 30 days, the loan and payment history is reviewed and
efforts are made to collect the loan. While Ponchatoula generally prefers to
work with borrowers to resolve such problems, when the account becomes 90 days
delinquent, Ponchatoula institutes foreclosure or other proceedings, as
necessary, to minimize any potential loss.
Loans are placed on non-accrual status when, in the judgment 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.
As a matter of policy, Ponchatoula discontinues the accrual of interest income
when the loan becomes 90 days past due as to principal or interest.
Real estate acquired by Ponchatoula as a result of foreclosure or by
deed-in-lieu of foreclosure and loans deemed to be in-substance foreclosed under
generally accepted accounting principles are classified as real estate owned
until sold. Pursuant to a statement of position ("SOP 92-3") issued by the AICPA
in April 1992, which provides guidance on determining the balance sheet
treatment of foreclosed assets in annual financial statements for periods ending
on or after December 15, 1992, there is a rebuttable presumption that foreclosed
assets are held for sale and such assets are recommended to be carried at the
lower of fair value minus estimated costs to sell the property, or cost
(generally the balance of the loan on the property at the date of acquisition).
After the date of acquisition, all costs incurred in maintaining the property
are expensed and costs incurred for the improvement or development of such
property are capitalized up to the extent of their net realizable value.
Ponchatoula's accounting for its real estate owned complies with the guidance
set forth in SOP 92-3.
Delinquent Loans and Leases. The following table sets forth information
concerning delinquent loans and leases at December 31, 1997, in dollar amount
and as a percentage of Ponchatoula's total loan and lease portfolio. The amounts
presented represent the total outstanding principal balances of the related
loans and leases, rather than the actual payment amounts which are past due. At
December 31, 1997, Ponchatoula had no commercial real estate loans, construction
loans or land loans which were delinquent 30 or more days.
73
<PAGE>
<TABLE>
<CAPTION>
Single-Family
Residential Consumer Total
----------- -------- -----
Amount % Amount % Amount %
------ --- ------ --- ------ ---
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans and leases delinquent for:
30 - 59 days $ 879 2.8% $ 32 .1% $ 911 2.9%
60 - 89 days 192 .6 5 -- 197 .6
90 days and over 169 .5 4 -- 173 .5
------ --- ------ -- ------ ---
Total delinquent loans
and leases $1,240(1) 3.9% $ 41 .1% $1,281 4.0%
-------- --- ------ -- ------ ---
-------- --- ------ -- ------ ---
</TABLE>
- --------------
(1) Includes $13,000 of single-family residential leases.
Non-Performing Assets. The following table sets forth the amounts and
categories of Ponchatoula's non-performing assets at the dates indicated.
Ponchatoula did not have any accruing loans 90 days or more delinquent or
troubled debt restructurings at any of the dates presented.
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Non-accruing loans and leases:
Single-family residential(1) $169 $350 $434
Consumer 4 15 --
---- ---- ----
Total non-accruing loans
and leases 173 365 434
Real estate owned -- 141 --
---- ---- ----
Total non-performing assets $173 $506 $434
---- ---- ----
---- ---- ----
Total non-performing loans and
leases as a percentage of total
loans and leases .55% 1.38% 1.66%
---- ---- ----
---- ---- ----
Total non-performing assets as a
percentage of total assets .29% .83% .76%
---- ---- ----
---- ---- ----
</TABLE>
- --------------------------
(1) Includes $0, $62,000, and $104,000 of single-family residential leases
at December 31, 1997, 1996 and 1995, respectively.
74
<PAGE>
Classified Assets. Federal regulations require that each insured
savings institution classify its assets on a regular basis. In addition, in
connection with examinations of insured institutions, federal examiners have
authority to identify problem assets and, if appropriate, classify them. There
are three classifications for problem assets: "substandard," "doubtful" and
"loss." Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified loss is considered uncollectible and of
such little value that continuance as an asset of the institution is not
warranted. Another category designated "special mention" also must be
established and maintained for assets which do not currently expose an insured
institution to a sufficient degree of risk to warrant classification as
substandard, doubtful or loss. Assets classified as substandard or doubtful
require the institution to establish general allowances for loan and lease
losses. If an asset or portion thereof is classified loss, the insured
institution must either establish specific allowances for loan losses in the
amount of 100% of the portion of the asset classified loss, or charge-off such
amount. General loss allowances established to cover possible losses related to
assets classified substandard or doubtful may be included in determining an
institution's regulatory capital, while specific valuation allowances for loan
and lease losses do not qualify as regulatory capital. Federal examiners may
disagree with an insured institution's classifications and amounts reserved.
Exclusive of assets classified loss which have been fully reserved or
charged-off, Ponchatoula's classified assets at December 31, 1997 consisted of
$173,000 of assets classified as substandard, which represented .3% of total
assets.
Allowance for Loan and Lease Losses. Ponchatoula's loan and lease
portfolio consists primarily of one-to-four family residential loans and, to a
lesser extent, consumer loans, construction loans, and commercial real estate
loans. Ponchatoula believes that there are no material elements of risk in its
loan portfolio, and total nonperforming assets are closely monitored. The
classification of assets policy is reviewed periodically by the Board of
Directors. The loan loss allowance is maintained by management at a level
considered adequate to cover possible losses that are currently anticipated
based on the past three-year loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's ability to
repay, the estimated value of any underlying collateral, general economic
conditions, and other factors and estimates which are subject to change over
time. Although management believes that it uses the best information available
to make such determinations, future adjustments to allowances may be necessary,
and net income could be significantly affected, if circumstances differ
substantially from the assumptions used in making the initial determinations.
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<PAGE>
The following table sets forth an analysis of Ponchatoula's allowance
for loan and lease losses during the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Total loans and leases
outstanding at end of period(1) $ 31,462 $ 30,460 $ 29,373
-------- -------- --------
-------- -------- --------
Average loans and leases
outstanding(1) $ 28,403 $ 27,597 $ 27,129
-------- -------- --------
-------- -------- --------
Balance at beginning of period 282 280 288
Charge-offs 1 1 2
Recoveries -- -- --
-------- -------- --------
Net charge-offs 1 1 2
Recovery of allowance for losses (16) 3 (6)
-------- -------- --------
Balance at end of period $ 265 $ 282 $ 280
-------- -------- --------
-------- -------- --------
Allowance for loan and lease
losses as a percent of total loans
and leases outstanding .84% .93% .95%
-------- -------- --------
-------- -------- --------
Ratio of net charge-offs to
average loans and leases
outstanding .00% .00% .01%
-------- -------- --------
-------- -------- --------
</TABLE>
- ------------------
(1) Total and average loans outstanding include loans classified as held
for sale at or during the respective dates or periods.
76
<PAGE>
The following table presents the allocation of Ponchatoula's allowance
for loan losses by type of loan at each of the dates indicated.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------
1997 1996 1995
------------------- -------------------- ---------------------
Loan Loan Loan
Category Category Category
Amount as a % Amount as a % Amount as a %
of of Total of of Total of of Total
Allowance Loans Allowance Loans Allowance Loans
--------- ----- --------- ----- --------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family residential $262 63.9% $279 62.9% $277 60.1%
Construction -- 10.3 -- 12.5 -- 10.3
Commercial real estate -- 1.6 -- .2 -- .2
Land -- .4 -- .5 -- .7
Consumer 3 22.8 3 22.4 3 20.6
Lease -- 1.0 -- 1.5 -- 8.1
---- ----- ---- ----- ---- -----
Total $265 100.0% $282 100.0% $280 100.0%
---- ----- ---- ----- ---- -----
---- ----- ---- ----- ---- -----
</TABLE>
Mortgage-Backed Securities
Mortgage-backed securities represent a participation interest in a pool
of single-family or multi-family mortgages, the principal and interest payments
on which are passed from the mortgage originators, through intermediaries
(generally U.S. Government agencies and government-sponsored enterprises) that
pool and repackage the participation interests in the form of securities, to
investors such as Ponchatoula. Such U.S. Government agencies and
government-sponsored enterprises, which guarantee the payment of principal and
interest to investors, primarily include the FHLMC, the FNMA and the GNMA.
The FHLMC, which is a corporation chartered by the U.S. Government,
issues participation certificates backed principally by conventional mortgage
loans. The FHLMC guarantees the timely payment of interest and the ultimate
return of principal on participation certificates. The FNMA is a private
corporation chartered by the U.S. Congress with a mandate to establish a
secondary market for mortgage loans. The FNMA guarantees the timely payment of
principal and interest on FNMA securities. The GNMA is a government agency
within the Department of Housing and Urban Development which is intended to help
finance government-assisted housing programs. GNMA securities are backed by
FHA-insured and VA-guaranteed loans, and the timely payment of principal and
interest on GNMA securities are guaranteed by the GNMA and backed by the full
faith and credit of the U.S. Government. Because the FHLMC, the FNMA and the
GNMA were established to provide support for low- and middle-income housing,
there are limits to the maximum size of loans that qualify for these programs.
For example, the FNMA and the FHLMC currently limit their loans secured by a
single-family, owner-occupied residence to
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<PAGE>
$227,000. To accommodate larger-sized loans, and loans that, for other reasons,
do not conform to the agency programs, a number of private institutions have
established their own home-loan origination and securitization programs.
Mortgage-backed securities typically are issued with stated principal
amounts, and the securities are backed by pools of mortgages that have loans
with interest rates that are within a range and have varying maturities. The
underlying pool of mortgages, i.e., fixed-rate or adjustable-rate, as well as
prepayment risk, are passed on to the certificate holder. The life of a
mortgage-backed pass-through security thus approximates the life of the
underlying mortgages.
At December 31, 1997, the carrying value of Ponchatoula's
mortgage-backed securities amounted to $24.6 million, which represented 41.3% of
Ponchatoula's $59.6 million of total assets at that date. All of Ponchatoula's
$24.6 million of mortgage-backed securities at December 31, 1997 were insured or
guaranteed by the GNMA, the FHLMC or the FNMA, and all of the mortgage-backed
securities had adjustable rates of interest at December 31, 1997. The amortized
cost of mortgage-backed securities being held to maturity at December 31, 1997
was $10.3 million with a fair value of $10.4 million. The amortized cost of
mortgage-backed securities available for sale at December 31, 1997 was $14.3
million with a fair value of $14.3 million.
Mortgage-backed securities generally yield less than the loans which
underlie such securities because of their payment guarantees or credit
enhancements which offer nominal credit risk. In addition, mortgage-backed
securities are more liquid than individual mortgage loans and may be used to
collateralize borrowings or other obligations of Ponchatoula.
The following table sets forth the composition of Ponchatoula's
mortgage-backed securities portfolio at each of the dates indicated.
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Mortgage-backed
securities held to maturity:
FNMA $ 6,712 $ 6,931 $ 5,201
FHLMC 2,543 3,323 1,058
GNMA 1,046 -- --
------- ------- -------
Subtotal 10,301 10,254 6,259
------- ------- -------
Mortgage-backed
securities available for sale:
FNMA 7,115 7,908 6,885
FHLMC 6,911 8,278 9,565
GNMA 235 286 342
------- ------- -------
Subtotal 14,261 16,472 16,792
------- ------- -------
Total $24,562 $26,726 $23,051
------- ------- -------
------- ------- -------
</TABLE>
78
<PAGE>
The following table sets forth the activity in Ponchatoula's
mortgage-backed securities portfolio during the periods indicated.
<TABLE>
<CAPTION>
At or For the Year Ended
December 31,
----------------------------------
1997 1996 1995
-------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C>
Mortgage-backed securities at
beginning of period (cost) $ 26,883 $ 23,038 $ 19,056
Purchases 2,244 7,884 7,720
Repayments (4,444) (3,999) (3,719)
Premium amortization (58) (40) (19)
-------- -------- --------
Mortgage-backed securities at end
of period (cost) $ 24,625 $ 26,883 $ 23,038
-------- -------- --------
-------- -------- --------
Mortgaged-backed securities at end
of period (fair value) $ 24,676 $ 26,824 $ 23,093
-------- -------- --------
-------- -------- --------
Weighted average yield at end of
period 6.40% 6.03% 5.87%
-------- -------- --------
-------- -------- --------
</TABLE>
Investment Securities
Ponchatoula has authority to invest in various types of liquid
assets, including United States Treasury obligations, securities of various
federal agencies and of state and municipal governments, certificates of
deposit at federally-insured banks and savings institutions, certain bankers'
acceptances and federal funds. Each purchase of an investment security is
approved by the Board of Directors. Ponchatoula's investment securities are
carried in accordance with generally accepted accounting principles. All of
Ponchatoula's investment securities were available for sale at December 31,
1997.
79
<PAGE>
The following table sets forth certain information relating to
Ponchatoula's investment securities portfolio at the dates indicated.
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
--------- ----- --------- ----- --------- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. agency securities $2,595 $2,605 $2,396 $2,399 $2,403 $2,415
</TABLE>
The following table sets forth the amount of Ponchatoula's investment
securities which mature during each of the periods indicated and the weighted
average yields for each range of maturities at December 31, 1997. None of the
investments mature after five years.
<TABLE>
<CAPTION>
At December 31, 1997
----------------------------------------------
Weighted Over One Weighted
One Year or Average Year Through Average
Less Yield Five Years Yield
----------- ------- ------------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
U.S. agency securities $1,196 6.04% $1,399 5.95%
</TABLE>
Sources of Funds
General. Deposits are the primary source of Ponchatoula's funds for
lending and other investment purposes. In addition to deposits, Ponchatoula
derives funds from principal and interest payments on loans and mortgage-backed
securities. Loan repayments are a relatively stable source of funds, while
deposits inflows and outflows are significantly influenced by general interest
rates and money market conditions. Borrowings may be used on a short-term basis
to compensate for reductions in the availability of funds from other sources.
They may also be used on a longer term basis for general business purposes.
Deposits. Ponchatoula's deposit products include a broad selection of
deposit instruments, including NOW accounts, money market accounts, passbook
accounts and term certificate accounts. Deposit account terms vary, with the
principal differences being the minimum balance required, the time periods the
funds must remain on deposit and the interest rate.
80
<PAGE>
Ponchatoula's deposits are obtained primarily from residents of
Tangipahoa and Livingston Parishes and, to a lesser extent, St. Helena Parish.
Management of Ponchatoula estimates that less than 1% of Ponchatoula's deposits
are obtained from customers residing outside of Louisiana. Ponchatoula does not
pay fees to brokers to solicit funds for deposit with Ponchatoula or actively
solicit negotiable-rate certificates of deposit with balances of $100,000 or
more.
Interest rates paid, maturity terms, service fees and withdrawal
penalties are established by Ponchatoula on a periodic basis. Determination of
rates and terms are predicated on funds acquisition and liquidity requirements,
rates paid by competitors, growth goals and federal and state regulations.
The following table sets forth the dollar amount of deposits in the
various types of deposit programs offered by Ponchatoula at the dates indicated.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
1997 1996 1995
------------ ------------- --------------
Amount % Amount % Amount %
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Certificate accounts:
2.00% - 3.99% $ 285 .7% $ 551 1.2% $ 845 1.9%
4.00% - 5.99% 30,031 71.4 30,686 69.1 10,519 23.3
6.00% - 7.99% 1,117 2.6 882 2.0 20,211 45.1
8.00% - 9.99% -- -- 42 .1 363 .8
------- ----- ------- ----- ------- -----
Total certificate
accounts 31,433 74.7 32,161 72.4 31,938 71.1
------- ----- ------- ----- ------- -----
Transaction accounts:
Passbook accounts 8,253 19.6 9,592 21.6 10,170 22.7
Money market
accounts 934 2.2 1,032 2.3 1,197 2.7
NOW accounts 1,491 3.5 1,642 3.7 1,584 3.5
------- ----- ------- ----- ------- -----
Total transaction
accounts 10,678 25.3 12,266 27.6 12,951 28.9
------- ----- ------- ----- ------- -----
Total deposits $42,111 100.0% $44,427 100.0% $44,889 100.0%
------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- -----
</TABLE>
81
<PAGE>
The following table presents the average balance of each type of
deposit and the average rate paid on each type of deposit for the periods
indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1997 1996 1995
-------------------- ---------------- -----------------
Average Average Average
Average Rate Average Rate Average Rate
Balance Paid Balance Paid Balance Paid
------- ---- ------- ---- ------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Passbook savings accounts $ 8,866 2.67% $ 9,931 3.00% $11,578 3.00%
Demand and NOW accounts 1,741 2.34 1,585 3.00 1,403 2.84
MMDAs 979 2.34 1,137 3.00 1,341 2.84
Certificates of deposit 32,021 5.24 32,080 5.50 28,658 5.40
------ ---- ------ ---- ------ ----
Total interest-bearing
deposits $43,607 4.52% $44,733 4.82% $42,980 4.67%
------ ---- ------ ---- ------ ----
------ ---- ------ ---- ------ ----
</TABLE>
The following table sets forth the activity in Ponchatoula's deposits
during the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Net increase (decrease) before
interest credited(1) $(4,287) $(2,620) $ 921
Interest credited 1,971 2,158 2,007
------- ------- -------
Net increase (decrease) in
deposits $(2,316) $ (462) $ 2,928
------- ------- -------
------- ------- -------
</TABLE>
- ---------------------
(1) The information provided is net of deposits and withdrawals because the
gross amount of deposits and withdrawals is not readily available.
82
<PAGE>
The following table shows the interest rate and maturity information
for Ponchatoula's certificates of deposit at December 31, 1997.
<TABLE>
<CAPTION>
Maturity Date
------------------------------------------------------
One Year Over 1 Over 2 Over
or Less to 2 Years to 3 Years 3 Years Total
---------- ---------- ---------- ------- -------
(In Thousands)
<C> <C> <C> <C> <C> <C>
2.00% - 3.99% $ 226 $ 30 $ 3 $ 26 $ 285
4.00% - 5.99% 28,282 1,502 125 122 30,031
6.00% - 7.99% 100 530 231 256 1,117
------- ------- ------- ------- -------
Total $28,608 $ 2,062 $ 359 $ 404 $31,433
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
The following table sets forth the maturities of Ponchatoula's
certificates of deposit having principal amounts of $100,000 or more at December
31, 1997.
<TABLE>
<CAPTION>
Certificates of deposit maturing
in quarter ending: Amount
- ------------------------------------------------ ----------------
(In Thousands)
<S> <C>
March 31, 1998 $2,386
June 30, 1998 514
September 30, 1998 1,382
December 31, 1998 529
After December 31, 1998 --
-------
Total certificates of deposit with
balances of $100,000 or more $4,811
-------
-------
</TABLE>
Borrowings. Ponchatoula may obtain advances from the FHLB of Dallas
upon the security of the common stock it owns in that bank, certain of its
residential mortgage loans and mortgage-backed securities, provided certain
standards related to creditworthiness have been met. Such advances are made
pursuant to several credit programs, each of which has its own interest rate
and range of maturities. Such advances are generally available to meet
seasonal and other withdrawals of deposit accounts and to permit increased
lending. See "Regulation - The Association - Federal Home Loan Bank System."
Ponchatoula had $11.5 million of FHLB advances outstanding at
December 31, 1997, compared to $10.7 million and $6.3 million at December
31, 1996 and 1995, respectively. Specific mortgage-backed securities, with a
fair value of approximately $11.7 million and a carrying value of $11.6
million at December 31, 1997, were pledged to the FHLB as collateral for the
advances.
83
<PAGE>
The following table sets forth certain information regarding short-term
borrowings at or for the dates indicated:
<TABLE>
<CAPTION>
At or for the Year Ended December 31,
------------------------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
FHLB advances:
Average balance outstanding .. $ 9,755 $ 7,630 $ 5,562
Maximum amount outstanding
at any month-end during
the period ................. $11,500 $10,700 $ 7,000
Balance outstanding at end
of period .................. $11,500 $10,700 $ 6,300
Average interest rate
during the period .......... 5.58% 5.67% 6.02%
Weighted average interest rate
at end of period ........... 5.85% 5.48% 5.81%
</TABLE>
Employees
Ponchatoula had 21 full-time employees and one part-time employee at
December 31, 1997. None of these employees is represented by a collective
bargaining agent, and Ponchatoula believes that it enjoys good relations with
its personnel.
Competition
Ponchatoula faces strong competition both in attracting deposits and in
making real estate loans. Its most direct competition for deposits has
historically come from other savings institutions, credit unions and commercial
banks located in Tangipahoa Parish, Louisiana, including many large financial
institutions which have greater financial and marketing resources available to
them. In addition, Ponchatoula has faced additional significant competition for
investors' funds from short-term money market securities, mutual funds and other
corporate and government securities. The ability of Ponchatoula to attract and
retain savings deposits depends on its ability to generally provide a rate of
return, liquidity and risk comparable to that offered by competing investment
opportunities.
Ponchatoula experiences strong competition for loans principally from other
savings institutions, commercial banks, credit unions and mortgage banking
companies. Ponchatoula competes for loans principally through the interest rates
and loan fees it charges and the efficiency and quality of services it provides
borrowers. Competition may increase as a result of the continuing reduction of
restrictions on the interstate operations of financial institutions and the
anticipated slowing of the refinancing activity.
84
<PAGE>
Properties
At December 31, 1997, Ponchatoula conducted its business from
its headquarters at 195 North Sixth Street, Ponchatoula, Louisiana 70454 and
one branch office. The estimated net book value of the electronic data
processing and other office equipment owned by Ponchatoula was $50,000 at
December 31, 1997. The following table sets forth certain information with
respect to the offices of Ponchatoula at December 31, 1997.
<TABLE>
<CAPTION>
Net Book Value
Description/Address Leased/Owned of Property Deposits
- ------------------------- -------------- --------------- ----------
(In Thousands)
<S> <C> <C> <C>
Home Office:
195 North Sixth Street
Ponchatoula, LA 70454 Owned $393,000 $ 35,494
Branch Office:
111 North Bay Street
Amite, LA 70422 ...... Owned $101,000 $ 6,616
</TABLE>
Legal Proceedings
Ponchatoula 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 Ponchatoula.
REGULATION
Set forth below is a brief description of certain laws and regulations
which are applicable to the Company and Ponchatoula. The description of these
laws and regulations, as well as descriptions of laws and regulations contained
elsewhere herein, does not purport to be complete and is qualified in its
entirety by reference to the applicable laws and regulations.
General
Ponchatoula, as a federally-chartered savings institution, is subject to
federal regulation and oversight by the OTS extending to all aspects of its
operations. Ponchatoula also is subject to regulation and examination by the
FDIC, which insures the deposits of Ponchatoula to the maximum extent permitted
by law, and requirements established by the Federal Reserve Board.
Federally-chartered savings institutions are required to file periodic reports
with the OTS and are subject to periodic examinations by the OTS and the FDIC.
85
<PAGE>
The investment and lending authority of savings institutions are prescribed by
federal laws and regulations, and such institutions are prohibited from engaging
in any activities not permitted by such laws and regulations. Such regulation
and supervision is primarily intended for the protection of depositors and not
for the purpose of protecting stockholders.
The OTS' enforcement authority over all savings institutions and their
holding companies includes, among other things, the ability to assess civil
money penalties, to issue cease and desist or removal orders and to initiate
injunctive actions. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the OTS.
The Company
Holding Company Acquisitions. Upon consummation of the Conversion, the
Company will become a savings and loan holding company within the meaning of the
Home Owners' Loan Act, as amended ("HOLA"), and will be required to register
with the OTS. The HOLA and OTS regulations generally prohibit a savings and loan
holding company, without prior OTS approval, from acquiring, directly or
indirectly, the ownership or control of any other savings institution or savings
and loan holding company, or all, or substantially all, of the assets or more
than 5% of the voting shares thereof. These provisions also prohibit, among
other things, any director or officer of a savings and loan holding company, or
any individual who owns or controls more than 25% of the voting shares of such
holding company, from acquiring control of any savings institution not a
subsidiary of such savings and loan holding company, unless the acquisition is
approved by the OTS.
Holding Company Activities. The Company will operate as a unitary savings
and loan holding company. Generally, there are limited restrictions on the
activities of a unitary savings and loan holding company and its non-savings
institution subsidiaries. However, if the Director of the OTS determines that
there is reasonable cause to believe that the continuation by a savings and loan
holding company of an activity constitutes a serious risk to the financial
safety, soundness or stability of its subsidiary savings institution, the
Director may impose such restrictions as deemed necessary to address such risk,
including limiting (i) payment of dividends by the savings institution; (ii)
transactions between the savings institution and its affiliates; and (iii) any
activities of the savings institution that might create a serious risk that the
liabilities of the holding company and its affiliates may be imposed on the
savings institution. Notwithstanding the above rules as to permissible business
activities of unitary savings and loan holding companies, if the savings
institution subsidiary of such a holding company fails to meet the QTL test, as
discussed under "-The Association - Qualified Thrift Lender Test," then such
unitary holding company also shall become subject to the activities restrictions
applicable to multiple savings and loan holding companies and, unless the
savings institution requalifies as a QTL within one year thereafter, shall
register as, and become subject to the restrictions applicable to, a bank
holding company. See "- The Association - Qualified Thrift Lender Test."
86
<PAGE>
The HOLA requires every savings institution subsidiary of a savings and
loan holding company to give the OTS at least 30 days' advance notice of any
proposed dividends to be made on its guarantee, permanent or other
non-withdrawable stock, or else such dividend will be invalid. See "- The
Association - Capital Distribution Regulation."
Affiliate Restrictions. Transactions between a savings institution and its
"affiliates" are subject to quantitative and qualitative restrictions under
Sections 23A and 23B of the Federal Reserve Act and OTS regulations. Affiliates
of a savings institution include, among other entities, the savings
institution's holding company and companies that are controlled by or under
common control with the savings institution.
In general, Sections 23A and 23B and OTS regulations issued in connection
therewith limit the extent to which a savings institution or its subsidiaries
may engage in certain "covered transactions" with affiliates to an amount equal
to 10% of the institution's capital and surplus, in the case of covered
transactions with any one affiliate, and to an amount equal to 20% of such
capital and surplus, in the case of covered transactions with all affiliates. In
addition, a savings institution and its subsidiaries may engage in covered
transactions and certain other transactions only on terms and under
circumstances that are substantially the same, or at least as favorable to the
savings institution or its subsidiary, as those prevailing at the time for
comparable transactions with nonaffiliated companies. A "covered transaction" is
defined to include a loan or extension of credit to an affiliate; a purchase of
investment securities issued by an affiliate; a purchase of assets from an
affiliate, with certain exceptions; the acceptance of securities issued by an
affiliate as collateral for a loan or extension of credit to any party; or the
issuance of a guarantee, acceptance or letter of credit on behalf of an
affiliate.
In addition, under the OTS regulations, a savings institution may not make
a loan or extension of credit to an affiliate unless the affiliate is engaged
only in activities permissible for bank holding companies; a savings institution
may not purchase or invest in securities of an affiliate other than shares of a
subsidiary; a savings institution and its subsidiaries may not purchase a
low-quality asset from an affiliate; and covered transactions and certain other
transactions between a savings institution or its subsidiaries and an affiliate
must be on terms and conditions that are consistent with safe and sound banking
practices. With certain exceptions, each loan or extension of credit by a
savings institution to an affiliate must be secured by collateral with a market
value ranging from 100% to 130% (depending on the type of collateral) of the
amount of the loan or extension of credit.
The OTS regulation generally excludes all non-bank and non-savings
institution subsidiaries of savings institutions from treatment as affiliates,
except to the extent that the OTS or the Federal Reserve Board decides to treat
such subsidiaries as affiliates. The regulation also requires savings
institutions to make and retain records that reflect affiliate transactions in
reasonable detail, and provides that certain classes of savings institutions may
be required to give the OTS prior notice of affiliate transactions.
87
<PAGE>
The Association
Insurance of Accounts. The deposits of Ponchatoula are insured to the
maximum extent permitted by the SAIF, which is administered by the FDIC, and are
backed by the full faith and credit of the U.S. Government. As insurer, the FDIC
is authorized to conduct examinations of, and to require reporting by,
FDIC-insured institutions. It also may prohibit any FDIC-insured institution
from engaging in any activity the FDIC determines by regulation or order to pose
a serious threat to the FDIC. The FDIC also has the authority to initiate
enforcement actions against savings institutions, after giving the OTS an
opportunity to take such action.
Under current FDIC regulations, SAIF-insured institutions are assigned to
one of three capital groups which are based solely on the level of an
institution's capital--"well capitalized," "adequately capitalized," and
"undercapitalized"--which are defined in the same manner as the regulations
establishing the prompt corrective action system discussed below. These three
groups are then divided into three subgroups which reflect varying levels of
supervisory concern, from those which are considered to be healthy to those
which are considered to be of substantial supervisory concern. The matrix so
created results in nine assessment risk classifications, with rates ranging
prior to September 30, 1996 from .23% for well capitalized, healthy institutions
to .31% for undercapitalized institutions with substantial supervisory concerns.
The insurance premiums for Ponchatoula for 1994, 1995 and the first nine months
of 1996 were .23% (per annum) of insured deposits.
The deposits of Ponchatoula are currently insured by the SAIF. Both the
SAIF and the BIF are required by law to attain and thereafter maintain a reserve
ratio of 1.25% of insured deposits. The BIF achieved a fully funded status
first, and therefore as discussed below, effective January 1, 1996 the FDIC
substantially reduced the average deposit insurance premium paid by BIF-insured
banks. On November 14, 1995, the FDIC approved a final rule regarding deposit
insurance premiums. The final rule reduced deposit insurance premiums for BIF
member institutions to zero basis points (subject to a $2,000 minimum) for
institutions in the lowest risk category, while holding deposit insurance
premiums for SAIF members at their then current levels (23 basis points for
institutions in the lowest risk category). The reduction was effective with
respect to the semiannual premium assessment beginning January 1, 1996.
On September 30, 1996, President Clinton signed into law legislation which
eliminated the premium differential between SAIF-insured institutions and
BIF-insured institutions by recapitalizing the SAIF's reserves to the required
ratio. The legislation required all SAIF member institutions to pay a one-time
special assessment to recapitalize the SAIF, with the aggregate amount to be
sufficient to bring the reserve ratio to 1.25% of insured deposits. The
legislation also provides for the merger of the BIF and the SAIF, with such
merger being conditioned upon the prior elimination of the thrift charter.
88
<PAGE>
Implementing FDIC regulations imposed a one-time special assessment equal
to 65.7 basis points for all SAIF-assessable deposits as of March 31, 1995,
which was accrued as an expense on September 30, 1996. Ponchatoula's one-time
special assessment amounted to $284,000. Net of related tax benefits, the
one-time special assessment amounted to $187,000. The payment of the special
assessment had the effect of immediately reducing Ponchatoula's capital by such
amount. However, management does not believe that this one-time special
assessment had a material adverse effect on Ponchatoula's financial condition.
In the fourth quarter of 1996, the FDIC lowered the assessment rates for
SAIF members to reduce the disparity in the assessment rates paid by BIF and
SAIF members. Beginning October 1, 1996, effective SAIF rates generally range
from zero basis points to 27 basis points, except that during the fourth quarter
of 1996, the rates for SAIF members ranged from 18 to 27 basis points in order
to include assessments paid to the Financing Corporation ("FICO"). From 1997
through 1999, SAIF members will pay 6.4 basis points to fund the FICO, while BIF
member institutions will pay approximately 1.3 basis points. Ponchatoula's
insurance premiums, which had amounted to 23 basis points, were thus reduced to
6.4 basis points effective January 1, 1997. Based on Ponchatoula's $44.4 million
of assessable deposits at December 31, 1996, the premium reduction resulted in a
pre-tax cost savings of approximately $74,000 in 1997 for Ponchatoula.
The FDIC may terminate the deposit insurance of any insured depository
institution, including Ponchatoula, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution at the time of the termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined by
the FDIC. Management is aware of no existing circumstances which would result in
termination of Ponchatoula's deposit insurance.
Regulatory Capital Requirements. Federally insured savings institutions are
required to maintain minimum levels of regulatory capital. The OTS has
established capital standards applicable to all savings institutions. These
standards generally must be as stringent as the comparable capital requirements
imposed on national banks. The OTS also is authorized to impose capital
requirements in excess of these standards on individual institutions on a
case-by-case basis.
Current OTS capital standards require savings institutions to satisfy three
different capital requirements. Under these standards, savings institutions must
maintain "tangible" capital equal to at least 1.5% of adjusted total assets,
"core" capital equal to at least 3.0% of adjusted total assets and "total"
capital (a combination of core and "supplementary" capital) equal to at least
8.0% of "risk-weighted" assets. For purposes of the regulation, core
89
<PAGE>
capital generally consists of common stockholders' equity (including retained
earnings). Tangible capital is given the same definition as core capital but is
reduced by the amount of all the savings institution's intangible assets, with
only a limited exception for purchased mortgage servicing rights. Ponchatoula
had no intangible assets at December 31, 1997 which are required to be
considered in computing regulatory capital. Both core and tangible capital are
further reduced by an amount equal to a savings institution's debt and equity
investments in subsidiaries engaged in activities not permissible to national
banks (other than subsidiaries engaged in activities undertaken as agent for
customers or in mortgage banking activities and subsidiary depository
institutions or their holding companies). These adjustments do not affect
Ponchatoula's regulatory capital.
In determining compliance with the risk-based capital requirement, a
savings institution is allowed to include both core capital and supplementary
capital in its total capital, provided that the amount of supplementary capital
included does not exceed the savings institution's core capital. Supplementary
capital generally consists of general allowances for loan and lease losses up to
a maximum of 1.25% of risk-weighted assets, together with certain other items.
In determining the required amount of risk-based capital, total assets,
including certain off-balance sheet items, are multiplied by a risk weight based
on the risks inherent in the type of assets. The risk weights assigned by the
OTS for principal categories of assets are (i) 0% for cash and securities issued
by the U.S. Government or unconditionally backed by the full faith and credit of
the U.S. Government; (ii) 20% for securities (other than equity securities)
issued by U.S. Government-sponsored agencies and mortgage-backed securities
issued by, or fully guaranteed as to principal and interest by, the FNMA or the
FHLMC, except for those classes with residual characteristics or stripped
mortgage-related securities; (iii) 50% for prudently underwritten permanent
one-to four-family first lien mortgage loans not more than 90 days delinquent
and having a loan-to-value ratio of not more than 80% at origination unless
insured to such ratio by an insurer approved by the FNMA or the FHLMC,
qualifying residential bridge loans made directly for the construction of one-
to four-family residences and qualifying multi-family residential loans; and
(iv) 100% for all other loans and investments, including consumer loans,
commercial loans, and one- to four-family residential real estate loans more
than 90 days delinquent, and for repossessed assets.
In August 1993, the OTS adopted a final rule incorporating an interest-rate
risk component into the risk-based capital regulation. Under the rule, an
institution with a greater than "normal" level of interest rate risk will be
subject to a deduction of its interest rate risk component from total capital
for purposes of calculating its risk-based capital. As a result, such an
institution will be required to maintain additional capital in order to comply
with the risk-based capital requirement. An institution with a greater than
"normal" interest rate risk is defined as an institution that would suffer a
loss of net portfolio value exceeding 2.0% of the estimated economic value of
its assets in the event of a 200 basis point increase or decrease (with certain
minor exceptions) in interest rates. The interest rate risk component will be
calculated, on a quarterly basis, as one-half of the difference between an
institution's measured interest rate risk and 2.0% multiplied by the economic
90
<PAGE>
value of its assets. The rule also authorizes the Director of the OTS, or his
designee, to waive or defer an institution's interest rate risk component on a
case-by-case basis. The final rule was originally effective as of January 1,
1994, subject however to a two quarter "lag" time between the reporting date of
the data used to calculate an institution's interest rate risk and the effective
date of each quarter's interest rate risk component. However, in October 1994
the Director of the OTS indicated that it would waive the capital deductions for
institutions with a greater than "normal" risk until the OTS published an
appeals process. On August 21, 1995, the OTS released Thrift Bulletin 67 which
established (i) an appeals process to handle "requests for adjustments" to the
interest rate risk component and (ii) a process by which "well-capitalized"
institutions may obtain authorization to use their own interest rate risk model
to determine their interest rate risk component. The Director of the OTS
indicated, concurrent with the release of Thrift Bulletin 67, that the OTS will
continue to delay the implementation of the capital deduction for interest rate
risk pending the testing of the appeals process set forth in Thrift Bulletin 67.
Effective November 28, 1994, the OTS revised its interim policy issued in
August 1993 under which savings institutions computed their regulatory capital
in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Under the revised OTS policy, savings institutions must
value securities available for sale at amortized cost for regulatory capital
purposes. This means that in computing regulatory capital, savings institutions
should add back any unrealized losses and deduct any unrealized gains, net of
income taxes, on debt securities reported as a separate component of GAAP
capital.
At December 31, 1997, Ponchatoula exceeded all of its regulatory capital
requirements, with tangible, core and risk-based capital ratios of 9.68%, 9.68%
and 23.69%, respectively. The following table sets forth Ponchatoula's
compliance with each of the above-described capital requirements as of December
31, 1997.
91
<PAGE>
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital(1) Capital (2)
-------- ---------- ------------
(Dollars in Thousands)
<S> <C> <C> <C>
Capital under GAAP ............................ $5,735 $5,735 $5,735
Additional capital items:
Unrealized (gain) loss on securities available
for sale, net of taxes ..................... 35 35 35
General valuation allowances(3) ............. -- -- 250
------ ------ ------
Regulatory capital ............................ 5,770 5,770 6,020
Minimum required regulatory capital(4) ........ 894 1,788 2,033
------ ------ ------
Excess regulatory capital ..................... $4,876 $3,982 $3,987
------ ------ ------
------ ------ ------
Regulatory capital as a percentage ............ 9.68% 9.68% 23.69%
Minimum capital required as a
percentage(4) .............................. 1.50% 3.00% 8.00%
------ ------ ------
Regulatory capital as a percentage
in excess of requirements .................... 8.18% 6.68% 15.69%
------ ------ ------
------ ------ ------
</TABLE>
- -----------------------------
(1) Does not reflect the 4.0% requirement to be met in order for an
institution to be "adequately capitalized." See "- Prompt Corrective
Action."
(2) Does not reflect the interest-rate risk component in the risk-based
capital requirement, the effective date of which has been postponed as
discussed above.
(3) General valuation allowances are only used in the calculation of
risk-based capital. Such allowances are limited to 1.25% of
risk-weighted assets.
(4) Tangible and core capital are computed as a percentage of adjusted
total assets of $59.6 million. Risk-based capital is computed as a
percentage of adjusted risk-weighted assets of $25.4 million.
Any savings institution that fails any of the capital requirements is
subject to possible enforcement actions by the OTS or the FDIC. Such actions
could include a capital directive, a cease and desist order, civil money
penalties, the establishment of restrictions on the institution's operations,
termination of federal deposit insurance and the appointment
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<PAGE>
of a conservator or receiver. The OTS' capital regulation provides that such
actions, through enforcement proceedings or otherwise, could require one or more
of a variety of corrective actions.
Prompt Corrective Action. Under the prompt corrective action regulations of
the OTS, an institution is deemed to be (i) "well capitalized" if it has total
risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio of
6.0% or more, has a Tier 1 leverage capital ratio of 5.0% or more and is not
subject to any order or final capital directive to meet and maintain a specific
capital level for any capital measure, (ii) "adequately capitalized" if it has a
total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital
ratio of 4.0% or more and a Tier 1 leverage capital ratio of 4.0% or more (3.0%
under certain circumstances) and does not meet the definition of "well
capitalized," (iii) "undercapitalized" if it has a total risk-based capital
ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less
than 4.0% or a Tier 1 leverage capital ratio that is less than 4.0% (3.0% under
certain circumstances), (iv) "significantly undercapitalized" if it has a total
risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital
ratio that is less than 3.0% or a Tier 1 leverage capital ratio that is less
than 3.0%, and (v) "critically undercapitalized" if it has a ratio of tangible
equity to total assets that is equal to or less than 2.0%. Under specified
circumstances, a federal banking agency may reclassify a well capitalized
institution as adequately capitalized and may require an adequately capitalized
institution or an undercapitalized institution to comply with supervisory
actions as if it were in the next lower category (except that the FDIC may not
reclassify a significantly undercapitalized institution as critically
undercapitalized).
An institution generally must file a written capital restoration plan which
meets specified requirements with its appropriate federal banking agency within
45 days of the date that the institution receives notice or is deemed to have
notice that it is undercapitalized, significantly undercapitalized or critically
undercapitalized. A federal banking agency must provide the institution with
written notice of approval or disapproval within 60 days after receiving a
capital restoration plan, subject to extensions by the agency. An institution
which is required to submit a capital restoration plan must concurrently submit
a performance guaranty by each company that controls the institution. In
addition, undercapitalized institutions are subject to various regulatory
restrictions, and the appropriate federal banking agency also may take any
number of discretionary supervisory actions.
At December 31, 1997, Ponchatoula was deemed a well capitalized institution
for purposes of the above regulations and as such is not subject to the above
mentioned restrictions.
Safety and Soundness Guidelines. The OTS and the other federal banking
agencies have established guidelines for safety and soundness, addressing
operational and managerial standards, as well as compensation matters for
insured financial institutions. Institutions failing to meet these standards are
required to submit compliance plans to their appropriate
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<PAGE>
federal regulators. The OTS and the other agencies have also established
guidelines regarding asset quality and earnings standards for insured
institutions. Ponchatoula believes that it is in compliance with these
guidelines and standards.
Liquidity Requirements. All savings institutions are required to maintain
an average daily balance of liquid assets equal to a certain percentage of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings institutions. At the present time, the required minimum
liquid asset ratio is 4%. At December 31, 1997, Ponchatoula's liquidity ratio
was 7.5%.
Capital Distributions. OTS regulations govern capital distributions by
savings institutions, which include cash dividends, stock redemptions or
repurchases, cash-out mergers, interest payments on certain convertible debt and
other transactions charged to the capital account of a savings institution to
make capital distributions. Generally, the regulation creates a safe harbor for
specified levels of capital distributions from institutions meeting at least
their minimum capital requirements, so long as such institutions notify the OTS
and receive no objection to the distribution from the OTS. Savings institutions
and distributions that do not qualify for the safe harbor are required to obtain
prior OTS approval before making any capital distributions.
Generally, a savings institution that before and after the proposed
distribution meets or exceeds its fully phased-in capital requirements (Tier 1
institutions) may make capital distributions during any calendar year equal to
the higher of (i) 100% of net income for the calendar year-to-date plus 50% of
its "surplus capital ratio" at the beginning of the calendar year or (ii) 75% of
net income over the most recent four-quarter period. The "surplus capital ratio"
is defined to mean the percentage by which the institution's tangible, core or
risk-based capital ratio exceeds its tangible, core or risk-based capital
requirement. Failure to meet minimum capital requirements will result in further
restrictions on capital distributions, including possible prohibition without
explicit OTS approval. See "Regulatory Capital Requirements."
In order to make distributions under these safe harbors, Tier 1 and Tier 2
institutions must submit 30 days written notice to the OTS prior to making the
distribution. The OTS may object to the distribution during that 30-day period
based on safety and soundness concerns. In addition, a Tier 1 institution deemed
to be in need of more than normal supervision by the OTS may be downgraded to a
Tier 2 or Tier 3 institution as a result of such a determination. At December
31, 1997, Ponchatoula was a Tier 1 institution for purposes of this regulation.
On December 5, 1994, the OTS published a notice of proposed rulemaking to
amend its capital distribution regulation. Under the proposal, institutions
would be permitted to only make capital distributions that would not result in
their capital being reduced below
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<PAGE>
the level required to remain "adequately capitalized," as defined above under
"-Prompt Corrective Action." Because Ponchatoula will become a subsidiary of a
holding company, the proposal would require Ponchatoula to provide notice to the
OTS of its intent to make a capital distribution. Ponchatoula does not believe
that the proposal will adversely affect its ability to make capital
distributions if it is adopted substantially as proposed.
Branching by Federal Savings Institutions. OTS policy permits interstate
branching to the full extent permitted by statute (which is essentially
unlimited). Generally, federal law prohibits federal savings institutions from
establishing, retaining or operating a branch outside the state in which the
federal institution has its home office unless the institution meets the IRS'
domestic building and loan test (generally, 60% of a thrift's assets must be
housing-related) ("IRS Test"). The IRS Test requirement does not apply if: (i)
the branch(es) result(s) from an emergency acquisition of a troubled savings
institution (however, if the troubled savings institution is acquired by a bank
holding company, does not have its home office in the state of the bank holding
company bank subsidiary and does not qualify under the IRS Test, its branching
is limited to the branching laws for state-chartered banks in the state where
the savings institution is located); (ii) the law of the state where the branch
would be located would permit the branch to be established if the federal
savings institution were chartered by the state in which its home office is
located; or (iii) the branch was operated lawfully as a branch under state law
prior to the savings institution's conversion to a federal charter.
Furthermore, the OTS will evaluate a branching applicant's record of
compliance with the Community Reinvestment Act of 1977 ("CRA"). An
unsatisfactory CRA record may be the basis for denial of a branching
application.
Community Reinvestment Act and the Fair Lending Laws. Savings institutions
have a responsibility under the 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 comply 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.
Qualified Thrift Lender Test. All savings institutions are required to meet
a QTL test to avoid certain restrictions on their operations. Under Section 2303
of the Economic Growth and Regulatory Paperwork Reduction Act of 1996, a savings
institution can comply with the QTL test by either qualifying as a domestic
building and loan association as defined in Section 7701(a)(19) of the Code or
meeting the second prong of the QTL test set forth in Section 10(m) of the HOLA.
A savings institution that does not meet the QTL test must either convert to a
bank charter or comply with the following restrictions on its operations: (i)
the institution may not engage in any new activity or make any new investment,
directly
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<PAGE>
or indirectly, unless such activity or investment is permissible for a national
bank; (ii) the branching powers of the institution shall be restricted to those
of a national bank; (iii) the institution shall not be eligible to obtain any
new advances from its FHLB, other than special liquidity advances with the
approval of the OTS; and (iv) payment of dividends by the institution shall be
subject to the rules regarding payment of dividends by a national bank. Upon the
expiration of three years from the date the savings institution ceases to be a
QTL, it must cease any activity and not retain any investment not permissible
for a national bank and immediately repay any outstanding FHLB advances (subject
to safety and soundness considerations).
Currently, the prong of the QTL test that is not based on the Code requires
that 65% of an institution's "portfolio assets" (as defined) consist of certain
housing and consumer-related assets on a monthly average basis in nine out of
every 12 months. Assets that qualify without limit for inclusion as part of the
65% requirement are loans made to purchase, refinance, construct, improve or
repair domestic residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); stock issued by the FHLB of
Dallas; and direct or indirect obligations of the FDIC. In addition, the
following assets, among others, may be included in meeting the test subject to
an overall limit of 20% of the savings institution's portfolio assets: 50% of
residential mortgage loans originated and sold within 90 days of origination;
100% of consumer and educational loans (limited to 10% of total portfolio
assets); and stock issued by the FHLMC or the FNMA. Portfolio assets consist of
total assets minus the sum of (i) goodwill and other intangible assets, (ii)
property used by the savings institution to conduct its business, and (iii)
liquid assets up to 20% of the institution's total assets. At December 31, 1997,
the qualified thrift investments of Ponchatoula were approximately 88.9% of its
portfolio assets.
Federal Home Loan Bank System. Ponchatoula is a member of the FHLB of
Dallas, which is one of 12 regional FHLBs that administers the home financing
credit function of savings institutions. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from proceeds derived from the sale of consolidated obligations of the FHLB
System. It makes loans to members (i.e., advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB. At December
31, 1997, Ponchatoula had $11.5 million of FHLB advances. See Note 9 to the
Financial Statements.
As a member, Ponchatoula is required to purchase and maintain stock in the
FHLB of Dallas in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year. At December 31, 1997, Ponchatoula had $584,000 in
FHLB stock, which was in compliance with this requirement.
The FHLBs are required to provide funds for the resolution of troubled
savings institutions and to contribute to affordable housing programs through
direct loans or interest
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<PAGE>
subsidies on advances targeted for community investment and low- and
moderate-income housing projects. These contributions have adversely affected
the level of FHLB dividends paid and could continue to do so in the future.
These contributions also could have an adverse effect on the value of FHLB stock
in the future. The dividend yield on Ponchatoula's FHLB stock was 5.66% in 1997
compared to 5.40% in 1996 and 6.22% in 1995.
Federal Reserve System. The Federal Reserve Board requires all depository
institutions to maintain reserves against their transaction accounts (primarily
NOW and Super NOW checking accounts) and non-personal time deposits. As of
December 31, 1997, no reserves were required to be maintained on the first $4.4
million of transaction accounts, reserves of 3% were required to be maintained
against the next $46.3 million of net transaction accounts (with such dollar
amounts subject to adjustment by the Federal Reserve Board), and a reserve of
10% (which is subject to adjustment by the Federal Reserve Board to a level
between 8% and 14%) against all remaining net transaction accounts. Because
required reserves must be maintained in the form of vault cash or a
noninterest-bearing account at a Federal Reserve Bank, the effect of this
reserve requirement is to reduce an institution's earning assets.
Thrift Charter. Congress has been considering legislation in various forms
that would require federal thrifts, such as Ponchatoula, to convert their
charters to national or state bank charters. Recent legislation required the
Treasury Department to prepare for Congress a comprehensive study on the
development of a common charter for federal savings institutions 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. Ponchatoula 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 Ponchatoula and
its parent holding company.
TAXATION
Federal Taxation
General. The Company and Ponchatoula are subject to the generally
applicable corporate tax provisions of the Code, and Ponchatoula is subject to
certain additional provisions of the Code which apply to thrifts and other types
of financial institutions. The following discussion of federal taxation is
intended only to summarize certain pertinent federal income tax matters and is
not a comprehensive discussion of the tax rules applicable to the Company and
Ponchatoula.
Fiscal Year. The Company and Ponchatoula will file federal income tax
returns on the basis of a calendar year ending on December 31, and it is
expected that separate returns will be filed for 1998 and 1999.
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<PAGE>
Bad Debt Reserves. In August 1996, legislation was enacted that repealed
the reserve method of accounting (including the percentage of taxable income
method) previously used by many savings institutions to calculate their bad debt
reserve for federal income tax purposes. Savings institutions with $500 million
or less in assets may, however, continue to use the experience method. As a
result, Ponchatoula must recapture that portion of its reserve which exceeds the
amount that could have been taken under the experience method for post-1987 tax
years. At December 31, 1995, Ponchatoula's post-1987 excess reserves amounted to
approximately $68,000. The recapture will occur over a six-year period, the
commencement of which was January 1, 1996. The legislation also requires savings
institutions to account for bad debts for federal income tax purposes on the
same basis as commercial banks for tax years beginning after December 31, 1995.
This change in accounting method and reversal and excess bad debt reserves is
adequately provided for in Ponchatoula's deferred tax liability.
At December 31, 1997, the federal income tax reserves of Ponchatoula
included $1.0 million for which no federal income tax has been provided. Because
of these federal income tax reserves and the liquidation account to be
established for the benefit of certain depositors of Ponchatoula in connection
with the Conversion, the retained earnings of Ponchatoula are substantially
restricted.
Distributions. If Ponchatoula were to distribute cash or property to its
stockholders, and the distribution was treated as being from its accumulated bad
debt reserves, the distribution would cause Ponchatoula to have additional
taxable income. A distribution is deemed to have been made from accumulated bad
debt reserves to the extent that (a) the reserves exceed the amount that would
have been accumulated on the basis of actual loss experience, and (b) the
distribution is a "non-qualified distribution." A distribution with respect to
stock is a non-qualified distribution to the extent that, for federal income tax
purposes, (i) it is in redemption of shares, (ii) it is pursuant to a
liquidation of the institution, or (iii) in the case of a current distribution,
together with all other such distributions during the taxable year, it exceeds
the institution's current and post-1951 accumulated earnings and profits. The
amount of additional taxable income created by a non-qualified distribution is
an amount that when reduced by the tax attributable to it is equal to the amount
of the distribution.
Minimum Tax. The Code imposes an alternative minimum tax at a rate of 20%.
The alternative minimum tax generally applies to a base of regular taxable
income plus certain tax preferences ("alternative minimum taxable income" or
"AMTI") and is payable to the extent such AMTI is in excess of an exemption
amount. The Code provides that an item of tax preference is the excess of the
bad debt deduction allowable for a taxable year pursuant to the percentage of
taxable income method over the amount allowable under the experience method.
Other items of tax preference that constitute AMTI include (a) depreciation and
(b) 75% of the excess (if any) of (i) adjusted current earnings as defined in
the Code, over (ii) AMTI (determined without regard to this preference and prior
to reduction by net operating losses).
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Net Operating Loss Carryovers. A financial institution may carry back net
operating losses ("NOLs") to the preceding three taxable years and forward to
the succeeding 15 taxable years. This provision applies to losses incurred in
taxable years beginning after 1986. At December 31, 1997, Ponchatoula had no NOL
carryforwards for federal income tax purposes.
Capital Gains and Corporate Dividends-Received Deduction. Corporate net
capital gains are taxed at a maximum rate of 35%. Corporations which own 20% or
more of the stock of a corporation distributing a dividend may deduct 80% of the
dividends received. Corporations which own less than 20% of the stock of a
corporation distributing a dividend may deduct 70% of the dividends received.
However, a corporation that receives dividends from a member of the same
affiliated group of corporations may deduct 100% of the dividends received.
Other Matters. Federal legislation is introduced from time to time that
would limit the ability of individuals to deduct interest paid on mortgage
loans. Individuals are currently not permitted to deduct interest on consumer
loans. Significant increases in tax rates or further restrictions on the
deductibility of mortgage interest could adversely affect Ponchatoula.
Ponchatoula's federal income tax returns for the tax years ended 1994, 1995
and 1996 are open under the statute of limitations and are subject to review by
the IRS.
State Taxation
The Company is subject to the Louisiana Corporation Income Tax based on its
Louisiana taxable income. The Corporation Income Tax applies at graduated rates
from 4% upon the first $25,000 of Louisiana taxable income to 8% on all
Louisiana taxable income in excess of $200,000. For these purposes, "Louisiana
taxable income" means net income which is earned within or derived from sources
within the State of Louisiana, after adjustments permitted under Louisiana law,
including a federal income tax deduction. In addition, Ponchatoula is subject to
the Louisiana Shares Tax which is imposed on the assessed value of a company's
stock. The formula for deriving the assessed value is to calculate 15% of the
sum of (a) 20% of a company's capitalized earnings, plus (b) 80% of the
company's taxable stockholders' equity, and to subtract from that figure 50% of
the company's real and personal property assessment. Various items may also be
subtracted in calculating a company's capitalized earnings. Ponchatoula believes
that the Louisiana Shares Tax, which applies at rates up to 16% on the assessed
value of its stock, will not result in a material tax liability following the
Conversion.
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<PAGE>
MANAGEMENT
Management of the Company
The Board of Directors of the Company 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. The following table sets forth
certain information regarding the directors of the Company, all of whom are also
directors of Ponchatoula.
<TABLE>
<CAPTION>
Position with
Ponchatoula and
Principal Occupation Director of Year
During the Ponchatoula Term
Name Age(1) Past Five Years Since Expires
- ---------------------------- ---------- -------------------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
John C. Bohning 56 Director; President and 1974 2001
manager of Bohning's
Supermarket, Ponchatoula,
Louisiana, since 1961.
Lawrence C. Caldwell, Jr. 50 Director; President and Chief 1984 2000
Executive Officer of
Ponchatoula since January
1994. From 1984 until January
1994, served as Executive Vice
President and Chief Executive
Officer of Ponchatoula.
Present Chairman of Louisiana
League of Savings Institutions
and Commissioner on the
Louisiana Housing Finance
Agency.
Robert H. Gabriel 42 Director; President of Gabriel 1996 1999
Bldg. Supply Co., Inc.,
Ponchatoula, Louisiana, since
1982.
Dennis E. James 38 Director; Audit Partner with 1996 2000
Durnin & James, CPA, Amite,
Louisiana, since 1987.
Allen B. Pierson, Jr. 61 Director, Attorney and, from 1989(2) 2000
1991 to May 1996, a Partner
with the law firm of Matheny
and Pierson, Ponchatoula,
Louisiana.
Milton J. Schanzbach 71 Chairman of the Board; 1978 2001
Retired optometrist.
Barbara B. Theriot 53 Director; Secretary and 1994 1999
Treasurer of Ponchatoula since
1984.
</TABLE>
(Footnotes on next page)
100
<PAGE>
- -------------------
(1) Age as of December 31, 1997.
(2) In addition, Mr. Pierson served as a director of Ponchatoula from 1969
to 1983.
Directors of the Company initially will not be compensated by the Company
but will serve with and be compensated by Ponchatoula. It is not anticipated
that separate compensation will be paid to directors of the Company until such
time as such persons devote significant time to the separate management of the
Company's affairs, which is not expected to occur until the Company becomes
actively engaged in additional businesses other than holding the stock of
Ponchatoula. The Company may determine that such compensation is appropriate in
the future.
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.
Management of Ponchatoula
The directors and executive officers of Ponchatoula are the same as the
directors and executive officers of the Company. Information concerning the
names, ages, principal occupations during the past five years and term of office
of the directors and executive officers of Ponchatoula is set forth under "-
Management of the Company."
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires Ponchatoula's officers and
directors, and persons who own more than 10% of the Ponchatoula Common Stock, to
file reports of ownership and changes in ownership with the OTS. Officers,
directors and greater than 10% stockholders are required by regulation to
furnish Ponchatoula with copies of all Section 16(a) forms they file. Based
solely on review of the copies of such forms furnished to Ponchatoula,
Ponchatoula believes that during 1997, all Section 16(a) filing requirements
applicable to its officers and directors were complied with.
Beneficial Ownership of Ponchatoula Common Stock
The following table sets forth information as to the Ponchatoula Common
Stock beneficially owned as of March 31, 1998 by (i) the only persons or
entities known to Ponchatoula to be the beneficial owners of more than 5% of the
Ponchatoula Common Stock, (ii) each director of Ponchatoula, and (iii) all
directors and executive officers of Ponchatoula as a group.
101
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature Percent
of Beneficial of
Name Ownership(1)(2)(3) Class
---- ------------------ -------
<S> <C> <C>
Homestead Mutual Holding Company
195 North Sixth Street
Ponchatoula, Louisiana 70454 ......... 456,240 75.2%
Directors:
John C. Bohning ................... 3,338 *
Lawrence C. Caldwell, Jr .......... 8,227(4) 1.4%
Robert H. Gabriel ................. 1,597 *
Dennis E. James ................... 1,153 *
Allen B. Pierson, Jr .............. 8,526(5) 1.4%
Milton J. Schanzbach .............. 3,838(6) *
Barbara B. Theriot ................ 7,294(7) 1.2%
All directors and executive officers
of Ponchatoula as a group (7 persons) 33,973 5.6%
</TABLE>
- ----------------
* Represents less than 1% of the outstanding Ponchatoula Common Stock.
(1) Based on information furnished by the respective individuals. Under
application regulations, shares are deemed to be beneficially owned by
a person if he directly or indirectly has or shares the power to vote
or dispose of the shares, whether or not he has any economic interest
in the shares. Unless otherwise indicated, the named beneficial owner
has sole voting and dispositive power with respect to the shares.
(2) Under applicable regulations, a person is deemed to have beneficial
ownership of any shares of Ponchatoula Common Stock which may be
acquired within 60 days of the date shown pursuant to the exercise of
outstanding stock options. Shares of Ponchatoula Common Stock which are
subject to stock options are deemed to be outstanding for the purpose
of computing the percentage of outstanding Ponchatoula Common Stock
owned by such person or group but not deemed outstanding for the
purpose of computing the percentage of Ponchatoula Common Stock owned
by any other person or group. The amounts set forth in the table
include shares which may be received upon the exercise of stock options
within 60 days of the date shown as follows: for each of Messrs.
Bohning, Gabriel, Schanzbach and James, 599 shares; for Mrs. Theriot,
431 shares; for Mr. Caldwell, 755 shares; and for all directors and
executive officers as a group, 3,582 shares.
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<PAGE>
(3) Includes unvested restricted shares granted pursuant to Ponchatoula's
Management Recognition Plans ("MRPs") as follows: for each of Messrs.
Bohning, Schanzbach, James and Pierson, 196 shares; for Mr. Gabriel, 48
shares; for Mrs. Theriot, 691 shares; for Mr. Caldwell, 1,208 shares;
and for all directors and executive officers as a group, 2,731 shares.
While these restricted shares have not yet vested or been distributed
to the recipient of the grant, the grant recipients are entitled to
vote the restricted shares.
(4) Includes 1,500 shares which are owned jointly with Mr. Caldwell's
spouse and 4,463 shares held by Ponchatoula's Profit Sharing Plan for
the account of Mr. Caldwell.
(5) Excludes 1,000 shares held in trust for a client of Mr. Pierson as to
which Mr. Pierson serves as trustee and as to which he disclaims
beneficial ownership.
(6) Includes 3,000 shares which are owned jointly with Mr. Schanzbach's
spouse.
(7) Includes 2,000 shares which are owned jointly with Mrs. Theriot's
spouse and 4,000 shares held by Ponchatoula's Profit Sharing Plan for
the account of Mrs. Theriot.
For information regarding the proposed purchases of Conversion Stock by
Ponchatoula's directors and executive officers and their pro forma ownership,
see "Proposed Management Purchases."
The Board of Directors and Its Committees
Regular meetings of the Board of Directors of Ponchatoula are held once
a month and special meetings of the Board of Directors of Ponchatoula are held
from time-to-time as needed. There were 12 meetings of the Board of Directors of
Ponchatoula held during 1997. No director attended fewer than 75% of the total
number of meetings of the Board of Directors of Ponchatoula held during 1997 and
the total number of meetings held by all committees of the Board on which the
director served during such year.
The Board of Directors of Ponchatoula has established an Executive
Committee, which is authorized to act with the same authority as the Board of
Directors between meetings of the Board. Currently, the entire Board of
Directors serves as members of this Committee. The Executive Committee met 35
times during 1997.
The Board of Directors has established a Compensation Committee to
administer employee benefit plans and to review existing compensation. The
Compensation Committee consists of the five non-employee directors of
Ponchatoula and met once during 1997.
The entire Board of Directors performs the functions of an audit
committee and of a nominating committee. Article II, Section 14 of the Bylaws of
Ponchatoula provides that
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the Board of Directors shall act as a nominating committee for selecting the
nominees for election as directors. The Board of Directors, acting in its
capacity as the nominating committee, met once during 1997.
Directors' Compensation
Each director of Ponchatoula receives $400 per month (paid
semi-annually) for service on the Board of Directors and $450 per month (paid
semi-annually) for service on Ponchatoula's Executive Committee. Mr. Schanzbach
receives an additional $300 per month (paid monthly) as Chairman of the Board of
Ponchatoula.
Summary Compensation Table
The following table sets forth certain information with respect to the
compensation of the President and Chief Executive Officer of Ponchatoula during
the periods presented. No executive officer of Ponchatoula received total
compensation in excess of $100,000 during 1997.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------------- -------------------------------------
Awards Payouts
--------------------------- -------
Other Securities
Name and Fiscal Annual Restricted Underlying LTIP All Other
Principal Position Year Salary(1) Bonus Compensation(2) Stock Award(3) Options(4) Payouts Compensation(5)
------------------ ---- --------- ----- --------------- -------------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence C. Caldwell, Jr. 1997 $82,200 $5,016 -- $ -- -- -- $10,764
President and Chief 1996 81,000 3,540 -- 15,090 3,774 -- 10,624
Executive Officer 1995 75,600 5,088 -- -- -- -- 10,620
</TABLE>
(1) Includes Board fees of $10,200, $10,200 and $4,800 in 1997, 1996 and
1995, respectively. See "- Directors' Compensation."
(2) Does not include amounts attributable to miscellaneous benefits
received by the named executive officer. In the opinion of management
of Ponchatoula, the costs to Ponchatoula of providing such benefits to
the named executive officer during the year ended December 31, 1997 did
not exceed the lesser of $50,000 or 10% of the total of annual salary
and bonus reported for such individual.
(3) Represents the grant of 1,509 shares of restricted Ponchatoula Common
Stock pursuant to Ponchatoula's 1996 Management Recognition Plan for
Officers, which shares were deemed to have had the indicated value at
the date of grant. The remaining unvested shares of restricted stock
had a fair market value of $13,288 at December 31, 1997, based on the
$11.00 per share closing market price on such date. The award vests at
the rate of 20% a year over a five-year period commencing on the first
anniversary of the date of grant, and dividends are paid on the
restricted shares.
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(4) Consists of stock options granted pursuant to Ponchatoula's 1996 Stock
Incentive Plan, which options vest and are exercisable at the rate of
20% a year over a five-year period commencing on the first anniversary
of the date of grant.
(5) Consists of amounts allocated, accrued or paid by Ponchatoula on behalf
of Mr. Caldwell pursuant to Ponchatoula's Profit Sharing Plan.
Employment Agreements
In connection with the Conversion, the Company and Ponchatoula (the
"Employers") intend to enter into employment agreements with each of Mr.
Caldwell and Ms. Theriot. The Employers have agreed to employ the executives for
a term of three years, in each case in their current respective positions. The
agreements with the executives will be initially at their current salary levels.
The executives' compensation and expenses shall be paid by the Company and
Ponchatoula in the same proportion as the time and services actually expended by
the Executives on behalf of each respective Employer. The employment agreements
will be reviewed annually, and the term of the executives' employment agreements
shall be extended each year for a successive additional one-year period upon the
approval of the Employers' Boards of Directors, unless either party elects, not
less than 30 days prior to the annual anniversary date, not to extend the
employment term.
Each of the employment agreements shall be terminable with or without
cause by the Employers. The executives shall have no right to compensation or
other benefits pursuant to the employment agreements for any period after
voluntary termination or termination by the Employers for cause, disability or
retirement. The agreements provide for certain benefits in the event of the
executive's death. In the event that (i) the executive terminates his or her
employment because of failure to comply with any material provision of the
employment agreement or the Employers change the executive's title or duties or
(ii) the employment agreement is terminated by the Employers other than for
cause, disability, retirement or death or by the executive as a result of
certain adverse actions which are taken with respect to the executive's
employment following a change in control of the Company, as defined, each of the
Executives will be entitled to a cash severance amount equal to three times his
or her average annual compensation for the last five calendar years.
A change in control is generally defined in the employment agreements
to include any change in control of the Company required to be reported under
the federal securities laws, as well as (i) the acquisition by any person of 20%
or more of the Company's outstanding voting securities and (ii) a change in a
majority of the directors of the Company during any three-year period without
the approval of at least two-thirds of the persons who were directors of the
Company at the beginning of such period.
Each employment agreement provides that, in the event that any of the
payments to be made thereunder or otherwise upon termination of employment are
deemed to constitute "parachute payments" within the meaning Section 280G of the
Code, then such payments
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<PAGE>
and benefits received thereunder shall be reduced by the amount which is the
minimum necessary to result in the payments not exceeding three times the
recipient's average annual compensation from the employer which was includable
in the recipient's gross income during the most recent five taxable years.
Recipients of parachute payments are subject to a 20% excise tax on the amount
by which such payments exceed the base amount, in addition to regular income
taxes, and payments in excess of the base amount are not deductible by the
employer as compensation expense for federal income tax purposes.
Although the above-described employment agreements could increase the
cost of any acquisition of control of the Company, management of the Company
does not believe that the terms thereof would have a significant anti-takeover
effect. The Company and/or Ponchatoula may determine to enter into similar
employment agreements with other officers in the future.
Existing Stock Options
Stock options for 10,782 shares of Ponchatoula Common Stock were
granted to all employees of Ponchatoula on July 10, 1996 at $10.00 per share
pursuant to Ponchatoula's 1996 Stock Incentive Plan, which plan was approved by
stockholders at the 1996 Annual Meeting. No stock options were granted in 1997.
No options were exercised by executive officers during 1997. Mr.
Pierson, a non-employee director of Ponchatoula, exercised his stock option for
60 shares during 1997. The following table sets forth, with respect to the
executive officer named in the Summary Compensation Table, information with
respect to the number of shares of Ponchatoula Common Stock covered by options
held at the end of the fiscal year and the value with respect thereto.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Unexercised Options in the Money Options
Acquired Fiscal Year End at Fiscal Year End(1)
on Value at ---------------------------- ---------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence C. Caldwell, Jr. -- -- 755 3,019 $ 755 $3,019
</TABLE>
(1) Based on a per share market price of the Ponchatoula Common Stock of
$11.00 at December 31, 1997, minus the applicable exercise price per
share.
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<PAGE>
Profit Sharing Plan
Ponchatoula maintains an Employee Profit Sharing Trust (the "Profit Sharing
Plan"), which is a tax-qualified defined contribution plan. Full-time employees
who have been credited with at least six consecutive months of service and who
have attained age 20 are eligible to participate in the Profit Sharing Plan.
Under the Profit Sharing Plan, a separate account is established for each
participating employee, and Ponchatoula may make discretionary contributions to
the Profit Sharing Plan which are allocated to the participants' accounts.
Distributions from the Profit Sharing Plan are made upon termination of service
either in a lump sum or in installments over a period not to exceed the greater
of the life expectancy of the participant or the joint survivor life expectancy
of the participant and his or her designated beneficiary, or upon application in
case of specified financial hardship.
The Profit Sharing Plan was amended in 1994 to permit each participant to
direct the trustee of the plan with respect to the investment of his or her
vested account balances within the plan into four alternative investment funds,
including a Fixed Income Fund, which shall be invested by the trustee in
interest-bearing accounts, money market accounts or certificates of deposit at a
federally insured financial institution; the Vanguard Wellington Fund; an
Employer Stock Fund, which shall be invested by the trustee in shares of
Ponchatoula Common Stock; and the Vanguard Windsor II Fund. The Profit Sharing
Plan purchased 14,376 shares of Ponchatoula Common Stock on August 31, 1994 in
connection with the MHC Reorganization. Such shares were purchased in accordance
with instructions from participants who authorized their vested account balances
to be used to purchase Ponchatoula Common Stock. Each participant has the right
to direct the trustee as to the manner in which whole and partial shares of
Ponchatoula Common Stock allocated to his or her account are to be voted. The
trustee shall vote allocated shares of Ponchatoula Common Stock for which it has
not received directions from a participant, and any unallocated shares, in the
same proportion for and against proposals to stockholders of Ponchatoula as
participants and their beneficiaries actually vote shares of Ponchatoula Common
Stock which have been allocated to their individual participant's accounts.
Prior to April 1, 1998, participants were not permitted to make
contributions to their accounts within the Profit Sharing Plan. The plan was
amended effective April 1, 1998 to incorporate a 401(k) feature, pursuant to
which employees are permitted to contribute up to 7.5% of their annual base
salary (excluding incentive bonuses, stock benefit plans and any other form of
compensation), with the annual contribution not to exceed $10,000 in 1998.
Ponchatoula will make matching contributions equal to 100% of each employee's
contribution up to 7.5% of the employee's annual base salary. As of April 1,
1998, the investment alternatives available to participants were expanded to
include nine different mutual funds (equity funds, bond funds and money market
funds), the Ponchatoula Common Stock, deposit accounts and whole life insurance.
An independent third party administrator administers the amended plan.
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New Stock Benefit Plans
Employee Stock Ownership Plan. The Company has established the ESOP for
employees of the Company and Ponchatoula to become effective upon the
Conversion. Full-time employees of the Company and Ponchatoula who have been
credited with at least 1,000 hours of service during a twelve-month period are
eligible to participate in the ESOP.
As part of the Conversion, in order to fund the purchase of up to 8% of the
Conversion Stock sold in the Offerings (excluding any Contingent Shares), it is
anticipated that the ESOP will borrow funds from the Company. It is anticipated
that such loan will equal 100% of the aggregate purchase price of the Conversion
Stock acquired by the ESOP. The loan to the ESOP will be repaid principally from
the Company's and Ponchatoula's contributions to the ESOP over a period of not
less than 10 years, and the collateral for the loan will be the Common Stock
purchased by the ESOP. The interest rate for the ESOP loan is expected to be a
fixed rate of ___%. The Company may, in any plan year, make additional
discretionary contributions for the benefit of plan participants in either cash
or shares of Common Stock, which may be acquired through the purchase of
outstanding shares in the market or from individual stockholders, upon the
original issuance of additional shares by the Company or upon the sale of
treasury shares by the Company. Such purchases, if made, would be funded through
additional borrowings by the ESOP or additional contributions from the Company.
The timing, amount and manner of future contributions to the ESOP will be
affected by various factors, including prevailing regulatory policies, the
requirements of applicable laws and regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be held in
a suspense account and released to participants on a pro rata basis as debt
service payments are made. Shares released from the ESOP will be allocated to
each eligible participant's ESOP account based on the ratio of each such
participant's base compensation to the total base compensation of all eligible
ESOP participants. Forfeitures will be reallocated among remaining participating
employees and may reduce any amount the Company might otherwise have contributed
to the ESOP. Upon the completion of three years of service, the account balances
of participants within the ESOP will become 20% vested and will continue to vest
at the rate of 20% for each additional year of service completed by the
participant, such that a participant will become 100% vested upon the completion
of seven years of service. Credit is given for years of service with Ponchatoula
prior to adoption of the ESOP. In the case of a "change in control," as defined,
however, participants will become immediately fully vested in their account
balances. Benefits may be payable upon retirement or separation from service.
The Company's contributions to the ESOP are not fixed, so benefits payable under
the ESOP cannot be estimated.
Messrs. Caldwell, James and Kelly Morse (an officer of Ponchatoula) will
serve as trustees of the ESOP. Under the ESOP, the trustees must generally vote
all allocated shares held in the ESOP in accordance with the instructions of the
participating employees, and unallocated shares will generally be voted in the
same ratio on any matter as those
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<PAGE>
allocated shares for which instructions are given, in each case subject to the
requirements of applicable law and the fiduciary duties of the trustees.
See "Risk Factors - Potential Increased Compensation Expense After the
Conversion" for a discussion of SOP 93-6, which requires that the compensation
expense recorded by employers for leveraged ESOPs be based on the fair value of
the ESOP shares.
GAAP requires that any third party borrowing by the ESOP be reflected as a
liability on the Company's statement of financial condition. Since the ESOP is
borrowing from the Company, such obligation is not treated as a liability, but
will instead be excluded from stockholders' equity. If the ESOP purchases newly
issued shares from the Company, total stockholders' equity would neither
increase nor decrease, but per share stockholders' equity and per share net
earnings would decrease as the newly issued shares are allocated to the ESOP
participants.
The ESOP will be subject to the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the regulations of the
IRS and the Department of Labor thereunder.
Stock Option Plan. Following consummation of the Conversion, the Board of
Directors of the Company intends to adopt a 1998 Stock Option Plan, which will
be designed to attract and retain qualified personnel in key positions, provide
directors, officers and key employees with a proprietary interest in the Company
as an incentive to contribute to the success of the Company and reward key
employees for outstanding performance. The Stock Option Plan will provide for
the grant of incentive stock options intended to comply with the requirements of
Section 422 of the Code ("incentive stock options"), non-incentive or
compensatory stock options, stock appreciation rights and limited rights which
will be exercisable only upon a change in control of the Company (collectively
"Awards"). Awards may be granted to directors and key employees of the Company
and any subsidiaries. The Stock Option Plan will be administered and interpreted
by a committee of the Board of Directors ("Committee"). Unless sooner
terminated, the Stock Option Plan shall continue in effect for a period of 10
years from the date the Stock Option Plan is adopted by the Board of Directors.
Subject to any applicable OTS regulations, upon exercise of "Limited Rights" in
the event of a change in control, the employee will be entitled to receive a
lump sum cash payment equal to the difference between the exercise price of the
related option and the fair market value of the shares of Common Stock subject
to the option on the date of exercise of the right in lieu of purchasing the
stock underlying the option.
Under the Stock Option Plan, the Committee will determine which directors,
officers and key employees will be granted Awards, whether options will be
incentive or compensatory options, the number of shares subject to each Award,
the exercise price of each option, whether options may be exercised by
delivering other shares of Common Stock and when such options become
exercisable. The per share exercise price of an incentive stock option must at
least equal the fair market value of a share of Common Stock on the
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<PAGE>
date the option is granted (110% of fair market value in the case of incentive
stock options granted to employees who are 5% stockholders).
At a meeting of stockholders of the Company following the Conversion, which
under applicable OTS regulations may be held no earlier than six months after
the completion of the Conversion, the Board of Directors intends to present the
1998 Stock Option Plan to stockholders for approval and to reserve an amount
equal to 10% of the shares of Conversion Stock sold in the Offerings (exclusive
of any Contingent Shares) (or 112,412 shares based upon the issuance of
1,124,125 shares of Conversion Stock at the maximum of the Estimated Valuation
Range), for issuance under the 1998 Stock Option Plan. OTS regulations provide
that, in the event such plan is implemented within one year following the
Conversion, no individual officer or employee of Ponchatoula may receive more
than 25% of the options granted under the 1998 Stock Option Plan and
non-employee directors may not receive more than 5% individually, or 30% in the
aggregate of the options granted under the 1998 Stock Option Plan. OTS
regulations also provide that the exercise price of any options granted under
any such plan must be at least equal to the fair market value of the Common
Stock as of the date of grant. Each stock option or portion thereof will be
exercisable at any time on or after it vests and will be exercisable until 10
years after its date of grant or for periods of up to one year following the
death, disability or other termination of the optionee's employment or service
as a director. However, failure to exercise incentive stock options within three
months after the date on which the optionee's employment terminates may result
in the loss of incentive stock option treatment.
At the time an Award is granted pursuant to the 1998 Stock Option Plan, the
recipient will not be required to make any payment in consideration for such
grant. With respect to incentive or compensatory stock options, the optionee
will be required to pay the applicable exercise price at the time of exercise in
order to receive the underlying shares of Common Stock. The shares reserved for
issuance under the 1998 Stock Option Plan may be authorized but previously
unissued shares, treasury shares, or shares purchased by the Company on the open
market or from private sources. In the event of a stock split, reverse stock
split or stock dividend, the number of shares of Common Stock under the 1998
Stock Option Plan, the number of shares to which any Award relates and the
exercise price per share under any option or stock appreciation right shall be
adjusted to reflect such increase or decrease in the total number of shares of
Common Stock outstanding. In the event the Company declares a special cash
dividend or return of capital following the implementation of the 1998 Stock
Option Plan in an amount per share which exceeds 10% of the fair market value of
a share of Common Stock as of the date of declaration, the per share exercise
price of all previously granted options which remain unexercised as of the date
of such declaration shall, subject to certain limitations, be proportionately
adjusted to give effect to such special cash dividend or return of capital as of
the date of payment of such special cash dividend or return of capital.
Under current provisions of the Code, the federal income tax treatment of
incentive stock options and compensatory stock options is different. As regards
incentive stock
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options, an optionee who meets certain holding period requirements will not
recognize income at the time the option is granted or at the time the option is
exercised, and a federal income tax deduction generally will not be available to
the Company at any time as a result of such grant or exercise. With respect to
compensatory stock options, the difference between the fair market value on the
date of exercise and the option exercise price generally will be treated as
compensation income upon exercise, and the Company will be entitled to a
deduction in the amount of income so recognized by the optionee. Upon the
exercise of a stock appreciation right, the holder will realize income for
federal income tax purposes equal to the amount received by him, whether in
cash, shares of stock or both, and the Company will be entitled to a deduction
for federal income tax purposes in the same amount.
It is currently expected that the 1998 Stock Option Plan will provide that
no individual officer will be able to receive stock options for more than 25% of
the shares available under the 1998 Stock Option Plan, or 28,103 shares if the
amount of Conversion Stock sold in the Offerings is equal to the maximum of the
Estimated Valuation Range, vesting over a five-year period (or 5,620 shares per
year based upon the maximum of the Estimated Valuation Range).
Recognition Plan. Following consummation of the Conversion, the Board of
Directors of the Company intends to adopt a 1998 Recognition Plan for directors,
officers and employees. The objective of the 1998 Recognition Plan will be to
enable the Company to provide directors, officers and employees with a
proprietary interest in the Company as an incentive to contribute to its
success. The Company intends to present the 1998 Recognition Plan to
stockholders for their approval at a meeting of stockholders which, pursuant to
applicable OTS regulations, may be held no earlier than six months subsequent to
completion of the Conversion.
