<PAGE>
As filed with the Securities and Exchange Commission on May 11, 1998
Registration No. 333-49277
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
PRE-EFFECTIVE AMENDMENT NO 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
HOMESTEAD BANCORP, INC.
(Exact name of registrant as specified in its articles of incorporation)
Louisiana 6711 (Being Applied For)
----------------------- ------------- -------------------
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification No.)
Classification
Code Number)
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 C. Caldwell, Jr.
President and Chief Executive Officer
Homestead Bancorp, Inc.
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
-----------
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>
===========================================================================================
Amount Proposed Maximum Amount of
Title of each Class of to be Purchase Price Aggregate Registration
Securities to be Registered Registered Per Share Offering Price Fee
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share 1,511,669 shares(1) $10.00 $15,116,690(2) $4,461(3)
===========================================================================================
</TABLE>
(1) Includes 1,124,125 shares of Conversion Stock, 353,820 Exchange Shares and
(as originally registered but since deleted from the Prospectus) 33,724
Contingent Shares.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Previously paid.
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.
<PAGE>
PROSPECTUS
HOMESTEAD BANCORP, INC.
(Proposed Holding Company for Ponchatoula Homestead Savings, F.A.)
Minimum of 949,908 and Maximum of 1,285,170 Shares of Common Stock
Homestead Bancorp, Inc. (the "Company"), a Louisiana corporation, is
offering shares of its common stock, par value $.01 per share (the "Common
Stock"), in connection with the conversion and reorganizatian of Ponchatoula
Homestead Savings, F.A. ("Ponchatoula") from the mutual holding company
structure to the stock holding company structure (the "Conversion"). Ponchatoula
is currently a majority-owned subsidiary of Homestead Mutual Holding Company
(the "MHC"), which will be merged out of existence, and Ponchatoula will become
a wholly owned subsidiary of the Company .
The Company is offering a minimum of 722,500 shares and a maximum of
977,500 shares of common stock (the "Conversion Stock") at $10.00 per share to
persons with priority subscription rights in a subscription offering and to
other members of the public in a community offering (the "Offerings"). These
shares represent the MHC's ownership interest in Ponchatoula based on an
independent appraisal, which may be increased by up to 15% without a
resolicitation. The table below sets forth information regarding the sale of
Conversion Stock in the Offerings.
The Company will also issue a minimum of 227,408 shares and a maximum of
307,670 shares of common stock (the "Exchange Shares") to the stockholders of
Ponchatoula (other than the MHC) in exchange for their Ponchatoula common stock
(the "Exchange"). The Company will not pay or receive any cash in the Exchange,
except that cash will be paid in lieu of fractional shares . The number of
Exchange Shares to be issued is dependent upon the amount of Conversion Stock
sold, with an exchange ratio designed to provide Ponchatoula's stockholders
(other than the MHC) with approximately the same percentage ownership interest
in the Company that they have in Ponchatoula .
The sum of the Conversion Stock and the Exchange Shares represents the
total amount of Common Stock to be issued in the Conversion, which sum is a
minimum of 949,908 shares and a maximum of 1,285,170 shares. If the independent
appraisal is increased by 15%, the maximum amount of Conversion Stock , Exchange
Shares and total shares would be increased to 1,124,125 shares, 353,820 shares
and 1,477,945 shares, respectively.
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
VARIOUS FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK
FACTORS" BEGINNING ON PAGE __.
* 2
* 3
* 4
* 5
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
ANY SUCH COMMISSION, OFFICE OR AGENCY PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
Estimated
Underwriting
Subscription Fees and Other Estimated Net
Price(1) Expenses(2) Proceeds(3)
- --------------------------------------------------------------------------------
Minimum Per Share $10.00 $ .58 $ 9.42
- --------------------------------------------------------------------------------
Midpoint Per Share $10.00 $ .51 $ 9.49
- --------------------------------------------------------------------------------
Maximum Per Share $10.00 $ .46 $ 9.54
- --------------------------------------------------------------------------------
Maximum Per Share,
as adjusted $10.00 $ .41 $ 9.59
- --------------------------------------------------------------------------------
Total Minimum(1) $7,225,000 $ 421,179 $ 6,803,821
- --------------------------------------------------------------------------------
Total Midpoint(1) $8,500,000 $ 434,375 $ 8,065,625
- --------------------------------------------------------------------------------
Total Maximum(1) $9,775,000 $ 447,571 $ 9,327,429
- --------------------------------------------------------------------------------
Total Maximum, as
adjusted(1) $11,241,250 $ 462,747 $ 10,778,503
================================================================================
** 1 (Footnotes on next page)
TRIDENT SECURITIES, INC.
The date of this Prospectus is May __, 1998.
<PAGE>
(Footnotes from page 1)
(1) Based upon the minimum, midpoint, maximum and 15% above the maximum ,
respectively, of the portion of the independent appraisal attributable to
the Conversion Stock.
(2) Consists of the estimated costs to be incurred 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 a minimum of $71,179 and a maximum of $97,571. 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
Company's employee stock ownership plan, which initially will be deducted
from the Company's stockholders' equity. For the effects of such
purchases, see "Capitalization" and "Pro Forma Data."
The Company, Ponchatoula and the MHC 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."
** 2 The subscription offering will terminate at noon, Central Time, on
June 23, 1998 (the "Expiration Date"), unless extended 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 must be completed within 45 days after the close of the
subscription offering, or August 7, 1998, unless extended 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."
** 3 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 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 for the Conversion Stock (the "Estimated
Valuation Range").
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, 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."
** 4 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."
** 5 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.
2
<PAGE>
[Map to be inserted which shows the State of Louisiana, with an
enlargement of Tangipahoa Parish showing the towns of Ponchatoula and Amite.]
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.
3
<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 ("Public Ponchatoula Shares")
that are held by persons other than the Mutual Holding Company ("Public
Stockholders").
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 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
4
<PAGE>
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.
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
5
<PAGE>
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.
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, and (c) any exercise of dissenters'
rights.
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 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%. These ownership interests
will be adjusted immediately prior to consummation of the Conversion to reflect
additional dividends waived by the Mutual Holding Company.
In addition to the Exchange Shares to be issued to the Public Stockholders
pursuant to the Exchange, 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."
6
<PAGE>
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.
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)
-----------------------------------------
7
<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, or (iii) any exercise of dissenters'
rights.
- ------------------------------------- ---------------------------------
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 May 4, 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 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
8
<PAGE>
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 to 15%. 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 of Ponchatoula as of the Voting Record Date, May 4, 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 June 23, 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
9
<PAGE>
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.
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, 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 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. In addition, joint account relationships and common
addresses will be taken into account in applying the maximum purchase
limitations.
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
10
<PAGE>
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 and any Dissenting 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 or (ii) the Offerings are
extended beyond August 7, 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 23.94%,
respectively, of the Company's total outstanding shares (excluding cash in lieu
of fractional Exchange Shares as well as any Dissenting 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 or fractional Exchange Shares.
11
<PAGE>
<TABLE>
<CAPTION>
Conversion Stock to Be Exchange Shares
Issued(1) 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. Ponchatoula's directors and executive officers currently
do not expect to exercise their stock options prior to consummation of the
Conversion .
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.
Benefits of Conversion to Directors and Officers
Stock Option and Recognition Plans. 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 (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 (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,
12
<PAGE>
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 at no cost to
the recipients. See "Management - New Stock Benefit Plans" and "Risk Factors -
Possible Dilutive Effect of Issuance of Additional Shares."