The 1998 Recognition Plan will be administered by a committee of the Board
of Directors, which will have the responsibility to invest all funds contributed
to the trust created for the 1998 Recognition Plan (the "Trust"). The Company
will contribute sufficient funds to the Trust so that the Trust can purchase,
following the receipt of stockholder approval, a number of shares equal to an
aggregate of 4% of the Conversion Stock sold in the Offerings (exclusive of any
Contingent Shares) (44,965 shares, based on the sale of 1,124,125 shares at the
maximum of the Estimated Valuation Range). Shares of Common Stock granted
pursuant to the 1998 Recognition Plan generally will be in the form of
restricted stock vesting at the rate of 20% per year over the five years
following the date of grant. For accounting purposes, compensation expense in
the amount of the fair market value of the Common Stock at the date of the grant
to the recipient will be recognized pro rata over the period during which the
shares are payable. A recipient will be entitled to all voting and other
stockholder rights, except that the shares, while restricted, may not be sold,
pledged or otherwise disposed of and are required to be held in the Trust. Under
the terms of the 1998 Recognition Plan, recipients of awards will be entitled to
instruct the trustees of the 1998 Recognition Plan as to how the underlying
shares should be voted, and the
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<PAGE>
trustees will be entitled to vote all unallocated shares in their discretion. If
a recipient's employment is terminated as a result of death or disability, all
restrictions will expire and all allocated shares will become unrestricted. The
Board of Directors of the Company can terminate the 1998 Recognition Plan at any
time, and if it does so, any shares not allocated will revert to the Company.
Recipients of grants under the 1998 Recognition Plan will not be required to
make any payment at the time of grant or when the underlying shares of Common
Stock become vested, other than payment of withholding taxes.
It is currently expected that the 1998 Recognition Plan will provide that
no individual officer will be able to receive an award for more than 25% of the
shares available under the 1998 Recognition Plan, or 9,775 shares if the amount
of Conversion Stock sold in the Offerings is equal to the maximum of the
Estimated Valuation Range, vesting over a five-year period (or 1,955 shares per
year based upon the maximum of the Estimated Valuation Range).
Indebtedness of Management
Ponchatoula offers mortgage loans to its directors, officers and full-time
employees for the financing of their primary residences and certain other loans
in accordance with applicable federal laws and regulations. Since August 1989,
all loans made by Ponchatoula to its executive officers, directors and, to the
extent otherwise permitted, principal stockholder(s), or any related interest of
the foregoing, must be (i) on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions by the savings institution with non-affiliated parties, and (ii)
not involve more than the normal risk of repayment or present other unfavorable
features.
The following table sets forth information as to all directors and
executive officers, including members of their immediate families and affiliated
entities, who had loans with Ponchatoula aggregating $60,000 or more during the
year ended December 31, 1997. These loans generally were made on substantially
the same terms as those prevailing at the time for comparable transactions with
non-affiliated persons. It is the belief by management that these loans neither
involve more than the normal risk of collectibility nor present other
unfavorable features.
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<TABLE>
<CAPTION>
Highest
Balance Interest
Year 1/1/97 Principal Rate
Name and Position Nature of Loan to Balance at as of
or Relationship Indebtedness Made 12/31/97 12/31/97 12/31/97
- ----------------------------- -------------------- ------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
John C. Bohning, First mortgage 1978 $ 8,643 $ 0 9.000%
Director Second mortgage 1986 71,341 64,963 8.000
Lawrence C. Caldwell, Jr., First mortgage(1) 1986 67,182 65,134 8.125
President and Signature loan 1992 4,299 0 8.500
Chief Executive Officer Signature loan 1996 15,000 0 8.500
First mortgage 1996 75,000 73,147 8.000
Signature loan 1997 6,000 6,000 8.500
Allen B. Pierson, Jr., First mortgage(2) 1985 43,069 39,992 8.125
Director First mortgage(2) 1986 30,413 28,571 9.000
</TABLE>
- ----------------------
(1) The mortgage was assumed by another borrower, but Mr. Caldwell has
secondary liability on the mortgage.
(2) The mortgage is secured by rental property.
Certain Transactions
Allen B. Pierson, Jr., a director of Ponchatoula, is an attorney and
receives a retainer from Ponchatoula of $350 per month. In addition, during the
year ended December 31, 1997, the fees paid by Ponchatoula to Mr. Pierson
(exclusive of the above described retainer) amounted to approximately $36,529 in
connection with loan closings.
THE CONVERSION
The Boards of Directors of the Mutual Holding Company, Ponchatoula and the
Company have approved the Plan of Conversion, as has the OTS, subject to
approval by the Members of the Mutual Holding Company and the Stockholders of
Ponchatoula 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
The Boards of Directors of the Mutual Holding Company and Ponchatoula
unanimously adopted the Plan on February 25, 1998. Following the incorporation
of the Company, the Board of Directors of the Company unanimously adopted the
Plan on March 25, 1998. The Plan has been approved by the OTS, subject to, among
other things,
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approval of the Plan by the Members of the Mutual Holding Company and the
Stockholders of Ponchatoula. The Members' Meeting and the Stockholders' Meeting
have been called for this purpose on _____ __, 1998.
The following is a brief summary of pertinent aspects of the Plan and the
Conversion. The summary is qualified in its entirety by reference to the
provisions of the Plan, which is available for inspection at each branch office
of Ponchatoula and at the offices of the OTS. The Plan also is filed as an
exhibit to the Registration Statement of which this Prospectus is a part, copies
of which may be obtained from the SEC. See "Additional Information."
Purposes of the Conversion
The Mutual Holding Company, as a federally chartered mutual holding
company, does not have stockholders and has no authority to issue capital stock.
As a result of the Conversion, the Company will be structured in the form used
by holding companies of commercial banks, most business entities and a growing
number of savings institutions. The Conversion will be important to the future
growth and performance of the holding company organization by providing a larger
capital base to support the operations of Ponchatoula and Company and by
enhancing their future access to capital markets, ability to diversify into
other financial services related activities, and ability to provide services to
the public. Although Ponchatoula currently has the ability to raise additional
capital through the sale of additional shares of Ponchatoula Common Stock, that
ability is limited by the mutual holding company structure which, among other
things, requires that the Mutual Holding Company hold a majority of the
outstanding shares of Ponchatoula Common Stock.
The Conversion also will result in an increase in the number of outstanding
shares of Common Stock following the Conversion, as compared to the number of
outstanding shares of Public Ponchatoula Shares prior to the Conversion, which
will increase the likelihood of the development of an active and liquid trading
market for the Common Stock. See "Market for Common Stock."
If Ponchatoula had undertaken a standard conversion involving the formation
of a stock holding company in 1994, applicable OTS regulations would have
required a greater amount of common stock to be sold than the $1.2 million of
net proceeds raised in the MHC Reorganization. Management of Ponchatoula
believed that it may have been difficult in 1994 to prudently invest in a timely
manner the larger amount of capital that would have been raised in a standard
conversion, when compared to the net proceeds raised in the MHC Reorganization.
A standard conversion in 1994 also would have immediately eliminated all aspects
of the mutual form of organization.
The Offerings will further increase the capital of the Company and
Ponchatoula and provide them with additional flexibility to grow and increase
net income.
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In light of the foregoing, the Boards of Directors of Ponchatoula and the
Mutual Holding Company believe that the Conversion is in the best interests of
such companies and their respective Stockholders and Members.
Description of the Conversion
On February 25, 1998, the Boards of Directors of Ponchatoula and the Mutual
Holding Company adopted the Plan, and as of February 27, 1998 Ponchatoula
incorporated the Company under Louisiana law as a first-tier wholly owned
subsidiary of Ponchatoula. Pursuant to the Plan, (i) the Mutual Holding Company
will convert from mutual form to a federal interim stock savings institution and
simultaneously merge with and into Ponchatoula, pursuant to which the Mutual
Holding Company will cease to exist and the shares of Ponchatoula Common Stock
held by the Mutual Holding Company will be cancelled, and (ii) Interim will then
merge with and into Ponchatoula. As a result of the merger of Interim with and
into Ponchatoula, Ponchatoula will become a wholly-owned subsidiary of the
Company and the Public Ponchatoula Shares (other than Dissenting Shares, if any)
will be converted into the Exchange Shares pursuant to the Exchange Ratio, which
will result in the holders of such shares owning in the aggregate approximately
the same percentage of the Common Stock to be outstanding upon the completion of
the Conversion (i.e., the Conversion Stock and the Exchange Shares) as the
percentage of Ponchatoula Common Stock owned by them in the aggregate
immediately prior to consummation of the Conversion (as adjusted from 24.2% to
23.94% to reflect the amount of dividends previously waived by the MHC), before
giving effect to (a) the payment of cash in lieu of issuing fractional Exchange
Shares, (b) any shares of Conversion Stock purchased by Ponchatoula's
stockholders in the Offerings, (c) any Dissenting Shares, and (d) any Contingent
Shares.
Pursuant to OTS regulations, consummation of the Conversion (including the
offering of Conversion Stock in the Offerings, as described below) is
conditioned upon the approval of the Plan by (1) the OTS, (2) at least a
majority of the total number of votes eligible to be cast by Members of the
Mutual Holding Company at the Members' Meeting, and (3) holders of at least
two-thirds of the shares of the outstanding Ponchatoula Common Stock at the
Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Conversion on the approval of the Plan by at least a
majority of the votes cast, in person or by proxy, by the Public Stockholders at
the Stockholders' Meeting.
Effects of the Conversion
General. Prior to the Conversion, each depositor in Ponchatoula has both a
deposit account in the institution and a pro rata ownership interest in the net
worth of the Mutual Holding Company based upon the balance in his account, which
interest may only be realized in the event of a liquidation of the Mutual
Holding Company. However, this ownership interest is tied to the depositor's
account and has no tangible market value separate from such deposit account. A
depositor who reduces or closes his account receives a portion or all of the
balance in the account but nothing for his ownership interest in the
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net worth of the Mutual Holding Company, which is lost to the extent that the
balance in the account is reduced.
Consequently, the depositors of Ponchatoula normally have no way to realize
the value of their ownership interest in the Mutual Holding Company, which has
realizable value only in the unlikely event that the Mutual Holding Company is
liquidated. In such event, the depositors of record at that time, as owners,
would share pro rata in any residual surplus and reserves of the Mutual Holding
Company after other claims are paid.
Upon consummation of the Conversion, permanent nonwithdrawable capital
stock will be created to represent the ownership of the net worth of the
Company. The Common Stock of the Company is separate and apart from deposit
accounts and cannot be and is not insured by the FDIC or any other governmental
agency. Certificates are issued to evidence ownership of the permanent stock.
The stock certificates are transferable, and therefore the stock may be sold or
traded if a purchaser is available with no effect on any account the seller may
hold in Ponchatoula.
Continuity. While the Conversion is being accomplished, the normal business
of Ponchatoula of accepting deposits and making loans will continue without
interruption. Ponchatoula will continue to be subject to regulation by the OTS
and the FDIC. After the Conversion, Ponchatoula will continue to provide
services for depositors and borrowers under current policies by its present
management and staff.
The directors and officers of Ponchatoula at the time of the Conversion
will continue to serve as directors and officers of Ponchatoula after the
Conversion. The directors and officers of the Company consist of individuals
currently serving as directors and officers of the Mutual Holding Company and
Ponchatoula, and they generally will retain their positions in the Company after
the Conversion.
Effect on Public Ponchatoula Shares. Under the Plan, upon consummation of
the Conversion, the Public Ponchatoula Shares (other than any Dissenting Shares)
shall be converted into Common Stock based upon the Exchange Ratio without any
further action on the part of the holder thereof. Upon surrender of the Public
Ponchatoula Shares, Common Stock will be issued in exchange for such shares. See
"- Delivery and Exchange of Certificates."
Upon consummation of the Conversion, the Public Stockholders of
Ponchatoula, a federally chartered savings institution, will become stockholders
of the Company, a Louisiana corporation. For a description of certain changes in
the rights of stockholders as a result of the Conversion, see "The Conversion -
Comparison of Stockholders' Rights" in Ponchatoula's Proxy Statement for the
Stockholders' Meeting.
Under OTS regulations, Public Stockholders of Ponchatoula will have
dissenters' rights in connection with the Conversion. See " - Dissenters' Rights
of Appraisal."
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Effect on Deposit Accounts. Under the Plan, each depositor in Ponchatoula
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, except to the extent that
funds in the account are withdrawn to purchase Conversion Stock to be issued in
the Offerings. Each such account will be insured by the 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 Ponchatoula 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 Ponchatoula 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 and will no
longer be entitled to vote at meetings of the Mutual Holding Company (which will
cease to exist). Upon completion of the Conversion, all voting rights in
Ponchatoula will be vested in the Company as the sole stockholder of
Ponchatoula. Exclusive voting rights with respect to the Company will be vested
in the holders of Common Stock. Depositors of and borrowers from Ponchatoula
will not have voting rights in the Company after the Conversion, except to the
extent that they become stockholders of the Company.
Tax Effects. Consummation of the Conversion is conditioned on prior receipt
by the Primary Parties of rulings or opinions with regard to federal and
Louisiana income taxation which indicate that the adoption and implementation of
the Plan of Conversion set forth herein will not be taxable for federal or
Louisiana income tax purposes to the Primary Parties or Ponchatoula's Eligible
Account Holders, Supplemental Eligible Account Holders or Other Members, except
as discussed below. See "- Tax Aspects" below.
Effect on Liquidation Rights. Were the Mutual Holding Company to liquidate,
all claims of the Mutual Holding Company's creditors would be paid first.
Thereafter, if there were any assets remaining, Members of the Mutual Holding
Company would receive such remaining assets, pro rata, based upon the deposit
balances in their deposit accounts at Ponchatoula immediately prior to
liquidation. In the unlikely event that Ponchatoula were to liquidate after the
Conversion, all claims of creditors (including those of depositors, to the
extent of their deposit balances) also would be paid first, followed by
distribution of the "liquidation account" to certain depositors (see "-
Liquidation Rights" below), with any assets remaining thereafter distributed to
the Company as the holder of Ponchatoula's capital stock. Pursuant to the rules
and regulations of the OTS, a merger, consolidation, sale of bulk assets or
similar combination or transaction with another insured institution would not be
considered a liquidation for this purpose and, in such a transaction, the
liquidation account would be required to be assumed by the surviving
institution.
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Effect on Existing Compensation Plans. Under the Plan, the 1996 Stock
Incentive Plan and the 1996 Management Recognition Plan will become stock
benefit plans of the Company and shares of Common Stock will be issued (or
reserved for issuance) pursuant to such benefit plans and not shares of
Ponchatoula Common Stock. Upon consummation of the Conversion, the Public
Ponchatoula Shares held by such benefit plans shall be converted into Common
Stock based upon the Exchange Ratio. Also upon consummation of the Conversion,
(i) all rights to purchase, sell or receive Public Ponchatoula Shares under any
agreement between Ponchatoula and any director, officer or employee of
Ponchatoula or under any plan or program of Ponchatoula (including, without
limitation, Ponchatoula's profit sharing plan and the 1996 Management
Recognition Plan), shall automatically, by operation of law, be converted into
and shall become an identical right to purchase, sell or receive Common Stock
and an identical right to make payment in Common Stock under any such agreement
between Ponchatoula and any director, officer or employee of Ponchatoula or
under such plan or program of Ponchatoula, and (ii) rights outstanding under the
1996 Stock Incentive Plan shall be assumed by the Company and thereafter shall
be rights only for shares of Common Stock, with each such right being for a
number of shares of Common Stock based upon the Exchange Ratio and the number of
shares of Public Ponchatoula Shares 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.
See "Management - Existing Stock Options."
The Offerings
Subscription Offering. In accordance with the Plan of Conversion, rights to
subscribe for the purchase of Conversion Stock have been granted under the Plan
of Conversion to the following persons in the following order of descending
priority: (1) Eligible Account Holders, (2) the ESOP, (3) Supplemental Eligible
Account Holders, (4) Other Members, (5) directors, officers and employees of the
Mutual Holding Company and Ponchatoula, and (6) Public Stockholders. All
subscriptions received will be subject to the availability of Conversion Stock
after satisfaction of all subscriptions of all persons having prior rights in
the Subscription Offering and to the maximum and minimum purchase limitations
set forth in the Plan of Conversion and as described below under "- Limitations
on Conversion Stock Purchases."
Priority 1: Eligible Account Holders. Each Eligible Account Holder will
receive, without payment therefor, first priority, nontransferable subscription
rights to subscribe for in the Subscription Offering up to the greater of (i)
one percent (1%) of the total offering of shares of Conversion Stock in the
Subscription Offering (excluding any Contingent Shares) and (ii) 15 times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock offered in the Subscription Offering
by a fraction, of which the numerator is the amount of the Eligible Account
Holder's qualifying deposit and the denominator of which is the total amount of
qualifying deposits of all Eligible Account Holders, in each case as of the
close of business on December 31, 1996 (the "Eligibility Record Date"), subject
to the overall purchase
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limitations and excluding the issuance of any Contingent Shares. See "-
Limitations on Conversion 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 the number of shares subscribed for or 100 shares.
Thereafter, unallocated shares will be allocated to subscribing Eligible Account
Holders whose subscriptions remain unfilled in the proportion that the amounts
of their respective eligible deposits bear to the total amount of eligible
deposits of all subscribing Eligible Account Holders whose subscriptions remain
unfilled, provided that no fractional shares shall be issued. The subscription
rights of Eligible Account Holders who are also directors or officers of the
Mutual Holding Company or Ponchatoula and their associates will be subordinated
to the subscription rights of other Eligible Account Holders to the extent
attributable to increased deposits in the year preceding December 31, 1996.
Priority 2: ESOP. The ESOP will receive, without payment therefor, second
priority, nontransferable subscription rights to purchase, in the aggregate, up
to 8% of the Conversion Stock (excluding any Contingent Shares), including any
increase in the number of shares of Conversion Stock after the date hereof as a
result of an increase of up to 15% in the maximum of the Estimated Valuation.
The ESOP intends to purchase 8% of the shares of Conversion Stock, or 78,200
shares based on the maximum of the Estimated Valuation Range. Subscriptions by
the ESOP will not be aggregated with shares of Conversion Stock purchased
directly by or which are otherwise attributable to any other participants in the
Subscription and Community Offerings, including subscriptions of any of
Ponchatoula's directors, officers, employees or associates thereof. See
"Management - New Stock Benefit Plans - Employee Stock Ownership Plan." In the
event that the total number of shares of Conversion Stock sold in the Offerings
is increased to an amount greater than the number of shares representing the
maximum of the Estimated Valuation Range ("Maximum Shares"), the ESOP will have
a priority right to purchase any such shares exceeding the Maximum Shares up to
an aggregate of 8% of the Conversion Stock (excluding any Contingent Shares).
See "- Limitations on Conversion Stock Purchases" and "Risk Factors - Possible
Dilutive Effect of Issuance of Additional Shares."
Priority 3: Supplemental Eligible Account Holders. Each Supplemental
Eligible Account Holder will receive, without payment therefor, third priority,
nontransferable subscription rights to subscribe for in the Subscription
Offering up to the greater of (i) one percent (1%) of the total offering of
shares of Conversion Stock in the Subscription Offering and (ii) 15 times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock offered in the Subscription Offering
by a fraction, of which the numerator is the amount of the Supplemental Eligible
Account Holder's qualifying deposit and the denominator of which is the total
amount of qualifying deposits of all Supplemental Eligible Account Holders, in
each case as of the close of business on March 31, 1998 (the "Supplemental
Eligibility Record Date"), subject
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to the overall purchase limitations and excluding the issuance of any Contingent
Shares. See "- Limitations on Conversion Stock Purchases."
If there are not sufficient shares available to satisfy all subscriptions,
shares first 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 the number of shares subscribed for or
100 shares. Thereafter, unallocated shares will be allocated to subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled in the
proportion that the amounts of their respective eligible deposits bear to the
total amount of eligible deposits of all such subscribing Supplemental Eligible
Account Holders whose subscriptions remain unfilled, provided that no fractional
shares shall be issued.
Priority 4: Other Members. To the extent that there are shares remaining
after satisfaction of subscriptions by Eligible Account Holders, the ESOP and
Supplemental Eligible Account Holders, each Other Member will receive, without
payment therefor, fourth priority, nontransferable subscription rights to
subscribe for Conversion Stock in the Subscription Offering up to one percent
(1%) of the total offering of shares of Conversion Stock in the Subscription
Offering (excluding any Contingent Shares), subject to the overall purchase
limitations. See "- Limitations on Conversion Stock Purchases."
In the event the Other Members subscribe for a number of shares which, when
added to the shares subscribed for by Eligible Account Holders, the ESOP and
Supplemental Eligible Account Holders, is in excess of the total number of
shares of Conversion Stock offered in the Subscription Offering, shares first
will be allocated so as to permit each subscribing Other Member to purchase a
number of shares sufficient to make his total allocation equal to the lesser of
the number of shares subscribed for or 100 shares. Thereafter, any remaining
shares will be allocated among subscribing Other Members on a pro rata basis in
the same proportion as each Other Member's subscription bears to the total
subscriptions of all subscribing Other Members, provided that no fractional
shares shall be issued.
Priority 5: Directors, Officers and Employees. To the extent that there are
shares remaining after satisfaction of all subscriptions by Eligible Account
Holders, the ESOP, Supplemental Eligible Account Holders and Other Members, then
directors, officers and employees of the Mutual Holding Company and Ponchatoula
will receive, without payment therefor, fifth priority, nontransferable
subscription rights to subscribe for, in this category, up to an aggregate of
24.7% of the shares of Conversion Stock offered in the Subscription Offering
(excluding any Contingent Shares). The ability of directors, officers and
employees to purchase Conversion Stock under this category is in addition to
rights which are otherwise available to them under the Plan, which generally
allows such persons to purchase in the aggregate up to 34.7% of the total number
of shares of Conversion Stock sold in the Offerings (excluding any Contingent
Shares). See "- Limitations on Conversion Stock Purchases."
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In the event of an oversubscription in this category, subscription rights
will be allocated among the individual directors, officers and employees on a
point system basis, whereby such individuals will receive subscription rights in
the proportion that the number of points assigned to each of them bears to the
total points assigned to all directors, officers and employees, provided that no
fractional shares shall be issued. One point will be assigned for each year of
service with the Mutual Holding Company and Ponchatoula, one point for each
salary increment of $5,000 per annum and five points for each office presently
held in the Mutual Holding Company and Ponchatoula, including directorships. For
information as to the number of shares proposed to be purchased by certain of
the directors and officers, see "Proposed Management Purchases."
Priority 6: Public Stockholders. To the extent that there are shares
remaining after satisfaction of subscriptions by Eligible Account Holders, the
ESOP, Supplemental Eligible Account Holders, Other Members and directors,
officers and employees, each Public Stockholder as of the Voting Record Date
will receive, without payment therefor, sixth priority, nontransferable
subscription rights to subscribe for Conversion Stock in the Subscription
Offering up to one percent (1%) of the total offering of shares of Conversion
Stock in the Subscription Offering (excluding any Contingent Shares), subject to
the overall purchase limitations. See "- Limitations on Conversion Stock
Purchases."
In the event the Public Stockholders as of the Voting Record Date subscribe
for a number of shares which, when added to the shares subscribed for by
Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders, Other
Members and directors, officers and employees, is in excess of the total number
of shares of Conversion Stock offered in the Subscription Offering, available
shares will be allocated among subscribing Public Stockholders as of the Voting
Record Date on a pro rata basis in the same proportion as each Public
Stockholder's subscription bears to the total subscriptions of all subscribing
Public Stockholders, provided that no fractional shares shall be issued.
Expiration Date for the Subscription Offering. The Subscription Offering
will expire at noon, Central Time, on ______ __, 1998, unless extended for up to
45 days or such additional periods by the Primary Parties with the approval of
the OTS. Such extensions may not be extended beyond ______ __, 2000.
Subscription rights which have not been exercised prior to the Expiration Date
will become void.
The Primary Parties will not execute orders until at least the minimum
number of shares of Conversion Stock (722,500 shares) have been subscribed for
or otherwise sold. If all 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 Ponchatoula 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 Primary Parties will notify
subscribers of the extension of time and of any rights of subscribers to modify
or rescind their subscriptions.
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Community Offering. To the extent that shares remain available for purchase
after satisfaction of all subscriptions of Eligible Account Holders, the ESOP,
Supplemental Eligible Account Holders, Other Members, directors, officers and
employees of the Mutual Holding Company and Ponchatoula and Public Stockholders,
the Primary Parties have determined to offer shares pursuant to the Plan to
certain members of the general public, with preference given to natural persons
residing in parishes in Louisiana in which Ponchatoula has branch offices (such
natural persons referred to as "Preferred Subscribers"). Such persons may
purchase up to one percent (1%) of the total offering of shares of Conversion
Stock in the Subscription Offering (excluding any Contingent Shares), subject to
the maximum purchase limitations. See "- Limitations on Conversion Stock
Purchases." This amount may be increased at the sole discretion of the Primary
Parties. The opportunity to subscribe for shares of Conversion Stock in the
Community Offering category is subject to the right of the Primary Parties, in
their 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 there are not sufficient shares available to fill the orders of
Preferred Subscribers after completion of the Subscription and Community
Offerings, such stock will be allocated first to each Preferred Subscriber whose
order is accepted by the Primary Parties, in an amount equal to the lesser of
100 shares or the number of shares subscribed for by each such Preferred
Subscriber, if possible. Thereafter, unallocated shares will be allocated among
the Preferred Subscribers whose orders remain unsatisfied in the same proportion
that the unfilled subscription of each bears to the total unfilled subscriptions
of all Preferred Subscribers whose subscription remains unsatisfied. If there
are any shares remaining, shares will be allocated to other members of the
general public who subscribe in the Community Offering applying the same
allocation described above for Preferred Subscribers.
Syndicated Community Offering. The Plan provides that, if feasible, all
shares of Conversion Stock not purchased in the Subscription and Community
Offerings may be offered for sale to the general public in a Syndicated
Community Offering through a syndicate of registered broker-dealers to be
formed. No person will be permitted to subscribe in the Syndicated Community
Offering for more than one percent (1%) of the total offering of shares of
Conversion Stock in the Subscription Offering (excluding any Contingent Shares),
subject to the maximum purchase limitations. The Primary Parties have the right
to reject orders in whole or part in their sole discretion in the Syndicated
Community Offering. Neither Trident nor any registered broker-dealer shall have
any obligation to take or purchase any shares of Conversion Stock in the
Syndicated Community Offering; however, Trident has agreed to use its best
efforts in the sale of shares in the Syndicated Community Offering.
In addition to the foregoing, if a syndicate of broker-dealers ("selected
dealers") is formed to assist in the Syndicated Community Offering, a purchaser
may pay for his shares with funds held by or deposited with a selected dealer.
If an order form is executed and forwarded to the selected dealer or if the
selected dealer is authorized to execute the order
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form on behalf of a purchaser, the selected dealer is required to forward the
order form and funds to Ponchatoula for deposit in a segregated account on or
before noon of the business day following receipt of the order form or execution
of the order form by the selected dealer. Alternatively, selected dealers may
solicit indications of interest from their customers to place orders for shares.
Such selected dealers shall subsequently contact their customers who indicated
an interest and seek their confirmation as to their intent to purchase. The
selected dealer will acknowledge receipt of the order to its customer in writing
on the following business day and will debit such customer's account on the
third business day after the customer has confirmed his intent to purchase (the
"debit date") and on or before noon of the next business day following the debit
date will send funds to Ponchatoula for deposit in a segregated account. If such
alternative procedure is employed, purchasers' funds are not required to be in
their accounts with selected dealers until the debit date.
The Syndicated Community Offering will terminate no more than 45 days
following the Expiration Date, unless extended by the Primary Parties with the
approval of the OTS. See "- Stock Pricing, Exchange Ratio and Number of Shares
to be Issued" below for a discussion of rights of subscribers, if any, in the
event an extension is granted.
Stock Pricing, Exchange Ratio and Number of Shares to be Issued
The Plan of Conversion requires that the purchase price of the Conversion
Stock must be based on the appraised pro forma market value of the Conversion
Stock, as determined on the basis of an independent valuation. The Primary
Parties have retained RP Financial to make such valuation. For its services in
making such appraisal and any expenses incurred in connection therewith, RP
Financial will receive a fixed fee of $20,000, plus out-of-pocket expenses which
are not expected to exceed $7,500. Ponchatoula has also retained RP Financial to
assist in the preparation of a business plan for a fixed fee of $7,500. The
Primary Parties have agreed to indemnify RP Financial and its employees and
affiliates against certain losses (including any losses in connection with
claims under the federal securities laws) arising out of its services as
appraiser, except where RP Financial's liability results from its negligence or
bad faith.
The Appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Financial Statements. RP
Financial also considered the following factors, among others: the present and
projected operating results and financial condition of the Primary Parties and
the economic and demographic conditions in Ponchatoula's existing market area;
certain historical, financial and other information relating to Ponchatoula; a
comparative evaluation of the operating and financial statistics of Ponchatoula
with those of other similarly situated publicly-traded companies located in
Louisiana and other regions of the United States; the aggregate size of the
offering of the Conversion Stock; the impact of the Conversion on Ponchatoula's
net worth and earnings potential; the proposed dividend policy of the Company
and Ponchatoula; and the trading
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market for the Ponchatoula Common Stock and securities of comparable companies
and general conditions in the market for such securities.
On the basis of the foregoing, RP Financial has advised the Primary Parties
that in its opinion the estimated pro forma market value of Ponchatoula and the
Mutual Holding Company on a combined basis was $11,175,390 as of March 20, 1998.
The holders of the Public Ponchatoula Shares will continue to hold the same
aggregate percentage ownership interest in the Company as they currently hold in
Ponchatoula, as adjusted from 24.8% to 23.94% to reflect the amount of dividends
previously waived by the MHC and before giving effect to the payment of cash in
lieu of issuing fractional Exchange Shares, any shares of Conversion Stock
purchased by Ponchatoula's stockholders in the Offerings, any Dissenting Shares
and any Contingent Shares. As a result, the Appraisal was multiplied by the
Mutual Holding Company's adjusted percentage interest in Ponchatoula (i.e.,
76.06%), to determine the midpoint of the valuation ($8,500,000), and the
minimum and maximum of the valuation were set at 15% below and above the
midpoint, respectively, resulting in a range of $7,225,000 to $9,775,000. The
Boards of Directors of the Primary Parties determined that the Conversion Stock
would be sold at $10.00 per share, resulting in a range of 722,500 to 977,500
shares of Conversion Stock being offered (excluding any Contingent Shares). Upon
consummation of the Conversion, the Conversion Stock and the Exchange Shares
will represent approximately 76.06% and 23.94%, respectively, of the Company's
total outstanding shares, before giving effect to the items set forth above.
The Boards of Directors of the Primary Parties reviewed RP Financial's
appraisal report, including the methodology and the assumptions used by RP
Financial, and determined that the Estimated Valuation Range was reasonable and
adequate. The Boards of Directors of the Primary Parties also established the
formula for determining the Exchange Ratio. Based upon such formula and the
Estimated Valuation Range, the Exchange Ratio ranged from a minimum of 1.51499
to a maximum of 2.04970 Exchange Shares for each Public Ponchatoula Share, with
a midpoint of 1.78235. Based upon these Exchange Ratios, the Company expects to
issue between 227,408 and 307,670 shares of Exchange Shares to the holders of
Public Ponchatoula Shares outstanding immediately prior to the consummation of
the Conversion. The Estimated Valuation Range and the Exchange Ratio may be
amended with the approval of the OTS, if required, or if necessitated by
subsequent developments in the financial condition of any of the Primary Parties
or market conditions generally. In the event the Appraisal is updated so that
the Conversion Stock is below $7,225,000 or above $11,241,250 (the maximum of
the Estimated Valuation Range, as adjusted by 15%) (excluding any Contingent
Shares), such Appraisal will be filed with the SEC by post-effective amendment.
RP Financial has indicated that it does not consider the Contingent Shares to be
material.
Based upon current market and financial conditions and recent practices and
policies of the OTS, in the event the Company receives orders for Conversion
Stock in excess of $9,775,000 (the maximum of the Estimated Valuation) and up to
$11,241,250 (the maximum of the Estimated Valuation, as adjusted by 15%), the
Company may be required by the OTS
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to accept all such orders. No assurances, however, can be made that the Company
will receive orders for Conversion Stock in excess of the maximum of the
Estimated Valuation Range or that, if such orders are received, that all such
orders will be accepted because the Company's final valuation and number of
shares to be issued are subject to the receipt of an updated appraisal from RP
Financial which reflects such an increase in the valuation and the approval of
such increase by the OTS. There is no obligation or understanding on the part of
management to take and/or pay for any shares of Conversion Stock in order to
complete the Offerings.
The following table sets forth, based upon the minimum, midpoint, maximum
and 15% above the maximum of the Estimated Valuation Range, the following: (i)
the total number of shares of Conversion Stock and Exchange Shares to be issued
in the Conversion, (ii) the percentage of the total Common Stock represented by
the Conversion Stock and the Exchange Shares, and (iii) the Exchange Ratio. The
table assumes that there are no Dissenting Shares, Contingent Shares or
fractional Exchange Shares.
<TABLE>
<CAPTION>
Conversion Stock to Be
Issued Exchange Shares to be Issued Total Shares of
-------------------------- ----------------------------- Common Stock to Exchange
Amount Percent Amount Percent be Outstanding Ratio
------- ------- ------ ------- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Minimum ......... 722,500 76.06% 227,408 23.94% 949,908 1.51499
Midpoint ........ 850,000 76.06 267,539 23.94 1,117,539 1.78235
Maximum ......... 977,500 76.06 307,670 23.94 1,285,170 2.04970
15% above maximum 1,124,125 76.06 353,820 23.94 1,477,945 2.35715
</TABLE>
RP Financial's valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing such shares. RP
Financial did not independently verify the Financial Statements and other
information provided by Ponchatoula and the Mutual Holding Company, nor did RP
Financial value independently the assets or liabilities of Ponchatoula. The
valuation considers Ponchatoula and the Mutual Holding Company as going concerns
and should not be considered as an indication of the liquidation value of
Ponchatoula and the Mutual Holding Company. Moreover, because such valuation is
necessarily based upon estimates and projections of a number of matters, all of
which are subject to change from time to time, no assurance can be given that
persons purchasing Conversion Stock or receiving Exchange Shares in the
Conversion will thereafter be able to sell such shares at prices at or above the
Purchase Price or in the range of the foregoing valuation of the pro forma
market value thereof.
No sale of shares of Conversion Stock or issuance of Exchange Shares may be
consummated unless prior to such consummation RP Financial confirms that nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause it to conclude that the Purchase Price is materially
incompatible with the estimate of the pro forma market value of a share of
Common Stock upon consummation of the Conversion. If such is not the case, a new
Estimated Valuation Range may be set, a new Exchange Ratio may be determined
based upon the new Estimated Valuation Range, a new Subscription
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and Community Offering and/or Syndicated Community Offering may be held or such
other action may be taken as the Primary Parties shall determine and the OTS may
permit or require.
Depending upon market or financial conditions following the commencement of
the Subscription Offering, the total number of shares of Conversion Stock to be
issued in the Offerings may be increased or decreased without a resolicitation
of subscribers, provided that the product of the total number of shares times
the Purchase Price is not below the minimum or more than 15% above the maximum
of the Estimated Valuation Range (excluding any Contingent Shares). In the event
market or financial conditions change so as to cause the aggregate Purchase
Price of the shares to be below the minimum of the Estimated Valuation Range or
more than 15% above the maximum of such range, (excluding any Contingent Shares)
purchasers will be resolicited (i.e., permitted to continue their orders, in
which case they will need to affirmatively reconfirm their subscriptions prior
to the expiration of the resolicitation offering or their subscription funds
will be promptly refunded with interest at Ponchatoula's passbook rate of
interest, or be permitted to modify or rescind their subscriptions). Any
increase or decrease in the number of shares of Conversion Stock (excluding any
Contingent Shares) will result in a corresponding change in the number of
Exchange Shares, so that upon consummation of the Conversion the Conversion
Stock and the Exchange Shares will represent approximately 76.06% and 23.94%,
respectively, of the Company's total outstanding shares of Common Stock
(exclusive of the effects of the exercise of outstanding stock options).
An increase in the number of shares of Conversion Stock as a result of an
increase in the Estimated Valuation Range would decrease both a subscriber's
ownership interest and the Company's pro forma net earnings and shareholders'
equity on a per share basis while increasing pro forma net earnings and
shareholders' equity on an aggregate basis. A decrease in the number of shares
of Conversion Stock would increase both a subscriber's ownership interest and
the Company's pro forma net earnings and shareholders' equity on a per share
basis while decreasing pro forma net earnings and shareholders' equity on an
aggregate basis. See "Risk Factors - Possible Dilutive Effect of Issuance of
Additional Shares" and "Pro Forma Data."
The appraisal report of RP Financial has been filed as an exhibit to the
Company's Registration Statement and the Mutual Holding Company's Application
for Conversion, of which this Prospectus is a part, and is available for
inspection in the manner set forth under "Additional Information."
Persons in Nonqualified States or Foreign Countries
The Primary Parties will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled to
subscribe for stock pursuant to the Plan reside. However, the Primary Parties
are not required to offer stock in the Subscription Offering to any person who
resides in a foreign country or resides in a state
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of the United States with respect to which all of the following apply: (a) the
number of persons otherwise eligible to subscribe for shares under the Plan who
reside in such jurisdiction is small; (b) the granting of subscription rights or
the offer or sale of shares of Conversion Stock to such persons would require
any of the Primary Parties or their officers, directors or employees, under the
laws of such jurisdiction, to register as a broker, dealer, salesman or selling
agent or to register or otherwise qualify its securities for sale in such
jurisdiction or to qualify as a foreign corporation or file a consent to service
of process in such jurisdiction; and (c) such registration, qualification or
filing in the judgment of the Primary Parties would be impracticable or unduly
burdensome for reasons of costs or otherwise. Where the number of persons
eligible to subscribe for shares in one state is small, the Primary Parties will
base their decision as to whether or not to offer the Conversion Stock in such
state on a number of factors, including but not limited to the size of accounts
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.
Limitations on Conversion Stock Purchases
The Plan includes the following limitations on the number of shares of
Conversion Stock which may be purchased:
(1) No less than 25 shares of Conversion Stock may be
purchased, to the extent such shares are available;
(2) Each Eligible Account Holder may subscribe for and
purchase in the Subscription Offering up to the greater of (i) one
percent (1%) of the total offering of shares of Conversion Stock in the
Subscription Offering and (ii) 15 times the product (rounded down to
the next whole number) obtained by multiplying the total number of
shares of Conversion Stock to be issued by a fraction, of which the
numerator is the amount of the qualifying deposit of the Eligible
Account Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders, in each case as of the close
of business on the Eligibility Record Date, subject to the overall
limitation in clause (6) below and excluding the issuance of any
Contingent Shares;
(3) The ESOP may purchase in the aggregate up to 8% of the
shares of Conversion Stock to be issued in the Offerings (excluding any
Contingent Shares), including any additional shares issued in the event
of an increase in the Estimated Valuation Range;
(4) Each Supplemental Eligible Account Holder may subscribe
for and purchase in the Subscription Offering up to the greater of (i)
one percent (1%) of the total offering of shares of Conversion Stock in
the Subscription Offering and (ii) 15 times the product (rounded down
to the next whole number) obtained by
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multiplying the total number of shares of Conversion Stock to be issued
by a fraction, of which the numerator is the amount of the qualifying
deposit of the Supplemental Eligible Account Holder and the denominator
is the total amount of qualifying deposits of all Supplemental Eligible
Account Holders, in each case as of the close of business on the
Supplemental Eligibility Record Date, subject to the overall limitation
in clause (6) below and excluding the issuance of any Contingent
Shares;
(5) Each Other Member, Public Stockholder or any other person
purchasing shares of Conversion Stock in the Subscription Offering,
Community Offering or in the Syndicated Community Offering, as
applicable, may subscribe for and purchase in the respective Offering
up to one percent (1%) of the total offering of shares of Conversion
Stock in the Subscription Offering, subject to the overall limitation
in clause (6) below and excluding the issuance of any Contingent
Shares;
(6) Except for the ESOP and certain Eligible Account Holders
and Supplemental Eligible Account Holders whose subscription rights are
based upon the amount of their deposits, the maximum number of shares
of Conversion Stock subscribed for or purchased in all categories by
any person, together with associates of and groups of persons acting in
concert with such persons, shall not exceed the number of shares of
Conversion Stock that when combined with Exchange Shares received
aggregate 3% of the number of shares of Common Stock issued in the
Conversion (28,497 shares and 38,555 shares at the minimum and maximum
of the Estimated Valuation Range, respectively), excluding the issuance
of any Contingent Shares; and
(7) No more than 24.7% of the total number of shares sold in
the Subscription Offering may be purchased by directors and officers of
the Mutual Holding Company and Ponchatoula in the fourth priority
category in the Subscription Offering. No more than 34.7% of the total
number of shares sold in the Offerings may be purchased by directors
and officers of the Mutual Holding Company and Ponchatoula and their
associates in the aggregate, excluding purchases by the ESOP and
excluding the issuance of any Contingent Shares.
For purposes of the purchase limitations set forth in the Plan of
Conversion, Exchange Shares will be valued at the same price that shares of
Conversion Stock are issued in the Offerings. Any Contingent Shares that may be
issued will be disregarded in calculating any applicable purchase limitation.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Members of
the Mutual Holding Company or the Stockholders of Ponchatoula, both the
individual amount permitted to be subscribed for and the overall purchase
limitation may be decreased or increased up to a maximum of 5% of the total
shares of Common Stock to be issued in the Conversion (excluding any Contingent
Shares) at the sole discretion of the Primary Parties. If such
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amount is increased, subscribers for the maximum amount will be, and certain
other large subscribers in the sole discretion of the Primary Parties may be,
given the opportunity to increase their subscriptions up to the then applicable
limit.
An individual Eligible Account Holder, Supplemental Eligible Account
Holder, Other Member or Public Stockholder may not purchase individually in the
Subscription Offering the overall maximum purchase limit of 3% of the number of
shares of Common Stock issued in the Conversion but may make such purchase,
together with associates of and persons acting in concert with such person, by
also purchasing in other available categories, subject to availability of shares
and the maximum overall purchase limit for purchases in the Offerings, including
Exchange Shares received by Public Stockholders for Public Ponchatoula Shares.
However, Public Stockholders will not have to sell any Public Ponchatoula Shares
or be limited in receiving Exchange Shares even if their current ownership of
Public Ponchatoula Shares when converted into Exchange Shares exceeds an
applicable purchase limitation, including the maximum purchase limitation of 3%
of the number of shares of Common Stock issued in the Conversion.
In the event of an increase in the total number of shares of Conversion
Stock offered in the Conversion due to an increase in the Estimated Valuation
Range of up to 15% (the "Adjusted Maximum") (excluding any Contingent Shares),
the additional shares will be allocated in the following order of priority in
accordance with the Plan: (i) to fill the ESOP's subscription of 8% of the
Adjusted Maximum number of shares; (ii) in the event that there is an
oversubscription by Eligible Account Holders, to fill unfulfilled subscriptions
of Eligible Account Holders, inclusive of the Adjusted Maximum; (iii) in the
event that there is an oversubscription by Supplemental Eligible Account
Holders, to fill unfulfilled subscriptions of Supplemental Eligible Account
Holders, inclusive of the Adjusted Maximum; (iv) in the event that there is an
oversubscription by Other Members, to fill unfulfilled subscriptions of Other
Members, inclusive of the Adjusted Maximum; (v) in the event there is an
oversubscription by directors, officers and employees of the Mutual Holding
Company and Ponchatoula, to fill unfulfilled subscriptions of directors,
officers and employees, inclusive of the Adjusted Maximum; (vi) in the event
that there is an oversubscription by Public Stockholders, to fill unfulfilled
subscriptions of Public Stockholders, inclusive of the Adjusted Maximum; and
(vii) to fill unfulfilled subscriptions in the Community Offering to the extent
possible, inclusive of the Adjusted Maximum.
The term "associate" of a person is defined to mean (i) any corporation or
other organization (other than the Primary Parties or a majority-owned
subsidiary of Ponchatoula) of which such person is a director, officer or
partner or is directly or indirectly the beneficial owner of 10% or more of any
class of equity securities; (ii) any trust or other estate in which such person
has a substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, provided, however, that such term
shall not include any tax-qualified employee stock benefit plan of the Primary
Parties in which such person has a substantial beneficial interest or serves as
a trustee or in a similar fiduciary capacity; and (iii) any relative or spouse
of such person, or any relative of such spouse, who either has the
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same home as such person or who is a director or officer of the Primary Parties
or any of their subsidiaries.
Marketing Arrangements
The Company and Ponchatoula have engaged Trident as a financial advisor and
marketing agent in connection with the offering of the Common Stock, and Trident
has agreed to use its best efforts to solicit subscriptions and purchase orders
for shares of Conversion Stock in the Offerings. Trident is a member of the
National Association of Securities Dealers, Inc. ("NASD") and an SEC-registered
broker-dealer. Trident is headquartered in Raleigh, North Carolina, and its
telephone number is (919) 781-8900. Trident will provide various services
including, but not limited to, (i) training and educating Ponchatoula's
directors, officers and employees regarding the mechanics and regulatory
requirements of the stock sales process; (2) providing its employees to assist
in staffing the Stock Sales Center to assist Ponchatoula's customers and
internal stock purchasers and to assist in records management for orders of
shares of Common Stock; and (3) targeting the Company's sales efforts, including
assisting in the preparation of marketing materials. Based upon negotiations
between the Company and Ponchatoula concerning fee structure, Trident will
receive a commission equal to 1.125% of the aggregate dollar amount of
Conversion Stock sold in the Offerings, excluding any shares of Conversion Stock
purchased in the Offerings by directors, officers, employees and employee
benefit plans of the Company and Ponchatoula and excluding any Contingent
Shares. The commission will be payable upon consummation of the Conversion. In
the event that a selected dealers agreement is entered into in connection with a
Syndicated Community Offering, Ponchatoula will pay to such selected dealers a
fee at the commission rate to be agreed upon by the Company, Ponchatoula and
Trident, for shares sold by an NASD member firm pursuant to a selected dealers
agreement. Fees to Trident and to any other broker-dealer may be deemed to be
underwriting fees, and Trident and such broker-dealers may be deemed to be
underwriters. Trident will also be reimbursed for its out-of-pocket expenses and
legal fees in amounts not to exceed $10,000 and $27,500, respectively, of which
$10,000 has been paid to date. The Company and Ponchatoula have agreed to
indemnify Trident and each person, if any, who controls Trident against all
losses, claims, damages or liabilities, joint or several, and all legal and
other expenses reasonably incurred by them in connection with certain claims
that may arise as a result of the Conversion, including liabilities under the
Securities Act, except those that are due to Trident's willful misconduct or
gross negligence.
Directors and executive officers of the Primary Parties may participate in
the solicitation of offers to purchase Conversion Stock. Other employees of
Ponchatoula may participate in the Offerings in ministerial capacities or
providing clerical work in effecting a sales transaction. Such other employees
have been instructed not to solicit offers to purchase Conversion Stock or
provide advice regarding the purchase of Conversion Stock. Questions of
prospective purchasers will be directed to executive officers or registered
representatives. The Company will rely on Rule 3a4-1 under the Exchange Act, and
sales of Conversion 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 Conversion Stock. No
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officer, director or employee of the Primary Parties will be compensated in
connection with his solicitations or other participation in the Offerings or the
Exchange by the payment of commissions or other remuneration based either
directly or indirectly on transactions in the Conversion Stock and Exchange
Shares, respectively.
Procedure for Purchasing Shares in the Offerings
To ensure that each purchaser receives a Prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of the order
form will confirm receipt or delivery of the Prospectus in accordance with Rule
15c2-8. Order forms will only be distributed with a Prospectus.
To purchase shares in the Offerings, an executed order form with the
required payment for each share subscribed for, or with appropriate
authorization for withdrawal from a deposit account at Ponchatoula (which may be
given by completing the appropriate blanks in the order form), must be received
by Ponchatoula at any of its offices by noon, Central Time, on the Expiration
Date. In addition, the Primary Parties will require a prospective purchaser to
execute a certification in the form required by applicable OTS regulations in
connection with any sale of Conversion Stock. Order forms which are not received
by such time or are executed defectively or are received without full payment
(or appropriate withdrawal instructions) are not required to be accepted. In
addition, Ponchatoula will not accept orders submitted on photocopied or
facsimiled order forms nor order forms unaccompanied by an executed
certification form. The Primary Parties have the right to waive or permit the
correction of incomplete or improperly executed forms, but do not represent that
they will do so. Once received, an executed order form may not be modified,
amended or rescinded without the consent of the Primary Parties, unless the
Offerings have not been completed within 45 days after the end of the
Subscription and Community Offerings, unless such period has been extended.
In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priority, depositors as of the close of business on the Eligibility
Record Date (December 31, 1996) or the Supplemental Eligibility Record Date
(March 31, 1998) and depositors and certain borrowers as of the close of
business on the Voting Record Date (________ __, 1998) must list on the order
form all accounts in which they have an ownership interest, giving all names in
each account and the account numbers.
Payment for subscriptions may be made (i) in cash if delivered in person at
any office of Ponchatoula, (ii) by check or money order or (iii) by
authorization of withdrawal from deposit accounts maintained with Ponchatoula.
Interest will be paid on payments made by cash, check or money order at
Ponchatoula's passbook rate of interest from the date payment is received until
completion or termination of the Conversion. If payment is made
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by authorization of withdrawal from deposit accounts, the funds authorized to be
withdrawn from a deposit account will continue to accrue interest at the
contractual rates until completion or termination of the Conversion, but a hold
will be placed on such funds, thereby making them unavailable to the depositor
until completion or termination of the Conversion.
If a subscriber authorizes Ponchatoula to withdraw the amount of the
purchase price from a deposit account, Ponchatoula will do so as of the
effective date of the Conversion. Ponchatoula will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization, the certificate will be cancelled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the passbook
rate.
The ESOP will not be required to pay for the shares subscribed for at the
time it subscribes, but rather may pay for such shares of Conversion Stock
subscribed for by it at the Purchase Price upon consummation of the Offerings,
provided that there is in force from the time of its subscription until such
time, a loan commitment from an unrelated financial institution or the Company
to lend to the ESOP, at such time, the aggregate Purchase Price of the shares
for which it subscribed.
Owners of self-directed Individual Retirement Accounts ("IRAs") may use the
assets of such IRAs to purchase shares of Conversion Stock in the Offerings,
provided that such IRAs are not maintained at Ponchatoula. Persons with
self-directed IRAs maintained at Ponchatoula must have their accounts
transferred to an unaffiliated institution or broker to purchase shares of
Conversion Stock in the Subscription and Community Offerings. In addition, ERISA
provisions and IRS regulations require that officers, directors and 10%
stockholders who use self-directed IRA funds to purchase shares of Conversion
Stock in the Subscription and Community Offerings make such purchases for the
exclusive benefit of the IRAs. Any interested parties wishing to use IRA funds
for stock purchases are advised to contact the Stock Sales Center for additional
information and allow sufficient time for the account to be transferred as
required.
Restrictions on Transfer of Subscription Rights and Shares
Pursuant to the rules and regulations of the OTS, no person with
subscription rights may transfer or enter into any agreement or understanding to
transfer the legal or beneficial ownership of the subscription rights issued
under the Plan or the shares of Conversion 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. Federal regulations also prohibit any person from
offering or making an announcement of an offer
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or intent to make an offer to purchase such subscription rights or shares of
Conversion Stock prior to the completion of the Conversion.
The Primary Parties 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.
Liquidation Rights
In the unlikely event of a complete liquidation of the Mutual Holding
Company in its present mutual form, each depositor of Ponchatoula would receive
his pro rata share of any assets of the Mutual Holding Company remaining after
payment of claims of all creditors. Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
account was to the total value of all deposit accounts in Ponchatoula at the
time of liquidation. After the Conversion, each depositor, in the event of a
complete liquidation of Ponchatoula, would have a claim as a creditor of the
same general priority as the claims of all other general creditors of
Ponchatoula. However, except as described below, his claim would be solely in
the amount of the balance in his deposit account plus accrued interest. He would
not have an interest in the value or assets of Ponchatoula or the Company above
that amount.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the amount of any dividends waived by the Mutual Holding Company plus the
greater of (1) Ponchatoula's retained earnings of $3,673,000 at March 31, 1994,
the date of the latest statement of financial condition contained in the final
offering circular utilized in the MHC Reorganization, or (2) 75.2% of
Ponchatoula's total stockholders' equity as reflected in its latest statement of
financial condition contained in the final Prospectus utilized in the Offerings.
As of the date of this Prospectus, the initial balance of the liquidation
account would be $__________. Each Eligible Account Holder and Supplemental
Eligible Account Holder, if he were to continue to maintain his deposit account
at Ponchatoula, would be entitled, upon a complete liquidation of Ponchatoula
after the Conversion, to an interest in the liquidation account prior to any
payment to the Company as the sole stockholder of Ponchatoula. Each Eligible
Account Holder and Supplemental Eligible Account Holder would have an initial
interest in such liquidation account for each deposit account, including
passbook accounts, transaction accounts such as checking accounts, money market
deposit accounts and certificates of deposit, held in Ponchatoula at the close
of business on December 31, 1996 or March 31, 1998, as the case may be. Each
Eligible Account Holder and Supplemental Eligible Account Holder will have a pro
rata interest in the total liquidation account for each of his deposit accounts
based on the proportion that the balance of each such deposit account on the
December 31, 1996 Eligibility Record Date (or the March 31, 1998 Supplemental
Eligibility Record Date, as the case may be) bore to the balance of all deposit
accounts in Ponchatoula on such date.
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If, however, on any December 31 annual closing date of Ponchatoula,
commencing December 31, 1998, the amount in any deposit account is less than the
amount in such deposit account on December 31, 1996 or March 31, 1998, as the
case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed. In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Company as the sole stockholder of Ponchatoula.
Tax Aspects
Consummation of the Conversion is expressly conditioned upon prior receipt
of either a ruling or an opinion of counsel with respect to federal tax laws,
and either a ruling or an opinion with respect to Louisiana tax laws, to the
effect that consummation of the transactions contemplated hereby will not result
in a taxable reorganization under the provisions of the applicable codes or
otherwise result in any adverse tax consequences to the Mutual Holding Company,
Ponchatoula, the Company or to account holders receiving subscription rights,
except to the extent, if any, that subscription rights are deemed to have fair
market value on the date such rights are issued. This condition may not be
waived by the Primary Parties.
Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., has issued an
opinion to the Company and Ponchatoula to the effect that, for federal income
tax purposes: (1) the conversion of the Mutual Holding Company from mutual form
to a federal interim stock savings institution and its simultaneous merger with
and into Ponchatoula, with Ponchatoula being the surviving institution, will
qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code, (2) no gain or loss will be recognized by Ponchatoula upon the receipt of
the assets of the Mutual Holding Company in such merger, (3) the merger of
Interim with and into Ponchatoula, with Ponchatoula being the surviving
institution, will qualify as a reorganization within the meaning of Section
368(a)(1)(A) of the Code, (4) no gain or loss will be recognized by Interim upon
the transfer of its assets to Ponchatoula, (5) no gain or loss will be
recognized by Ponchatoula upon the receipt of the assets of Interim, (6) no gain
or loss will be recognized by the Company upon the receipt of Ponchatoula Common
Stock solely in exchange for Common Stock, (7) no gain or loss will be
recognized by the Public Stockholders upon the receipt of Common Stock solely in
exchange for their Public Ponchatoula Shares, (8) the basis of the Common Stock
to be received by the Public Stockholders will be the same as the basis of the
Public Ponchatoula Shares surrendered in exchange therefor, before giving effect
to any payment of cash in lieu of fractional shares, (9) the holding period of
the Common Stock to be received by the Public Stockholders will include the
holding period of the Public Ponchatoula Shares, provided that the Public
Ponchatoula Shares were held as a capital asset on the date of the exchange,
(10) no gain or loss will be recognized by the Company upon the sale of shares
of Conversion Stock in
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the Offerings, (11) the Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members will recognize gain, if any, upon the issuance to them
of withdrawable savings accounts in Ponchatoula following the Conversion,
interests in the liquidation account and nontransferable subscription rights to
purchase Conversion Stock, but only to the extent of the value, if any, of the
subscription rights, and (12) the tax basis to the holders of Conversion Stock
purchased in the Offerings will be the amount paid therefor, and the holding
period for the shares of Conversion Stock will begin on the date of consummation
of the Offerings if purchased through the exercise of subscription rights and on
the day after the date of purchase if purchased in the Community Offering or
Syndicated Community Offering.
Hannis T. Bourgeois, L.L.P. has issued an opinion to the Company and
Ponchatoula to the effect that the income tax consequences under Louisiana law
of the Conversion are not materially different than for federal tax purposes.
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
Conversion 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
Conversion Stock. If the subscription rights granted to eligible subscribers are
deemed to have an ascertainable value, receipt of such rights likely would be
taxable only to those eligible subscribers who exercise the subscription rights
(either as a capital gain or ordinary income) in an amount equal to such value,
and the Primary Parties could recognize gain on such distribution. Eligible
subscribers 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 is not binding on the IRS and the IRS
could disagree with the conclusions reached therein. In the event of such
disagreement, there can be no assurance that the IRS would not prevail in a
judicial or administrative proceeding.
Delivery and Exchange of Certificates
Conversion Stock. Certificates representing Conversion Stock issued in
connection with the Offerings will be mailed by the Company's transfer agent for
the Common Stock to the persons entitled thereto at the addresses of such
persons appearing on the stock order form for Conversion Stock as soon as
practicable following consummation of the Conversion. Any certificates returned
as undeliverable will be held by the Company until claimed by persons legally
entitled thereto or otherwise disposed of in accordance with applicable law.
Until certificates for Conversion Stock are available and delivered to
subscribers, subscribers may not be able to sell such shares, even though
trading of the Common Stock may have commenced.
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Exchange Shares. After consummation of the Conversion, each holder of a
certificate or certificates theretofore evidencing issued and outstanding shares
of Ponchatoula Common Stock (other than the Mutual Holding Company), upon
surrender of the same to an agent, duly appointed by the Company, which is
anticipated to be the transfer agent for the Common Stock (the "Exchange
Agent"), shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of full shares of Common Stock for which
the shares of Ponchatoula Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been converted based on
the Exchange Ratio. The Exchange Agent shall promptly mail to each such holder
of record of an outstanding certificate which immediately prior to the
consummation of the Conversion evidenced shares of Ponchatoula Common Stock, and
which is to be exchanged for Common Stock based on the Exchange Ratio as
provided in the Plan, a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to such certificate shall
pass, only upon delivery of such certificate to the Exchange Agent) advising
such holder of the terms of the exchange effected by the Conversion and of the
procedure for surrendering to the Exchange Agent such certificate in exchange
for a certificate or certificates evidencing Common Stock. Ponchatoula's
stockholders should not forward Ponchatoula Common Stock certificates to
Ponchatoula or the Exchange Agent until they have received the transmittal
letter.
No holder of a certificate theretofore representing shares of Ponchatoula
Common Stock shall be entitled to receive any dividends in respect of the Common
Stock into which such shares shall have been converted by virtue of the
Conversion until the certificate representing such shares of Ponchatoula Common
Stock is surrendered in exchange for certificates representing shares of Common
Stock. In the event that dividends are declared and paid by the Company in
respect of Common Stock after the consummation of the Conversion but prior to
surrender of certificates representing shares of Ponchatoula Common Stock,
dividends payable in respect of shares of Common Stock not then issued shall
accrue (without interest). Any such dividends shall be paid (without interest)
upon surrender of the certificates representing such shares of Ponchatoula
Common Stock. The Company shall be entitled, after the consummation of the
Conversion, to treat certificates representing shares of Ponchatoula Common
Stock as evidencing ownership of the number of full shares of Common Stock into
which the shares of Ponchatoula Common Stock represented by such certificates
shall have been converted, notwithstanding the failure on the part of the holder
thereof to surrender such certificates.
The Company shall not be obligated to deliver a certificate or certificates
representing shares of Common Stock to which a holder of Ponchatoula Common
Stock would otherwise be entitled as a result of the Conversion until such
holder surrenders the certificate or certificates representing the shares of
Ponchatoula Common Stock for exchange as provided above, or, in default thereof,
an appropriate affidavit of loss and indemnity agreement and/or a bond as may be
required in each case by the Company. If any certificate evidencing shares of
Common Stock is to be issued in a name other than that in which the certificate
evidencing Ponchatoula Common Stock surrendered in exchange
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therefor is registered, it shall be a condition of the issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of a
certificate for shares of Common Stock in any name other than that of the
registered holder of the certificate surrendered or otherwise establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
Required Approvals
Various approvals of the OTS are required in order to consummate the
Conversion. The OTS has approved the Plan of Conversion, subject to approval by
the Mutual Holding Company's Members and Ponchatoula's Stockholders. In
addition, consummation of the Conversion is subject to OTS approval of the
Company's application to acquire all of the to-be-outstanding Ponchatoula Common
Stock and the applications with respect to the merger of the Mutual Holding
Company (following its conversion to a federal interim stock savings
institution) into Ponchatoula and the merger of Interim into Ponchatoula, with
Ponchatoula being the surviving entity in both mergers. Applications for these
approvals have been filed and are currently pending. There can be no assurances
that the requisite OTS approvals will be received in a timely manner, in which
event the consummation of the Conversion may be delayed beyond the expiration of
the Offerings.
The Company is required to make certain filings with state securities
regulatory authorities in connection with the issuance of Conversion Stock and
Exchange Shares in the Conversion.
Pursuant to OTS regulations, the Plan of Conversion also must be approved
by (1) at least a majority of the total number of votes eligible to be cast by
Members of the Mutual Holding Company at the Members' Meeting, and (2) holders
of at least two-thirds of the outstanding Ponchatoula Common Stock at the
Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Conversion on the approval of the Plan by at least a
majority of the votes cast, in person or by proxy, by the Public Stockholders at
the Stockholders' Meeting.
Dissenters' Rights of Appraisal
Record holders of Ponchatoula Common Stock are entitled to appraisal rights
under Section 552.14 of the OTS regulations as a result of the merger of the
Mutual Holding Company with and into Ponchatoula and the merger of Ponchatoula
with and into Interim, with Ponchatoula to be the surviving entity in both
mergers. A holder of shares of Ponchatoula Common Stock wishing to exercise his
appraisal rights must deliver to the Secretary of Ponchatoula, before the vote
on the Plan of Conversion at the Stockholders' Meeting, a writing which
identifies such stockholder and which states his intention to demand appraisal
of and payment for his shares of Ponchatoula Common Stock. Such demand must be
in addition to and separate from any proxy or vote against the Plan of
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Conversion. Any such stockholder who wishes to exercise such appraisal rights
should review carefully the discussion of such rights in Ponchatoula's proxy
statement, including Appendix A thereto, because failure to timely and properly
comply with the procedures specified will result in the loss of appraisal rights
under Section 552.14. All written demands for appraisal should be sent or
delivered to Barbara B. Theriot, Secretary, Ponchatoula Homestead Savings, F.A.,
195 North Sixth Street, Ponchatoula, Louisiana 70454 so as to be received prior
to the vote at the Stockholders' Meeting with respect to the Plan of Conversion.
Consummation of the Conversion is conditioned upon holders of less than 10% of
the outstanding Ponchatoula Common Stock exercising appraisal rights.
In determining whether or not to exercise appraisal rights, current
stockholders of Ponchatoula should review the comparison of their rights as
stockholders of Ponchatoula with their rights as stockholders of the Company
following consummation of the Conversion. Such comparison is contained in
Ponchatoula's Proxy Statement to its stockholders under "The Conversion -
Comparison of Stockholder Rights." Because the Company is governed by the
Louisiana Business Corporation Law and Ponchatoula is governed by federal law,
including OTS regulations, there are material differences between the rights of
stockholders of Ponchatoula and stockholders of the Company.
Certain Restrictions on Purchase or Transfer of Shares after the Conversion
All shares of Conversion Stock purchased in connection with the Conversion
by a director or an executive officer of the Primary Parties 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 or pursuant to a merger or similar transaction approved by the OTS. Each
certificate for restricted shares will bear a legend giving notice of this
restriction on transfer, and appropriate stop-transfer instructions will be
issued to the Company's transfer agent. Any shares of Common Stock issued within
this one-year period 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 Company will also be subject to the insider
trading rules promulgated pursuant to the Exchange Act.
Purchases of Common Stock of the Company by directors, executive officers
and their associates during the three-year period following completion of 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 any
tax-qualified employee stock benefit plan, such as the ESOP, or by any
non-tax-qualified employee stock benefit plan, such as the 1998 Management
Recognition Plan.
Pursuant to OTS regulations, the Company will generally be prohibited from
repurchasing any shares of Common Stock within one year following consummation
of the Conversion. During the second and third years following consummation of
the Conversion,
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the Company may not repurchase any shares of its Common Stock other than
pursuant to (i) an offer to all stockholders on a pro rata basis which is
approved by the OTS; (ii) the repurchase of qualifying shares of a director, if
any; (iii) purchases in the open market by a tax-qualified or non-tax-qualified
employee stock benefit plan in an amount reasonable and appropriate to fund the
plan; or (iv) purchases that are part of an open-market program not involving
more than 5% of its outstanding capital stock during a 12-month period, if the
repurchases do not cause Ponchatoula to become undercapitalized and Ponchatoula
provides to the Regional Director of the OTS no later than 10 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. However, the Regional Director has authority to permit
repurchases during the first year following consummation of the Conversion and
to permit repurchases in excess of 5% during the second and third years upon the
establishment of exceptional circumstances (i.e., where such repurchases would
be in the best interests of the institution and its stockholders).
RESTRICTIONS ON ACQUISITION OF THE COMPANY
AND PONCHATOULA
General
As described below, certain provisions in the Company's Articles of
Incorporation and Bylaws and in the Company's and Ponchatoula's proposed benefit
plans, together with provisions of Louisiana corporate law and OTS regulations,
may have anti-takeover effects. In addition, regulatory restrictions may make it
difficult for persons or companies to acquire control of either the Company or
Ponchatoula.
Restrictions in the Company's Articles of Incorporation and Bylaws
General. A number of provisions of the Company's Articles 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 Articles of Incorporation and Bylaws which might be
deemed to have a potential "anti-takeover" effect. These provisions may have the
effect of discouraging a future takeover attempt which is not approved by the
Board of Directors but which 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
might desire to participate in such a transaction may not have an opportunity to
do so. Such provisions will also render the removal of the current Board of
Directors or management of the Company more difficult. The following description
of certain of the provisions of the Articles of Incorporation and Bylaws of the
Company is necessarily general and reference should be made in each case to such
Articles of Incorporation and Bylaws, which are incorporated herein by
reference. See "Additional Information" as to how to obtain a copy of these
documents.
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Limitation on Voting Rights. Article 10.A of the Company's Articles of
Incorporation provides that for a period of five years from the date of the
Conversion, no person shall directly or indirectly offer to acquire or acquire
the beneficial ownership of (i) more than 10% of the issued and outstanding
shares of any class of an equity security of the Company, or (ii) any securities
convertible into, or exercisable for, any equity securities of the Company if,
assuming conversion or exercise by such person of all securities of which such
person is the beneficial owner which are convertible into, or exercisable for,
such equity securities (but of no securities convertible into, or exercisable
for, such equity securities of which such person is not the beneficial owner),
such person would be the beneficial owner of more than 10% of any class of an
equity security of the Company. The term "person" is broadly defined to prevent
circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view toward
public resale made exclusively to the Company by underwriters or a selling group
acting on its behalf, (ii) any tax-qualified employee benefit plan or
arrangement established by the Company or Ponchatoula and any trustee of such a
plan or arrangement, and (iii) any other offer or acquisition approved in
advance by the affirmative vote of two-thirds of the Company's entire Board of
Directors. In the event that shares are acquired in violation of Article 10.A,
all shares beneficially owned by any person in excess of 10% shall be considered
"Excess Shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to stockholders for a vote, and the Board of Directors may
cause such Excess Shares to be transferred to an independent trustee for sale on
the open market or otherwise, with the expenses of such trustee to be paid out
of the proceeds of sale.
Board of Directors. Article 6.B of the Articles of Incorporation of the
Company contains provisions relating to the Board of Directors and provides,
among other things, that the Board of Directors shall be divided into three
classes as nearly equal in number as possible, with the term of office of one
class expiring each year. See "Management Management of the Company." 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 stockholder 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. Cumulative voting in
the election of directors is not permitted.
Directors may be removed without cause at a duly constituted meeting of
stockholders called expressly for that purpose upon the vote of the holders of
at least 75% of the total votes eligible to be cast by stockholders, and with
cause by the affirmative vote of a majority of the total votes eligible to be
cast by stockholders. Cause for removal shall exist only if the director whose
removal is proposed has been either declared of unsound mind by an order of a
court of competent jurisdiction, convicted of a felony or of an offense
punishable by imprisonment for a term of more than one year by a court of
competent jurisdiction, or deemed liable by a court of competent jurisdiction
for gross negligence or misconduct in the performance of such director's duties
to the Company. Any vacancy
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occurring in the Board of Directors for any reason (including an increase in the
number of authorized directors) may be filled by the affirmative vote of a
majority of the remaining directors, whether or not a quorum of the Board of
Directors is present, and a director appointed to fill a vacancy shall serve
until the expiration of the term to which he was appointed.
Article 6.F of the Articles of Incorporation governs nominations for
election to the Board, and requires all nominations for election to the Board of
Directors other than those made by the Board to be made by a stockholder
eligible to vote at an annual meeting of stockholders who has complied with the
notice provisions in that section. Written notice of a stockholder nomination
must be delivered to, or mailed to and received at, the principal executive
offices of the Company not later than 120 days prior to the anniversary date of
the initial mailing of proxy materials by the Company in connection with the
immediately preceding annual meeting of stockholders of the Company, provided
that, with respect to the first scheduled annual meeting following completion of
the Conversion, notice must be received no later than the close of business on
Monday, January 4, 1999. Each such notice shall set forth (a) the name, age,
business address and residence address of the stockholder who intends to make
the nomination and of the person or persons to be nominated; (b) the principal
occupation or employment of the stockholder submitting the notice and of each
person being nominated; (c) the class and number of shares of the Company's
stock beneficially owned by the stockholder submitting the notice, by any person
who is acting in concert with or who is an affiliate or associate of such
stockholder (as such terms are defined in the Articles of Incorporation), by any
person who is a member of any group with such stockholder with respect to the
Company's stock or who is known by such stockholder to be supporting such
nominee(s) on the date the notice is given to the Company, by each person being
nominated, and by each person who is in control of, is controlled by or is under
common control with any of the foregoing persons (if any of the foregoing
persons is a partnership, corporation, limited liability company, association or
trust, information must be provided regarding the name and address of, and the
class of number of shares of Company stock which are beneficially owned by, each
partner in such partnership, each director, executive officer and stockholder in
such corporation, each member in such limited liability company or association,
and each trustee and beneficiary of such trust, and in each case each person
controlling such entity and each partner, director, executive officer,
stockholder, member or trustee of any entity which is ultimately in control of
such partnership, corporation, limited liability company, association or trust);
(d) a representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(e) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (f) such other information regarding the stockholder submitting the
notice, each nominee proposed by such stockholder and any other person covered
by clause (c) of this paragraph as would be required to be included in a proxy
statement filed pursuant to the
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proxy rules of the SEC; and (g) the consent of each nominee to serve as a
director of the Company if so elected.
Article 8.A of the Articles of Incorporation provides that a director or
officer of the Company will not be personally liable for monetary damages for
any action taken, or any failure to take any action, as a director or officer
except to the extent that by law a director's or officer's liability for
monetary damages may not be limited. This provision does not eliminate or limit
the liability of the Company's directors and officers for (a) any breach of the
director's or officer's duty of loyalty to the Company or its stockholders, (b)
any acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (c) any unlawful dividend, stock repurchase or
other distribution, payment or return of assets to stockholders, or (d) any
transaction from which the director or officer derived an improper personal
benefit. This provision may preclude stockholder derivative actions and may be
construed to preclude other third-party claims against the directors and
officers.
The Company's Articles of Incorporation also provide that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, including
actions by or in the right of the Company, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise. Such
indemnification is furnished to the full extent provided by law against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding. The indemnification provisions also permit the Company to pay
reasonable expenses in advance of the final disposition of any action, suit or
proceeding as authorized by the Company's Board of Directors, provided that the
indemnified person undertakes to repay the Company if it is ultimately
determined that such person was not entitled to indemnification.
The rights of indemnification provided in the Company's Articles of
Incorporation are not exclusive of any other rights which may be available under
the Company's Bylaws, any insurance or other agreement, by vote of stockholders
or directors (regardless of whether directors authorizing such indemnification
are beneficiaries thereof) or otherwise. In addition, the Articles of
Incorporation authorize the Company to maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company,
whether or not the Company would have the power to provide indemnification to
such person. By action of the Board of Directors, the Company may create and
fund a trust fund or other fund or form of self-insurance arrangement of any
nature, and may enter into agreements with its officers, directors, employees
and agents for the purpose of securing or insuring in any manner its obligation
to indemnify or advance expenses provided for in the provisions in the Articles
of Incorporation and Bylaws regarding indemnification. These provisions are
designed to reduce, in appropriate cases, the risks incident to serving as a
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director, officer, employee or agent and to enable the Company to attract and
retain the best personnel available.
The provisions regarding director elections and other provisions in the
Articles of Incorporation and Bylaws are generally designed to protect the
ability of the Board of Directors to negotiate with the proponent of an
unfriendly or unsolicited proposal to take over or restructure the Company by
making it more difficult and time-consuming to change majority control of the
Board, whether by proxy contest or otherwise. The effect of these provisions
will be to generally require at least two (and possibly three) annual
stockholders' meetings, instead of one, to effect a change in control of the
Board of Directors of the Company even if holders of a majority of the Company's
capital stock believed that a change in the composition of the Board of
Directors was desirable. Because a majority of the directors at any given time
will have prior experience as directors, these requirements will help to ensure
continuity and stability of the Company's management and policies and facilitate
long-range planning for the Company's business. The provisions relating to
removal of directors and filling of vacancies are consistent with and supportive
of a classified board of directors.
The procedures regarding stockholder nominations will provide the Board of
Directors with sufficient time and information to evaluate a stockholder nominee
to the Board and other relevant information, such as existing stockholder
support for the nominee. The proposed procedures, however, will provide
incumbent directors advance notice of a dissident slate of nominees for
directors, and will make it easier for the Board to solicit proxies resisting
such nominees. This may make it easier for the incumbent directors to retain
their status as directors, even when certain stockholders view the stockholder
nominations as in the best interests of the Company or its stockholders.
Authorized Shares. Article 4 of the Articles of Incorporation authorizes
the issuance of 15,000,000 shares of stock, of which 5,000,000 shares shall be
shares of serial Preferred Stock, and 10,000,000 shares shall be Common 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 rates, and liquidation preferences.
As a result of the ability to fix voting rights for a series of Preferred Stock,
the Board has the power, to the extent consistent with its fiduciary duty, to
issue a series of Preferred Stock to persons friendly to management in order to
attempt to block a post-tender offer merger or other transaction by which a
third party seeks control, and thereby assist management to retain its position.
The Company's Board currently has no plans for the issuance of additional
shares, other than the issuance of additional shares pursuant to stock benefit
plans.
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Special Meetings of Stockholders and Stockholder Proposals. Article 9.B of
the Articles of Incorporation provides that special meetings of the Company's
stockholders may only be called by (i) the President, (ii) a majority of the
Board of Directors, and (iii) persons who beneficially own an aggregate of at
least 50% of the outstanding voting shares, except as may otherwise be provided
by law. The Articles of Incorporation also provide that any action permitted to
be taken at a meeting of stockholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, is given by the holders
of all outstanding shares entitled to vote and filed with the Secretary of the
Company.
Article 9.D of the Company's Articles of Incorporation provides that only
such business as shall have been properly brought before an annual meeting of
stockholders shall be conducted at the annual meeting. In order to be properly
brought before an annual meeting following completion of the Conversion,
business must be (a) brought before the meeting by or at the direction of the
Board of Directors or (b) otherwise properly brought before the meeting by a
stockholder who has given timely and complete notice thereof in writing to the
Company. For stockholder proposals to be included in the Company's proxy
materials, the stockholder must comply with all the timing and informational
requirements of Rule 14a-8 of the Exchange Act. With respect to stockholder
proposals to be considered at the annual meeting of stockholders but not
included in the Company's proxy materials, the stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not later than 120 days prior to the anniversary date of the initial
mailing of proxy materials by the Company in connection with the immediately
preceding annual meeting; provided, however, that with respect to the first
scheduled annual meeting following completion of the Conversion, such written
notice must be received by the Company not later than the close of business on
Monday, January 4, 1999. A stockholder's notice shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a
description of the proposal desired to be brought before the annual meeting, (b)
the name and address, as they appear on the Company's books, of the stockholder
proposing such business, and, to the extent known, any other stockholders known
by such stockholder to be supporting such proposal, (c) the class and number of
shares of the Company which are beneficially owned by the stockholder submitting
the notice, by any person who is acting in concert with or who is an affiliate
or associate of such stockholder (as such terms are defined in the Articles of
Incorporation), by any person who is a member of any group with such stockholder
with respect to the Company's stock or who is known by such stockholder to be
supporting such proposal on the date the notice is given to the Company, and by
each person who is in control of, is controlled by or is under common control
with any of the foregoing persons (if any of the foregoing persons is a
partnership, corporation, limited liability company, association or trust,
information must be provided regarding the name and address of, and the class
and number of shares of Company stock which are beneficially owned by, each
partner in such partnership, each director, executive officer and stockholder in
such corporation, each member in such limited liability company or association,
and each trustee and beneficiary of such trust, and in each case each person
controlling such entity and each partner, director, executive officer,
stockholder, member or trustee of any entity which is ultimately in control of
such partnership, corporation, limited liability company, association or trust),
(d) the
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identification of any person retained or to be compensated by the stockholder
submitting the proposal, or any person acting on his or her behalf, to make
solicitations or recommendations to stockholders for the purpose of assisting in
the passage of such proposal and a brief description of the terms of such
employment, retainer or arrangement for compensation, and (e) any material
interest of the stockholder in such business.
The procedures regarding stockholder proposals are designed to provide the
Board with sufficient time and information to evaluate a stockholder proposal
and other relevant information, such as existing stockholder support for the
proposal. The proposed procedures, however, will give incumbent directors
advance notice of a stockholder proposal. This may make it easier for the
incumbent directors to defeat a stockholder proposal, even when certain
stockholders view such proposal as in the best interests of the Company or its
stockholders.
Amendment of Articles of Incorporation and Bylaws. Article 11 of the
Company's Articles of Incorporation generally provides that any amendment of the
Articles of Incorporation must be first approved by a majority of the Board of
Directors and then by the holders of at least 75% of the shares of the Company
entitled to vote in an election of directors ("Voting Shares"), except that if
the amendment is approved by at least two-thirds of the Board of Directors, the
amendment shall only need stockholder approval if required by the Louisiana
Business Corporation Law ("BCL") and then only by the affirmative vote of the
holders of a majority of the Voting Shares.
The Bylaws of the Company may be amended by a majority of the Board of
Directors or by the affirmative vote of a majority of the Voting Shares, except
that the affirmative vote of at least 75% of the Voting Shares shall be required
to amend, adopt, alter, change or repeal any provision inconsistent with certain
specified provisions of the Bylaws.
Louisiana Corporate Law
In addition to the provisions contained in the Company's Articles of
Incorporation, the BCL includes certain provisions applicable to Louisiana
corporations, such as the Company, which may be deemed to have an anti-takeover
effect. Such provisions include (i) rights of stockholders to receive the fair
value of their shares of stock following a control transaction from a
controlling person or group and (ii) requirements relating to certain business
combinations.
The BCL provides that any person who acquires "control shares" will be able
to vote such shares only if the right to vote is approved by the affirmative
vote of at least a majority of both (1) all the votes entitled to be cast by
stockholders and (2) all the votes entitled to be cast by stockholders excluding
"interested shares". "Control shares" is defined to include shares that would
entitle the holder thereof, assuming the shares had full voting rights, to
exercise voting power within any of the following ranges: (a) 20% or more but
less than one-third of all voting power; (b) one-third or more but less than a
majority of all voting power;
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or (c) a majority or more of all voting power. Any acquisition that would result
in the ownership of control shares in a higher range would require an additional
vote of stockholders. "Interested shares" includes control shares and any shares
held by an officer or employee director of the corporation. If the control
shares are provided full voting rights, all stockholders have dissenters' rights
entitling them to receive the "fair cash value" of their shares, which shall not
be less than the highest price paid per share to acquire the control shares.
The BCL defines a "Business Combination" generally to include (a) any
merger, consolidation or share exchange of the corporation with an "Interested
Shareholder" or affiliate thereof, (b) any sale, lease, transfer or other
disposition, other than in the ordinary course of business, of assets equal to
10% or more of the market value of the corporation's outstanding stock or of the
corporation's net worth to any Interested Shareholder or affiliate thereof in
any 12-month period, (c) the issuance or transfer by the corporation of equity
securities of the corporation with an aggregate market value of 5% or more of
the total market value of the corporation's outstanding stock to any Interested
Shareholder or affiliate thereof, except in certain circumstances, (d) the
adoption of any plan or proposal for the liquidation or dissolution of the
corporation in which anything other than cash will be received by an Interested
Shareholder or affiliate thereof, or (e) any reclassification of the
corporation's stock or merger which increases by 5% or more the ownership
interest of the Interested Shareholder or any affiliate thereof. "Interested
Shareholder" includes any person who beneficially owns, directly or indirectly,
10% or more of the corporation's outstanding voting stock, or any affiliate
thereof who had such beneficial ownership during the preceding two years,
excluding in each case the corporation, its subsidiaries and their benefit
plans.