** 6 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."
ESOP. The Company's ESOP intends to purchase 8% of the Conversion Stock to
be sold in the Offerings (78,200 shares or $782,000 of Conversion Stock at the
maximum of the Estimated Valuation Range) with a loan funded 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. See "Management - New Stock Benefit Plans - Employee
Stock Ownership Plan" and "The Conversion - The Offerings - Subscription
Offering."
Pro Forma Effects. 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."
* 6
Employment Agreements. Upon consummation of the Conversion, the Company and
Ponchatoula intend to enter into three-year employment agreements with Mr.
Caldwell and Ms. Theriot, and each of the officers are presently expected to
have an initial annual salary of less than $100,000. If the employment of such
officers is terminated as a result of a change in control of the Company, Mr.
Caldwell and Ms. Theriot would each be entitled to a cash severance amount equal
to three times his or her average annual compensation over the most recent five
taxable years. At least 30 days prior to each annual anniversary date of the
employment agreement, the Boards of Directors of the Company and Ponchatoula
shall determine whether or not to extend the term of the agreements for an
additional one year. See "Management - Employment Agreements."
13
<PAGE>
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 , order forms unaccompanied by an
executed certification form, payments from other private third parties and wire
transfers will not be accepted. 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 as of the close of business on the Voting
Record Date, May 4, 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."
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
14
<PAGE>
(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.
15
<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,
-----------------------------------------------
Selected Financial 1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
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.
16
<PAGE>
SUMMARY OF RECENT DEVELOPMENTS
(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.
March 31,
-------------------------
1998(1) 1997(1)
------- -------
Selected Financial
Condition and Other Data:
Total assets $61,487 $59,757
Cash and cash equivalents(2) 579 218
Securities available for sale 16,368 18,409
Securities held to maturity 9,977 9,659
Loans held for sale 2,186 1,182
Loans and leases receivable, net 29,637 26,634
Real estate owned, net -- 201
Deposits 41,382 44,687
Stockholders' equity 5,884 5,487
Full service offices 2 2
Three Months Ended
March 31,
------------------------
1998(1) 1997(1)
------- -------
Selected Operating Data:
Total interest income $ 1,092 $ 1,033
Total interest expense 624 641
------- -------
Net interest income 468 392
Provision for (recovery of) loan
and lease losses 1 (16)
------- -------
Net interest income after provision
for (recovery of) losses 467 408
Noninterest income 130 99
Noninterest expenses 403 350
------- -------
Income before provision for income taxes 194 157
Income taxes 66 54
------- -------
Net income $ 128 $ 103
======= =======
Fully diluted earnings per share $ .21 $ .17
======= =======
Cash dividends declared per share $ .20 $ .16
======= =======
After for the Three
Months Ended March 31,
------------------------
1998(1) 1997(1)
------- -------
Selected Ratios (3):
Return on average assets .87% .68%
Return on average equity 8.45 7.19
Average equity to average assets 10.25 9.49
Equity to assets at end of period 9.57 9.18
Interest rate spread(4) 2.81 2.35
Net interest margin(4) 3.24 2.68
Non-performing loans and leases to total
loans and leases at end of period(5) .57 .89
Non-performing assets to total assets
at end of period(5) .27 .40
Average interest-earning assets to average
interest-bearing liabilities 109.90 107.69
Net interest income after provision for
(recovery of) loan and lease losses to
total noninterest expenses 115.84 116.50
Noninterest expenses to average total assets 2.73 2.44
Dividend payout ratio(6) 94.53 94.18
- ----------
(1) In the opinion of management, financial information at March 31, 1998 and
1997 and for the three months ended March 31, 1998 and 1997 reflect all
adjustments (consisting only of normal recurring accruals) which are
necessary for a fair presentation of the information as of such dates and
for such periods.
(2) Includes cash and due from banks as well as interest-bearing deposits in
other institutions.
(3) With the exception of end of period ratios, all ratios are based on
average monthly balances during the periods and are annualized where
appropriate.
(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.
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Changes in Financial Condition
At March 31, 1998, Ponchatoula's total assets, deposits and stockholders'
equity amounted to $61.5 million, $41.4 million, and $5.9 million, respectively,
compared to $59.7 million, $44.6 million and $5.4 million, respectively, at
March 31, 1997. The increase in total assets of $1.7 million or 2.8% was due
primarily to an increase of $3 million in the net loan and lease portfolio,
combined with an increase of $1 million in loans held for sale, offset by a
decrease of $2 million in securities available for sale. The increase of $1
million or 84.9% in loans held for sale was due to new loan originations
exceeding new loan sales. The increase of $3 million or 11.3% in the net loan
and lease portfolio was due to new loan originations exceeding loan payments and
prepayments. Mortgage-backed securities available for sale decreased by $2
million or 11.1%, which is mainly due to the Association investing excess
liquidity into loans which Ponchatoula has retained in its portfolio. The
decrease in deposits of $3.3 million or 7.4% between March 31, 1997 and March
31, 1998 was due to a normal outflow of such liabilities into competing
instruments, while the increase of $397,000 or 7.2% in stockholders' equity
during such period was partially due to continued profitable operations, as well
as an increase of $151,000 in the unrealized gain on securities available for
sale.
Results of Operations
Ponchatoula's net income increased by $25,000 or 24.3% in the first
quarter of 1998 from the comparable 1997 quarter. This increase was due to
increases of $76,000 or 19.4% in net interest income and $31,000 or 31.3% in
noninterest income. These increases were partially offset by increases of
$53,000 or 15.1% in noninterest expense and $12,000 or 22.2% in income tax
expense, as well as the absence in 1998 of the $16,000 recovery of loan and
lease losses in the 1997 quarter.
The increase in net interest income resulted from a $59,000 or 5.7%
increase in total interest income and a $17,000 or 2.7% decrease in total
interest expense. The increased net interest income was due to an increase in
the average interest rate spread to 2.81% for the March 31, 1998 quarter from
2.35% for the first quarter of 1997. The average yield on interest-earning
assets increased to 7.55% in the 1998 quarter from 7.06% in the 1997 quarter
primarily due to an increase in the average yield on Ponchatoula's
adjustable-rate mortgage loans and mortgage-backed securities, which was
partially offset by a lower yield on investment securities. The average rate on
deposits decreased to 4.43% in the first quarter of 1998 from 4.57% in the
comparable 1997 quarter.
The increase in noninterest income in the first quarter of 1998 was
primarily due to an increase in the volume of loans closed during the quarter.
The increase in noninterest expense was attributable to increases of $28,000 in
other noninterest expense, primarily due to the increased loan volume, and
$18,000 in compensation expense.
At March 31, 1998, Ponchatoula's core capital amounted to $5.9 million or
9.53% of adjusted total assets of $61.5 million, and its risk-based capital
amounted to $6.1 million or 2297% of adjusted risk-weighted assets of $26.6
million. Ponchatoula was deemed to be a well-capitalized institution at March
31, 1998.
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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.
Absence of Market for the Common Stock
** 7 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.
** 8 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."
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
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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 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."
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.
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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."
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. These loans aggregated $3.9 million or 12.3% of
Ponchatoula's total loan and lease portfolio at December 31, 1997. See "Business
- - Asset Quality - Non-Performing Assets." For information on Ponchatoula's five
largest loans or groups of loans to one borrower, all of which were performing
in accordance with their terms at December 31, 1997, see "Business - Lending
Activities - General."
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
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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.
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."
Voting Control of Officers and Directors. Directors and executive officers
of the Company expect to purchase approximately 8.2% or 7.3% 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
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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
11.3% or 10.4% 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 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,
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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."
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.
* 7
* 8
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."
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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 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."
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 letter 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 value.
Based upon the letter from RP Financial, the Company does not believe that the
receipt of subscription rights should be
25
<PAGE>
a taxable event. However, 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>
- ---------------
(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.
26
<PAGE>
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 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 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 $5.3 million. See "Dividend Policy," "The Conversion - Liquidation
Rights" and "The Conversion - Certain Restrictions on Purchase or Transfer of
Shares After the Conversion."
27
<PAGE>
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.
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 $2.0 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 $36,000. 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.
28
<PAGE>
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 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 May 4,
1998, Ponchatoula had approximately 142 stockholders of record.
29
<PAGE>
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.
30
<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 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>
GAAP capital .... $ 5,735 9.63% $ 8,372 13.33% $ 8,850 13.96% $ 9,328 14.58% $ 9,877 15.28%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
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, except
that the ratios regarding GAAP capital are based on total assets.
(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."
31
<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
-------------------------------------------------------------------
1,124,125
Ponchatoula- 722,500 Shares 850,000 Shares 977,500 Shares 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)
32
<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."
33
<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%); and (iv) total other expenses, excluding the
marketing fees paid to Trident, will be $350,000. Actual expenses may vary from
those estimated.
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 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.
34
<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)
35
<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,
(ii) that the loan to the ESOP bears a fixed interest rate of 8.5%, and
(iii) 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 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.
36
<PAGE>
(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.
37
<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.
Year Ended December 31,
---------------------------------
1997 1996 1995
------- ------- -------
(In Thousands, except per share data)
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
======= ======= =======
The accompanying notes are an integral part of these financial statements.
38
<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 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,
39
<PAGE>
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.
40
<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)
41
<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 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.
42
<PAGE>
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)
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
- ----------
(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 by 1.8% to $59.6 million at December
31, 1997 from $60.7 million at December 31, 1996, primarily due to a $2.2
million or 13.4% decline in mortgage-backed securities available for sale.
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.
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.
43
<PAGE>
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. As of December 31, 1997, the aggregate amount of
dividends waived by the Mutual Holding Company was $783,000, which amount will
be included as part of the liquidation account to be established for the benefit
of Eligible Account Holders and Supplemental Eligible Account Holders upon
consummation of the Conversion. See "The Conversion -Liquidation Rights."
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).
Because the Company currently anticipates that it will take time to
prudently deploy the new capital raised in the Conversion, the Company's return
on equity initially is expected to be below the industry average after the
Conversion. See "Risk Factors - Potential Low Return on Equity Following the
Conversion; Uncertainty as to Future Growth Opportunities." The increase in net
income shown under "Pro Forma Data" as a result of the investment of the net
Conversion proceeds is not necessarily indicative of future results of
operations.
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 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.
44
<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 as daily balances are
unavailable. Ponchatoula does not believe that the monthly averages differ
significantly from what the daily averages would be.
<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 non-accruing loans and loans classified as held for sale.
(3) Equals net interest income divided by average interest-earning assets.
45
<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 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
46
<PAGE>
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.
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.
47
<PAGE>
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.
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.
48
<PAGE>
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 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 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.
49
<PAGE>
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% on a pro
forma basis at December 31, 1997. Both the Company and Ponchatoula will be
well-capitalized upon consummation of the Conversion. The Company anticipates
that the net Conversion proceeds contributed to Ponchatoula will initially
increase Ponchatoula's liquidity.
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 has reviewed its computer and data processing issues relating
to the Year 2000. 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. Ponchatoula's data processing is handled by an independent third party
data center, and management is monitoring the data center's progress and
timetable to resolving issues relating to the Year 2000. If the data center is
able to become Year 2000 compliant in a timely manner, then management believes
that issues related to the Year 2000 will not have a material adverse effect on
the Company's liquidity, capital resources or consolidated results of
operations. Ponchatoula currently expects to be Year 2000 compliant by the end
of 1998.
In the event the third party data center is unable to become Year 2000
compliant in a timely manner, Ponchatoula is in the process of establishing a
contingency plan to switch to another data center. While the costs of switching
to another data center have not yet been quantified, management currently does
not believe that such costs would have a material adverse effect on the
Company's liquidity, capital resources or consolidated 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 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
50
<PAGE>
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.
51
<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.
52
<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.
53
<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.
Fixed Floating or
Rates Adjustable Rates Total
----- ---------------- -----
(In Thousands)
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
======= ====== =======
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 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
54
<PAGE>
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.
Year Ended December 31,
-------------------------------
1997 1996 1995
-------- ------- -------
(In Thousands)
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
======== ======= =======
- ----------
(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 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.
56
<PAGE>
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.
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
57
<PAGE>
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).
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 balance. The interest rate on the loan
is equal to the interest rate paid on the account plus 2.5%.
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<PAGE>
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.
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
59
<PAGE>
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.
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.
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Single-Family
Residential Consumer Total
---------------- -------------- --------------
Amount % Amount % Amount %
------ ------ ------ ------ ------ ------
(Dollars in Thousands)
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%
====== ====== ====== ====== ====== ======
- ----------
(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.
December 31,
----------------------------
1997 1996 1995
---- ---- ----
(Dollars in Thousands)
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%
==== ==== ====
- ----------
(1) Includes $0, $62,000, and $104,000 of single-family residential leases at
December 31, 1997, 1996 and 1995, respectively.
If the non-accruing loans and leases at December 31, 1997 had been current
in accordance with their terms during 1997, the gross interest income on such
loans and leases would have been $15,200. No interest income on these
non-accruing loans and leases was recorded in 1997.
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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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The following table sets forth an analysis of Ponchatoula's allowance for
loan and lease losses during the periods indicated.
Year Ended December 31,
----------------------------------
1997 1996 1995
-------- ------- --------
(Dollars in Thousands)
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%
======== ======= ========
- ----------
(1) Total and average loans outstanding include loans classified as held for
sale at or during the respective dates or periods.
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<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 $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
64
<PAGE>
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.
December 31,
-----------------------------------
1997 1996 1995
-------- -------- --------
(In Thousands)
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
======= ======= =======
The following table sets forth the activity in Ponchatoula's
mortgage-backed securities portfolio during the periods indicated.
At or For the Year Ended
December 31,
--------------------------------------
1997 1996 1995
-------- -------- --------
(Dollars in Thousands)
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%
======== ======== ========
65
<PAGE>
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.
The following table sets forth certain information relating to
Ponchatoula's investment securities portfolio at the dates indicated.
December 31,
-----------------------------------------------------------------
1997 1996 1995
------------------- ------------------- -------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
--------- ------- --------- ------- --------- ------
(In Thousands)
U.S. agency
securities $2,595 $2,605 $2,396 $2,399 $2,403 $2,415
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.
At December 31, 1997
--------------------------------------------------------
Weighted Over One Weighted
One Year or Average Year Through Average
Less Yield Five Years Yield
------------ ---------- ------------- -----------
(Dollars in Thousands)
U.S. agency
securities $1,196 6.04% $1,399 5.95 %
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.