Under the BCL, a Business Combination must be approved by any vote
otherwise required by law or the articles of incorporation, and by the
affirmative vote of at least each of the following: (1) 80% of the total
outstanding voting stock of the corporation; and (2) two-thirds of the
outstanding voting stock held by persons other than the Interested Shareholder.
However, the supermajority vote requirement shall not be applicable if the
Business Combination meets certain minimum price requirements and other
procedural safeguards, or if the transaction is approved by the Board of
Directors prior to the time that the Interested Shareholder first became an
Interested Shareholder.
The BCL authorizes the board of directors of Louisiana business
corporations to create and issue (whether or not in connection with the issuance
of any of its shares or other securities) rights and options granting to the
holders thereof (1) the right to convert shares or obligations into shares of
any class, or (2) the right or option to purchase shares of any class, in each
case upon such terms and conditions as the Company may deem expedient.
Anti-Takeover Effects of the Articles of Incorporation and Bylaws and Management
Remuneration Adopted in the Conversion
The foregoing provisions of the Articles of Incorporation and Bylaws of the
Company and Louisiana law could have the effect of discouraging an acquisition
of the Company or
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stock purchases in furtherance of an acquisition, and could accordingly, under
certain circumstances, discourage transactions which might otherwise have a
favorable effect on the price of the Company's Common Stock.
In addition, the proposed employment agreements with Ponchatoula's
executive officers and certain provisions in Ponchatoula's existing stock
benefit plans provide for accelerated benefits to participants in the event of a
change in control of the Company or Ponchatoula, as applicable. See "Management
- - Employment Agreements" and "- Existing Stock Options. The foregoing provisions
and limitations may make it more costly for companies or persons to acquire
control of the Company.
The Board of Directors believes that the provisions described above are
prudent and will reduce vulnerability to takeover attempts and certain other
transactions that are not negotiated with and approved by the Board of Directors
of the Company. The Board of Directors believes that these provisions are in the
best interests of the Company and its future stockholders. In the Board of
Directors' judgment, the Board of Directors is in the best position to determine
the true value of the Company and to negotiate more effectively for what may be
in the best interests of its stockholders. Accordingly, the Board of Directors
believes that it is in the best interests of the Company and its future
stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors and that these provisions will encourage such negotiations
and discourage hostile 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 prices reflective of the true value of the Company and
where the transaction is in the best interests of all stockholders.
Despite the Board of Directors' belief as to the benefits to the Company's
stockholders of the foregoing provisions, these provisions also may have the
effect of discouraging a future takeover attempt in which stockholders might
receive a substantial premium for their shares over then current market prices
and may tend to perpetuate existing management. As a result, stockholders who
might desire to participate in such a transaction may not have an opportunity to
do so. The Board of Directors, however, has concluded that the potential
benefits of these provisions outweigh their possible disadvantages.
The Board of Directors of the Company and Ponchatoula are not aware of any
effort that might be made to acquire control of the Company or Ponchatoula.
Regulatory Restrictions
The Change in Bank Control Act provides that no person, acting directly or
indirectly or through or in concert with one or more other persons, may acquire
control of a savings institution unless the OTS has been given at least 60 days'
prior written notice. The HOLA provides that no company may acquire "control" of
a savings institution without the prior approval of the OTS. Any company that
acquires such control becomes a thrift holding company subject to registration,
examination and regulation by the OTS. Pursuant to
147
<PAGE>
federal regulations, control of a savings institution is conclusively deemed to
have been acquired by, among other things, the acquisition of more than 25% of
any class of voting stock of the institution or its holding company or the
ability to control the election of a majority of the directors of an institution
or its holding company. Moreover, control is presumed to have been acquired,
subject to rebuttal, upon the acquisition of more than 10% of any class of
voting stock, or of more than 25% of any class of stock, of a savings
institution or its holding company where certain enumerated "control factors"
are also present in the acquisition. The OTS may prohibit an acquisition if (i)
it would result in a monopoly or substantially lessen competition, (ii) the
financial condition of the acquiring person might jeopardize the financial
stability of the institution, or (iii) the competence, experience or integrity
of the acquiring person indicates that it would not be in the interest of the
depositors or of the public to permit the acquisition of control by such person.
The foregoing restrictions do not apply to the acquisition of the capital stock
of a savings institution or its holding company by one or more tax-qualified
employee stock benefit plans, provided that the plan or plans do not have
beneficial ownership in the aggregate of more than 25% of any class of equity
security of the savings institution or its holding company.
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 or its
holding company, without the prior written approval of the OTS, except for (i)
any offer with a view toward public resale made exclusively to the institution
or its holding company or to underwriters or a selling group acting on its
behalf, (ii) 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,
(iii) offers in the aggregate for up to 24.9% by the ESOP or other tax-qualified
plans of the Company or Ponchatoula, and (iv) an offer to acquire or acquisition
of beneficial ownership of more than 10% of the common stock of the savings
institution or its holding company by a corporation whose ownership is or will
be substantially the same as the ownership of the savings institution, provided
that the offer or acquisition is made more than one year following the date of
completion of the Conversion. Such prohibition also is applicable to the
acquisition of the Common Stock. In the event that any person, directly or
indirectly, violates this regulation, the securities beneficially owned by such
person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matters submitted to a vote of stockholders. The definition of beneficial
ownership for this regulation extends to persons holding revocable or
irrevocable proxies for the stock of an institution or its holding company under
circumstances that give rise to a conclusive or rebuttable determination of
control under OTS regulations.
In addition to the foregoing, the Plan prohibits any person, prior to the
completion of the Conversion, from offering, or making an announcement of an
intent to make an offer, to purchase subscription rights for Conversion Stock.
See "The Conversion - Restrictions on Transfer of Subscription Rights and
Shares."
148
<PAGE>
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
General
The Company is authorized to issue 10,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock. The Company currently expects to issue up
to a maximum of 1,285,170 shares of Common Stock, including 977,500 shares of
Conversion Stock and 307,670 shares of Exchange Shares, and no shares of
Preferred Stock in the Conversion. Each share of Common Stock will have the same
relative rights as, and will be identical in all respects with, each other share
of Common Stock. Upon payment of the Purchase Price for the Conversion Stock and
the issuance of the Exchange Shares in accordance with the Plan of Conversion,
all such stock will be duly authorized, fully paid and nonassessable.
The Common Stock will represent nonwithdrawable capital, will not be an
account of an insurable type and will not be insured by the FDIC or any other
governmental authority.
Common Stock
Dividends. The Company can pay dividends if, as and when declared by its
Board of Directors, subject to compliance with limitations which are imposed by
law. See "Dividend Policy." The holders of Common Stock 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 completion of the 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 Louisiana law or the Company's Articles
of Incorporation or as are otherwise presented to them by the Board of
Directors. Except as discussed in "Restrictions on Acquisition of the Company
and Ponchatoula - Restrictions in the Company's Articles of Incorporation and
Bylaws - Limitation on Voting Rights," each holder of Common Stock will be
entitled to one vote per share and will not have any right to cumulate votes in
the election of directors. If the Company issues Preferred Stock, holders of the
Preferred Stock may also possess voting rights.
Liquidation. In the event of any liquidation, dissolution or winding up of
the Company, the holders of the then-outstanding 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.
149
<PAGE>
Preemptive Rights. Holders of the Common Stock will not be entitled to
preemptive rights with respect to any shares which may be issued in the future.
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 stockholder 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.
EXPERTS
The financial statements of Ponchatoula as of December 31, 1997 and 1996,
and for each of the years ended December 31, 1997, 1996 and 1995, included in
this Prospectus have been included herein in reliance upon the report of Hannis
T. Bourgeois, L.L.P., independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
RP Financial has consented to the publication herein of the summary of its
report to the Company and Ponchatoula setting forth its opinion as to the
estimated pro forma market value of the Common Stock to be outstanding upon
completion of the Conversion and its opinion with respect to subscription
rights.
LEGAL MATTERS
The legality of the Common Stock and the federal income tax consequences of
the Conversion will be passed upon for the Company and Ponchatoula by Elias,
Matz, Tiernan & Herrick L.L.P., Washington, D.C., special counsel to the Company
and Ponchatoula. The Louisiana income tax consequences of the Conversion will be
passed upon for the Company and Ponchatoula by Hannis T. Bourgeois, L.L.P.
Certain legal matters will be passed upon for Trident by Luse Lehman Gorman
Pomerenk & Schick, P.C.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement under the
Securities Act with respect to the Conversion Stock and the Exchange Shares
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 can be examined
150
<PAGE>
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; each such statement is qualified by
reference to such control or document.
The Mutual Holding Company has filed an Application for Conversion with the
OTS with respect to the Conversion. 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
Midwest Regional Office of the OTS located at 122 W. John Carpenter Freeway,
Suite 600, Irving, Texas 75039-2010.
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 requirements and certain other requirements of
the Exchange Act. Under the Plan, the Company has undertaken that it will not
terminate such registration for a period of at least three years following the
Conversion.
151
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report....................................................................................F-1
Statements of Financial Condition as of December 31, 1997 and 1996..............................................F-2
Statements of Income for the years ended December 31, 1997, 1996 and 1995 ...................................... 47
Statements of Stockholders' Equity for the years ended December 31, 1997,
1996 and 1995..................................................................................................F-3
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995...................................F-4
Notes to Financial Statements...................................................................................F-6
</TABLE>
All financial statement schedules are omitted because the required
information either is not applicable or is shown in the financial statements or
in the notes thereto.
Homestead Mutual Holding Company has limited assets other than its shares
of Ponchatoula Common Stock (which will be cancelled in connection with the
Conversion ) and has engaged in only minimal activities to date; accordingly,
the financial statements of the Mutual Holding Company have been omitted because
of their immateriality.
Homestead Bancorp, Inc. was incorporated on February 27, 1998. Its current
capitalization is $1,000, and it has engaged in only minimal activities to date;
accordingly, the financial statements of the Company have been omitted because
of their immateriality.
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Ponchatoula Homestead Savings, F.A.
Ponchatoula, Louisiana
We have audited the Statements of Financial Condition of Ponchatoula
Homestead Savings, F.A. as of December 31, 1997 and 1996, and the related
Statements of Income, Stockholders' Equity and Cash Flows for the years ended
December 31, 1997, 1996 and 1995. These financial statements are the
responsibility of the Association's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ponchatoula Homestead
Savings, F.A. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996 and
1995 in conformity with generally accepted accounting principles.
RESPECTFULLY SUBMITTED,
HANNIS T. BOURGEOIS, L.L.P.
Baton Rouge, Louisiana
January 13, 1998, except as to Note 21,
which is as of February 25, 1998
F-2
<PAGE>
PONCHATOULA HOMESTEAD SAVINGS, F.A
STATEMENTS OF FINANCIAL CONDITION
as of December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash...................................... $609 $276
Interest-Bearing Deposits in Other
Institutions............................ 645 1,022
Securities:
Investment Securities Available for
Sale (Amortized Cost of $2.6 million
and $2.4 million)..................... 2,605 2,399
Mortgage-Backed Securities Available
for Sale (Amortized Cost of $14.3
million and $16.6 million)............ 14,261 16,472
Mortgage-Backed Securities Held to
Maturity (Fair Value of $10.4 million
and $10.4 million).................... 10,301 10,254
Federal Home Loan Bank Stock, at Cost... 584 543
------------ ------------
Total Securities.................... 27,751 29,668
Loans Held for Sale....................... 1,414 2,290
Loans Receivable.......................... 28,033 25,973
Leases Receivable......................... 301 459
Total Loans and Leases Receivable........ 28,334 26,432
------------ ------------
Less: Allowance for Loan and Lease
Losses................................... (265) (282)
------------ ------------
Net Loans and Lease Receivables...... 28,069 26,150
Real Estate Owned.......................... -- 141
Premises and Equipment, Net................ 545 542
Accrued Interest Receivable................ 420 463
Other Assets............................... 127 139
------------ ------------
Total Assets......................... $59,580 $60,691
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits................................... $42,111 $44,427
Advances from Borrowers for Taxes and
Insurance................................ 32 38
Advances from Federal Home Loan Bank....... 11,500 10,700
Income Taxes Payable....................... 162 --
Other Liabilities.......................... 40 83
------------ ------------
Total Liabilities.................... 53,845 55,248
------------ ------------
Stockholders' Equity:
Common Stock-- $0.10 Par Value;
8,000,000 Shares Authorized,
606,345 Shares Issued and Outstanding
in 1997 and 606,285 Shares Issued and
Outstanding in 1996..................... 61 61
Paid-in Capital in Excess of Par.......... 2,017 1,697
Retained Earnings--Substantially
Restricted.............................. 3,734 3,843
Unrealized Loss on Securities Available
for Sale, Net........................... (35) (101)
------------ ------------
5,777 5,500
Common Stock acquired by Management
Recognition Plans........................ (42) (57)
------------ ------------
Total Stockholders' Equity........... 5,735 5,443
------------ ------------
Total Liabilities and Stockholders'
Equity............................. $59,580 $60,691
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
PONCHATOULA HOMESTEAD SAVINGS, F.A.
STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS)
Common Stock:
Balance--Beginning of Year......................................................... $ 61 $ 60 $ 60
Exercise of Stock Option........................................................... -- 1 --
--------- --------- ---------
Balance--End of Year............................................................... $ 61 $ 61 $ 60
--------- --------- ---------
--------- --------- ---------
Paid-In Capital In Excess of Par:
Balance--Beginning of Year......................................................... $ 1,697 $ 1,402 $ 1,219
Exercise of Stock Option........................................................... -- 61 --
Dividends Declared and Waived by Holding Company................................... 320 234 183
--------- --------- ---------
Balance--End of Year............................................................... $ 2,017 $ 1,697 $ 1,402
--------- --------- ---------
--------- --------- ---------
Retained Earnings:
Balance--Beginning of Year......................................................... $ 3,843 $ 4,006 $ 3,937
Net Income......................................................................... 316 146 309
Cash Dividends Declared and Paid................................................... (105) (75) (57)
Dividends Declared and Waived by Holding Company................................... (320) (234) (183)
--------- --------- ---------
Balance--End of Year............................................................... $ 3,734 $ 3,843 $ 4,006
--------- --------- ---------
--------- --------- ---------
Unrealized Gain (Loss) on Securities Available for Sale, Net:
Balance--Beginning of Year......................................................... $ (101) $ 16 $ (437)
Net Change in Unrealized Gain (Loss)............................................... 66 (117) 453
--------- --------- ---------
Balance--End of Year............................................................... $ (35) $ (101) $ 16
--------- --------- ---------
--------- --------- ---------
Management Recognition Plans:
Balance--Beginning of Year......................................................... $ (57) $ -- $ --
Issuance of Common Stock........................................................... -- (57) --
Shares of Common Stock Earned...................................................... 15 -- --
--------- --------- ---------
Balance--End of Year................................................................. $ (42) $ (57) $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
PONCHATOULA HOMESTEAD SAVINGS, F.A.
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income............................................................................. $ 316 $ 146 $ 309
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating
Activities:
Depreciation......................................................................... 29 43 52
Provision for Deferred Income Taxes.................................................. 31 10 19
Provision for (Recovery of) Loan and Lease Losses.................................... (16) 3 (6)
Loss on Sale of Real Estate Owned.................................................... 27 -- --
Provision for (Recovery of) Real Estate Losses....................................... (4) 4 5
Net Amortization of Premiums on Securities........................................... 57 42 23
Loss on Call of Mortgage-Backed Securities........................................... 1 -- --
Stock Dividends on Federal Home Loan Bank Stock...................................... (41) (58) (30)
Loans Originated for Sale............................................................ (7,835) (10,464) (7,018)
Sale of Loans........................................................................ 8,711 9,940 6,527
Changes in Assets and Liabilities:
(Increase) Decrease in Interest Receivable........................................... 43 (19) (100)
(Increase) Decrease in Other Assets.................................................. (40) (46) (5)
Increase (Decrease) in Income Taxes Payable.......................................... 131 -- --
Increase (Decrease) in Other Liabilities............................................. (26) (74) (26)
--------- --------- ---------
Net Cash Provided by (Used in) Operating Activities................................ 1,384 (473) (250)
--------- --------- ---------
Cash Flows From Investing Activities:
Purchase of Property and Equipment................................................... (32) (15) (60)
Maturities of Investment Securities.................................................. 1,200 1,200 1,500
Purchases of Investment Securities................................................... (1,400) (1,195) (1,506)
Proceeds from Call or Maturities of Mortgage-Backed Securities....................... 4,444 3,999 3,719
Purchases of Mortgage-Backed Securities.............................................. (2,244) (7,884) (7,720)
Net Increase in Loans and Leases Receivable.......................................... (1,844) (432) (338)
Proceeds from Sales of Real Estate Owned............................................. 61 -- 13
Purchases of Real Estate Owned....................................................... (1) -- --
-------- --------- ---------
Net Cash Provided by (Used in) Investing Activities................................ 184 (4,327) (4,392)
--------- --------- ---------
Cash Flows From Financing Activities:
Net Increase (Decrease) in Money Market Accounts, NOW Accounts and Savings
Accounts........................................................................... (1,588) (685) (8,010)
Net Increase (Decrease) in Certificates of Deposit................................... (728) 223 10,938
Increase (Decrease) in Advances from Borrowers for Taxes and Insurance............... (6) (9) (5)
</TABLE>
F-5
<PAGE>
PONCHATOULA HOMESTEAD SAVINGS, F.A.
STATEMENTS OF CASH FLOWS
(CONTINUED)
for the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Proceeds from Federal Home Loan Bank
Advances............................. 800 4,400 3,100
Dividends Paid on Common Stock......... (105) (75) (57)
MRP Shares Earned...................... 15 -- --
---------- --------- ---------
Net Cash Provided by (Used in)
Financing Activities.............. (1,612) 3,854 5,966
---------- --------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents............................ (44) (946) 1,324
Cash and Cash Equivalents -
Beginning of Year...................... 1,298 2,244 920
---------- --------- ---------
Cash and Cash Equivalents -
End of Year........................... $ 1,254 $ 1,298 $ 2,244
Supplemental Disclosures of Cash Flow
Information:
Cash Payments for:
Interest Paid to Depositors.......... $1,972 $ 2,159 $ 2,007
---------- --------- ---------
---------- --------- ---------
Income Taxes......................... $-- $ 91 $ 136
---------- --------- ---------
---------- --------- ---------
Supplemental Schedules of Noncash
Investing and Financing Activities:
Real Estate Acquired in Settlement of
Loans and Leases....................... $88 $ 145 $ 75
---------- --------- ---------
---------- --------- ---------
Loans and Leases to Facilitate the Sale
of Real Estate Owned................... $147 $ -- $ 120
---------- --------- ---------
---------- --------- ---------
Increase in Unrealized Gain (Loss) on
Securities Available for Sale........ $100 $(178) $ 697
---------- --------- ---------
---------- --------- ---------
Increase (Decrease) in Deferred Tax
Effect on Unrealized Gain (Loss) on
Securities Available for Sale........ $(34) $61 $(244)
---------- --------- ---------
---------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
PONCHATOULA HOMESTEAD SAVINGS, F.A.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
The accounting principles followed by Ponchatoula Homestead Savings, F.A.
("Ponchatoula") are those which are generally practiced within the savings
and loan industry. The methods of applying those principles conform with
generally accepted accounting principles and have been applied on a
consistent basis. The principles which significantly affect the determination
of financial position, results of operations, changes in stockholders' equity
and cash flows are summarized below. Homestead Mutual Holding Company (the
Company) is the majority stockholder of Ponchatoula and engages in no
business activities other than its ownership of approximately 75% of
Ponchatoula's common stock.
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. The most significant estimates and assumptions in the
financial statements affect the allowance for loan and lease losses and the
value of securities available for sale. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, certificates of deposit,
and funds due from banks. For purposes of the Statements of Cash Flows,
Ponchatoula considers all highly liquid debt instruments with original
maturities when purchased of three months or less to be cash equivalents. In
addition, Ponchatoula reports its loans and certificates of deposit on a net
basis.
INVESTMENT AND MORTGAGE-BACKED SECURITIES
Securities are being accounted for in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", which requires the classification of securities as
held to maturity, trading, or available for sale.
Securities classified as held to maturity are those securities Ponchatoula
has both the intent and ability to hold to maturity regardless of changes in
market conditions, liquidity needs or changes in general economic conditions.
These securities are carried at cost adjusted for amortization of premium and
accretion of discount, computed by various methods approximating the interest
method over their contractual lives.
Securities classified as available for sale are those securities that
Ponchatoula intends to hold for an indefinite period of time but not necessarily
to maturity. Any decision to sell a security classified as available for sale
would be based on various factors, including significant movements in interest
rates, changes in the maturity mix of Ponchatoula's assets and liabilities,
liquidity needs, regulatory capital considerations, and other similar factors.
Securities available for sale are carried at fair value. Unrealized gains or
losses are reported as increases or decreases in stockholders' equity, net of
related income tax effects. Realized gains or losses, determined on the basis of
the cost of specific securities sold, are included in earnings. Ponchatoula does
not engage in trading activities.
F-7
<PAGE>
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
LOANS HELD FOR SALE
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated fair value in the aggregate. Net
unrealized losses are recognized in a valuation allowance by charges to income.
Gains on sales of loans are recognized when the proceeds from the loan sales are
received by the Association.
LOANS RECEIVABLE
Loans receivable are stated at unpaid principal balances, less the allowance
for loan losses, and net deferred loan origination fees. Interest on mortgage
and consumer loans is accrued based on the principal outstanding.
Impaired loans are being accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan", as amended by Statement No. 118, "Accounting by Creditors
for Impairment of a Loan--Income Recognition and Disclosure." The statements
generally require impaired loans to be measured on the present value of expected
future cash flows discounted at the loan's effective interest rate, or as an
expedient, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent.
A loan is impaired when it is probable the creditor will be unable to
collect all contractual principal and interest payments due in accordance with
the terms of the loan agreement.
Ponchatoula discontinues the accrual of interest income when a loan becomes
90 days past due as to principal or interest. At that time, a reserve is
recorded equal to the amount of delinquent interest. If the delinquent interest
is subsequently collected, it is credited to income in the period collected.
Interest on impaired loans is discontinued when, in management's opinion, the
borrower may be unable to meet payments as they become due.
ALLOWANCE FOR LOSSES
The allowance for loan and lease losses is maintained at a level which, in
management's judgment, is adequate to absorb credit losses inherent in the loan
and lease portfolios. The amount of the allowance is based on management's
evaluation of the collectibility of the loan and lease portfolios, including the
nature of the portfolios, credit concentrations, trends in historical loss
experience, specific impaired loans, and economic conditions. Allowances for
impaired loans are generally determined based on collateral values or the
present value of estimated cash flows. The allowance is increased by a provision
for loan and lease losses, which is charged to expense, and reduced by
charge-offs, net of recoveries.
LOAN FEES
Loan fees received are accounted for in accordance with SFAS No. 91,
"Accounting for Nonrefundable Fees and Costs Associated With Originating or
Acquiring Loans and Initial Direct Costs of Leases". Loan fees and certain
direct loan origination costs are deferred, and the net fee or cost is
recognized as interest income using the level yield method over the contractual
life of the loan.
LEASING ACTIVITIES
Ponchatoula's leasing operations consist of the leasing of various real
estate properties owned. The leases are classified as sales-type leases. The
lease terms range from 15 to 30 years. Under the sales-type method of accounting
for leases, the total net rentals receivable under the lease contracts,
including accrued interest, are recorded as a lease sale receivable. The
interest is recognized each month as it is earned so as to produce a constant
periodic rate of return on the unrecovered investment.
Valuations are periodically performed by management and an allowance for
losses is established by a charge to operations if the carrying value of the
property exceeds its estimated net realizable value.
F-8
<PAGE>
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Expenditures for maintenance and repairs are charged to operations as incurred.
Costs of major additions and improvements are capitalized.
Ponchatoula computes depreciation generally on the straight-line and
accelerated methods for financial reporting. The accelerated methods used do not
differ materially from results obtained using the straight-line method.
Depreciation is based on the estimated service lives of the assets. The
estimated service lives for buildings is twenty to thirty nine years and for
furniture, fixtures and equipment is five to ten years.
The costs of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year of
disposal and the resulting gains or losses are included in current operations.
INCOME TAXES
Deferred income taxes are provided on differences between income reported
for financial reporting and income tax purposes as explained more fully in Note
10. Deferred taxes are provided on a liability method in accordance with SFAS
No. 109. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date.
CURRENT ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board issued Statement No. 130 "Reporting
Comprehensive Income", which becomes effective for fiscal years beginning after
December 15, 1997. This statement establishes standards for reporting and
display of comprehensive income and its components which are revenues, expenses,
gains, and losses that under GAAP are included in comprehensive income but
excluded from net income. Ponchatoula will adopt this statement in 1998 and
anticipates that comprehensive income will not differ materially from net income
reported.
NOTE 2--SECURITIES -
The amortized cost and fair values of securities being held to maturity as
of December 31, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------- ----------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1997
Mortgage-Backed Securities....................................... $ 10,301 $135 $(21) $ 10,415
--------- ----- ---- ----------
--------- ----- ---- ----------
December 31, 1996
Mortgage-Backed Securities....................................... $ 10,254 $109 $(11) $ 10,352
--------- ----- ---- ----------
--------- ----- ---- ----------
</TABLE>
The amortized cost and fair values of securities being held to maturity may
differ from contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or repaid without any
penalties. Therefore, these securities are not included in maturity categories.
The amortized cost and fair values of securities available for sale as of
December 31, 1997 and 1996 are summarized as follows:
F-9
<PAGE>
NOTE 2--SECURITIES -(continued)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------- --------------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1997
Securities of U.S.
Government Agencies........................... $ 2,595 $ 10 $ -- $ 2,605
------------- ------ ------- ---------
------------- ------ ------- ---------
Mortgage-Backed Securities.................... $ 14,324 $ 74 $ (137) $ 14,261
------------- ------ ------- ---------
------------- ------ ------- ---------
December 31, 1996
Securities of U.S.
Government Agencies........................... $ 2,396 $ 6 $ (3) $ 2,399
------------- ------ ------- ---------
------------- ------ ------- ---------
Mortgage-Backed Securities.................... $ 16,629 $ 62 $ (219) $ 16,472
------------- ------ ------- ---------
------------- ------ ------- ---------
</TABLE>
The amortized cost and fair values of securities available for sale as of
December 31, 1997 by contractual maturity are shown below. Actual maturities
may differ from contractual maturities in mortgage-backed securities because
the mortgages underlying the securities may be called or repaid without any
penalties. Therefore these securities are not included in the maturity
categories in the following maturity summary.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
------------- ---------
(IN THOUSANDS)
<S> <C> <C>
Within One Year....................................... $ 1,196 $ 1,203
One to Five Years..................................... 1,399 1,402
------------- ---------
2,595 2,605
Mortgage-backed Securities............................ 14,324 14,261
------------- ---------
Total............................................... $ 16,919 $ 16,866
------------- ---------
------------- ---------
</TABLE>
There were no sales of securities during 1997, 1996 or 1995. Pledged
securities totaled $11.6 million and $11.0 million at December 31, 1997 and
1996.
Ponchatoula has invested in FHLB stock which is carried at cost which
approximates market.
NOTE 3--LOANS AND LEASES RECEIVABLE -
Loans and leases receivable at December 31, 1997 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
First Mortgage Loans...................... $ 19,500 $ 18,302
Second Mortgage Loans..................... 164 317
Construction Loans........................ 968 1,114
Consumer Loans............................ 7,175 6,812
Commercial Loans.......................... 521 52
--------- ---------
28,328 26,597
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Less:
Undisbursed Portion of Mortgage Loans............. (287) (607)
Deferred Loan Fees................................ (8) (17)
--------- ---------
Net Loans Receivable............................ 28,033 25,973
Leases Receivable................................... 301 459
Less:
Allowance for Loan and Lease Losses............... (265) (282)
--------- ---------
28,069 26,150
Loans Held for Sale................................. 1,414 2,290
--------- ---------
Net Loans and Leases.............................. $ 29,483 $ 28,440
--------- ---------
--------- ---------
</TABLE>
Ponchatoula had loans 90 days or more past due totaling approximately
$173,000 and $365,000 at December 31, 1997and 1996, respectively.
There were no impaired loans at December 31, 1997 which were required to be
recorded in conformity with SFAS No. 114 as amended by SFAS No. 118.
Ponchatoula is permitted to make extensions of credit to its officers and
directors in the ordinary course of business. The loans are made on
substantially the same terms as those prevailing at the time for comparable
loans with other parties. The total of such indebtedness outstanding at December
31, 1997 and 1996 was $403,000 and $341,000, respectively. An analysis of the
aggregate of these loans for 1997 is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Balance--Beginning of Year............................. $ 341
New Loans.............................................. 135
Repayments............................................. (73)
-----
Balance--End of Year................................... $ 403
-----
-----
</TABLE>
Following is a summary of the activity in the allowance for losses for the
years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance--Beginning of Year.................................... $ 282 $ 280 $ 288
Provision for (Recovery of) Prior Provisions.................. (16) 3 (6)
Charge Offs................................................... (1) (1) (2)
--------- --------- ---------
Balance--End of Year.......................................... $ 265 $ 282 $ 280
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-11
<PAGE>
NOTE 4--LEASES RECEIVABLE--
The composition of the sales-type lease receivables as of December 31, 1997
and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Total Minimum Lease Payments To Be Received....................................................... $ 529 $ 886
Less: Unearned Income............................................................................. 228 427
--------- ---------
Net Lease Receivable.............................................................................. $ 301 $ 459
--------- ---------
--------- ---------
</TABLE>
At December 31, 1997, the total minimum future lease payments receivable is
due as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
-----------------
<S> <C>
1998..............................................................................................$ 19
1999.............................................................................................. 18
2000.............................................................................................. 19
2001.............................................................................................. 21
2002.............................................................................................. 21
Thereafter........................................................................................ 203
-----
$ 301
-----
-----
</TABLE>
NOTE 5--LOAN SERVICING--
Mortgage loans serviced for others are not included in the accompanying
Statements of Financial Condition. The unpaid principal balances of these loans
serviced for FHLMC at December 31, 1997 and 1996 amounted to $91,000 and
$271,000, respectively.
Custodial escrow balances maintained in connection with the foregoing loan
servicing were approximately $300 and $3,000 at December 31, 1997 and 1996,
respectively.
NOTE 6--PREMISES AND EQUIPMENT--
Office properties and equipment at December 31, 1997 and 1996 consisted of
the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land................................................................................... $ 53 $ 53
Buildings.............................................................................. 680 680
Furniture, Fixtures and Equipment...................................................... 357 325
--------- ---------
1,090 1,058
Less: Accumulated Depreciation......................................................... (545) (516)
--------- ---------
$ 545 $ 542
--------- ---------
--------- ---------
</TABLE>
The provision for depreciation charged to expense was $29,000, $43,000 and
$52,000, respectively, for the years ended December 31, 1997, 1996 and 1995.
F-12
<PAGE>
NOTE 7--ACCRUED INTEREST RECEIVABLE---
Accrued Interest Receivable at December 31, 1997 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Investment Securities.................................................................... $ 39 $ 38
Mortgage-Backed Securities............................................................... 178 220
Loans.................................................................................... 203 205
--------- ---------
$ 420 $ 463
--------- ---------
--------- ---------
</TABLE>
NOTE 8--DEPOSITS--
An analysis of the deposit accounts at December 31, 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
RATE AMOUNT % RATE AMOUNT
----------- --------- --- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Money Market...................................................... 2.27% $ 934 2% 2.50% $ 1,032
NOW Accounts...................................................... 2.05% 1,491 3 2.05% 1,642
Passbook Savings.................................................. 2.52% 8,253 20 3.04% 9,592
--------- --- ---------
10,678 25 12,266
--------- --- ---------
Certificates:
2.00-3.99%...................................................... 3.03% 285 1 3.02% 551
4.00-5.99%...................................................... 5.22% 30,031 71 5.38% 30,686
6.00-7.99%...................................................... 6.28% 1,117 3 6.34% 882
8.00-9.99%...................................................... -% -- -- 8.02% 42
--------- --- ---------
31,433 75 32,161
--------- --- ---------
$ 42,111 100% $ 44,427
--------- --- ---------
--------- --- ---------
<CAPTION>
%
---
<S> <C>
Money Market...................................................... 2%
NOW Accounts...................................................... 4
Passbook Savings.................................................. 22
---
28
---
Certificates:
2.00-3.99%...................................................... 1
4.00-5.99%...................................................... 69
6.00-7.99%...................................................... 2
8.00-9.99%...................................................... --
---
72
---
100%
---
---
</TABLE>
The aggregate amount of deposits with a minimum balance of $100,000 was
approximately $4.8 million at December 31, 1997 and $4.5 million at December 31,
1996.
A summary of certificates of deposit by maturity at December 31, 1997 and
1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
1997................................................................................ $ -- $ 28,932
1998................................................................................ 28,608 2,166
1999................................................................................ 2,062 579
2000................................................................................ 359 352
2001................................................................................ 97 97
2002................................................................................ 307 35
--------- ---------
$ 31,433 $ 32,161
--------- ---------
--------- ---------
</TABLE>
F-13
<PAGE>
NOTE 8--DEPOSITS-- (CONTINUED)
Interest expense on deposits is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
NOW and Money Market................................................................. $ 59 $ 72 $ 76
Passbook Savings..................................................................... 228 294 373
Certificates of Deposit.............................................................. 1,684 1,792 1,558
--------- --------- ---------
$ 1,971 $ 2,158 $ 2,007
--------- --------- ---------
--------- --------- ---------
</TABLE>
NOTE 9--ADVANCES FROM FEDERAL HOME LOAN BANK--
Ponchatoula had outstanding advances from the Federal Home Loan Bank (FHLB)
of $11.5 million and $10.7 million at December 31, 1997 and 1996, respectively.
Specific mortgage-backed securities, with a fair value of approximately $11.7
million and $11 million and a carrying value of $11.6 million and $11 million at
December 31, 1997 and 1996, respectively, were pledged to the FHLB as collateral
securing the advances. Interest expense on advances from the FHLB totaled
$544,000, $433,000, and $335,000 for the years ended December 31, 1997, 1996 and
1995, respectively. All advances are for a one month period.
The following schedule provides certain information about the advances at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Borrowing at End of Year........................................................ $11.5 million $10.7 million
Rate at End of Year............................................................. 5.85% 5.48%
Maximum Borrowing during Year................................................... $11.5 million $10.7 million
Average Borrowing during Year................................................... $9.8 million $7.63 million
Weighted Average Rate........................................................... 5.53% 5.38%
</TABLE>
NOTE 10--INCOME TAXES--
The total provision for income taxes charged to income amounted to $185,000,
$60,000, and $150,000 for 1997, 1996, and 1995.
Following is a reconciliation between income tax expense based on the
federal statutory tax rates and income taxes reported in the Statements of
Income:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax at Statutory Rate--(34%)............................................................. $ 170 $ 70 $ 156
Increases (Decreases) in Taxes:
Bad Debt Deduction Based on Percentage of Income......................................... -- -- (11)
Bad Debt Provision (Recovery) Per Books.................................................. -- -- (6)
Other.................................................................................... 15 (10) 11
--------- --------- ---------
Provision for Federal Income Taxes....................................................... $ 185 $ 60 $ 150
--------- --------- ---------
--------- --------- ---------
Effective Tax Rate....................................................................... 36.93% 29.13% 32.68%
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-14
<PAGE>
NOTE 10--INCOME TAXES-- (CONTINUED)
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ----- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for Current Taxes................................................................ $ 154 $ 50 $ 131
Provision for Deferred Taxes............................................................... 31 10 19
--------- --- ---------
$ 185 $ 60 $ 150
--------- --- ---------
--------- --- ---------
</TABLE>
The deferred tax provision (benefit) consists of the following timing
differences:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Bad Debt Deduction for Tax Reporting in Excess of Amount for Financial Reporting............. $ (9) $ 10 $ 19
Depreciation................................................................................. 7 -- --
Stock Dividends.............................................................................. 33 -- --
--- --- ---
$ 31 $ 10 $ 19
--- --- ---
--- --- ---
</TABLE>
The net deferred tax asset or liability consists of the following components
at December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Depreciation............................................................................... $ (7) $ -- $ --
Stock Dividends............................................................................ (33) -- --
Provision for Loan Losses.................................................................. (19) (29) (19)
Unrealized (Gain) Loss on Securities Available for Sale.................................... 18 52 (9)
--- --- ---
Total Deferred Tax Asset (Liability)..................................................... $ (41) $ 23 $ (28)
--- --- ---
--- --- ---
</TABLE>
The reserve method of accounting for bad debt utilized by qualified thrift
institutions pursuant to Code Section 593 was repealed for tax years beginning
after December 31, 1995. The $68,000 of excess reserves of Ponchatoula are being
taken into income ratably over a six-year period beginning January 1, 1996. This
change in accounting method and reversal of excess bad debt reserves is
adequately provided for in Ponchatoula's deferred tax liability.
NOTE 11--OTHER GENERAL AND ADMINISTRATIVE EXPENSES--
An analysis of other general and administrative expenses for the years ended
December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Data Processing Fees...................................................................... $ 47 $ 67 $ 92
Professional Fees......................................................................... 214 242 201
Postage and Supplies...................................................................... 44 40 47
Insurance................................................................................. 28 27 34
Other..................................................................................... 228 192 166
--------- --------- ---------
$ 561 $ 568 $ 540
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-15
<PAGE>
NOTE 12--PROFIT SHARING PLAN--
Ponchatoula established a noncontributory profit sharing plan during the
year ended December 31, 1986. The plan is a defined contribution plan and covers
all employees after a specified period of employment and within specified age
brackets. The profit sharing expense for the years ended December 31, 1997, 1996
and 1995 amounted to $77,000, $74,000 and $74,000, respectively. The Board of
Directors of Ponchatoula has determined that Ponchatoula's liability will be
computed each year based on fifteen percent of eligible wages.
NOTE 13--STOCK OPTION AND MANAGEMENT RECOGNITION PLANS--
1996 STOCK INCENTIVE PLAN
This program was designed to attract and retain qualified personnel in key
positions, provide key employees with a proprietary interest in Ponchatoula as
an incentive to contribute to the success of Ponchatoula and reward key
employees for outstanding performance. An aggregate of 10,782 shares of
authorized but unissued Common Stock of Ponchatoula was reserved for issuance
under the Plan, which is equal to 7.5% of Common Stock issued to the public in
connection with the formation of the mutual holding company ("the offering").
The exercise price of each option equals the market price of Ponchatoula's stock
on the date of grant and an option's maximum term is 10 years. Options are
granted and vested at the discretion of the Compensation Committee. Ninety
percent of the options were granted on July 10, 1996. At December 31, 1997,
shares available for grant under this plan amounted to 1,583 shares.
1996 DIRECTORS' STOCK OPTION PLAN
In order to attract and retain qualified directors for Ponchatoula, the
Board of Directors and stockholders of Ponchatoula have adopted the 1996
Directors' Stock Option Plan. An aggregate of 3,594 shares of authorized but
unissued Common Stock of Ponchatoula was reserved for issuance under the
Directors' Stock Option Plan, which is equal to 2.5% of the Common Stock of
Ponchatoula issued in the offering. The exercise price of each option equals the
market price of Ponchatoula's stock on the date of grant and an option's maximum
term is 10 years. Ninety percent of the options were granted on the date the
Plan was approved by the stockholders of Ponchatoula, which was April 10, 1996.
The options become exercisable after six months from the grant date.
1996 MANAGEMENT RECOGNITION PLAN FOR OFFICERS
The objective of this plan is to enable Ponchatoula to provide officers and
key employees with a proprietary interest in Ponchatoula as compensation for
their contributions to the Association and as an incentive to contribute to
Ponchatoula's future success. An aggregate of 4,312 shares of authorized Common
Stock of Ponchatoula was issued to the Management Recognition Plan for Officers,
which is equal to 3.0% of the Common Stock of Ponchatoula issued in the
offering. The awards are allocated at the discretion of the Committee. Shares
vest at the rate of 20% on each annual anniversary date.
1996 MANAGEMENT RECOGNITION PLAN FOR DIRECTORS
The objective of this plan is to enable Ponchatoula to provide non-employee
directors with a proprietary interest in Ponchatoula as compensation for their
contributions to Ponchatoula and as an incentive to contribute to Ponchatoula's
future success. An aggregate of 1,434 shares of authorized Common Stock of
Ponchatoula was issued to the Management Recognition Plan for Directors, which
is equal to 1.0% of the Common Stock of Ponchatoula issued in the offering.
Ninety percent of the awards were granted on the date the Plan was approved by
the stockholders of Ponchatoula, which was April 10, 1996. The remaining 144
shares were granted April 10, 1997. Shares vest at the rate of 20% on each
annual anniversary date.
The tables below summarize the activity in the Plans during 1996 and 1997.
F-16
<PAGE>
1996 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
REMAINING
CONTRACTUAL PRICE RANGE
SHARES LIFE PER SHARE
----------- ----------- -------------
<S> <C> <C> <C>
Outstanding, December 31, 1995............................................... -- -- $ --
Granted...................................................................... 9,812 -- 10.00
-----
Outstanding, December 31, 1996............................................... 9,812 9.5 Years 10.00
Granted...................................................................... --
Forfeited.................................................................... (613)
-----
Outstanding, December 31, 1997............................................... 9,199 8.5 Years 10.00-- 10.50
-----
-----
Exercisable, December 31, 1997............................................... 1,832 -- 10.00-- 10.50
-----
-----
</TABLE>
1996 DIRECTORS STOCK OPTION PLAN
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL PRICE RANGE
SHARES LIFE PER SHARE
--------- ----------- -------------
<S> <C> <C> <C>
Outstanding, December 31, 1995.............................................. -- -- $ --
Granted..................................................................... 3,234 -- 10.00
Exercised................................................................... (539) -- 10.00
---------
Outstanding and Exercisable, December 31, 1996.............................. 2,695 9.4 Years 10.00
Granted..................................................................... 839
Exercised................................................................... (60)
Forfeited................................................................... (1,078)
---------
Outstanding, December 31, 1997.............................................. 2,396 8.8 Years 10.00-- 10.50
---------
---------
Exercisable, December 31, 1997.............................................. 2,396 10.00-- 10.50
---------
---------
</TABLE>
1996 MANAGEMENT RECOGNITION PLAN FOR OFFICERS
<TABLE>
<CAPTION>
REMAINING
CONTRACTUAL PRICE RANGE
SHARES LIFE PER SHARE
----------- ----------- -------------
<S> <C> <C> <C>
Outstanding, December 31, 1995............................................... -- -- $ --
Granted...................................................................... 4,312 -- 10.00
-----
Outstanding, December 31, 1996............................................... 4,312 9.5 Years 10.00
Forfeited.................................................................... (206)
-----
Outstanding, December 31, 1997............................................... 4,106 8.5 Years 10.00-- 10.50
-----
-----
Vested, December 31, 1997.................................................... 893 10.00-- 10.50
-----
-----
</TABLE>
F-17
<PAGE>
NOTE 13--STOCK OPTION AND MANAGEMENT RECOGNITION PLANS-- (CONTINUED)
1996 MANAGEMENT RECOGNITION PLAN FOR DIRECTORS
<TABLE>
<CAPTION>
REMAINING
CONTRACTUAL PRICE RANGE
SHARES LIFE PER SHARE
----------- ----------- -------------
<S> <C> <C> <C>
Outstanding, December 31, 1995............................................... -- -- $ --
Granted...................................................................... 1,290 -- 10.00
-----
Outstanding, December 31, 1996............................................... 1,290 9.5 Years 10.00
Granted...................................................................... 144
-----
Outstanding, December 31, 1997............................................... 1,434 8.5 Years 10.00-- 10.50
-----
-----
Vested, December 31, 1997.................................................... 602 10.00-- 10.50
-----
-----
</TABLE>
Ponchatoula applies APB Opinion 25 and related interpretations in accounting
for its stock option and management recognition plans. Had compensation cost for
Ponchatoula's stock-based compensation plans been determined based on the fair
value of the grant dates for awards under those plans consistent with the
methods of SFAS No. 123, Ponchatoula's net income and earnings per common share
would have been reduced to the proforma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
(DOLLARS IN
THOUSANDS)
Net Income As Reported............................................................................ $ 316 $ 146
Proforma.......................................................................................... $ 316 $ 130
Earnings Per Common Share
As Reported....................................................................................... $ .52 $ .24
Proforma.......................................................................................... $ .52 $ .21
</TABLE>
Compensation cost recognized under SFAS No. 123 was estimated using the
Black-Scholes model with the following assumptions: dividend yield of 7%, an
expected life of the options of 7 years, expected volatility of 19% and a risk
free interest rate of 7.0%.
NOTE 14--REGULATORY CAPITAL REQUIREMENTS--
Under applicable regulations, Ponchatoula is required by law to maintain (i)
core capital equal to at least 3% of adjusted total assets, (ii) tangible
capital equal to at least 1.5% of adjusted total assets, and (iii) total capital
equal to at least 8.0% of risk-weighted assets.
The following is a reconciliation of GAAP capital to regulatory capital at
December 31, 1997:
<TABLE>
<CAPTION>
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
----------- --------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
GAAP Capital...................................................................... $ 5,735 $ 5,735 $ 5,735
Additional Capital Items:
Unrealized Losses on Securities Available for Sale.............................. 35 35 35
General Valuation Allowances.................................................... -- -- 250
----------- --------- -----------
Regulatory Capital--Computed...................................................... 5,770 5,770 6,020
Minimum Capital Requirement....................................................... (894) (1,788) (2,033)
----------- --------- -----------
Regulatory Capital-Excess......................................................... $ 4,876 $ 3,982 $ 3,987
----------- --------- -----------
----------- --------- -----------
</TABLE>
F-18
<PAGE>
At December 31, 1997, Ponchatoula's leverage ratio was 9.68%, Tier 1
risk-based ratio was 22.71%, total risk-based ratio was 23.69%, and tangible
equity ratio was 9.68%, based on leverage capital of $5.8 million, Tier 1
capital of $5.8 million, total risk-based capital of $6 million and tangible
capital of $5.8 million, as defined. Based on these capital ratios, Ponchatoula
meets the criteria for a "well capitalized" institution at December 31, 1997.
Ponchatoula's management believes that under the current regulations,
Ponchatoula will continue to meet its minimum capital requirements in the
foreseeable future. However, events beyond the control of Ponchatoula, such as
increased interest rates or a downturn in the economy in Ponchatoula's area
could adversely affect future earnings and consequently, the ability of
Ponchatoula to continue to exceed its future minimum capital requirements.
NOTE 15--DIVIDENDS--
Ponchatoula declared quarterly dividends of $.16, $.17, $.18, and $.19 per
share in the first, second, third and fourth quarters of 1997. The Company
waived receipt of dividends declared on all shares owned; the amounts waived
have been recorded by Ponchatoula as additional paid-in capital. Total dividends
paid to the stockholders other than the Company in 1997 was $105,000 or $.70 per
share. Under Federal regulations, Ponchatoula may not declare or pay a cash
dividend on its capital stock if the effect thereof would cause Ponchatoula's
regulatory capital to be reduced below the amount required for liquidity.
NOTE 16--EARNINGS PER SHARE--
In February 1997, Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("SFAS No. 128") was issued which establishes standards
for computing and presenting earnings per share ("eps"). Under SFAS No. 128,
primary eps is replaced with basic eps. Basic eps is computed by dividing
income applicable to common shares by the weighted average shares
outstanding; no dilution for any potentially convertible shares is included
in the calculation. Fully diluted eps, now called diluted eps reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity. The
following illustrates the reconciliation of the numerators and denominators
of the basic and diluted eps computations:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------- -----------------------------------------------
PER- PER-
INCOME SHARES SHARE INCOME SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
--------------- --------------- ----------- ----------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
Basic EP
Income
available
to
common
stockholders.. $316 606,345 $ .52 $ 146 606,285 $ .24
--- ---
--- ---
Effect of
Dilutive
Securities
Stock
Options.. 11,534 12,507
------- -------
Diluted
EPS
Income
available
to
common
stockholders
+
assumed
conversions.. $316 617,879 $ .51 $ 146 618,792 $ .23
----- ------- --- --- ------- ---
----- ------- --- --- ------- ---
<CAPTION>
1995
------------------------------------------------
PER-
INCOME SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------------- --------------- -----------
<S> <C> <C> <C>
Basic EP
Income
available
to
common
stock $ 309 600,000 $ .51
Effect of
Dilutive
Securit
Stock
Options.. --
-------
Diluted
EPS
Income
available
to
common
stockho
+
assumed
convers $ 309 600,000 $ .51
--- ------- ---
--- ------- ---
</TABLE>
F-19
<PAGE>
NOTE 17--OFF-BALANCE SHEET INSTRUMENTS--
Ponchatoula 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.
These financial instruments include commitments to extend credit. Those
instruments involve, to varying degrees, elements of credit risk in excess of
the amount recognized in the Statements of Financial Condition.
Ponchatoula's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. Ponchatoula uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments.
In the normal course of business, Ponchatoula has made commitments to extend
credit of $463,000 and $370,000 at December 31, 1997 and 1996, respectively.
These amounts include unfunded loan commitments and lines of credit with rates
adjusting at Wall Street Prime + 1 1/2%.
Ponchatoula has entered into agreements with outside third parties to sell
loans that it originates. Ponchatoula may be required to repurchase a loan if it
becomes delinquent within a specified period of time as stated in the agreement.
The total amount of loans originated and sold to these parties subject to
repurchase amounted to $2.4 million and $3.4 million at December 31, 1997 and
1996, respectively.
NOTE 18--FAIR VALUE OF FINANCIAL INSTRUMENTS--
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and Short-Term Investments--For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
Securities--Fair value of securities available for sale is based on quoted
market prices or dealer quotes, if available. If a quoted market price is not
available, fair value is estimated using quoted market prices for similar
securities.
Loans--The fair value for loans is estimated using discounted cash flow
analyses, with interest rates currently being offered for similar loans to
borrowers with similar credit rates. Loans with similar classifications are
aggregated for purposes of the calculations. The allowance for loan loss, which
was used to measure the credit risk, is subtracted from loans.
Deposits--The fair value of demand deposits, savings accounts, and certain
money market deposits is the amount payable on demand at the reporting date. The
fair value of fixed-maturity certificates of deposit is estimated using
discounted cash flow analyses, with interest rates currently offered for
deposits of similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit--The fair value
of commitments to extend credit and standby letters of credit were not
significant.
The estimated approximate fair values of Ponchatoula's financial instruments
as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Financial Assets:
Cash and Short-Term Investments..................................... $ 1,254 $ 1,254 $ 1,298 $ 1,298
Securities Available for Sale....................................... 17,450 17,450 19,414 19,414
Securities--Held to Maturity........................................ 10,301 10,415 10,254 10,352
Loans--Net.......................................................... 29,483 29,294 28,440 28,445
--------- --------- --------- ---------
$ 58,488 $ 58,413 $ 59,406 $ 59,509
--------- --------- --------- ---------
--------- --------- --------- ---------
Financial Liabilities:
Deposits............................................................ $ 42,111 $ 42,088 $ 44,427 $ 44,889
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-20
<PAGE>
NOTE 19--CONTINGENCIES--
In the normal course of business, Ponchatoula is involved in various legal
proceedings. In the opinion of management and legal counsel, any liability
resulting from such proceedings would not have a material adverse effect on
Ponchatoula's financial statements.
NOTE 20--CONCENTRATIONS OF CREDIT--
All of Ponchatoula's business activities are with customers in Ponchatoula's
market area, which consists primarily of Tangipahoa Parish. The majority of such
customers are depositors of Ponchatoula. The concentrations of credit by type of
loan are shown in Note 3. Ponchatoula generally originates single-family
residential loans within its primary lending area. It is also active in
originating secured consumer loans to customers, primarily automobile and home
equity loans.
NOTE 21--THE CONVERSION--
On February 25, 1998, the Board of Directors of Ponchatoula and the Company
adopted a Plan of Conversion and Agreement and Plan of Reorganization (the
Plan). Pursuant to the Plan, (1) the Company, which owns approximately 75.2% of
Ponchatoula, will convert from mutual to stock form and simultaneously merge
into Ponchatoula, with Ponchatoula being the surviving entity; (2) Ponchatoula
will then merge into an interim institution (Interim) to be formed as a wholly
owned subsidiary of Homestead Bancorp, Inc., a newly formed Louisiana
corporation formed in connection with the reorganization, with Ponchatoula being
the surviving entity; and (3) the outstanding shares of Ponchatoula's common
stock (other than those held by the Company, which will be canceled) will be
converted into shares of common stock of Homestead Bancorp, Inc. Homestead
Bancorp, Inc. will then offer for sale pursuant to the Plan additional shares
equal to 75.2% of the common shares of Homestead Bancorp, Inc. Consummation of
the Plan is subject to (i) the approval of the members of the Company, (ii) the
stockholders of Ponchatoula and (iii) various regulatory agencies.
Pursuant to the Plan, shares of Homestead Bancorp, Inc.' s common stock are
expected to be offered initially for subscription by eligible members of the
Company and certain other persons as of specified dates subject to various
subscription priorities as provided in the Plan. The common stock will be
offered at a price to be determined by the Board of Directors based upon an
appraisal to be made by an independent appraisal firm. The exact number of
shares to be offered will be determined by the Board of Directors in conjunction
with the determination of the price at which the shares will be sold. At least
the minimum number of shares offered in the conversion must be sold. Any stock
not purchased in the subscription offering will be sold in a community offering
expected to the commenced simultaneously with the subscription offering or, if
necessary, in a syndicated community offering.
The Plan provides that when the conversion is completed, a "Liquidation
Account" will be established in an amount equal to the greater of (1) the
retained earnings of Ponchatoula as of March 31, 1994 or (2) 75.2% of
Ponchatoula's total stockholders' equity as reflected in its latest statement of
financial condition in the final prospectus utilized in the conversion. The
Liquidation Account is established to provide a limited priority claim to the
assets of Ponchatoula to qualifying depositors as of specified dates (Eligible
Account Holders and Supplemental Eligible Account Holders) who continue to
maintain deposits in Ponchatoula after the conversion. In the unlikely event of
a complete liquidation of Ponchatoula, and only in such an event, Eligible
Account Holders and Supplemental Eligible Account Holders would receive from the
Liquidation Account a liquidation distribution based on their proportionate
share of the then total remaining qualifying deposits.
Current regulations allow Ponchatoula to pay dividends on its stock after
the conversion if its regulatory capital would not thereby be reduced below the
amount then required for the aforementioned Liquidation Account. Also, capital
distribution regulations limit Ponchatoula's ability to make capital
distributions which include dividends, stock redemptions or repurchases,
cash-out mergers, interest payments on certain convertible debt, and other
transactions charged to the capital account based on their capital level and
supervisory condition. Federal regulations also preclude any repurchase of the
stock of Ponchatoula or its holding company for three years after the
conversion, except for repurchases of qualifying shares of a director and
repurchases pursuant to an offer made on a pro-rate basis to all stockholders
and with prior approval of the Office of Thrift Supervision or pursuant to an
open-market stock repurchase program that complies with certain regulatory
criteria. Ponchatoula has retained the services of both a marketing firm and
legal counsel for the specific purpose of implementing the Plan. Costs relating
to the conversion will be deferred and, upon conversion, such costs and any
additional costs will be charged against the proceeds from the sale of stock. As
of December 31, 1997 (unaudited), there were no deferred costs related to the
conversion. If the conversion is not completed, deferred costs will be charged
to operations.
F-21
<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 the Company, the Mutual Holding Company, Ponchatoula or Trident.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby to any person in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful 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 the Company or Ponchatoula since any of the dates as of
which information is furnished herein or since the date hereof.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary......................................... 6
Selected Financial and Other Data............... 22
Risk Factors.................................... 24
Proposed Management Purchases................... 34
Use of Proceeds................................. 35
Dividend Policy................................. 37
Market for Common Stock......................... 38
Regulatory Capital.............................. 39
Capitalization.................................. 41
Pro Forma Data.................................. 43
Statements of Income............................ 48
Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................. 49
Business ....................................... 62
Regulation...................................... 87
Taxation........................................ 99
Management ..................................... 102
The Conversion ................................. 115
Restrictions on Acquisition of the
Company and Ponchatoula....................... 141
Description of Capital Stock of the Company......151
Experts..........................................152
Legal Matters....................................152
Additional Information...........................152
Index to Financial Statements....................154
</TABLE>
Until ___________ __, 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. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1,285,170 Shares
HOMESTEAD
BANCORP, INC.
(Proposed Holding Company for
Ponchatoula Homestead Savings, F.A.)
COMMON STOCK
---------------------
PROSPECTUS
---------------------
TRIDENT SECURITIES, INC.
May __, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution (1).
<TABLE>
<CAPTION>
<S> <C>
SEC filing fees.......................................... $ 4,461
OTS filing fees.......................................... 8,400
Nasdaq filing fees....................................... 6,512
Printing, postage and mailing............................ 70,000
Legal fees............................................... 95,000
Underwriter's legal fees and out-of-pocket expenses...... 37,500
Blue Sky filing fees and expenses........................ 18,000
Accounting fees.......................................... 35,000
Appraiser's fees and expenses, including business plan... 35,000
Conversion agent fees and expenses....................... 7,500
Transfer agent and stock certificates.................... 7,500
Miscellaneous............................................ 25,127
--------
Total(1)............................................ $350,000
--------
--------
</TABLE>
- -----------------
(1) Does not include the marketing fees to be paid to Trident Securities, which
will be based on the amount of common stock sold. The marketing fees are
estimated to range from $71,179 to $97,571 at the minimum and maximum of the
Estimated Valuation Range.
Item 14. Indemnification of Directors and Officers.
In accordance with the Business Corporation Law of the State of Louisiana,
Article 8 of the Corporation's Articles of Incorporation provide as follows:
Article 8. Indemnification, etc. of Officers, Directors, Employees and
Agents.
A. Personal Liability of Directors and Officers. A director or officer
of the Corporation shall not be personally liable for monetary damages for any
action taken, or any failure to take any action, as a director or officer except
to the extent that by law a director's or officer's liability for monetary
damages may not be limited.
B. Indemnification. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in the right of
the Corporation, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a
II-1
<PAGE>
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding to the full extent
permissible under Louisiana law.
C. Advancement of Expenses. Reasonable expenses incurred by an officer,
director, employee or agent of the Corporation in defending an action, suit or
proceeding described in Section B of this Article 8 may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding if authorized by the board of directors (without regard to whether
participating members thereof are parties to such action, suit or proceeding),
upon receipt of an undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that the person is not entitled to
be indemnified by the Corporation.
D. Other Rights. The indemnification and advancement of expenses
provided by or pursuant to this Article 8 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, insurance or other agreement, vote of
stockholders or directors (regardless of whether directors authorizing such
indemnification are beneficiaries thereof) or otherwise, both as to actions in
their official capacity and as to actions in another capacity while holding an
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
E. Insurance. The Corporation shall have the power to purchase and
maintain insurance or other similar arrangement on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture or other enterprise,
against any liability asserted against or incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article 8.
F. Security Fund; Indemnity Agreements. By action of the Board of
Directors (notwithstanding their interest in the transaction), the Corporation
may create and fund a trust fund or other fund or form of self-insurance
arrangement of any nature, and may enter into agreements with its officers,
directors, employees and agents for the purpose of securing or insuring in any
manner its obligation to indemnify or advance expenses provided for in this
Article 8.
G. Modification. The duties of the Corporation to indemnify and to
advance expenses to any person as provided in this Article 8 shall be in the
nature of a contract between the Corporation and each such person, and no
amendment or repeal of any provision of this Article 8, and no amendment or
termination of any trust or other fund or form of self-insurance arrangement
created pursuant to Section F of this Article 8, shall
II-2
<PAGE>
alter to the detriment of such person the right of such person to the advance
of expenses or indemnification related to a claim based on an act or failure
to act which took place prior to such amendment, repeal or termination.
H. Proceedings Initiated by Indemnified Persons. Notwithstanding any
other provision of this Article 8, the Corporation shall not indemnify a
director, officer, employee or agent for any liability incurred in an action,
suit or proceeding initiated (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of or
participation in the action, suit or proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of the directors
in office.
Item 15. Recent Sales of Unregistered Securities
Not applicable.
Item 16. Exhibits and Financial Statements Schedules
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) List of Exhibits (filed herewith unless otherwise noted)
<TABLE>
<CAPTION>
<S> <C>
1.1 Engagement Letter dated February 25, 1998 with Trident Securities, Inc.
1.2* Form of Agency Agreement with Trident Securities, Inc.
2.1 Plan of Conversion and Agreement and Plan of Reorganization
3.1 Articles of Incorporation of Homestead Bancorp, Inc.
3.2 Bylaws of Homestead Bancorp, Inc.
4.1 Form of Stock Certificate of Homestead Bancorp, Inc.
5.0 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. regarding legality of
securities
8.1 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. regarding federal income
tax consequences
8.2 Opinion of Hannis T. Bourgeois, L.L.P. regarding Louisiana income tax
consequences
8.3 Letter of RP Financial, Inc. regarding subscription rights
10.1 1996 Stock Incentive Plan
10.2 1996 Directors' Stock Option Plan
10.3 1996 Management Recognition Plan - Directors
10.4 1996 Management Recognition Plan - Officers
10.5* Form of Employment Agreement between Homestead Bancorp, Inc. and
Ponchatoula Homestead Savings, F.A. and Lawrence C. Caldwell, Jr.
10.6* Form of Employment Agreement between Homestead Bancorp, Inc. and
Ponchatoula Homestead Savings, F.A. and Barbara B. Theriot
23.1 Consent of Hannis T. Bourgeois, L.L.P.
23.2 Consent of RP Financial, Inc.
23.3 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in
Exhibit 5.0)
24.1 Power of Attorney (included in the Signature Page to this Registration
Statement)
99.1 Proxy Statement and form of proxy for solicitation of members of
Ponchatoula Homestead Savings, F.A.
99.2 Proxy Statement and form of proxy for solicitation of stockholders of
Homestead Mutual Holding Company
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
99.3* Appraisal Report of RP Financial, Inc.
99.4* Stock Order Form
99.5* Transmittal Letters
99.6* Question and Answer Brochure
</TABLE>
* To be filed by amendment
(b) Financial Statement Schedules
All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.
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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of the
securities offered would not exceed that which was registered) and any
deviation from the low or high and the estimated maximum offering range may
be reflected in the form of Prospectus filed with the Commission pursuant
to Rule 424 (b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective 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 a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
Offering.
II-4
<PAGE>
The undersigned Registrant hereby undertakes to furnish stock certificates
to or in accordance with the instructions of the respective purchasers of the
Common Stock, so as to make delivery to each purchaser promptly following the
closing under the Plan of Conversion.
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 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 question of 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.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the city of
Ponchatoula, state of Louisiana, on March 25, 1998.
HOMESTEAD MUTUAL HOLDING COMPANY
By: /s/Lawrence C. Caldwell, Jr.
-------------------------------------
Lawrence C. Caldwell, Jr.
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby makes, constitutes and appoints Lawrence C. Caldwell, Jr. his true
and lawful attorney, with full power to sign for each person and in such
person's name and capacity indicated below, and with full power of substitution,
any and all amendments to this Registration Statement, hereby ratifying and
confirming such person's signature as it may be signed by said attorney to any
and all amendments.
<TABLE>
<CAPTION>
Name Title Date
- ---------------------------- ----------------------- -------------------
<S> <C> <C>
/s/Lawrence C. Caldwell, Jr. President and Chief March 25, 1998
- ---------------------------- Executive Officer
Lawrence C. Caldwell, Jr.
/s/Milton J. Schanzbach Chairman of the Board March 25, 1998
- ----------------------------
Milton J. Schanzbach
/s/Barbara B. Theriot Director, Secretary and March 25, 1998
- ---------------------------- Treasurer (principal
Barbara B. Theriot financial and accounting
officer)
/s/John C. Bohning Director March 25, 1998
- ----------------------------
John C. Bohning
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
- ---------------------------- ----------------------- -------------------
<S> <C> <C>
/s/Robert H. Gabriel Director March 25, 1998
- ----------------------------
Robert H. Gabriel
/s/Dennis E. James Director March 25, 1998
- ----------------------------
Dennis E. James
/s/Allen B. Pierson, Jr. Director March 25, 1998
- ----------------------------
Allen B. Pierson, Jr.
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
1.1 Engagement Letter dated February 25, 1998 with Trident Securities,
Inc.
1.2* Form of Agency Agreement with Trident Securities, Inc.
2.1 Plan of Conversion and Agreement and Plan of Reorganization
3.1 Articles of Incorporation of Homestead Bancorp, Inc.
3.2 Bylaws of Homestead Bancorp, Inc.
4.1 Form of Stock Certificate of Homestead Bancorp, Inc.
5.0 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. regarding legality
of securities
8.1 Opinion of Elias, Matz, Tiernan & Herrick L.L.P. regarding federal
income tax consequences
8.2 Opinion of Hannis T. Bourgeois, L.L.P. regarding Louisiana income tax
consequences
8.3 Letter of RP Financial, Inc. regarding subscription rights
10.1 1996 Stock Incentive Plan
10.2 1996 Directors' Stock Option Plan
10.3 1996 Management Recognition Plan - Directors
10.4 1996 Management Recognition Plan - Officers
10.5* Form of Employment Agreement between Homestead Bancorp, Inc. and
Ponchatoula Homestead Savings, F.A. and Lawrence C. Caldwell, Jr.
10.6* Form of Employment Agreement between Homestead Bancorp, Inc. and
Ponchatoula Homestead Savings, F.A. and Barbara B. Theriot
23.1 Consent of Hannis T. Bourgeois, L.L.P.
23.2 Consent of RP Financial, Inc.
23.3 Consent of Elias, Matz, Tiernan & Herrick L.L.P. (included in Exhibit
5.0)
27.0* Financial Data Schedule
24.1 Power of Attorney (included in the Signature Page to this
Registration Statement)
99.1 Proxy Statement and form of proxy for solicitation of stockholders of
Ponchatoula Homestead Savings, F.A.
99.2 Proxy Statement and form of proxy for solicitation of stockholders of
Homestead Mutual Holding Company
99.3* Appraisal Report of RP Financial, Inc.
99.4* Stock Order Form
99.5* Transmittal Letters
99.6* Question and Answer Brochure
* Filed by amendment
<PAGE>
EXHIBIT 1.1
<PAGE>
February 4, 1998
Board of Directors
Ponchatoula Homestead Savings, F.A.
195 North Sixth Street
Ponchatoula, Louisiana 70454
RE: Second Step Mutual Holding Company Reorganization
Gentlemen:
This letter sets forth the terms of the proposed engagement between TRIDENT
SECURITIES, INC. ("TRIDENT") and Ponchatoula Homestead Savings, F.A. (the
"Association") concerning our investment banking services in connection with
the second step mutual holding company reorganization.
TRIDENT is prepared to assist the Association in connection with the offering
of shares of common stock of its to-be-formed stock holding company ("Holding
Company) during the subscription offering and community offering as such terms
will be defined in the Association's proposed Plan of Reorganization. The
specific terms of the services contemplated hereunder shall be set forth in a
definitive sales agency agreement (the "Agreement") between TRIDENT, the
Holding Company and the Association to be executed on the date the prospectus
is declared effective by the appropriate regulatory authorities. The price of
the shares during the subscription offering and community offering will be the
price established by the Holding Company's and the Association's Board of
Directors, based upon an independent appraisal as approved by the appropriate
regulatory authorities, provided such price is mutually acceptable to TRIDENT,
the Holding Company and the Association.
In connection with the subscription offering and community offering, TRIDENT
will act as financial advisor and exercise its best efforts to assist the
Holding Company in the sale of its common stock during the subscription
offering and community offering. Additionally, TRIDENT may enter into
agreements with other National Association of Securities Dealers, Inc. ("NASD")
member firms to act as selected dealers, assisting in the sale of the common
stock. TRIDENT, the Holding Company and the Association will determine the
selected dealers to assist the Holding Company and the Association during the
community offering. At the appropriate time, TRIDENT in conjunction with its
counsel, will conduct an examination of the relevant documents and records of
the Holding Company and the Association as TRIDENT deems necessary and
appropriate. The Holding Company and the Association will make all documents,
records and other information deemed necessary by TRIDENT or its counsel
available to them upon request.
<PAGE>
Board of Directors
February 4, 1998
Page 2
For its services hereunder, TRIDENT will receive the following compensation and
reimbursement from the Holding Company:
1. A commission equal to 1.125% of the aggregate dollar amount of
capital stock sold in the subscription and community offerings, excluding any
shares of conversion stock sold to the Holding Company's and the Association's
directors, officers, employees and the employee benefit plans, and provided
that in no event shall such commission exceed $150,000.
2. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed upon jointly by
TRIDENT, the Holding Company and the Association to reflect market requirements
at the time of the stock allocation in a Syndicated Community Offering.
3. The foregoing fees and commissions are to be payable to TRIDENT at
closing as defined in the Agreement to be entered into between the Association,
the Holding Company and TRIDENT.
4. TRIDENT shall be reimbursed for allocable expenses incurred by it,
including legal fees, whether or not the Plan of Reorganization is consummated.
TRIDENT's out-of-pocket expenses will not exceed $10,000 and its legal fees
will not exceed $27,500. The Association will forward to TRIDENT a check in
the amount of $10,000 as an advance payment to defray the allocable expenses of
TRIDENT.
It further is understood that the Holding Company and the Association will pay
all other expenses of the reorganization including but not limited to their
attorneys' fees, NASD filing fees, and filing and registration fees and fees of
their attorneys relating to any required state securities law filings,
telephone charges, air freight, rental equipment, supplies, transfer agent
charges, fees relating to auditing and accounting and costs of printing all
documents necessary in connection with the foregoing.
For purposes of TRIDENT's obligation to file certain documents and to make
certain representations to the NASD in connection with the reorganization, the
Association warrants that: (a) the Association has not privately placed any
securities within the last 18 months; (b) there have been no material dealings
within the last 12 months between the Association and any NASD member or any
person related to or associated with any such member; (c) none of the officers
or directors of the Association has any affiliation with the NASD; (d) except
as contemplated by this engagement letter with TRIDENT, the Association has no
financial or management consulting contracts outstanding with any other person;
(e) the Association has not granted TRIDENT a right of first refusal with
respect to the underwriting of any future
<PAGE>
Board of Directors
February 4, 1998
Page 3
offering of the Association's or the Holding Company's stock; and (f) there has
been no intermediary between TRIDENT, the Holding Company and the Association
in connection with the public offering of the Holding Company's shares, and no
person is being compensated in any manner for providing such service.
The Association agrees to indemnify and hold harmless TRIDENT and each person,
if any, who controls the firm against all losses, claims, damages or
liabilities, joint or several and all legal or other expenses reasonably
incurred by them in connection with the investigation or defense thereof
(collectively, "Losses"), to which they may become subject under the securities
laws or under the common law, that arise out of or are based upon the
reorganization or the engagement hereunder of TRIDENT. If the foregoing
indemnification is unavailable for any reason, the Association agrees to
contribute to such Losses in the proportion that its financial interest in the
reorganization bears to that of the indemnified parties. If the Agreement is
entered into with respect to the common stock to be issued in the
reorganization, the Agreement will provide for indemnification, which will be
in addition to any rights that TRIDENT or any other indemnified party may have
at common law or otherwise. The indemnification provision of this paragraph
will be superseded by the indemnification provisions of the Agreement entered
into by the Association, the Holding Company and TRIDENT.
This letter is merely a statement of intent and is not a binding legal
agreement except as to paragraph (4) above with regard to the obligation to
reimburse TRIDENT for allocable expenses to be incurred prior to the execution
of the Agreement and the indemnity described in the preceding paragraph. While
TRIDENT and the Association agree in principle to the contents hereof and
propose to proceed promptly, and in good faith, to work out the arrangements
with respect to the proposed offering, any legal obligations between TRIDENT,
the Holding Company and the Association shall be only as set forth in a duly
executed Agreement. Such Agreement shall be in form and content satisfactory
to TRIDENT, the Holding Company and the Association, as well as their counsel,
and TRIDENT's obligations thereunder shall be subject to, among other things,
there being in TRIDENT's opinion no material adverse change in the condition or
obligations of the Association or no market conditions which might render the
sale of the shares by the Holding Company hereby contemplated inadvisable.
<PAGE>
Board of Directors
February 4, 1998
Page 4
Please acknowledge your agreement to the foregoing by signing below and
returning to TRIDENT one copy of this letter along with the advance payment of
$10,000. This proposal is open for your acceptance for a period of thirty (30)
days from the date hereof.
Yours very truly,
TRIDENT SECURITIES, INC.
By: /s/ R. Lee Burrows, Jr.
------------------------------
R. Lee Burrows, Jr.
Managing Director
Agreed and accepted to this 25th day
of February, 1998
PONCHATOULA HOMESTEAD SAVINGS, F.A.
By: /s/ Lawrence C. Caldwell, Jr.
----------------------------------------
Lawrence C. Caldwell, Jr.
President
<PAGE>
EXHIBIT 2.1
PLAN OF CONVERSION
of
HOMESTEAD MUTUAL HOLDING COMPANY
and
AGREEMENT AND PLAN OF REORGANIZATION
between
HOMESTEAD BANCORP, INC.
and
PONCHATOULA HOMESTEAD SAVINGS, F.A.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
Number Page
- ------- ----
<S> <C>
1. Introduction............................................................................. 1
2. Definitions.............................................................................. 3
3. General Procedure for Conversion and Reorganization...................................... 8
4. Total Number of Shares and Purchase Price of
Conversion Stock...................................................................... 11
5. Subscription Rights of Eligible Account Holders.......................................... 12
6. Subscription Rights of Tax-Qualified Employee
Stock Benefit Plans................................................................... 13
7. Subscription Rights of Supplemental Eligible Account Holders............................. 13
8. Subscription Rights of Other Members..................................................... 14
9. Subscription Rights of Directors, Officers and Employees................................. 15
10. Subscription Rights of Public Stockholders............................................... 15
11. Community Offering, Syndicated Community Offering and
Other Offerings......................................................................... 15
12. Limitations on Subscriptions and Purchases of Conversion Stock........................... 17
13. Timing of Subscription Offering; Manner of Exercising
Subscription Rights and Order Forms..................................................... 19
14. Payment for Conversion Stock............................................................. 21
15. Account Holders in Nonqualified States or in Foreign Countries........................... 22
16. Voting Rights of Stockholders............................................................ 23
17. Liquidation Account...................................................................... 23
18. Transfer of Deposit Accounts............................................................. 24
19. Requirements Following Conversion and Reorganization for
Registration, Market Making and Stock Exchange Listing.................................. 25
20. Directors and Officers of the Association................................................ 25
21. Requirements for Stock Purchases by Directors
and Officers Following the Conversion and Reorganization................................ 25
22. Restrictions on Transfer of Stock........................................................ 26
23. Restrictions on Acquisition of Stock of the Holding Company.............................. 26
24. Tax Rulings or Opinions.................................................................. 27
25. Stock Compensation Plans................................................................. 27
26. Dividend and Repurchase Restrictions on Stock............................................ 28
27. Payment of Fees to Brokers............................................................... 28
28. Dissenting Stockholders.................................................................. 28
29. Effective Date........................................................................... 29
30. Amendment or Termination of the Plan..................................................... 29
31. Interpretation of the Plan............................................................... 29
</TABLE>
Annex A - Plan of Merger between the Mutual Holding Company and the Association
Annex B - Plan of Merger between the Association, the Holding Company and
Interim
<PAGE>
1. INTRODUCTION.
For purposes of this section, all capitalized terms have the meanings
ascribed to them in Section 2.
On August 31, 1994, Ponchatoula Homestead Association, a
Louisiana-chartered mutual savings association ("Ponchatoula"), reorganized into
the mutual holding company form of organization. To accomplish this transaction,
Ponchatoula organized a federally-chartered, stock savings association known as
Ponchatoula Homestead Savings, F.A. (the "Association") as a wholly-owned
subsidiary. Ponchatoula then transferred substantially all of its assets and
liabilities to the Association in exchange for 456,240 shares of Association
Common Stock, and reorganized itself into a federally-chartered mutual holding
company known as Homestead Mutual Holding Company. The Association
simultaneously sold 143,760 shares of Association Common Stock to depositors of
the Association, employee stock benefit plans of the Association, directors,
officers and employees of the Association and members of the general public. As
of the date hereof, after taking into account the issuance of 6,345 shares
pursuant to stock benefit plans, the Mutual Holding Company and the other
Stockholders own an aggregate of 75.2% and 24.8% of the outstanding Association
Common Stock, respectively.
The Boards of Directors of the Mutual Holding Company and the
Association believe that a conversion of the Mutual Holding Company to stock
form and reorganization of the Association pursuant to this Plan of Conversion
is in the best interests of the Mutual Holding Company and the Association, as
well as the best interests of their respective Members and Stockholders. The
Boards of Directors determined that this Plan of Conversion equitably provides
for the interests of Members through the granting of subscription rights and the
establishment of a liquidation account. The Conversion and Reorganization will
result in the Association being wholly owned by a stock holding company, which
is a more common structure and form of ownership than a mutual holding company.
In addition, the Conversion and Reorganization will result in the raising of
additional capital for the Association and the Holding Company and should result
in a more active and liquid market for the Holding Company Common Stock than
currently exists for the Association Common Stock, although there can be no
assurances that this will be the case. Finally, the Conversion and
Reorganization has been structured to re-unite the accumulated earnings and
profits tax attribute retained by the Mutual Holding Company with the retained
earnings of the Association through a tax-free reorganization.
If the Association had undertaken a standard conversion involving the
formation of a stock holding company in 1994, applicable OTS regulations would
have required a greater amount of Association Common Stock to be sold than the
$1.2 million of net proceeds raised in connection with the formation of the
Mutual Holding Company. In addition, if a standard conversion had been conducted
in 1994, management of the Association believed that it may have been difficult
to prudently invest in a timely manner the larger amount of capital that would
have been raised, when compared to the net proceeds raised in connection with
the formation of the Mutual Holding Company. A standard conversion in 1994 also
would have immediately eliminated all aspects of the mutual form of
organization.
<PAGE>
Subsequent to the formation of the Mutual Holding Company, there have
been certain changes in the policies of the OTS relating to mutual holding
companies. In addition, market conditions for the stocks of savings institutions
and their holding companies have improved. In light of the foregoing, the Boards
of Directors of the Mutual Holding Company and the Association believe that it
is in the best interests of such companies and their respective Members and
Stockholders to raise additional capital at this time, and that the most
feasible way to do so is through the Conversion and Reorganization.
In connection with the Conversion and Reorganization, the Association
will form a new first-tier, wholly-owned subsidiary known as Homestead Bancorp,
Inc., which will become the Holding Company upon consummation of the Conversion
and Reorganization. The Holding Company will in turn form Interim as a
wholly-owned subsidiary. As described in more detail in Section 3, the Mutual
Holding Company will convert from the mutual form to a federal interim stock
savings association and simultaneously merge with and into the Association
pursuant to the Plan of Merger included as Annex A hereto, pursuant to which the
Mutual Holding Company will cease to exist and a liquidation account will be
established by the Association for the benefit of depositor Members as of
specified dates, and Interim will then merge with and into the Association
pursuant to the Plan of Merger included as Exhibit B hereto, pursuant to which
the Association will become a wholly-owned subsidiary of the Holding Company. In
connection therewith, each share of Association Common Stock outstanding
immediately prior to the effective time thereof (other than Dissenting Shares,
if any) shall be automatically converted, without further action by the holder
thereof, into and become the right to receive shares of Holding Company Common
Stock based on the Exchange Ratio, plus cash in lieu of any fractional share
interest.
In connection with the Conversion and Reorganization, the Holding
Company will offer shares of Conversion Stock in the Offerings as provided
herein. Shares of Conversion Stock will be offered in a Subscription Offering in
descending order of priority to Eligible Account Holders, Tax-Qualified Employee
Stock Benefit Plans, Supplemental Eligible Account Holders, Other Members,
Directors, Officers and Employees and Public Stockholders. Any shares of
Conversion Stock remaining unsold after the Subscription Offering will be
offered for sale to the public through a Community Offering and/or Syndicated
Community Offering, as determined by the Boards of Directors of the Holding
Company and the Association in their sole discretion.