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<PAGE>
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.
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>
67
<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.
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------- -------- -------
(In Thousands)
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
======== ======= =======
- ----------
(1) The information provided is net of deposits and withdrawals because the
gross amount of deposits and withdrawals is not readily available.
68
<PAGE>
The following table shows the interest rate and maturity information for
Ponchatoula's certificates of deposit at December 31, 1997.
Maturity Date
----------------------------------------------------
One Year Over 1 Over 2 Over
or Less to 2 Years to 3 Years 3 Years Total
------- ---------- ---------- ------- -----
(In Thousands)
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
======= ====== ==== ======= =======
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.
Certificates of deposit maturing
in quarter ending: Amount
--------------------------------- -------
(In Thousands)
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
======
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.
69
<PAGE>
The following table sets forth certain information regarding short-term
borrowings at or for the dates indicated:
At or for the Year Ended December 31,
-------------------------------------
1997 1996 1995
------- ------- ------
(Dollars in Thousands)
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%
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.
Market Area
Ponchatoula's primary market area for lending and deposits is Tangipahoa
Parish, which is located in southeast Louisiana. To a lesser extent, Ponchatoula
serves customers in the adjacent parishes of St. Helena and Livingston.
Ponchatoula's market area can be characterized as a combination of rural and
suburban areas. Tangipahoa Parish maintains a large commuter population with
residents commuting to jobs in the New Orleans and Baton Rouge metropolitan
areas. The parish's population increased from approximately 86,000 in 1990 to
96,000 in 1997, representing an annual growth rate of 1.6%. The increased demand
for housing resulting from the population growth has had a positive impact on
real estate values in Tangipahoa Parish in recent years.
Educational facilities, including Southeastern Louisiana University, are
three of the four largest employers in Tangipahoa Parish. The second largest
employer is North Oaks Medical Center. Median household and per capita income
levels in Tangipahoa Parish ($20,276 and $10,108, respectively, in 1997) are
lower than the comparative medians for Louisiana and the United States, which is
indicative of the market area's more rural nature that provides for a lower cost
of living than the more heavily populated markets within the state. The
unemployment rate in Tangipahoa Parish declined from 8.7% in December 1996 to
7.7% in 1997. These rates are higher than the comparative measures for Louisiana
and the United States, which tends to be a characteristic of rural markets in
general as the result of seasonal agricultural employment fluctuations.
70
<PAGE>
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.
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.
Net Book Value
Description/Address Leased/Owned of Property Deposits
- ------------------------ ------------ --------------- --------
(In Thousands)
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
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.
71
<PAGE>
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.
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."
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.
72
<PAGE>
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.
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
73
<PAGE>
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.
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
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
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<PAGE>
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
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.
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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.
Tangible Core Risk-Based
Capital Capital(1) Capital (2)
------- ---------- -----------
(Dollars in Thousands)
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%
====== ====== ======
- ----------
(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 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.
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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 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
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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 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
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activity or make any new investment, directly or indirectly, unless such
activity or investment is permissible for a national bank; (ii) the branching
powers of the institution shall be restricted to those of a national bank; (iii)
the institution shall not be eligible to obtain any 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 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.
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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.
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
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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).
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. Ponchatoula's tax returns have not been audited by the IRS in
the last five years.
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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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 manager 1974 2001
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; Retired 1978 2001
optometrist.
Barbara B. Theriot 53 Director; Secretary and 1994 1999
Treasurer of Ponchatoula since
1984.
</TABLE>
* 1
- -------------------
(1) Age as of December 31, 1997.
(2) In addition, Mr. Pierson served as a director of Ponchatoula from 1969 to
1983.
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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.
Amount and Nature Percent
of Beneficial of
Name Ownership(1)(2)(3) Class
---- ------------------ -----
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%
(Footnotes on following page)
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<PAGE>
- ----------
* 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.
(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.
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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 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
Name and Fiscal Annual All Other
Principal Position Year Salary(1) Bonus Compensation(2) ompensation(5)
--------------------------------------
Securities
Restricted Underlying LTIP
Stock Award(3) Options(4) Payouts
- -----------------------------------------------------------------------------------------------------------------------------------
<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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<PAGE>
(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 provide that Mr. Caldwell and Ms. Theriot will initially be paid
their current salary levels of $79,560 and $57,120, respectively. 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) either 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, then 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, plus
the continuation of certain miscellaneous fringe benefits, subject to reduction
pursuant to Section 280G of the Code as set forth below in the event of a change
in control.
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 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 (the "Section 280G Limit"). As a result, none of the
severance payments will be subject to a 20% excise tax, and the Employers
will be able to deduct such payments as compensation expense for federal
income tax purposes. If a change in control was to occur in 1998 subsequent to
consummation of the Conversion, the Section 280G Limit for Mr. Caldwell and Ms.
Theriot would be approximately $223,000 and $147,000, respectively.
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-
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<PAGE>
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>
Shares Number of Value of Unexercised
Acquired Unexercised Options in the Money Options
on Value at Fiscal Year End at Fiscal Year End(1)
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.
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
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<PAGE>
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.
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, 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 8.5%.
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
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<PAGE>
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.
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 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
(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
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<PAGE>
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 (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
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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.
<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.
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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 parties amended the Plan on May 4, 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 July 1, 1998.
The following is a summary of the material 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
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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.
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) an interim
savings institution ("Interim") to be formed as a wholly owned subsidiary of the
Company 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, and (c) any Dissenting 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.
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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."
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 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 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 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
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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.
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 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
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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, 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. 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 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
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Subscription Offering, 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.
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. 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. 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, 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 June 23, 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 July 1, 2000. Subscription
rights which have not been exercised prior to the Expiration Date will become
void.
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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, 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, 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 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
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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 market for the Ponchatoula Common Stock and
securities of comparable companies and general conditions in the market for such
securities. The projected operating results reviewed by RP Financial covered
periods through September 30, 2001. The financial projections assume (i) a flat
interest rate environment based on interest rates prevailing in mid-March 1998,
(ii) Ponchatoula's lending and investment activities continue to emphasize
single-family loan originations and purchases of mortgage-backed securities,
(iii) gradual asset growth funded primarily by interest-bearing deposits and
borrowings, and (iv) the net Conversion proceeds retained by the Company are
primarily invested in short-term investment 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 and any
Dissenting 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. 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
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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%), such
Appraisal will be filed with the SEC by post-effective amendment.
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 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 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
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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. 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, 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 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 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.
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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;
(3) The ESOP may purchase in the aggregate up to 8% of the shares of
Conversion Stock to be issued in the Offerings, 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 Record Date, subject to the
overall limitation in clause (6) below;
(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;
(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); 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.
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.
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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 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, except as may otherwise be required by the OTS, 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; provided, however, that a Public
Stockholder who would exceed an applicable purchase limitation may be precluded
from purchasing Conversion Stock in the Offerings.
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"), 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. In addition, joint account relationships and common
addresses will be taken into account in applying the maximum purchase
limitations.
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
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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.
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 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.
Copies of order forms, order forms unaccompanied by an executed certification
form, payments from other private third parties and wire transfers will not be
accepted. 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
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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 as of the close of business on the Voting
Record Date (May 4, 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 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 or intent to make an offer to
purchase such subscription rights or shares of Conversion Stock prior to the
completion of the Conversion.
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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 ($874,000 at
March 31, 1998) 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 approximately $5.3
million. 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.
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.
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This condition may not be waived by the Primary Parties. The Company believes
that the tax opinions summarized below address all material federal income tax
consequences that are generally applicable to the Primary Parties and the
persons receiving subscription rights.
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 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.
Based on a letter from RP Financial, which letter is not binding on the
IRS, the Company believes that 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.
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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.
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 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.
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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 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
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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, 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
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and Bylaws, which are incorporated herein by reference. See "Additional
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 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 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
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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 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
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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 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.
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
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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 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
114
<PAGE>
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 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, 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"
115
<PAGE>
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 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
116
<PAGE>
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."
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.
117
<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 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. In addition, the SEC maintains a web site that contains
registration statements and other reports regarding registrants that file
electronically with the SEC (such as the Company). The address of the SEC's web
site is http://www.sec.gov. 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
contract 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.
118
<PAGE>
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.
119
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
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....36
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
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.
120
<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-1
<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
------------ ------------
Commitments and Contingencies
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 of Income Taxes........... (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-2
<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-3
<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-4
<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-5
<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 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-6
<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-7
<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-8
<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. The mortgage-backed securities
are insured or guaranteed by the GNMA, the FHLMC or the FNMA, and have
adjustable rates of interest.
<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 (Includes $19.4
millon and $18.1 million in 1-4 family)... $ 19,500 $ 18,302
Second Mortgage Loans (Includes $164,000
and $317,000 in 1-4 family)............... 164 317
Construction Loans.......................... 968 1,114
Consumer Loans.............................. 7,175 6,812
Commercial Loans............................ 521 52
--------- ---------
28,328 26,597
</TABLE>
F-9
<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-10
<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, 1996 and 1995 amounted to
$91,000, $271,000 and $497,000, respectively.
Custodial escrow balances maintained in connection with the foregoing
loan servicing were approximately $300, $3,000 and $7,000 at December 31,
1997, 1996 and 1995, 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-11
<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. Deposit amounts in excess of $100,000 are not federally insured.
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-12
<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-13
<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-14
<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-15
<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-16
<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-17
<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-18
<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-19
<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-20
<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
---------------------
Page
----
Summary.................................................................. 4
Selected Financial Data.................................................. 15
Summary of Recent Developments........................................... 16
Risk Factors............................................................. 18
Proposed Management Purchases............................................ 25
Use of Proceeds.......................................................... 26
Dividend Policy.......................................................... 27
Market for Common Stock.................................................. 28
Regulatory Capital....................................................... 28
Capitalization........................................................... 30
Pro Forma Data........................................................... 32
Statements of Income..................................................... 36
Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................................................... 37
Business ................................................................ 48
Regulation............................................................... 68
Taxation................................................................. 77
Management .............................................................. 79
The Conversion .......................................................... 89
Restrictions on Acquisition of the
Company and Ponchatoula................................................ 107
Description of Capital Stock of the Company.............................. 114
Experts.................................................................. 115
Legal Matters............................................................ 115
Additional Information................................................... 115
Index to Financial Statements............................................ 116
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 24. 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 provides 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 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,
II-1
<PAGE>
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 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.
II-2
<PAGE>
Item 25. Other Expenses of Issuance and Distribution.
<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 26. Recent Sales of Unregistered Securities
The only securities sold by the Registrant to date consist of 100 shares
of common stock issued on March 25, 1998, to its sole incorporator, Ponchatoula
Homestead Savings, F.A., for $10.00 per share, which shares will be cancelled
upon consummation of the Conversion. Because the shares were sold to only one
entity and were sold only to facilitate the incorporation of the Registrant, the
sale was exempt from registration under the Securities Act of 1933 pursuant to
Section 4(2) thereof.
Item 27. Exhibits
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)
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.
II-3
<PAGE>
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., Ponchatoula
Homestead Savings, F.A. and Lawrence C. Caldwell, Jr.
10.6* Form of Employment Agreement between Homestead Bancorp, Inc., 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 Exhibits
5.0 and 8.1)
24.1* Power of Attorney (included in the Signature Page to the original filing
of this Registration Statement)
27.0* Financial Data Schedule
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
99.3* Appraisal Report of RP Financial, Inc.
99.4 Stock Order Form
99.5 Marketing Materials
* Previously filed.
(b) Financial Statement Schedules
All schedules have been omitted as not applicable or not required under
the rules of Regulation S-X.
Item 28. 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
II-4
<PAGE>
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.
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
of the requirements for filing on Form SB-2 and authorized this Pre-Effective
Amendment No. 2 to this Registration Statement to be signed on its behalf by the
undersigned, in the city of Ponchatoula, state of Louisiana, on May 6, 1998.
HOMESTEAD BANCORP, INC.
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.
Name Title Date
- ----------------------------- ------------------------ -----------
/s/ Lawrence C. Caldwell, Jr. President and Chief May 6, 1998
- ----------------------------- Executive Officer
Lawrence C. Caldwell, Jr.
/s/ Milton J. Schanzbach Chairman of the Board May 6, 1998
- -----------------------------
Milton J. Schanzbach
/s/ Barbara B. Theriot Director, Secretary and May 6, 1998
- ----------------------------- Treasurer (principal
Barbara B. Theriot financial and accounting
officer)
/s/ John C. Bohning Director May 6, 1998
- -----------------------------
John C. Bohning
/s/ Robert H. Gabriel Director May 6, 1998
- -----------------------------
Robert H. Gabriel
<PAGE>
Name Title Date
- ----------------------------- ------------------------ -----------
/s/ Dennis E. James Director May 6, 1998
- -----------------------------
Dennis E. James
/s/ Allen B. Pierson, Jr. Director May 6, 1998
- -----------------------------
Allen B. Pierson, Jr.
<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., Ponchatoula
Homestead Savings, F.A. and Lawrence C. Caldwell, Jr.
10.6* Form of Employment Agreement between Homestead Bancorp, Inc., 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 Exhibits
5.0 and 8.1)
24.1* Power of Attorney (included in the Signature Page to the original filing
of this Registration Statement)
27.0* Financial Data Schedule
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
99.3* Appraisal Report of RP Financial, Inc.
99.4 Stock Order Form
99.5 Marketing Materials
* Previously filed.
<PAGE>
Exhibit 1.2
HOMESTEAD BANCORP, INC.
HOMESTEAD MUTUAL HOLDING COMPANY
PONCHATOULA HOMESTEAD SAVINGS, F.A.
Up to 977,500 Shares of Common Stock
of Homestead Bancorp, Inc.
($.01 Par Value Per Spare)
AGENCY AGREEMENT
May __, 1998
Trident Securities, Inc.