The Conversion and Reorganization is intended to provide a larger
capital base to support the Association's lending and investment activities and
thereby enhance the Association's capabilities to serve the borrowing and other
financial needs of the communities it serves. The use of the Holding Company
will provide greater organizational flexibility and possible diversification.
This Plan was adopted by the Boards of Directors of the Mutual Holding
Company and the Association on February 25, 1998.
2
<PAGE>
This Plan is subject to the approval of the OTS and must be adopted by
(1) at least a majority of the total number of votes eligible to be cast by
Voting Members of the Mutual Holding Company at the Special Meeting and (2)
holders of at least two-thirds of the outstanding Association Common Stock at
the Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Conversion and Reorganization on the approval of the Plan by
at least a majority of the votes cast, in person or by proxy, by the Public
Stockholders at the Stockholders' Meeting.
After the Conversion and Reorganization, the Association will continue
to be regulated by the OTS, as its chartering authority, and by the FDIC, which
insures the Association's deposits. In addition, the Association will continue
to be a member of the Federal Home Loan Bank System and all insured savings
deposits will continue to be insured by the FDIC up to the maximum provided by
law.
2. DEFINITIONS.
As used in this Plan, the terms set forth below have the following
meaning:
2.1 Actual Purchase Price means the price per share at which the
Conversion Stock is ultimately sold by the Holding Company in the Offerings in
accordance with the terms hereof.
2.2 Affiliate means a Person who, directly or indirectly, through one
or more intermediaries, controls or is controlled by or is under common control
with the Person specified.
2.3 Associate, when used to indicate a relationship with any Person,
means (i) a corporation or organization (other than the Mutual Holding Company,
the Association, a majority-owned subsidiary of the Association or the Holding
Company) of which such Person is a director, officer or partner or is, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities, (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity, provided, however, that such term shall not
include any Tax-Qualified Employee Stock Benefit Plan of the Holding Company or
the Association in which such Person has a substantial beneficial interest or
serves as a trustee or in a similar fiduciary capacity, and (iii) any relative
or spouse of such Person, or any relative of such spouse, who has the same home
as such Person or who is a director or officer of the Holding Company or the
Association or any of the subsidiaries of the foregoing.
2.4 Association means Ponchatoula Homestead Savings, F.A., a
federally-chartered savings and loan association.
2.5 Association Merger means the merger of Interim with and into the
Association pursuant to the Plan of Merger included as Annex B hereto.
3
<PAGE>
2.6 Association Common Stock means the common stock of the Association,
par value $.10 per share, which stock is not and will not be insured by the FDIC
or any other governmental authority.
2.7 Code means the Internal Revenue Code of 1986, as amended.
2.8 Community Offering means the offering for sale by the Holding
Company of any shares of Conversion Stock not subscribed for in the Subscription
Offering to such Persons within or without the State of Louisiana as may be
selected by the Holding Company and the Association in their sole discretion and
to whom a copy of the Prospectus is delivered by or on behalf of the Holding
Company.
2.9 Control (including the terms "controlling," "controlled by," and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
2.10 Conversion and Reorganization means (i) the conversion of the
Mutual Holding Company from mutual form to a federal interim stock savings
association and the subsequent Mutual Holding Company Merger, pursuant to which
the Mutual Holding Company will cease to exist, (ii) the Association Merger,
pursuant to which the Association will become a wholly-owned subsidiary of the
Holding Company and, in connection therewith, each share of Association Common
Stock outstanding immediately prior to the effective time thereof (other than
Dissenting Shares, if any) shall automatically be converted, without further
action by the holder thereof, into and become the right to receive shares of
Holding Company Common Stock based on the Exchange Ratio, plus cash in lieu of
any fractional share interest, and (iii) the issuance of Conversion Stock by the
Holding Company in the Offerings as provided herein, which will increase the
number of shares of Holding Company Common Stock outstanding and the
capitalization of the Holding Company and the Association.
2.11 Conversion Stock means the Holding Company Common Stock to be
issued and sold in the Offerings pursuant to the Plan of Conversion.
2.12 Deposit Account means savings and demand accounts, including
passbook accounts, money market deposit accounts and negotiable order of
withdrawal accounts, and certificates of deposit and other authorized accounts
of the Association held by a Member.
2.13 Director, Officer and Employee means the terms as applied
respectively to any person who is a director, officer or employee of the Mutual
Holding Company, the Association or any subsidiary thereof.
2.14 Dissenting Shares shall have the meaning set forth in Section 28
hereof.
4
<PAGE>
2.15 Eligible Account Holder means 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 to be
established pursuant to Section 17 hereof.
2.16 Eligibility Record Date means the date for determining Qualifying
Deposits of Eligible Account Holders and is the close of business on December
31, 1996.
2.17 Estimated Price Range means the range of the estimated aggregate
pro forma market value of the total number of shares of Conversion Stock to be
issued in the Offerings, as determined by the Independent Appraiser in
accordance with Section 4 hereof.
2.18 Exchange Ratio means the rate at which shares of Holding Company
Common Stock will be exchanged for shares of Association Common Stock held by
the Public Stockholders in connection with the Association Merger. The exact
rate shall be determined by the Mutual Holding Company and the Association in
order to ensure that upon consummation of the Conversion and Reorganization the
Public Stockholders will own in the aggregate approximately the same percentage
of the Holding Company Common Stock to be outstanding upon completion of the
Conversion and Reorganization as the percentage of Association Common Stock
owned by them in the aggregate immediately prior to consummation of the
Conversion and Reorganization, before giving effect to (a) cash paid in lieu of
any fractional interests of Holding Company Common Stock, (b) any shares of
Conversion Stock purchased by the Public Stockholders or Tax-Qualified Employee
Stock Benefit Plans in the Offerings, and (c) any Dissenting Shares (as defined
in Section 28 hereof).
2.19 Exchange Shares mean the shares of Holding Company Common Stock to
be issued to the Public Stockholders in connection with the Association Merger.
2.20 FDIC means the Federal Deposit Insurance Corporation or any
successor thereto.
2.21 Holding Company means Homestead Bancorp, Inc., a corporation to be
organized under the laws of the State of Louisiana. Such corporation will be
initially formed as a first-tier, wholly-owned subsidiary of the Association.
Upon completion of the Conversion and Reorganization, the Holding Company shall
hold all of the outstanding capital stock of the Association.
2.22 Holding Company Common Stock means the common stock of the Holding
Company, par value $.01 per share, which stock cannot and will not be insured by
the FDIC or any other governmental authority.
5
<PAGE>
2.23 Independent Appraiser means the independent investment banking or
financial consulting firm retained by the Holding Company and the Association to
prepare an appraisal of the estimated pro forma market value of the Conversion
Stock.
2.24 Initial Purchase Price means the price per share to be paid
initially by Participants for shares of Conversion Stock subscribed for in the
Subscription Offering and by Persons for shares of Conversion Stock ordered in
the Community Offering and/or Syndicated Community Offering.
2.25 Interim means Ponchatoula Interim Savings Association, which will
be formed as a first-tier, wholly-owned subsidiary of the Holding Company to
facilitate the Association Merger.
2.26 Member means any Person qualifying as a member of the Mutual
Holding Company in accordance with its mutual charter and bylaws and the laws of
the United States.
2.27 Mutual Holding Company means Homestead Mutual Holding Company.
2.28 Mutual Holding Company Merger means the merger of the Mutual
Holding Company (following its conversion into a federal interim stock savings
association) with and into the Association pursuant to the Plan of Merger
included as Annex A hereto.
2.29 Offerings mean the Subscription Offering, the Community Offering
and the Syndicated Community Offering.
2.30 Officer means the chairman of the board of directors, president,
chief executive officer, vice-president, secretary, treasurer or principal
financial officer, comptroller or principal accounting officer and any other
person performing similar functions with respect to any organization whether
incorporated or unincorporated.
2.31 Order Form means the form or forms to be provided by the Holding
Company, containing all such terms and provisions as set forth in Section 13
hereof, to a Participant or other Person by which Conversion Stock may be
ordered in the Offerings.
2.32 Other Member means a Voting Member who is not an Eligible Account
Holder or a Supplemental Eligible Account Holder.
2.33 OTS means the Office of Thrift Supervision or any successor
thereto.
2.34 Participant means any Eligible Account Holder, Tax-Qualified
Employee Stock Benefit Plan, Supplemental Eligible Account Holder, Other Member,
Director, Officer and Employee and Public Stockholder.
6
<PAGE>
2.35 Person means an individual, a corporation, a limited liability
company, a partnership, a limited liability partnership, an association, a joint
stock company, a trust, an unincorporated organization or a government or any
political subdivision thereof.
2.36 Plan and Plan of Conversion mean this Plan of Conversion and
Agreement and Plan of Reorganization as adopted by the Boards of Directors of
the Mutual Holding Company and the Association and any amendment hereto approved
as provided herein. The Board of Directors of the Holding Company shall adopt
this Plan as soon as practicable following its organization, and the Board of
Directors of Interim shall adopt the Plan of Merger included as Annex B hereto
as soon as practicable following its organization.
2.37 Primary Parties mean the Mutual Holding Company, the Association
and the Holding Company.
2.38 Prospectus means the one or more documents to be used in offering
the Conversion Stock in the Offerings.
2.39 Public Stockholders mean those Persons who own shares of
Association Common Stock, excluding the Mutual Holding Company, as of the Voting
Record Date.
2.40 Qualifying Deposit means the aggregate balance of all Deposit
Accounts in the Association 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.
2.41 SEC means the Securities and Exchange Commission.
2.42 Special Meeting means the Special Meeting of Members of the Mutual
Holding Company called for the purpose of submitting this Plan to the Members
for their approval, including any adjournments of such meeting.
2.43 Stockholders mean those Persons who own shares of Association
Common Stock.
2.44 Stockholders' Meeting means the annual or special meeting of
Stockholders of the Association called for the purpose of submitting this Plan
to the Stockholders for their approval, including any adjournments of such
meeting.
2.45 Subscription Offering means the offering of the Conversion Stock
to Participants.
2.46 Subscription Rights mean nontransferable rights to subscribe for
Conversion Stock granted to Participants pursuant to the terms of this Plan.
7
<PAGE>
2.47 Supplemental Eligible Account Holder means any Person, except
Directors and Officers of the Association and their Associates, holding a
Qualifying Deposit at the close of business on the Supplemental Eligibility
Record Date.
2.48 Supplemental Eligibility Record Date, if applicable, means the
date for determining Qualifying Deposits of Supplemental Eligible Account
Holders and shall be required if the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Application for
Conversion filed by the Mutual Holding Company prior to approval of such
application by the OTS. If applicable, the Supplemental Eligibility Record Date
shall be the last day of the calendar quarter preceding OTS approval of the
Application for Conversion submitted by the Mutual Holding Company pursuant to
this Plan of Conversion.
2.49 Syndicated Community Offering means the offering for sale by a
syndicate of broker-dealers to the general public of shares of Conversion Stock
not purchased in the Subscription Offering and the Community Offering.
2.50 Tax-Qualified Employee Stock Benefit Plan means 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 is established
for the benefit of the employees of the Holding Company and/or the Association
and which, with its related trust, meets the requirements to be "qualified"
under Section 401 of the Code as from time to time in effect. A
"Non-Tax-Qualified Employee Stock Benefit Plan" is any defined benefit plan or
defined contribution stock benefit plan which is not so qualified.
2.51 Voting Member means a Person who at the close of business on the
Voting Record Date is entitled to vote as a Member of the Mutual Holding Company
in accordance with its mutual charter and bylaws.
2.52 Voting Record Date means the date or dates for determining the
eligibility of Members to vote at the Special Meeting and of Stockholders to
vote at the Stockholders' Meeting, as applicable.
3. GENERAL PROCEDURE FOR CONVERSION AND REORGANIZATION.
(a) After the Association's organization of the Holding Company and the
receipt of all requisite regulatory approvals, the Holding Company will form
Interim as a first-tier, wholly-owned subsidiary of the Holding Company, and the
Board of Directors of Interim shall adopt the Plan of Merger included as Annex B
hereto by at least a two-thirds vote. In addition, the Holding Company shall
approve such Plan of Merger in its capacity as the sole stockholder of Interim.
8
<PAGE>
(b) An application for the Conversion and Reorganization, including the
Plan and all other requisite material (the "Application for Conversion"), shall
be submitted to the OTS for approval. The Mutual Holding Company and the
Association also will cause notice of the adoption of the Plan by the Boards of
Directors of the Mutual Holding Company and the Association to be given by
publication in a newspaper having general circulation in each community in which
an office of the Association is located and will cause copies of the Plan to be
made available at each office of the Mutual Holding Company and the Association
for inspection by Members and Stockholders. The Mutual Holding Company and the
Association will again cause to be published, in accordance with the
requirements of applicable regulations of the OTS, a notice of the filing with
the OTS of an application to convert the Mutual Holding Company from mutual to
stock form and will post the notice of the filing for the Application for
Conversion in each of their offices.
(c) Promptly following receipt of requisite approval of the OTS, this
Plan will be submitted to the Members for their consideration and approval at
the Special Meeting. The Mutual Holding Company may, at its option, mail to all
Members as of the Voting Record Date, at their last known address appearing on
the records of the Mutual Holding Company and the Association, a proxy statement
in either long or summary form describing the Plan which will be submitted to a
vote of the Members at the Special Meeting. The Holding Company also shall mail
to all such Members (as well as other Participants) either a Prospectus and
Order Form for the purchase of Conversion Stock 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 Section 15 hereof. In
addition, all such Members will receive, or be given the opportunity to request
by returning a postage-prepaid card which will be distributed with the proxy
statement, letter or other written communication, a copy of the articles of
incorporation and bylaws of the Holding Company. The Plan must be approved by
the affirmative vote of at least a majority of the total number of votes
eligible to be cast by Voting Members at the Special Meeting.
(d) Subscription Rights to purchase shares of Conversion Stock will be
issued without payment therefor to Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans, Supplemental Eligible Account Holders, if any,
Other Members, Directors, Officers and Employees and Public Stockholders, as set
forth in Sections 5, 6, 7, 8, 9 and 10 hereof.
(e) The Association shall file preliminary proxy materials with the OTS
in order to seek the approval of the Plan by its Stockholders. Promptly
following clearance of such proxy materials and the receipt of any other
requisite approval of the OTS, the Association will mail definitive proxy
materials to all Stockholders as of the Voting Record Date, at their last known
address appearing on the records of the Association, for their consideration and
approval of this Plan at the Stockholders' Meeting. The Plan must be approved by
the holders of at least two-thirds of the outstanding Association Common Stock
as of the Voting Record Date. In addition, the Primary Parties have conditioned
the consummation of the
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Conversion and Reorganization on the approval of the Plan by at least a majority
of the votes cast, in person or by proxy, by the Public Stockholders at the
Stockholders' Meeting.
(f) The Holding Company shall submit or cause to be submitted an
Application H-(e)1 or H-(e)1-S to the OTS for approval of the acquisition of the
Association. Such application also shall include an application to form Interim.
In addition, an application to merge the Mutual Holding Company (following its
conversion into a federal interim stock savings association) and the Association
and an application to merge Interim and the Association shall be filed with the
OTS, either as exhibits to the Application H-(e)1 or H-(e)1-S or separately. All
notices required to be published in connection with such applications shall be
published at the times required.
(g) The Holding Company shall file a Registration Statement with the
SEC to register the Holding Company Common Stock to be issued in the Conversion
and Reorganization under the Securities Act of 1933, as amended, and shall
register such Holding Company Common Stock under any applicable state securities
laws. Upon registration and after the receipt of all required regulatory
approvals, the Conversion Stock shall be first offered for sale in a
Subscription Offering to Eligible Account Holders, Tax-Qualified Employee Stock
Benefit Plans, Supplemental Eligible Account Holders, if any, Other Members,
Directors, Officers and Employees and Public Stockholders as of the Voting
Record Date. It is anticipated that any shares of Conversion Stock remaining
unsold after the Subscription Offering will be sold through a Community Offering
and/or a Syndicated Community Offering. The purchase price per share for the
Conversion Stock shall be a uniform price determined in accordance with Section
4 hereof. The Holding Company shall contribute to the Association an amount of
the net proceeds received by the Holding Company from the sale of Conversion
Stock as shall be determined by the Boards of Directors of the Holding Company
and the Association and as shall be approved by the OTS.
(h) The effective date of the Conversion and Reorganization shall be
the date set forth in Section 29 hereof. Upon the effective date, the following
transactions shall occur:
(i) The Mutual Holding Company shall convert from a mutual
holding company to a federal interim stock savings association and
simultaneously merge with and into the Association in the Mutual
Holding Company Merger, with the Association being the surviving
institution. As a result of the Mutual Holding Company Merger, (x) the
shares of Association Common Stock held by the Mutual Holding Company
(following its conversion to a federal interim stock savings
association) shall be extinguished and (y) Members of the Mutual
Holding Company will be granted interests in the liquidation account to
be established by the Association pursuant to Section 17 hereof.
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(ii) Interim shall merge with and into the Association
pursuant to the Association Merger, with the Association being the
surviving institution. As a result of the Association Merger, (x) the
shares of Holding Company Common Stock held by the Association shall be
extinguished; (y) the shares of Association Common Stock held by the
Public Stockholders (other than any Dissenting Shares, as defined in
Section 28 hereof) shall be converted into the right to receive shares
of Holding Company Common Stock based upon the Exchange Ratio, plus
cash in lieu of any fractional share interest based upon the Actual
Purchase Price; and (z) the shares of common stock of Interim held by
the Holding Company shall be converted into shares of Association
Common Stock on a one-for-one basis, with the result that the
Association shall become a wholly-owned subsidiary of the Holding
Company. In addition, as a result of the Association Merger, options to
purchase shares of Association Common Stock which are outstanding
immediately prior to consummation of the Conversion and Reorganization
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.
(iii) The Holding Company shall sell the Conversion Stock in
the Offerings, as provided herein.
(i) The Primary Parties may retain and pay for the services of
financial and other advisors and investment bankers to assist in connection with
any or all aspects of the Conversion and Reorganization, including in connection
with the Offerings the payment of fees to brokers and investment bankers for
assisting Persons in completing and/or submitting Order Forms. All fees,
expenses, retainers and similar items shall be reasonable.
4. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK.
(a) The aggregate price at which shares of Conversion Stock shall be
sold in the Offerings shall be based on a pro forma valuation of the aggregate
market value of the Conversion Stock prepared by the Independent Appraiser. The
valuation shall be based on financial information relating to the Primary
Parties, market, financial and economic conditions, a comparison of the Primary
Parties with selected publicly-held financial institutions and holding companies
and with comparable financial institutions and holding companies and such other
factors as the Independent Appraiser may deem to be important. The valuation
shall be stated in terms of an Estimated Price Range, the maximum of which shall
generally be no more than 15% above the average of the minimum and maximum of
such price range and the minimum of which shall generally be no more than 15%
below such average. The valuation shall be updated during the Conversion and
Reorganization as market and financial conditions warrant and as may be required
by the OTS.
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(b) Based upon the independent valuation, the Boards of Directors of
the Primary Parties shall fix the Initial Purchase Price and the number (or
range) of shares of Conversion Stock to be offered in the Subscription Offering,
Community Offering and/or Syndicated Community Offering. The Actual Purchase
Price and the total number of shares of Conversion Stock to be issued in the
Offerings shall be determined by the Boards of Directors of the Primary Parties
upon conclusion of the Offerings in consultation with the Independent Appraiser
and any financial advisor or investment banker retained by the Primary Parties
in connection therewith.
(c) Subject to the approval of the OTS, the Estimated Price Range may
be increased or decreased to reflect market, financial and economic conditions
prior to completion of the Conversion and Reorganization, and under such
circumstances the Primary Parties may increase or decrease the total number of
shares of Conversion Stock to be issued in the Conversion and Reorganization to
reflect any such change. Notwithstanding anything to the contrary contained in
this Plan, no resolicitation of subscribers shall be required and subscribers
shall not be permitted to modify or cancel their subscriptions unless the gross
proceeds from the sale of the Conversion Stock issued in the Conversion and
Reorganization are less than the minimum or more than 15% above the maximum of
the Estimated Price Range set forth in the Prospectus. In the event of an
increase in the total number of shares offered in the Conversion and
Reorganization due to an increase in the Estimated Price Range, the priority of
share allocation shall be as set forth in this Plan.
5. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS.
(a) Each Eligible Account Holder shall receive, without payment,
Subscription Rights to purchase up to the greater of (i) 1% of the total
offering of shares of Conversion Stock in the Subscription Offering (or such
maximum purchase limitation as may be established for the Community Offering
and/or Syndicated Community Offering), and (ii) 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number of
shares of Conversion Stock offered in the Subscription Offering by a fraction,
of which the numerator is the amount of the Qualifying Deposits of the Eligible
Account Holder and the denominator is the total amount of all Qualifying
Deposits of all Eligible Account Holders, in each case subject to Sections 12
and 15 hereof.
(b) In the event of an oversubscription for shares of Conversion Stock
pursuant to Section 5(a), available shares shall be allocated among subscribing
Eligible Account Holders so as to permit each such Eligible Account Holder, to
the extent possible, to purchase a number of shares which will make his or her
total allocation equal to the lesser of the number of shares subscribed for or
100 shares. Any available shares remaining after each subscribing Eligible
Account Holder has been allocated the lesser of the number of shares subscribed
for or 100 shares shall be allocated among the subscribing Eligible Account
Holders in the proportion which the Qualifying Deposit of each such subscribing
Eligible Account Holder bears to the total Qualifying Deposits of all such
subscribing
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Eligible Account Holders whose orders are unfilled, provided that no fractional
shares shall be issued. Subscription Rights of Eligible Account Holders who are
also Directors or Officers and their Associates shall be subordinated to those
of other Eligible Account Holders to the extent that they are attributable to
increased deposits during the one-year period preceding the Eligibility Record
Date.
6. SUBSCRIPTION RIGHTS OF TAX-QUALIFIED EMPLOYEE STOCK BENEFIT
PLANS.
Tax-Qualified Employee Stock Benefit Plans shall receive, without
payment, Subscription Rights to purchase in the aggregate up to 8% of the
Conversion Stock, including any shares of Conversion Stock to be issued in the
Conversion and Reorganization as a result of an increase in the Estimated Price
Range after commencement of the Subscription Offering and prior to completion of
the Conversion and Reorganization. The subscription rights granted to
Tax-Qualified Employee Stock Benefit Plans shall be subject to the availability
of shares of Conversion Stock after taking into account the shares of Conversion
Stock purchased by Eligible Account Holders; provided, however, that in the
event that the total number of shares of Conversion is increased to any amount
greater than the number of shares representing the maximum of the Estimated
Price Range as set forth in the Prospectus ("Maximum Shares"), the ESOP shall
have a priority right to purchase any such shares exceeding the Maximum Shares
up to an aggregate of 8% of Conversion Stock. Shares of Conversion Stock
purchased by any individual participant ("Plan Participant") in a Tax-Qualified
Employee Stock Benefit Plan using funds therein pursuant to the exercise of
subscription rights granted to such Participant in his individual capacity as a
Participant and/or purchases by such Plan Participant in the Community Offering
shall not be deemed to be purchases by a Tax-Qualified Employee Stock Benefit
Plan for purposes of calculating the maximum amount of Conversion Stock that
Tax-Qualified Employee Stock Benefit Plans may purchase pursuant to the first
sentence of this Section 6 if the individual Plan Participant controls or
directs the investment authority with respect to such account or subaccount.
Consistent with applicable laws and regulations and policies and practices of
the OTS, the Tax-Qualified Employee Stock Benefit Plans may use funds
contributed by the Holding Company or the Association and/or borrowed from an
independent financial institution to exercise such Subscription Rights, and the
Holding Company and the Association may make scheduled discretionary
contributions thereto, provided that such contributions do not cause the Holding
Company or the Association to fail to meet any applicable regulatory capital
requirement.
7. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT
HOLDERS.
(a) In the event that the Eligibility Record Date is more than 15
months prior to the date of the latest amendment to the Application for
Conversion filed prior to OTS approval, then, and only in that event, a
Supplemental Eligibility Record Date shall be set and each Supplemental Eligible
Account Holder shall receive, without payment, Subscription
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<PAGE>
Rights to purchase up to the greater of (i) 1% of the total offering of shares
of Conversion Stock in the Subscription Offering (or such maximum purchase
limitation as may be established for the Community Offering and/or Syndicated
Community Offering), and (ii) 15 times the product (rounded down to the next
whole number) obtained by multiplying the total number of shares of Conversion
Stock offered in the Subscription Offering by a fraction, of which the numerator
is the amount of the Qualifying Deposits of the Supplemental Eligible Account
Holder and the denominator is the total amount of all Qualifying Deposits of all
Supplemental Eligible Account Holders, in each case subject to Sections 12 and
15 hereof and the availability of shares of Conversion Stock for purchase after
taking into account the shares of Conversion Stock purchased by Eligible Account
Holders and Tax-Qualified Employee Stock Benefit Plans through the exercise of
Subscription Rights under Sections 5 and 6 hereof.
(b) In the event of an oversubscription for shares of Conversion Stock
pursuant to Section 7(a), available shares shall be allocated among subscribing
Supplemental Eligible Account Holders so as to permit each such Supplemental
Eligible Account Holder, to the extent possible, to purchase a number of shares
sufficient to make his or her total allocation (including the number of shares,
if any, allocated in accordance with Section 5(a)) equal to the lesser of the
number of shares subscribed for or 100 shares. Any remaining available shares
shall be allocated among subscribing Supplemental Eligible Account Holders in
the proportion that the amount of their respective Qualifying Deposits bears to
the total amount of the Qualifying Deposits of all such subscribing Supplemental
Eligible Account Holders whose orders are unfilled, provided that no fractional
shares shall be issued.
8. SUBSCRIPTION RIGHTS OF OTHER MEMBERS.
(a) Each Other Member shall receive, without payment, Subscription
Rights to purchase up to 1% of the total offering of shares of Conversion Stock
in the Subscription Offering (or such maximum purchase limitation as may be
established for the Community Offering and/or Syndicated Community Offering),
subject to Sections 12 and 15 hereof and the availability of shares of
Conversion Stock for purchase after taking into account the shares of Conversion
Stock purchased by Eligible Account Holders, Tax-Qualified Employee Stock
Benefit Plans, and Supplemental Eligible Account Holders, if any, through the
exercise of Subscription Rights under Sections 5, 6 and 7 hereof.
(b) If, pursuant to this Section 8, Other Members subscribe for a
number of shares of Conversion Stock in excess of the total number of shares of
Conversion Stock remaining, available shares shall be allocated among
subscribing Other Members so as to permit each such Other Member, to the extent
possible, to purchase a number of shares which will make his or her total
allocation equal to the lesser of the number of shares subscribed for or 100
shares. Any remaining shares shall be allocated among subscribing Other Members
on a pro rata basis in the same proportion as each such Other Member's
subscription bears to the total subscriptions of all such subscribing Other
Members, provided that no fractional shares shall be issued.
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9. SUBSCRIPTION RIGHTS OF DIRECTORS, OFFICERS AND EMPLOYEES.
(a) To the extent that there are sufficient shares remaining after
satisfaction of all subscriptions under the above categories, Directors,
Officers and Employees of the Association shall receive, without payment,
Subscription Rights to purchase in this category up to an aggregate of 24.7% of
the shares of Conversion Stock offered in the Subscription Offering.
(b) In the event of an oversubscription for shares of Conversion Stock
pursuant to Section 9(a), Subscription Rights for the purchase of such shares
shall be allocated among the individual Directors, Officers and Employees on a
point system basis, whereby a point will be assigned for each year of employment
and for each salary increment of $5,000 per annum and five points for each
office held in the Mutual Holding Company and the Association, including a
directorship. If any such Director, Officer or Employee does not subscribe for
his or her full allocation of shares, any shares not subscribed for may be
purchased by other Directors, Officers and Employees in proportion to their
respective subscriptions, provided that no fractional shares shall be issued.
10. SUBSCRIPTION RIGHTS OF PUBLIC STOCKHOLDERS
(a) Each Public Stockholder shall receive, without payment,
Subscription Rights to purchase up to 1% of the total offering of shares of
Conversion Stock in the Subscription Offering (or such maximum purchase
limitation as may be established for the Community Offering and/or Syndicated
Community Offering), subject to Sections 12 and 15 hereof and the availability
of shares of Conversion Stock for purchase after taking into account the shares
of Conversion Stock purchased by Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans, Supplemental Eligible Account Holders, if any, and
Directors, Officers and Employees.
(b) If, pursuant to this Section 10, Public Stockholders subscribe for
a number of shares of Conversion Stock in excess of the total number of shares
of Conversion Stock remaining, available shares shall be allocated among
subscribing Public Stockholders as of the Voting Record Date on a pro rata basis
in the same proportion as each such Public Stockholder's subscription bears to
the total subscriptions of all such subscribing Public Stockholders, provided
that no fractional shares shall be issued.
11. COMMUNITY OFFERING, SYNDICATED COMMUNITY OFFERING AND
OTHER OFFERINGS.
(a) If less than the total number of shares of Conversion Stock are
sold in the Subscription Offering, it is anticipated that all remaining shares
of Conversion Stock shall, if practicable, be sold in a Community Offering.
Subject to the requirements set forth
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herein, the manner in which the Conversion Stock is sold in the Community
Offering shall have as the objective the achievement of the widest possible
distribution of such stock.
(b) In the event of a Community Offering, all shares of Conversion
Stock which are not subscribed for in the Subscription Offering shall be offered
for sale by means of a direct community marketing program, which may provide for
the use of brokers, dealers or investment banking firms experienced in the sale
of financial institution securities. Any available shares in excess of those not
subscribed for in the Subscription Offering will be available for purchase by
members of the general public to whom a Prospectus is delivered by the Holding
Company or on its behalf, with preference given to natural persons residing in
parishes in Louisiana in which the Association has a branch office ("Preferred
Subscribers").
(c) A Prospectus and Order Form shall be furnished to such Persons as
the Primary Parties may select in connection with the Community Offering, and
each order for Conversion Stock in the Community Offering shall be subject to
the absolute right of the Primary Parties to accept or reject any such order in
whole or in part either at the time of receipt of an order or as soon as
practicable following completion of the Community Offering. Available shares
will be allocated first to each Preferred Subscriber whose order is accepted in
an amount equal to the lesser of 100 shares or the number of shares subscribed
for by each such Preferred Subscriber, if possible. Thereafter, unallocated
shares shall be allocated among the Preferred Subscribers whose accepted orders
remain unsatisfied in the same proportion that the unfilled order of each bears
to the total unfilled orders of all Preferred Subscribers whose accepted orders
remain unsatisfied, provided that no fractional shares shall be issued. If there
are any shares remaining after all accepted orders by Preferred Subscribers have
been satisfied, such remaining shares shall be allocated to other members of the
general public who purchase in the Community Offering, applying the same
allocation described above for Preferred Subscribers.
(d) The amount of Conversion Stock that any Person may purchase in the
Community Offering shall not exceed 1% of the total offering of shares of
Conversion Stock in the Subscription Offering, provided, however, that this
amount may be increased to up to 5% of the total offering of shares of
Conversion Stock, subject to any required regulatory approval but without the
further approval of Members of the Mutual Holding Company or the Stockholders of
the Association; and provided further that, to the extent applicable, and
subject to the preferences set forth in Section 11(b) and (c) of this Plan and
the limitations on purchases of Conversion Stock set forth in this Section 11(d)
and Section 12 of this Plan, orders for Conversion Stock in the Community
Offering shall first be filled to a maximum of 2% of the total number of shares
of Conversion Stock sold in the Offerings and thereafter any remaining shares
shall be allocated on an equal number of shares basis per order until all orders
have been filled. The Primary Parties may commence the Community Offering
concurrently with, at any time during, or as soon as practicable after the end
of, the Subscription Offering, and the Community Offering must be completed
within 45 days
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after the completion of the Subscription Offering, unless extended by the
Primary Parties with any required regulatory approval.
(e) Subject to such terms, conditions and procedures as may be
determined by the Primary Parties, all shares of Conversion Stock not subscribed
for in the Subscription Offering or ordered in the Community Offering may be
sold by a syndicate of broker-dealers to the general public in a Syndicated
Community Offering. Each order for Conversion Stock in the Syndicated Community
Offering shall be subject to the absolute right of the Primary Parties to accept
or reject any such order in whole or in part either at the time of receipt of an
order or as soon as practicable after completion of the Syndicated Community
Offering. The amount of Conversion Stock that any Person may purchase in the
Syndicated Community Offering shall not exceed 1% of the total offering of
shares of Conversion Stock in the Subscription Offering, provided, however, that
this amount may be increased to up to 5% of the total offering of shares of
Conversion Stock, subject to any required regulatory approval but without the
further approval of Members of the Mutual Holding Company or the Stockholders of
the Association; and provided further that, to the extent applicable, and
subject to the limitations on purchases of Conversion Stock set forth in this
Section 11(e) and Section 12 of this Plan, orders for Conversion Stock in the
Syndicated Community Offering shall first be filled to a maximum of 2% of the
total number of shares of Conversion Stock sold in the Offerings and thereafter
any remaining shares shall be allocated on an equal number of shares basis per
order until all orders have been filled. The Primary Parties may commence the
Syndicated Community Offering concurrently with, at any time during, or as soon
as practicable after the end of, the Subscription Offering and/or Community
Offering, and the Syndicated Community Offering must be completed within 45 days
after the completion of the Subscription Offering, unless extended by the
Primary Parties with any required regulatory approval.
(f) If for any reason a Syndicated Community Offering of shares of
Conversion Stock not sold in the Subscription Offering and the Community
Offering cannot be effected, or in the event that any insignificant residue of
shares of Conversion Stock is not sold in the Subscription Offering, Community
Offering or Syndicated Community Offering, the Primary Parties shall use their
best efforts to obtain other purchasers for such shares in such manner and upon
such conditions as may be satisfactory to the OTS.
12. LIMITATIONS ON SUBSCRIPTIONS AND PURCHASES OF CONVERSION
STOCK.
(a) The maximum number of shares of Conversion Stock which may be
purchased in the Conversion by Tax-Qualified Employee Stock Benefit Plans shall
not exceed 8% of the total number of shares of Conversion Stock sold in the
Offerings, including any shares which may be issued in the event of an increase
in the maximum of the Estimated Price Range to reflect changes in market,
financial and economic conditions after commencement of the Subscription
Offering and prior to completion of the Offerings; provided, however, that
purchases of Conversion Stock which are made by Plan Participants pursuant to
the
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exercise of subscription rights granted to such Plan Participant in his
individual capacity as a Participant or purchases by a Plan Participant in the
Community Offering using the funds thereof held in Tax-Qualified Employee Stock
Benefit Plans shall not be deemed to be purchases by a Tax-Qualified Employee
Stock Benefit Plan for purposes of this Section 12(a).
(b) Except in the case of Tax-Qualified Employee Stock Benefit Plans in
the aggregate, as set forth in Section 12(a) hereof, and certain Eligible
Account Holders and Supplemental Eligible Account Holders, as set forth in
Sections 5(a)(ii) and 7(a)(ii) hereof, and in addition to the other restrictions
and limitations set forth herein, the maximum amount of Holding Company Common
Stock which any Person together with any Associate or group of Persons acting in
concert may, directly or indirectly, subscribe for or purchase in the Conversion
and Reorganization shall not exceed the number of shares of Conversion Stock
that when combined with Exchange Shares received aggregate 3% of the total
number of shares of Holding Company Common Stock issued in the Conversion and
Reorganization.
(c) The number of shares of Conversion Stock which Directors and
Officers and their Associates may purchase in the aggregate in the Offerings
shall not exceed 34.7% of the total number of shares of Conversion Stock sold in
the Offerings, including any shares which may be issued in the event of an
increase in the maximum of the Estimated Price Range to reflect changes in
market, financial and economic conditions after commencement of the Subscription
Offering and prior to completion of the Offerings.
(d) No Person may purchase fewer than 25 shares of Conversion Stock in
the Offerings, to the extent such shares are available; provided, however, that
if the Actual Purchase Price is greater than $20.00 per share, such minimum
number of shares shall be adjusted so that the aggregate Actual Purchase Price
for such minimum shares will not exceed $500.00.
(e) For purposes of the foregoing limitations and the determination of
Subscription Rights, (i) Directors, Officers and Employees shall not be deemed
to be Associates or a group acting in concert solely as a result of their
capacities as such, (ii) shares purchased by Tax-Qualified Employee Stock
Benefit Plans shall not be attributable to the individual trustees or
beneficiaries of any such plan for purposes of determining compliance with the
limitations set forth in Section 12(b) or Section 12(c) hereof, (iii) Exchange
Shares shall be valued at the Actual Purchase Price, and (iv) shares purchased
by a Tax-Qualified Employee Stock Benefit Plan pursuant to instructions of an
individual in an account in such plan in which the individual has the right to
direct the investment, including any plan of the Association qualified under
Section 401(k) of the Code, shall be aggregated and included in that
individual's purchases and not attributed to the TaxQualified Employee Stock
Benefit Plan.
(f) Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Members of
the Mutual Holding Company or the Stockholders of the Association, the Primary
Parties may increase or decrease any of the individual or aggregate purchase
limitations set forth herein to a percentage which does not exceed 5% of the
total offering of shares of Holding Company
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Common Stock in the Conversion and Reorganization whether prior to, during or
after the Subscription Offering, Community Offering and/or Syndicated Community
Offering. In the event that an individual purchase limitation is increased after
commencement of the Subscription Offering or any other offering, the Primary
Parties shall permit any Person who subscribed for the maximum number of shares
of Conversion Stock to purchase an additional number of shares, so that such
Person shall be permitted to subscribe for the then maximum number of shares
permitted to be subscribed for by such Person, subject to the rights and
preferences of any Person who has priority Subscription Rights. In the event
that any of the individual or aggregate purchase limitations are decreased after
commencement of the Subscription Offering or any other offering, the orders of
any Person who subscribed for more than the new purchase limitation shall be
decreased by the minimum amount necessary so that such Person shall be in
compliance with the then maximum number of shares permitted to be subscribed for
by such Person.
(g) The Primary Parties shall have the right to take all such action as
they may, in their sole discretion, deem necessary, appropriate or advisable in
order to monitor and enforce the terms, conditions, limitations and restrictions
contained in this Section 12 and elsewhere in this Plan and the terms,
conditions and representations contained in the Order Form, including, but not
limited to, the absolute right (subject only to any necessary regulatory
approvals or concurrences) to reject, limit or revoke acceptance of any
subscription or order and to delay, terminate or refuse to consummate any sale
of Conversion Stock which they believe might violate, or is designed to, or is
any part of a plan to, evade or circumvent such terms, conditions, limitations,
restrictions and representations. Any such action shall be final, conclusive and
binding on all persons, and the Primary Parties and their respective Boards
shall be free from any liability to any Person on account of any such action.
(h) Notwithstanding anything to the contrary contained in this Plan,
the Public Stockholders will not have to sell any Association Common Stock or be
limited in receiving Exchange Shares even if their ownership of Association
Common Stock when converted into Exchange Shares pursuant to the Association
Merger would exceed an applicable purchase limitation.
13. TIMING OF SUBSCRIPTION OFFERING; MANNER OF EXERCISING SUBSCRIPTION
RIGHTS AND ORDER FORMS.
(a) The Subscription Offering may be commenced concurrently with or at
any time after the mailing to Voting Members of the Mutual Holding Company and
Stockholders of the Association of the proxy statement(s) to be used in
connection with the Special Meeting and the Stockholders' Meeting. The
Subscription Offering may be closed before the Special Meeting and the
Stockholders' Meeting, provided that the offer and sale of the Conversion Stock
shall be conditioned upon the approval of the Plan by the Voting Members of the
Mutual Holding Company and the Stockholders of the Association at the Special
Meeting and the Stockholders' Meeting, respectively.
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(b) The exact timing of the commencement of the Subscription Offering
shall be determined by the Primary Parties in consultation with the Independent
Appraiser and any financial or advisory or investment banking firm retained by
them in connection with the Conversion. The Primary Parties may consider a
number of factors, including, but not limited to, their current and projected
future earnings, local and national economic conditions, and the prevailing
market for stocks in general and stocks of financial institutions in particular.
The Primary Parties shall have the right to withdraw, terminate, suspend, delay,
revoke or modify any such Subscription Offering, at any time and from time to
time, as they in their sole discretion may determine, without liability to any
Person, subject to compliance with applicable securities laws and any necessary
regulatory approval or concurrence.
(c) The Primary Parties shall, promptly after the SEC has declared the
Registration Statement which includes the Prospectus effective and all required
regulatory approvals have been obtained, distribute or make available the
Prospectus, together with Order Forms for the purchase of Conversion Stock, to
all Participants for the purpose of enabling them to exercise their respective
Subscription Rights, subject to Section 15 hereof. The Primary Parties may elect
to mail a Prospectus and Order Form only to those Participants who request such
materials by returning a postage-paid card to the Primary Parties by a date
specified in the letter informing them of their Subscription Rights. Under such
circumstances, the Subscription Offering shall not be closed prior to the
expiration of 30 days after the mailing by the Primary Parties of the
postage-paid card to Participants.
(d) A single Order Form for all Deposit Accounts maintained with the
Association by an Eligible Account Holder and any Supplemental Eligible Account
Holder may be furnished, irrespective of the number of Deposit Accounts
maintained with the Association on the Eligibility Record Date and Supplemental
Eligibility Record Date, respectively.
(e) The recipient of an Order Form shall have no less than 20 days and
no more than 45 days from the date of mailing of the Order Form (with the exact
termination date to be set forth on the Order Form) to properly complete and
execute the Order Form and deliver it to the Primary Parties. The Primary
Parties may extend such period by such amount of time as they determine is
appropriate. Failure of any Participant to deliver a properly executed Order
Form to the Primary Parties, along with payment (or authorization for payment by
withdrawal) for the shares of Conversion Stock subscribed for, within the time
limits prescribed, shall be deemed a waiver and release by such person of any
rights to subscribe for shares of Conversion Stock. Each Participant shall be
required to confirm to the Primary Parties by executing an Order Form that such
Person has fully complied with all of the terms, conditions, limitations and
restrictions in the Plan.
(f) The Primary Parties shall have the absolute right, in their sole
discretion and without liability to any Participant or other Person, to reject
any Order Form, including, but not limited to, any Order Form that is (i)
improperly completed or executed; (ii) not timely received; (iii) not
accompanied by the proper payment (or authorization of withdrawal for
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payment) or, in the case of institutional investors in the Community Offering,
not accompanied by an irrevocable order together with a legally binding
commitment to pay the full amount of the purchase price prior to 48 hours before
the completion of the Offerings; or (iv) submitted by a Person whose
representations the Primary Parties believe to be false or who they otherwise
believe, either alone, or acting in concert with others, is violating, evading
or circumventing, or intends to violate, evade or circumvent, the terms and
conditions of the Plan. The Primary Parties may, but will not be required to,
waive any irregularity on any Order Form or may require the submission of
corrected Order Forms or the remittance of full payment for shares of Conversion
Stock by such date as they may specify. The interpretation of the Primary
Parties of the terms and conditions of the Order Forms shall be final and
conclusive.
14. PAYMENT FOR CONVERSION STOCK.
(a) Payment for shares of Conversion Stock subscribed for by
Participants in the Subscription Offering and payment for shares of Conversion
Stock ordered by Persons in the Community Offering shall be equal to the Initial
Purchase Price multiplied by the number of shares which are being subscribed for
or ordered, respectively. Such payment may be made in cash, if delivered in
person, or by check or money order at the time the Order Form is delivered to
the Primary Parties. The Primary Parties may also elect to receive payment for
shares of Conversion Stock by wire transfer. In addition, the Primary Parties
may elect to provide Participants and/or other Persons who have a Deposit
Account with the Association the opportunity to pay for shares of Conversion
Stock by authorizing the Association to withdraw from such Deposit Account an
amount equal to the aggregate Initial Purchase Price of such shares. If the
Actual Purchase Price is less than the Initial Purchase Price, the Primary
Parties shall refund the difference to all Participants and other Persons,
unless the Primary Parties choose to provide Participants and other Persons the
opportunity on the Order Form to elect to have such difference applied to the
purchase of additional whole shares of Conversion Stock. If the Actual Purchase
Price is more than the Initial Purchase Price, the Primary Parties shall reduce
the number of shares of Conversion Stock ordered by Participants and other
Persons and refund any remaining amount which is attributable to a fractional
share interest, unless the Primary Parties choose to provide Participants and
other Persons the opportunity to increase the Actual Purchase Price submitted by
them.
(b) Consistent with applicable laws and regulations and policies and
practices of the OTS, payment for shares of Conversion Stock subscribed for by
Tax-Qualified Employee Stock Benefit Plans may be made with funds contributed by
the Holding Company and/or the Association and/or funds obtained pursuant to a
loan from an unrelated financial institution pursuant to a loan commitment which
is in force from the time that any such plan submits an Order Form until the
closing of the transactions contemplated hereby.
(c) If a Participant or other Person authorizes the Association to
withdraw the amount of the Initial Purchase Price from his or her Deposit
Account, the Association shall
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have the right to make such withdrawal or to freeze funds equal to the aggregate
Initial Purchase Price upon receipt of the Order Form. Notwithstanding any
regulatory provisions regarding penalties for early withdrawals from certificate
accounts, the Association may allow payment by means of withdrawal from
certificate accounts without the assessment of such penalties. In the case of an
early withdrawal of only a portion of such account, the certificate evidencing
such account shall be cancelled if any applicable minimum balance requirement
ceases to be met. In such case, the remaining balance will earn interest at the
regular passbook rate. However, where any applicable minimum balance is
maintained in such certificate account, the rate of return on the balance of the
certificate account shall remain the same as prior to such early withdrawal.
This waiver of the early withdrawal penalty applies only to withdrawals made in
connection with the purchase of Conversion Stock and is entirely within the
discretion of the Primary Parties.
(d) The Association shall pay interest, at not less than the passbook
rate, for all amounts paid in cash, by check or money order to purchase shares
of Conversion Stock in the Subscription Offering and the Community Offering from
the date payment is received until the date the Conversion and Reorganization is
completed or terminated.
(e) The Association shall not knowingly loan funds or otherwise extend
credit to any Participant or other Person to purchase Conversion Stock.
(f) Each share of Conversion Stock shall be non-assessable upon payment
in full of the Actual Purchase Price.
15. ACCOUNT HOLDERS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES.
The Primary Parties shall make reasonable efforts to comply with the
securities laws of all jurisdictions in the United States in which Participants
reside. However, no Participant will be offered or receive any Conversion Stock
under the Plan if such Participant resides in a foreign country or resides in a
jurisdiction of the United States with respect to which all of the following
apply: (a) there are few Participants otherwise eligible to subscribe for shares
under this Plan who reside in such jurisdiction; (b) the granting of
Subscription Rights or the offer or sale of shares of Conversion Stock to such
Participants would require any of the Primary Parties or their respective
Directors and Officers, under the laws of such jurisdiction, to register as a
broker-dealer, salesman or selling agent or to register or otherwise qualify the
Conversion Stock for sale in such jurisdiction, or any of the Primary Parties
would be required to qualify as a foreign corporation or file a consent to
service of process in such jurisdiction; and (c) such registration,
qualification or filing in the judgment of the Primary Parties would be
impracticable or unduly burdensome for reasons of cost or otherwise.
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16. VOTING RIGHTS OF STOCKHOLDERS.
Following consummation of the Conversion and Reorganization, voting
rights with respect to the Association shall be held and exercised exclusively
by the Holding Company as holder of all of the Association's outstanding voting
capital stock, and voting rights with respect to the Holding Company shall be
held and exercised exclusively by the holders of the Holding Company's voting
capital stock.
17. LIQUIDATION ACCOUNT.
(a) At the time of the Mutual Holding Company Merger, the Association
shall establish a liquidation account in an amount equal to the amount of
dividends with respect to the Association Common Stock waived by the Mutual
Holding Company plus the greater of (i) $3,673,000, which is equal to 100% of
the retained earnings of the Association as of March 31, 1994, the date of the
latest statement of financial condition contained in the final offering circular
utilized in the formation of the Mutual Holding Company, or (ii) 75.2% of the
Association's total stockholders' equity as reflected in its latest statement of
financial condition contained in the final Prospectus utilized in the Conversion
and Reorganization. The function of the liquidation account will be to preserve
the rights of certain holders of Deposit Accounts in the Association who
maintain such accounts in the Association following the Conversion and
Reorganization to a priority to distributions in the unlikely event of a
liquidation of the Association subsequent to the Conversion and Reorganization.
(b) The liquidation account shall be maintained for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders, if any, who
maintain their Deposit Accounts in the Association after the Conversion and
Reorganization. Each such account holder will, with respect to each Deposit
Account held, have a related inchoate interest in a portion of the liquidation
account balance, which interest will be referred to in this Section 17 as the
"subaccount balance." All Deposit Accounts having the same social security
number will be aggregated for purposes of determining the initial subaccount
balance with respect to such Deposit Accounts, except as provided in Section
17(d) hereof.
(c) In the event of a complete liquidation of the Association
subsequent to the Conversion and Reorganization (and only in such event), each
Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall
be entitled to receive a liquidation distribution from the liquidation account
in the amount of the then current subaccount balances for Deposit Accounts then
held (adjusted as described below) before any liquidation distribution may be
made with respect to the capital stock of the Association. No merger,
consolidation, sale of bulk assets or similar combination transaction with
another FDIC-insured institution in which the Association is not the surviving
entity shall be considered a complete liquidation for this purpose. In any such
transaction, the liquidation account shall be assumed by the surviving entity.
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(d) The initial subaccount balance for a Deposit Account held by an
Eligible Account Holder and Supplemental Eligible Account Holder, if any, shall
be determined by multiplying the opening balance in the liquidation account by a
fraction, of which the numerator is the amount of the Qualifying Deposits of
such account holder and the denominator is the total amount of Qualifying
Deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders, if any. For Deposit Accounts in existence at both the Eligibility
Record Date and the Supplemental Eligibility Record Date, if any, separate
initial subaccount balances shall be determined on the basis of the Qualifying
Deposits in such Deposit Accounts on each such record date. Initial subaccount
balances shall not be increased, and shall be subject to downward adjustment as
provided below.
(e) If the aggregate deposit balance in the Deposit Account(s) of any
Eligible Account Holder or Supplemental Eligible Account Holder, if any, at the
close of business on any December 31 annual closing date, commencing December
31, 1998, is less than the lesser of (a) the aggregate deposit balance in such
Deposit Account(s) at the close of business on any other annual closing date
subsequent to such record dates or (b) the aggregate deposit balance in such
Deposit Account(s) as of the Eligibility Record Date or the Supplemental
Eligibility Record Date, if any, the subaccount balance for such Deposit
Account(s) shall be adjusted by reducing such subaccount balance in an amount
proportionate to the reduction in such deposit balance. In the event of such a
downward adjustment, the subaccount balance shall not be subsequently increased,
notwithstanding any subsequent increase in the deposit balance of the related
Deposit Account(s). The subaccount balance of an Eligible Account Holder or
Supplemental Eligible Account Holder, if any, will be reduced to zero if the
Account Holder ceases to maintain a Deposit Account at the Association that has
the same social security number as appeared on his Deposit Account(s) at the
Eligibility Record Date or, if applicable, the Supplemental Eligibility Record
Date.
(f) Subsequent to the Conversion and Reorganization, the Association
may not pay cash dividends generally on deposit accounts and/or capital stock of
the Association, or repurchase any of the capital stock of the Association, if
such dividend or repurchase would reduce the Association's regulatory capital
below the aggregate amount of the then current subaccount balances for Deposit
Accounts then held; otherwise, the existence of the liquidation account shall
not operate to restrict the use or application of any of the net worth accounts
of the Association.
(g) For purposes of this Section 17, a Deposit Account includes a
predecessor or successor account which is held by an Account Holder with the
same social security number.
18. TRANSFER OF DEPOSIT ACCOUNTS.
Each Deposit Account in the Association at the time of the consummation
of the Conversion and Reorganization shall become, without further action by the
holder, a Deposit Account in the Association equivalent in withdrawable amount
to the withdrawal
24
<PAGE>
value (as adjusted to give effect to any withdrawal made for the purchase of
Conversion Stock), and subject to the same terms and conditions (except as to
voting and liquidation rights) as such Deposit Account in the Association
immediately preceding consummation of the Conversion and Reorganization. Holders
of Deposit Accounts in the Association shall not, as such holders, have any
voting rights.
19. REQUIREMENTS FOLLOWING CONVERSION FOR REGISTRATION, MARKET MAKING AND
STOCK EXCHANGE LISTING.
In connection with the Conversion and Reorganization, the Holding
Company shall register the Holding Company Common Stock pursuant to Section 12
of the Securities Exchange Act of 1934, as amended, and shall undertake not to
deregister such stock for a period of three years thereafter. The Holding
Company also shall use its best efforts to (i) encourage and assist a market
maker to establish and maintain a market for the Holding Company Common Stock
and (ii) list the Holding Company Common Stock on a national or regional
securities exchange or to have quotations for such stock disseminated on the
Nasdaq System.
20. DIRECTORS AND OFFICERS OF THE ASSOCIATION.
Each person serving as a Director or Officer of the Association at the
time of the Conversion and Reorganization shall continue to serve as a Director
or Officer of the Association for the balance of the term for which the person
was elected prior to the Conversion and Reorganization, and until a successor is
elected and qualified. The number, names, business addresses and terms of the
Directors of the Association are set forth in the Plans of Merger included as
Annexes A and B hereto.
21. REQUIREMENTS FOR STOCK PURCHASES BY DIRECTORS AND OFFICERS FOLLOWING
THE CONVERSION AND REORGANIZATION.
For a period of three years following the Conversion and
Reorganization, the Directors and Officers of the Holding Company and the
Association and their Associates may not purchase, without the prior written
approval of the OTS, Holding Company Common Stock except from a broker-dealer
registered with the SEC. This prohibition shall not apply, however, to (i) a
negotiated transaction arrived at by direct negotiation between buyer and seller
and involving more than 1% of the outstanding Holding Company Common Stock and
(ii) purchases of stock made by and held by any Tax-Qualified Employee Stock
Benefit Plan (and purchases of stock made by and held by any Non-Tax-Qualified
Employee Stock Benefit Plan following the receipt of stockholder approval of
such plan) which may be attributable to individual officers or directors.
The foregoing restriction on purchases of Holding Company Common Stock
shall be in addition to any restrictions that may be imposed by federal and
state securities laws.
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22. RESTRICTIONS ON TRANSFER OF STOCK.
All shares of Conversion Stock which are purchased by Persons other
than Directors and Officers shall be transferable without restriction, except in
connection with a transaction proscribed by Section 23 of this Plan. Shares of
Conversion Stock purchased by Directors and Officers of the Holding Company and
the Association on original issue from the Holding Company (by subscription or
otherwise) shall be subject to the restriction that such shares shall not be
sold or otherwise disposed of for value for a period of one year following the
date of purchase, except for any disposition of such shares following the death
of the original purchaser or pursuant to any merger or similar transaction
approved by the OTS. The shares of Conversion Stock issued by the Holding
Company to Directors and Officers shall bear the following legend giving
appropriate notice of such one-year restriction:
"The shares of stock evidenced by this Certificate are
restricted as to transfer for a period of one year from the date of
this Certificate pursuant to Part 563b of the Rules and Regulations of
the Office of Thrift Supervision. These shares may not be transferred
during such one-year period without a legal opinion of counsel for the
Company that said transfer is permissible under the provisions of
applicable law and regulation. This restrictive legend shall be deemed
null and void after one year from the date of this Certificate."
In addition, the Holding Company shall give appropriate instructions to
the transfer agent for the Holding Company Common Stock with respect to the
applicable restrictions relating to the transfer of restricted stock. Any shares
issued at a later date as a stock dividend, stock split or otherwise with
respect to any such restricted stock shall be subject to the same holding period
restrictions as may then be applicable to such restricted stock.
The foregoing restriction on transfer shall be in addition to any
restrictions on transfer that may be imposed by federal and state securities
laws.
23. RESTRICTIONS ON ACQUISITION OF STOCK OF THE HOLDING COMPANY.
The articles of incorporation of the Holding Company shall prohibit any
Person together with Associates or group of Persons acting in concert from
offering to acquire or acquiring, directly or indirectly, beneficial ownership
of more than 10% of any class of equity securities of the Holding Company, or of
securities convertible into more than 10% of any such class, for five years
following completion of the Conversion and Reorganization. The articles of
incorporation of the Holding Company also shall provide that all equity
securities beneficially owned by any Person in excess of 10% of any class of
equity securities during such five-year period shall be considered "excess
shares," and that excess shares shall not be counted as shares entitled to vote
and shall not be voted by any Person or counted as voting shares in connection
with any matters submitted to the stockholders for a vote. The foregoing
restrictions shall not apply to (i) any offer with a view toward public resale
26
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made exclusively to the Holding Company by underwriters or a selling group
acting on its behalf, (ii) the purchase of shares by a Tax-Qualified Employee
Stock Benefit Plan established for the benefit of the employees of the Holding
Company and its subsidiaries which is exempt from approval requirements under 12
C.F.R. ss.574.3(c)(1)(vi) or any successor thereto, and (iii) any offer or
acquisition approved in advance by the affirmative vote of two-thirds of the
entire Board of Directors of the Holding Company. Directors, Officers or
Employees of the Holding Company or the Association or any subsidiary thereof
shall not be deemed to be Associates or a group acting in concert with respect
to their individual acquisitions of any class of equity securities of the
Holding Company solely as a result of their capacities as such.
24. TAX RULINGS OR OPINIONS.
Consummation of the Conversion and Reorganization is conditioned upon
prior receipt by the Primary Parties of either a ruling or an opinion of counsel
with respect to federal tax laws, and either a ruling or an opinion with respect
to Louisiana tax laws, to the effect that consummation of the transactions
contemplated hereby will not result in a taxable reorganization under the
provisions of the applicable codes or otherwise result in any adverse tax
consequences to the Primary Parties or to account holders receiving Subscription
Rights before or after the Conversion and Reorganization, except in each case to
the extent, if any, that Subscription Rights are deemed to have fair market
value on the date such rights are issued.
25. STOCK COMPENSATION PLANS
(a) The Holding Company and the Association are authorized to adopt
TaxQualified Employee Stock Benefit Plans in connection with the Conversion and
Reorganization, including without limitation an employee stock ownership plan.
(b) The Holding Company and the Association also are authorized to
adopt stock option plans, restricted stock grant plans and other
Non-Tax-Qualified Employee Stock Benefit Plans, provided that 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 and Reorganization or (ii) the receipt of
stockholder approval of such plans at either an annual or special meeting of
stockholders of the Holding Company held no earlier than six months following
the Conversion and Reorganization.
(c) Existing as well as any newly-created Tax-Qualified Employee Stock
Benefit Plans may purchase shares of Conversion Stock in the Offerings, to the
extent permitted by the terms of such benefit plans and this Plan.
27
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26. DIVIDEND AND REPURCHASE RESTRICTIONS ON STOCK.
(a) The Holding Company generally may not repurchase any shares of its
capital stock during the first year following consummation of the Conversion and
Reorganization, except as may be otherwise approved by the OTS. During the
second and third years following consummation of the Conversion and
Reorganization, the Holding Company may not repurchase any of its capital stock
from any person, other than pursuant to (i) an offer to repurchase made by the
Holding Company on a pro rata basis to all of its stockholders and which is
approved by the OTS, (ii) the repurchase of qualifying shares of a director, if
any, (iii) purchases in the open market by a Tax-Qualified or Non-Tax-Qualified
Employee Stock Benefit Plan in an amount reasonable and appropriate to fund the
plan, or (iv) a repurchase program approved by the OTS.
(b) The Association may not declare or pay a cash dividend on, or
repurchase any of, its capital stock if the effect thereof would cause the
regulatory capital of the Association to be reduced below the amount required
for the liquidation account. Any dividend declared or paid on, or repurchase of,
the Association's capital stock also shall be in compliance with Section 563.134
of the Regulations Applicable to All Savings Associations, or any successor
thereto.
(c) Notwithstanding anything to the contrary set forth herein, the
Holding Company may repurchase its capital stock to the extent and subject to
the requirements set forth in Section 563b.3(g)(3) of the Regulations Applicable
to All Savings Associations, or any successor thereto, or as otherwise may be
approved by the OTS.
27. PAYMENT OF FEES TO BROKERS.
The Primary Parties may elect to offer to pay fees on a per share basis
to securities brokers who assist purchasers of Conversion Stock in the
Offerings.
28. DISSENTING STOCKHOLDERS.
If any Stockholders of the Association dissent from the Conversion
and exercise and perfect the right to obtain valuation of and payment for
their shares of Association Common Stock ("Dissenting Shares") pursuant to 12
C.F.R. Section 552.14, then (a) the Dissenting Shares, if any, will be
deemed to have been retired and cancelled immediately prior to consummation
of the Conversion, with the effect that such shares will not be exchanged for
Holding Company Common Stock pursuant to Section 3(h)(ii) hereof, and (b) all
payments to be made to the holders of such Dissenting Shares will be made
directly by the Association. Consummation of the Conversion is conditioned
upon the number of Dissenting Shares being less than 10.0% of the shares of
Association Common Stock issued and outstanding immediately prior to
consummation of the Conversion.
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29. EFFECTIVE DATE.
The effective date of the Conversion and Reorganization shall be the
date upon which the last of the following actions occurs: (i) the filing of
Articles of Combination with the OTS with respect to the Mutual Holding Company
Merger, (ii) the filing of Articles of Combination with the OTS with respect to
the Association Merger and (iii) the closing of the issuance of the shares of
Conversion Stock in the Offerings. The filing of Articles of Combination
relating to the Mutual Holding Company Merger and the Association Merger and the
closing of the issuance of shares of Conversion Stock in the Offerings shall not
occur until all requisite regulatory, Member and Stockholder approvals have been
obtained, all applicable waiting periods have expired and sufficient
subscriptions and orders for the Conversion Stock have been received. It is
intended that the closing of the Mutual Holding Company Merger, the Association
Merger and the sale of shares of Conversion Stock in the Offerings shall occur
consecutively and substantially simultaneously.
30. AMENDMENT OR TERMINATION OF THE PLAN.
If deemed necessary or desirable by the Boards of Directors of the
Primary Parties, this Plan may be substantively amended, as a result of comments
from regulatory authorities or otherwise, at any time prior to the solicitation
of proxies from Members and Stockholders to vote on the Plan and at any time
thereafter with the concurrence of the OTS. Any amendment to this Plan made
after approval by the Members and Stockholders with the concurrence of the OTS
shall not necessitate further approval by the Members or Stockholders unless
otherwise required by the OTS. This Plan shall terminate if the sale of all
shares of Conversion Stock is not completed within 24 months from the date of
the Special Meeting. Prior to the earlier of the Special Meeting and the
Stockholders' Meeting, this Plan may be terminated by the Boards of Directors of
the Primary Parties without approval of the OTS; after the Special Meeting or
the Stockholders' Meeting, the Boards of Directors may terminate this Plan only
with the approval of the OTS.
31. INTERPRETATION OF THE PLAN.
All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of each of the Boards of Directors of the
Primary Parties shall be final, subject to the authority of the OTS.
29
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Plan to be executed by
their duly authorized officers as of this 25th day of February 1998.
HOMESTEAD MUTUAL HOLDING COMPANY
Attest: \s\Barbara B. Theriot By: \s\Lawrence C. Caldwell, Jr.
------------------------ -----------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
PONCHATOULA HOMESTEAD SAVINGS, F.A.
Attest: \s\Barbara B. Theriot By: \s\Lawrence C. Caldwell, Jr.
------------------------ -----------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
HOMESTEAD BANCORP, INC.
Attest: \s\Barbara B. Theriot By: \s\Lawrence C. Caldwell, Jr.
------------------------ -----------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
30
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ANNEX A
PLAN OF MERGER
This Plan of Merger, dated as of February 25, 1998, is between
Homestead Mutual Holding Company (the "Mutual Holding Company"), a
federally-chartered mutual holding company, and Ponchatoula Homestead Savings,
F.A. (the "Association" or the "Surviving Association"), a federally-chartered
savings association.
WITNESSETH:
WHEREAS, the Mutual Holding Company and the Association have adopted a
Plan of Conversion of the Mutual Holding Company and Agreement and Plan of
Reorganization between Homestead Bancorp, Inc. (the "Holding Company") and the
Association (the "Plan of Conversion"), pursuant to which (i) the Mutual Holding
Company will convert to a federally-chartered interim stock savings association
and simultaneously merge with and into the Association, (ii) the Association and
a newly-formed interim savings association will merge, pursuant to which the
Association will become a wholly-owned subsidiary of the Holding Company (the
"Association Merger"), and (iii) the Holding Company will offer shares of its
common stock in the manner set forth in the Plan of Conversion;
WHEREAS, the Mutual Holding Company, which owns 75.2% of the
outstanding common stock of the Association, par value $.10 per share
("Association Common Stock"), will convert to a federally-chartered interim
stock savings association pursuant to the Plan of Conversion and merge with and
into the Association pursuant to this Plan of Merger (the "Mutual Holding
Company Merger"), pursuant to which, among other things, all interests of
members in the Mutual Holding Company and all shares of Association Common Stock
held by the Mutual Holding Company will be cancelled; and
WHEREAS, the Mutual Holding Company and the Association (the
"Constituent Associations") desire to provide for the terms and conditions of
the Mutual Holding Company Merger;
NOW, THEREFORE, the Mutual Holding Company and the Association hereby
agree as follows:
1. Effective Date. The Mutual Holding Company Merger shall become
effective on the date specified in the endorsement of the Articles of
Combination relating to the Mutual Holding Company Merger by the Secretary of
the Office of Thrift Supervision ("OTS") pursuant to 12 C.F.R. ss. 552.13(k), or
any successor thereto (the "Effective Date").
2. The Mutual Holding Company Merger and Effect Thereof. Subject to the
terms and conditions set forth herein and the prior approval of the OTS of the
Conversion
<PAGE>
and Reorganization, as defined in the Plan of Conversion, and the expiration of
all applicable waiting periods, the Mutual Holding Company shall convert from
the mutual form to a federal interim stock savings association and
simultaneously merge with and into the Association, which shall be the Surviving
Association. Upon consummation of the Mutual Holding Company Merger, the
Surviving Association shall be considered the same business and corporate entity
as each of the Constituent Associations and thereupon and thereafter all the
property, rights, powers and franchises of each of the Constituent Associations
shall vest in the Surviving Association and the Surviving Association shall be
subject to and be deemed to have assumed all of the debts, liabilities,
obligations and duties of each of the Constituent Associations and shall have
succeeded to all of each of their relationships, fiduciary or otherwise, as
fully and to the same extent as if such property, rights, privileges, powers,
franchises, debts, obligations, duties and relationships had been originally
acquired, incurred or entered into by the Surviving Association. In addition,
any reference to either of the Constituent Associations in any contract, will or
document, whether executed or taking effect before or after the Effective Date,
shall be considered a reference to the Surviving Association if not inconsistent
with the other provisions of the contract, will or document; and any pending
action or other judicial proceeding to which either of the Constituent
Associations is a party shall not be deemed to have abated or to have been
discontinued by reason of the Mutual Holding Company Merger, but may be
prosecuted to final judgment, order or decree in the same manner as if the
Mutual Holding Company Merger had not occurred or the Surviving Association may
be substituted as a party to such action or proceeding, and any judgment, order
or decree may be rendered for or against it that might have been rendered for or
against either of the Constituent Associations if the Mutual Holding Company
Merger had not occurred.
3. Cancellation of Association Common Stock held by the Mutual
Holding Company and Member Interests; Liquidation Account
(a) On the Effective Date, (i) each share of Association Common Stock
issued and outstanding immediately prior to the Effective Date and held by the
Mutual Holding Company shall, by virtue of the Mutual Holding Company Merger and
without any action on the part of the holder thereof, be cancelled, (ii) the
interests in the Mutual Holding Company of any person, firm or entity who or
which qualified as a member of the Mutual Holding Company in accordance with its
mutual charter and bylaws and the laws of the United States prior to the Mutual
Holding Company's conversion from mutual to stock form (the "Members") shall, by
virtue of the Mutual Holding Company Merger and without any action on the part
of the holder thereof, be cancelled, and (iii) the Association shall establish a
liquidation account on behalf of each depositor member of the Mutual Holding
Company, as defined in the Plan of Conversion, in accordance with Section 17 of
the Plan of Conversion.
(b) At or after the Effective Date and prior to the Association Merger,
each certificate or certificates theretofore evidencing issued and outstanding
shares of Association Common Stock, other than any such certificate or
certificates held by the Mutual Holding
A-2
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Company, which shall be cancelled, shall continue to represent issued and
outstanding shares of Association Common Stock.
4. Dissenting Shares. No Member of the Mutual Holding Company shall
have any dissenter or appraisal rights in connection with the Mutual Holding
Company Merger. Holders of Association Common Stock shall have dissenter and
approval rights pursuant to 12 C.F.R. Section 552.14, as set forth in Section
28 of the Plan of Conversion.
5. Name of Surviving Corporation. The name of the Surviving Association
shall be "Ponchatoula Homestead Savings, F.A."
6. Directors of the Surviving Association. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Association and applicable law, the number of directors of the Surviving
Association shall be seven. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Association are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Association in the year set forth after
his respective name, and until a successor is elected and qualified.
<TABLE>
<CAPTION>
Name Term Expires
---- ------------
<S> <C>
John C. Bohning 1998
Milton J. Schanzbach 1998
Robert H. Gabriel 1999
Barbara B. Theriot 1999
Lawrence C. Caldwell, Jr. 2000
Dennis E. James 2000
Allen B. Pierson, Jr. 2000
</TABLE>
The address of each such director is c/o Ponchatoula Homestead Savings,
F.A., 195 North Sixth Street, Ponchatoula, Louisiana 70454.
7. Officers of the Surviving Association. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Association and applicable law, the officers of the Association immediately
prior to the Effective Date shall be the officers of the Surviving Association.
8. Offices. Upon the Effective Date, all offices of the Association
shall be offices of the Surviving Association. As of the Effective Date, the
home office of the Surviving Association shall remain at 195 North Sixth Street,
Ponchatoula, Louisiana 70454 and the location of the only other deposit-taking
office of the Surviving Association shall continue to be 111 North Bay Street,
Amite, Louisiana 70422, except for the addition of deposittaking offices
authorized or the deletion of deposit-taking offices closed subsequent to the
date hereof and the Effective Date.
A-3
<PAGE>
9. Charter and Bylaws. On and after the Effective Date, the Charter of
the Association as in effect immediately prior to the Effective Date shall be
the Charter of the Surviving Association until amended in accordance with the
terms thereof and applicable law, except that the Charter shall be amended to
provide for the establishment of a liquidation account in accordance with
applicable law and regulation.
On and after the Effective Date, the Bylaws of the Association as in
effect immediately prior to the Effective Date shall be the Bylaws of the
Surviving Association until amended in accordance with the terms thereof and
applicable law.
10. Stockholder and Member Approvals. The affirmative votes of the
holders of Association Common Stock set forth in Section 3(e) of the Plan of
Conversion and the Members set forth in Section 3(b) of the Plan of Conversion
shall be required to approve the Plan of Conversion, of which this Plan of
Merger is a part, on behalf of the Association and the Mutual Holding Company,
respectively.
11. Abandonment of Agreement. This Plan of Merger may be abandoned by
either the Mutual Holding Company or the Association at any time before the
Effective Date in the manner set forth in Section 30 of the Plan of Conversion.
12. Amendments. This Plan of Merger may be amended in the manner set
forth in Section 30 of the Plan of Conversion by a subsequent writing signed by
the parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
13. Successors. This Agreement shall be binding on the successors of
the Mutual Holding Company and the Association.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America.
A-4
<PAGE>
IN WITNESS WHEREOF, the Mutual Holding Company and the Association have
caused this Plan of Merger to be executed by their duly authorized officers as
of the day and year first above written.
HOMESTEAD MUTUAL HOLDING COMPANY
Attest:
\s\Barbara B. Theriot By: \s\Lawrence C. Caldwell, Jr.
- ------------------------ -----------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
PONCHATOULA HOMESTEAD SAVINGS, F.A.
Attest:
\s\Barbara B. Theriot By: \s\Lawrence C. Caldwell, Jr.
- ------------------------ -----------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
A-5
<PAGE>
ANNEX B
PLAN OF MERGER
This Plan of Merger, dated as of ________ __, 1998, is among
Ponchatoula Homestead Savings, F.A. (the "Association" or the "Surviving
Association"), a federally-chartered savings association, Homestead Bancorp,
Inc. (the "Holding Company"), a Louisiana corporation, and Ponchatoula Interim
Savings Association ("Interim"), a federally-chartered interim savings
association.
WITNESSETH:
WHEREAS, the Association has organized the Holding Company as a
first-tier, wholly-owned subsidiary for the purpose of becoming the stock
holding company of the Association upon completion of the Conversion and
Reorganization, as defined in the Plan of Conversion of Homestead Mutual Holding
Company (the "Mutual Holding Company") and Agreement and Plan of Reorganization
between the Holding Company and the Association (the "Plan of Conversion");
WHEREAS, the Mutual Holding Company, a federally-chartered mutual
holding company which owns 75.2% of the common stock of the Association, par
value $.10 per share ("Association Common Stock"), will convert to a
federally-chartered interim stock savings association and simultaneously merge
with and into the Association pursuant to the Plan of Conversion and the Plan of
Merger included as Annex A thereto (the "Mutual Holding Company Merger"),
pursuant to which all shares of Association Common Stock held by the Mutual
Holding Company will be cancelled;
WHEREAS, the formation of a stock holding company by the Association
will be facilitated by causing the Holding Company to become the sole
stockholder of a newly-formed interim federally-chartered stock savings
association and then merging the interim savings association with and into the
Association (the "Association Merger"), pursuant to which the Association will
become a wholly-owned subsidiary of the Holding Company and, in connection
therewith, all outstanding shares of Association Common Stock will be converted
automatically into and become shares of common stock of the Holding Company, par
value $.01 per share ("Holding Company Common Stock");
WHEREAS, Interim is being organized by the officers of the Association
as an interim federally-chartered stock savings association with the Holding
Company as its sole stockholder in order to effect the Association Merger; and
WHEREAS, the Association and Interim (the "Constituent Associations")
desire to provide for the terms and conditions of the Association Merger;
<PAGE>
NOW, THEREFORE, the Association, the Holding Company and Interim hereby
agree as follows:
1. Effective Date. The Association Merger shall become effective on the
date specified in the endorsement of the Articles of Combination relating to the
Association Merger by the Secretary of the Office of Thrift Supervision ("OTS")
pursuant to 12 C.F.R. ss. 552.13(k), or any successor thereto (the "Effective
Date").
2. The Association Merger and Effect Thereof. Subject to the terms and
conditions set forth herein and the prior approval of the OTS of the Conversion
and the Reorganization, as defined in the Plan of Conversion, and the expiration
of all applicable waiting periods, Interim shall merge with and into the
Association, which shall be the Surviving Association. Upon consummation of the
Association Merger, the Surviving Association shall be considered the same
business and corporate entity as each of the Constituent Associations and
thereupon and thereafter all the property, rights, powers and franchises of each
of the Constituent Associations shall vest in the Surviving Association and the
Surviving Association shall be subject to and be deemed to have assumed all of
the debts, liabilities, obligations and duties of each of the Constituent
Associations and shall have succeeded to all of each of their relationships,
fiduciary or otherwise, as fully and to the same extent as if such property,
rights, privileges, powers, franchises, debts, obligations, duties and
relationships had been originally acquired, incurred or entered into by the
Surviving Association. In addition, any reference to either of the Constituent
Associations in any contract, will or document, whether executed or taking
effect before or after the Effective Date, shall be considered a reference to
the Surviving Association if not inconsistent with the other provisions of the
contract, will or document; and any pending action or other judicial proceeding
to which either of the Constituent Associations is a party shall not be deemed
to have abated or to have been discontinued by reason of the Association Merger,
but may be prosecuted to final judgment, order or decree in the same manner as
if the Association Merger had not occurred or the Surviving Association may be
substituted as a party to such action or proceeding, and any judgment, order or
decree may be rendered for or against it that might have been rendered for or
against either of the Constituent Associations if the Association Merger had not
occurred.
3. Conversion of Stock.
(a) On the Effective Date, (i) each share of Association Common Stock
issued and outstanding immediately prior to the Effective Date shall, by virtue
of the Association Merger and without any action on the part of the holder
thereof, be converted into the right to receive Holding Company Common Stock
based on the Exchange Ratio, as defined in the Plan of Conversion, plus the
right to receive cash in lieu of any fractional share interest, as determined in
accordance with Section 3(c) hereof, except for any Dissenting Shares (as
defined in Section 28 of the Plan of Conversion) which shall be treated as set
forth in Section 28 of the Plan of Conversion, (ii) each share of common stock,
par value $.01 per share, of Interim ("Interim Common Stock") issued and
outstanding immediately prior to the
B-2
<PAGE>
Effective Date shall, by virtue of the Association Merger and without any action
on the part of the holder thereof, be converted into one share of Association
Common Stock, and (iii) each share of Holding Company Common Stock issued and
outstanding immediately prior to the Effective Date shall, by virtue of the
Association Merger and without any action on the part of the holder thereof, be
cancelled. By voting in favor of this Plan of Merger, the Holding Company, as
the sole stockholder of Interim, shall have agreed (i) to issue shares of
Holding Company Common Stock in accordance with the terms hereof and (ii) to
cancel all previously issued and outstanding shares of Holding Company Common
Stock upon the effectiveness of the Association Merger.
(b) On and after the Effective Date, there shall be no registrations of
transfers on the stock transfer books of Interim or the Association of shares of
Interim Common Stock or Association Common Stock which were outstanding
immediately prior to the Effective Date.
(c) Notwithstanding any other provision hereof, no fractional shares of
Holding Company Common Stock shall be issued to holders of Association Common
Stock. In lieu thereof, each holder of shares of Association Common Stock
entitled to a fraction of a share of Holding Company Common Stock shall, at the
time of surrender of the certificate or certificates representing such holder's
shares, receive an amount of cash equal to the product arrived at by multiplying
such fraction of a share of Holding Company Common Stock by the Actual Purchase
Price, as defined in the Plan of Conversion. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share.
4. Exchange of Shares.
(a) At or after the Effective Date, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Association
Common Stock (other than holders of Dissenting Shares, if any), upon surrender
of the same to an agent, duly appointed by the Holding Company ("Exchange
Agent"), shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of full shares of Holding Company Common
Stock for which the shares of Association Common Stock theretofore represented
by the certificate or certificates so surrendered shall have been converted as
provided in Section 3(a) hereof. The Exchange Agent shall mail to each holder of
record of an outstanding certificate which immediately prior to the Effective
Date evidenced shares of Association Common Stock, and which is to be exchanged
for Holding Company Common Stock as provided in Section 3(a) hereof, a form of
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to such certificate shall pass, only upon delivery of
such certificate to the Exchange Agent) advising such holder of the terms of the
exchange effected by the Association Merger and of the procedure for
surrendering to the Exchange Agent such certificate in exchange for a
certificate or certificates evidencing Holding Company Common Stock.
B-3
<PAGE>
(b) No holder of a certificate theretofore representing shares of
Association Common Stock shall be entitled to receive any dividends in respect
of the Holding Company Common Stock into which such shares shall have been
converted by virtue of the Association Merger until the certificate representing
such shares of Association Common Stock is surrendered in exchange for
certificates representing shares of Holding Company Common Stock. In the event
that dividends are declared and paid by the Holding Company in respect of
Holding Company Common Stock after the Effective Date but prior to surrender of
certificates representing shares of Association Common Stock, dividends payable
in respect of shares of Holding Company Common Stock not then issued shall
accrue (without interest). Any such dividends shall be paid (without interest)
upon surrender of the certificates representing such shares of Association
Common Stock. The Holding Company shall be entitled, after the Effective Date,
to treat certificates representing shares of Association Common Stock as
evidencing ownership of the number of full shares of Holding Company Common
Stock into which the shares of Association Common Stock represented by such
certificates shall have been converted, notwithstanding the failure on the part
of the holder thereof to surrender such certificates.
(c) The Holding Company shall not be obligated to deliver a certificate
or certificates representing shares of Holding Company Common Stock to which a
holder of Association Common Stock would otherwise be entitled as a result of
the Association Merger until such holder surrenders the certificate or
certificates representing the shares of Association Common Stock for exchange as
provided in this Section 4, or, in default thereof, an appropriate Affidavit of
Loss and Indemnity Agreement and/or a bond as may be required in each case by
the Holding Company. If any certificate evidencing shares of Holding Company
Common Stock is to be issued in a name other than that in which the certificate
evidencing Association Common Stock surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange pay to the Exchange Agent
any transfer or other tax required by reason of the issuance of a certificate
for shares of Holding Company Common Stock in any name other than that of the
registered holder of the certificate surrendered or otherwise establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) If, between the date hereof and the Effective Date, the shares of
Association Common Stock shall be changed into a different number or class of
shares by reason of any reclassification, recapitalization, split-up,
combination, exchange of shares or readjustment, or a stock dividend thereon
shall be declared with a record date within said period, the Exchange Ratio
specified in Section 3(a) hereof shall be adjusted accordingly.
5. Dissenting Shares. Holders of shares of Association Common Stock
shall have dissenter and appraisal rights in connection with the Association
Merger pursuant to 12 C.F.R. Section 552.14.
B-4
<PAGE>
6. Name of Surviving Association. The name of the Surviving Association
shall be "Ponchatoula Homestead Savings, F.A."
7. Directors of the Surviving Association. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Association and applicable law, the number of directors of the Surviving
Association shall be seven. The names of those persons who, upon and after the
Effective Date, shall be directors of the Surviving Association are set forth
below. Each such director shall serve for the term which expires at the annual
meeting of stockholders of the Surviving Association in the year set forth after
his respective name, and until a successor is elected and qualified.
<TABLE>
<CAPTION>
Name Term Expires
---- ------------
<S> <C>
John C. Bohning 1998
Milton J. Schanzbach 1998
Robert H. Gabriel 1999
Barbara B. Theriot 1999
Lawrence C. Caldwell, Jr. 2000
Dennis E. James 2000
Allen B. Pierson, Jr. 2000
</TABLE>
The address of each such director is c/o Ponchatoula Homestead Savings,
F.A., 195 North Sixth Street, Ponchatoula, Louisiana 70454.
8. Officers of the Surviving Association. Upon and after the Effective
Date, until changed in accordance with the Charter and Bylaws of the Surviving
Association and applicable law, the officers of the Association immediately
prior to the Effective Date shall be the officers of the Surviving Association.
9. Offices. Upon the Effective Date, all offices of the Association
shall be offices of the Surviving Association. As of the Effective Date, the
home office of the Surviving Association shall remain at 195 North Sixth Street,
Ponchatoula, Louisiana 70454 and the location of the only other deposit-taking
office of the Surviving Association shall continue to be 111 North Bay Street,
Amite, Louisiana 70422, except for the addition of deposittaking offices
authorized or the deletion of deposit-taking offices closed subsequent to the
date hereof and the Effective Date.
10. Charter and Bylaws. On and after the Effective Date, the Charter
and Bylaws of the Association as in effect immediately prior to the Effective
Date shall be the Charter and Bylaws of the Surviving Association until amended
in accordance with the terms thereof and applicable law.
B-5
<PAGE>
11. Savings Accounts. Upon the Effective Date, any savings accounts of
Interim, without reissue, shall be and become savings accounts of the Surviving
Association without change in their respective terms, including, without
limitation, maturity, minimum required balances or withdrawal value.
12. Stock Compensation Plans. By voting in favor of this Agreement, the
Holding Company shall have approved adoption of the Association's existing 1996
Stock Incentive Plan, 1996 Directors' Stock Option Plan, 1996 Management
Recognition Plan for Directors and 1996 Management Recognition Plan for Officers
(collectively the "Plans") as plans of the Holding Company and shall have agreed
to issue Holding Company Common Stock in lieu of Association Common Stock
pursuant to the terms of such Plans. As of the Effective Date, rights
outstanding under the Plans shall be assumed by the Holding Company and
thereafter shall be rights only for shares of Holding Company Common Stock, with
each such right being for a number of shares of Holding Company Common Stock
equal to the number of shares of Association Common Stock that were available
thereunder immediately prior to the Effective Date times the Exchange Ratio, as
defined in the Plan of Conversion, and the price of each such right shall be
adjusted to reflect the Exchange Ratio and so that the aggregate purchase price
of the right is unaffected, but with no change in any other term or condition of
such right. The Holding Company shall make appropriate amendments to the Plans
to reflect the adoption of the Plans by the Holding Company without adverse
effect upon the rights outstanding thereunder, including changing references to
the Association in the Plans to the Holding Company where appropriate.
13. Stockholder Approval. The affirmative votes of the holders of
Association Common Stock set forth in Section 3 of the Plan of Conversion shall
be required to approve the Plan of Conversion, of which this Plan of Merger is a
part, on behalf of the Association. The approval of the Holding Company, as the
sole holder of the Interim Common Stock, shall be required to approve the Plan
of Conversion, of which this Plan of Merger is a part, on behalf of Interim.
14. Registration; Other Approvals. In addition to the approvals set
forth in Sections 1 and 13 hereof and the Plan of Conversion, the parties'
obligations to consummate the Association Merger shall be subject to the Holding
Company Common Stock to be issued hereunder in exchange for Association Common
Stock being registered under the Securities Act of 1993, as amended, and
registered or qualified under applicable state securities laws, as well as the
receipt of all other approvals, consents or waivers as the parties may deem
necessary or advisable.
15. Abandonment of Agreement. This Plan of Merger may be abandoned by
either the Association or Interim at any time before the Effective Date in the
manner set forth in Section 30 of the Plan of Conversion.
B-6
<PAGE>
16. Amendments. This Plan of Merger may be amended in the manner set
forth in Section 30 of the Plan of Conversion by a subsequent writing signed by
the parties hereto upon the approval of the Board of Directors of each of the
parties hereto.
17. Successors. This Agreement shall be binding on the successors of
the Association and Interim.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States of America.
IN WITNESS WHEREOF, the Association, the Holding Company and Interim
have caused this Plan of Merger to be executed by their duly authorized officers
as of the day and year first above written.
PONCHATOULA HOMESTEAD SAVINGS, F.A.
Attest:
By:
- ------------------ ---------------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
HOMESTEAD BANCORP, INC.
Attest:
By:
- ------------------ ---------------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
PONCHATOULA INTERIM SAVINGS
ASSOCIATION (In Organization)
Attest:
By:
- ------------------ ---------------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
HOMESTEAD BANCORP, INC.
Article 1. Name. The name of the corporation is Homestead Bancorp, Inc.
(hereinafter referred to as the "Corporation").
Article 2. Nature of Business. The purpose of the Corporation is to
engage in any lawful act or activity for which a corporation may be formed under
the Louisiana Business Corporation Law, as amended (the "BCL"). The Corporation
is incorporated under the provisions of the BCL.
Article 3. Duration. The term of the existence of the Corporation shall
be perpetual.
Article 4. Capital Stock.
A. Authorized Amount. The total number of shares of capital stock which
the Corporation has authority to issue is 15,000,000, of which 5,000,000 shall
be serial preferred stock, par value $.01 per share (hereinafter the "Preferred
Stock"), and 10,000,000 shall be common stock, par value $.01 per share
(hereinafter the "Common Stock"). Except to the extent required by governing
law, rule or regulation, the shares of capital stock may be issued from time to
time by the Board of Directors without further approval of stockholders. The
Corporation shall have the authority to purchase its capital stock out of funds
lawfully available therefor.
B. Common Stock. Except as provided in this Article 4 (or in any
resolution or resolutions adopted by the Board of Directors pursuant hereto),
the exclusive voting power shall be vested in the Common Stock, with each holder
thereof being entitled to one vote for each share of such Common Stock standing
in the holder's name on the books of the Corporation, except as provided in
Article 10. Subject to any rights and preferences of any class of stock having
preference over the Common Stock, holders of Common Stock shall be entitled to
such dividends as may be declared by the Board of Directors out of funds
lawfully available therefor. Upon any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, holders of
Common Stock shall be entitled to receive pro rata the remaining assets of the
Corporation after the holders of any class of stock having preference over the
Common Stock have been paid in full any sums to which they may be entitled.
C. Authority of Board to Fix Terms of Preferred Stock. The Board of
Directors shall have the full authority permitted by law to divide the
authorized and unissued shares of Preferred Stock into series and to fix by
resolution full, limited, multiple or fractional, or no voting rights, and such
designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights, and other special or relative rights
of the Preferred Stock or any series thereof that may be desired.
Article 5. Incorporator. The name and mailing address of the sole
incorporator is as follows:
<PAGE>
<TABLE>
<CAPTION>
Number and
Class of
Shares
Name Address Subscribed For
- ---------------------- -------------------------------- ------------------
<S> <C> <C>
Ponchatoula Homestead 195 North Sixth Street 100 shares of
Savings, F.A. Ponchatoula, Louisiana 70454 Common Stock
</TABLE>
Article 6. Directors. The business and affairs of the Corporation shall
be managed by or under the direction of a Board of Directors.
A. Number. Except as otherwise increased from time to time by the
exercise of the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional directors, the number of directors of the Corporation shall be no
less than five and no more than 15, as specified in the Corporation's Bylaws, as
may be amended from time to time.
B. Classification and Term. The Board of Directors, other than those
who may be elected by the holders of any class or series of stock having
preference over the Common Stock as to dividends or upon liquidation, shall be
divided into three classes as nearly equal in number as possible, with one class
to be elected annually. At each annual meeting of stockholders, the directors
elected to succeed those in the class whose terms are expiring shall be elected
for a term of office to expire at the third succeeding annual meeting of
stockholders and when their respective successors are elected and qualified.
Notwithstanding the foregoing, and except as otherwise required by law, whenever
the holders of any one or more series of Preferred Stock shall have the right,
voting separately as a class, to elect one or more directors of the Corporation,
the terms of the director or directors elected by such holders shall expire at
the next succeeding annual meeting of stockholders and vacancies created with
respect to any directorship of the directors so elected may be filled in the
manner specified by the terms of such Preferred Stock.
C. No Cumulative Voting. Stockholders of the Corporation shall not be
permitted to cumulate their votes for the election of directors.
D. Vacancies. Except as otherwise fixed pursuant to the provisions of
Article 4 hereof relating to the rights of the holders of any class or series of
stock having preference over the Common Stock as to dividends or upon
liquidation to elect directors, any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, shall be filled by a majority vote of the directors then in office,
whether or not a quorum is present, or by a sole remaining director, and any
director so chosen shall serve until the term of the class to which he was
appointed shall expire and until his successor is elected and qualified. When
the number of directors is changed, the Board of Directors shall determine the
class or classes to which the increased or decreased
2
<PAGE>
number of directors shall be apportioned, provided that no decrease in the
number of directors shall shorten the term of any incumbent director.
E. Removal. Subject to the rights of any class or series of stock
having preference over the Common Stock as to dividends or upon liquidation to
elect directors, any director (including persons elected by directors to fill
vacancies in the Board of Directors) may be removed from office without cause by
an affirmative vote of not less than 75% of the total votes eligible to be cast
by stockholders at a duly constituted meeting of stockholders called expressly
for such purpose and may be removed from office with cause by an affirmative
vote of not less than a majority of the total votes eligible to be cast by
stockholders. Cause for removal shall exist only if the director whose removal
is proposed has been either declared of unsound mind by an order of a court of
competent jurisdiction, convicted of a felony or of an offense punishable by
imprisonment for a term of more than one year by a court of competent
jurisdiction, or deemed liable by a court of competent jurisdiction for gross
negligence or misconduct in the performance of such director's duties to the
Corporation. At least 30 days prior to such meeting of stockholders, written
notice shall be sent to the director whose removal will be considered at the
meeting.
F. Nominations of Directors. Nominations of candidates for election as
directors at any annual meeting of stockholders may be made (a) by, or at the
direction of, a majority of the Board of Directors or (b) by any stockholder
entitled to vote at such annual meeting. Only persons nominated in accordance
with the procedures set forth in this Article 6.F shall be eligible for election
as directors at an annual meeting. Ballots bearing the names of all the persons
who have been nominated for election as directors at an annual meeting in
accordance with the procedures set forth in this Article 6.F shall be provided
for use at the annual meeting.
Nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Article 6.F. To be timely, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the Corporation not later than 120 days prior to
the anniversary date of the initial mailing of proxy materials by the
Corporation in connection with the immediately preceding annual meeting of
stockholders of the Corporation; provided, however, that with respect to the
first scheduled annual meeting following the completion of the reorganization of
Ponchatoula Homestead Savings, F.A., Ponchatoula, Louisiana (the "Association")
from the mutual holding company structure to the stock holding company structure
(which meeting is expected to be held in April 1999), notice by the stockholder
must be so delivered or received no later than the close of business on Monday,
January 4, 1999. Such stockholder's notice shall set forth (a) the name, age,
business address and residence address of the stockholder who intends to make
the nomination and of the person or persons to be nominated; (b) the principal
occupation or employment of the stockholder submitting the notice and of each
person being nominated; (c) the class and number of shares of Corporation stock
which are Beneficially Owned (as defined in Article 9.A(e) hereof) by the
stockholder submitting the notice, by any Person
3
<PAGE>
who is Acting in Concert with or who is an Affiliate or Associate of such
stockholder (as such capitalized terms are defined in Article 9.A hereof), by
any Person who is a member of any group with such stockholder with respect to
the Corporation stock or who is known by such stockholder to be supporting such
nominee(s) on the date the notice is given to the Corporation, by each person
being nominated, and by each Person who is in control of, is controlled by or is
under common control with any of the foregoing Persons (if any of the foregoing
Persons is a partnership, corporation, limited liability company, association or
trust, information shall be provided regarding the name and address of, and the
class of number of shares of Corporation stock which are Beneficially Owned by,
each partner in such partnership, each director, executive officer and
stockholder in such corporation, each member in such limited liability company
or association, and each trustee and beneficiary of such trust, and in each case
each Person controlling such entity and each partner, director, executive
officer, stockholder, member or trustee of any entity which is ultimately in
control of such partnership, corporation, limited liability company, association
or trust); (d) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (e) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (f) such other information regarding the stockholder
submitting the notice, each nominee proposed by such stockholder and any other
Person covered by clause (c) of this paragraph as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission; and (g) the consent of each nominee to serve
as a director of the Corporation if so elected. At the request of the Board of
Directors, any person nominated by, or at the direction of, the Board for
election as a director at an annual meeting 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.
The Board of Directors may reject any nomination by a stockholder not
timely made in accordance with the requirements of this Article 6.F. If the
Board of Directors, or a designated committee thereof, determines that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Article 6.F in any material respect, the
Secretary of the Corporation or a duly authorized representative of the
Corporation shall promptly notify such stockholder of the deficiency in the
notice. The stockholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed five days from the date such deficiency notice is given to the
stockholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board of
Directors or such committee reasonably determines that the additional
information provided by the stockholder, together with information previously
provided, does not satisfy the requirements of this Article 6.F in any material
respect, then the Board of Directors may reject such stockholder's nomination.
The Secretary of the Corporation or a duly authorized representative of the
Corporation shall notify a stockholder in writing
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whether his nomination has been made in accordance with the time and
informational requirements of this Article 6.F. Notwithstanding the procedures
set forth in this paragraph, if neither the Board of Directors nor such
committee makes a determination as to the validity of any nominations by a
stockholder, the presiding officer of the annual meeting shall determine and
declare at the annual meeting whether the nomination was made in accordance with
the terms of this Article 6.F. If the presiding officer determines that a
nomination was made in accordance with the terms of this Article 6.F, he shall
so declare at the annual meeting and ballots shall be provided for use at the
meeting with respect to such nominee. If the presiding officer determines that a
nomination was not made in accordance with the terms of this Article 6.F, he
shall so declare at the annual meeting and the defective nomination shall be
disregarded.
Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more series of Preferred Stock shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the provisions of this Article 6.F shall not apply with respect to
the director or directors elected by such holders of Preferred Stock.
G. Discharge of Duties. In discharging the duties of their respective
positions, the Board of Directors, committees of the Board of Directors and
individual directors shall, in considering the best interests of the
Corporation, consider the effects of any action upon the employees of the
Corporation and its subsidiaries, the depositors and borrowers of any insured
institution subsidiary, the communities in which offices or other establishments
of the Corporation or any subsidiary are located and all other pertinent
factors.
Article 7. Preemptive Rights. No holder of the capital stock of the
Corporation shall be entitled as such, as a matter of right, to subscribe for or
purchase any part of any new or additional issue of stock of any class
whatsoever of the Corporation, or of securities convertible into stock of any
class whatsoever, whether now or hereafter authorized, or whether issued for
cash or other consideration or by way of a dividend.
Article 8. Indemnification, etc. of Officers, Directors, Employees and
Agents.
A. Personal Liability of Directors and Officers. A director or officer
of the Corporation shall not be personally liable for monetary damages for any
action taken, or any failure to take any action, as a director or officer except
to the extent that by law a director's or officer's liability for monetary
damages may not be limited.
B. Indemnification. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, including actions by or in the right of
the Corporation, whether civil, criminal, administrative or investigative, by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
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partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding to the full extent permissible under Louisiana law.
C. Advancement of Expenses. Reasonable expenses incurred by an officer,
director, employee or agent of the Corporation in defending an action, suit or
proceeding described in Section B of this Article 8 may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding if authorized by the board of directors (without regard to whether
participating members thereof are parties to such action, suit or proceeding),
upon receipt of an undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that the person is not entitled to
be indemnified by the Corporation.
D. Other Rights. The indemnification and advancement of expenses
provided by or pursuant to this Article 8 shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, insurance or other agreement, vote of
stockholders or directors (regardless of whether directors authorizing such
indemnification are beneficiaries thereof) or otherwise, both as to actions in
their official capacity and as to actions in another capacity while holding an
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
E. Insurance. The Corporation shall have the power to purchase and
maintain insurance or another similar arrangement on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture or other enterprise,
against any liability asserted against or incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation would have
the power to indemnify him against such liability under the provisions of this
Article 8.
F. Security Fund; Indemnity Agreements. By action of the Board of
Directors (notwithstanding their interest in the transaction), the Corporation
may create and fund a trust fund or other fund or form of self-insurance
arrangement of any nature, and may enter into agreements with its officers,
directors, employees and agents for the purpose of securing or insuring in any
manner its obligation to indemnify or advance expenses provided for in this
Article 8.
G. Modification. The duties of the Corporation to indemnify and to
advance expenses to any person as provided in this Article 8 shall be in the
nature of a contract between the Corporation and each such person, and no
amendment or repeal of any provision of this Article 8, and no amendment or
termination of any trust or other fund or form of self-insurance arrangement
created pursuant to Section F of this Article 8, shall
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alter to the detriment of such person the right of such person to the advance of
expenses or indemnification related to a claim based on an act or failure to act
which took place prior to such amendment, repeal or termination.
H. Proceedings Initiated by Indemnified Persons. Notwithstanding any
other provision of this Article 8, the Corporation shall not indemnify a
director, officer, employee or agent for any liability incurred in an action,
suit or proceeding initiated (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of or
participation in the action, suit or proceeding is authorized, either before or
after its commencement, by the affirmative vote of a majority of the directors
in office.
Article 9. Meetings of Stockholders and Stockholder Proposals
A. Definitions.
(a) Acquire. The term "Acquire" includes every type of
acquisition, whether effected by purchase, exchange, operation of law or
otherwise.
(b) Acting in Concert. The term "Acting in Concert" means (a)
knowing participation in a joint activity or conscious parallel action towards a
common goal whether or not pursuant to an express agreement, or (b) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise.
(c) Affiliate. An "Affiliate" of, or a Person "affiliated
with," a specified Person, means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified.
(d) Associate. The term "Associate" used to indicate a
relationship with any Person means:
(i) Any corporation, partnership, limited liability
company or other organization (other than the Corporation or a
Subsidiary of the Corporation), or any subsidiary or parent
thereof, of which such Person is a director, officer, partner
or member 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 10% or greater beneficial interest or as to which such
Person serves as trustee or in a similar fiduciary capacity,
provided, however, such term shall not include any employee
stock benefit plan of the Corporation or a Subsidiary of the
Corporation in which such Person has a 10% or greater
beneficial interest or serves as a trustee or in a similar
fiduciary capacity;
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(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 Corporation or a
Subsidiary of the Corporation (or any subsidiary or parent
thereof); or
(iv) Any investment company registered under the
Investment Company Act of 1940 for which such Person or any
Affiliate or Associate of such Person serves as investment
advisor.
(e) Beneficial Owner (including Beneficially Owned). A Person
shall be considered the "Beneficial Owner" of any shares of stock (whether or
not owned of record):
(i) With respect to which such Person or any
Affiliate or Associate of such Person directly or indirectly
has or shares (A) voting power, including the power to vote or
to direct the voting of such shares of stock, and/or (B)
investment power, including the power to dispose of or to
direct the disposition of such shares of stock;
(ii) Which such Person or any Affiliate or Associate
of such Person has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding
or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, and/or (B) the right to
vote pursuant to any agreement, arrangement or understanding
(whether such right is exercisable immediately or only after
the passage of time); or
(iii) Which are Beneficially Owned within the meaning
of (i) or (ii) of this Article 9.A(e) by any other Person with
which such first-mentioned Person or any of its Affiliates or
Associates either (A) has any agreement, arrangement or
understanding, written or oral, with respect to acquiring,
holding, voting or disposing of any shares of stock of the
Corporation or any Subsidiary of the Corporation or acquiring,
holding or disposing of all or substantially all, or any
Substantial Part, of the assets or business of the Corporation
or a Subsidiary of the Corporation, or (B) is Acting in
Concert. For the purpose only of determining whether a Person
is the Beneficial Owner of a percentage specified in this
Article 9 of the outstanding Voting Shares, such shares shall
be deemed to include any Voting Shares which may be issuable
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants, options or otherwise and which are deemed to be
Beneficially Owned by such Person pursuant to the foregoing
provisions of this Article 9.A(e), but shall not include any
other Voting Shares which may be issuable in such manner.
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(f) Offer. The term "Offer" shall mean every offer to buy or
acquire, solicitation of an offer to sell, tender offer or request or invitation
for tender of, a security or interest in a security for value; provided that the
term "Offer" shall not include (i) inquiries directed solely to the management
of the Corporation and not intended to be communicated to stockholders which are
designed to elicit an indication of management's receptivity to the basic
structure of a potential acquisition with respect to the amount of cash and or
securities, manner of acquisition and formula for determining price, or (ii)
non-binding expressions of understanding or letters of intent with the
management of the Corporation regarding the basic structure of a potential
acquisition with respect to the amount of cash and or securities, manner of
acquisition and formula for determining price.
(g) Person. The term "Person" shall mean any individual,
partnership, corporation, limited liability company, association, trust, group
or other entity. When two or more Persons act as a partnership, limited
partnership, limited liability company, syndicate, association or other group
for the purpose of acquiring, holding or disposing of shares of stock, such
partnership, syndicate, associate or group shall be deemed a "Person."
(h) Substantial Part. The term "Substantial Part" as used with
reference to the assets of the Corporation or of any Subsidiary means assets
having a value of more than 10% of the total consolidated assets of the
Corporation and its Subsidiaries as of the end of the Corporation's most recent
fiscal year ending prior to the time the determination is being made.
(i) Subsidiary. "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or indirectly, by
the Person in question.
(j) Voting Shares. "Voting Shares" shall mean shares of the
Corporation entitled to vote generally in an election of directors.
(k) Certain Determinations With Respect to Article 9. A
majority of the directors shall have the power to determine for the purposes of
this Article 9, on the basis of information known to them and acting in good
faith: (A) the number of Voting Shares of which any Person is the Beneficial
Owner, (B) whether a Person is an Affiliate or Associate of another, (C) whether
a Person has an agreement, arrangement or understanding with another as to the
matters referred to in the definition of "Beneficial Owner" as hereinabove
defined, and (D) such other matters with respect to which a determination is
required under this Article 9.
(l) Directors, Officers or Employees. Directors, officers or
employees of the Corporation or any Subsidiary thereof shall not be deemed to be
a group with respect to their individual acquisitions of any class of equity
securities of the Corporation solely as a result of their capacities as such.
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B. Special Meetings of Stockholders. Except as otherwise required by
law and subject to the rights of the holders of any class or series of Preferred
Stock, special meetings of the stockholders of the Corporation may be called
only by (i) the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the directors then in office, (ii) the
President, or (iii) by Persons who Beneficially Own an aggregate of at least 50%
of the outstanding Voting Shares.
C. Action Without a Meeting. Any action permitted to be taken by the
stockholders at a meeting may be taken without a meeting if consent in writing
setting forth the action so taken shall be signed by all of the stockholders who
would be entitled to vote at a meeting for such purpose and filed with the
Secretary of the Corporation as part of the corporate records.
D. Stockholder Proposals. At an annual meeting of stockholders, only
such new business shall be conducted, and only such proposals shall be acted
upon, as shall have been brought before the annual meeting by, or at the
direction of, (a) the Board of Directors or (b) any stockholder of the
Corporation who complies with all the requirements set forth in this Article
9.D.
Proposals, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Article 9.D. For stockholder proposals
to be included in the Corporation's proxy materials, the stockholder must comply
with all the timing and informational requirements of Rule 14a-8 of the Exchange
Act (or any successor regulation). With respect to stockholder proposals to be
considered at the annual meeting of stockholders but not included in the
Corporation's proxy materials, the stockholder notice shall be delivered to, or
mailed and received at, the principal executive offices of the Corporation not
later than 120 days prior to the anniversary date of the initial mailing of
proxy materials by the Corporation in connection with the immediately preceding
annual meeting of stockholders of the Corporation; provided, however, that with
respect to the first scheduled annual meeting following the completion of the
reorganization of the Association from the mutual holding company structure to
the stock holding company structure (which meeting is expected to be held in
April 1999), notice by the stockholder must be so delivered or received no later
than the close of business on Monday January 4, 1999. Such stockholder's notice
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting (a) a description of the proposal desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the Corporation's books, of
the stockholder proposing such business and, to the extent known, any other
stockholders known by such stockholder to be supporting such proposal, (c) the
class and number of shares of the Corporation's capital stock which are
Beneficially Owned by the stockholder submitting the notice, by any Person who
is Acting in Concert with or who is an Affiliate or Associate of such
stockholder, by any Person who is a member of any group with such stockholder
with respect to the Corporation stock or who is known by such stockholder to be
supporting such proposal on the date the
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notice is given to the Corporation, and by each Person who is in control of, is
controlled by or is under common control with any of the foregoing Persons (if
any of the foregoing Persons is a partnership, corporation, limited liability
company, association or trust, information shall be provided regarding the name
and address of, and the class and number of shares of Corporation stock which
are Beneficially Owned by, each partner in such partnership, each director,
executive officer and stockholder in such corporation, each member in such
limited liability company or association, and each trustee and beneficiary of
such trust, and in each case each Person controlling such entity and each
partner, director, executive officer, stockholder, member or trustee of any
entity which is ultimately in control of such partnership, corporation, limited
liability company, association or trust), (d) the identification of any person
retained or to be compensated by the stockholder submitting the proposal, or any
person acting on his or her behalf, to make solicitations or recommendations to
stockholders for the purpose of assisting in the passage of such proposal and a
brief description of the terms of such employment, retainer or arrangement for
compensation, and (e) any material interest of the stockholder in such business.
The Board of Directors may reject any stockholder proposal not timely
made in accordance with the terms of this Article 9.D. If the Board of
Directors, or a designated committee thereof, determines that the information
provided in a stockholder's notice does not satisfy the information requirements
of this Article 9.D in any material respect, the Secretary of the Corporation or
a duly authorized representative of the Corporation shall promptly notify such
stockholder of the deficiency in the notice. The stockholder shall have an
opportunity to cure the deficiency by providing additional information to the
Secretary within such period of time not to exceed five days from the date such
deficiency notice is given to the stockholder as the Board of Directors or such
committee shall reasonably determine. If the deficiency is not cured within such
period, or if the Board of Directors or such committee determines that the
additional information provided by the stockholder, together with information
previously provided, does not satisfy the requirements of this Article 9.D in
any material respect, then the Board of Directors may reject such stockholder's
proposal. The Secretary of the Corporation or a duly authorized representative
of the Corporation shall notify a stockholder in writing whether his proposal
has been made in accordance with the time and informational requirements of this
Article 9.D. Notwithstanding the procedures set forth in this paragraph, if
neither the Board of Directors nor such committee makes a determination as to
the validity of any stockholder proposal, the presiding officer of the annual
meeting shall determine and declare at the annual meeting whether the
stockholder proposal was made in accordance with the terms of this Article 9.D.
If the presiding officer determines that a stockholder proposal was made in
accordance with the terms of this Article 9.D, he shall so declare at the annual
meeting and ballots shall be provided for use at the meeting with respect to any
such proposal. If the presiding officer determines that a stockholder proposal
was not made in accordance with the terms of this Article 9.D, he shall so
declare at the annual meeting and any such proposal shall not be acted upon at
the annual meeting.
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This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.
Article 10. Restrictions on Offers and Acquisitions of the
Corporation's Equity Securities.
A. Restrictions. The definitions and other provisions set forth in
Article 9.A are also applicable to this Article 10. Except as set forth in
Article 10.B, for a period of five years from the completion of the
reorganization of the Association from the mutual holding company structure to
the stock holding company structure, no Person shall directly or indirectly
Offer to Acquire or Acquire the Beneficial Ownership of (i) more than 10% of the
issued and outstanding shares of any class of an equity security of the
Corporation, or (ii) any securities convertible into, or exercisable for, any
equity securities of the Corporation if, assuming conversion or exercise by such
Person of all securities of which such Person is the Beneficial Owner which are
convertible into, or exercisable for, such equity securities (but of no
securities convertible into, or exercisable for, such equity securities of which
such Person is not the Beneficial Owner), such Person would be the Beneficial
Owner of more than 10% of any class of an equity security of the Corporation.
B. Exclusions. The foregoing restrictions shall not apply to (i) any
Offer with a view toward public resale made exclusively to the Corporation by
underwriters or a selling group acting on its behalf, (ii) any employee benefit
plan or arrangement established by the Corporation or the Association and any
trustee of such a plan or arrangement, and (iii) any other Offer or acquisition
approved in advance by the affirmative vote of two-thirds of the Corporation's
entire Board of Directors.
C. Remedies. In the event that shares are acquired in violation of this
Article 10, all shares Beneficially Owned by any Person in excess of 10% shall
be considered "Excess Shares" and (i) shall not be counted as shares entitled to
vote and shall not be voted by any Person or counted as Voting Shares in
connection with any matters submitted to stockholders for a vote, (ii) the
Corporation is authorized to refuse to recognize a transfer or attempted
transfer of any shares of the Corporation's equity securities to any Person who
is the Beneficial Owner, or as the result of such transfer would become the
Beneficial Owner, of Excess Shares, and (iii) the Board of Directors may cause
such Excess Shares to be transferred to an independent trustee for sale on the
open market or otherwise, with the expenses of such trustee to be paid out of
the proceeds of the sale.
For purposes of ensuring compliance with Article 10.A, in the event any
partnership, corporation, limited liability company, association or trust is
deemed to Beneficially Own more than 5% of any class of the Corporation's stock,
either by itself or together with one or more other Persons who is an Affiliate
of or Acting in Concert with such entity or who is a member of any group with
such entity with respect to the Corporation's stock, then the
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Corporation shall be entitled upon written request to such entity to receive
information regarding the name and address of, and the class and number of
shares of Corporation stock which are Beneficially Owned by, each partner in
such partnership, each director, executive officer and stockholder in such
corporation, each member in such limited liability company or association, and
each trustee and beneficiary of such trust, and in each case each Person
controlling such entity and each partner, director, executive officer,
stockholder, member or trustee of any entity which is ultimately in control of
such partnership, corporation, limited liability company, association or trust.
E. Severability. In the event any provision (or portion thereof) of
this Article 10 shall be found to be invalid, prohibited or unenforceable for
any reason, the remaining provisions (or portions thereof) of this Article 10
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 each such remaining provision (or portion thereof) of this
Article 10 remain, to the fullest extent permitted by law, applicable and
enforceable as to all stockholders.
Article 11. Amendment of Articles and Bylaws.
A. Articles. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by law, and all rights conferred upon
stockholders herein are granted subject to this reservation. No amendment,
addition, alteration, change or repeal of these Articles of Incorporation shall
be made unless it is first approved by the Board of Directors of the Corporation
pursuant to a resolution adopted by the affirmative vote of a majority of the
directors then in office, and thereafter is approved by the holders of at least
75% of the Voting Shares (as defined in Article 9 hereof and after giving effect
to Article 10.C hereof), voting together as a single class, as well as such
additional vote of the Preferred Stock as may be required by the provisions of
any series thereof. Notwithstanding the preceding sentence, any amendment to
these Articles of Incorporation recommended for adoption by at least two-thirds
of the entire Board of Directors (including any vacancies) shall, to the extent
the Business Corporation Law of the State of Louisiana requires stockholder
approval of such amendment, require the affirmative vote of a majority of the
Voting Shares (as defined in Article 9 hereof and after giving effect to Article
10.C hereof), voting together as a single class, as well as such additional vote
of the Preferred Stock as may be required by the provisions of any series
thereof.
B. Bylaws. The Board of Directors, to the extent permitted by law, or
stockholders may adopt, alter, amend or repeal the Bylaws of the Corporation.
Such action by the Board of Directors shall require the affirmative vote of a
majority of the directors then in office at any regular or special meeting of
the Board of Directors. Such action by the stockholders shall require the
affirmative vote of the holders of a majority of the Voting Shares of the
Corporation (as defined on Article 9 hereof and after giving effect to Article
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10.C hereof), voting together as a single class, as well as such additional vote
of the Preferred Stock as may be required by the provisions of any series
thereof, provided that the affirmative vote of the holders of at least 75% of
the Voting Shares of the Corporation (as defined in Article 9 hereof and after
giving effect to Article 10.C hereof), voting together as a single class, as
well as such additional vote of the Preferred Stock as may be required by the
provisions of any series thereof, shall be required to amend, adopt, alter,
change or repeal any provision inconsistent with Sections 4.1, 4.2, 4.3 and 4.4
of the Bylaws and Articles VIII and XII of the Bylaws.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the Louisiana Business
Corporation Law, as amended, through these Articles of Incorporation, has caused
these Articles of Incorporation to be signed by its President and Chief
Executive Officer, who hereby declares and certifies that the facts herein
stated are true and who has hereunto set his hand this 27th day of February
1998.
ATTEST (SEAL) PONCHATOULA HOMESTEAD SAVINGS, F.A.
\s\Barbara B. Theriot By: \s\Lawrence C. Caldwell, Jr.
- --------------------- -----------------------------------
Barbara B. Theriot, Lawrence C. Caldwell, Jr., President
Secretary and Chief Executive Officer
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ACKNOWLEDGMENT
STATE OF LOUISIANA
TANGIPAHOA PARISH
On this 27th day of February 1998, before me appeared Lawrence C.
Caldwell, Jr., to me personally known, who, being by me duly sworn, did say that
he is the President and Chief Executive Officer of Ponchatoula Homestead
Savings, F.A. (the sole incorporator of Homestead Bancorp, Inc.), that the seal
affixed to the above and foregoing instrument is the corporate seal of said
Association and that the instrument was signed and sealed on behalf of the
Association by authority of its Board of Directors; and said Lawrence C.
Caldwell, Jr. acknowledged the instrument to be the free act and deed of the
Association.
\s\Lawrence C. Caldwell, Jr.
----------------------------
Lawrence C. Caldwell, Jr.
SWORN TO AND SUBSCRIBED before me this 27th day of February 1998.
Allen B. Pierson, Jr.
---------------------------------
NOTARY PUBLIC
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
HOMESTEAD BANCORP, INC.
ARTICLE I. OFFICES
1.1 Registered Office and Registered Agent. The registered office of
Homestead Bancorp, Inc. (the "Corporation") shall be located in the State of
Louisiana at such place as may be fixed from time to time by the Board of
Directors upon filing of such notices as may be required by law, and the
registered agent shall have a business office identical with such registered
office.
1.2 Other Offices. The Corporation may have other offices within or
outside the State of Louisiana at such place or places as the Board of Directors
may from time to time determine.
ARTICLE II. STOCKHOLDERS' MEETINGS
2.1 Meeting Place. All meetings of the stockholders shall be held at
the principal place of business of the Corporation, or at such other place
within or without the State of Louisiana as shall be determined from time to
time by the Board of Directors, and the place at which any such meeting shall be
held shall be stated in the notice of the meeting.
2.2 Annual Meeting Time. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the third Wednesday
of April at the hour of 10:00 a.m., if not a legal holiday, and if a legal
holiday, then on the day following, at the same hour, or at such other date and
time as may be determined by the Board of Directors and stated in the notice of
such meeting.
2.3 Organization and Conduct. Each meeting of the stockholders shall be
presided over by the President, or if the President is not present, by such
other person as the directors may determine. The Secretary, or in her absence a
temporary Secretary, shall act as secretary of each meeting of the stockholders.
In the absence of the Secretary and any temporary Secretary, the chairman of the
meeting may appoint any person present to act as secretary of the meeting. The
chairman of any meeting of the stockholders, unless prescribed by law or
regulation or unless the Board of Directors has otherwise determined, shall
determine the order of the business and the procedure at the meeting, including
such regulation of the manner of voting and the conduct of discussions as shall
be deemed appropriate by him in his sole discretion.
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2.4 Notice.
(a) Notice of the time and place of the annual meeting of
stockholders shall be given by delivering personally or by mailing a written or
printed notice of the same, at least 10 days and not more than 60 days prior to
the meeting, to each stockholder of record entitled to vote at such meeting.
When any stockholders' meeting, either annual or special, is adjourned for 30
days or more, or if a new record date is fixed for an adjourned meeting of
stockholders, notice of the adjourned meeting shall be given as in the case of
an original meeting. It shall not be necessary to give any notice of the time
and place of any meeting adjourned for less than 30 days or of the business to
be transacted thereat (unless a new record date is fixed therefor), other than
an announcement at the meeting at which such adjournment is taken.
(b) At least 15 days and not more than 60 days prior to the
meeting, a written or printed notice of each special meeting of stockholders,
stating the place, day and hour of such meeting, and the purpose or purposes for
which the meeting is called, shall be either delivered personally or mailed to
each stockholder of record entitled to vote at such meeting.
2.5 Voting Record. At least five days before each meeting of
stockholders, a complete record of the stockholders entitled to vote at such
meeting, or any adjournment thereof, shall be made, arranged in alphabetical
order, with the number and class of shares held by each stockholder, which
record shall be kept on file at the registered office of the Corporation and
shall be subject to inspection by any stockholder at any time during usual
business hours. The record shall be kept open at the time and place of such
meeting for the inspection by any stockholder.
2.6 Quorum. Except as otherwise required by law or the Corporation's
Articles of Incorporation or these Bylaws:
(a) A quorum at any annual or special meeting of stockholders
shall consist of stockholders representing, either in person or by proxy, a
majority of the outstanding capital stock of the Corporation entitled to vote at
such meeting.
(b) The votes of a majority in interest of those present at
any properly called meeting or adjourned meeting of stockholders, at which a
quorum as defined above is present, shall be sufficient to transact business.
2.7 Voting of Shares.
(a) Except as otherwise provided in these Bylaws or to the
extent that voting rights of the shares of any class or classes are limited or
denied by the Articles of Incorporation, each stockholder, on each matter
submitted to a vote at a meeting of
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stockholders, shall have one vote for each share of stock registered in his name
on the books of the Corporation.
(b) Directors are to be elected by a plurality of votes cast
by the shares entitled to vote in the election at a meeting at which a quorum is
present. Stockholders shall not be permitted to cumulate their votes for the
election of directors. If, at any meeting of the stockholders, due to a vacancy
or vacancies or otherwise, directors of more than one class of the Board of
Directors are to be elected, each class of directors to be elected at the
meeting shall be elected in a separate election by a plurality vote.
2.8 Fixing of Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend, the Board
of Directors shall fix in advance a record date for such determination of
stockholders, such date to be not more than 60 days and, in case of a meeting of
stockholders, not less than 10 days prior to the date on which the particular
action requiring such determination of stockholders is to be taken.
2.9 Proxies. A stockholder may vote either in person or by proxy
executed in writing by the stockholder, or his duly authorized attorney-in-fact.
No proxy shall be valid after 11 months from the date of its execution, unless
otherwise provided in the proxy.
2.10 Voting of Shares in the Name of Two or More Persons. Where shares
are held jointly or as tenants in common by two or more persons as fiduciaries
or otherwise, if only one or more of such persons is present in person or by
proxy, all of the shares standing in the names of such persons shall be deemed
to be represented for the purpose of determining a quorum and the Corporation
shall accept as the vote of all such shares the votes cast by him or a majority
of them and if in any case such persons are equally divided upon the manner of
voting the shares held by them, the vote of such shares shall be divided equally
among such persons, without prejudice to the rights of such joint owners or the
beneficial owners thereof among themselves, unless either (a) the Corporation
receives written notice to the contrary from a nonsigning registered holder
before the proxy is voted, or (b) there shall have been filed with the Secretary
of the Corporation a copy, certified by an attorney-at-law to be correct, of the
relevant portions of the agreements under which such shares are held or the
instrument by which the trust or estate was created or the decree of court
appointing them, or of a decree of court directing the voting of such shares,
and the persons specified as having such voting power in the latest such
document so filed, and only such persons, shall be entitled to vote such shares
but only in accordance therewith.
2.11 Voting of Shares by Certain Holders. Shares standing in the name
of another corporation may be voted by an officer, agent or proxy as the bylaws
of such corporation may prescribe, or, in the absence of such provision, in
accordance with the Louisiana Business Corporation Law, as amended ("BCL").
Shares held by an administrator, executor, guardian or conservator may be voted
by him, either in person or by proxy, without a transfer of such shares into his
name. Shares standing in the name of a trustee may be
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voted by him, either in person or by proxy. Shares standing in the name of a
receiver may be voted by such receiver, and shares held by or under the control
of a receiver may be voted by such receiver without the transfer thereof into
his name if authority to do so is contained in an appropriate order of the court
or other public authority by which such receiver was appointed. A stockholder
whose shares are pledged shall be entitled to vote such shares until the shares
have been transferred into the name of the pledgee or nominee, and thereafter
the pledgee or nominee shall be entitled to vote the shares so transferred
2.12 Inspectors. For each meeting of stockholders, the Board of
Directors may appoint one or more inspectors of election. If for any meeting the
inspector(s) appointed by the Board of Directors shall be unable to act or the
Board of Directors shall fail to appoint any inspector, one or more inspectors
may be appointed at the meeting by the chairman thereof. Such inspectors shall
conduct the voting in each election of directors and, as directed by the Board
of Directors or the chairman of the meeting, the voting on each matter voted on
at such meeting, and after the voting shall make a certificate of the vote
taken. Inspectors need not be stockholders.
ARTICLE III. CAPITAL STOCK
3.1 Certificates. Certificates of stock shall be issued in numerical
order, and each stockholder shall be entitled to a certificate signed by the
President or a Vice President, and the Secretary or the Treasurer, and may be
sealed with the seal of the Corporation or a facsimile thereof. The signatures
of such officers may be facsimiles if the certificate is manually signed on
behalf of a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. If an officer who has
signed or whose facsimile signature has been placed upon such certificate ceases
to be an officer before the certificate is issued, it may be issued by the
Corporation with the same effect as if the person were an officer on the date of
issue. Each certificate of stock shall state:
(a) that the Corporation is incorporated under the laws of the
State of Louisiana;
(b) the name of the person to whom issued;
(c) the number and class of shares and the designation of the
series, if any, which such certificate represents;
(d) the par value of each share represented by such
certificate, or a statement that such shares are without par value; and
(e) such other information as may be required by the BCL.
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3.2 Transfers.
(a) Transfers of stock shall be made only upon the stock
transfer books of the Corporation, kept at the registered office of the
Corporation or at its principal place of business, or at the office of its
transfer agent or registrar, and before a new certificate is issued the old
certificate shall be surrendered for cancellation. The Board of Directors may,
by resolution, open a share register in any state of the United States, and may
employ an agent or agents to keep such register, and to record transfers of
shares therein.
(b) Shares of stock shall be transferred by delivery of the
certificates therefor, accompanied either by an assignment in writing on the
back of the certificate or an assignment separate from the certificate, or by a
written power of attorney to sell, assign and transfer the same, signed by the
holder of said certificate. No shares of stock shall be transferred on the books
of the Corporation until the outstanding certificates therefor have been
surrendered to the Corporation.
3.3 Registered Owner. Registered stockholders shall be treated by the
Corporation as the holders in fact of the stock standing in their respective
names and the Corporation shall not be bound to recognize any equitable or other
claim to or interest in any share on the part of any other person, whether or
not it shall have express or other notice thereof, except as expressly provided
below or by the laws of the State of Louisiana. The Board of Directors may adopt
by resolution a procedure whereby a stockholder of the Corporation may certify
in writing to the Corporation that all or a portion of the shares registered in
the name of such stockholder are held for the account of a specified person or
persons. The resolution shall set forth:
(a) The classification of shareholder who may certify;
(b) The purpose or purposes for which the certification may be
made;
(c) The form of certification and information to be contained
therein;
(d) If the certification is with respect to a record date or
closing of the stock transfer books, the date within which the certification
must be received by the Corporation; and
(e) Such other provisions with respect to the procedure as are
deemed necessary or desirable.
Upon receipt by the Corporation of a certification complying with the
above requirements, the persons specified in the certification shall be deemed,
for the purpose or purposes set forth in the certification, to be the holders of
record of the number of shares specified in place of the stockholder making the
certification.
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3.4 Mutilated, Lost or Destroyed Certificates. In case of any
mutilation, loss or destruction of any certificate of stock, another may be
issued in its place upon receipt of proof of such mutilation, loss or
destruction. The Board of Directors may impose conditions on such issuance and
may require the giving of a satisfactory bond or indemnity to the Corporation in
such sum as they might determine, or establish such other procedures as they
deem necessary.
3.5 Fractional Shares or Scrip. The Corporation may (a) issue fractions
of a share which shall entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the Corporation in
the event of liquidation; (b) arrange for the disposition of fractional
interests by those entitled thereto; (c) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such shares are
determined; or (d) issue scrip in registered or bearer form which shall entitle
the holder to receive a certificate for a full share upon the surrender of such
scrip aggregating a full share.
3.6 Shares of Another Corporation. Shares owned by the Corporation in
another corporation, domestic or foreign, may be voted by such officer, agent or
proxy as the Board of Directors may determine or, in the absence of such
determination, by the President of the Corporation.
ARTICLE IV. BOARD OF DIRECTORS
4.1 Number and Powers. The management of all the affairs, property and
interest of the Corporation shall be vested in a Board of Directors. The Board
of Directors shall be divided into three classes as nearly equal in number as
possible. The initial Board of Directors shall consist of seven persons. The
classification and term of the directors shall be as set forth in the
Corporation's Articles of Incorporation, which provisions are incorporated
herein with the same effect as if they were set forth herein. Directors need not
be stockholders or residents of the State of Louisiana. In addition to the
powers and authorities expressly conferred upon it by these Bylaws and the
Articles of Incorporation, the Board of Directors may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Articles of Incorporation or by these Bylaws directed or required to
be exercised or done by the stockholders.
4.2 Change of Number. The number of directors may at any time be
increased or decreased by a vote of a majority of the Board of Directors,
provided that no decrease shall have the effect of shortening the term of any
incumbent director except as provided in Sections 4.3 and 4.4 hereunder.
Notwithstanding anything to the contrary contained within these Bylaws, the
number of directors may not be less than 5 nor more than 15.
4.3 Vacancies. All vacancies in the Board of Directors shall be filled
in the manner provided in the Corporation's Articles of Incorporation, which
provisions are incorporated herein with the same effect as if they were set
forth herein.
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4.4 Removal of Directors. Directors may be removed in the manner
provided in the Corporation's Articles of Incorporation, which provisions are
incorporated herein with the same effect as if they were set forth herein.
4.5 Regular Meeting. Regular meetings of the Board of Directors or any
committee may be held without notice at the principal place of business of the
Corporation or at such other place or places, either within or without the State
of Louisiana, as the Board of Directors or such committee, as the case may be,
may from time to time designate. The annual meeting of the Board of Directors
shall be held without notice immediately after the adjournment of the annual
meeting of stockholders.
4.6 Special Meetings.
(a) Special meetings of the Board of Directors may be called
at any time by the President or by a majority of the authorized number of
directors, to be held at the principal place of business of the Corporation or
at such other place or places as the Board of Directors or the person or persons
calling such meeting may from time to time designate. Notice of all special
meetings of the Board of Directors shall be given to each director by five days'
service of the same by telegram, by letter, or personally. Such notice need not
specify the business to be transacted at, nor the purpose of, the meeting.
(b) Special meetings of any committee may be called at any
time by such person or persons and with such notice as shall be specified for
such committee by the Board of Directors, or in the absence of such
specification, in the manner and with the notice required for special meetings
of the Board of Directors.
4.7 Quorum. A majority of the Board of Directors shall be necessary at
all meetings to constitute a quorum for the transaction of business.
4.8 Waiver of Notice. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends
for the express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. A waiver of notice signed by the
director or directors, whether before or after the time stated for the meeting,
shall be equivalent to the giving of notice.
4.9 Registering Dissent. A director who is present at a meeting of the
Board of Directors at which action on a corporate matter is taken shall be
presumed to have assented to such action unless his dissent is entered in the
minutes of the meeting, or unless he files his written dissent to such action
with the person acting as the secretary of the meeting before the adjournment
thereof, or unless he delivers his dissent in writing to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
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4.10 Executive, Audit and Other Committees. Standing or special
committees may be appointed from its own number by the Board of Directors from
time to time, and the Board of Directors may from time to time invest such
committees with such powers as it may see fit, subject to such conditions as may
be prescribed by the Board. An Executive Committee may be appointed by
resolution passed by a majority of the full Board of Directors. It shall have
and exercise all of the authority of the Board of Directors, except in reference
to amending the Articles of Incorporation, adopting a plan of merger or
consolidation, recommending the sale, lease or exchange or other dispositions of
all or substantially all the property and assets of the Corporation otherwise
than in the usual and regular course of business, recommending a voluntary
dissolution or a revocation thereof, or amending these Bylaws. An Audit
Committee shall be appointed by resolution passed by a majority of the full
Board of Directors, and at least a majority of the members of the Audit
Committee shall be directors who are not also officers of the Corporation. The
Audit Committee shall recommend independent auditors to the Board of Directors
annually and shall review the Corporation's budget, the scope and results of the
audit performed by the Corporation's independent auditors and the Corporation's
system of internal control and audit with management and such independent
auditors, and such other duties as may be assigned to it by the Board of
Directors. All committees appointed by the Board of Directors shall keep regular
minutes of the transactions of their meetings and shall cause them to be
recorded in books kept for that purpose in the office of the Corporation. The
designation of any such committee, and the delegation of authority thereto,
shall not relieve the Board of Directors, or any member thereof, of any
responsibility imposed by law.
4.11 Remuneration. No stated fee shall be paid to directors, as such,
for their service, but by resolution of the Board of Directors, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of such Board; provided, that nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of standing or special
committees may be allowed like compensation for attending committee meetings.
4.12 Action by Directors Without a Meeting. Any action which may be
taken at a meeting of the directors, or of a committee thereof, may be taken
without a meeting if a consent in writing, setting forth the action so taken or
to be taken, shall be signed by all of the directors, or all of the members of
the committee, as the case may be. Such consent shall have the same effect as a
unanimous vote.
4.13 Action of Directors by Communications Equipment. Any action which
may be taken at a meeting of directors, or of a committee thereof, may be taken
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other at the
same time.
4.14 Chairman of the Board of Directors. The Board of Directors may
elect from among its members a Chairman of the Board and a Vice Chairman of the
Board of
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Directors. The Chairman of the Board of Directors (or, in his absence, the Vice
Chairman of the Board, if one has been elected) shall preside at all meetings of
the Board of Directors. The Chairman of the Board (and the Vice Chairman of the
Board, if one has been elected) shall perform such other duties as may be
assigned from time to time by the Board of Directors.
ARTICLE V. OFFICERS
5.1 Designations. The officers of the Corporation shall be the Chairman
of the Board, a President, a Secretary and a Treasurer, as well as such Vice
Presidents (including Executive and Senior Vice Presidents), Assistant
Secretaries and Assistant Treasurers as the Board may designate, who shall be
elected for one year by the directors at their first meeting after the annual
meeting of stockholders, and who shall hold office until their successors are
elected and qualify. Any two or more offices may be held by the same person,
except that the offices of President and Secretary may not be held by the same
person.
5.2 Powers and Duties. The officers of the Corporation shall have such
authority and perform such duties as the Board of Directors may from time to
time authorize or determine. In the absence of action by the Board of Directors,
the officers shall have such powers and duties as generally pertain to their
respective offices.
5.3 Delegation. In the case of absence or inability to act of any
officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any director or other person whom
it may select.
5.4 Vacancies. Vacancies in any office arising from any cause may be
filled by the Board of Directors at any regular or special meeting of the Board.
5.5 Other Officers. Directors may appoint such other officers and
agents as it shall deem necessary or expedient, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
5.6 Term - Removal. The officers of the Corporation shall hold office
until their successors are chosen and qualify. Any officer or agent elected or
appointed by the Board of Directors may be removed at any time, with or without
cause, by the affirmative vote of a majority of the whole Board of Directors,
but such removal shall be without prejudice to the contract rights, if any, of
the person so removed.
5.7 Bonds. The Board of Directors may, by resolution, require any and
all of the officers to give bonds to the Corporation, with sufficient surety or
sureties, conditioned for
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the faithful performance of the duties of their respective offices, and to
comply with such other conditions as may from time to time be required by the
Board of Directors.
ARTICLE VI. FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the Corporation shall end on the 31st day of
December of each year. The Corporation shall be subject to an annual audit as of
the end of its fiscal year by independent public accountants appointed by and
responsible to the Board of Directors. The appointment of such accountants shall
be subject to annual ratification by the stockholders.
ARTICLE VII. DIVIDENDS AND FINANCE
7.1 Dividends. Dividends may be declared by the Board of Directors and
paid by the Corporation out of the unreserved and unrestricted earned surplus of
the Corporation, or out of the unrestricted capital surplus of the Corporation,
subject to the conditions and limitations imposed by the laws of the State of
Louisiana. The Board of Directors may declare dividends payable to the holders
of record at the close of business on any business day not more than 60 days
prior to the date on which the dividend is paid.
7.2 Reserves. Before making any distribution of earned surplus, there
may be set aside out of the earned surplus of the Corporation such sum or sums
as the directors from time to time in their absolute discretion deem expedient
as a reserve fund to meet contingencies, or for equalizing dividends, or for
maintaining any property of the Corporation, or for any other purpose. Any
earned surplus of any year not distributed as dividends shall be deemed to have
thus been set apart until otherwise disposed of by the Board of Directors.
7.3 Depositories. The monies of the Corporation shall be deposited in
the name of the Corporation in such bank or banks or trust company or trust
companies as the Board of Directors shall designate, and shall be drawn out only
by check or other order for payment of money signed by such persons and in such
manner as may be determined by resolution of the Board of Directors.
ARTICLE VIII. PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
Directors and officers of the Corporation shall not be personally
liable for monetary damages for any action taken, or any failure to take any
action, as a director or officer to the extent set forth in the Corporation's
Articles of Incorporation, which provisions are incorporated herein with the
same effect as if they were set forth herein.
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ARTICLE IX. NOTICES
Except as may otherwise be required by law, any notice to any
stockholder or director may be delivered personally or by mail. If mailed, the
notice shall be deemed to have been delivered when deposited in the United
States mail, addressed to the addressee at his last known address in the records
of the Corporation, with postage thereon prepaid.
ARTICLE X. SEAL
The corporate seal of the Corporation shall be in such form and bear
such inscription as may be adopted by resolution of the Board of Directors, or
by usage of the officers on behalf of the Corporation.
ARTICLE XI. BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account and shall keep minutes and proceedings of meetings of its stockholders
and Board of Directors; and it shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a record
of its stockholders, giving the names and addresses of all stockholders and the
number and class of the shares held by each. Any books, records and minutes may
be in written form or any other form capable of being converted into written
form within a reasonable time.
ARTICLE XII. AMENDMENTS
These Bylaws may be altered, amended or repealed only as set forth in
the Corporation's Articles of Incorporation, which provisions are incorporated
herein with the same effect as if they were set forth herein.
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EXHIBIT 4.1
(FORM OF STOCK CERTIFICATE - FRONT SIDE)
NUMBER SHARES
COMMON STOCK CUSIP 015600 10 9
(Par Value $.01 Per Share) See reverse for
certain definitions
HOMESTEAD BANCORP, INC.
Incorporated Under the Laws of Louisiana
This certifies that ___________________________________ is the
registered holder of _________________ fully paid and non-assessable shares of
the Common Stock, par value $.01 per share, of Homestead Bancorp, Inc.,
Ponchatoula, Louisiana (the "Corporation").
The shares evidenced by this Certificate are transferable in person or
by a duly authorized attorney or legal representative, upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are subject to all the provisions of the Articles of Incorporation and
Bylaws of the Corporation and any and all amendments thereto.
This Certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
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 facsimile seal to be affixed hereto.
Dated:
(SEAL)
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief
Executive Officer
<PAGE>
(FORM OF STOCK CERTIFICATE - BACK SIDE)
The Corporation is authorized to issue more than one class of stock,
including a class of preferred stock which may be issued in one or more series.
The Corporation will furnish to any stockholder, upon written request and
without charge, a full statement of the designations, preferences, limitations
and relative rights of the shares of each class authorized to be issued and,
with respect to the issuance of any preferred stock to be issued in series, the
relative rights and preferences between the shares of each series so far as the
rights and preferences have been fixed and determined and the authority of the
Board of Directors to fix and determine the relative rights and preferences of
subsequent series.
The Articles of Incorporation of the Corporation include a provision
which generally prohibits any person (including an individual, company or group
acting in concert) from directly or indirectly offering to acquire or acquiring
the beneficial ownership of more than 10% of any class of equity securities of
the Corporation. In the event that stock is acquired in violation of this 10%
limitation, which will expire upon the fifth anniversary of the completion of
the reorganization of Ponchatoula Homestead Savings, F.A. from the mutual
holding company to the stock holding company structure, the excess shares will
no longer be counted in determining the total number of outstanding shares for
purposes of any matter involving stockholder action and the Board of Directors
of the Corporation may cause such excess shares to be transferred to an
independent trustee for sale in the open market or otherwise, with the expenses
of such sale to be paid out of the proceeds of the sale.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT - ______________ Custodian ______________ under
(Cust) (Minor)
Uniform Gifts to Minors Act ________________________
(State)
Additional abbreviations may also be used though not in the above list.
<PAGE>
For value received, _________________________________ hereby sell,
assign and transfer
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAXPAYER IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------
| |
- ---------------------------------
unto ______________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP
CODE, OF ASSIGNEE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
- -----------------------------------------------------------------
__________________________ shares of Common Stock represented by this
Certificate, and do hereby irrevocably constitute and appoint
__________________________ as Attorney, to transfer the said shares on the books
of the within named Corporation, with full power of substitution.
Dated _____________ __, ____
---------------------------------
Signature
---------------------------------
Signature
Notice: The signature(s) to this assignment must correspond with the name(s)
written upon the face of this Certificate in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
<PAGE>
EXHIBIT 5.0
<PAGE>
[Elias, Matz, Tiernan & Herrick L.L.P. Letterhead]
April 2, 1998
VIA EDGAR
Board of Directors
Homestead Bancorp, Inc.
195 North Sixth Street
Ponchatoula, Louisiana 70454
Gentlemen:
We have acted as special counsel to Homestead Bancorp, Inc. (the
"Company") in connection with the preparation and filing with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended, of
the Registration Statement on Form S-1 (the "Registration Statement"), relating
to the issuance of up to 1,285,170 shares (which may be increased to up to
1,477,945 shares under certain circumstances described below) of the Company's
common stock, par value $.01 per share (the "Common Stock"), in connection with
the conversion of Homestead Mutual Holding Company (the "MHC") from mutual to
stock form with Ponchatoula Homestead Savings, F.A. (the "Association")
becoming a wholly owned subsidiary of the Company (the "Conversion"). In this
regard, we have examined the Articles of Incorporation and Bylaws of the
Company, resolutions of the Board of Directors of the Company, the MHC and the
Association, the Plan of Conversion and Agreement and Plan of Reorganization
("Plan of Conversion"), and such other documents and matters of law as we
deemed appropriate for the purposes of this opinion.
Based upon the foregoing, we are of the opinion as of the date hereof that
the Common Stock has been duly and validly authorized, and when issued in
accordance with the terms of the Plan of Conversion and upon the receipt of the
consideration required thereby, will be legally issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement and to the references to this firm under the
headings "The Conversion - Tax Aspects" and "Legal Matters" in the Prospectus
contained in the Registration Statement.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: \s\Kevin M. Houlihan
-----------------------------------
Kevin M. Houlihan, a Partner
<PAGE>
EXHIBIT 8.1
<PAGE>
[Elias, Matz, Tiernan & Herrick L.L.P. Letterhead]
April 2, 1998
VIA EDGAR
Boards of Directors
Homestead Bancorp, Inc.
Ponchatoula Homestead Savings, F.A.
Homestead Mutual Holding Company
195 North Sixth Street
Ponchatoula, Louisiana 70454
Gentlemen:
You have requested this firm's opinion regarding certain federal income
tax consequences which will result from 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
opinions herein are limited to the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations promulgated thereunder (the "Subject Laws").
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 stated herein.
We have made such other investigations as we have deemed relevant or
necessary for the purpose of this opinion. In our examination of documents, we
have assumed the authenticity of those documents submitted to us as certified,
conformed or reproduced copies. As to matters of fact which are material to
this opinion, we have relied upon the accuracy of the factual matters set forth
in the Registration Statement on Form SB-2, as amended ("Form SB-2"), to be
filed by Homestead Bancorp, Inc. (the "Company") with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended.
The Proposed Transactions
Based solely upon our review of the documents described herein, and in
reliance upon such documents, we understand that the relevant facts are as
follows. On August 31, 1994, Ponchatoula Homestead Association
("Ponchatoula"), a Louisiana chartered mutual savings
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Boards of Directors
April 2, 1998
Page 2
association, reorganized into the mutual holding company form of organization.
To accomplish this transaction, Ponchatoula organized a wholly owned stock
subsidiary known as Ponchatoula Homestead Savings, F.A. (the "Association").
Ponchatoula then transferred virtually all of its assets and liabilities to the
Association in exchange for 456,240 shares of common stock, par value $.10 per
share (the "Association Common Stock"), of the Association, and Ponchatoula
converted its charter to that of a federal mutual holding company known as
"Homestead Mutual Holding Company" (the "MHC").
In connection with the foregoing transaction, the Association raised
approximately $1.2 million (after deducting expenses) by selling 143,760 shares
of Association Common Stock to the public. The shares of Common Stock that were
sold to the public constituted approximately 24.0% of the issued and
outstanding shares of the Association Common Stock. After taking into account
the subsequent issuance of 6,345 shares of Association Common Stock pursuant to
stock benefit plans, the MHC currently owns 75.2% of the outstanding
Association Common Stock and other stockholders own an aggregate of 150,105
shares or 24.8% of the Association Common Stock. The reorganization of
Ponchatoula into the mutual holding company form of organization, and the sale
to the public of stock in the Association, are sometimes hereinafter
collectively referred to as the "MHC Transaction."
At the present time, two transactions are being undertaken. The first
transaction, which is sometimes hereafter referred to as "Merger 1," is the
conversion of the MHC from the mutual form of organization to a federal interim
stock savings institution ("Interim") and the simultaneous merger of Interim
with and into the Association. The second transaction, which is sometimes
hereafter referred to as "Merger 2," is the acquisition of the Association by
the Company by means of the merger of the Association with a federal interim
stock savings institution (the "Interim Association"), which will be organized
as a wholly owned subsidiary of the Company. Merger 1 and Merger 2 are
sometimes hereinafter collectively referred to as the "Conversion."
Merger 1 and Merger 2 are being accomplished pursuant to a Plan of
Conversion and Agreement and Plan of Reorganization (hereafter referred to as
the "Plan of Conversion" or the "Plan"). The Plan of Conversion complies in all
material respects with the provisions of Subpart A of 12 C.F.R. Part 563b,
which sets forth the regulations promulgated by the Office of Thrift
Supervision ("OTS") with respect to conversions of mutual institutions to stock
form. The Plan also complies in all material respects with the provisions of 12
C.F.R. Section 575.12(a), which is the OTS regulation governing the conversion
of mutual holding companies to stock form. Because the proposed transaction
involves two mergers, the Plan also includes two related plans of merger with
language that complies in all material respects with 12 C.F.R. Section 552.13,
which is the OTS regulation governing mergers involving federal stock
associations.
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Boards of Directors
April 2, 1998
Page 3
In Merger 1, a liquidation account is being established by the Association
for the benefit of eligible account holders and supplemental eligible account
holders. Pursuant to Section 17 of the Plan of Conversion, the initial balance
of the liquidation account will equal the amount of dividends waived by the MHC
plus the greater of (1) $3,673,000 which is equal to 100% of the retained
earnings of Ponchatoula as of March 31, 1994, the date of the latest statement
of financial condition contained in the final offering circular utilized in the
MHC Transaction, or (2) 75.2% of the Association's total stockholders' equity
as reflected in its latest statement of financial condition contained in the
final prospectus to be utilized in the Conversion. The $3,673,000 is the
amount that the liquidation account would have been if the MHC Transaction had
been a standard conversion not involving a mutual holding company. Under the
above formula, the initial balance of the liquidation account will be at least
$3,673,000. At December 31, 1997, the total stockholders' equity of the
Association amounted to $5.7 million, of which 75.2% equalled $4.3 million.
Upon consummation of Merger 1, the shares of Association Common Stock held by
the MHC will be cancelled.
Upon consummation of Merger 2 (the "Effective Date"), all of the then
outstanding shares of the Association Common Stock will be converted into and
become shares of common stock of the Company ("Company Common Stock") pursuant
to an exchange ratio that will result in holders of shares of the Association
Common Stock (other than the MHC) owning in the aggregate approximately the
same percentage of the Company Common Stock (as adjusted to 23.94% to reflect
the prior waiver of dividends by the MHC) to be outstanding upon completion of
Merger 2 and the additional shares of Company Common Stock issued thereafter,
before giving effect to (a) the payment of cash in lieu of fractional shares of
Company Common Stock, (b) any shares of the Company Common Stock purchased by
such stockholders in the public offerings as described in the Prospectus
contained in Form SB-2 (the "Prospectus"), (c) any exercise of dissenters'
rights, or (d) any issuance of contingent shares. The common stock of the
Interim Association owned by the Company prior to the Merger shall be
converted into and become shares of common stock of the Association on the
Effective Date. The Company Common Stock held by the Association immediately
prior to the Effective Date shall be cancelled on the Effective Date.
Immediately following Merger 2, additional shares of Company Common Stock
will be sold to members of the public. Upon the Effective Date, Interim
Association will be merged with and into the Association and Interim
Association shall cease to exist as a legal entity. As a result, 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
Association will become a wholly owned subsidiary of the Company and will
continue to carry on its business and activities as conducted immediately prior
to Merger 2.
The stockholders of the Company will be those persons who were
stockholders of the Association immediately prior to Merger 2 (i.e., all
stockholders of the Association, excluding the MHC and hereafter referred to as
the "Public Stockholders"), plus those persons who purchase shares of Company
Common Stock. Nontransferable rights to subscribe for the Company Common Stock
have been granted, in order of priority, to
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Boards of Directors
April 2, 1998
Page 4
depositors of the Association with account balances of $50.00 or more as of the
close of business as of December 31, 1996 ("Eligible Account Holders"), the
Association's tax qualified employee stock benefit plans, depositors of the
Association with account balances of $50.00 or more as of the close of business
on March 31, 1998 ("Supplemental Eligible Account Holders"), depositors and
borrowers of the Association as of a Voting Record Date to be determined (other
than Eligible Account Holders and Supplemental Eligible Account Holders), the
directors, officers and employees of the MHC and the Association, and the
Public Stockholders. Subscription rights are nontransferable. The Company will
also offer shares of Company Common Stock not subscribed for in the
Subscription Offering for sale in a community offering to certain members of
the general public (the "Community Offering") (the Subscription Offering and
Community Offering are referred to collectively as the "Offerings").
Analysis
Section 368(a)(1)(A) of the Code defines the term "reorganization" to
include a "statutory merger or consolidation" of corporations such as Merger 1
and Merger 2. Section 368(a)(2)(E) of the Code provides that a transaction
otherwise qualifying as a merger under Section 368(a)(1)(A), such as Merger 2,
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
Association] holds substantially all of its properties and the properties of
the merged corporation [Interim Association] (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 Association's 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 Agreement provides that Mergers 1 and 2 will be
accomplished in accordance with applicable federal law.
Treasury Regulations and case law require that, in addition to the
existence of statutory authority for a merger, certain other conditions must be
satisfied in order to qualify a proposed transaction as a reorganization within
the meaning of Section 368(a)(1)(A) of the Code. The "business purpose test,"
which requires a proposed merger to have a bona fide business purpose, must be
satisfied. See 26 C.F.R. Section 1.368-1(c). We believe that Merger 1 and
Merger 2 satisfy the business purpose test for the reasons set forth in the
Prospectus under the caption "The Conversion - Purposes of the
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Boards of Directors
April 2, 1998
Page 5
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 continuity of business
enterprise test is satisfied since the Plan of Conversion provides that the
business conducted by the Association prior to Merger 1 and Merger 2 will be
unaffected by the transactions.
The "continuity of interest doctrine" requires that the continuing common
stock interest of the former owners of an acquired corporation, considered in
the aggregate, represent a "substantial part" of the value of their former
interest, and provide them with a "definite and substantial interest" in the
affairs of the acquiring corporation or a corporation in control of the
acquiring corporation. Paulsen v. Comm'r., 469 U.S. 131 (1985); Helvering v.
Minnesota Tea Co., 296 U.S. 378 (1935); John A. Nelson Co. v. Helvering, 296
U.S. 374 (1935); Southwest Natural Gas Co. v. Comm'r., 189 F.2d 332 (5th Cir.
1951), cert. denied, 342 U.S. 860 (1951). We believe that Merger 1 satisfies
the continuity of interest doctrine based upon the private letter rulings
("PLRs") issued by the IRS in substantially identical transactions as the
Conversion and based upon the information set forth in the Company's
Registration Statement. See, e.g., PLRs 9510044 and 9437020. Specifically,
the IRS has ruled in substantially identical transactions that:
(1) The exchange of the members' equity interests in the MHC for interests
in a liquidation account established at the Association in Merger 1 will not
violate the continuity of interest requirement of Section 1.368-1(b) of the
Income Tax Regulations.
(2) Interests in the liquidation account established at the Association,
and the shares of Association Common Stock held by the MHC prior to
consummation of Merger 1, will be disregarded for the purpose of determining
that an amount of stock in the Association which constitutes "control" of such
corporation was acquired by the Company in exchange for shares of Company
Common Stock pursuant to Merger 2.
(3) The exchange of shares of Company Common Stock for the shares of the
Association Common Stock in Merger 2, following consummation of Merger 1, will
satisfy the continuity of interest requirement of Section 1.368-1(b) of the
Income Tax Regulations in Merger 2.
Accordingly, we also believe that Merger 2 satisfies the continuity of interest
doctrine because those persons who are the Association's stockholders following
Merger 1 will receive only Company Common Stock in exchange for their shares of
Association Common Stock. In addition, we believe other applicable
requirements of the Treasury Regulations and case law which are preconditions
to qualification of Merger 1 and Merger 2 as a reorganization, within the
meaning of 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 of Conversion 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
Association, which is a party to a reorganization, solely for common stock in
another corporation which is a party
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Boards of Directors
April 2, 1998
Page 6
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 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 Association 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 Association 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
Association will have a carryover basis in property received from another
corporation which is a party to a reorganization, the holding period of such
assets in the hands of the acquiring corporation shall include the period for
which such assets were held by the transferor, provided that the property
transferred had been held as a capital asset. Section 1032 of the Code states
that no gain or loss shall be recognized to a corporation, such as the Company,
on the receipt of property in exchange for common stock.
Opinions
Based on the foregoing description of Merger 1 and Merger 2, and subject
to the qualifications and limitations set forth in this letter, we are of the
opinion that, if Merger 1 were to be consummated as described above as of the
date hereof, then:
1. Merger 1 qualifies as a reorganization within the meaning of Section
368(a)(1)(A) of the Code.
2. No gain or loss will be recognized by the Association upon the receipt
of the assets of the MHC in Merger 1.
In addition, we are of the opinion that, if Merger 2 were to be consummated
as described above as of the date hereof, then:
1. Merger 2 qualifies as a reorganization within the meaning of Section
368(a)(1)(A) of the Code. Pursuant to Section 368(a)(2)(E) of the Code, Merger
2 is not disqualified from qualifying as a reorganization within the meaning of
Section 368(a)(1)(A) because Company Common Stock will be conveyed to the
Association's stockholders in exchange for their Association Common Stock.
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Boards of Directors
April 2, 1998
Page 7
2. No gain or loss will be recognized by the Interim Association upon the
transfer of its assets to the Association.
3. No gain or loss will be recognized by the Association upon the receipt
of the assets of Interim Association.
4. No gain or loss will be recognized by the Company upon the receipt of
Association Common Stock solely in exchange for Company Common Stock.
5. No gain or loss will be recognized by the Association's Public
Stockholders upon the receipt of Company Common Stock solely in exchange for
their shares of Association Common Stock.
6. The basis of the Company Common Stock to be received by the
Association's Public Stockholders will be the same as the basis of the
Association Common Stock surrendered in exchange therefor, before giving effect
to any payment of cash in lieu of fractional shares.
7. The holding period of the Company Common Stock to be received by the
Association's Public Stockholders will include the holding period of the
Association Common Stock, provided that the Association Common Stock was held
as a capital asset on the date of the exchange.
8. No gain or loss will be recognized by the Company upon the sale of
shares of Company Common Stock in the Company to investors.
9. The Eligible Account Holders and Supplemental Eligible Account Holders
will recognize gain, if any, upon the issuance to them of withdrawable savings
accounts in the Association following the Conversion, interests 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.
10. The tax basis to the holders of Company Common Stock purchased in the
Offerings will be the amount paid therefor, and the holding period for such
shares will begin on the date of consummation of the Offerings if purchased
through the exercise of subscription rights. If purchased in the Community
Offering or Syndicated Community Offering, the holding period for such stock
will begin on the day after the date of purchase.
Our opinions set forth herein are based upon the descriptions of Merger 1
and Merger 2 as set forth in the Prospectus and upon the factual matters set
forth in the Plan of Conversion. If the actual facts relating to any aspect of
Merger 1 or Merger 2 differ from such description in any material respect, the
opinions expressed herein may become inapplicable. Further, our opinions are
based on research of the Code, applicable Treasury Regulations, current
published administrative decisions of the IRS, and existing judicial
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Boards of Directors
April 2, 1998
Page 8
decisions as of the date hereof. No assurance can be given that legislative,
administrative or judicial decisions or interpretations may not be forthcoming
that will significantly change the opinions set forth herein. We express no
opinions other than those stated immediately above as our opinions.
We hereby consent to the references to our firm in the Prospectus
contained in the Forms AC and SB-2 under the caption "Legal Matters."
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: \s\Gerald F. Heupel
----------------------------------
Gerald F. Heupel, a Partner
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EXHIBIT 8.2
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[Hannis T. Bourgeois, L.L.P. Letterhead]
April 1, 1998
Board of Directors
Homestead Bancorp, Inc.
Ponchatoula Homestead Savings, F.A.
195 North Sixth Street
Ponchatoula, Louisiana 70454
Gentlemen:
You have requested our opinion as to the status as a reorganization for
Louisiana income tax consequences of the transactions pursuant to the Plan of
Conversion and Agreement and Plan of Reorganization, adopted by the Boards of
Directors of Homestead Bancorp, Inc., Homestead Mutual Holding Company and
Ponchatoula Homestead Savings, F.A. on February 25, 1998 ("Plan of
Conversion").
We have reviewed the Plan of Conversion and a draft of the opinion of Elias,
Matz, Tiernan & Herrick, L.L.P. regarding the federal income tax consequences
of such transactions. Under Louisiana Statute Section 133 C - Exchanges of
Stock or Securities in Certain Reorganizations, no gain or loss shall be
recognized if stock in a corporation is exchanged, pursuant to a plan of
reorganization, solely for stock in the corporation or in another corporation
which is a party to the reorganization.
Based upon our review, it is our opinion that the transactions contemplated by
the Plan of Conversion will not result in a recognized gain or loss for
Louisiana tax purposes.
Our opinion is based upon the facts and circumstance made known to use as of
the date of this letter; should these facts and circumstances change, our
opinion may change.
Very truly yours,
HANNIS T. BOURGEOIS, L.L.P.
By:/s/ Ronald L. Gagnet
------------------------------------
Ronald L. Gagnet, C.P.A.
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[RP FINANCIAL, LC. LETTERHEAD]
EXHIBIT 8.3
April 1, 1998
Board of Directors
Homestead Mutual Holding Company
Ponchatoula Homestead Savings, F.A.
195 North Sixth Street
Ponchatoula, Louisiana 70454
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 Agreement and Plan of
Reorganization (the "Plan") adopted by the Boards of Directors of Ponchatoula
Homestead Savings, F.A. (the "Association") and Homestead Mutual Holding
Company (the "Mutual Holding Company"). Pursuant to the Plan, Homestead
Bancorp, Inc. (the "Holding Company") will offer and sell the Conversion Stock.
We understand that "Subscription Rights" to purchase shares of the
Conversion Stock are to be issued to: (i) certain depositors and borrowers of
the Association as of specified dates; (ii) the ESOP; (iii) directors, officers
and employees of the Mutual Holding Company and the Association; and (iv) the
Public Stockholders, collectively referred to as the "Recipients". Based solely
upon our observation that the Subscription Rights will be available to such
Recipients without cost, will be legally non-transferable and of short
duration, and will afford the Recipients the right only to purchase shares of
Conversion 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 Conversion Stock
in the conversion will thereafter be able to buy or sell such shares at the same
price paid in the Subscription Offering.
Sincerely,
/s/ Gregory E. Dunn
---------------------------------------
Gregory E. Dunn
Senior Vice President
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EXHIBIT 10.1
PONCHATOULA HOMESTEAD SAVINGS, F.A.
1996 STOCK INCENTIVE PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Ponchatoula Homestead Savings, F.A. (the "Association") hereby
establishes this 1996 Stock Incentive Plan (the "Plan") upon the terms and
conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Association and its Subsidiary Companies by attracting and retaining
qualified personnel, providing such Employees with a proprietary interest in the
Association as an incentive to contribute to the success of the Association and
its Subsidiary Companies, and rewarding those Employees for outstanding
performance and the attainment of targeted goals. All Incentive Stock Options
issued under this Plan are intended to comply with the requirements of Section
422 of the Code, and the regulations thereunder, and all provisions hereunder
shall be read, interpreted and applied with that purpose in mind.
ARTICLE III
DEFINITIONS
3.01 "Award" means an Option or Stock Appreciation Right granted
pursuant to the terms of this Plan.
3.02 "Board" means the Board of Directors of the Association.
3.03 "Code" means the Internal Revenue Code of 1986, as amended.
3.04 "Committee" means a committee of two or more directors appointed
by the Board pursuant to Article IV hereof, none of whom shall be an officer or
employee of the Association, and each of whom shall be a "disinterested person"
within the meaning of Rule 16b-3 under the Exchange Act, or any successor
thereto.
3.05 "Common Stock" means shares of common stock, par value $.10 per
share, of the Association.
3.06 "Disability" means any physical or mental impairment which
qualifies an Employee for disability benefits under the applicable long-term
disability plan maintained
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by the Association or a Subsidiary Company, or, if no such plan applies, which
would qualify such Employee for disability benefits under any long-term
disability plan maintained by the Association, if such Employee were covered by
that plan.
3.07 "Effective Date" means the date this Plan is approved by the
stockholders of the Association.
3.08 "Employee" means any person who is employed by the Association or
a Subsidiary Company, including Officers, but not including directors who are
not also officers of or otherwise employed by the Association or a Subsidiary
Company.
3.09 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.10 "Fair Market Value" shall be equal to the fair market value per
share of the Association's Common Stock on the date an Award is granted. For
purposes hereof, the Fair Market Value of a share of Common Stock shall be the
closing sale price of a share of Common Stock on the date in question (or, if
such day is not a trading day in the U.S. markets, on the nearest preceding
trading day), as reported with respect to the principal market (or the composite
of the markets, if more than one) or national quotation system in which such
shares are then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal market or
national quotation system then in use, or if no such quotations are available,
the price furnished by a professional securities dealer making a market in such
shares selected by the Committee.
3.11 "Incentive Stock Option" means any Option granted under this Plan
which the Board intends (at the time it is granted) to be an incentive stock
option within the meaning of Section 422 of the Code or any successor thereto.
3.12 "Non-Qualified Option" means any Option granted under this Plan
which is not an Incentive Stock Option.