4601 Six Forks Road, 4th Floor
Raleigh, North Carolina 27609
Ladies and Gentlemen:
Homestead Bancorp, Inc., Ponchatoula, Louisiana, a Louisiana corporation
("Company"), Homestead Mutual Holding Company, Ponchatoula, Louisiana ("MHC"), a
federally chartered mutual holding company, and Ponchatoula Homestead Savings,
F.A., Ponchatoula, Louisiana ("Association"), a federally chartered stock
savings association, the deposit accounts of which are insured by the Federal
Deposit Insurance Corporation ("FDIC") through the Savings Association Insurance
Fund ("SAIF"), and the majority owned subsidiary of the MHC (the Company, the
MHC and the Association are collectively referred to herein as the "Primary
Parties"), hereby confirm, jointly and severally, their agreement with Trident
Securities, Inc., Raleigh, North Carolina ("Trident") as of the date hereof, as
follows:
Introduction. On August 31, 1994, Ponchatoula Homestead Association
reorganized into the mutual holding company structure in a transaction in which
the MHC was formed. As of the date of this Agreement, the MHC owns 75.2% of the
issued and outstanding shares of common stock of the Association and the
remaining 24.8% of the outstanding shares of common stock of the Association are
owned by persons other than the MHC. The foregoing transaction is hereinafter
referred to as the "MHC Reorganization."
The MHC and the Association desire to eliminate the mutual holding company
structure. A Plan of Conversion of Homestead Mutual Holding Company and
Agreement and Plan of Reorganization between Homestead Bancorp, Inc. and
Ponchatoula Homestead Savings, F.A. ("Plan") was adopted on February 25, 1998 by
the Boards of Directors of the MHC and the Association and on __________, 1998
by the Board of Directors of the Company. Pursuant to the Plan, the following
transactions will be effected: (i) the MHC will convert to an interim federal
stock savings association and merge with and into the Association, with the
Association as the surviving entity and with the cancellation of the shares of
common stock of the Association, $1.00 par value per share ("Association Common
Stock"), held by the MHC as of the Closing Date (as hereinafter defined), (ii)
an interim federal stock savings association formed by the Company will
<PAGE>
Trident Securities, Inc.
Page 2
merge with and into the Association, resulting in (a) the Association becoming a
wholly owned subsidiary of the Company and (b) the outstanding shares of
Association Common Stock held by persons other than the MHC ("Public Association
Shares") being exchanged for shares of common stock, $.01 par value per share,
of the Company ("Exchange Shares") pursuant to a specified exchange ratio
("Exchange Ratio") ("Exchange Offering"), all as described in the Plan, and
(iii) the Company will offer shares of its common stock as described below
(collectively, the "Conversion and Reorganization").
In addition to the Exchange Offering, pursuant to the Plan and as part of
the Conversion and Reorganization, the Company is also offering up to 977,500
shares (subject to adjustment up to 1,124,125 shares) of its common stock, $.01
par value per share ("Conversion Shares" and together with the Exchange Shares,
"Common Stock" or "Shares") in a subscription offering ("Subscription Offering")
to (i) Eligible Account Holders (as defined in the Plan), (ii) tax-qualified
employee stock benefit plans, including an ESOP (as defined in the Plan), (iii)
Supplemental Eligible Account Holders (as defined in the Plan), (iv) Other
Members (as defined in the Plan), (v) officers, directors and employees of the
Primary Parties, and (vi) stockholders of the Association other than the MHC
("Public Stockholders"). The Company may offer any Conversion Shares not
subscribed for in the Subscription Offering for sale in a community offering
("Community Offering" and, when referred to together with the Subscription
Offering, the "Subscription and Community Offering") to certain members of the
general public to whom a Prospectus (as hereinafter defined) is delivered by or
on behalf of the Company, with preference given to natural persons residing in
Tangipahoa Parish. If any Conversion Shares are not subscribed for or purchased
in the Subscription and Community Offering, Trident may seek to form a syndicate
of selected registered broker-dealers to assist in the sale of the Conversion
Shares on a best efforts basis in a syndicated community offering ("Syndicated
Community Offering"). The Subscription Offering, Community Offering, and
Syndicated Community Offering, if any, together with the Exchange Offering, are
collectively referred to as the "Offering."
The Company has filed with the Securities and Exchange Commission
("Commission") a registration statement on Form SB-2 (File No. 333-_____),
including exhibits and as may be amended and/or supplemented ("Registration
Statement"), containing a prospectus relating to the Offering, for the
registration of the Shares under the Securities Act of 1933 (" 1933 Act"), and
has filed such amendments and supplements thereto, if any, and such amended
prospectuses and supplemented prospectuses as may have been required to the date
hereof. The prospectus, as amended and/or supplemented, on file with the
Commission at the time the Registration Statement initially becomes effective is
hereinafter called the "Prospectus," except that if any prospectus is filed by
the Company pursuant to Rule 424(b) or (c) of the rules and regulations of the
Commission under the 1933 Act ("1933 Act Regulations") differing from the
prospectus on file at the time the Registration Statement initially becomes
effective, the term "Prospectus" shall refer to the prospectus filed pursuant to
Rule 424(b) or (c) from and after the time said prospectus is filed with the
Commission.
<PAGE>
Trident Securities, Inc.
Page 3
The MHC has filed with the Office of Thrift Supervision ("OTS") an
Application for Approval of Conversion, including exhibits and as may be amended
and/or supplemented ("Conversion Application"), including the Prospectus
contained therein, and has filed such amendments or supplements thereto, if any,
as may have been required pursuant to the Home Owners' Loan Act, as amended
("HOLA"), 12 C.F.R. 575.12(a) and 12 C.F.R. Part 563b ("Conversion
Regulations"). In addition, the Company has filed with the OTS an application on
Form H-(e)l-S, with exhibits (including such required filings in connection with
the interim mergers described above which are part of the Conversion and
Reorganization) and as may be amended and/or supplemented (collectively, the
"Holding Company Application"), and has filed such amendments or supplements
thereto, if any, as may have been required to become a registered savings and
loan holding company under the HOLA.
Section 1. Appointment of Trident; Trident's Services; Compensation and
Expenses; Sale and Delivery of Shares.
(a) Subject to the terms and conditions herein set forth, the Primary
Parties hereby appoint Trident to serve as their exclusive financial advisor to
exercise its best efforts to sell the Conversion Stock in the Offering.
(i) On the basis of the representations and warranties and the
agreements herein, but subject to the terms and conditions herein, Trident
hereby accepts such appointment. The Primary Parties acknowledge that Trident
shall not be required to purchase any Conversion Stock and shall not be
obligated to take any action inconsistent with all applicable laws, regulations,
decisions or orders. Trident may assemble and manage a selling group of
broker-dealers, which are members of the National Association of Securities
Dealers, Inc. ("NASD"), to participate in the solicitation of purchase orders
for Conversion Stock in the event of the Syndicated Community Offering. Members
of such selling group will enter into a selected dealers' agreement ("Dealers'
Agreement"), the form of which is set forth as Exhibit A to this Agreement.
(ii) Trident agrees to perform, at the request of management of the
Primary Parties, the services described in the engagement letter dated February
4, 1998 and agreed to and accepted by the Association on February 25, 1998.
The obligations of Trident pursuant to this Agreement shall terminate in
accordance with Section 9 hereof.
(b) Trident shall receive the following compensation for its services
hereunder:
(i) A commission equal to 1.125% of the aggregate dollar amount of
Conversion Shares sold in the Subscription and Community Offerings, excluding
any Conversion Shares sold to the Company's and the Association's directors,
officers, employees and employee
<PAGE>
Trident Securities, Inc.
Page 4
benefit plans and excluding any Contingent Shares (as described in the
Prospectus), and provided that in no event shall the commission exceed $150,000.