3.13 "Offering" means the offer and sale of 143,760 shares of Common
Stock to the public pursuant to the Stock Issuance Plan adopted by the
Association in connection with the reorganization of Ponchatoula Homestead
Association into the mutual holding company form of organization.
3.14 "Officer" means an Employee whose position in the Association or
Subsidiary Company is that of a corporate officer, as determined by the Board.
3.15 "Option" means a right granted under this Plan to purchase Common
Stock.
3.16 "Optionee" means an Employee or former Employee to whom an Option
is granted under the Plan.
2
<PAGE>
3.17 "Retirement" means a termination of employment which constitutes a
"retirement" under any applicable qualified pension benefit plan maintained by
the Association or a Subsidiary Company, or, if no such plan is applicable,
which would constitute "retirement" under any qualified pension benefit plan
maintained by the Association or a Subsidiary Company, if such individual were a
participant in such plan.
3.18 "Stock Appreciation Right" means a right to surrender an Option in
consideration for a payment by the Association in cash and/or Common Stock, as
provided in the discretion of the Committee in accordance with Section 8.10.
3.19 "Subsidiary Companies" means any future subsidiaries of the
Association which meet the definition of "subsidiary corporations" set forth in
Section 425(f) of the Code, at the time of granting of the Option in question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Duties of the Committee. The Plan shall be administered and
interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority in its absolute
discretion to adopt, amend and rescind such rules, regulations and procedures
as, in its opinion, may be advisable in the administration of the Plan,
including, without limitation, rules, regulations and procedures which (i) deal
with satisfaction of an Employee's tax withholding obligation pursuant to
Section 12.02 hereof, (ii) include arrangements to facilitate the Employee's
ability to borrow funds for payment of the exercise or purchase price of an
Award, if applicable, from securities brokers and dealers, and (iii) include
arrangements which provide for the payment of some or all of such exercise or
purchase price by delivery of previously-owned shares of Common Stock or other
property and/or by withholding some of the shares of Common Stock which are
being acquired. The interpretation and construction by the Committee of any
provisions of the Plan, any rule, regulation or procedure adopted by it pursuant
thereto or of any Award shall be final and binding.
4.02 Appointment and Operation of the Committee. The members of the
Committee shall be appointed by, and will serve at the pleasure of, the Board.
The Board from time to time may remove members from, or add members to, the
Committee, provided the Committee shall continue to consist of two or more
members of the Board, none of whom shall be an officer or employee of the
Association, and each of whom shall be a "disinterested person" within the
meaning of Rule 16b-3 under the Exchange Act. 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. It may
appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its actions and
decisions to the Board at appropriate times but in no event less than one time
per calendar year.
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4.03 Revocation for Misconduct. The Committee may by resolution
immediately revoke, rescind and terminate any Option, or portion thereof, to the
extent not yet exercised, or any Stock Appreciation Right, to the extent not yet
exercised, previously granted or awarded under this Plan to an Employee who is
discharged from the employ of the Association or a Subsidiary Company for cause,
which, for purposes hereof, shall mean termination because of the Employee's
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, or
willful violation of any law, rule, or regulation (other than traffic violations
or similar offenses) or final cease-and-desist order.
4.04 Limitation on Liability. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan, any rule, regulation or procedure adopted by it pursuant thereto or any
Awards granted under it. If a member of 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 Association shall, subject to the requirements of
applicable laws and regulations, indemnify such member against all liabilities
and expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Association and its
Subsidiary Companies and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
4.05 Compliance with Law and Regulations. All Awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency as may be required.
The Association shall not be required to issue or deliver any certificates for
shares of Common Stock prior to the completion of any registration or
qualification of or obtaining of consents or approvals with respect to such
shares under any federal or state law or any rule or regulation of any
government body, which the Association shall, in its sole discretion, determine
to be necessary or advisable. Moreover, no Option or Stock Appreciation Right
may be exercised if such exercise would be contrary to applicable laws and
regulations.
4.06 Restrictions on Transfer. The Association may place a legend upon
any certificate representing shares acquired pursuant to an Award granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees of the Association and its
Subsidiary Companies as may be designated from time to time by the Committee.
Awards may not be
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granted to individuals who are not Employees of either the Association or its
Subsidiary Companies.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 Option Shares. The aggregate number of shares of Common Stock
which may be issued pursuant to this Plan, subject to adjustment as provided in
Article IX, shall be 10,782 shares, which equals 7.5% of the shares of Common
Stock issued in the Offering. None of such shares shall be the subject of more
than one Award at any time, but if an Option as to any shares is surrendered
before exercise (including surrender in connection with exercise of a Stock
Appreciation Right), or expires or terminates for any reason without having been
exercised in full, or for any other reason ceases to be exercisable, the number
of shares covered thereby shall again become available for grant under the Plan
as if no Awards had been previously granted with respect to such shares.
6.02 Source of Shares. The shares of Common Stock issued under the Plan
may be authorized but unissued shares, treasury shares or shares purchased by
the Association on the open market or from private sources for use under the
Plan.
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
The Committee shall, in its discretion, determine from time to time
which Employees will be granted Awards under the Plan, the number of shares of
Common Stock subject to each Award, whether each Option will be an Incentive
Stock Option or a Non-Qualified Stock Option and the exercise price of an
Option. In making all such determinations there shall be taken into account the
duties, responsibilities and performance of each respective Employee, his
present and potential contributions to the growth and success of the
Association, his salary and such other factors as the Committee shall deem
relevant to accomplishing the purposes of the Plan.
ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 Stock Option Agreement. The proper Officers of the Association and
each Optionee shall execute a Stock Option Agreement which shall set forth the
total number of shares of Common Stock to which it pertains, the exercise price,
whether it is a Non-Qualified Option or an Incentive Stock Option, and such
other terms, conditions, restrictions and privileges as the Committee in each
instance shall deem appropriate,
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provided they are not inconsistent with the terms, conditions and provisions of
this Plan. Each Optionee shall receive a copy of his executed Stock Option
Agreement.
8.02 Option Exercise Price.
(a) Incentive Stock Options. The per share price at which the subject
Common Stock may be purchased upon exercise of an Incentive Stock Option shall
be no less than one hundred percent (100%) of the Fair Market Value of a share
of Common Stock at the time such Incentive Stock Option is granted.
(b) Non-Qualified Options. The per share price at which the subject
Common Stock may be purchased upon exercise of a Non-Qualified Option shall be
established by the Committee at the time of grant, but in no event shall be less
than one hundred percent (100%) of the Fair Market Value of a share of Common
Stock at the time such Non-Qualified Option is granted.
8.03 Vesting and Exercise of Options.
(a) General Rules. Incentive Stock Options and Non-Qualified Options
shall become vested and exercisable at the rate, to the extent and subject to
such limitations as may be specified by the Committee, provided, however, that
in the case of any Option exercisable within the first six months following the
date the Option is granted, the shares of Common Stock received upon the
exercise of such Option may not be sold or disposed of by the optionee for the
first six months following the date of grant. Notwithstanding the foregoing, no
vesting shall occur on or after an Optionee's employment with the Association
and all Subsidiary Companies is terminated for any reason other than his death,
Disability or Retirement. In determining the number of shares of Common Stock
with respect to which Options are vested and/or exercisable, fractional shares
will be rounded up to the nearest whole number if the fraction is 0.5 or higher,
and down if it is less.
(b) Accelerated Vesting Upon Death, Disability or Retirement. Unless
the Committee shall specifically state otherwise at the time an Option is
granted, all Options granted under this Plan shall become vested and exercisable
in full on the date an Optionee terminates his employment with the Association
or a Subsidiary Company because of his death, Disability or Retirement.
(c) Accelerated Vesting for Changes in Control. Notwithstanding the
general rule described in Section 8.03(a), all outstanding Options shall become
immediately vested and exercisable in the event there is a change in control of
the Association. A "change in control of the Association" is defined as a change
of control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act, or
any successor thereto, whether or not the Association in fact is required to
comply with Regulation 14A thereunder; provided, however, that a reorganization
of the Association from the mutual holding company form
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of organization to the stock holding company form of organization shall not
constitute a change in control of the Association.
8.04 Duration of Options.
(a) General Rule. Except as provided in Sections 8.04(b) and 8.09, each
Option or portion thereof shall be exercisable at any time on or after it vests
and become exercisable until the earlier of (i) ten (10) years after its date of
grant or (ii) three (3) months after the date on which the Optionee ceases to be
employed by the Association and all Subsidiary Companies, unless, in the case of
a Non-Qualified Option, the Committee in its discretion decides at the time of
grant or thereafter to extend such period of exercise upon termination of
employment from three (3) months to a period not exceeding five (5) years.
(b) Exception for Termination Due to Death, Disability or Retirement.
If an Optionee dies while in the employ of the Association or a Subsidiary
Company or terminates employment with the Association or a Subsidiary Company as
a result of Disability or Retirement without having fully exercised his Options,
the Optionee or the executors, administrators, legatees or distributees of his
estate shall have the right, during the twelve-month period following the
earlier of his death, Disability or Retirement, to exercise such Options to the
extent vested on the date of such death, Disability or Retirement. In no event,
however, shall any Option be exercisable more than ten (10) years from the date
it was granted.
8.05 Nonassignability. Options shall not be transferable by an Optionee
except by will or the laws of descent or distribution, and during an Optionee's
lifetime shall be exercisable only by such Optionee or the Optionee's guardian
or legal representative.
8.06 Manner of Exercise. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be set
forth in the written Stock Option Agreement provided for in Section 8.01 above.
8.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of any Option shall be
made to the Association upon exercise of the Option. All shares sold under the
Plan shall be fully paid and nonassessable. Payment for shares may be made by
the Optionee in cash or, at the discretion of the Committee, by delivering
shares of Common Stock (including shares acquired pursuant to the exercise of an
Option) or other property equal in Fair Market Value to the purchase price of
the shares to be acquired pursuant to the Option, by withholding some of the
shares of Common Stock which are being purchased upon exercise of an Option, or
any combination of the foregoing.
8.08 Voting and Dividend Rights. No Optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares of
Common Stock covered
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by an Option prior to the time that his name is recorded on the Association's
stockholder ledger as the holder of record of such shares acquired pursuant to
an exercise of an Option.
8.09 Additional Terms Applicable to Incentive Stock Options. All
Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.08 above, to those
contained in this Section 8.09.
(a) Notwithstanding any contrary provisions contained elsewhere in this
Plan and as long as required by Section 422 of the Code, the aggregate Fair
Market Value, determined as of the time an Incentive Stock Option is granted, of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by the Optionee during any calendar year under this Plan, and
stock options that satisfy the requirements of Section 422 of the Code under any
other stock option plan or plans maintained by the Association (or any parent or
Subsidiary Company), shall not exceed $100,000.
(b) Limitation on Ten Percent Stockholders. The price at which shares
of Common Stock may be purchased upon exercise of an Incentive Stock Option
granted to an individual who, at the time such Incentive Stock Option is
granted, owns, directly or indirectly, more than ten percent (10%) of the total
combined voting power of all classes of stock issued to stockholders of the
Association or any Subsidiary Company, shall be no less than one hundred and ten
percent (110%) of the Fair Market Value of a share of the Common Stock of the
Association at the time of grant, and such Incentive Stock Option shall by its
terms not be exercisable after the earlier of the date determined under Section
8.03 or the expiration of five (5) years from the date such Incentive Stock
Option is granted.
(c) Notice of Disposition; Withholding; Escrow. An Optionee shall
immediately notify the Association in writing of any sale, transfer, assignment
or other disposition (or action constituting a disqualifying disposition within
the meaning of Section 421 of the Code) of any shares of Common Stock acquired
through exercise of an Incentive Stock Option, within two (2) years after the
grant of such Incentive Stock Option or within one (1) year after the
acquisition of such shares, setting forth the date and manner of disposition,
the number of shares disposed of and the price at which such shares were
disposed of. The Association shall be entitled to withhold from any compensation
or other payments then or thereafter due to the Optionee such amounts as may be
necessary to satisfy any withholding requirements of federal or state law or
regulation and, further, to collect from the Optionee any additional amounts
which may be required for such purpose. The Committee may, in its discretion,
require shares of Common Stock acquired by an Optionee upon exercise of an
Incentive Stock Option to be held in an escrow arrangement for the purpose of
enabling compliance with the provisions of this Section 8.09(c).
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8.10 Stock Appreciation Rights.
(a) General Terms and Conditions. The Committee may, but shall not be
obligated to, authorize the Association, on such terms and conditions as it
deems appropriate in each case, to grant rights to Optionees to surrender an
exercisable Option, or any portion thereof, in consideration for the payment by
the Association of an amount equal to the excess of the Fair Market Value of the
shares of Common Stock subject to the Option, or portion thereof, surrendered
over the exercise price of the Option with respect to such shares (any such
authorized surrender and payment being hereinafter referred to as a "Stock
Appreciation Right"). Such payment, at the discretion of the Committee, may be
made in shares of Common Stock valued at the then Fair Market Value thereof, or
in cash, or partly in cash and partly in shares of Common Stock.
The terms and conditions set with respect to a Stock Appreciation Right
may include (without limitation), subject to other provisions of this Section
8.10 and the Plan: the period during which, date by which or event upon which
the Stock Appreciation Right may be exercised; the method for valuing shares of
Common Stock for purposes of this Section 8.10; a ceiling on the amount of
consideration which the Association may pay in connection with exercise and
cancellation of the Stock Appreciation Right; and arrangements for income tax
withholding. The Committee shall have complete discretion to determine whether,
when and to whom Stock Appreciation Rights may be granted. Notwithstanding the
foregoing, the Association may not permit the exercise of a Stock Appreciation
Right issued pursuant to this Plan until the Association has been subject to the
reporting requirements of Section 13 of the Exchange Act for a period of at
least one year prior to the exercise of any such Stock Appreciation Right and
until a Stock Appreciation Right issued pursuant to this Plan has been
outstanding for at least six months from the date of grant.
(b) Time Limitations. If a holder of a Stock Appreciation Right
terminates service with the Association as an Officer or Employee, the Stock
Appreciation Right may be exercised only within the period, if any, within which
the Option to which it relates may be exercised. Notwithstanding the foregoing,
any election by an Optionee to exercise the Stock Appreciation Rights provided
in this Plan shall be made during the period beginning on the third business day
following the release for publication of quarterly or annual financial
information required to be prepared and disseminated by the Association pursuant
to the requirements of the Exchange Act and ending on the twelfth business day
following such date. The required release of information shall be deemed to have
been satisfied when the specified financial data appears on or in a wire
service, financial news service or newspaper of general circulation or is
otherwise first made publicly available.
(c) Effects of Exercise of Stock Appreciation Rights or Options. Upon
the exercise of a Stock Appreciation Right, the number of shares of Common Stock
available under the Option to which it relates shall decrease by a number equal
to the number of shares for which the Stock Appreciation Right was exercised.
Upon the exercise of an
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Option, any related Stock Appreciation Right shall terminate as to any number of
shares of Common Stock subject to the Stock Appreciation Right that exceeds the
total number of shares for which the Option remains unexercised.
(d) Time of Grant. A Stock Appreciation Right granted in connection
with an Incentive Stock Option must be granted concurrently with the Option to
which it relates, while a Stock Appreciation Right granted in connection with a
Non-Qualified Option may be granted concurrently with the Option to which it
relates or at any time thereafter prior to the exercise or expiration of such
Option.
(e) Non-Transferable. The holder of a Stock Appreciation Right may not
transfer or assign the Stock Appreciation Right otherwise than by will or in
accordance with the laws of descent and distribution, and during a holder's
lifetime a Stock Appreciation Right may be exercisable only by the holder.
ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any Award relates and the
exercise price per share of Common Stock under any Option shall be
proportionately adjusted for any increase or decrease in the total number of
outstanding shares of Common Stock issued subsequent to the Offering resulting
from a split, subdivision or consolidation of shares or any other capital
adjustment, the payment of a stock dividend, or other increase or decrease in
such shares effected without receipt or payment of consideration by the
Association. If, upon a merger, consolidation, reorganization, liquidation,
recapitalization or the like of the Association, the shares of the Association's
Common Stock shall be exchanged for other securities of the Association or of
another corporation, each recipient of an Award shall be entitled, subject to
the conditions herein stated, to purchase or acquire such number of shares of
Common Stock or amount of other securities of the Association or such other
corporation as were exchangeable for the number of shares of Common Stock of the
Association which such optionees would have been entitled to purchase or acquire
except for such action, and appropriate adjustments shall be made to the per
share exercise price of outstanding Options.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the Plan
with respect to any shares of Common Stock as to which Awards have not been
granted, subject to any required stockholder approval or any stockholder
approval which the Board may deem to be advisable for any reason, such as for
the purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. The Board may not, without the consent of the holder of an
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Award, alter or impair any Award previously granted or awarded under this Plan
as specifically authorized herein.
ARTICLE XI
EMPLOYMENT RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any action
taken by the Committee or the Board in connection with the Plan shall create any
right on the part of any Employee of the Association or a Subsidiary Company to
continue in the employ of the Association or a Subsidiary Company.
ARTICLE XII
WITHHOLDING
12.01 Tax Withholding. The Association may withhold from any cash
payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Association may require the Optionee to pay to the Association
the amount required to be withheld as a condition to delivering the shares
acquired pursuant to an Award. The Association also may withhold or collect
amounts with respect to a disqualifying disposition of shares of Common Stock
acquired pursuant to exercise of an Incentive Stock Option, as provided in
Section 8.09(c).
12.02 Methods of Tax Withholding. The Committee is authorized to adopt
rules, regulations or procedures which provide for the satisfaction of an
Employee's tax withholding obligation by the retention of shares of Common Stock
to which the Employee would otherwise be entitled pursuant to an Award and/or by
the Employee's delivery of previously-owned shares of Common Stock or other
property.
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 Effective Date of the Plan. This Plan shall become effective on
the Effective Date, and Awards may be granted hereunder as of or after the
Effective Date and prior to the termination of the Plan, provided that no
Incentive Stock Option issued pursuant to this Plan shall qualify as such unless
this Plan is approved by the requisite vote of the holders of the outstanding
voting shares of the Association at a meeting of stockholders of the Association
held within twelve (12) months following the adoption of the Plan by the Board
of Directors of the Association.
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13.02 Term of Plan. Unless sooner terminated, this Plan shall remain in
effect for a period of ten (10) years ending on the tenth anniversary of the
adoption of the Plan by the Board of Directors of the Association. Termination
of the Plan shall not affect any Awards previously granted, and such Awards
shall remain valid and in effect until they have been fully exercised or earned,
are surrendered or by their terms expire or are forfeited.
ARTICLE XIV
MISCELLANEOUS
14.01 Governing Law. To the extent not governed by federal law, this
Plan shall be construed under the laws of the State of Louisiana.
14.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
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EXHIBIT 10.2
PONCHATOULA HOMESTEAD SAVINGS, F.A.
1996 DIRECTORS' STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Ponchatoula Homestead Savings, F.A. (the "Association") hereby
establishes this 1996 Directors' Stock Option Plan (the "Plan") upon the
terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of
the Association by providing non-employee directors with a proprietary
interest in the Association through non-discretionary grants of
non-qualified stock options (an "Option" or "Options").
ARTICLE III
ADMINISTRATION OF THE PLAN
3.01 Administration. This Plan shall be administered by the
entire Board of Directors of the Association (the "Board"). The Board
shall have the power, subject to and within the limits of the express
provisions of this Plan, to exercise such powers and to perform such acts
as are deemed necessary or expedient to promote the best interests of the
Association with respect to this Plan.
3.02 Compliance with Law and Regulations. All Options granted
hereunder shall be subject to all applicable federal and state laws, rules
and regulations and to such approvals by any government or regulatory
agency as may be required. The Association shall not be required to issue
or deliver any certificates for shares of Common Stock prior to the
completion of any registration or qualification of or obtaining of consents
or approvals with respect to such shares under any federal or state law or
any rule or regulation of any government body, which the Association shall,
in its sole discretion, determine to be necessary or advisable. Moreover,
no Option may be exercised if such exercise or issuance would be contrary
to applicable laws and regulations.
3.03 Restrictions on Transfer. The Association may place a legend
upon any certificate representing shares acquired pursuant to an Option
granted hereunder noting that the transfer of such shares may be restricted
by applicable laws and regulations.
ARTICLE IV
ELIGIBILITY
Each of the non-employee directors ("non-employee director") of the
Association as of the dates specified in Article VI hereof shall receive
options hereunder. No honorary directors, advisory directors or directors
emeritus shall be entitled to receive Options hereunder.
<PAGE>
ARTICLE V
COMMON STOCK COVERED BY THE PLAN
5.01 Option Shares. The aggregate number of shares of common stock of
the Association, par value $.10 per share ("Common Stock"), which may be
issued pursuant to this Plan, subject to adjustment as provided in Article
VIII, shall be 3,594 shares, which equals 2.5% of the shares of Common
Stock issued pursuant to the Stock Issuance Plan adopted by the Association
in connection with the reorganization of the Association into the mutual
holding company form of organization ( the "Offering").
5.02 Source of Shares. The shares of Common Stock issued under this
Plan may be authorized but unissued shares, treasury shares or shares
purchased by the Association on the open market or from private sources for
use under the Plan.
ARTICLE VI
OPTION GRANTS
6.01 Initial Grants. An Option to purchase shares of Common Stock
shall be granted to each non-employee director of the Association as of the
date this Plan is approved by the stockholders of the Association.
Specifically, each non-employee director shall receive Options to purchase
the number of shares of Common Stock (rounded down to the nearest whole
number) determined by multiplying the total number of shares of Common
Stock which may be issued pursuant to this Plan by 90%, divided by the
number of non-employee directors of the Association at such time.
6.02 Grant on One-Year Anniversary Date. An Option to purchase shares
of Common Stock shall be granted to each non-employee director of the
Association one year from the date on which Options are initially granted
pursuant to Section 6.01 hereof. Specifically, each non-employee director
shall receive Options to purchase the number of shares of Common Stock
(rounded down to the nearest whole number) determined by dividing the
remaining number of shares of Common Stock which may be issued pursuant to
this Plan by the number of non-employee directors of the Association at
such time.
6.03 Subsequent Grants. In the event any Options granted to a
non-employee director expire or terminate for any reason before they have
been exercised in full, the unpurchased shares subject to those expired or
terminated Options shall be granted to persons who become a non-employee
director for the first time following the date Options are granted pursuant
to Section 6.02 above, as follows: (1) on the date such person is first
appointed or elected as a non-employee director, he shall receive an Option
for 300 shares or such lesser number of shares as may be available for
grants under the Plan; and (2) if such person does not receive an Option
for 300 shares as of the date he is first appointed or elected as a
non-employee director because sufficient shares were not available, he
shall receive one or more additional grants as of each day, if any, that an
Option subsequently expires or terminates until the number of Options
granted to him shall aggregate 300 shares.
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ARTICLE VII
OPTION TERMS
Each Option granted hereunder shall be on the following terms and
conditions:
7.01 Option Agreement. The Association and each optionee shall
execute an Option Agreement which shall set forth the total number of
shares of Common Stock to which it pertains, the exercise price and such
other terms, conditions and provisions as are appropriate, provided that
they are not inconsistent with the terms, conditions and provisions of this
Plan. Each optionee shall receive a copy of his executed Option Agreement.
7.02 Option Exercise Price. The per share exercise price at which the
shares of Common Stock may be purchased upon exercise of an Option granted
pursuant to Article VI hereof shall be equal to the Fair Market Value of a
share of Common Stock as of the date of grant. For purposes of this Plan,
the Fair Market Value shall be the closing sale price of a share of Common
Stock on the date in question (or, if such day is not a trading day in the
U.S. markets, on the nearest preceding trading day), as reported with
respect to the principal market (or the composite of the markets, if more
than one) in which such shares are then traded, or if no such closing
prices are reported, the mean between the high bid and low asked prices
that day on the principal market or national quotation system then in use,
or if no such quotations are available, the price furnished by a
professional securities dealer making a market in such shares selected by
the Board.
7.03 Vesting and Exercise of Options. Options shall be vested and
exercisable six months following the date of grant.
7.04 Duration of Options.
(a) Each Option or portion thereof shall be exercisable at any time
on or after six (6) months following the date of grant until ten (10) years
after the date of grant, except as provided below.
(b) Exception for Termination Due to Death, Disability, Retirement,
Resignation or Non-Reelection. If an optionee dies while serving as a
non-employee director or if his service as a non-employee director is
terminated as a result of disability, retirement, resignation or
non-reelection without the optionee having fully exercised his Options, the
optionee or the executors, administrators, legatees or distributees of his
estate shall have the right, during the twelve-month period following such
death, disability, retirement, resignation or non-reelection, to exercise
such Options, provided that no Option shall be exercisable within six (6)
months after the date of grant or more than ten (10) years from the date it
was granted.
(c) Options granted to a non-employee director who is removed by
stockholders of the Association for cause shall terminate as of the
effective date of such removal.
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Removal for cause shall include removal because of the non-employee
director's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform
stated duties, or willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease-and-desist
order.
7.05 Nonassignability. Options shall not be transferable by an
optionee except by will or the laws of descent or distribution, and during
an optionee's lifetime shall be exercisable only by such optionee or the
optionee's guardian or legal representative.
7.06 Manner of Exercise. Options may be exercised in part or in whole
and at one time or from time to time. The procedures for exercise shall be
set forth in the written Option Agreement provided for in Section 7.01.
7.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of an Option
shall be made to the Association upon exercise of the Option. All shares
sold under the Plan shall be fully paid and nonassessable. Payment for
shares may be made by the optionee in cash or by delivering shares of
Common Stock (including shares acquired pursuant to the exercise of an
Option) equal in fair market value to the purchase price of the shares to
be acquired pursuant to the Option, by withholding some of the shares of
Common Stock which are being purchased upon exercise of an Option, or any
combination of the foregoing.
7.08 Voting and Dividend Rights. No optionee shall have any voting or
dividend rights or other rights of a stockholder in respect of any shares
of Common Stock covered by an Option prior to the time that his name is
recorded on the Association's stockholder ledger as the holder of record of
such shares acquired pursuant to an exercise of an Option.
ARTICLE VIII
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance
under this Plan, the number of shares to which any Option relates and the
exercise price per share of Common Stock under any Option shall be
proportionately adjusted for any increase or decrease in the total number
of outstanding shares of Common Stock issued subsequent to the Offering
resulting from a split, subdivision or consolidation of shares or any other
capital adjustment, the payment of a stock dividend, or other increase or
decrease in such shares effected without receipt or payment of
consideration by the Association. If, upon a merger, consolidation,
reorganization, liquidation, recapitalization or the like of the
Association, the shares of the Association's Common Stock shall be
exchanged for other securities of the Association or of another
corporation, each recipient of an Option shall be entitled, subject to the
conditions herein stated, to purchase or acquire such number of shares of
Common Stock or amount of other securities of the Association or such other
corporation as were exchangeable for the number of shares of Common Stock
of the Association which such optionees would have been entitled to
purchase or acquire except for such action, and
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appropriate adjustments shall be made to the per share exercise price of
outstanding Options.
ARTICLE IX
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend this Plan
with respect to any shares of Common Stock as to which Options have not
been granted, subject to any required stockholder approval or any
stockholder approval which the Board may deem to be advisable for any
reason, such as for the purpose of obtaining or retaining any statutory or
regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The Board may not, without
the consent of the holder of an Option, alter or impair any Option
previously granted under this Plan as specifically authorized herein.
Notwithstanding anything contained in this Plan to the contrary, the
provisions of Articles IV, VI and VII of this Plan shall not be amended
more than once every six months, other than to comport with changes in the
Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations promulgated
under such statutes.
ARTICLE X
RIGHTS TO CONTINUE AS A DIRECTOR
Neither the Plan nor the grant of any Options hereunder nor any action
taken by the Board in connection with the Plan shall create any right on
the part of any non-employee director of the Association to continue as
such.
ARTICLE XI
WITHHOLDING
The Association may withhold from any cash payment made under this
Plan sufficient amounts to cover any applicable withholding and employment
taxes, and if the amount of such cash payment is insufficient, the
Association may require the optionee to pay to the Association the amount
required to be withheld as a condition to delivering the shares acquired
pursuant to an Option.
ARTICLE XII
EFFECTIVE DATE OF THE PLAN; TERM
12.01 Effective Date of the Plan. This Plan shall become
effective on the date this Plan is approved by the stockholders of the
Association (the "Effective Date"), and Options may be granted hereunder as
of or after the Effective Date and prior to the termination of this Plan.
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12.02 Term of Plan. Unless sooner terminated, this Plan shall
remain in effect for a period of ten (10) years ending on the tenth
anniversary of the adoption of this Plan by
the Board of Directors of the Association. Termination of the Plan shall
not affect any Options previously granted, and such Options shall remain
valid and in effect until they have been fully exercised or earned, are
surrendered or by their terms expire or are forfeited.
ARTICLE XIII
MISCELLANEOUS
13.01 Governing Law. To the extent not governed by federal law,
this Plan shall be construed under the laws of the State of Louisiana.
13.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
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EXHIBIT 10.3
PONCHATOULA HOMESTEAD SAVINGS, F.A.
1996 MANAGEMENT RECOGNITION
PLAN FOR DIRECTORS AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Ponchatoula Homestead Savings, F.A. (the "Association") hereby
establishes the 1996 Management Recognition Plan for Directors (the "Plan") and
Trust (the "Trust") upon the terms and conditions hereinafter stated in this
1996 Management Recognition Plan for Directors and Trust Agreement (the
"Agreement").
1.02 The Trustees hereby accept this Trust and agree to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to improve the growth and profitability
of the Association by providing non-employee directors with a proprietary
interest in the Association as compensation for their contributions to the
Association and as an incentive to make such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement, unless the
context clearly indicates otherwise, shall have the meanings set forth below.
Wherever appropriate, the masculine pronouns shall include the feminine pronouns
and the singular shall include the plural.
3.01 "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.
3.02 "Board" means the Board of Directors of the Association.
3.03 "Code" means the Internal Revenue Code of 1986, as amended.
3.04 "Committee" means the entire Board of Directors of the Association
which administers the Plan pursuant to Article IV hereof.
<PAGE>
3.05 "Common Stock" means shares of common stock, par value $.10 per
share, of the Association.
3.06 "Disability" means any physical or mental impairment which
qualifies a Non-employee Director for disability benefits under the applicable
long-term disability plan maintained by the Association or any Subsidiary or, if
no such plan applies, which would qualify such Non-employee Director for
disability benefits under the Federal Social Security System.
3.07 "Effective Date" means the date on which the stockholders of the
Association approve this Plan.
3.08 "Employee" means any person who is employed by the Association or
any Subsidiary, including officers or other employees who may be directors of
the Association.
3.09 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.10 "Non-employee Director" means a member of the Board who is not an
Employee.
3.11 "Offering" means the offer and sale of 143,760 shares of Common
Stock to the public pursuant to the Stock Issuance Plan adopted by the
Association in connection with the reorganization of Ponchatoula Homestead
Association into the mutual holding company form of organization.
3.12 "Plan Shares" or "Shares" means shares of Common Stock held in the
Trust which may be distributed to a Recipient pursuant to the Plan.
3.13 "Plan Share Award" or "Award" means a right granted under this
Plan to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII.
3.14 "Recipient" means a Non-employee Director who receives a Plan
Share Award under the Plan.
3.15 "Retirement" means a termination of service upon or after
attainment of age sixty-five (65) or such earlier age as may be specified in
applicable plans or policies of the Association or in a Recipient's Plan Share
Award.
3.16 "Subsidiary" means any subsidiaries of the Association.
3.17 "Trustee" or "Trustees" means the person or persons (which may
be members of the Committee), or firm or other entity, nominated by the
Committee and approved by the Board pursuant to Sections 4.01 and 4.02, to
hold legal title to the Plan assets for the purposes set forth herein.
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ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of the members of the entire
Board. The Committee 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 Plan Share Award granted hereunder shall
be final and binding. The Committee shall act by vote or written consent of a
majority of its members. 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 appoint
one or more persons (which may be from among its members), or a firm or other
entity, to act as Trustee(s) in accordance with the provisions of this Plan and
Trust and the terms of Article VIII hereof.
4.02 Role of the Board. The Trustee or Trustees shall be appointed or
approved by, and will serve at the pleasure of, the Committee. The Committee may
in its discretion from time to time remove, replace or add Trustees.
4.03 Limitation on Liability. No member of the Committee shall be
liable for any determination made in good faith with respect to the Plan or any
Plan Shares or Plan Share Awards granted under it. If a member of the 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 Association shall, subject to the
requirements of applicable laws and regulations, indemnify such member against
all liabilities and expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in the best interests of the Association and any
Subsidiaries and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
4.04 Compliance with Laws and Regulations. All awards granted hereunder
shall be subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency or stockholders as
may be required. The Association shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any federal or state law or any rule or regulation
of any government body, which the Association shall, in its sole discretion,
determine to be necessary or advisable.
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ARTICLE V
CONTRIBUTIONS
5.01 Amount and Timing of Contributions. The Board shall determine the
amount (or the method of computing the amount) and timing of any contributions
by the Association to the Trust established under this Plan. Such amounts may be
paid in cash or in shares of Common Stock and shall be paid to the Trust at the
designated time of contribution. No contributions by Non-employee Directors
shall be permitted.
5.02 Investment of Trust Assets; Number of Plan Shares. Subject to
Section 8.02 hereof, the Trustees shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan in the first year following the Effective
Date, subject to adjustment as provided in Section 9.01 hereof, shall not exceed
1,437 shares, which equals 1.0% of the shares of Common Stock issued by the
Association in the Offering (rounded down to the nearest whole number), which
shares shall be acquired by the Trust following receipt of stockholder approval
of the Plan with funds contributed by the Association.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Plan Share Awards shall be made to each Non-employee
Director.
(a) Initial Allocation. A Plan Share Award shall be allocated
to each Nonemployee Director as of the Effective Date. Specifically, each
Non-employee Director shall receive a Plan Share Award for the number of whole
shares of Common Stock (rounded down to the nearest whole number) determined by
multiplying the number of shares of Common Stock which may be issued pursuant to
this Plan by 90% and dividing such product by the number of Non-employee
Directors of the Association at such time.
(b) Grant on One-Year Anniversary Date. A Plan Share Award
shall be allocated to each Non-employee Director on the one-year anniversary of
the Effective Date. Specifically, each Non-employee Director shall receive a
Plan Share Award for the number of whole shares of Common Stock (rounded down to
the nearest whole number) determined by dividing the remaining number of shares
of Common Stock which may be issued pursuant to this Plan by the number of
Non-employee Directors at such time.
(c) Subsequent Grants. In the event any Plan Share Awards
granted to a Non-employee Director expire or terminate for any reason before
they have been earned in full, the unearned shares subject to those expired or
terminated Plan Share Awards shall be granted to persons who become a
Non-employee Director for the first time following the date Plan Share Awards
are granted pursuant to Section 6.01(b) above, as follows: (1) on the date such
person is first appointed or elected as a Non-employee Director, he shall
receive a Plan Share Award for 100 shares or such lesser number of shares as may
be available for grants under the Plan;
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and (2) if such person does not receive a Plan Share Award for 100 shares as
of the date he is first appointed or elected as a Non-employee Director
because sufficient shares were not available, he shall receive one or more
additional grants as of each day, if any, that a Plan Share Award
subsequently expires or terminates until the number of Plan Share Awards
granted to him shall aggregate 100 shares.
6.02 Form of Allocation. As promptly as practicable after a Plan Share
Award is to be issued, the Committee shall notify the Recipient in writing of
the grant of the Award, the number of Plan Shares covered by the Award, and the
terms upon which the Plan Shares subject to the Award shall be distributed to
the Recipient. Such terms shall be reflected in a written agreement with the
Recipient. The Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Except as set forth below, Plan Shares subject to an
Award 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 each annual anniversary of
the date of grant of the Award. If service as a director by a Recipient is
terminated prior to the fifth annual anniversary of the date of grant of a Plan
Share Award for any reason (except as specifically provided in subsections (b),
(c) and (d) below), the Recipient shall forfeit the right to any Shares subject
to the Award which have not theretofore been earned.
In determining the number of Plan Shares which are to be earned,
fractional Shares shall be rounded down to the nearest whole number, provided
that such fractional Shares shall be aggregated and distributed on the fifth
annual anniversary of the date of grant.
(b) Exception for Terminations Due to Death, Disability and Retirement.
Notwithstanding the general rule contained in Section 7.01(a), all Plan Shares
subject to a Plan Share Award held by a Recipient whose service as a director of
the Association terminates due to death, Disability or Retirement shall be
deemed earned as of the Recipient's last day of service with the Association and
shall be distributed as soon as practicable thereafter; provided, however, that
no Awards shall be distributed prior to six months from the date of grant of the
Plan Share Award.
(c) Exception for Terminations after a Change in Control.
Notwithstanding the general rule contained in Section 7.01(a), all Plan Shares
subject to a Plan Share Award held by a Recipient shall be deemed to be earned
in the event of a "change in control of the Association". A "change in control
of the Association" is defined as a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Exchange Act, or any successor thereto, whether or not
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the Association in fact is required to comply with Regulation 14A thereunder;
provided however, that a reorganization of the Association from the mutual
holding company form of organization to the stock holding company form of
organization shall not constitute a change in control of the Association.
(d) Revocation for Misconduct. Notwithstanding anything herein to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Plan Share Award, or portion thereof, previously awarded under this Plan, to
the extent Plan Shares have not been distributed hereunder to the Recipient,
whether or not yet earned, in the case of any Non-employee Director who is
removed from service as a director of the Association for cause (as hereinafter
defined). Removal shall be deemed to be for cause if the Non-employee Director
has been convicted of a felony by a court of competent jurisdiction or has been
adjudged by a court of competent jurisdiction to be liable for gross negligence
or misconduct in the performance of his duties to the Association or any
Subsidiary.
7.02 Distribution of Dividends. Any cash dividends or stock dividends
declared in respect of each Plan Share held by the Trust will be paid by the
Trust, as soon as practicable after the Trust's receipt thereof, to the
Recipient on whose behalf such Plan Share is then held by the Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in
Section 7.03(b), Plan Shares shall be distributed to a Recipient or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned, provided, however, that no Plan Shares shall be distributed to a
Recipient or Beneficiary pursuant to a Plan Share Award within six months from
the date on which that Plan Share Award was granted to such person.
(b) Timing: Exception for 10% Stockholders. Notwithstanding
Section 7.03(a) above, no Plan Shares may be distributed prior to the date which
is five years from the date of consummation of the Offering to the extent the
Recipient or Beneficiary, as the case may be, would after receipt of such Shares
own in excess of 10% of the issued and outstanding shares of Common Stock. Any
Plan Shares remaining undistributed solely by reason of the operation of this
Section 7.03(b) shall be distributed to the Recipient or his Beneficiary on the
date which is five years from the date of consummation of the Offering.
(c) Form of Distributions. All Plan Shares, together with any
Shares representing stock dividends, shall be distributed in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned and
distributable. Payments representing cash dividends shall be made in cash.
(d) Withholding. The Trustees may withhold from any cash
payment or Common Stock distribution made under this Plan sufficient amounts to
cover any applicable withholding and employment taxes, and if the amount of a
cash payment is insufficient, the Trustees may
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require the Recipient or Beneficiary to pay to the Trustees the amount
required to be withheld as a condition of delivering the Plan Shares. The
Trustees shall pay over to the Association or any Subsidiary which employs or
employed such Recipient any such amount withheld from or paid by the
Recipient or Beneficiary.
(e) Restrictions on Selling of Plan Shares. Plan Share Awards
may not be sold, assigned, pledged or otherwise disposed of prior to the time
that they are earned and distributed pursuant to the terms of this Plan.
Following distribution, the Committee may require the Recipient or his
Beneficiary, as the case may be, to agree not to sell or otherwise dispose of
his distributed Plan Shares except in accordance with all then applicable
federal and state securities laws, and the Committee may cause a legend to be
placed on the stock certificate(s) representing the distributed Plan Shares in
order to restrict the transfer of the distributed Plan Shares for such period of
time or under such circumstances as the Committee, upon the advice of counsel,
may deem appropriate.
7.04 Voting of Plan Shares. After a Plan Share Award has been made, the
Recipient shall be entitled to direct the Trustees as to the voting of the Plan
Shares which are covered by the Plan Share Award and which have not yet been
earned and distributed to him pursuant to Section 7.03, subject to rules and
procedures adopted by the Committee for this purpose. If the Recipient does not
direct the Trustees as to the voting of Plan Shares which have not yet been
earned and distributed pursuant to Section 7.03, such shares shall not be voted
by the Trustees. In the event a tender offer is made for Plan Shares, the
Trustees shall tender Plan Shares held by the Plan which have not yet been
earned and distributed in accordance with instructions from the Recipient.
ARTICLE VIII
TRUST
8.01 Trust. The Trustees shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust
that the Trustees shall have complete authority and discretion with respect
to the arrangement, control and investment of the Trust, and that the
Trustees shall invest all assets of the Trust in Common Stock to the fullest
extent practicable, except (i) to the extent that the Trustees determine that
the holding of monies in cash or cash equivalents is necessary to meet the
obligations of the Trust and (ii) contributions to the Trust by the
Association may be temporarily invested in such interest-bearing account or
accounts as the Trustees shall determine to be appropriate. In performing
their duties, the Trustees shall have the power to do all things and execute
such instruments as may be deemed necessary or proper, including the
following powers:
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(a) To invest up to one hundred percent (100%) of all Trust assets in
Common Stock without regard to any law now or hereafter in force limiting
investments for trustees or other fiduciaries. The investment authorized herein
may constitute the only investment of the Trust, and in making such investment,
the Trustees are authorized to purchase Common Stock from the Association or
from any other source, and such Common Stock so purchased may be outstanding,
newly issued or treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above, in such deposit accounts, and certificates of deposit,
obligations of the United States Government or its agencies or such other
investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time
held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in the
name of a nominee, without the addition of words indicating that such security
is an asset of the Trust (but accurate records shall be maintained showing that
such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in the opinion
of the Trustees be reasonable for the proper operation of the Plan and Trust.
(f) To employ brokers, agents, custodians, consultants and accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute as
to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustees
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of a court for the exercise of any power
herein contained, or to give any bond.
8.03 Records and Accounts. The Trustees shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
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8.04 Expenses. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Association.
8.05 Indemnification. Subject to the requirements of applicable laws
and regulations, the Association shall indemnify, defend and hold the Trustees
harmless against all claims, expenses and liabilities arising out of or related
to the exercise of the Trustees' powers and the discharge of their duties
hereunder, unless the same shall be due to their gross negligence or willful
misconduct.
ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the Offering resulting from any split,
subdivision or consolidation of shares or other capital adjustment, or other
increase or decrease in such shares effected without receipt or payment of
consideration by the Association.
9.02 Amendment and Termination of Plan. The Board may, by resolution,
at any time amend or terminate the Plan, subject to any required stockholder
approval or any stockholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any statutory
or regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The Board may not, without the
consent of the holder of a Plan Share Award, alter or impair any Plan Share
Award previously granted under this Plan as specifically authorized herein.
Termination of this Plan shall not affect Plan Share Awards previously granted,
and such Plan Share Awards shall remain valid and in effect until they (a) have
been fully earned, (b) are surrendered, or (c) expire or are forfeited in
accordance with their terms. Notwithstanding anything contained in this Plan to
the contrary, the provisions of Articles VI and VII of this Plan 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 of 1974, as amended, or
the rules and regulations promulgated under such statutes.
9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Recipient, and during the lifetime of the Recipient,
Plan Shares may only be earned by and paid to a Recipient who was notified in
writing of an Award by the Committee pursuant to Section 6.02. No Recipient or
Beneficiary shall have any right in or claim to any assets of the Plan or Trust,
nor shall the Association or any Subsidiary be subject to any claim for benefits
hereunder.
9.04 Service Rights. Neither the Plan nor any grant of a Plan Share
Award or Plan Shares hereunder nor any action taken by the Trustees, the
Committee or the Board in connection with the Plan shall create any right on
the part of any Non-employee Director to continue as such.
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9.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award, except as expressly provided in Sections 7.02 and
7.04 above, prior to the time said Plan Shares are actually earned and
distributed to him.
9.06 Governing Law. To the extent not governed by federal law, the Plan
and Trust shall be governed by the laws of the State of Louisiana.
9.07 Effective Date. This Plan shall be effective as of the Effective
Date, and Awards may be granted hereunder as of or after the Effective Date and
as long as the Plan remains in effect.
9.08 Term of Plan. This Plan shall remain in effect until the earlier
of (1) ten (10) years from the Effective Date, (2) termination by the Board, or
(3) the distribution to Recipients and Beneficiaries of all assets of the Trust.
9.09 Tax Status of Trust. It is intended that the trust established
hereby be treated as a Grantor Trust of the Association under the provisions of
Section 671 et seq. of the Code, as the same may be amended from time to time.
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IN WITNESS WHEREOF, the Association has caused this Agreement to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, and the initial Trustees of the Trust established pursuant
hereto have duly and validly executed this Agreement, all on this __ day of
February 1996.
PONCHATOULA HOMESTEAD SAVINGS, F.A.
Attest:\s\Barbara B. Theriot By: \s\ Lawrence C. Caldwell, Jr.
---------------------- --------------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
TRUSTEES:
\s\John C. Bohning
------------------------------
John C. Bohning
\s\Harry J. Gabriel, Jr.
------------------------------
Harry J. Gabriel, Jr.
\s\Paul C. Granier
------------------------------
Paul C. Granier
\s\Allen B. Pierson, Jr.
------------------------------
Allen B. Pierson, Jr.
\s\Milton J. Schanzbach
------------------------------
Milton J. Schanzbach
\s\Henry S. Yawn
------------------------------
Henry S. Yawn
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Exhibit 10.4
PONCHATOULA HOMESTEAD SAVINGS, F.A.
1996 MANAGEMENT RECOGNITION
PLAN FOR OFFICERS AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Ponchatoula Homestead Savings, F.A. (the "Association") hereby
establishes the 1996 Management Recognition Plan (the "Plan") and Trust (the
"Trust") upon the terms and conditions hereinafter stated in this 1996
Management Recognition Plan for Officers and Trust Agreement (the "Agreement").
1.02 The Trustee(s) hereby accept this Trust and agree to hold the
Trust assets existing on the date of this Agreement and all additions and
accretions thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain personnel of experience and
ability in key positions by providing such key employees of the Association and
any Subsidiaries with a proprietary interest in the Association as compensation
for their contributions to the Association and any Subsidiaries and as an
incentive to make such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement, unless the
context clearly indicates otherwise, shall have the meanings set forth below.
Wherever appropriate, the masculine pronouns shall include the feminine pronouns
and the singular shall include the plural.
3.01 "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.
3.02 "Board" means the Board of Directors of the Association.
3.03 "Code" means the Internal Revenue Code of 1986, as amended.
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3.04 "Committee" means the committee appointed by the Board pursuant to
Article IV hereof.
3.05 "Common Stock" means shares of common stock, par value $.10 per
share, of the Association.
3.06 "Disability" means any physical or mental impairment which
qualifies an Employee for disability benefits under the applicable long-term
disability plan maintained by the Association or any Subsidiary or, if no such
plan applies, which would qualify such Employee for disability benefits under
the Federal Social Security System.
3.07 "Effective Date" means the date this Plan is approved by the
stockholders of the Association.
3.08 "Employee" means any person who is employed by the Association or
any Subsidiary, including officers or other employees who may be directors of
the Association.
3.09 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
3.10 "Offering" means the offer and sale of 143,760 shares of Common
Stock to the public pursuant to the Stock Issuance Plan adopted by the
Association in connection with the reorganization of Ponchatoula Homestead
Association into the mutual holding company form of organization.
3.11 "Plan Shares" or "Shares" means shares of Common Stock held in the
Trust which may be distributed to a Recipient pursuant to the Plan.
3.12 "Plan Share Award" or "Award" means a right granted under this
Plan to receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII.
3.13 "Recipient" means an Employee who receives a Plan Share Award
under the Plan.
3.14 "Retirement" means a termination of employment upon or after
attainment of age sixty-five (65) or such earlier age as may be specified in
applicable plans or policies of the Association or in a Recipient's Plan Share
Award.
3.15 "Subsidiary" means any subsidiaries of the Association which, with
the consent of the Board, agree to participate in this Plan.
3.16 "Trustee" or "Trustees" means the person or persons (which may be
members of the Committee), or firm or other entity, nominated by the Committee
and approved by the Board pursuant to Sections 4.01 and 4.02, to hold legal
title to the Plan assets for the purposes set forth herein.
2
<PAGE>
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and
interpreted by the Committee, which shall consist of two or more members of the
Board, none of whom shall be an officer or employee of the Association and each
of whom shall be a "disinterested person" within the meaning of Rule 16b-3 under
the Exchange Act. The Committee 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 Plan Share Award granted
hereunder shall be final and binding. The Committee shall act by vote or written
consent of a majority of its members. 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. The
Committee shall recommend to the Board one or more persons (which may be from
among its members), or a firm or other entity, to act as Trustee(s) in
accordance with the provisions of this Plan and Trust and the terms of Article
VIII hereof.
4.02 Role of the Board. The members of the Committee and the Trustee or
Trustees 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, and may remove, replace or add Trustees,
provided that any directors who are selected as members of the Committee shall
not be officers or employees of the Association and shall be "disinterested
persons" within the meaning of Rule 16b-3 promulgated under the Exchange Act.
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 Plan Shares or Plan Share 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 Association shall, subject to the requirements of
applicable laws and regulations, indemnify such member against all
liabilities and expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in the best interests of the
Association and any Subsidiaries and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
4.04 Compliance with Laws and Regulations. All awards granted
hereunder shall be subject to all applicable federal and state laws, rules
and regulations and to such approvals by any government or regulatory agency
or stockholders as may be required. The Association shall not be required to
issue or deliver any certificates for shares of Common Stock prior to the
completion of any registration or qualification of or obtaining of consents
3
<PAGE>
or approvals with respect to such shares under any federal or state law or
any rule or regulation of any government body, which the Association shall,
in its sole discretion, determine to be necessary or advisable.
ARTICLE V
CONTRIBUTIONS
5.01 Amount and Timing of Contributions. The Board shall determine the
amount (or the method of computing the amount) and timing of any contributions
by the Association and any Subsidiaries to the Trust established under this
Plan. Such amounts may be paid in cash or in shares of Common Stock and shall be
paid to the Trust at the designated time of contribution. No contributions by
Employees shall be permitted.
5.02 Investment of Trust Assets; Number of Plan Shares. Subject to
Section 8.02 hereof, the Trustees shall invest all of the Trust's assets
primarily in Common Stock. The aggregate number of Plan Shares available for
distribution pursuant to this Plan in the first year following the Effective
Date, subject to adjustment as provided in Section 9.01 hereof, shall not exceed
4,312 shares, which equals 3.0% of the shares of Common Stock issued by the
Association in the Offering (rounded down to the nearest whole number), which
shares shall be acquired by the Trust following receipt of stockholder approval
of the Plan with funds contributed by the Association. Subsequent to the
one-year anniversary of the Effective Date, the Trust may purchase (from the
Association and/or stockholders thereof) additional shares of Common Stock for
distribution pursuant to this Plan.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Plan Share Awards may be made to such Employees as
may be selected by the Committee. In selecting those Employees to whom Plan
Share Awards may be granted and the number of Shares covered by such Awards, the
Committee shall consider the position and responsibilities of the eligible
Employees, the value of their services to the Association and any Subsidiaries,
and any other factors the Committee may deem relevant. The Committee may but
shall not be required to request the written recommendation of the Chief
Executive Officer of the Association other than with respect to Plan Share
Awards to be granted to him.
6.02 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Section 6.01 that a Plan Share Award is to be
issued, the Committee shall notify the Recipient in writing of the grant of the
Award, the number of Plan Shares covered by the Award, and the terms upon which
the Plan Shares subject to the Award shall be distributed to the Employee. Such
terms shall be reflected in a written agreement with the Employee. The date on
which the Committee so notifies the Recipient shall be considered the date of
grant of the Plan Share Award. The Committee shall maintain records as to all
grants of Plan Share Awards under the Plan.
4
<PAGE>
6.03 Allocations Not Required to any Specific Employee. Notwithstanding
anything to the contrary in Section 6.01 hereof, no Employee shall have any
right or entitlement to receive a Plan Share Award hereunder, such Awards being
at the total discretion of the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Except as set forth below, Plan Shares subject to
an Award 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 each annual
anniversary of the date of grant of the Award. If the employment of a Recipient
is terminated prior to the fifth annual anniversary of the date of grant of a
Plan Share Award for any reason (except as specifically provided in subsections
(b), (c) and (d) below), the Recipient shall forfeit the right to any Shares
subject to the Award which have not theretofore been earned.
In determining the number of Plan Shares which are to be earned,
fractional Shares shall be rounded down to the nearest whole number, provided
that such fractional Shares shall be aggregated and distributed on the fifth
annual anniversary of the date of grant.
(b) Exception for Terminations Due to Death or Disability.
Notwithstanding the general rule contained in Section 7.01(a), all Plan Shares
subject to a Plan Share Award held by a Recipient whose employment with the
Association or any Subsidiary terminates due to death or Disability shall be
deemed earned as of the Recipient's last day of employment with the Association
or any Subsidiary and shall be distributed as soon as practicable thereafter;
provided, however, that no Awards shall be distributed prior to six months from
the date of grant of the Plan Share Award.
(c) Exception for Terminations after a Change in Control.
Notwithstanding the general rule contained in Section 7.01(a), all Plan
Shares subject to a Plan Share Award held by a Recipient shall be deemed to
be earned in the event of a "change in control of the Association". A "change
in control of the Association" is defined as a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act, or any successor
thereto, whether or not the Association in fact is required to comply with
Regulation 14A thereunder; provided, however, that a reorganization of the
Association from the mutual holding company form of organization to the stock
holding company form of organization shall not constitute a change in control
of the Association.
(d) Revocation for Misconduct. Notwithstanding anything herein to
the contrary, the Board may by resolution immediately revoke, rescind and
terminate any Plan Share Award, or portion thereof, previously awarded under
this Plan, to the extent Plan Shares have not been distributed hereunder to
the Recipient, whether or not yet earned, in the case of an
5
<PAGE>
Employee who is discharged from the employ of the Association or any
Subsidiary for cause (as hereinafter defined). Termination of employment for
cause shall include termination because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, or
willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order.
7.02 Distribution of Dividends. Any cash dividends or stock dividends
declared in respect of each Plan Share held by the Trust will be paid by the
Trust, as soon as practicable after the Trust's receipt thereof, to the
Recipient on whose behalf such Plan Share is then held by the Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in
Section 7.03(b), Plan Shares shall be distributed to a Recipient or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned, provided, however, that no Plan Shares shall be distributed to a
Recipient or Beneficiary pursuant to a Plan Share Award within six months from
the date on which that Plan Share Award was granted to such person.
(b) Timing: Exception for 10% Stockholders. Notwithstanding Section
7.03(a) above, no Plan Shares may be distributed prior to the date which is five
years from the date of consummation of the Offering to the extent the Recipient
or Beneficiary, as the case may be, would after receipt of such Shares own in
excess of 10% of the issued and outstanding shares of Common Stock. Any Plan
Shares remaining undistributed solely by reason of the operation of this Section
7.03(b) shall be distributed to the Recipient or his Beneficiary on the date
which is five years from the date of consummation of the Offering.
(c) Form of Distributions. All Plan Shares, together with any Shares
representing stock dividends, shall be distributed in the form of Common Stock.
One share of Common Stock shall be given for each Plan Share earned and
distributable. Payments representing cash dividends shall be made in cash.
(d) Withholding. The Trustees may withhold from any cash payment or
Common Stock distribution made under this Plan sufficient amounts to cover any
applicable withholding and employment taxes, and if the amount of a cash payment
is insufficient, the Trustees may require the Recipient or Beneficiary to pay to
the Trustees the amount required to be withheld as a condition of delivering the
Plan Shares. The Trustees shall pay over to the Association or any Subsidiary
which employs or employed such Recipient any such amount withheld from or paid
by the Recipient or Beneficiary.
(e) Restrictions on Selling of Plan Shares. Plan Share Awards may
not be sold, assigned, pledged or otherwise disposed of prior to the time that
they are earned and distributed pursuant to the terms of this Plan. Following
distribution, the Committee may
6
<PAGE>
require the Recipient or his Beneficiary, as the case may be, to agree not to
sell or otherwise dispose of his distributed Plan Shares except in accordance
with all then applicable federal and state securities laws, and the Committee
may cause a legend to be placed on the stock certificate(s) representing the
distributed Plan Shares in order to restrict the transfer of the distributed
Plan Shares for such period of time or under such circumstances as the
Committee, upon the advice of counsel, may deem appropriate.
7.04 Voting of Plan Shares. After a Plan Share Award has been made, the
Recipient shall be entitled to direct the Trustees as to the voting of the Plan
Shares which are covered by the Plan Share Award and which have not yet been
earned and distributed to him pursuant to Section 7.03, subject to rules and
procedures adopted by the Committee for this purpose. If the Recipient does not
direct the Trustees as to the voting of Plan Shares which have not yet been
earned and distributed pursuant to Section 7.03, such shares shall not be voted
by the Trustees. In the event a tender offer is made for Plan Shares, the
Trustees shall tender Plan Shares held by the Plan which have not yet been
earned and distributed in accordance with instructions from the Recipient.
ARTICLE VIII
TRUST
8.01 Trust. The Trustees shall receive, hold, administer, invest and
make distributions and disbursements from the Trust in accordance with the
provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Committee pursuant to
the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust
that the Trustees shall have complete authority and discretion with respect
to the arrangement, control and investment of the Trust, and that the
Trustees shall invest all assets of the Trust in Common Stock to the fullest
extent practicable, except (i) to the extent that the Trustees determine that
the holding of monies in cash or cash equivalents is necessary to meet the
obligations of the Trust and (ii) contributions to the Trust by the
Association may be temporarily invested in such interest-bearing account or
accounts as the Trustees shall determine to be appropriate. In performing
their duties, the Trustees shall have the power to do all things and execute
such instruments as may be deemed necessary or proper, including the
following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets
in Common Stock without regard to any law now or hereafter in force limiting
investments for trustees or other fiduciaries. The investment authorized herein
may constitute the only investment of the Trust, and in making such investment,
the Trustees are authorized to purchase Common Stock from the Association or
from any other source, and such Common Stock so purchased may be outstanding,
newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above, in such deposit accounts, and certificates of deposit,
obligations of the United States
7
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Government or its agencies or such other investments as shall be considered
the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any
time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in
the name of a nominee, without the addition of words indicating that such
security is an asset of the Trust (but accurate records shall be maintained
showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in the
opinion of the Trustees be reasonable for the proper operation of the Plan and
Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services or
representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his Beneficiary as a consequence of a dispute as
to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustees
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of a court for the exercise of any power
herein contained, or to give any bond.
8.03 Records and Accounts. The Trustees shall maintain accurate and
detailed records and accounts of all transactions of the Trust, which shall be
available at all reasonable times for inspection by any legally entitled person
or entity to the extent required by applicable law, or any other person
determined by the Committee.
8.04 Expenses. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Association.
8.05 Indemnification. Subject to the requirements of applicable laws
and regulations, the Association shall indemnify, defend and hold the Trustees
harmless against all claims, expenses and liabilities arising out of or related
to the exercise of the Trustees' powers and the discharge of their duties
hereunder, unless the same shall be due to their gross negligence or willful
misconduct.
8
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ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan
Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the Offering resulting from any split,
subdivision or consolidation of shares or other capital adjustment, or other
increase or decrease in such shares effected without receipt or payment of
consideration by the Association.
9.02 Amendment and Termination of Plan. The Board may, by resolution,
at any time amend or terminate the Plan, subject to any required stockholder
approval or any stockholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any statutory
or regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The Board may not, without the
consent of the holder of a Plan Share Award, alter or impair any Plan Share
Award previously granted under this Plan as specifically authorized herein.
Termination of this Plan shall not affect Plan Share Awards previously granted,
and such Plan Share Awards shall remain valid and in effect until they (a) have
been fully earned, (b) are surrendered, or (c) expire or are forfeited in
accordance with their terms.
9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall
not be transferable by a Recipient, and during the lifetime of the Recipient,
Plan Shares may only be earned by and paid to a Recipient who was notified in
writing of an Award by the Committee pursuant to Section 6.02. No Recipient or
Beneficiary shall have any right in or claim to any assets of the Plan or Trust,
nor shall the Association or any Subsidiary be subject to any claim for benefits
hereunder.
9.04 Employment Rights. Neither the Plan nor any grant of a Plan Share
Award or Plan Shares hereunder nor any action taken by the Trustees, the
Committee or the Board in connection with the Plan shall create any right on the
part of any Employee to continue in the employ of the Association or any
Subsidiary.
9.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award, except as expressly provided in Sections 7.02 and
7.04 above, prior to the time said Plan Shares are actually earned and
distributed to him.
9.06 Governing Law. To the extent not governed by federal law, the Plan
and Trust shall be governed by the laws of the State of Louisiana.
9
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9.07 Effective Date. This Plan shall be effective as of the Effective
Date, and Awards may be granted hereunder as of or after the Effective Date and
as long as the Plan remains in effect.
9.08 Term of Plan. This Plan shall remain in effect until the earlier
of (1) ten (10) years from the Effective Date, (2) termination by the Board, or
(3) the distribution to Recipients and Beneficiaries of all assets of the Trust.
9.09 Tax Status of Trust. It is intended that the trust established
hereby be treated as a Grantor Trust of the Association under the provisions of
Section 671 et seq. of the Code, as the same may be amended from time to time.
10
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IN WITNESS WHEREOF, the Association has caused this Agreement to be
executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, and the initial Trustees of the Trust established pursuant
hereto have duly and validly executed this Agreement, all on this __ day of
February 1996.
PONCHATOULA HOMESTEAD SAVINGS, F.A.
Attest: \s\Barbara B. Theriot By: \s\Lawrence C. Caldwell, Jr.
---------------------- ---------------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive
Officer
TRUSTEES:
\s\John C. Bohning
------------------------------
John C. Bohning
\s\Harry J. Gabriel, Jr.
------------------------------
Harry J. Gabriel, Jr.
\s\Paul C. Granier
------------------------------
Paul C. Granier
\s\Allen B. Pierson, Jr.
------------------------------
Allen B. Pierson, Jr.
\s\Milton J. Schanzbach
------------------------------
Milton J. Schanzbach
\s\Henry S. Yawn
------------------------------
Henry S. Yawn
11
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EXHIBIT 23.1
<PAGE>
[Hannis T. Bourgeois, L.L.P. Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated January 13, 1998, except as to Note 21, which is as of February 25, 1998
on the financial statements of Ponchatoula Homestead Savings, F.A. as of
December 31, 1997 and 1996 and for the years ended December 31, 1997, 1996 and
1995 included in the Form SB-2 filed on April 2, 1998.
Very truly yours,
/s/ HANNIS T. BOURGEOIS, L.L.P.
---------------------------------------
HANNIS T. BOURGEOIS, L.L.P.
April 1, 1998
<PAGE>
EXHIBIT 23.2
<PAGE>
[RP FINANCIAL LC. LETTERHEAD]
April 1, 1998
Board of Directors
Homestead Mutual Holding Company
Ponchatoula Homestead Savings, F.A.
195 North Sixth Street
Ponchatoula, Louisiana 70454
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of Homestead Mutual Holding Company, the mutual holding company for
Ponchatoula Homestead Savings, F.A., Ponchatoula, Louisiana and any amendments
thereto, in the Form S-1 Registration Statement and any amendments thereto and
in the Form H(e)1-s for Homestead 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 Homestead Bancorp, Inc.
Sincerely,
RP FINANCIAL, LC.
/s/ Gregory E. Dunn
---------------------------------------
Gregory E. Dunn
Senior Vice President
<PAGE>
EXHIBIT 99.1
PONCHATOULA HOMESTEAD SAVINGS, F.A.
195 North Sixth Street
Ponchatoula, Louisiana 70454
NOTICE OF SPECIAL MEETING
To Be Held on_______ __, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Ponchatoula Homestead Savings, F.A. ("Ponchatoula" or the "Association") will be
held at the main office of Ponchatoula located at 195 North Sixth Street,
Ponchatoula, Louisiana, on ________ __, 1998, at __:__ _.m., for the following
purposes, as more completely set forth in the accompanying proxy statement:
(1) To approve and adopt the Plan of Conversion and Agreement and Plan
of Reorganization dated February 25, 1998 (the "Plan" or "Plan of Conversion"),
pursuant to which (i) Homestead Mutual Holding Company (the "Mutual Holding
Company"), which currently owns approximately 76.06% of Ponchatoula, will
convert from mutual to stock form and simultaneously merge into Ponchatoula,
with Ponchatoula being the surviving entity; (ii) Ponchatoula will then merge
into an interim institution ("Interim") to be formed as a wholly owned
subsidiary of Homestead Bancorp, Inc., a Louisiana corporation recently formed
as a wholly owned subsidiary of Ponchatoula (the "Company"), with Ponchatoula
being the surviving entity and becoming a wholly owned subsidiary of the
Company; (iii) the outstanding shares of Ponchatoula common stock (other than
those held by the Mutual Holding Company, which will be cancelled) will be
converted into shares of common stock of the Company pursuant to a ratio that
will result in the holders of such shares owning in the aggregate the same
percentage of the Company as they currently own of Ponchatoula (as adjusted for
waived dividends), before giving effect to such stockholders purchasing
additional shares, receiving cash in lieu of fractional shares or exercising
dissenters' rights (collectively, the "Reorganization"); and (iv) Ponchatoula's
charter will be amended to include a liquidation account. In addition, the
Company is offering for sale up to 1,285,170 shares of its common stock by means
of the accompanying Prospectus, and the sale of such stock and the
Reorganization are referred to herein as the "Conversion."
(2) To transact such other business as may properly come before the
meeting. Except with respect to procedural matters incident to the conduct of
the meeting, management of Ponchatoula is not aware of any matters other than
those set forth above which may properly come before the meeting.
Stockholders of Ponchatoula have the right, pursuant to 12 C.F.R.
Section 522.14, to dissent from the Conversion and to exercise appraisal rights
for their shares of Ponchatoula common stock upon strict compliance with the
terms and conditions of 12 C.F.R. Section 552.14, a copy of which is attached
hereto as Appendix A. Failure to comply strictly with the requirements of 12
C.F.R. Section 552.14 will result in the loss of appraisal rights.
Stockholders of record of Ponchatoula at the close of business on ____
__, 1998 are entitled to notice of and to vote at the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Barbara B. Theriot, Secretary
Ponchatoula, Louisiana
May __, 1998
YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE>
PONCHATOULA HOMESTEAD SAVINGS, F.A.
------------------------------------------------
PROXY STATEMENT
------------------------------------
SPECIAL MEETING OF STOCKHOLDERS
____________, 1998
This Proxy Statement is furnished to the holders of the common stock,
par value $.10 per share ("Ponchatoula Common Stock"), of Ponchatoula Homestead
Savings, F.A. ("Ponchatoula" or the "Association") in connection with the
solicitation of proxies on behalf of the Board of Directors, to be used at the
Special Meeting of Stockholders ("Special Meeting") to be held at the main
office of Ponchatoula located at 195 North Sixth Street, Ponchatoula, Louisiana,
on _______ _, 1998, at __:__ _m., Central Time, and at any adjournment thereof
for the purposes set forth in the Notice of Special Meeting. This Proxy
Statement is expected to be mailed to stockholders on or about ____ _, 1998.
Each proxy solicited hereby, if properly signed and returned to
Association and not revoked prior to its use, will be voted in accordance with
the instructions contained therein. If no contrary instructions are given, each
proxy received will be voted in favor of the Plan of Conversion and Agreement
and Plan of Reorganization dated February 25, 1998 (the "Plan" or "Plan of
Conversion") and, upon the transaction of such other business as may properly
come before the meeting, in accordance with the best judgment of the persons
appointed as proxies.
Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Association
written notice thereof (Barbara B. Theriot, Secretary, Ponchatoula Homestead
Savings, F.A., 195 North Sixth Street, Ponchatoula, Louisiana 70454), (ii)
submitting a duly executed proxy bearing a later date, or (iii) appearing at the
Special Meeting and giving the Secretary notice of his or her intention to vote
in person. Proxies solicited hereby may be exercised only at the Special Meeting
and any adjournment thereof and will not be used for any other meeting.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP THEREOF
Only stockholders of record at the close of business on ____ __, 1998
("Voting Record Date") are entitled to notice of and to vote at the Special
Meeting. On the Voting Record Date, there were 606,345 shares of Ponchatoula
Common Stock outstanding, and the Association had no other class of equity
securities outstanding. Each share of Ponchatoula Common Stock is entitled to
one vote at the Special Meeting on all matters properly presented at the Special
Meeting.
A majority of the outstanding Ponchatoula Common Stock, represented in
person or by proxy, shall constitute a quorum at the Special Meeting. Shares as
to which the "ABSTAIN" box has been marked on the proxy and any shares held by
brokers in street name for customers which are not voted in the absence of
instructions from the customers ("broker non-votes") will be counted as present
for determining if a quorum is present. Because adoption of the Plan of
Conversion must be approved by the holders of at least two-thirds of the
outstanding Ponchatoula Common Stock, abstentions and broker non-votes will have
the same effect as a vote against such proposal. The Plan also conditions
consummation of the Conversion on the approval of the Plan by at least a
majority of the votes cast, in person or by proxy, at the Special Meeting by the
holders of Ponchatoula Common Stock excluding the Mutual Holding Company (the
"Public Stockholders"). Abstentions and broker non-votes will have no effect on
the required vote of the Public Stockholders.
2
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INCORPORATION OF INFORMATION BY REFERENCE
The Prospectus of Homestead Bancorp, Inc. (the "Company") is
incorporated herein by reference. The Prospectus sets forth a description of the
Plan of Conversion and the related offering of common stock by the Company under
the caption "The Conversion." Such caption also describes the effects of the
Conversion on the stockholders of the Association and the members of the Mutual
Holding Company, including the tax consequences of the Conversion and the
establishment of a liquidation account for the benefit of certain depositors of
the Association. Upon consummation of the Conversion, the charter of the
Association will be amended to delete current Section 9, which establishes a
priority for deposit account holders as creditors in certain situations. A new
Section 9 will be added to the charter to provide for a liquidation account.
These amendments are being adopted to comply with applicable regulations of the
OTS. See Appendix A attached hereto.
Information regarding the Company, the Association and the Mutual
Holding Company are set forth in the Prospectus under the captions "Summary -
Homestead Bancorp, Inc.," "- Ponchatoula Homestead Savings, F.A." and " -
Homestead Mutual Holding Company." The Prospectus also describes the business
and financial condition of the Association under the captions "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the historical financial statements of the Association are
included in the Prospectus. Information regarding the use of proceeds of the
offerings conducted in connection with the Conversion, the historical
capitalization of the Association and the pro forma capitalization of the
Company, and other pro forma data are set forth in the Prospectus under the
captions "Use of Proceeds," "Capitalization" and "Pro Forma Data," respectively.
The Prospectus sets forth certain information as to the Ponchatoula
Common Stock beneficially owned by (i) the only persons or entities who or which
were known to the Association to be the beneficial owner of more than 5% of the
issued and outstanding Ponchatoula Common Stock, (ii) the directors of the
Association, and (iii) all directors and executive officers of the Association
as a group. See "Management - Beneficial Ownership of Ponchatoula Common Stock"
in the Prospectus.
Dissenters' Rights of Appraisal
Record holders of Ponchatoula Common Stock are entitled to appraisal
rights under Section 552.14 of the OTS regulations as a result of the merger of
the Mutual Holding Company with and into the Association and the merger of the
Association with and into Interim, with the Association to be the surviving
entity in both mergers (the "Mergers"). Any person having a beneficial interest
in shares of Ponchatoula Common Stock held of record in the name of another
person, such as a broker or nominee, and who wishes to exercise dissenters'
rights must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect whatever appraisal
rights the beneficial owner may have.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under Section 552.14 and is qualified in its
entirety by the full text of Section 552.14, which is reprinted as Appendix A to
this Proxy Statement.
Under Section 552.14, where a merger is to be submitted for approval at
a meeting of stockholders, as in the case of the Special Meeting, not less than
20 days prior to the meeting, the institution must notify each of the holders of
its stock for which appraisal rights are available that such appraisal rights
are available and include in each such notice a copy of Section 552.14. This
Proxy Statement shall constitute such notice to the record holders of the
Ponchatoula Common Stock. Any such stockholder who wishes to exercise such
appraisal rights should review carefully the following discussion and Appendix A
to this Proxy Statement because failure to timely and properly comply with the
procedures specified will result in the loss of appraisal rights under Section
552.14.
A holder of shares of Ponchatoula Common Stock wishing to exercise
his appraisal rights must deliver to the Secretary of Ponchatoula, before the
vote on the Plan of Conversion at the Special Meeting, a writing which
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identifies such stockholder and which states his intention to demand appraisal
of and payment for his shares of Ponchatoula Common Stock. Such demand must be
in addition to and separate from any proxy or vote against the Plan of
Conversion. A vote against the Plan of Conversion does not, by itself,
constitute a demand for appraisal rights. Also, voting for the approval and
adoption of the Plan of Conversion will result in the loss of appraisal rights
with respect to such shares. In addition, a holder of shares of Ponchatoula
Common Stock wishing to exercise his appraisal rights must hold of record such
shares on the date the written demand for appraisal is made and must hold such
shares continuously through the Effective Date.
Only a holder of record of shares of Ponchatoula Common Stock is
entitled to assert appraisal rights for the shares of Ponchatoula Common Stock
registered in that holder's name. A demand for appraisal should be executed by
or on behalf of the holder of record fully and correctly, as his name appears on
his stock certificates. If the shares of Ponchatoula Common Stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the shares of
Ponchatoula Common Stock are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is agent for such
owner or owners. A record holder such as a broker who holds shares of
Ponchatoula Common Stock as nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of Ponchatoula Common Stock held for
one or more beneficial owners while not exercising such rights with respect to
the shares of Ponchatoula Common Stock held for other beneficial owners; in such
case, the written demand should set forth the number of shares of Ponchatoula
Common Stock as to which appraisal is sought and where no number of shares of
Ponchatoula Common Stock is expressly mentioned the demand will be presumed to
cover all shares of Ponchatoula Common Stock held in the name of the record
owner. Stockholders who hold their shares of Ponchatoula Common Stock in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights must take all necessary steps in order that a demand for appraisal is
made by the record holder of such shares and are urged to consult with their
brokers to determine the appropriate procedures for the making of a demand for
appraisal by the record holder and for surrendering the certificates for such
shares to the Association for notation of appraisal rights as set forth below.
All written demands for appraisal should be sent or delivered to
Barbara B. Theriot, Secretary, Ponchatoula Homestead Savings, F.A., 195 North
Sixth Street, Ponchatoula, Louisiana 70454 so as to be received prior to the
vote of stockholders with respect to the Plan of Conversion.
Within ten days after the Effective Date of the Conversion, the
Association, as the resulting institution in the Mergers, must: (i) send a
written notice as to the Effective Date of the Conversion to each person who has
satisfied the appropriate provisions of Section 552.14 and who has not voted in
favor of the Plan of Conversion, (ii) make a written offer to each stockholder
to pay for dissenting shares at a specified price deemed by the Association to
be the fair value thereof, and (iii) inform each stockholder that within 60 days
of such date the stockholder must take certain actions set forth in such notice
(and summarized below). A written offer to dissenting stockholders, if any, will
be based on the circumstances existing on the Effective Date, and the
Association has not determined the price per share it would offer any dissenting
stockholders. If, within 60 days of the Effective Date, an agreement is reached
as to the fair value between the Association and a dissenting stockholder,
payment therefore shall be made within 90 days of the Effective Date.
If Ponchatoula and any holder of the Ponchatoula Common Stock who has
complied with the foregoing procedures and who is entitled to appraisal rights
under Section 552.14 have not agreed as to the fair value within 60 days of the
Effective Date, the stockholder may file a petition with the OTS, with a copy to
Ponchatoula by registered or certified mail demanding a determination of the
fair value of the stock of all dissenting stockholders. A stockholder who fails
to file such petition within 60 days of the Effective Date shall be deemed to
have accepted the Exchange Shares to which he is entitled. In addition, within
60 days of the Effective Date, each stockholder demanding appraisal and payment
under Section 552.14 must submit to Ponchatoula the certificates for notation
thereon that appraisal and payment has been demanded and that appraisal
proceedings are pending. The failure to
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submit certificates for notation will result in the loss of appraisal rights.
Ponchatoula is not under any obligation to file a petition with respect to the
appraisal of the fair value of the shares of Ponchatoula Common Stock.
Accordingly, it is the obligation of the stockholders to initiate all necessary
action to perfect their appraisal rights within the time prescribed in Section
552.14.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Director of the OTS will determine the holders of shares of
Ponchatoula Common Stock entitled to appraisal rights and will order an
appraisal of the "fair value" of the shares of Ponchatoula Common Stock,
exclusive of any element of value arising from the accomplishment or expectation
of the Conversion. Such appraisal may be conducted by appropriate staff of the
OTS or such independent appraiser as the Director shall determine. If the
appraisal is conducted by an independent appraiser, then the OTS staff will
review and provide an opinion as to the suitability of the methodology and the
adequacy of the analysis and supportive data. If the Director concurs in the
valuation, then payment of the appraised value of the shares will be directed
from the resulting institution (Ponchatoula) upon surrender of the certificates
representing the dissenting shares of Ponchatoula Common Stock, along with
interest from the Effective Date at a rate deemed equitable by the Director.
Holders of shares of Ponchatoula Common Stock considering seeking appraisal
should be aware that the fair value of their shares of Ponchatoula Common Stock
as determined under Section 552.14 could be more than, the same as, or less than
the value of the consideration they would receive pursuant to the Plan of
Conversion if they did not seek appraisal of their shares of Ponchatoula Common
Stock.
The costs of any appraisal proceeding may be apportioned and assessed
by the Director as he or she deems equitable against all or some of the parties.
In making the determination, the Director shall consider whether any of the
parties has acted arbitrarily, vexatiously, or not in good faith.
Any holder of shares of Ponchatoula Common Stock who has duly demanded
an appraisal in compliance with Section 552.14 will not, after the Effective
Date, be entitled to vote the shares of Ponchatoula Common Stock subject to such
demand for any purpose or be entitled to the payment of dividends or other
distributions on those shares (except dividends or other distributions payable
to, or a vote to be taken by, holders of record of shares of Ponchatoula Common
Stock as of a date prior to the Effective Date).
If any holder of Ponchatoula Common Stock who demands appraisal of his
shares under Section 552.14 fails to perfect, or effectively withdraws or loses
his right to appraisal as provided in Section 552.14, the shares of such
stockholder will be converted into Exchange Shares in accordance with the Plan
of Conversion. A holder may withdraw his demand for appraisal by delivering to
Ponchatoula a written withdrawal of his demand for appraisal and acceptance of
the Exchange Shares (any such written withdrawal should be directed to Barbara
B. Theriot, Secretary, Ponchatoula Homestead Savings, F.A., 195 North Sixth
Street, Ponchatoula, Louisiana 70454).
Failure to follow the steps required by Section 552.14 for perfecting
appraisal rights may result in the loss of such rights.
Comparison of Stockholder Rights
At the Effective Date, the Public Stockholders (except for any
Public Stockholder exercising dissenters' rights of appraisal) automatically
will become stockholders of the Company, and their rights as stockholders
will be determined by the Louisiana Business Corporation Law ("BCL") and by
the Company's Articles of Incorporation and Bylaws. The following is a
summary of material differences between the rights of holders of Company
Common Stock and the rights of holders of Ponchatoula Common Stock. These
differences arise from various provisions of the BCL and federal law,
including OTS regulations, the Articles of Incorporation and Bylaws of the
Company and the Charter and Bylaws of the Association.
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Limitation on Voting Rights
Article 10.A of the Company's Articles of Incorporation provides that
for a period of five years from the date of the Conversion, no person shall
directly or indirectly offer to acquire or acquire the beneficial ownership of
(i) more than 10% of the issued and outstanding shares of any class of an equity
security of the Company, or (ii) any securities convertible into, or exercisable
for, any equity securities of the Company if, assuming conversion or exercise by
such person of all securities of which such person is the beneficial owner which
are convertible into, or exercisable for, such equity securities (but of no
securities convertible into, or exercisable for, such equity securities of which
such person is not the beneficial owner), such person would be the beneficial
owner of more than 10% of any class of an equity security of the Company. The
term "person" is broadly defined to prevent circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view
toward public resale made exclusively to the Company by underwriters or a
selling group acting on its behalf, (ii) any tax-qualified employee benefit plan
or arrangement established by the Company or the Association and any trustee of
such a plan or arrangement, and (iii) any other offer or acquisition approved in
advance by the affirmative vote of two-thirds of the Company's entire Board of
Directors. In the event that shares are acquired in violation of Article 10.A,
all shares beneficially owned by any person in excess of 10% shall be considered
"Excess Shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to stockholders for a vote, and the Board of Directors may
cause such Excess Shares to be transferred to an independent trustee for sale on
the open market or otherwise, with the expenses of such trustee to be paid out
of the proceeds of sale. There are no similar provisions in the Association's
Charter or Bylaws.
Directors
Removal. Pursuant to the Company's Articles of Incorporation, directors
may be removed from office without cause by the affirmative vote of not less
than 75% of the total votes eligible to be cast by stockholders at a duly
constituted meeting of stockholders called expressly for such purpose and may be
removed from office with cause by an affirmative vote of not less than a
majority of the total votes eligible to be cast by stockholders. Cause for
removal shall exist only if the director whose removal is proposed has been
either declared of unsound mind by an order of a court of competent
jurisdiction, convicted of a felony or of an offense punishable by imprisonment
for a term of more than one year by a court of competent jurisdiction, or deemed
liable by a court of competent jurisdiction for gross negligence or misconduct
in the performance of such director's duties to the Company. At least 30 days
prior to such meeting of stockholders, written notice shall be sent to the
director whose removal will be considered at the meeting.
Under the Association's Bylaws, at a meeting of stockholders called
expressly for that purpose, any director may be removed for cause by the vote of
the holders of a majority of the shares then entitled to vote at an election of
directors.
Vacancies. Under Ponchatoula's Bylaws, any vacancies in the Board of
Directors of Ponchatoula may be filled by the affirmative vote of a majority of
the remaining directors although less than a quorum of the Board of Directors.
Persons elected by the directors of Ponchatoula to fill vacancies may only serve
until the next annual meeting of stockholders. However, under the Company's
Articles of Incorporation, any vacancy occurring in the Board of Directors of
the Company, including any vacancy created by reason of an increase in the
number of directors, may be filled by a majority vote of the remaining
directors, whether or not a quorum is present, or by a sole remaining director,
and any director so chosen shall hold office for the remainder of the term to
which the director has been elected and until his or her successor is elected
and qualified.
Nomination. Stockholders of both the Company and the Association are
required to submit to their respective companies, in writing and in advance, any
nomination of a candidate for election as a director.
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The Company's Articles of Incorporation provide that such nominations
generally must be submitted not later than 120 days prior to the anniversary
date of the initial mailing of proxy materials by the Company in connection with
the immediately preceding annual meeting of stockholders of the Company;
provided, however, that with respect to the first scheduled annual meeting
following the completion of the Conversion, notice by the stockholder must be
received no later than the close of business on Monday, January 4, 1999. Under
the Association's Bylaws, stockholder nominations must be received at least five
days prior to the date of the annual meeting.
Limited Liability. Article 8.A of the Company's Articles of
Incorporation provides that a director or officer of the Company will not be
personally liable for monetary damages for any action taken, or any failure to
take any action, as a director or officer except to the extent that by law a
director's or officer's liability for monetary damages may not be limited. This
provision does not eliminate or limit the liability of the Company's directors
and officers for (a) any breach of the director's or officer's duty of loyalty
to the Company or its stockholders, (b) any acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (c) any
unlawful dividend, stock repurchase or other distribution, payment or return of
assets to stockholders, or (d) any transaction from which the director or
officer derived an improper personal benefit. This provision may preclude
stockholder derivative actions and may be construed to preclude other
third-party claims against the directors and officers. There are no similar
provisions in the Association's Charter or Bylaws or federal law.
Indemnification. The Company's Articles of Incorporation also provide
that the Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, including actions by or in the right of the Company, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was a director, officer, employee or agent of the Company, or
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise. Such indemnification is furnished to the full extent provided by law
against expenses (including attorneys' fees), judgments, fines, amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding. The indemnification provisions also permit the Company to pay
reasonable expenses in advance of the final disposition of any action, suit or
proceeding as authorized by the Company's Board of Directors, provided that the
indemnified person undertakes to repay the Company if it is ultimately
determined that such person was not entitled to indemnification.
The rights of indemnification provided in the Company's Articles of
Incorporation are not exclusive of any other rights which may be available under
the Company's Bylaws, any insurance or other agreement, by vote of stockholders
or directors (regardless of whether directors authorizing such indemnification
are beneficiaries thereof) or otherwise. In addition, the Articles of
Incorporation authorize the Company to maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company,
whether or not the Company would have the power to provide indemnification to
such person. By action of the Board of Directors, the Company may create and
fund a trust fund or other fund or form of self-insurance arrangement of any
nature, and may enter into agreements with its officers, directors, employees
and agents for the purpose of securing or insuring in any manner its obligation
to indemnify or advance expenses provided for in the provisions in the Articles
of Incorporation and Bylaws regarding indemnification. These provisions are
designed to reduce, in appropriate cases, the risks incident to serving as a
director, officer, employee or agent and to enable the Company to attract and
retain the best personnel available.
Under Section 545.121 of the OTS regulations, the indemnification of
officers, directors and employees of an institution for actions taken in their
capacity as such is mandatory (provided that the OTS does not object) where such
officer, director or employee has been issued a final judgment on the merits in
his or her favor. In other cases, indemnification may be made only if a majority
of the disinterested members of the Board of Directors approve such
indemnification as provided in the regulation. Indemnification may be provided
only after the OTS has been provided with 60 days advance written notice and has
failed to object to indemnification within that period.
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Stockholders
Special Meetings. Special meetings of the Company's stockholders may be
called at any time by any of the following: (1) the President of the Company,
(2) the Board of Directors of the Company, or (3) stockholders who beneficially
own an aggregate of at least 50% of the shares entitled to vote generally in an
election of directors.
The Association's Bylaws provide that special meetings of the
stockholders, for any purpose or purposes, may be called at any time by the
Chairman of the Board, the President or a majority of the Board of Directors of
the Association and by written request of the holders of not less than 10% of
the issued and outstanding capital stock of the Association entitled to vote at
the meeting. Such written request must state the purpose or purposes of the
meeting and be delivered to the Association's home office addressed to the
Chairman of the Board, the President, or the Secretary of the Association.
Stockholder Proposals. Article 9.D of the Company's Articles of
Incorporation provides that for stockholder proposals to be included in the
Company's proxy materials, the stockholder must comply with all the timing and
informational requirements of Rule 14a-8 of the Exchange Act. With respect to
stockholder proposals to be considered at the annual meeting of stockholders but
not included in the Company's proxy materials, the stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 120 days prior to the anniversary date of the initial
mailing of proxy materials by the Company in connection with the immediately
preceding annual meeting; provided, however, that with respect to the first
scheduled annual meeting following completion of the Conversion, such written
notice must be received by the Company not later than the close of business on
Monday, January 4, 1999. The stockholder's notice shall set forth the
information required by Article 9.D.
Under the Association's Bylaws, stockholder proposals must be received
by the Association at least five days prior to the date of the annual meeting.
Amendment of Articles of Incorporation and Bylaws
Article 11 of the Company's Articles of Incorporation generally
provides that any amendment of the Articles of Incorporation must be first
approved by a majority of the Board of Directors and thereafter approved by the
holders of 75% of the shares of the Company entitled to vote generally in an
election of directors, voting together as a single class, as well as such
additional vote of the Preferred Stock as may be required by the provisions of
any series thereof. Any amendment to the Articles of Incorporation recommended
for adoption by at least two-thirds of the entire Board of Directors (including
any vacancies) shall, to the extent the BCL requires stockholder approval of
such amendment, require the affirmative vote of a majority of the voting shares
voting together as a single class, as well as such additional vote of the
Preferred Stock as may be required by the provisions of any series thereof. The
Bylaws of the Company may be amended by a majority of the Board of Directors or
by the affirmative vote of a majority of the total shares entitled to vote in an
election of directors, except that the affirmative vote of at least 75% of the
total shares entitled to vote in an election of directors shall be required to
amend, adopt, alter, change or repeal any provision inconsistent with certain
specified provisions of the Bylaws.
The Association's Charter provides that no amendment of the Charter
shall be made unless the amendment is proposed by the Board of Directors, then
preliminarily approved by the OTS and thereafter approved by a majority of the
total votes eligible to be cast at a legal meeting of stockholders. The
Association's Bylaws may be amended by a majority of the Board of Directors or
by a majority of the votes cast by the stockholders of the Association at any
legal meeting.
Louisiana BCL
The BCL provides that any person who acquires "control shares" will be
able to vote such shares only if the right to vote is approved by the
affirmative vote of at least a majority of both (1) all the votes entitled to be
cast
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by stockholders and (2) all the votes entitled to be cast by stockholders
excluding "interested shares". "Control shares" is defined to include shares
that would entitle the holder thereof, assuming the shares had full voting
rights, to exercise voting power within any of the following ranges: (a) 20% or
more but less than one-third of all voting power; (b) one-third or more but less
than a majority of all voting power; or (c) a majority or more of all voting
power. Any acquisition that would result in the ownership of control shares in a
higher range would require an additional vote of stockholders. "Interested
shares" includes control shares and any shares held by an officer or employee
director of the corporation. If the control shares are provided full voting
rights, all stockholders have dissenters' rights entitling them to receive the
"fair cash value" of their shares, which shall not be less than the highest
price paid per share to acquire the control shares.
The BCL defines a "Business Combination" generally to include (a) any
merger, consolidation or share exchange of the corporation with an "Interested
Shareholder" or affiliate thereof, (b) any sale, lease, transfer or other
disposition, other than in the ordinary course of business, of assets equal to
10% or more of the market value of the corporation's outstanding stock or of the
corporation's net worth to any Interested Shareholder or affiliate thereof in
any 12-month period, (c) the issuance or transfer by the corporation of equity
securities of the corporation with an aggregate market value of 5% or more of
the total market value of the corporation's outstanding stock to any Interested
Shareholder or affiliate thereof, except in certain circumstances, (d) the
adoption of any plan or proposal for the liquidation or dissolution of the
corporation in which anything other than cash will be received by an Interested
Shareholder or affiliate thereof, or (e) any reclassification of the
corporation's stock or merger which increases by 5% or more the ownership
interest of the Interested Shareholder or any affiliate thereof. "Interested
Shareholder" includes any person who beneficially owns, directly or indirectly,
10% or more of the corporation's outstanding voting stock, or any affiliate
thereof who had such beneficial ownership during the preceding two years,
excluding in each case the corporation, its subsidiaries and their benefit
plans.
Under the BCL, a Business Combination must be approved by any vote
otherwise required by law or the articles of incorporation, and by the
affirmative vote of at least each of the following: (1) 80% of the total
outstanding voting stock of the corporation; and (2) two-thirds of the
outstanding voting stock held by persons other than the Interested Shareholder.
However, the supermajority vote requirement shall not be applicable if the
Business Combination meets certain minimum price requirements and other
procedural safeguards, or if the transaction is approved by the Board of
Directors prior to the time that the Interested Shareholder first became an
Interested Shareholder.
The BCL authorizes the board of directors of Louisiana business
corporations to create and issue (whether or not in connection with the issuance
of any of its shares or other securities) rights and options granting to the
holders thereof (1) the right to convert shares or obligations into shares of
any class, or (2) the right or option to purchase shares of any class, in each
case upon such terms and conditions as the Company may deem expedient.
There are no similar provisions in the Association's Charter or Bylaws
or in the OTS regulations.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials for the next annual meeting of stockholders, which is expected to be
held in April 1999, must be received at the main office of the Association, 195
North Sixth Street, Ponchatoula, Louisiana 70454, no later than November 13,
1998. If such proposal is in compliance with all of the requirements of Rule
14a-8 of the Exchange Act, it will be included in the Proxy Statement and set
forth on the form of proxy issued for the next annual meeting of stockholders.
It is urged that any such proposals be sent by certified mail, return receipt
requested.
OTHER MATTERS
Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Association, to vote the proxy with respect to the
approval of the minutes of the last meeting of stockholders, matters
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incident to the conduct of the meeting, and upon such other matters as may
properly come before the Special Meeting. Management is not aware of any
business that may properly come before the Special Meeting other than those
matters described above in this Proxy Statement. However, if any other matters
should properly come before the Special Meeting, it is intended that the proxies
solicited hereby will be voted with respect to those other matters in accordance
with the judgment of the persons voting the proxies.
The cost of solicitation of the proxies will be borne by the
Association. In addition to solicitations by mail, the directors and officers of
the Association may solicit proxies personally or by telephone without
additional compensation. The Association will reimburse brokerage firms and
other custodians, nominees and fiduciaries for reasonable expenses incurred by
them in sending the Association's proxy materials to the beneficial owners of
the Ponchatoula Common Stock.
YOUR VOTE IS IMPORTANT! WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY
CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Barbara B. Theriot, Secretary
May __, 1998
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APPENDIX A
SECTION 552.14 OF THE OTS REGULATIONS RELATING TO
DISSENTERS' RIGHTS OF APPRAISAL
Section.552.14 Dissenter and appraisal rights.
(a) Right to demand payment of fair or appraised value. Except as
provided in paragraph (b) of this section, any stockholder of a Federal stock
association combining in accordance with Section.552.13 of this part shall have
the right to demand payment of the fair or appraised value of his stock:
Provided, That such stockholder has not voted in favor of the combination and
complies with the provisions of paragraph (c) of this section.
(b) Exceptions. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this section to
demand payment of the stock's fair or appraised value, if such stock was listed
on a national securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the
meeting at which the combination was acted upon or stockholder action is not
required for a combination made pursuant to Section.552.13(h)(2) of this part.
"Qualified consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will be listed on a
national securities exchange or quoted on NASDAQ or any combination of such
shares of stock and cash.
(c) Procedure.
(1) NOTICE. Each constituent Federal stock association shall
notify all stockholders entitled to rights under this section, not less than
twenty days prior to the meeting at which the combination agreement is to be
submitted for stockholder approval, of the right to demand payment of appraised
value of shares, and shall include in such notice a copy of this section. Such
written notice shall be mailed to stockholders of record and may be part of the
management's proxy solicitation for such meeting.
(2) DEMAND FOR APPRAISAL AND PAYMENT. Each stockholder electing
to make a demand under this section shall deliver to the Federal stock
association, before voting on the combination, a writing identifying himself or
herself and stating his or her intention thereby to demand appraisal of and
payment for his or her shares. Such demand must be in addition to and separate
from any proxy or vote against the combination by the stockholder.
(3) NOTIFICATION OF EFFECTIVE DATE AND WRITTEN OFFER. Within
ten days after the effective date of the combination, the resulting association
shall:
(i) Give written notice by mail to stockholders of
constituent Federal Stock associations who have
complied with the provisions of paragraph (c)(2) of
this section and have not voted in favor of the
combination, of the effective date of the combination;
(ii) Make a written offer to each stockholder to pay
for dissenting shares at a specified price deemed by
the resulting association to be the fair value
thereof; and
(iii) Inform them that, within sixty days of such
date, the respective requirements of paragraphs (c)(5)
and (6) of this section (set out in the notice) must
be satisfied.
The notice and offer shall be accompanied by a balance sheet and
statement of income of the association the shares of which the dissenting
stockholder holds, for a fiscal year ending not more than sixteen months before
the date of notice and offer, together with the latest available interim
financial statements.
(4) ACCEPTANCE OF OFFER. If within sixty days of the effective
date of the combination the fair value is agreed upon between the resulting
association and any stockholder who has complied with the
A-1
<PAGE>
provisions of paragraph (c)(2) of this section, payment therefor shall be
made within ninety days of the effective date of the combination.
(5) PETITION TO BE FILED IF OFFER NOT ACCEPTED. If within sixty
days of the effective date of the combination the resulting association and any
stockholder who has complied with the provisions of paragraph (c)(2) of this
section do not agree as to the fair value, then any such stockholder may file a
petition with the Office, with a copy by registered or certified mail to the
resulting association, demanding a determination of the fair market value of the
stock of all such stockholders. A stockholder entitled to file a petition under
this section who fails to file such petition within sixty days of the effective
date of the combination shall be deemed to have accepted the terms offered under
the combination.
(6) STOCK CERTIFICATES TO BE NOTED. Within sixty days of the
effective date of the combination, each stockholder demanding appraisal and
payment under this section shall submit to the transfer agent his certificates
of stock for notation thereon that an appraisal and payment have been demanded
with respect to such stock and that appraisal proceedings are pending. Any
stockholder who fails to submit his stock certificates for such notation shall
no longer be entitled to appraisal rights under this section and shall be deemed
to have accepted the terms offered under the combination.
(7) WITHDRAWAL OF DEMAND. Notwithstanding the foregoing, at any
time within sixty days after the effective date of the combination, any
stockholder shall have the right to withdraw his or her demand for appraisal and
to accept the terms offered upon the combination.
(8) VALUATION AND PAYMENT. The Director shall, as he or she may
elect, either appoint one or more independent persons or direct appropriate
Staff of the Office to appraise the shares to determine their fair market value,
as of the effective date of the combination, exclusive of any element of value
arising from the accomplishment or expectation of the combination. Appropriate
staff of the Office shall review and provide an opinion on appraisals prepared
by independent persons as to the suitability of the appraisal methodology and
the adequacy of the analysis and supportive data. The Director after
consideration of the appraisal report and the advice of the appropriate staff
shall, if he or she concurs in the valuation of the shares, direct payment by
the resulting association of the appraised fair market value of the shares, upon
surrender of the certificates representing such stock. Payment shall be made,
together with interest from the effective date of the combination, at a rate
deemed equitable by the Director.
(9) COSTS AND EXPENSES. The costs and expenses of any
proceeding under this section may be apportioned and assessed by the Director as
he or she may deem equitable against all or some of the parties. In making this
determination the Director shall consider whether any party has acted
arbitrarily, vexatiously, or not in good faith in respect to the rights provided
by this section.
(10) VOTING AND DISTRIBUTION. Any stockholder who has demanded
appraisal rights as provided in paragraph (c)(2) of this section shall
thereafter neither be entitled to vote such stock for any purpose nor be
entitled to the payment of dividends or other distributions on the stock (except
dividends or other distribution payable to, or a vote to be taken by
stockholders of record at a date which is on or prior to, the effective date of
the combination): Provided, That if any stockholder becomes unentitled to
appraisal and payment of appraised value with respect to such stock and accepts
or is deemed to have accepted the terms offered upon the combination, such
stockholder shall thereupon be entitled to vote and receive the distribution
described above.
(11) STATUS. Shares of the resulting association into which
shares of the stockholders demanding appraisal rights would have been converted
or exchanged, had they assented to the combination, shall have the status of
authorized and unissued shares of the resulting association.
A-2
<PAGE>
APPENDIX B
PROPOSED AMENDMENTS TO THE CHARTER OF
PONCHATOULA HOMESTEAD SAVINGS, F.A.
The following section will be added as new Section 9 of the Charter,
replacing the existing Section 9:
[Section 9. Liquidation Account. Pursuant to the requirements of 12
C.F.R. Subchapter D, the Association shall establish and maintain a liquidation
account for the benefit of its savings account holders who had an account
balance of at least $50.00 as of the close of business on either December 31,
1996 or March 31, 1998 ("eligible depositors"). In the event of a complete
liquidation of the Association, it shall comply with such Rules and Regulations
with respect to the amount and the priorities on liquidation of each of the
Association's eligible depositor's inchoate interest in the liquidation account,
to the extent it is still in existence. An eligible depositor's inchoate
interest in the liquidation account shall not entitle such eligible depositor to
any voting rights at meetings of the Association's stockholders.]
B-1
<PAGE>
PONCHATOULA HOMESTEAD SAVINGS, F.A. REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PONCHATOULA
HOMESTEAD SAVINGS, F.A. ("ASSOCIATION") FOR USE ONLY AT A SPECIAL MEETING
OF STOCKHOLDERS TO BE HELD ON ________ __, 1998 AND ANY ADJOURNMENT
THEREOF.
The undersigned, being a stockholder of the Association as of
__________ __, 1998, hereby authorizes the Board of Directors of the
Association, or any of their successors, as proxies, with full powers of
substitution, to represent the undersigned at the Special Meeting of
Stockholders to be held at the Association's principal executive offices
located at 195 North Sixth Street, Ponchatoula, Louisiana, on _______ __,
1998, at __:__ _.m., Central Time, and at any adjournment of said meeting,
and thereat to act with respect to all votes that the undersigned would be
entitled to cast, if then personally present, as follows:
(1) To approve and adopt a Plan of Conversion of Homestead Mutual
Holding Company (the "Mutual Holding Company") and Agreement and Plan of
Reorganization between Homestead Bancorp, Inc. (the "Company") and the
Association (the "Plan of Conversion"), pursuant to which (i) the Mutual
Holding Company, which currently owns approximately 75.2% of the
outstanding shares of common stock of the Association, will convert from
mutual form to a federal interim stock savings institution and
simultaneously merge into the Association, with the Association being the
surviving entity; (ii) an interim institution ("Interim") to be formed as a
first-tier wholly-owned subsidiary of the Company, a Louisiana corporation
recently formed as a first-tier wholly-owned subsidiary of the Association,
will merge into the Association, with the Association being the surviving
entity and becoming a wholly-owned subsidiary of the Company; (iii) the
outstanding shares of Association common stock (other than those held by
the Mutual Holding Company, which will be cancelled) will be converted into
shares of common stock of the Company pursuant to an exchange ratio as
described in the Proxy Statement; (iv) the Company will sell additional
shares of its common stock pursuant to the Plan of Conversion; and (v) in
connection therewith the Association's charter will be amended as set forth
in Appendix A to the Proxy Statement.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote with respect
to approval of the minutes of the last meeting of stockholders, matters
incident to the conduct of the meeting, and upon such other matters as may
properly come before the meeting.
This proxy may be revoked at any time before it is exercised. Shares
of common stock of the Association will be voted as specified. If no
specification is made herein, shares will be voted FOR Proposal 1.
<PAGE>
(Continued and to be signed on other side)
The undersigned hereby acknowledges receipt of a Notice of Special
Meeting of the Stockholders of Ponchatoula Homestead Savings, F.A. called
for _________ __, 1998 and a Proxy Statement for the Special Meeting prior
to the signing of this proxy.
Dated: , 1998
-----------------------
-----------------------------------
-----------------------------------
Signature(s)
Please sign exactly as your name(s)
appear(s) on this proxy. Only one
signature is required in the case of
a joint account. When signing in a
representative capacity, please give
title.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE.
<PAGE>
EXHIBIT 99.2
HOMESTEAD MUTUAL HOLDING COMPANY
195 North Sixth Street
Ponchatoula, Louisiana 70454
(504) 386-3379
NOTICE OF SPECIAL MEETING OF MEMBERS
To Be Held on ______ __, 1998
NOTICE IS HEREBY GIVEN that a special meeting ("Special Meeting") of
the members of Homestead Mutual Holding Company (the "Mutual Holding Company")
will be held at the main office of the Mutual Holding Company located at
Homestead Mutual Holding Company, 195 North Sixth Street, Ponchatoula, Louisiana
70454 on ________ __, 1998 at ____ _.m., Central Time, to consider and vote
upon:
1. The approval of the Plan of Conversion of the Mutual Holding Company
and Agreement and Plan of Reorganization between Homestead Bancorp, Inc. (the
"Company") and Ponchatoula Homestead Savings, F.A. ("Ponchatoula" or the
"Association"), pursuant to which the Association organized the Company and,
upon consummation of the following transactions, will become a wholly-owned
subsidiary of the Company: (1) the Mutual Holding Company, which currently holds
76.06% of the outstanding shares of common stock of the Association, will
convert from mutual form to a federal interim stock savings institution and
simultaneously merge into the Association, with the Association being the
surviving entity; (2) the Association will then merge with an interim
institution to be formed as a wholly-owned subsidiary of the Company, with the
Association being the surviving entity; (3) the outstanding shares of
Association common stock (other than those held by the Mutual Holding Company,
which will be cancelled) will be converted into shares of the Company's common
stock pursuant to a ratio that will result in the holders of such shares owning
in the aggregate approximately the same percentage of the Company as they
currently own of the Association (as adjusted for waived dividends), before
giving effect to such stockholders purchasing additional shares in a concurrent
stock offering by the Company, receiving cash in lieu of fractional shares or
exercising dissenters' rights; and (4) the offer and sale of shares of the
Company's common stock; and
2. Such other business as may properly come before the Special Meeting
or any adjournment thereof. Except with respect to procedural matters incident
to the conduct of the meeting, management is not aware of any other such
business.
The Board of Directors has fixed ________ _, 1998 as the voting record
date for the determination of members entitled to notice of and to vote at the
Special Meeting and at any adjournment thereof. Only those members of the Mutual
Holding Company 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.
By Order of the Board of Directors
Barbara B. Theriot
Secretary
Ponchatoula, Louisiana
May __, 1998
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU SIGN, DATE AND MARK THE ENCLOSED
PROXY CARD FOR ADOPTION OF THE PLAN AND RETURN IT PROMPTLY IN THE ENCLOSED
SELF-ADDRESSED STAMPED ENVELOPE. RETURNING PROXY CARDS WILL NOT PREVENT YOU FROM
VOTING IN PERSON IF YOU ATTEND THE SPECIAL MEETING. YOUR VOTE IS IMPORTANT. NOT
VOTING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PLAN. VOTING ON THE PLAN
DOES NOT REQUIRE YOU TO PURCHASE STOCK IN THE OFFERINGS.
IF YOU WOULD LIKE A MORE DETAILED DESCRIPTION OF THE PROPOSED TRANSACTION
OR IF YOU ARE INTERESTED IN PURCHASING THE COMPANY'S COMMON STOCK, YOU MAY
OBTAIN A COPY OF THE PROSPECTUS AND AN ORDER FORM BY RETURNING THE ENCLOSED
REQUEST CARD IN THE POSTAGE-PAID ENVELOPE.
<PAGE>
HOMESTEAD MUTUAL HOLDING COMPANY
PROXY STATEMENT
SPECIAL MEETING OF MEMBERS
To Be Held On _____ __, 1998
INTRODUCTION
This Proxy Statement is being furnished to you in connection with the
solicitation by the Board of Directors of Homestead Mutual Holding Company (the
"Mutual Holding Company") of proxies to be voted at the Special Meeting of
Members of the Mutual Holding Company (the "Special Meeting") to be held on
________ __, 1998 at the main office of the Mutual Holding Company located at
195 North Sixth Street, Ponchatoula, Louisiana 70454 at _:00 _.m., Central Time,
and at any adjournments thereof. This Special Meeting is being held for the
purpose of considering and voting upon a Plan of Conversion of the Mutual
Holding Company and Agreement and Plan of Reorganization between Homestead
Bancorp, Inc. (the "Company") and Ponchatoula Homestead Savings, F.A.
("Ponchatoula" or the "Association") (the "Plan" or the "Plan of Conversion"),
pursuant to which the Association organized the Company and, upon consummation
of the following transactions, will become a wholly owned subsidiary of the
Company: (1) the Mutual Holding Company, which currently owns approximately
76.06% of the outstanding common stock of the Association (the "Ponchatoula
Common Stock"), will convert from mutual form to a federal interim stock savings
institution and simultaneously merge into the Association, with the Association
being the surviving entity; (2) the Association will then merge with an interim
institution ("Interim") to be formed as a wholly owned subsidiary of the
Company, with the Association being the surviving entity; (3) the outstanding
shares of Ponchatoula Common Stock (other than those held by the Mutual Holding
Company, which will be cancelled) (the "Public Ponchatoula Shares") will be
converted into shares of common stock of the Company (the "Exchange Shares")
pursuant to a ratio (the "Exchange Ratio") that will result in the holders of
such shares owning in the aggregate approximately the same percentage of the
Company as they owned of the Association (as adjusted for waived dividends),
before giving effect to such stockholders purchasing additional shares in a
concurrent stock offering by the Company, receiving cash in lieu of fractional
shares or exercising dissenters' rights; and (4) the offer and sale of shares of
the Company's common stock (the "Conversion Stock") pursuant to the Plan. The
offer and sale of the Conversion Stock and the reorganization are referred to
herein as the "Conversion."
Voting in favor of the Plan of Conversion will not obligate any person
to purchase Conversion Stock. Exchange Shares and shares of Conversion Stock are
being offered only by the Prospectus, which is available upon request, if not
included herein. See "How to Obtain Additional Information" and "Available
Information."
<PAGE>
2
VOTING RIGHTS AND VOTE REQUIRED FOR APPROVAL
Depositors of the Association are Members of the Mutual Holding Company
under its current Charter (the "Members"). All of the Members as of the close of
business on __________ __, 1998 (the "Voting Record Date") who continue to be
Members on the date of the Special Meeting or any adjournment thereof will be
entitled to vote on the Plan of Conversion. If there are not sufficient votes
for approval of the Plan at the time of the Special Meeting, the Special Meeting
may be adjourned to permit further solicitation of proxies.
At the Special Meeting, each depositor Member will be entitled to cast
one vote for every $100, or fraction thereof, of the total withdrawal value of
all of his accounts in the Association as of the Voting Record Date up to a
maximum of 25 votes. As of the Voting Record Date, the Association had
approximately _______ deposit accounts, the holders of which are entitled to
cast a total of approximately _________ votes at the Special Meeting.
Pursuant to Office of Thrift Supervision ("OTS") regulations,
consummation of the Conversion is conditioned upon the approval of the Plan by
the OTS, as well as (1) the approval of the holders of at least a majority of
the total number of votes eligible to be cast by the Members as of the close of
business on the Voting Record Date at the Special Meeting, and (2) the approval
of the holders of at least two-thirds of the shares of the outstanding
Ponchatoula Common Stock held by the Mutual Holding Company and the holders of
the Public Association Shares (the "Public Stockholders") (collectively, the
"Stockholders") as of the Voting Record Date at a Special Meeting of
Stockholders called for the purpose of considering the Plan (the "Stockholders'
Meeting.") In addition, the Mutual Holding Company, Ponchatoula and the Company
(the "Primary Parties") have conditioned the consummation of the Conversion on
the approval of the Plan by the holders of at least a majority of the votes
cast, in person or by proxy, by the Public Stockholders at the Stockholders'
Meeting. The Mutual Holding Company intends to vote its shares of Ponchatoula
Common Stock, which amount to 76.06% of the outstanding shares, in favor of the
Plan at the Stockholders' Meeting.
This Proxy Statement and related materials are first being mailed to
Members on or about May __, 1998
The affirmative vote of a majority of the total votes eligible to be
cast at the Special Meeting is required for approval of the Plan of Conversion.
<PAGE>
3
PROXIES
The Board of Directors of the Mutual Holding Company is soliciting the
proxy which accompanies this Proxy Statement for use at the Special Meeting.
Each proxy solicited hereby, if properly executed, duly returned before the
Special Meeting and not revoked prior to or at the Special Meeting, will be
voted at the Special Meeting in accordance with the Member's instructions
indicated thereon. If no contrary instructions are given on the proxy, the
proxy, if signed, will be voted in favor of the Plan of Conversion. If you do
not return a proxy or vote at the meeting, it will have the same effect as a
vote against the Plan of the Conversion. If any other matters properly come
before the Special Meeting, the persons named as proxies will vote upon such
matters according to their discretion. Except with respect to procedural matters
incident to the conduct of the meeting, no additional matters are expected to
come before the Special Meeting.
Any Member giving a proxy may revoke it at any time before it is voted
by delivering to the Secretary of the Mutual Holding Company either a written
revocation of the proxy or a duly executed proxy bearing a later date, or by
voting in person at the Special Meeting. Proxies are being solicited only for
use at the Special Meeting and any and all adjournments thereof and will not be
used for any other meeting.
Proxies may be solicited by officers, directors and employees of the
Mutual Holding Company personally, by telephone or further correspondence
without additional compensation.
Deposits held in a trust or other fiduciary capacity may be voted by the
trustee or other fiduciary to whom voting rights are delegated under the trust
instrument or other governing document or applicable law. In the case of
individual retirement accounts and Keogh trusts established at the Association,
the beneficiary may direct the trustee's vote on the Plan of Conversion by
returning a completed proxy card to the Mutual Holding Company. For retirement
accounts and Keogh trusts, if no proxy card is returned, the trustee will vote
in favor of approval of the Plan of Conversion on behalf of such beneficiary.
The Board of Directors urges you to mark, sign, date and return the
enclosed proxy card in the enclosed postage-paid envelope as soon as possible,
even if you do not intend to purchase Common Stock. This will ensure that your
vote will be counted.
HOMESTEAD MUTUAL HOLDING COMPANY
The Mutual Holding Company is a federally-chartered mutual holding
company which was chartered on August 31, 1994. The Mutual Holding Company's
primary asset is 456,240 shares of Ponchatoula Common Stock, which represent
76.06% of the shares of Ponchatoula Common Stock outstanding as of the date
hereof. The Mutual Holding Company's only other asset consists of a deposit
account in the amount of $101,675 as of December 31, 1997 (which will become an
asset of the Association upon consummation of the Conversion). As part of the
Conversion, the Mutual Holding Company will convert from mutual form to a
federal interim stock savings institution and simultaneously merge with and into
the Association, with the Association being the surviving entity.
<PAGE>
4
HOMESTEAD BANCORP, INC.
The Company is a Louisiana corporation organized in February 1998 by
Ponchatoula for the purpose of holding all of the capital stock of the
Association and in order to facilitate the Conversion. The Company has applied
for the approval of the OTS to become a thrift 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 thrift holding company.
Upon consummation of the Conversion, the Company will have no significant assets
other than all of the outstanding shares of Ponchatoula Common Stock, and the
portion of the net proceeds from the Offerings retained by the Company, and the
Company will have no significant liabilities. See "Use of Proceeds." Initially,
the management of the Company and the Association will be substantially similar
and the Company will neither own nor lease any property, but will instead use
the premises, equipment and furniture of the Association. At the present time,
the Company does not intend to employ any persons other than officers who are
also officers of the Association, and the Company will utilize the support staff
of the Association from time to time. Additional employees will be hired as
appropriate to the extent the Company expands or changes its business in the
future.
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.
Although there are no current arrangements, understandings or agreements
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 to be retained by the Company and
earnings thereon, as well as dividends from the Association. See "Dividend
Policy."
PONCHATOULA HOMESTEAD SAVINGS, F.A.
Ponchatoula Homestead Savings, F.A. is a federally chartered stock
savings institution that was organized on August 31, 1994 as a subsidiary of the
Mutual Holding Company. Prior to that date, Ponchatoula Homestead Association
("Ponchatoula Homestead"), the predecessor to Ponchatoula in its mutual form,
had operated in the market area now served by Ponchatoula. In connection with
the organization of the Mutual Holding Company (the "MHC Reorganization"),
Ponchatoula Homestead transferred substantially all of its assets and
liabilities to Ponchatoula in exchange for 456,240 shares of Ponchatoula Common
Stock and converted its charter to that of a federal mutual holding company
known as Homestead Mutual Holding Company. As part of the MHC Reorganization,
Ponchatoula also sold an additional 143,760 shares of Ponchatoula Common Stock
to certain members of the general public. After taking into account the issuance
of 6,345 shares pursuant to stock benefit plans, Ponchatoula has 150,105
outstanding shares of Ponchatoula Common Stock that are held by persons other
than the Mutual Holding Company.
Ponchatoula is primarily engaged in attracting deposits from the
general public through its offices and using such funds to originate loans
secured by single-family residences located primarily in Tangipahoa, Livingston
and St. Helena Parishes, Louisiana and to purchase mortgage-backed securities.
Ponchatoula's single-family residential loans amounted to $20.1 million or 63.9%
of Ponchatoula's total loan and lease portfolio (including loans held for sale)
and 33.8% of total assets at December 31, 1997, and mortgage-backed securities
amounted to $24.6 million or 41.2% of total assets at December 31, 1997. To a
much lesser extent, Ponchatoula originates construction loans secured by
single-family residential real estate, which amounted to $3.2 million or 10.3%
of the total loan and lease portfolio (including loans held for sale) at
December 31, 1997, as well as consumer loans, which amounted to $7.2 million or
22.8% of the total loan and lease portfolio (including loansheld for sale) at
such date. Ponchatoula also
<PAGE>
5
originates commercial real estate loans and land loans to a limited extent and
invests in interest-bearing deposits in other financial institutions and U.S.
Government and federal agency obligations.
Ponchatoula's leases are bond for deed contracts in which Ponchatoula
retains title to the property until all payments are made on the contract, at
which time Ponchatoula transfers the title to the lessee. Total leases amounted
to $301,000 at December 31, 1997, and Ponchatoula has not originated any leases
since 1995.
Ponchatoula is a community-oriented savings institution which emphasizes
customer service and convenience. As part of this strategy, Ponchatoula has
developed a variety of products and services which meet the needs of its retail
customers. Ponchatoula generally has sought to achieve long-term financial
strength and stability by (i) increasing the amount and stability of its net
interest income, (ii) managing its assets and liabilities to reduce its
vulnerability to changes in interest rates, and (iii) maintaining a high level
of regulatory capital. In pursuit of these goals, Ponchatoula has adopted a
number of complementary business strategies which emphasize retail lending and
deposit products and services traditionally offered by savings institutions.
Highlights of Ponchatoula's business strategy include the following:
Emphasis on Traditional Lending and Investment Activities. Management
believes that Ponchatoula is more likely to achieve its goals of long-term
financial strength and profitability by emphasizing retail products and
services, as opposed to wholesale or commercial activities. Ponchatoula's
primary lending emphasis is the origination of loans secured by first liens on
single-family (one-to-four units) residences and, to a lesser extent, consumer
loans, such as second mortgages and home equity and improvement loans. At
December 31, 1997, Ponchatoula's net loans and leases (including loans held for
sale) amounted to $29.5 million or 49.5% of Ponchatoula's total assets. In
addition, $24.6 million or 41.2% of Ponchatoula's total assets at December 31,
1997 consisted of adjustable-rate mortgage-backed securities, which are backed
by single-family residential loans.
Interest Rate Risk Management. Ponchatoula has implemented a strategy
designed to maintain the interest rate maturity of its assets relative to its
liabilities. The primary elements of the strategy include (i) purchasing
adjustable-rate mortgage-backed securities and short-term investment securities,
(ii) emphasizing the origination of 15-year, fixed-rate single-family
residential loans and, to the extent possible, adjustable-rate mortgages
("ARMs"), (iii) selling newly-originated, 30-year, fixed-rate single-family
residential loans in the secondary market, except that commencing February 1998
Ponchatoula began retaining a portion of such loans and matching them with
long-term Federal Home Loan Bank ("FHLB") advances, and (iv) managing interest
rate expense. Based upon certain repricing assumptions, Ponchatoula's
interest-bearing liabilities repricing or maturing within one year exceeded its
interest-earning assets with similar characteristics by $2.3 million or 3.8% of
total assets at December 31, 1997.
Emphasis on Retail Deposits. Ponchatoula's liability strategy emphasizes
retail deposits obtained through its offices. This strategy is facilitated by
Ponchatoula's emphasis on lower-costing passbook savings, negotiable order of
withdrawal ("NOW") and money market accounts, which in the aggregate amounted to
$10.7 million or 25.3% of Ponchatoula's total deposits at December 31, 1997. At
December 31, 1997, the weighted average rate paid on Ponchatoula's passbook
savings, NOW and money market accounts amounted to 2.41%, as compared to a
weighted average rate paid of 5.24% on Ponchatoula's certificates of deposits at
such date.
High Asset Quality. Total non-performing assets have declined from .76%
of total assets at December 31, 1995 to .29% of total assets at December 31,
1997. Non-accruing single-family residential loans and leases represented 100%
of the total non-performing assets at December 31, 1997 and 1995, and these
non-accruing loans have steadily declined in recent years. Single-family real
estate owned accounted for 27.9% of total non-performing assets at December 31,
1996, but all of such real estate owned was sold in 1997. At December 31, 1997,
Ponchatoula's allowance for loan and lease losses equalled $265,000 or .84% of
total loans and leases outstanding.
<PAGE>
6
Maintain High Levels of Regulatory Capital. Ponchatoula seeks to
maintain high levels of regulatory capital to give it maximum flexibility in the
changing regulatory environment and to respond to changes in market and economic
conditions. At December 31, 1997, Ponchatoula's tangible, core and risk-based
capital ratios amounted to 9.68%, 9.68% and 23.69%, respectively, which exceeded
the minimum requirements of 1.5%, 3.0% and 8.0% by $4.9 million, $4.0 million
and $4.0 million, respectively. The Conversion will further increase
Ponchatoula's regulatory capital, as Ponchatoula's pro forma tangible capital
ratio will increase to 14.01% if Conversion Shares are sold at the midpoint of
the Estimated Valuation Range. The pro forma capital levels may initially result
in the Company's return on equity being below the industry average. See "Risk
Factors - Potential Low Return on Equity Following the Conversion; Uncertainty
as to Future Growth Opportunities" in the Prospectus. To manage its capital
levels, the Company intends to consider stock repurchases and/or returns of
capital as soon as permissible following the Conversion. See "Use of Proceeds."
Ponchatoula is subject to extensive regulation, supervision and
examination by the OTS, its primary federal regulator, and by the Federal
Deposit Insurance Corporation ("FDIC"), which insures its deposits up to
applicable limits. Such regulation and supervision establishes a comprehensive
framework of activities in which an institution may engage and is intended
primarily for the protection of depositors and the Savings Association Insurance
Fund ("SAIF") administered by the FDIC. Ponchatoula is also a member of the FHLB
of Dallas, which is one of the 12 banks which comprise the FHLB System.
Ponchatoula is further subject to regulations of the Board of Governors of the
Federal Reserve System ("Federal Reserve Board") governing reserves required to
be maintained against deposits and certain other matters.
Ponchatoula's executive offices are located at 195 North Sixth Street,
Ponchatoula, Louisiana 70454, and its telephone number is (504) 386-3379.
<PAGE>
7
THE CONVERSION
The Boards of Directors of the Mutual Holding Company, Ponchatoula and
the Company have approved the Plan of Conversion, as has the OTS, subject to
approval by the Members of the Mutual Holding Company and the Stockholders of
Ponchatoula 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
The Boards of Directors of the Mutual Holding Company and Ponchatoula
unanimously adopted the Plan on February 25, 1998. Following the incorporation
of the Company, the Board of Directors of the Company unanimously adopted the
Plan on March 25, 1998. The Plan has been approved by the OTS, subject to, among
other things, approval of the Plan by the Members of the Mutual Holding Company
and the Stockholders of Ponchatoula. The Members' Meeting and the Stockholders'
Meeting have been called for this purpose on _____ __, 1998.
The following is a brief summary of pertinent aspects of the Plan and
the Conversion. The summary is qualified in its entirety by reference to the
provisions of the Plan, which is available for inspection at each branch office
of Ponchatoula and at the offices of the OTS. The Plan also is filed as an
exhibit to the Registration Statement of which the Prospectus is a part, copies
of which may be obtained from the SEC. See "How to Obtain Additional
Information."
Purposes of the Conversion
The Mutual Holding Company, as a federally chartered mutual holding
company, does not have stockholders and has no authority to issue capital stock.
As a result of the Conversion, the Company will be structured in the form used
by holding companies of commercial banks, most business entities and a growing
number of savings institutions. The Conversion will be important to the future
growth and performance of the holding company organization by providing a larger
capital base to support the operations of Ponchatoula and Company and by
enhancing their future access to capital markets, ability to diversify into
other financial services related activities, and ability to provide services to
the public. Although Ponchatoula currently has the ability to raise additional
capital through the sale of additional shares of Ponchatoula Common Stock, that
ability is limited by the mutual holding company structure which, among other
things, requires that the Mutual Holding Company hold a majority of the
outstanding shares of Ponchatoula Common Stock.
The Conversion also will result in an increase in the number of
outstanding shares of Common Stock following the Conversion, as compared to the
number of outstanding shares of Public Ponchatoula Shares prior to the
Conversion, which will increase the likelihood of the development of an active
and liquid trading market for the Common Stock. See "Market for Common Stock."
If Ponchatoula had undertaken a standard conversion involving the
formation of a stock holding company in 1994, applicable OTS regulations would
have required a greater amount of common stock to be sold than the $1.2 million
of net proceeds raised in the MHC Reorganization. Management of Ponchatoula
believed that it may have been difficult in 1994 to prudently invest in a timely
manner the larger amount of capital that would have been raised in a standard
conversion, when compared to the net proceeds raised in the MHC Reorganization.
A standard conversion in 1994 also would have immediately eliminated all aspects
of the mutual form of organization.
The Offerings will further increase the capital of the Company and
Ponchatoula and provide them with additional flexibility to grow and increase
net income.
<PAGE>
8
In light of the foregoing, the Boards of Directors of Ponchatoula and
the Mutual Holding Company believe that the Conversion is in the best interests
of such companies and their respective Stockholders and Members.
Description of the Conversion
On February 25, 1998, the Boards of Directors of Ponchatoula and the
Mutual Holding Company adopted the Plan, and as of February 27, 1998 Ponchatoula
incorporated the Company under Louisiana law as a first-tier wholly owned
subsidiary of Ponchatoula. Pursuant to the Plan, (i) the Mutual Holding Company
will convert from mutual form to a federal interim stock savings institution and
simultaneously merge with and into Ponchatoula, pursuant to which the Mutual
Holding Company will cease to exist and the shares of Ponchatoula Common Stock
held by the Mutual Holding Company will be cancelled, and (ii) Interim will then
merge with and into Ponchatoula. As a result of the merger of Interim with and
into Ponchatoula, Ponchatoula will become a wholly-owned subsidiary of the
Company and the Public Ponchatoula Shares (other than Dissenting Shares, if any)
will be converted into the Exchange Shares pursuant to the Exchange Ratio, which
will result in the holders of such shares owning in the aggregate approximately
the same percentage of the Common Stock to be outstanding upon the completion of
the Conversion (i.e., the Conversion Stock and the Exchange Shares) as the
percentage of Ponchatoula Common Stock owned by them in the aggregate
immediately prior to consummation of the Conversion (as adjusted from 24.2% to
23.94% to reflect the amount of dividends previously waived by the MHC), before
giving effect to (a) the payment of cash in lieu of issuing fractional Exchange
Shares, (b) any shares of Conversion Stock purchased by Ponchatoula's
stockholders in the Offerings, (c) any Dissenting Shares, and (d) any Contingent
Shares.
Pursuant to OTS regulations, consummation of the Conversion (including
the offering of Conversion Stock in the Offerings, as described below) is
conditioned upon the approval of the Plan by (1) the OTS, (2) at least a
majority of the total number of votes eligible to be cast by Members of the
Mutual Holding Company at the Members' Meeting, and (3) holders of at least
two-thirds of the shares of the outstanding Ponchatoula Common Stock at the
Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Conversion on the approval of the Plan by at least a
majority of the votes cast, in person or by proxy, by the Public Stockholders at
the Stockholders' Meeting.
Effects of the Conversion
General. Prior to the Conversion, each depositor in Ponchatoula has both
a deposit account in the institution and a pro rata ownership interest in the
net worth of the Mutual Holding Company based upon the balance in his account,
which interest may only be realized in the event of a liquidation of the Mutual
Holding Company. However, this ownership interest is tied to the depositor's
account and has no tangible market value separate from such deposit account. A
depositor who reduces or closes his account receives a portion or all of the
balance in the account but nothing for his ownership interest in the net worth
of the Mutual Holding Company, which is lost to the extent that the balance in
the account is reduced.
Consequently, the depositors of Ponchatoula normally have no way to
realize the value of their ownership interest in the Mutual Holding Company,
which has realizable value only in the unlikely event that the Mutual Holding
Company is liquidated. In such event, the depositors of record at that time, as
owners, would share pro rata in any residual surplus and reserves of the Mutual
Holding Company after other claims are paid.
Upon consummation of the Conversion, permanent nonwithdrawable capital
stock will be created to represent the ownership of the net worth of the
Company. The Common Stock of the Company is separate and apart from deposit
accounts and cannot be and is not insured by the FDIC or any other governmental
agency. Certificates are issued to evidence ownership of the permanent stock.
The stock certificates are transferable, and therefore the stock may be sold or
traded if a purchaser is available with no effect on any account the seller may
hold in Ponchatoula.
<PAGE>
9
Continuity. While the Conversion is being accomplished, the normal
business of Ponchatoula of accepting deposits and making loans will continue
without interruption. Ponchatoula will continue to be subject to regulation by
the OTS and the FDIC. After the Conversion, Ponchatoula will continue to provide
services for depositors and borrowers under current policies by its present
management and staff.
The directors and officers of Ponchatoula at the time of the Conversion
will continue to serve as directors and officers of Ponchatoula after the
Conversion. The directors and officers of the Company consist of individuals
currently serving as directors and officers of the Mutual Holding Company and
Ponchatoula, and they generally will retain their positions in the Company after
the Conversion.
Effect on Public Ponchatoula Shares. Under the Plan, upon consummation
of the Conversion, the Public Ponchatoula Shares (other than any Dissenting
Shares) shall be converted into Common Stock based upon the Exchange Ratio
without any further action on the part of the holder thereof. Upon surrender of
the Public Ponchatoula Shares, Common Stock will be issued in exchange for such
shares.
Effect on Deposit Accounts. Under the Plan, each depositor in
Ponchatoula 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, except to
the extent that funds in the account are withdrawn to purchase Conversion Stock
to be issued in the Offerings. Each such account will be insured by the 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 Ponchatoula 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 Ponchatoula 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
and will no longer be entitled to vote at meetings of the Mutual Holding Company
(which will cease to exist). Upon completion of the Conversion, all voting
rights in Ponchatoula will be vested in the Company as the sole stockholder of
Ponchatoula. Exclusive voting rights with respect to the Company will be vested
in the holders of Common Stock. Depositors of and borrowers from Ponchatoula
will not have voting rights in the Company after the Conversion, except to the
extent that they become stockholders of the Company.
Tax Effects. Consummation of the Conversion is conditioned on prior
receipt by the Primary Parties of rulings or opinions with regard to federal and
Louisiana income taxation which indicate that the adoption and implementation of
the Plan of Conversion set forth herein will not be taxable for federal or
Louisiana income tax purposes to the Primary Parties or Ponchatoula's Eligible
Account Holders, Supplemental Eligible Account Holders or Other Members, except
as discussed below. The Primary Parties have received favorable opinions
regarding the federal and Louisiana income tax consequences of the Conversion.
Effect on Liquidation Rights. Were the Mutual Holding Company to
liquidate, all claims of the Mutual Holding Company's creditors would be paid
first. Thereafter, if there were any assets remaining, Members of the Mutual
Holding Company would receive such remaining assets, pro rata, based upon the
deposit balances in their deposit accounts at Ponchatoula immediately prior to
liquidation. In the unlikely event that Ponchatoula were to liquidate after the
Conversion, all claims of creditors (including those of depositors, to the
extent of their deposit balances) also would be paid first, followed by
distribution of the "liquidation account" to certain depositors (see "-
Liquidation Rights" below), with any assets remaining thereafter distributed to
the Company as the holder of Ponchatoula's capital stock. Pursuant to the rules
and regulations of the OTS, a merger, consolidation, sale of bulk assets or
similar combination or transaction with another insured institution would not be
considered a liquidation
<PAGE>
10
for this purpose and, in such a transaction, the liquidation account would be
required to be assumed by the surviving institution.
Effect on Existing Compensation Plans. Under the Plan, the 1996 Stock
Incentive Plan and the 1996 Management Recognition Plan will become stock
benefit plans of the Company and shares of Common Stock will be issued (or
reserved for issuance) pursuant to such benefit plans and not shares of
Ponchatoula Common Stock. Upon consummation of the Conversion, the Public
Ponchatoula Shares held by such benefit plans shall be converted into Common
Stock based upon the Exchange Ratio. Also upon consummation of the Conversion,
(i) all rights to purchase, sell or receive Public Ponchatoula Shares under any
agreement between Ponchatoula and any director, officer or employee of
Ponchatoula or under any plan or program of Ponchatoula (including, without
limitation, Ponchatoula's profit sharing plan and the 1996 Management
Recognition Plan), shall automatically, by operation of law, be converted into
and shall become an identical right to purchase, sell or receive Common Stock
and an identical right to make payment in Common Stock under any such agreement
between Ponchatoula and any director, officer or employee of Ponchatoula or
under such plan or program of Ponchatoula, and (ii) rights outstanding under the
1996 Stock Incentive Plan shall be assumed by the Company and thereafter shall
be rights only for shares of Common Stock, with each such right being for a
number of shares of Common Stock based upon the Exchange Ratio and the number of
shares of Public Ponchatoula Shares 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.
Stock Pricing, Exchange Ratio and Number of Shares to be Issued
The Plan of Conversion requires that the purchase price of the
Conversion Stock must be based on the appraised pro forma market value of the
Conversion Stock, as determined on the basis of an independent valuation. The
Primary Parties have retained RP Financial to make such valuation. For its
services in making such appraisal and any expenses incurred in connection
therewith, RP Financial will receive a fixed fee of $20,000, plus out-of-pocket
expenses which are not expected to exceed $7,500. Ponchatoula has also retained
RP Financial to assist in the preparation of a business plan for a fixed fee of
$7,500. The Primary Parties have agreed to indemnify RP Financial and its
employees and affiliates against certain losses (including any losses in
connection with claims under the federal securities laws) arising out of its
services as appraiser, except where RP Financial's liability results from its
negligence or bad faith.
The Appraisal has been prepared by RP Financial in reliance upon the
information contained in this Prospectus, including the Financial Statements. RP
Financial also considered the following factors, among others: the present and
projected operating results and financial condition of the Primary Parties and
the economic and demographic conditions in Ponchatoula's existing market area;
certain historical, financial and other information relating to Ponchatoula; a
comparative evaluation of the operating and financial statistics of Ponchatoula
with those of other similarly situated publicly-traded companies located in
Louisiana and other regions of the United States; the aggregate size of the
offering of the Conversion Stock; the impact of the Conversion on Ponchatoula's
net worth and earnings potential; the proposed dividend policy of the Company
and Ponchatoula; and the trading market for the Ponchatoula Common Stock and
securities of comparable companies and general conditions in the market for such
securities.
On the basis of the foregoing, RP Financial has advised the Primary
Parties that in its opinion the estimated pro forma market value of Ponchatoula
and the Mutual Holding Company on a combined basis was $11,175,390 as of March
20, 1998. The holders of the Public Ponchatoula Shares will continue to hold the
same aggregate percentage ownership interest in the Company as they currently
hold in Ponchatoula, as adjusted from 24.8% to 23.94% to reflect the amount of
dividends previously waived by the MHC and before giving effect to the payment
of cash in lieu of issuing fractional Exchange Shares, any shares of Conversion
Stock purchased by Ponchatoula's stockholders in the Offerings, any Dissenting
Shares and any Contingent Shares. As a result, the Appraisal was
<PAGE>
11
multiplied by the Mutual Holding Company's adjusted percentage interest in
Ponchatoula (i.e., 76.06%), to determine the midpoint of the valuation
($8,500,000), and the minimum and maximum of the valuation were set at 15% below
and above the midpoint, respectively, resulting in a range of $7,225,000 to
$9,775,000. The Boards of Directors of the Primary Parties determined that the
Conversion Stock would be sold at $10.00 per share, resulting in a range of
722,500 to 977,500 shares of Conversion Stock being offered (excluding any
Contingent Shares). Upon consummation of the Conversion, the Conversion Stock
and the Exchange Shares will represent approximately 76.06% and 23.94%,
respectively, of the Company's total outstanding shares, before giving effect to
the items set forth above.
The Boards of Directors of the Primary Parties reviewed RP Financial's
appraisal report, including the methodology and the assumptions used by RP
Financial, and determined that the Estimated Valuation Range was reasonable and
adequate. The Boards of Directors of the Primary Parties also established the
formula for determining the Exchange Ratio. Based upon such formula and the
Estimated Valuation Range, the Exchange Ratio ranged from a minimum of 1.51499
to a maximum of 2.04970 Exchange Shares for each Public Ponchatoula Share, with
a midpoint of 1.78235. Based upon these Exchange Ratios, the Company expects to
issue between 227,408 and 307,670 shares of Exchange Shares to the holders of
Public Ponchatoula Shares outstanding immediately prior to the consummation of
the Conversion. The Estimated Valuation Range and the Exchange Ratio may be
amended with the approval of the OTS, if required, or if necessitated by
subsequent developments in the financial condition of any of the Primary Parties
or market conditions generally. In the event the Appraisal is updated so that
the Conversion Stock is below $7,225,000 or above $11,241,250 (the maximum of
the Estimated Valuation Range, as adjusted by 15%) (excluding any Contingent
Shares), such Appraisal will be filed with the SEC by post-effective amendment.
RP Financial has indicated that it does not consider the Contingent Shares to be
material.
Based upon current market and financial conditions and recent practices
and policies of the OTS, in the event the Company receives orders for Conversion
Stock in excess of $9,775,000 (the maximum of the Estimated Valuation) and up to
$11,241,250 (the maximum of the Estimated Valuation, as adjusted by 15%), the
Company may be required by the OTS to accept all such orders. No assurances,
however, can be made that the Company will receive orders for Conversion Stock
in excess of the maximum of the Estimated Valuation Range or that, if such
orders are received, that all such orders will be accepted because the Company's
final valuation and number of shares to be issued are subject to the receipt of
an updated appraisal from RP Financial which reflects such an increase in the
valuation and the approval of such increase by the OTS. There are is no
obligation or understanding on the part of management to take and/or pay for any
shares of Conversion Stock in order to complete the Offerings.
The following table sets forth, based upon the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range, the
following: (i) the total number of shares of Conversion Stock and Exchange
Shares to be issued in the Conversion, (ii) the percentage of the total Common
Stock represented by the Conversion Stock and the Exchange Shares, and (iii) the
Exchange Ratio. The table assumes that there are no Dissenting Shares,
Contingent Shares or fractional Exchange Shares.
<TABLE>
<CAPTION>
Conversion Stock to Be
Issued Exchange Shares to be Issued Total Shares of
---------------------------- --------------------------------- Common Stock to Exchange
Amount Percent Amount Percent be Outstanding Ratio
------------ ------------ -------------- ------------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Minimum 722,500 76.06% 227,408 23.94% 949,908 1.51499
Midpoint 850,000 76.06 267,539 23.94 1,117,539 1.78235
Maximum 977,500 76.06 307,670 23.94 1,285,170 2.04970
15% above maximum 1,124,125 76.06 353,820 23.94 1,477,945 2.35715
</TABLE>
<PAGE>
12
RP Financial's valuation is not intended, and must not be construed, as
a recommendation of any kind as to the advisability of purchasing such shares.
RP Financial did not independently verify the Financial Statements and other
information provided by Ponchatoula and the Mutual Holding Company, nor did RP
Financial value independently the assets or liabilities of Ponchatoula. The
valuation considers Ponchatoula and the Mutual Holding Company as going concerns
and should not be considered as an indication of the liquidation value of
Ponchatoula and the Mutual Holding Company. Moreover, because such valuation is
necessarily based upon estimates and projections of a number of matters, all of
which are subject to change from time to time, no assurance can be given that
persons purchasing Conversion Stock or receiving Exchange Shares in the
Conversion will thereafter be able to sell such shares at prices at or above the
Purchase Price or in the range of the foregoing valuation of the pro forma
market value thereof.
No sale of shares of Conversion Stock or issuance of Exchange Shares may
be consummated unless prior to such consummation RP Financial confirms that
nothing of a material nature has occurred which, taking into account all
relevant factors, would cause it to conclude that the Purchase Price is
materially incompatible with the estimate of the pro forma market value of a
share of Common Stock upon consummation of the Conversion. If such is not the
case, a new Estimated Valuation Range may be set, a new Exchange Ratio may be
determined based upon the new Estimated Valuation Range, a new Subscription and
Community Offering and/or Syndicated Community Offering may be held or such
other action may be taken as the Primary Parties shall determine and the OTS may
permit or require.
Depending upon market or financial conditions following the commencement
of the Subscription Offering, the total number of shares of Conversion Stock to
be issued in the Offerings may be increased or decreased without a
resolicitation of subscribers, provided that the product of the total number of
shares times the Purchase Price is not below the minimum or more than 15% above
the maximum of the Estimated Valuation Range (excluding any Contingent Shares).
In the event market or financial conditions change so as to cause the aggregate
Purchase Price of the shares to be below the minimum of the Estimated Valuation
Range or more than 15% above the maximum of such range, (excluding any
Contingent Shares) purchasers will be resolicited (i.e., permitted to continue
their orders, in which case they will need to affirmatively reconfirm their
subscriptions prior to the expiration of the resolicitation offering or their
subscription funds will be promptly refunded with interest at Ponchatoula's
passbook rate of interest, or be permitted to modify or rescind their
subscriptions). Any increase or decrease in the number of shares of Conversion
Stock (excluding any Contingent Shares) will result in a corresponding change in
the number of Exchange Shares, so that upon consummation of the Conversion the
Conversion Stock and the Exchange Shares will represent approximately 76.06% and
23.94%, respectively, of the Company's total outstanding shares of Common Stock
(exclusive of the effects of the exercise of outstanding stock options).
An increase in the number of shares of Conversion Stock as a result of
an increase in the Estimated Valuation Range would decrease both a subscriber's
ownership interest and the Company's pro forma net earnings and shareholders'
equity on a per share basis while increasing pro forma net earnings and
shareholders' equity on an aggregate basis. A decrease in the number of shares
of Conversion Stock would increase both a subscriber's ownership interest and
the Company's pro forma net earnings and shareholders' equity on a per share
basis while decreasing pro forma net earnings and shareholders' equity on an
aggregate basis. See "Pro Forma Data."
The appraisal report of RP Financial has been filed as an exhibit to
the Company's Registration Statement and the Mutual Holding Company's
Application for Conversion, of which the Prospectus is a part, and is available
for inspection in the manner set forth under "How to Obtain Additional
Information."
<PAGE>
13
The Offerings
Subscription Offering. In accordance with the Plan of Conversion, rights
to subscribe for the purchase of Conversion Stock have been granted under the
Plan of Conversion to the following persons in the following order of descending
priority: (1) Eligible Account Holders, (2) the ESOP, (3) Supplemental Eligible
Account Holders, (4) Other Members, (5) directors, officers and employees of the
Mutual Holding Company and Ponchatoula, and (6) Public Stockholders. All
subscriptions received will be subject to the availability of Conversion Stock
after satisfaction of all subscriptions of all persons having prior rights in
the Subscription Offering and to the maximum and minimum purchase limitations
set forth in the Plan of Conversion and as described below under "- Limitations
on Conversion Stock Purchases."
Priority 1: Eligible Account Holders. Each Eligible Account Holder will
receive, without payment therefor, first priority, nontransferable subscription
rights to subscribe for in the Subscription Offering up to the greater of (i)
one percent (1%) of the total offering of shares of Conversion Stock in the
Subscription Offering (excluding any Contingent Shares) and (ii) 15 times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock offered in the Subscription Offering
by a fraction, of which the numerator is the amount of the Eligible Account
Holder's qualifying deposit and the denominator of which is the total amount of
qualifying deposits of all Eligible Account Holders, in each case as of the
close of business on December 31, 1996 (the "Eligibility Record Date"), subject
to the overall purchase limitations and excluding the issuance of any Contingent
Shares. See "- Limitations on Conversion 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 the number of shares subscribed for or
100 shares. Thereafter, unallocated shares will be allocated to subscribing
Eligible Account Holders whose subscriptions remain unfilled in the proportion
that the amounts of their respective eligible deposits bear to the total amount
of eligible deposits of all subscribing Eligible Account Holders whose
subscriptions remain unfilled, provided that no fractional shares shall be
issued. The subscription rights of Eligible Account Holders who are also
directors or officers of the Mutual Holding Company or Ponchatoula and their
associates will be subordinated to the subscription rights of other Eligible
Account Holders to the extent attributable to increased deposits in the year
preceding December 31, 1996.
Priority 2: ESOP. The ESOP will receive, without payment therefor,
second priority, nontransferable subscription rights to purchase, in the
aggregate, up to 8% of the Conversion Stock (excluding any Contingent Shares),
including any increase in the number of shares of Conversion Stock after the
date hereof as a result of an increase of up to 15% in the maximum of the
Estimated Valuation. The ESOP intends to purchase 8% of the shares of Conversion
Stock, or 78,200 shares based on the maximum of the Estimated Valuation Range.
Subscriptions by the ESOP will not be aggregated with shares of Conversion Stock
purchased directly by or which are otherwise attributable to any other
participants in the Subscription and Community Offerings, including
subscriptions of any of Ponchatoula's directors, officers, employees or
associates thereof. See "Management New Stock Benefit Plans - Employee Stock
Ownership Plan." In the event that the total number of shares of Conversion
Stock sold in the Offerings is increased to an amount greater than the number of
shares representing the maximum of the Estimated Valuation Range ("Maximum
Shares"), the ESOP will have a priority right to purchase any such shares
exceeding the Maximum Shares up to an aggregate of 8% of the Conversion Stock
(excluding any Contingent Shares). See "- Limitations on Conversion Stock
Purchases."
Priority 3: Supplemental Eligible Account Holders. Each Supplemental
Eligible Account Holder will receive, without payment therefor, third priority,
nontransferable subscription rights to subscribe for in the
<PAGE>
14
Subscription Offering up to the greater of (i) one percent (1%) of the total
offering of shares of Conversion Stock in the Subscription Offering and (ii)
15 times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock offered in the
Subscription Offering by a fraction, of which the numerator is the amount of
the Supplemental Eligible Account Holder's qualifying deposit and the
denominator of which is the total amount of qualifying deposits of all
Supplemental Eligible Account Holders, in each case as of the close of
business on March 31, 1998 (the "Supplemental Eligibility Record Date"),
subject to the overall purchase limitations and excluding the issuance of any
Contingent Shares. See "- Limitations on Conversion Stock Purchases."
If there are not sufficient shares available to satisfy all
subscriptions, shares first 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 the number of shares
subscribed for or 100 shares. Thereafter, unallocated shares will be allocated
to subscribing Supplemental Eligible Account Holders whose subscriptions remain
unfilled in the proportion that the amounts of their respective eligible
deposits bear to the total amount of eligible deposits of all such subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled,
provided that no fractional shares shall be issued.
Priority 4: Other Members. To the extent that there are shares
remaining after satisfaction of subscriptions by Eligible Account Holders, the
ESOP and Supplemental Eligible Account Holders, each Other Member will receive,
without payment therefor, fourth priority, nontransferable subscription rights
to subscribe for Conversion Stock in the Subscription Offering up to one percent
(1%) of the total offering of shares of Conversion Stock in the Subscription
Offering (excluding any Contingent Shares), subject to the overall purchase
limitations. See "- Limitations on Conversion Stock Purchases."
In the event the Other Members subscribe for a number of shares which,
when added to the shares subscribed for by Eligible Account Holders, the ESOP
and Supplemental Eligible Account Holders, is in excess of the total number of
shares of Conversion Stock offered in the Subscription Offering, shares first
will be allocated so as to permit each subscribing Other Member to purchase a
number of shares sufficient to make his total allocation equal to the lesser of
the number of shares subscribed for or 100 shares. Thereafter, any remaining
shares will be allocated among subscribing Other Members on a pro rata basis in
the same proportion as each Other Member's subscription bears to the total
subscriptions of all subscribing Other Members, provided that no fractional
shares shall be issued.
Priority 5: Directors, Officers and Employees. To the extent that there
are shares remaining after satisfaction of all subscriptions by Eligible Account
Holders, the ESOP, Supplemental Eligible Account Holders and Other Members, then
directors, officers and employees of the Mutual Holding Company and Ponchatoula
will receive, without payment therefor, fifth priority, nontransferable
subscription rights to subscribe for, in this category, up to an aggregate of
24.7% of the shares of Conversion Stock offered in the Subscription Offering
(excluding any Contingent Shares). The ability of directors, officers and
employees to purchase Conversion Stock under this category is in addition to
rights which are otherwise available to them under the Plan, which generally
allows such persons to purchase in the aggregate up to 34.7% of the total number
of shares of Conversion Stock sold in the Offerings (excluding any Contingent
Shares). See "- Limitations on Conversion Stock Purchases."
In the event of an oversubscription in this category, subscription
rights will be allocated among the individual directors, officers and employees
on a point system basis, whereby such individuals will receive subscription
rights in the proportion that the number of points assigned to each of them
bears to the total points assigned to all directors, officers and employees,
provided that no fractional shares shall be issued. One point will be assigned
for each year of service with the Mutual Holding Company and Ponchatoula, one
point for each salary increment of $5,000 per annum and five points for each
office presently held in the Mutual Holding Company and Ponchatoula, including
directorships.
<PAGE>
15
Priority 6: Public Stockholders. To the extent that there are shares
remaining after satisfaction of subscriptions by Eligible Account Holders, the
ESOP, Supplemental Eligible Account Holders, Other Members and directors,
officers and employees, each Public Stockholder as of the Voting Record Date
will receive, without payment therefor, sixth priority, nontransferable
subscription rights to subscribe for Conversion Stock in the Subscription
Offering up one percent (1%) of the total offering of shares of Conversion Stock
in the Subscription Offering (excluding any Contingent Shares), subject to the
overall purchase limitations. See "- Limitations on Conversion Stock Purchases."
In the event the Public Stockholders as of the Voting Record Date
subscribe for a number of shares which, when added to the shares subscribed for
by Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders,
Other Members and directors, officers and employees, is in excess of the total
number of shares of Conversion Stock offered in the Subscription Offering,
available shares will be allocated among subscribing Public Stockholders as of
the Voting Record Date on a pro rata basis in the same proportion as each Public
Stockholder's subscription bears to the total subscriptions of all subscribing
Public Stockholders, provided that no fractional shares shall be issued.
Expiration Date for the Subscription Offering. The Subscription
Offering will expire at noon, Central Time, on ______ __, 1998, unless extended
for up to 45 days or such additional periods by the Primary Parties with the
approval of the OTS. Such extensions may not be extended beyond ______ __, 2000.
Subscription rights which have not been exercised prior to the Expiration Date
will become void.
The Primary Parties will not execute orders until at least the minimum
number of shares of Conversion Stock (722,500 shares) have been subscribed for
or otherwise sold. If all 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 Ponchatoula 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 Primary Parties will notify
subscribers of the extension of time and of any rights of subscribers to modify
or rescind their subscriptions.
Community Offering. To the extent that shares remain available for
purchase after satisfaction of all subscriptions of Eligible Account Holders,
the ESOP, Supplemental Eligible Account Holders, Other Members, directors,
officers and employees of the Mutual Holding Company and Ponchatoula and Public
Stockholders, the Primary Parties have determined to offer shares pursuant to
the Plan to certain members of the general public, with preference given to
natural persons residing in parishes in Louisiana in which Ponchatoula has
branch offices (such natural persons referred to as "Preferred Subscribers").
Such persons may purchase up to one percent (1%) of the total offering of shares
of Conversion Stock in the Subscription Offering (excluding any Contingent
Shares), subject to the maximum purchase limitations. See "- Limitations on
Conversion Stock Purchases." This amount may be increased at the sole discretion
of the Primary Parties. The opportunity to subscribe for shares of Conversion
Stock in the Community Offering category is subject to the right of the Primary
Parties, in their 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 there are not sufficient shares available to fill the orders of
Preferred Subscribers after completion of the Subscription and Community
Offerings, such stock will be allocated first to each Preferred Subscriber whose
order is accepted by the Primary Parties, in an amount equal to the lesser of
100 shares or the number of shares subscribed for by each such Preferred
Subscriber, if possible. Thereafter, unallocated shares will be allocated among
the Preferred Subscribers whose orders remain unsatisfied in the same proportion
that the unfilled subscription of each bears to the total unfilled subscriptions
of all Preferred Subscribers whose subscription remains unsatisfied. If there
are any shares remaining, shares will be allocated to other members of the
general
<PAGE>
16
public who subscribe in the Community Offering applying the same allocation
described above for Preferred Subscribers.
Syndicated Community Offering. The Plan provides that, if feasible, all
shares of Conversion Stock not purchased in the Subscription and Community
Offerings may be offered for sale to the general public in a Syndicated
Community Offering through a syndicate of registered broker-dealers to be
formed. No person will be permitted to subscribe in the Syndicated Community
Offering for more than one percent (1%) of the total offering of shares of
Conversion Stock in the Subscription Offering (excluding any Contingent Shares),
subject to the maximum purchase limitations. The Primary Parties have the right
to reject orders in whole or part in their sole discretion in the Syndicated
Community Offering. The Primary Parties have engaged Trident Securities, Inc.
("Trident") to consult with and advise them in the Conversion and Trident has
agreed to use its best efforts to solicit subscriptions and purchase orders for
shares of Conversion Stock in the Offerings. Neither Trident nor any registered
broker-dealer shall have any obligation to take or purchase any shares of
Conversion Stock in the Syndicated Community Offering; however, Trident has
agreed to use its best efforts in the sale of shares in the Syndicated Community
Offering.
The Syndicated Community Offering will terminate no more than 45 days
following the Expiration Date, unless extended by the Primary Parties with the
approval of the OTS. See "- Stock Pricing, Exchange Ratio and Number of Shares
to be Issued" for a discussion of rights of subscribers, if any, in the event an
extension is granted.
Limitations on Conversion Stock Purchases
The Plan includes the following limitations on the number of shares of
Conversion Stock which may be purchased:
(1) No less than 25 shares of Conversion Stock may be purchased, to the
extent such shares are available;
(2) Each Eligible Account Holder may subscribe for and purchase in the
Subscription Offering up to the greater of (i) one percent (1%) of the total
offering of shares of Conversion Stock in the Subscription Offering and (ii) 15
times the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Conversion Stock to be issued by a
fraction, of which the numerator is the amount of the qualifying deposit of the
Eligible Account Holder and the denominator is the total amount of qualifying
deposits of all Eligible Account Holders, in each case as of the close of
business on the Eligibility Record Date, subject to the overall limitation in
clause (6) below and excluding the issuance of any Contingent Shares;
(3) The ESOP may purchase in the aggregate up to 8% of the shares of
Conversion Stock to be issued in the Offerings (excluding any Contingent
Shares), including any additional shares issued in the event of an increase in
the Estimated Valuation Range;
(4) Each Supplemental Eligible Account Holder may subscribe for and
purchase in the Subscription Offering up to the greater of (i) one percent (1%)
of the total offering of shares of Conversion Stock in the Subscription Offering
and (ii) 15 times the product (rounded down to the next whole number) obtained
by multiplying the total number of shares of Conversion Stock to be issued by a
fraction, of which the numerator is the amount of the qualifying deposit of the
Supplemental Eligible Account Holder and the denominator is the total amount of
qualifying deposits of all Supplemental Eligible Account Holders, in each case
as of the close of business on the Supplemental Eligibility
<PAGE>
17
Record Date, subject to the overall limitation in clause (6) below and excluding
the issuance of any Contingent Shares;
(5) Each Other Member, Public Stockholder or any other person
purchasing shares of Conversion Stock in the Subscription Offering,
Community Offering or in the Syndicated Community Offering, as
applicable, may subscribe for and purchase in the respective Offering
up to one percent (1%) of the total offering of shares of Conversion
Stock in the Subscription Offering, subject to the overall limitation
in clause (6) below and excluding the issuance of any Contingent
Shares;
(6) Except for the ESOP and certain Eligible Account Holders
and Supplemental Eligible Account Holders whose subscription rights are
based upon the amount of their deposits, the maximum number of shares
of Conversion Stock subscribed for or purchased in all categories by
any person, together with associates of and groups of persons acting in
concert with such persons, shall not exceed the number of shares of
Conversion Stock that when combined with Exchange Shares received
aggregate 3% of the number of shares of Common Stock issued in the
Conversion (28,497 shares and 38,555 shares at the minimum and maximum
of the Estimated Valuation Range, respectively), excluding the issuance
of any Contingent Shares; and
(7) No more than 24.7% of the total number of shares sold in
the Subscription Offering may be purchased by directors and officers of
the Mutual Holding Company and Ponchatoula in the fourth priority
category in the Subscription Offering. No more than 34.7% of the total
number of shares sold in the Offerings may be purchased by directors
and officers of the Mutual Holding Company and Ponchatoula and their
associates in the aggregate, excluding purchases by the ESOP and
excluding the issuance of any Contingent Shares.
For purposes of the purchase limitations set forth in the Plan of
Conversion, Exchange Shares will be valued at the same price that shares of
Conversion Stock are issued in the Offerings. Any Contingent Shares that may be
issued will be disregarded in calculating any applicable purchase limitation.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Members of
the Mutual Holding Company or the Stockholders of Ponchatoula, both the
individual amount permitted to be subscribed for and the overall purchase
limitation may be decreased or increased up to a maximum of 5% of the total
shares of Common Stock to be issued in the Conversion (excluding any Contingent
Shares) at the sole discretion of the Primary Parties. If such amount is
increased, subscribers for the maximum amount will be, and certain other large
subscribers in the sole discretion of the Primary Parties may be, given the
opportunity to increase their subscriptions up to the then applicable limit.
An individual Eligible Account Holder, Supplemental Eligible Account
Holder, Other Member or Public Stockholder may not purchase individually in the
Subscription Offering the overall maximum purchase limit of 3% of the number of
shares of Common Stock issued in the Conversion but may make such purchase,
together with associates of and persons acting in concert with such person, by
also purchasing in other available categories, subject to availability of shares
and the maximum overall purchase limit for purchases in the Offerings, including
Exchange Shares received by Public Stockholders for Public Ponchatoula Shares.
However, Public Stockholders will not have to sell any Public Ponchatoula Shares
or be limited in receiving Exchange Shares even if their current ownership of
Public Ponchatoula Shares when converted into Exchange Shares exceeds an
applicable purchase limitation, including the maximum purchase limitation of 3%
of the number of shares of Common Stock issued in the Conversion.
<PAGE>
18
In the event of an increase in the total number of shares of Conversion
Stock offered in the Conversion due to an increase in the Estimated Valuation
Range of up to 15% (the "Adjusted Maximum") (excluding any Contingent Shares),
the additional shares will be allocated in the following order of priority in
accordance with the Plan: (i) to fill the ESOP's subscription of 8% of the
Adjusted Maximum number of shares; (ii) in the event that there is an
oversubscription by Eligible Account Holders, to fill unfulfilled subscriptions
of Eligible Account Holders, inclusive of the Adjusted Maximum; (iii) in the
event that there is an oversubscription by Supplemental Eligible Account
Holders, to fill unfulfilled subscriptions of Supplemental Eligible Account
Holders, inclusive of the Adjusted Maximum; (iv) in the event that there is an
oversubscription by Other Members, to fill unfulfilled subscriptions of Other
Members, inclusive of the Adjusted Maximum; (v) in the event there is an
oversubscription by directors, officers and employees of the Mutual Holding
Company and Ponchatoula, to fill unfulfilled subscriptions of directors,
officers and employees, inclusive of the Adjusted Maximum; (vi) in the event
that there is an oversubscription by Public Stockholders, to fill unfulfilled
subscriptions of Public Stockholders, inclusive of the Adjusted Maximum; and
(vii) to fill unfulfilled subscriptions in the Community Offering to the extent
possible, inclusive of the Adjusted Maximum.
The term "associate" of a person is defined to mean (i) any corporation
or other organization (other than the Primary Parties or a majority-owned
subsidiary of Ponchatoula) of which such person is a director, officer or
partner or is directly or indirectly the beneficial owner of 10% or more of any
class of equity securities; (ii) any trust or other estate in which such person
has a substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity, provided, however, that such term
shall not include any tax-qualified employee stock benefit plan of the Primary
Parties in which such person has a substantial beneficial interest or serves as
a trustee or in a similar fiduciary capacity; and (iii) any relative or spouse
of such person, or any relative of such spouse, who either has the same home as
such person or who is a director or officer of the Primary Parties or any of
their subsidiaries.
Liquidation Rights
In the unlikely event of a complete liquidation of the Mutual Holding
Company in its present mutual form, each depositor of Ponchatoula would receive
his pro rata share of any assets of the Mutual Holding Company remaining after
payment of claims of all creditors. Each depositor's pro rata share of such
remaining assets would be in the same proportion as the value of his deposit
account was to the total value of all deposit accounts in Ponchatoula at the
time of liquidation. After the Conversion, each depositor, in the event of a
complete liquidation of Ponchatoula, would have a claim as a creditor of the
same general priority as the claims of all other general creditors of
Ponchatoula. However, except as described below, his claim would be solely in
the amount of the balance in his deposit account plus accrued interest. He would
not have an interest in the value or assets of Ponchatoula or the Company above
that amount.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the amount of any dividends waived by the Mutual Holding Company plus the
greater of (1) Ponchatoula's retained earnings of $3,673,000 at March 31, 1994,
the date of the latest statement of financial condition contained in the final
offering circular utilized in the MHC Reorganization, or (2) 75.2% of
Ponchatoula's total stockholders' equity as reflected in its latest statement of
financial condition contained in the final Prospectus utilized in the Offerings.