(ii) For Conversion Shares sold by other NASD member firms in the
Syndicated Community Offering, if any, pursuant to the Dealers' Agreement, a
commission not to exceed a fee to be agreed upon jointly by Trident, the Company
and the Association to reflect market requirements at the time of the stock
allocation in the Syndicated Community Offering;
(iii) Fees and commissions set forth under (i) and (ii) shall be
paid to Trident on the date of Closing; and
(iv) Trident shall be reimbursed for all allocable expenses incurred
by it, including, but not limited to, legal fees, whether or not the Conversion
and Reorganization is consummated. Reimbursement for such legal fees and other
out-of-pocket expenses shall not exceed $27,500 and $10,000, respectively.
Trident acknowledges receipt of $10,000 to be applied toward the payment of such
expenses. None of the Primary Parties shall pay or reimburse Trident for any of
the foregoing expenses which are incurred or accrued after Trident shall have
notified any of the Primary Parties of its election to terminate this Agreement
pursuant to Section 9 hereof or after such time as the Primary Parties shall
have given notice to Trident of its or their election to terminate this
Agreement pursuant to Section 9(d) hereof.
To the extent not previously paid, full payment of Trident's actual and
accountable expenses shall be made in next day funds on the Closing Date (as
hereinafter defined) or, if the Conversion and Reorganization is not completed
and is abandoned or terminated for any reason, within five (5) days of receipt
by the Primary Parties of a reasonable accounting from Trident of its expenses.
In the event of a resolicitation of subscribers, the parties agree to
renegotiate the expense cap on legal fees and out-of-pocket expenses applicable
to Trident provided, however, that the failure to renegotiate will not result in
a termination of the Agreement.
(c) The release of Shares against payment therefor shall be made on
a date acceptable to Trident and at the principal office of the Company or the
Association or at such other place as shall be agreed upon between the parties
hereto. The date upon which the Company shall release or deliver the Shares sold
in the Offering in accordance with the terms hereof is herein called the
"Closing Date." If all conditions precedent to the consummation of the
Conversion and Reorganization are satisfied, including, without limitation, the
sale of all Shares required by the Plan to be sold, the Company agrees to issue
or have issued the Shares sold in the Offerings and to release for delivery
certificates for such Shares within three business days after the Closing Date
against payment to the Company by any means authorized by the Plan; provided,
however, that no Shares shall be released for delivery by the Company until the
conditions specified in Section
<PAGE>
Trident Securities, Inc.
Page 5
4 hereof shall have been complied with to the reasonable satisfaction of Trident
or waived in writing by Trident.
In the event the Company is unable to sell a minimum of 722,500 Conversion
Shares (or such lesser number as the OTS may authorize) by ___________, 1998 or
any extension of such period as may be approved by the OTS), the Company shall
refund to any persons who have subscribed for any of the Conversion Shares the
full amount which it may have received from them, plus accrued interest as set
forth in the Prospectus and none of the parties to this Agreement shall
thereafter have any obligation to the other parties hereunder, except as set
forth in this Section 1 and in Sections 6, 7 and 9(e) hereof.
Section 2. Representations and Warranties of the Primary Parties. The
Primary Parties, jointly and severally, represent and warrant to Trident as
follows:
(a) The MHC Reorganization was conducted in all material respects in
accordance with all applicable OTS rules and regulations then in effect, and the
Primary Parties received, and complied in all materials respects with, all
applicable regulatory approvals.
(b) The Company has filed with the Commission the Registration Statement,
including exhibits, amendments or supplements thereto. The Registration
Statement was declared effective by the Commission on _________, 1998. No stop
order or equivalent order has been issued with respect to the Registration
Statement and no proceedings therefor have been initiated or, to the best
knowledge of the Primary Parties, threatened by the Commission.
(c) As of the date of the Prospectus, and at all times subsequent thereto
through and including the Closing Date, the Registration Statement complied in
all material respects with the 1933 Act and the 1933 Act Regulations. No order
has been issued by the Commission preventing or suspending the use of the
Prospectus. No action by or for the Commission preventing the use of the
Prospectus is pending or, to the best knowledge of the Primary Parties,
threatened.
(d) As of the date of the Prospectus, and at all times subsequent thereto,
through and including the Closing Date, the Registration Statement and the
Prospectus did not and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Representations and warranties in this subsection (d)
shall not apply to statements or omissions which relate to Trident and which
were made in reliance upon and in conformity with written information furnished
to the Primary Parties by Trident or its counsel expressly for use in the
Registration Statement or the Prospectus.
(e) The MHC has filed the Conversion Application with the OTS. The
Conversion Application was approved by the OTS on ________, 1998, and the
Prospectus and proxy statements for the special meeting of members of the MHC
and the special meeting of stockholders
<PAGE>
Trident Securities, Inc.
Page 6
of the Association were authorized for use by the OTS on _________, 1998. No
stop order or equivalent order has been issued with respect to the Conversion
Application and, to the best knowledge of the Primary Parties, no proceedings
therefor have been initiated or threatened by the OTS.
(f) The Conversion Application complies in all material respects with the
Conversion Regulations. The Prospectus, which is included in the Conversion
Application, has been approved for use by the OTS and such approval is in full
force and effect. All solicitation and marketing materials which are included in
the Conversion Application have been approved for use by the OTS and such
approval is in full force and effect. No order has been issued by the OTS
preventing or suspending the use of the Prospectus. No action by or before the
OTS revoking such approval is pending or, to the best knowledge of the Primary
Parties, threatened.
(g) The Company has filed the Holding Company Application with the OTS.
The Holding Company Application complies in all material respects with the
Conversion Regulations.
(h) The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of Louisiana, with full power and
authority to own its properties and conduct its business as described in the
Registration Statement and the Prospectus. The Articles of Incorporation and
Bylaws of the Company comply in all material respects with applicable laws and
regulations. The Company has obtained all licenses, permits and other
governmental authorizations currently required for the conduct of its business,
except where the failure to obtain such licenses, permits or authorizations
would not have a material adverse effect upon the business or operations of the
Primary Parties, taken as a whole. All of such licenses, permits and other
governmental authorizations are in full force and effect, and the Company is in
all material respects in compliance therewith. On the Closing Date, the Company
will be duly qualified as a foreign corporation to transact business and will be
in good standing in each jurisdiction in which its ownership of property or
leasing of property or the conduct of its business requires such qualification,
unless the failure to be so qualified in one or more of such jurisdictions would
not have a material adverse effect on the Primary Parties, taken as a whole.
(i) The Association is a stock savings association organized and validly
existing under the laws of the United States, with full power and authority to
own its properties and conduct its business as described in the Prospectus. The
Federal Stock Charter and Bylaws of the Association comply in all material
respects with applicable laws and regulations. The Association has obtained all
licenses, permits and other governmental authorizations currently required for
the conduct of its business, except where the failure to obtain such licenses,
permits or authorizations would not have a material adverse effect upon the
business or operations of the Primary Parties, taken as a whole. All of such
licenses, permits and other governmental authorizations are in full force and
effect, and the Association is in all material respects in compliance therewith.
The deposit accounts of the Association are insured up to applicable limits by
the FDIC under the SAIF. The Association is a member of the Federal Home Loan
Bank ("FHLB") of Dallas. The Association
<PAGE>
Trident Securities, Inc.
Page 7
is duly qualified as a foreign corporation to transact business and is in good
standing or is exempt from such qualification in each jurisdiction in which its
ownership of property or leasing of property or the conduct of its business
requires such qualification, unless the failure to be so qualified in one or
more of such jurisdictions would not have a material adverse effect on the
Primary Parties, taken as a whole.