As of the date of this Prospectus, the initial balance of the liquidation
account would be $__________. Each Eligible Account Holder and Supplemental
Eligible Account Holder, if he were to continue to maintain his deposit account
at Ponchatoula, would be entitled, upon a complete liquidation of Ponchatoula
after the Conversion, to an interest in the liquidation account prior to any
payment to the Company as the sole stockholder of Ponchatoula. Each Eligible
Account Holder and Supplemental Eligible Account Holder would have an initial
interest in such liquidation account for each deposit account, including
passbook accounts, transaction accounts such as checking accounts, money market
deposit accounts
<PAGE>
19
and certificates of deposit, held in Ponchatoula at the close of business on
December 31, 1996 or March 31, 1998, as the case may be. Each Eligible Account
Holder and Supplemental Eligible Account Holder will have a pro rata interest in
the total liquidation account for each of his deposit accounts based on the
proportion that the balance of each such deposit account on the December 31,
1996 Eligibility Record Date (or the March 31, 1998 Supplemental Eligibility
Record Date, as the case may be) bore to the balance of all deposit accounts in
Ponchatoula on such date.
If, however, on any December 31 annual closing date of Ponchatoula,
commencing December 31, 1998, the amount in any deposit account is less than the
amount in such deposit account on December 31, 1996 or March 31, 1998, as the
case may be, or any other annual closing date, then the interest in the
liquidation account relating to such deposit account would be reduced by the
proportion of any such reduction, and such interest will cease to exist if such
deposit account is closed. In addition, no interest in the liquidation account
would ever be increased despite any subsequent increase in the related deposit
account. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Company as the sole stockholder of Ponchatoula.
Required Approvals
Various approvals of the OTS are required in order to consummate the
Conversion. The OTS has approved the Plan of Conversion, subject to approval by
the Mutual Holding Company's Members and Ponchatoula's Stockholders. In
addition, consummation of the Conversion is subject to OTS approval of the
Company's application to acquire all of the to-be-outstanding Ponchatoula Common
Stock and the applications with respect to the merger of the Mutual Holding
Company (following its conversion to a federal interim stock savings
institution) into Ponchatoula and the merger of Interim into Ponchatoula, with
Ponchatoula being the surviving entity in both mergers. Applications for these
approvals have been filed and are currently pending. There can be no assurances
that the requisite OTS approvals will be received in a timely manner, in which
event the consummation of the Conversion may be delayed beyond the expiration of
the Offerings.
The Company is required to make certain filings with state securities
regulatory authorities in connection with the issuance of Conversion Stock and
Exchange Shares in the Conversion.
Pursuant to OTS regulations, the Plan of Conversion also must be
approved by (1) at least a majority of the total number of votes eligible to be
cast by Members of the Mutual Holding Company at the Members' Meeting, and (2)
holders of at least two-thirds of the outstanding Ponchatoula Common Stock at
the Stockholders' Meeting. In addition, the Primary Parties have conditioned the
consummation of the Conversion on the approval of the Plan by at least a
majority of the votes cast, in person or by proxy, by the Public Stockholders at
the Stockholders' Meeting.
<PAGE>
20
MANAGEMENT
Management of the Company
The Board of Directors of the Company 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. The following table sets forth
certain information regarding the directors of the Company, all of whom are also
directors of Ponchatoula.
<TABLE>
<CAPTION>
Position with
Ponchatoula and
Principal Occupation Director of Year
During the Ponchatoula Term
Name Age(1) Past Five Years Since Expires
- ---------------------------- ---------- -------------------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
John C. Bohning 56 Director; President and 1974 2001
manager of Bohning's
Supermarket, Ponchatoula,
Louisiana, since 1961.
Lawrence C. Caldwell, Jr. 50 Director; President and Chief 1984 2000
Executive Officer of
Ponchatoula since January
1994. From 1984 until January
1994, served as Executive Vice
President and Chief Executive
Officer of Ponchatoula.
Present Chairman of Louisiana
League of Savings Institutions
and Commissioner on the
Louisiana Housing Finance
Agency.
Robert H. Gabriel 42 President of Gabriel Bldg. 1996 1999
Supply Co., Inc., Ponchatoula,
Louisiana, since 1982.
Dennis E. James 38 Director; Audit Partner with 1996 2000
Durnin & James, CPA, Amite,
Louisiana, since 1987.
Allen B. Pierson, Jr. 61 Director, Attorney and, from 1989(2) 2000
1991 to May 1996, a Partner
with the law firm of Matheny
and Pierson, Ponchatoula,
Louisiana.
Milton J. Schanzbach 71 Chairman of the Board; 1978 2001
Retired optometrist.
Barbara B. Theriot 53 Director; Secretary and 1994 1999
Treasurer of Ponchatoula since
1984.
</TABLE>
(Footnotes on next page)
<PAGE>
21
- ------------------
(1) Age as of December 31, 1997.
(2) In addition, Mr. Pierson served as a director of Ponchatoula from
1969 to 1983.
Directors of the Company initially will not be compensated by the
Company but will serve with and be compensated by Ponchatoula. It is not
anticipated that separate compensation will be paid to directors of the Company
until such time as such persons devote significant time to the separate
management of the Company's affairs, which is not expected to occur until the
Company becomes actively engaged in additional businesses other than holding the
stock of Ponchatoula. The Company may determine that such compensation is
appropriate in the future.
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.
Management of Ponchatoula
The directors and executive officers of Ponchatoula are the same as the
directors and executive officers of the Company. Information concerning the
names, ages, principal occupations during the past five years and term of office
of the directors and executive officers of Ponchatoula is set forth under "-
Management of the Company."
New Stock Benefit Plans
Employee Stock Ownership Plan. The Company has established the ESOP for
employees of the Company and Ponchatoula to become effective upon the
Conversion. Full-time employees of the Company and Ponchatoula who have been
credited with at least 1,000 hours of service during a twelve-month period are
eligible to participate in the ESOP.
As part of the Conversion, in order to fund the purchase of up to 8% of
the Conversion Stock sold in the Offerings (excluding any Contingent Shares), it
is anticipated that the ESOP will borrow funds from the Company. It is
anticipated that such loan will equal 100% of the aggregate purchase price of
the Conversion Stock acquired by the ESOP. The loan to the ESOP will be repaid
principally from the Company's and Ponchatoula's contributions to the ESOP over
a period of not less than 10 years, and the collateral for the loan will be the
Common Stock purchased by the ESOP. The interest rate for the ESOP loan is
expected to be a fixed rate of ___%. The Company may, in any plan year, make
additional discretionary contributions for the benefit of plan participants in
either cash or shares of Common Stock, which may be acquired through the
purchase of outstanding shares in the market or from individual stockholders,
upon the original issuance of additional shares by the Company or upon the sale
of treasury shares by the Company. Such purchases, if made, would be funded
through additional borrowings by the ESOP or additional contributions from the
Company. The timing, amount and manner of future contributions to the ESOP will
be affected by various factors, including prevailing regulatory policies, the
requirements of applicable laws and regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan will be held
in a suspense account and released to participants on a pro rata basis as debt
service payments are made. Shares released from the ESOP will be allocated to
each eligible participant's ESOP account based on the ratio of each such
participant's base compensation to the total base compensation of all eligible
ESOP participants. Forfeitures will be reallocated among remaining participating
employees and may reduce any amount the Company might otherwise have contributed
to the ESOP. Upon the completion of three years of service, the account balances
of participants
<PAGE>
22
within the ESOP will become 20% vested and will continue to vest at the rate of
20% for each additional year of service completed by the participant, such that
a participant will become 100% vested upon the completion of seven years of
service. Credit is given for years of service with Ponchatoula prior to adoption
of the ESOP. In the case of a "change in control," as defined, however,
participants will become immediately fully vested in their account balances.
Benefits may be payable upon retirement or separation from service. The
Company's contributions to the ESOP are not fixed, so benefits payable under the
ESOP cannot be estimated.
Messrs. Caldwell, James and Kelly Morse (an officer of Ponchatoula)
will serve as trustees of the ESOP. Under the ESOP, the trustees must generally
vote all allocated shares held in the ESOP in accordance with the instructions
of the participating employees, and unallocated shares will generally be voted
in the same ratio on any matter as those allocated shares for which instructions
are given, in each case subject to the requirements of applicable law and the
fiduciary duties of the trustees.
Stock Option Plan. Following consummation of the Conversion, the Board
of Directors of the Company intends to adopt a 1998 Stock Option Plan, which
will be designed to attract and retain qualified personnel in key positions,
provide directors, officers and key employees with a proprietary interest in the
Company as an incentive to contribute to the success of the Company and reward
key employees for outstanding performance. The Stock Option Plan will provide
for the grant of incentive stock options intended to comply with the
requirements of Section 422 of the Code ("incentive stock options"),
non-incentive or compensatory stock options, stock appreciation rights and
limited rights which will be exercisable only upon a change in control of the
Company (collectively "Awards"). Awards may be granted to directors and key
employees of the Company and any subsidiaries. The Stock Option Plan will be
administered and interpreted by a committee of the Board of Directors
("Committee"). Unless sooner terminated, the Stock Option Plan shall continue in
effect for a period of 10 years from the date the Stock Option Plan is adopted
by the Board of Directors. Subject to any applicable OTS regulations, upon
exercise of "Limited Rights" in the event of a change in control, the employee
will be entitled to receive a lump sum cash payment equal to the difference
between the exercise price of the related option and the fair market value of
the shares of Common Stock subject to the option on the date of exercise of the
right in lieu of purchasing the stock underlying the option.
Under the Stock Option Plan, the Committee will determine which
directors, officers and key employees will be granted Awards, whether options
will be incentive or compensatory options, the number of shares subject to each
Award, the exercise price of each option, whether options may be exercised by
delivering other shares of Common Stock and when such options become
exercisable. The per share exercise price of an incentive stock option must at
least equal the fair market value of a share of Common Stock on the date the
option is granted (110% of fair market value in the case of incentive stock
options granted to employees who are 5% stockholders).
At a meeting of stockholders of the Company following the Conversion,
which under applicable OTS regulations may be held no earlier than six months
after the completion of the Conversion, the Board of Directors intends to
present the 1998 Stock Option Plan to stockholders for approval and to reserve
an amount equal to 10% of the shares of Conversion Stock sold in the Offerings
(exclusive of any Contingent Shares) (or 112,412 shares based upon the issuance
of 1,124,125 shares of Conversion Stock at the maximum of the Estimated
Valuation Range), for issuance under the 1998 Stock Option Plan. OTS regulations
provide that, in the event such plan is implemented within one year following
the Conversion, no individual officer or employee of Ponchatoula may receive
more than 25% of the options granted under the 1998 Stock Option Plan and
non-employee directors may not receive more than 5% individually, or 30% in the
aggregate of the options granted under the 1998 Stock Option Plan. OTS
regulations also provide that the exercise price of any options granted under
any such plan must be at least equal to the fair market value of the Common
Stock as of the date of grant. Each stock option or portion thereof will be
exercisable at any time on or after it vests and will be exercisable until 10
years after its date of grant or for periods of up to one year following the
death, disability or other
<PAGE>
23
termination of the optionee's employment or service as a director. However,
failure to exercise incentive stock options within three months after the date
on which the optionee's employment terminates may result in the loss of
incentive stock option treatment.
At the time an Award is granted pursuant to the 1998 Stock Option Plan,
the recipient will not be required to make any payment in consideration for such
grant. With respect to incentive or compensatory stock options, the optionee
will be required to pay the applicable exercise price at the time of exercise in
order to receive the underlying shares of Common Stock. The shares reserved for
issuance under the 1998 Stock Option Plan may be authorized but previously
unissued shares, treasury shares, or shares purchased by the Company on the open
market or from private sources. In the event of a stock split, reverse stock
split or stock dividend, the number of shares of Common Stock under the 1998
Stock Option Plan, the number of shares to which any Award relates and the
exercise price per share under any option or stock appreciation right shall be
adjusted to reflect such increase or decrease in the total number of shares of
Common Stock outstanding. In the event the Company declares a special cash
dividend or return of capital following the implementation of the 1998 Stock
Option Plan in an amount per share which exceeds 10% of the fair market value of
a share of Common Stock as of the date of declaration, the per share exercise
price of all previously granted options which remain unexercised as of the date
of such declaration shall, subject to certain limitations, be proportionately
adjusted to give effect to such special cash dividend or return of capital as of
the date of payment of such special cash dividend or return of capital.
Under current provisions of the Code, the federal income tax treatment
of incentive stock options and compensatory stock options is different. As
regards incentive stock options, an optionee who meets certain holding period
requirements will not recognize income at the time the option is granted or at
the time the option is exercised, and a federal income tax deduction generally
will not be available to the Company at any time as a result of such grant or
exercise. With respect to compensatory stock options, the difference between the
fair market value on the date of exercise and the option exercise price
generally will be treated as compensation income upon exercise, and the Company
will be entitled to a deduction in the amount of income so recognized by the
optionee. Upon the exercise of a stock appreciation right, the holder will
realize income for federal income tax purposes equal to the amount received by
him, whether in cash, shares of stock or both, and the Company will be entitled
to a deduction for federal income tax purposes in the same amount.
It is currently expected that the 1998 Stock Option Plan will provide
that no individual officer will be able to receive stock options for more than
25% of the shares available under the 1998 Stock Option Plan, or 28,103 shares
if the amount of Conversion Stock sold in the Offerings is equal to the maximum
of the Estimated Valuation Range, vesting over a five-year period (or 5,620
shares per year based upon the maximum of the Estimated Valuation Range).
Recognition Plan. Following consummation of the Conversion, the Board
of Directors of the Company intends to adopt a 1998 Recognition Plan for
directors, officers and employees. The objective of the 1998 Recognition Plan
will be to enable the Company to provide directors, officers and employees with
a proprietary interest in the Company as an incentive to contribute to its
success. The Company intends to present the 1998 Recognition Plan to
stockholders for their approval at a meeting of stockholders which, pursuant to
applicable OTS regulations, may be held no earlier than six months subsequent to
completion of the Conversion.
The 1998 Recognition Plan will be administered by a committee of the
Board of Directors, which will have the responsibility to invest all funds
contributed to the trust created for the 1998 Recognition Plan (the "Trust").
The Company will contribute sufficient funds to the Trust so that the Trust can
purchase, following the receipt of stockholder approval, a number of shares
equal to an aggregate of 4% of the Conversion Stock sold in the Offerings
(exclusive of any Contingent Shares) (44,965 shares, based on the sale of
1,124,125 shares at the maximum of the Estimated Valuation Range). Shares of
Common Stock granted pursuant to the 1998
<PAGE>
24
Recognition Plan generally will be in the form of restricted stock vesting at
the rate of 20% per year over the five years following the date of grant. For
accounting purposes, compensation expense in the amount of the fair market value
of the Common Stock at the date of the grant to the recipient will be recognized
pro rata over the period during which the shares are payable. A recipient will
be entitled to all voting and other stockholder rights, except that the shares,
while restricted, may not be sold, pledged or otherwise disposed of and are
required to be held in the Trust. Under the terms of the 1998 Recognition Plan,
recipients of awards will be entitled to instruct the trustees of the 1998
Recognition Plan as to how the underlying shares should be voted, and the
trustees will be entitled to vote all unallocated shares in their discretion. If
a recipient's employment is terminated as a result of death or disability, all
restrictions will expire and all allocated shares will become unrestricted. The
Board of Directors of the Company can terminate the 1998 Recognition Plan at any
time, and if it does so, any shares not allocated will revert to the Company.
Recipients of grants under the 1998 Recognition Plan will not be required to
make any payment at the time of grant or when the underlying shares of Common
Stock become vested, other than payment of withholding taxes.
It is currently expected that the 1998 Recognition Plan will provide
that no individual officer will be able to receive an award for more than 25% of
the shares available under the 1998 Recognition Plan, or 9,775 shares if the
amount of Conversion Stock sold in the Offerings is equal to the maximum of the
Estimated Valuation Range, vesting over a five-year period (or 1,955 shares per
year based upon the maximum of the Estimated Valuation Range).
Indebtedness of Management
Ponchatoula offers mortgage loans to its directors, officers and
full-time employees for the financing of their primary residences and certain
other loans in accordance with applicable federal laws and regulations. Since
August 1989, all loans made by Ponchatoula to its executive officers, directors
and, to the extent otherwise permitted, principal stockholder(s), or any related
interest of the foregoing, must be (i) on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions by the savings institution with non-affiliated parties,
and (ii) not involve more than the normal risk of repayment or present other
unfavorable features.
The following table sets forth information as to all directors and
executive officers, including members of their immediate families and affiliated
entities, who had loans with Ponchatoula aggregating $60,000 or more during the
year ended December 31, 1997. These loans generally were made on substantially
the same terms as those prevailing at the time for comparable transactions with
non-affiliated persons. It is the belief by management that these loans neither
involve more than the normal risk of collectibility nor present other
unfavorable features.
<PAGE>
25
<TABLE>
<CAPTION>
Highest
Balance Interest
Year 1/1/97 Principal Rate
Name and Position Nature of Loan to Balance at as of
or Relationship Indebtedness Made 12/31/97 12/31/97 12/31/97
- ------------------------------- ------------------------ ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
John C. Bohning, First mortgage 1978 $ 8,643 $ 0 9.000%
Director Second mortgage 1986 71,341 64,963 8.000
Lawrence C. Caldwell, Jr., First mortgage(1) 1986 67,182 65,134 8.125
President and Signature loan 1992 4,299 0 8.500
Chief Executive Officer Signature loan 1996 15,000 0 8.500
First mortgage 1996 75,000 73,147 8.000
Signature loan 1997 6,000 6,000 8.500
Allen B. Pierson, Jr., First mortgage(2) 1985 43,069 39,992 8.125
Director First mortgage(2) 1986 30,413 28,571 9.000
</TABLE>
- ----------------------
(1) The mortgage was assumed by another borrower, but Mr. Caldwell has
secondary liability on the mortgage.
(2) The mortgage is secured by rental property.
Certain Transactions
Allen B. Pierson, Jr., a director of Ponchatoula, is an attorney and
receives a retainer from Ponchatoula of $350 per month. In addition, during the
year ended December 31, 1997, the fees paid by Ponchatoula to Mr. Pierson
(exclusive of the above described retainer) amounted to approximately $36,529 in
connection with loan closings.
<PAGE>
26
SELECTED FINANCIAL DATA
(Dollars in Thousands, except per share data)
The following selected financial and other data of Ponchatoula does not
purport to be complete and should be read in conjunction with, and is qualified
in its entirety by, the more detailed information appearing in the Prospectus.
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------------
Selected Financial 1997 1996 1995 1994 1993
Condition and Other Data: --------------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Total assets $59,580 $60,691 $56,876 $50,146 $49,740
Cash and cash equivalents(1) 1,254 1,298 2,244 920 3,388
Securities available for sale 16,866 18,871 19,207 17,671 --
Securities held to maturity 10,301 10,254 6,259 3,114 15,048
Loans held for sale 1,414 2,290 1,766 1,275 2,588
Loans and leases receivable, net 28,069 26,150 25,860 25,471 27,427
Real estate owned, net -- 141 -- 63 299
Deposits 42,111 44,427 44,889 41,961 45,913
Stockholders' equity 5,735 5,443 5,484 4,779 3,697
Full service offices 2 2 2 2 2
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Selected Operating Data:
Total interest income $4,247 $ 4,276 $ 3,988 $ 3,147 $3,343
Total interest expense 2,515 2,591 2,342 1,518 1,799
------ ------- ------- ------- ------
Net interest income 1,732 1,685 1,646 1,629 1,544
Provision for (recovery of)
loan and lease losses (16) 3 (6) (7) (4)
------ ------- ------- ------- ------
Net interest income after provision for
(recovery of) losses 1,748 1,682 1,652 1,636 1,548
373 434 378 417 695
Noninterest income
Noninterest expenses 1,620 1,910 1,571 1,423 1,567
------ ------- ------- ------- ------
Income before provision for income taxes 501 206 459 630 676
Income taxes 185 60 150 184 218
------ ------- ------- ------- ------
Net income $ 316 $ 146 $ 309 $ 446 $ 458
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Fully diluted earnings per share $ .51 $ .23 $ .51 $ .74 N/A
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Cash dividends declared per share $ .70 $ .51 $ .40 $ .10 N/A
------ ------- ------- ------- ------
------ ------- ------- ------- ------
</TABLE>
<TABLE>
<CAPTION>
At or For the Year Ended December 31,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Selected Ratios (3):
Return on average assets .53% .25% .57% .92% .91%
Return on average equity 5.67 2.63 5.85 11.04 13.28
Average equity to average assets 9.40 9.50 9.78 8.29 6.82
Equity to assets at end of period 9.63 8.97 9.64 9.53 7.43
Interest rate spread(4) 2.65 2.54 2.73 3.20 2.92
Net interest margin(4) 3.00 2.95 3.12 3.43 3.12
Non-performing loans and leases to total
loans and leases at end of period(5) .55 1.38 1.66 2.60 4.12
Non-performing assets to total assets at
end of period(5) .29 .83 .76 1.53 3.09
Average interest-earning assets to
average interest-bearing liabilities 108.26 109.01 108.75 107.02 105.38
Net interest income after provision for
(recovery of) loan and lease losses to
total noninterest expenses 107.90 88.06 105.16 114.97 98.79
Noninterest expenses to average total
assets 2.73 3.27 2.91 2.92 3.10
Dividend payout ratio(6) 134.49 211.64 77.67 13.45 N/A
</TABLE>
- -------------------------
(1) Includes cash and due from banks as well as interest-bearing deposits
in other institutions.
(2) The per share amounts do not reflect the Conversion or the Exchange
Ratio.
(3) With the exception of end of period ratios, all ratios are based on
average monthly balances during 1997,
1996 and 1995 and average quarterly balances during the prior years.
(4) Interest rate spread represents the difference between the average
yield on interest-earning assets and the average rate on
interest-bearing liabilities. Net interest margin represents net
interest income as a percentage of average interest-earning assets.
(5) Non-performing loans and leases consist of non-accrual loans and
leases, and non-performing assets consist of non-performing loans and
leases and real estate acquired by foreclosure or deed-in lieu thereof.
(6) Ratio based upon total dividends declared, including dividends waived
by the Mutual Holding Company.
<PAGE>
27
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Conversion is completed, it is presently anticipated
that the net proceeds from the sale of the Conversion Stock will be between $6.8
million and $9.3 million ($10.8 million assuming an increase in the Estimated
Valuation Range by 15%). See "Pro Forma Data" and "The Conversion - Stock
Pricing, Exchange Ratio and Number of Shares to be Issued" as to the assumptions
used to arrive at such amounts.
The Company plans to contribute to Ponchatoula 50% of the net Conversion
proceeds and retain the remaining 50% of the net proceeds. The Company intends
to use a portion of the net proceeds to make a loan directly to the ESOP to
enable the ESOP to purchase up to 8% of the Conversion Stock sold in the
Offerings. Based upon the issuance of 722,500 shares or 977,500 shares at the
minimum and maximum of the Estimated Valuation Range, respectively, the loan to
the ESOP would be $578,000 and $782,000, respectively. See "Management - New
Stock Benefit Plans - Employee Stock Ownership Plan." The remaining net proceeds
retained by the Company initially may be used to invest in investment
securities, mortgage-backed securities, U.S. Government and federal agency
securities of various maturities, deposits in either Ponchatoula or other
financial institutions, or a combination thereof. The portion of the net
proceeds retained by the Company may ultimately be used to support Ponchatoula's
lending activities, to support the future expansion of operations, and for other
business and investment purposes, including the payment of regular or special
cash dividends, possible repurchases of the Common Stock or returns of capital
(the Company and Ponchatoula have committed that no return of capital will be
made on the Common Stock during the one-year period subsequent to consummation
of the Conversion). Neither Ponchatoula nor the Company has any specific plans,
arrangements, or understandings regarding any branch acquisitions or
diversification of activities at this time.
Following the six-month anniversary of the completion of the Conversion (to
the extent permitted by the OTS), and based upon then existing facts and
circumstances, the Company's Board of Directors may determine to repurchase some
shares of Common Stock, subject to any applicable statutory and regulatory
requirements. 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 an improvement in the Company's return on
equity; (ii) the avoidance of dilution to stockholders by not having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Company and its stockholders. Any stock
repurchases will be subject to the determination of the Company's Board of
Directors that Ponchatoula will be capitalized in excess of all applicable
regulatory requirements after any such repurchases. The payment of dividends or
repurchase of stock, however, would be prohibited if Ponchatoula's net worth
would be reduced below the amount required for the liquidation account to be
established for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. As of the date of this Prospectus, the initial balance
of the liquidation account would be approximately $_____ million. See "Dividend
Policy," and "The Conversion - Liquidation Rights."
The Company will be a unitary savings and loan holding company which, under
existing laws, would generally not be restricted as to the types of business
activities in which it may engage, provided that Ponchatoula continues to be a
qualified thrift lender ("QTL").
The portion of the net proceeds contributed by the Company to Ponchatoula
will be added to Ponchatoula's general funds to be used for general corporate
purposes, including increased lending activities and purchases of securities.
While the amount of net proceeds received by Ponchatoula will further strengthen
Ponchatoula's capital position, which already substantially exceeds all
regulatory requirements, it should be noted
<PAGE>
28
that Ponchatoula is not converting primarily to raise capital. After the
Conversion, Ponchatoula's tangible capital ratio will be 14.01% (based upon the
midpoint of the Estimated Valuation Range). As a result, Ponchatoula will
continue to be a well-capitalized institution. After the Conversion, Ponchatoula
intends to emphasize capital strength and growth in assets and earnings.
The net proceeds may vary because total expenses of the Conversion may be
more or less than those estimated. The net proceeds will also vary if the number
of shares to be issued in the Conversion is adjusted to reflect a change in the
estimated pro forma market value of Ponchatoula. Payments for shares made
through withdrawals from existing deposit accounts at Ponchatoula will not
result in the receipt of new funds for investment by Ponchatoula but will result
in a reduction of Ponchatoula's interest expense and liabilities as funds are
transferred from interest-bearing certificates or other deposit accounts.
DIVIDEND POLICY
Upon completion of the Conversion, the Board of Directors of the Company
will have the authority to declare dividends on the Common Stock, subject to
statutory and regulatory requirements. The Board of Directors intends to pay
quarterly cash dividends on the Common Stock at an initial rate of 2% of the
Purchase Price per annum. Declarations of dividends by the Board of Directors
will depend upon a number of factors, including the amount of net proceeds
retained by the Company in the Conversion, investment opportunities available to
the Company or Ponchatoula, capital requirements, the Company's and
Ponchatoula's financial condition and results of operations, tax considerations,
statutory and regulatory limitations, and general economic conditions. No
assurances can be given that any dividends will be paid or that, if paid, will
not be reduced or eliminated in future periods. Special cash dividends, stock
dividends or returns of capital may be paid in addition to, or in lieu of,
regular cash dividends (however, the Company and Ponchatoula have committed to
the OTS that they will take no action with respect to any return of capital
during the one-year period following consummation of the Conversion).
Dividends from the Company may eventually depend, in part, upon receipt of
dividends from Ponchatoula, because the Company initially will have no source of
income other than dividends from Ponchatoula, earnings from the investment of
proceeds from the sale of Conversion Stock retained by the Company, and interest
payments with respect to the Company's loan to the ESOP. A regulation of the OTS
imposes limitations on "capital distributions" by savings institutions,
including cash dividends, payments by a savings institution to repurchase or
otherwise acquire its stock, payments to stockholders of another savings
institution in a cash-out merger and other distributions charged against
capital. As of December 31, 1997, Ponchatoula was a Tier 1 savings institution
and is expected to continue to so qualify immediately following the consummation
of the Conversion. Based on the regulatory capital level of Ponchatoula at
December 31, 1997, Ponchatoula would have been permitted to make a capital
distribution to the Company of up to $____ million as of January 1, 1998.
However, because the accumulated earnings and profits tax attribute was retained
by the Mutual Holding Company in the MHC Reorganization, Ponchatoula's
accumulated earnings and profits at December 31, 1997 was only approximately
$___ million. Any dividends or other distributions paid in excess of
Ponchatoula's accumulated earnings and profits would require a recapture of a
portion of Ponchatoula's bad debt reserves, resulting in a tax liability as
discussed below. The Conversion will re-unite the tax attribute retained by the
Mutual Holding Company with Ponchatoula's retained earnings and thus increase
Ponchatoula's ability to pay dividends.
Any payment of dividends by Ponchatoula to the Company which would be
deemed to be drawn out of Ponchatoula's bad debt reserves would require a
payment of taxes at the then-current tax rate by Ponchatoula on the amount of
earnings deemed to be removed from the reserves for such distribution.
Ponchatoula does not intend to make any distribution to the Company that would
create such a federal tax liability.
<PAGE>
29
Unlike Ponchatoula, the Company is not subject to the aforementioned
regulatory restrictions on the payment of dividends to its stockholders,
although the source of such dividends may eventually be dependent, in part, upon
dividends from Ponchatoula in addition to the net proceeds retained by the
Company and earnings thereon. The Company is subject, however, to the
requirements of Louisiana law, which generally permits the payment of dividends
out of surplus, except when (1) the corporation is insolvent or would thereby be
made insolvent, or (2) the declaration or payment thereof would be contrary to
any restrictions contained in the articles of incorporation. If there is no
surplus available for dividends, a Louisiana corporation may pay dividends out
of its net profits for the then current or the preceding fiscal year or both,
except that no dividend may be paid if the corporation's assets are exceeded by
its liabilities or if its net assets are less than the amount which would be
needed, under certain circumstances, to satisfy any preferential rights of
stockholders.
MARKET FOR COMMON STOCK
The Company has never issued capital stock (other than 100 shares issued to
Ponchatoula, which will be cancelled upon consummation of the Conversion), and
to date an active and liquid trading market has not developed for the 150,105
Public Ponchatoula Shares outstanding prior to the Offerings. Consequently,
there is no established market for the Common Stock at this time.
The Company has applied to have its Common Stock quoted on the Nasdaq
SmallCap System under the symbol "HSTD." 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. Additionally, the development of a liquid
public market depends on the existence of willing buyers and sellers, the
presence of which is not within the control of the Company, Ponchatoula or any
market maker. Accordingly, there can be no assurance that an active and liquid
trading market for the Common Stock will develop or that, if developed, it will
continue, nor is there any assurance that persons purchasing shares of Common
Stock will be able to sell them at or above the Purchase Price. Therefore,
investors in the Common Stock could have difficulty disposing of their shares
and should not view the Common Stock as a short-term investment. The absence of
an active and liquid trading market for the Common Stock could adversely affect
the price and liquidity of the Common Stock.
Quotation on the Nasdaq SmallCap System is dependent upon the Company
having at least three market makers for the Common Stock and at least 300
stockholders of record. Based upon the minimum of 722,500 shares of Conversion
Stock being offered, the minimum of 227,408 Exchange Shares to be issued, and
the anticipated pro forma ownership of officers, directors and the ESOP, the
Company expects to have more than 300 stockholders of record. Trident has
advised the Company that it intends to make a market in the Common Stock. While
the Company intends to seek with the assistance of Trident 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 commitments 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.
In addition, there can be no assurance that an active and liquid trading market
for the Common Stock will develop or that, if developed, it will continue.
The Ponchatoula Common Stock is not currently traded on any exchange or
quoted on the Nasdaq SmallCap System. Since Ponchatoula's initial public
offering was consummated on August 31, 1994, Ponchatoula is aware of only a
limited number of trades with respect to the Ponchatoula Common Stock. At
_________, 1998, Ponchatoula had approximately ____ stockholders of record.
Upon consummation of the Conversion, all Public Ponchatoula Shares will be
automatically converted into Exchange Shares based upon the Exchange Ratio.
<PAGE>
30
CAPITALIZATION
The following table presents the historical capitalization of Ponchatoula
at December 31, 1997, and the pro forma consolidated capitalization of the
Company after giving effect to the Conversion, based upon the sale of the number
of shares shown below and the other assumptions set forth under "Pro Forma
Data."
<TABLE>
<CAPTION>
The Company - Pro Forma
Based Upon Sale at $10.00 Per Share
-----------------------------------------------------------------
Ponchatoula- 722,500 Shares 850,000 Shares 977,500 Shares 1,124,125 Shares(1)
Historical (Minimum of (Midpoint of (Maximum of (15% above
Capitalization Range) Range) Range) Maximum of Range)
-------------- ------------- -------------- -------------- ------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2)....................................... $ 42,111 $ 42,111 $ 42,111 $ 42,111 $ 42,111
Borrowings........................................ 11,500 11,500 11,500 11,500 11,500
---------- ---------- ---------- ---------- ----------
Total deposits and borrowings..................... $ 53,611 $ 53,611 $ 53,611 $ 53,611 $ 53,611
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Stockholders' equity:
Preferred Stock, par value $.01, 5,000,000
shares authorized; none to be issued......... $ -- $ -- $ -- $ -- $ --
Common Stock, par value $.01,
10,000,000 shares authorized; shares to
be issued as reflected(3)................... 61 9 11 13 15
Additional paid-in capital(4).................. 2,017 8,975 10,235 11,494 12,943
Retained earnings(5)........................... 3,734 3,734 3,734 3,734 3,734
Net unrealized loss on securities available
for sale................................... (35) (35) (35) (35) (35)
Less:
Common Stock to be acquired by the
ESOP(6).................................... -- (578) (680) (782) (899)
Common Stock acquired or to be acquired (42) (331) (382) (433) (492)
by Recognition Plans(7)....................
---------- ---------- ---------- ---------- ----------
Total stockholders' equity........................ $ 5,735 $ 11,774 $ 12,883 $ 13,991 $ 15,266
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------
</TABLE>
(Footnotes on following page)
<PAGE>
31
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions following
the commencement of the Offerings.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Conversion Stock in the Offerings. Such withdrawals would reduce pro
forma deposits by the amount of such withdrawals.
(3) Assumes that (i) the 150,105 Public Ponchatoula Shares currently
outstanding are converted into 227,408, 267,539, 307,670 and 353,820
Exchange Shares at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, respectively, (ii) there are
no fractional Exchange Shares or Dissenting Shares, and (iii) the
number of shares of Conversion Stock shown are sold in the Offerings.
No effect has been given to the issuance of additional shares of Common
Stock pursuant to the proposed 1998 Option Plan. See "Pro Forma Data"
and "Management - New Stock Benefit Plans - Stock Option Plan."
(4) The pro forma additional paid-in capital includes the $101,675 to be
acquired by Ponchatoula upon the merger of the Mutual Holding Company
into Ponchatoula.
(5) The retained earnings of Ponchatoula will be substantially restricted
after the Conversion by virtue of the liquidation account to be
established in connection with the Conversion. See "The Conversion
Liquidation Rights." In addition, certain distributions from
Ponchatoula's retained earnings may be treated as being from its
accumulated bad debt reserve for tax purposes, which would cause
Ponchatoula to have additional taxable income.
(6) Assumes that 8% of the Conversion Stock sold in the Offerings will be
purchased by the ESOP, which is reflected as a reduction of
stockholders' equity. The ESOP shares will be purchased with funds
loaned to the ESOP by the Company. See "Pro Forma Data" and "Management
- New Stock Benefit Plans - Employee Stock Ownership Plan."
(7) The Company intends to adopt the 1998 Recognition Plan and to submit
such plan to stockholders at an annual or special meeting of
stockholders held at least six months following the consummation of the
Conversion. If the plan is approved by stockholders, the Company
intends to contribute sufficient funds to the trust created under the
1998 Recognition Plan to enable the trust to purchase a number of
shares of Common Stock equal to 4% of the Conversion Stock sold in the
Offerings. Assumes that stockholder approval has been obtained and that
the shares have been purchased in the open market at the Purchase
Price. However, in the event the Company issues authorized but unissued
shares of Common Stock to the 1998 Recognition Plan in the amount of 4%
of the Conversion Stock sold in the Offerings, the voting interests of
existing stockholders would be diluted by approximately 3.0%. The
shares are reflected as a reduction of stockholders' equity. See "Pro
Forma Data" and "Management - New Stock Benefit Plans - Recognition
Plan."
REGULATORY CAPITAL
At December 31, 1997, Ponchatoula exceeded all of the regulatory capital
requirements applicable to it. The table on the following page sets forth
Ponchatoula's historical regulatory capital at December 31, 1997 and the pro
forma regulatory capital of Ponchatoula after giving effect to the Conversion,
based upon the sale of the number of shares shown in the table. The pro forma
regulatory capital amounts reflect the receipt by Ponchatoula of 50% of the net
Conversion proceeds, minus the amounts to be loaned to the ESOP and contributed
to the 1998 Recognition Plan. The pro forma risk-based capital amounts assume
the investment of the net proceeds received by Ponchatoula in assets which have
a risk-weight of 50% under applicable regulations, as if such net proceeds had
been received and so applied at December 31, 1997.
<PAGE>
32
<TABLE>
<CAPTION>
Pro Forma at December 31, 1997 Based on
-----------------------------------------------------------------------------------
722,500 850,000 977,500 1,124,125
Shares Sold Shares Sold Shares Sold Shares Sold
Historical at at $10.00 at $10.00 at $10.00 at $10.00
December 31, 1997 Per Share Per Share Per Share Per Share
-------------------- ---------------------- ---------------------- -------------------- -----------------
Percent of Percent of Percent of Percent of Percent of
Amount Assets(1) Amount Assets(1) Amount Assets(1) Amount Assets(1) Amount Assets(1)
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tangible capital:
Actual ............. $5,770 9.68% $8,407 13.38% $8,885 14.01% $13,718 20.07% $9,912 15.33%
Requirement ........ 894 1.50 942 1.50 951 1.50 1,025 1.50 970 1.50
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
Excess ............. $4,876 8.18% $7,465 11.88% $7,934 12.51% $12,692 18.57% $8,942 13.83%
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
Core capital(2):
Actual ............. $5,770 9.68% $8,407 13.38% $8,885 14.01% $13,718 20.07% $9,912 15.33%
Requirement ........ 1,788 3.00 1,885 3.00 1,902 3.00 2,050 3.00 1,940 3.00
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
Excess ............. $3,982 6.68% $6,522 10.38% $6,983 11.01% $11,667 17.07% $7,972 12.33%
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
Risk-based capital(2):
Actual ............. $6,020 23.69% $8,657 33.23% $9,135 34.91% $13,968 51.44% $10,162 38.47%
Requirement ........ 2,033 8.00 2,084 8.00 2,093 8.00 2,172 8.00 2,113 8.00
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
Excess ............. $3,987 15.69% $6,573 25.23% $7,042 26.91% $11,796 43.44% $8,049 30.47%
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
------- --------- ---------- --------- ---------- --------- ------ ----------- -------- ---------
</TABLE>
- ---------------------------------
(1) Adjusted total or adjusted risk-weighted assets, as appropriate.
(2) Does not reflect the interest rate risk component to be added to the
risk-based capital requirements or, in the case of the core capital
requirement, the 4.0% requirement to be met in order for an institution
to be "adequately capitalized" under applicable laws and regulations.
<PAGE>
33
PRO FORMA DATA
The actual net proceeds from the sale of the Conversion Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $6.8 million and $9.3 million (or $10.8
million in the event the Estimated Valuation Range is increased by 15%) based
upon the following assumptions: (i) all shares of Conversion Stock will be sold
in the Subscription Offering; (ii) no fees will be paid to Trident on shares
purchased by (x) the ESOP and any other employee benefit plan of the Company or
Ponchatoula or (y) officers, directors, employees and members of their immediate
families, which purchases are estimate to aggregate 32,000 shares of Conversion
Stock at the midpoint of the Estimated Valuation Range; (iii) Trident will
receive a fee equal to 1.125% of the aggregate Purchase Price for sales in the
Subscription Offering (excluding the sale of shares to the ESOP, employee
benefit plans, and officers, directors, employees and their immediate families),
with such fee estimated to be $71,179 and $97,571 at the minimum and maximum of
the Estimated Valuation Range (or $112,747 in the event the Estimated Valuation
Range is increased by 15%); (iv) total other expenses, excluding the marketing
fees paid to Trident, will be $350,000; and (v) no Contingent Shares are issued.
Actual expenses may vary from those estimated. If any Contingent Shares are
issued, Trident will not receive a fee with respect to such shares.
Pro forma consolidated net income and stockholders' equity of the Company
have been calculated for the year ended December 31, 1997 as if the Conversion
Stock to be issued in the Offerings had been sold at the beginning of the period
and the net proceeds had been invested at 5.48%, which represents the yield on
one-year U.S. Government securities at December 31, 1997 (which, in light of
changes in interest rates in recent periods, are deemed by the Company and
Ponchatoula to more accurately reflect pro forma reinvestment rates than the
arithmetic average method). The effect of withdrawals from deposit accounts for
the purchase of Conversion Stock has not been reflected. A marginal tax rate of
34% has been assumed for the period, resulting in an after-tax yield of 3.62%
for the year ended December 31, 1997. 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. See Note 4 to the tables below. No
effect has been given in the pro forma stockholders' equity calculations for the
assumed earnings on the net proceeds. As discussed under "Use of Proceeds," the
Company intends to make a loan to fund the purchase of 8% of the Conversion
Stock by the ESOP and retain 50% of the net proceeds from the Offerings.
No effect has been given in the tables to the issuance of additional shares
of Common Stock equal to 10% of the Conversion Stock pursuant to the proposed
1998 Option Plan. See "Management - New Stock Benefit Plans - Stock Option
Plan." The table below gives effect to the 1998 Recognition Plan, which is
expected to be adopted by the Company following the Conversion and presented
(together with the 1998 Stock Option Plan) to stockholders for approval at an
annual or special meeting of stockholders to be held at least six months
following the consummation of the Conversion. If the 1998 Recognition Plan is
approved by stockholders, the 1998 Recognition Plan intends to acquire an amount
of Common Stock equal to 4% of the shares of Conversion Stock sold in the
Offerings, either through open market purchases or from authorized but unissued
shares of Common Stock. The table below assumes that stockholder approval has
been obtained, as to which there can be no assurance, and that the shares
acquired by the 1998 Recognition Plan are purchased in the open market at the
Purchase Price. No effect has been given to (i) the Company's results of
operations after the Conversion, (ii) the market price of the Common Stock after
the Conversion, or (iii) a less than 4% purchase by the 1998 Recognition Plan.
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 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 different than amounts that would be
available for distribution to stockholders in the event of liquidation.
<PAGE>
34
<TABLE>
<CAPTION>
At or For the Year Ended December 31, 1997
------------------------------------------------------------------------
722,500 850,000 977,500 1,124,125
Shares Sold Shares Sold Shares Sold Shares Sold
at $10.00 at $10.00 at $10.00 at $10.00 Per
Per Share Per Share Per Share Share (15%
(Minimum of (Midpoint (Maximum of above Maximum
Range) of Range) Range) of Range)(9)
-------------- ------------- ------------- ----------------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds............................. $ 7,225 $ 8,500 $ 9,775 $11,241
Less offering expenses and commissions..... (401) (434) (448) (463)
------- ------- ------- -------
Estimated net proceeds................... 6,804 8,066 9,327 10,778
Less: Shares purchased by the ESOP......... (578) (680) (782) (899)
Shares to be purchased by the
1998 Recognition Plan.............. (289) (340) (391) (450)
Plus assets from MHC....................... 102 102 102 102
------- ------- ------- -------
Total estimated net proceeds, as adjusted(1) $ 6,039 $ 7,148 $ 8,256 $ 9,531
------- ------- ------- -------
------- ------- ------- -------
Net income:
Historical............................... $ 316 $ 316 $ 316 $ 316
Pro forma income on net proceeds,
as adjusted(2)......................... 164 200 234 275
Pro forma ESOP adjustment(3)............. (38) (45) (52) (59)
Pro forma 1998 Recognition Plan
adjustment(4).......................... (38) (45) (52) (59)
------- ------- ------- -------
Pro forma net income..................... $ 404 $ 426 $ 446 $ 473
------- ------- ------- -------
------- ------- ------- -------
Net income per share(5)(6):
Historical............................... $ .35 $ .30 $ .26 $ .23
Pro forma income on net proceeds, as
adjusted............................... .18 .18 .19 .19
Pro forma ESOP adjustment(3)............. (.04) (.04) (.04) (.04)
Pro forma 1998 Recognition Plan
adjustment(4).......................... (.04) (.04) (.04) (.04)
------- ------- ------- -------
Pro forma net income per share(5)(6)..... $ .45 $ .40 $ .37 $ .34
------- ------- ------- -------
------- ------- ------- -------
Offering price to pro forma net
income per share (5)..................... 22.2x 25.0x 27.0x 29.4x
------- ------- ------- -------
------- ------- ------- -------
Stockholders' equity:
Historical(7)............................ $ 5,837 $ 5,837 $ 5,837 $ 5,837
Estimated net proceeds................... 6,804 8,066 9,327 10,778
Less: Common Stock acquired
by the ESOP(3)................... (578) (680) (782) (899)
Common Stock to be acquired by
the 1998 Recognition Plan(4)..... (289) (340) (391) (450)
------- ------- ------- -------
Pro forma stockholders' equity(6)(7)(8).. $ 11,774 $ 12,883 $ 13,991 $ 15,266
------- ------- ------- -------
------- ------- ------- -------
Stockholders' equity per share(5):
Historical............................... $ 6.14 $ 5.22 $ 4.54 $ 3.95
Estimated net proceeds................... 7.16 7.22 7.26 7.29
Less: Common Stock acquired
by the ESOP(3)................... (.61) (.61) (.61) (.61)
Common Stock to be acquired by
the 1998 Recognition Plan(4)..... (.30) (.30) (.30) (.30)
------- ------- ------- -------
Pro forma stockholders' equity
per share(6)(7)(8)..................... $12.39 $11.53 $10.89 $10.33
------- ------- ------- -------
------- ------- ------- -------
Offering price as a percentage of pro
forma stockholders' equity per share(5).. 80.7% 86.7% 91.8% 96.8%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
(Footnotes on following page)
<PAGE>
35
- ---------------
(1) Estimated net proceeds, as adjusted, consist of the estimated net
proceeds from the Offerings minus (i) the proceeds attributable to the
purchase by the ESOP and (ii) the value of the shares to be purchased
by the 1998 Recognition Plan, subject to stockholder approval, after
the Conversion at an assumed purchase price of $10.00 per share.
(2) Net of the impact of state franchise/share taxes, which are estimated
to be $54,000, $59,000, $65,000 and $70,000 at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively.
(3) It is assumed that 8% of the shares of Conversion Stock sold in the
Offerings will be purchased by the ESOP with funds loaned by the
Company. The Company and Ponchatoula intend to make annual
contributions to the ESOP in an amount at least equal to the principal
and interest requirement of the debt. The pro forma net income assumes
(i) that the loan to the ESOP is payable over 10 years, with the ESOP
shares having an average fair value of $10.00 per share in accordance
with SOP 93-6, entitled "Employers' Accounting for Employee Stock
Ownership Plans," of the American Institute of Certified Public
Accountants ("AICPA"), and (ii) the effective tax rate was 34% for the
period. See "Management - New Stock Benefit Plans - Employee Stock
Ownership Plan."
(4) It is assumed that the 1998 Recognition Plan will purchase, following
stockholder approval of such plan, a number of shares of Common Stock
equal to 4% of the shares of Conversion Stock sold in the Offerings for
issuance to directors, officers and employees. Funds used by the 1998
Recognition Plan to purchase the shares initially will be contributed
to the 1998 Recognition Plan by the Company. It is further assumed that
the shares were acquired by the 1998 Recognition Plan at the beginning
of the period presented in open market purchases at the Purchase Price
and that 20% of the amount contributed, net of taxes, was an amortized
expense during the year ended December 31, 1997. The issuance of
authorized but unissued shares of Common Stock pursuant to the 1998
Recognition Plan in the amount of 4% of the Conversion Stock sold in
the Offerings would dilute the voting interests of existing
stockholders by approximately 3.0% and under such circumstances pro
forma net income per share for the year ended December 31, 1997 would
be $.45 $.40, $.37 and $.34 at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range, respectively, and
pro forma stockholders' equity per share at December 31, 1997 would be
$12.32, $11.48, $10.86 and $10.32 at the minimum, midpoint, maximum and
15% above the maximum of such range, respectively. There can be no
assurance that the actual purchase price of shares purchased by or
issued to the 1998 Recognition Plan will be equal to the Purchase
Price. See "Management - New Stock Benefit Plans - Recognition Plan."
(5) The net income per share calculations are based upon 894,998,
1,052,939, 1,210,880 and 1,392,512 shares of Common Stock at the
minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively, which amounts include 227,408, 267,539,
307,670 and 353,820 Exchange Shares, respectively, and exclude, in
accordance with SOP 93-6, 54,910, 64,600, 74,290 and 85,434 shares,
respectively, representing the ESOP shares which have not been
committed for release during the year ended December 31, 1997. Assuming
the uncommitted ESOP shares were not subtracted from the number of
shares of Common Stock outstanding at December 31, 1997, the offering
price as a multiple of pro forma net income per share would be 23.5x,
26.2x, 28.8x and 31.3x at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Valuation Range, respectively. The
historical net income per share and historical stockholders' equity per
share figures represent Ponchatoula's historical per share amounts
divided by the Exchange Ratio. For a description of the Exchange Ratio,
see "The Conversion - Stock Pricing, Exchange Ratio and Number of
Shares to be Issued in the
<PAGE>
36
Conversion." For purposes of calculating pro forma stockholders' equity
per share, it is assumed that the number of shares of Common Stock
outstanding total 949,908, 1,117,539, 1,285,170 and 1,477,945 shares at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range.
(6) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the 1998 Option Plan, which will be adopted by the
Company following the Conversion and presented for approval by
stockholders at an annual or special meeting of stockholders of the
Company held at least six months following the consummation of the
Conversion. If the 1998 Option Plan is approved by stockholders, an
amount equal to 10% of the Conversion Stock sold in the Offerings, or
72,250, 85,000, 97,750 and 112,412 shares at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range,
respectively, will be reserved for future issuance upon the exercise of
options to be granted under the 1998 Option Plan. The issuance of
Common Stock pursuant to the exercise of options under the 1998 Option
Plan will result in the dilution of existing stockholders' interests.
Assuming stockholder approval of the 1998 Option Plan, that all these
options were exercised at the beginning of the period at an exercise
price of $10.00 per share and that the shares to fund the 1998
Recognition Plan are acquired through open market purchases at the
Purchase Price, pro forma net income per share for the year ended
December 31, 1997 would be $.44, $.40, $.37 and $.34 at the minimum,
midpoint, maximum and 15% above the maximum of the Estimated Valuation
Range, respectively, and pro forma stockholders' equity per share at
December 31, 1997 would be $12.22, $11.42, $10.82 and $10.31 at the
minimum, midpoint, maximum and 15% above the maximum of such range,
respectively. See "Management - New Stock Benefit Plans - Stock Option
Plan."
(7) Includes the $101,675 to be acquired by Ponchatoula upon the merger of
the Mutual Holding Company into Ponchatoula.
(8) The retained earnings of Ponchatoula will be substantially restricted
after the Conversion by virtue of the liquidation account to be
established in connection with the Conversion. See "Dividend Policy"
and "The Conversion - Liquidation Rights." In addition, certain
distributions from Ponchatoula's retained earnings may be treated as
being from its accumulated bad debt reserve for tax purposes, which
would cause Ponchatoula to have additional taxable income. Pro forma
stockholders' equity and pro forma stockholders' equity per share do
not give effect to the liquidation account or the bad debt reserves
established by Ponchatoula for federal income tax purposes in the event
of a liquidation of Ponchatoula.
(9) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up
to 15% to reflect changes in market and financial conditions following
the commencement of the Offerings.
<PAGE>
37
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
General
The Company is authorized to issue 10,000,000 shares of Common Stock
having a par value of $.01 per share and 5,000,000 shares of preferred stock,
par value $.01 per share (the "Preferred Stock"). The Company currently expects
to issue up to a maximum of 1,285,170 shares of Common Stock, including 977,500
shares of Conversion Stock and 307,670 shares of Exchange Shares, and no 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 Conversion Stock and the issuance of the Exchange Shares in accordance with
the Plan of Conversion, all such stock will be duly authorized, fully paid and
nonassessable based on the laws and regulations in effect as of the date of
consummation of the Conversion.
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.
Common Stock
Dividends. The Company can pay dividends if, as and when declared by
its Board of Directors, subject to compliance with limitations which are imposed
by law. 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 completion of the 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 Louisiana law or the Company's Articles
of Incorporation or as are otherwise presented to them by the Board of
Directors. Except as discussed in "Restrictions on Acquisition of the Company
and the Association," each holder of Common Stock will be entitled to one vote
per share and will not have any right to cumulate votes in the election of
directors. If the Company issues Preferred Stock, holders of the Preferred Stock
may also possess voting rights.
Liquidation. In the event of any liquidation, dissolution or winding up
of the Association, the Company, as the sole holder of the Association's capital
stock, would be entitled to receive, after payment or provision for payment of
all debts and liabilities of the Association (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
Association available for distribution. In the event of any 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
in the future. The Common Stock is not subject to redemption.
<PAGE>
38
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 stockholder 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.
RESTRICTIONS ON ACQUISITION OF THE COMPANY
AND THE ASSOCIATION
General
As described below, certain provisions in the Company's Articles of
Incorporation and Bylaws and in the Company's and the Association's benefit
plans, together with provisions of Louisiana corporate law and OTS regulations,
may have anti-takeover effects. In addition, regulatory restrictions may make it
difficult for persons or companies to acquire control of either the Company or
the Association.
Restrictions in the Company's Articles of Incorporation and Bylaws
General. A number of provisions of the Company's Articles 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 Articles of Incorporation and Bylaws which might be
deemed to have a potential "anti-takeover" effect. These provisions may have the
effect of discouraging a future takeover attempt which is not approved by the
Board of Directors but which 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
might desire to participate in such a transaction may not have an opportunity to
do so. Such provisions will also render the removal of the current Board of
Directors or management of the Company more difficult. The following description
of certain of the provisions of the Articles of Incorporation and Bylaws of the
Company is necessarily general and reference should be made in each case to such
Articles of Incorporation and Bylaws, which are incorporated herein by
reference. See "Available Information" as to how to obtain a copy of these
documents.
Limitation on Voting Rights. Article 10.A of the Company's Articles of
Incorporation provides that for a period of five years from the date of the
Conversion, no person shall directly or indirectly offer to acquire or acquire
the beneficial ownership of (i) more than 10% of the issued and outstanding
shares of any class of an equity security of the Company, or (ii) any securities
convertible into, or exercisable for, any equity securities of the Company if,
assuming conversion or exercise by such person of all securities of which such
person is the beneficial owner which are convertible into, or exercisable for,
such equity securities (but of no securities convertible into, or exercisable
for, such equity securities of which such person is not the beneficial owner),
such person would be the beneficial owner of more than 10% of any class of an
equity security of the Company. The term "person" is broadly defined to prevent
circumvention of this restriction.
The foregoing restrictions do not apply to (i) any offer with a view
toward public resale made exclusively to the Company by underwriters or a
selling group acting on its behalf, (ii) any tax-qualified employee benefit plan
or arrangement established by the Company or the Association and any trustee of
such a plan or arrangement, and (iii) any other offer or acquisition approved in
advance by the affirmative vote of two-thirds of the Company's entire Board of
Directors. In the event that shares are acquired in violation of Article 10.A,
all shares beneficially owned by any person in excess of 10% shall be considered
"Excess Shares" and shall not
<PAGE>
39
be counted as shares entitled to vote and shall not be voted by any person or
counted as voting shares in connection with any matters submitted to
stockholders for a vote, and the Board of Directors may cause such Excess Shares
to be transferred to an independent trustee for sale on the open market or
otherwise, with the expenses of such trustee to be paid out of the proceeds of
sale.
Board of Directors. Article 6.B of the Articles of Incorporation of the
Company contains provisions relating to the Board of Directors and provides,
among other things, that the Board of Directors shall be divided into three
classes as nearly equal in number as possible, with the term of office of one
class expiring each year. See "Management of the Company." 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 stockholder 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. Cumulative voting in the
election of directors is not permitted.
Directors may be removed without cause at a duly constituted meeting of
stockholders called expressly for that purpose upon the vote of the holders of
at least 75% of the total votes eligible to be cast by stockholders, and with
cause by the affirmative vote of a majority of the total votes eligible to be
cast by stockholders. Cause for removal shall exist only if the director whose
removal is proposed has been either declared of unsound mind by an order of a
court of competent jurisdiction, convicted of a felony or of an offense
punishable by imprisonment for a term of more than one year by a court of
competent jurisdiction, or deemed liable by a court of competent jurisdiction
for gross negligence or misconduct in the performance of such director's duties
to the Company. Any vacancy occurring in the Board of Directors for any reason
(including an increase in the number of authorized directors) may be filled by
the affirmative vote of a majority of the remaining directors, whether or not a
quorum of the Board of Directors is present, and a director appointed to fill a
vacancy shall serve until the expiration of the term to which he was appointed.
Article 6.F of the Articles of Incorporation governs nominations for
election to the Board, and requires all nominations for election to the Board of
Directors other than those made by the Board to be made by a stockholder
eligible to vote at an annual meeting of stockholders who has complied with the
notice provisions in that section. Written notice of a stockholder nomination
must be delivered to, or mailed to and received at, the principal executive
offices of the Company not later than 60 days prior to the anniversary date of
the immediately preceding annual meeting, provided that, with respect to the
first scheduled annual meeting following completion of the Conversion, notice
must be received no later than the close of business on the 10th day following
the date on which notice of such meeting is mailed to stockholders, and provided
further that the notice by the stockholder must be delivered or received no
later than the close of business on the fifth day preceding the date of the
meeting. Each such notice shall set forth (a) as to each person whom the
stockholder proposes to nominate as a director, and as to the stockholder giving
the notice, (i) the name, age, business address and residence address of such
person; (ii) the principal occupation or employment of such person; (iii) the
class and number of shares of the Company's stock beneficially owned by such
person on the date of the stockholder notice; and (iv) such other information
regarding such person as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC; and (b) to the extent known by the
stockholder giving the notice, (i) the name and address of any other
stockholders supporting such nominees; and (ii) the class and number of shares
of the Company's stock beneficially owned by any other stockholders supporting
such nominees, on the date of such stockholder notice.
Article 8.A of the Articles of Incorporation provides that a director
or officer of the Company will not be personally liable for monetary damages for
any action taken, or any failure to take any action, as a director or officer
except to the extent that by law a director's or officer's liability for
monetary damages may not be limited. This provision does not eliminate or limit
the liability of the Company's directors and officers for (a) any breach of the
director's or officer's duty of loyalty to the Company or its stockholders, (b)
any acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (c) any
<PAGE>
40
unlawful dividend, stock repurchase or other distribution, payment or return of
assets to stockholders, or (d) any transaction from which the director or
officer derived an improper personal benefit. This provision may preclude
stockholder derivative actions and may be construed to preclude other
third-party claims against the directors and officers.
The Company's Articles of Incorporation also provide that the Company
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
including actions by or in the right of the Company, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise. Such
indemnification is furnished to the full extent provided by law against expenses
(including attorneys' fees), judgments, fines, amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding. The indemnification provisions also permit the Company to pay
reasonable expenses in advance of the final disposition of any action, suit or
proceeding as authorized by the Company's Board of Directors, provided that the
indemnified person undertakes to repay the Company if it is ultimately
determined that such person was not entitled to indemnification.
The rights of indemnification provided in the Company's Articles of
Incorporation are not exclusive of any other rights which may be available under
the Company's Bylaws, any insurance or other agreement, by vote of stockholders
or directors (regardless of whether directors authorizing such indemnification
are beneficiaries thereof) or otherwise. In addition, the Articles of
Incorporation authorize the Company to maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company,
whether or not the Company would have the power to provide indemnification to
such person. By action of the Board of Directors, the Company may create and
fund a trust fund or other fund or form of self-insurance arrangement of any
nature, and may enter into agreements with its officers, directors, employees
and agents for the purpose of securing or insuring in any manner its obligation
to indemnify or advance expenses provided for in the provisions in the Articles
of Incorporation and Bylaws regarding indemnification. These provisions are
designed to reduce, in appropriate cases, the risks incident to serving as a
director, officer, employee or agent and to enable the Company to attract and
retain the best personnel available.
The provisions regarding director elections and other provisions in the
Articles of Incorporation and Bylaws are generally designed to protect the
ability of the Board of Directors to negotiate with the proponent of an
unfriendly or unsolicited proposal to take over or restructure the Company by
making it more difficult and time-consuming to change majority control of the
Board, whether by proxy contest or otherwise. The general effect of these
provisions will be to generally require at least two (and possibly three) annual
stockholders' meetings, instead of one, to effect a change in control of the
Board of Directors of the Company even if holders of a majority of the Company's
capital stock believed that a change in the composition of the Board of
Directors was desirable. Because a majority of the directors at any given time
will have prior experience as directors, these requirements will help to ensure
continuity and stability of the Company's management and policies and facilitate
long-range planning for the Company's business. The provisions relating to
removal of directors and filling of vacancies are consistent with and supportive
of a classified board of directors.
The procedures regarding stockholder nominations will provide the Board
of Directors with sufficient time and information to evaluate a stockholder
nominee to the Board and other relevant information, such as existing
stockholder support for the nominee. The proposed procedures, however, will
provide incumbent directors advance notice of a dissident slate of nominees for
directors, and will make it easier for the Board to solicit proxies resisting
such nominees. This may make it easier for the incumbent directors to retain
their status as directors, even when certain stockholders view the stockholder
nominations as in the best interests of the Company or its stockholders.
<PAGE>
41
Authorized Shares. Article 4 of the Articles of Incorporation
authorizes the issuance of 10,000,000 shares of Common Stock and 5,000,000
shares of Preferred Stock. The shares of Common Stock and Preferred Stock were
authorized in an amount greater than that to be issued in the Conversion to
provide the Company's Board of Directors with as much flexibility as possible to
effect, among other transactions, financings, acquisitions, stock dividends,
stock splits and 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 rates, and
liquidation preferences. As a result of the ability to fix voting rights for a
series of Preferred Stock, the Board has the power, to the extent consistent
with its fiduciary duty, to issue a series of Preferred Stock to persons
friendly to management in order to attempt to block a post-tender offer merger
or other transaction by which a third party seeks control, and thereby assist
management to retain its position. The Company's Board currently has no plans
for the issuance of additional shares, other than the issuance of additional
shares pursuant to stock benefit plans.
Special Meetings of Stockholders and Stockholder Proposals. Article 9.B
of the Articles of Incorporation provides that special meetings of the Company's
stockholders may only be called by (i) the President, (ii) a majority of the
Board of Directors, (iii) by persons who beneficially own an aggregate of at
least 50% of the outstanding voting shares, except as may otherwise be provided
by law. The Articles of Incorporation also provide that any action permitted to
be taken at a meeting of stockholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, is given by the holders
of all outstanding shares entitled to vote and filed with the Secretary of the
Company.
Article 9.D of the Company's Articles of Incorporation provides that
only such business as shall have been properly brought before an annual meeting
of stockholders shall be conducted at the annual meeting. In order to be
properly brought before an annual meeting following completion of the
Conversion, business must be (a) brought before the meeting by or at the
direction of the Board of Directors or (b) otherwise properly brought before the
meeting by a stockholder who has given timely and complete notice thereof in
writing to the Company. For stockholder proposals to be included in the
Company's proxy materials, the stockholder must comply with all the timing and
informational requirements of Rule 14a-8 of the Exchange Act. With respect to
stockholder proposals to be considered at the annual meeting of stockholders but
not included in the Company's proxy materials, the stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 60 days prior to the anniversary date of the immediately
preceding annual meeting; provided, however, that with respect to the first
scheduled annual meeting following completion of the Conversion, such written
notice must be received by the Company not later than the close of business on
the 10th day following the day on which notice of the meeting was first mailed
to stockholders; and provided further, that the written notice must be received
by the Company not later than the close of business on the fifth day preceding
the date of the meeting. A stockholder's notice shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting, (b)
the name and address, as they appear on the Company's books, of the stockholder
proposing such business, and, to the extent known, any other stockholders known
by such stockholder to be supporting such proposal, (c) the class and number of
shares of the Company which are beneficially owned by the stockholder and, to
the extent known, by any other stockholders known by such stockholder to be
supporting such proposal on the date of such stockholder notice, and (d) any
financial interest of the stockholder in such proposal (other than interests
which all stockholders would have). The presiding officer of an annual meeting
shall determine and declare to the meeting whether the stockholder proposal was
made in accordance with the provisions of Article 9.D, and any such proposal not
properly brought before the meeting shall not be acted upon at the annual
meeting.
The procedures regarding stockholder proposals are designed to provide
the Board with sufficient time and information to evaluate a stockholder
proposal and other relevant information, such as existing stockholder
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42
support for the proposal. The proposed procedures, however, will give incumbent
directors advance notice of a stockholder proposal. This may make it easier for
the incumbent directors to defeat a stockholder proposal, even when certain
stockholders view such proposal as in the best interests of the Company or its
stockholders.
Amendment of Articles of Incorporation and Bylaws. Article 11 of the
Company's Articles of Incorporation generally provides that any amendment of the
Articles of Incorporation must be first approved by a majority of the Board of
Directors and then by the holders of a majority of the shares of the Company
entitled to vote in an election of directors, except that the approval of 75% of
the shares of the Company entitled to vote in an election of directors is
required for any amendment to Articles 6 (directors), 7 (preemptive rights), 8
(indemnification), 9 (meetings of stockholders and stockholder proposals), 10
(restrictions on acquisitions) and 11 (amendments).
The Bylaws of the Company may be amended by a majority of the Board of
Directors or by the affirmative vote of a majority of the total shares entitled
to vote in an election of directors, except that the affirmative vote of at
least 75% of the total shares entitled to vote in an election of directors shall
be required to amend, adopt, alter, change or repeal any provision inconsistent
with certain specified provisions of the Bylaws.
Louisiana Corporate Law
In addition to the provisions contained in the Company's Articles of
Incorporation, the Louisiana Business Corporation Law ("BCL") includes certain
provisions applicable to Louisiana corporations, such as the Company, which may
be deemed to have an anti-takeover effect. Such provisions include (i) rights of
stockholders to receive the fair value of their shares of stock following a
control transaction from a controlling person or group and (ii) requirements
relating to certain business combinations.
The BCL provides that any person who acquires "control shares" will be
able to vote such shares only if the right to vote is approved by the
affirmative vote of at least a majority of both (1) all the votes entitled to be
cast by stockholders and (2) all the votes entitled to be cast by stockholders
excluding "interested shares". "Control shares" is defined to include shares
that would entitle the holder thereof, assuming the shares had full voting
rights, to exercise voting power within any of the following ranges: (a) 20% or
more but less than one-third of all voting power; (b) one-third or more but less
than a majority of all voting power; or (c) a majority or more of all voting
power. Any acquisition that would result in the ownership of control shares in a
higher range would require an additional vote of stockholders. "Interested
shares" includes control shares and any shares held by an officer or employee
director of the corporation. If the control shares are provided full voting
rights, all stockholders have dissenters' rights entitling them to receive the
"fair cash value" of their shares, which shall not be less than the highest
price paid per share to acquire the control shares.
The BCL defines a "Business Combination" generally to include (a) any
merger, consolidation or share exchange of the corporation with an "Interested
Shareholder" or affiliate thereof, (b) any sale, lease, transfer or other
disposition, other than in the ordinary course of business, of assets equal to
10% or more of the market value of the corporation's outstanding stock or of the
corporation's net worth to any Interested Shareholder or affiliate thereof in
any 12-month period, (c) the issuance or transfer by the corporation of equity
securities of the corporation with an aggregate market value of 5% or more of
the total market value of the corporation's outstanding stock to any Interested
Shareholder or affiliate thereof, except in certain circumstances, (d) the
adoption of any plan or proposal for the liquidation or dissolution of the
corporation in which anything other than cash will be received by an Interested
Shareholder or affiliate thereof, or (e) any reclassification of the
corporation's stock or merger which increases by 5% or more the ownership
interest of the Interested Shareholder or any affiliate thereof. "Interested
Shareholder" includes any person who beneficially owns, directly or indirectly,
10% or more of the corporation's outstanding voting stock, or any affiliate
thereof who had such
<PAGE>
43
beneficial ownership during the preceding two years, excluding in each case the
corporation, its subsidiaries and their benefit plans.
Under the BCL, a Business Combination must be approved by any vote
otherwise required by law or the articles of incorporation, and by the
affirmative vote of at least each of the following: (1) 80% of the total
outstanding voting stock of the corporation; and (2) two-thirds of the
outstanding voting stock held by persons other than the Interested Shareholder.
However, the supermajority vote requirement shall not be applicable if the
Business Combination meets certain minimum price requirements and other
procedural safeguards, or if the transaction is approved by the Board of
Directors prior to the time that the Interested Shareholder first became an
Interested Shareholder.
The BCL authorizes the board of directors of Louisiana business
corporations to create and issue (whether or not in connection with the issuance
of any of its shares or other securities) rights and options granting to the
holders thereof (1) the right to convert shares or obligations into shares of
any class, or (2) the right or option to purchase shares of any class, in each
case upon such terms and conditions as the Company may deem expedient.
Anti-Takeover Effects of the Articles of Incorporation and Bylaws and Management
Remuneration Adopted in the Conversion
The foregoing provisions of the Articles of Incorporation and Bylaws of
the Company and Louisiana law could have the effect of discouraging an
acquisition of the Company or stock purchases in furtherance of an acquisition,
and could accordingly, under certain circumstances, discourage transactions
which might otherwise have a favorable effect on the price of the Company's
Common Stock.
In addition, certain provisions of the Company's 1998 Stock Option Plan
and the 1998 Recognition Plan, each of which will not be implemented prior to
the receipt of stockholder approval, provide for accelerated benefits to
participants in the event of a change in control of the Company, the Association
or a tender or exchange offer for their stock. See "Management - New Stock
Benefit Plans". The foregoing provisions and limitations may make it more
difficult for companies or persons to acquire control of the Company.
Additionally, the provisions could deter offers to the stockholders which might
be viewed by such stockholders to be in their best interests.
The Board of Directors believes that the provisions described above are
prudent and will reduce vulnerability to takeover attempts and certain other
transactions that are not negotiated with and approved by the Board of Directors
of the Company. The Board of Directors believes that these provisions are in the
best interests of the Company and its future stockholders. In the Board of
Directors' judgment, the Board of Directors is in the best position to determine
the true value of the Company and to negotiate more effectively for what may be
in the best interests of its stockholders. Accordingly, the Board of Directors
believes that it is in the best interests of the Company and its future
stockholders to encourage potential acquirors to negotiate directly with the
Board of Directors and that these provisions will encourage such negotiations
and discourage hostile 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 prices reflective of the true value of the Company and
where the transaction is in the best interests of all stockholders.
Despite the Board of Directors' belief as to the benefits to the
Company's stockholders of the foregoing provisions, these provisions also may
have the effect of discouraging a future takeover attempt in which stockholders
might receive a substantial premium for their shares over then current market
prices and may tend to perpetuate existing management. As a result, stockholders
who might desire to participate in such a
<PAGE>
44
transaction may not have an opportunity to do so. The Board of Directors,
however, has concluded that the potential benefits of these provisions outweigh
their possible disadvantages.
The Board of Directors of the Company and the Association are not aware
of any effort that might be made to acquire control of the Association or the
Company.
Regulatory Restrictions
The Change in Association Control Act provides that no person, acting
directly or indirectly or through or in concert with one or more other persons,
may acquire control of a savings institution unless the OTS has been given 60
days' prior written notice. The Home Owners' Loan Act provides that no company
may acquire "control" of a savings institution without the prior approval of the
OTS. Any company that acquires such control becomes a savings and loan holding
company subject to registration, examination and regulation by the OTS. Pursuant
to federal regulations, control of a savings institution is conclusively deemed
to have been acquired by, among other things, the acquisition of more than 25%
of any class of voting stock of the institution or the ability to control the
election of a majority of the directors of an institution. Moreover, control is
presumed to have been acquired, subject to rebuttal, upon the acquisition of
more than 10% of any class of voting stock, or of more than 25% of any class of
stock, of a savings institution where certain enumerated "control factors" are
also present in the acquisition. The OTS may prohibit an acquisition if (i) it
would result in a monopoly or substantially lessen competition, (ii) the
financial condition of the acquiring person might jeopardize the financial
stability of the institution, or (iii) the competence, experience or integrity
of the acquiring person indicates that it would not be in the interest of the
depositors or of the public to permit the acquisition of control by such person.
The foregoing restrictions do not apply to the acquisition of a savings
institution's capital stock by one or more tax-qualified employee stock benefit
plans, provided that the plan or plans do not have beneficial ownership in the
aggregate of more than 25% of any class of equity security of the savings
institution.
REVIEW OF OTS ACTION
Any person aggrieved by a final action of the OTS which approves, with
or without conditions, or disapproves a plan of conversion may obtain review of
such action by filing in the court of appeals of the United States for the
circuit in which the principal office or residence of such person is located, or
in the United States Court of Appeals for the District of Columbia, a written
petition praying that the final action of the OTS be modified, terminated or set
aside. Such petition must be filed within 30 days after the publication of
notice of such final action in the Federal Register, or 30 days after the
mailing by the applicant of the notice to members as provided for in 12 C.F.R.
ss.563b.6(c), whichever is later. The further procedure for review is as
follows: A copy of the petition is forthwith transmitted to the OTS by the clerk
of the court and thereupon the OTS files in the court the record in proceeding,
as provided in Section 2112 of Title 28 of the United States Code. Upon the
filing of the petition, the court has jurisdiction, which upon the filing of the
record is exclusive, to affirm, modify, terminate, or set aside in whole or in
part, the final action of the OTS. Review of such proceedings is as provided in
Chapter 7 of Title 5 of the United States Code. The judgment and decree of the
court is final, except that they are subject to review by the Supreme Court upon
certiorari as provided in Section 1254 of Title 28 of the United States Code.
<PAGE>
45
REGISTRATION REQUIREMENTS
The Company will register the Common Stock under the Exchange Act in
connection with the Conversion and has agreed not to deregister such shares for
a period of three years following the Conversion. Upon such registration, the
proxy rules, tender offer rules, insider reporting requirements and trading
restrictions, annual and periodic reporting and other requirements of the
Exchange Act will be applicable. In addition, upon registration, the Company
will furnish its stockholders with annual reports containing audited financial
statements as promptly as practicable after the end of each fiscal year.
EXPERTS
The financial statements of the Association as of December 31, 1997,
and for each of the years ended December 31, 1997, 1996 and 1995, included in
the Prospectus have been audited by Hannis T. Bourgeois, L.L.P., independent
certified public accountants, as indicated in their report with respect thereto,
and are included therein in reliance upon the authority of said firm as experts
in accounting and auditing.
RP Financial has consented to the publication herein of the summary of
its report to the Association and the Company setting forth its opinion as to
the estimated pro forma market value of Ponchatoula and the Mutual Holding
Company on a combined basis and its opinion with respect to subscription rights.
LEGAL AND TAX OPINIONS
The legality of the Common Stock and the federal income tax
consequences of the Conversion will be passed upon for the Association and the
Company by Elias, Matz, Tiernan & Herrick L.L.P., Washington, D.C., special
counsel to the Association and the Company. The Louisiana income tax
consequences of the Conversion will be passed upon for the Association and the
Company by Hannis T. Bourgeois, L.L.P. Certain legal matters will be passed upon
for Trident by Luse Lehman Gorman Pomerenk & Schick.
HOW TO OBTAIN ADDITIONAL INFORMATION
If you would like to receive the Prospectus and an Order Form, either
to consider additional information prior to voting your proxy or because you are
interested in exercising your subscription rights, you must mark, sign and
return the enclosed Request Card in the enclosed postage-paid envelope so that
it is received by the Mutual Holding Company at the address shown on the
envelope by _:00 p.m., Central Time, on ______ __, 1998. Returning the Request
Card does not obligate you to purchase shares. You should return the Request
Card in the enclosed postage-paid envelope so that the Mutual Holding Company
receives it at the address shown on the envelope by _:00 p.m., Central Time, on
______ __, 1998 in order to receive the requested materials on a timely basis.
Request Cards received after such date and before the Special Meeting will be
honored after receipt; however, there can be no assurance that you will have
sufficient time to review the additional information prior to the Special
Meeting and conclusion of the Subscription and Community Offering if the Request
Card is not received by the Mutual Holding Company by the aforementioned time
and date. You will, however, still be able to obtain a Prospectus and an Order
Form from the office of the Mutual Holding Company. For additional information,
you may call (504) _______.
In addition, you may request in writing a copy of the Plan of
Conversion from the Mutual Holding Company. Any such requests should be directed
to Barbara B. Theriot, Secretary, Homestead Mutual Holding Company, 195 North
Street, Ponchatoula, Louisiana 70454. So that you have sufficient time to
receive and review
<PAGE>
46
the requested materials, it is recommended that any such requests be sent so
that they are received by the Mutual Holding Company by _:00 p.m., Central Time,
on _______ __, 1998.
AVAILABLE INFORMATION
The Mutual Holding Company has filed with the OTS an Application for
Conversion pursuant to which it will reorganize in accordance with the terms of
the Plan. This Proxy Statement and the Prospectus omit certain information
contained in such Application. The Application may be inspected at the offices
of the OTS, 1700 G Street, N.W., Washington, D.C. 20055 and at the office of the
Regional Director of the OTS located at 122 West John Carpenter Freeway, Suite
600, Irving, Texas 75039.
The Company has filed with the SEC a Registration Statement on Form S-1
(File No. 333-______) under the Securities Act with respect to the Common Stock
being offered in the Conversion. This Proxy Statement and the Prospectus do not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. Such information may be inspected at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and copies may be obtained at prescribed rates from the Public Reference
Section of the SEC at the same address.
PLEASE REMEMBER TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR IMPORTANT VOTE WILL BE
COUNTED AT THE SPECIAL MEETING.
THIS PROXY STATEMENT IS NEITHER AN OFFER TO SELL NOR THE SOLICITATION
OF ANY OFFER TO BUY STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
HOMESTEAD MUTUAL HOLDING COMPANY REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HOMESTEAD
MUTUAL HOLDING COMPANY (THE "MUTUAL HOLDING COMPANY") FOR USE ONLY AT A
SPECIAL MEETING OF MEMBERS TO BE HELD ON ________ __, 1998 AND ANY
ADJOURNMENT THEREOF.
The undersigned, being a member of the Mutual Holding Company, hereby
authorizes the Board of Directors of the Mutual Holding Company, or any of
their successors, as proxies, with full powers of substitution, to
represent the undersigned at the Special Meeting of Members of the Mutual
Holding Company to be held at the Mutual Holding Company's office located
at 195 North Sixth Street, Ponchatoula, Louisiana on _______ __, 1998, at
____ _.m., Central Time, and at any adjournment of said meeting, and
thereat to act with respect to all votes that the undersigned would be
entitled to cast, if then personally present, as follows:
(1) To approve and adopt a Plan of Conversion of the Mutual Holding
Company and Agreement and Plan of Reorganization between Homestead Bancorp,
Inc. (the "Company") and Ponchatoula Homestead Savings, F.A. (the
"Association") (the "Plan of Conversion"), pursuant to which the
Association organized the Company and, upon consummation of the following
transactions, will become a wholly-owned subsidiary of the Company: (i) the
Mutual Holding Company, which currently owns approximately 75.2% of the
Association, will convert from the mutual form to a federal interim stock
savings bank and simultaneously merge into the Association, with the
Association being the surviving entity; (ii) the Association will then
merge with an interim institution to be formed as a wholly-owned subsidiary
of the Company, with the Association being the surviving entity; (iii) the
outstanding shares of Association common stock (other than those held by
the Mutual Holding Company, which will be cancelled) will be converted into
shares of the Company's common stock pursuant to a ratio that will result
in the holders of such shares owning in the aggregate approximately the
same percentage of the Company as they currently own of the Association,
before giving effect to such stockholders purchasing additional shares in a
concurrent stock offering by the Company or receiving cash in lieu of
fractional shares; and (iv) the offer and sale of shares of the Company's
common stock.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote with respect
to approval of the minutes of the last meeting of members, matters incident
to the conduct of the meeting, and upon such other matters as may properly
come before the meeting.
(Continued and to be signed on other side)
<PAGE>
This proxy, if executed, will be voted FOR adoption of the Plan of
Conversion if no choice is made herein. This proxy may be revoked at any
time before it is exercised.
The undersigned hereby acknowledges receipt of a Notice of Special
Meeting of the Members of Homestead Mutual Holding Company called for
________ __, 1998 and a Proxy Statement for the Special Meeting prior to
the signing of this Proxy.
Date: , 1998
----------------------------------
---------------------------------------------
Signature
---------------------------------------------
Signature
Note: Please sign exactly your name(s)
appear(s) on this Proxy. Only one
signature is required in the case of a
joint account. When signing in a
representative capacity, please give
title.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE.