(j) The MHC is a mutual holding company organized and validly existing
under the laws of the United States, with full power and authority to own its
properties and conduct its business as described in the Prospectus. The Charter
and Bylaws of the MHC comply in all material respects with applicable laws and
regulations. The MHC has obtained all licenses, permits and other governmental
authorizations currently required for the conduct of its business, except where
the failure to obtain such licenses, permits or authorizations would not have a
material adverse effect on the MHC, taken as a whole. All of such licenses,
permits and other governmental authorizations are in full force and effect, and
the MHC is in all material respects in compliance therewith. The MHC is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which its ownership of property or leasing of property
or the conduct of its business requires such qualification, unless the failure
to be so qualified in one or more of such jurisdictions would not have a
material adverse effect on the Primary Parties, taken as a whole.
(k) The authorized capital stock of the Association consists of 2,000,000
shares of preferred stock, par value $.10 per share, none of which are issued,
and 8,000,000 shares of common stock, par value $.10 per share, of which 456,240
shares are owned by the MHC, free, clear and unencumbered, and 150,105 of which
are owned of record by Public Stockholders as of the date of this Agreement. All
issuances and sales by the Association of its securities prior to the date
hereof were exempt from registration under the 1933 Act, and all such issuances
and sales complied in all material respects with the provisions of all
applicable federal and state securities laws then in effect.
(1) The Plan has been duly and validly adopted by the Boards of Directors
of the Primary Parties. Prior to the Closing Date, the Plan will be duly and
validly approved by the requisite vote of members of the MHC and by the
requisite votes of the stockholders of the Association.
(m) Prior to the Closing Date, the offer and sale of the Shares will have
been conducted in all material respects in accordance with the Plan, the
Conversion Regulations and all other applicable laws and regulations, including
all items, conditions, requirements and provisions precedent to the Conversion
and Reorganization imposed upon the Primary Parties by the OTS, the Commission
or any other regulatory authority and in the manner described in the Prospectus;
provided, however, that no representation or warranty is made with respect to
any action on the part of Trident or its agents. To the best knowledge of the
Primary Parties, no person has sought
<PAGE>
Trident Securities, Inc.
Page 8
to obtain review of the final action of the OTS in approving the Plan or the
Conversion Application pursuant to the HOLA or any other statute or regulation.
(n) Except as disclosed in the Prospectus, none of the Primary Parties own
of record or beneficially more than 5% of the equity securities of, or more than
a 5% equity interest in, any entity or business enterprise.
(o) Each of the Primary Parties has good title to all assets material to
its respective businesses and to those assets described in the Prospectus as
owned by it, free and clear of all liens, charges, encumbrances or restrictions,
except as set forth in the Prospectus or as are not materially significant or
important in relation to the business of the Primary Parties, taken as a whole.
All of the leases and subleases material to the business of the Primary Parties
under which any one of them holds property, including those set forth in the
Prospectus, are in full force and effect as described therein.
(p) This Agreement has been duly and validly authorized, executed and
delivered by the Primary Parties. Assuming due execution and delivery by
Trident, this Agreement constitutes a valid and legally binding obligation of
the Primary Parties, enforceable against them in accordance with its terms,
except as the enforceability thereof may be limited by (i) bankruptcy,
insolvency, moratorium, reorganization, conservatorship, receivership or similar
laws relating to or affecting the enforcement of creditors' rights or by general
equity principles regardless of whether such enforceability is considered in a
proceeding in equity or at law, and (ii) laws relating to the safety and
soundness of insured depository institutions and their affiliates, and except to
the extent that the provisions of Sections 8 and 9 hereof may be unenforceable
as against public policy or by applicable law, including without limitation
Sections 23A and 23B of the Federal Reserve Act, 12 U.S.C. Section 371c
("Sections 23A and 23B").
(q) The Primary Parties have received (i) the opinion of Elias, Matz,
Tiernan & Herrick, L.L.P. to the effect that the Conversion and Reorganization
will constitute a tax-free reorganization under the Internal Revenue Code of
1986, as amended ("Code"), and (ii) the opinion of Hannis T. Bourgeois, L.L.P.
to the effect that the Conversion and Reorganization will not be a taxable
transaction under the laws of the State of Louisiana; and the facts relied upon
by such firms as set forth in such opinions are accurate and complete as of the
date of such opinions.
(r) The Primary Parties have all such corporate power, authority,
authorizations, approvals and orders as may be required to enter into this
Agreement, to perform all of their respective obligations hereunder and to
consummate the transactions contemplated hereby. On or before the Closing Date,
the Company will have the power, authority, authorizations, approvals and orders
to issue and sell the Shares in accordance with this Agreement, the Plan and the
Prospectus.
<PAGE>
Trident Securities, Inc.
Page 9
(s) None of the Primary Parties is in violation of any rule or regulation
of the OTS or the FDIC or any other agency which would materially and adversely
affect the condition, financial or otherwise, operations, business or properties
of the Primary Parties, taken as a whole ("Material Adverse Effect"). None of
the Primary Parties is subject to any written directive from the OTS or the FDIC
(or their predecessors) or any other agency to make any change in the method of
conducting its business or affairs. Each of the Primary Parties has conducted
its business in material compliance with all applicable statutes and regulations
(including, without limitation, all regulations, decisions, directives and
orders of the FHLB of Dallas, the OTS and the FDIC, or their predecessors).
Except as set forth in the Registration Statement and the Prospectus, there is
not pending or, to the best knowledge of the Primary Parties, threatened any
litigation, charge, investigation, action, suit or proceeding before or by any
court, regulatory authority or governmental agency or body which, individually
or in the aggregate, might materially affect the performance of the terms and
conditions of this Agreement or the consummation of the transactions
contemplated hereby or which, individually or in the aggregate, might result in
any Material Adverse Effect.
(t) The capitalization, assets, properties and business of the Primary
Parties conform in all material respects to the descriptions thereof contained
in the Prospectus as of the dates specified therein. Since the latest date
specified in the Prospectus, there have been no changes which would result in a
Material Adverse Effect. None of the Primary Parties has any material contingent
liabilities of any kind, except as set forth in the Prospectus.
(u) No material default exists, and no event has occurred which, with
notice or lapse of time, or both, would constitute a default, on the part of any
of the Primary Parties, in the due performance and observance of any term,
covenant or condition of any agreement which would result in a material adverse
effect. Such agreements are in full force and effect. No other party to any such
agreement has instituted or, to the best knowledge of the Primary Parties,
threatened any action or proceeding wherein any of the Primary Parties is
alleged to be in default thereunder.
(v) None of the Primary Parties is in violation of its respective Articles
of Incorporation or Charter, as applicable, or Bylaws or in default in any
respect in the performance of any material obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness by
which it is bound, except where such default would not have a Material Adverse
Effect. The execution, delivery and performance of this Agreement by the Primary
Parties and the consummation of the transactions contemplated hereby do not and
will not (i) violate or conflict with the Charter or Articles of Incorporation,
as applicable, or Bylaws of the Primary Parties or (ii) violate, conflict with
or constitute a breach of, or a default (or an event which, with notice or lapse
of time, or both, would constitute a default), except where such violation,
conflict, breach or default would not have a Material Adverse Effect under (I)
any agreement, indenture or other instrument by which any of the Primary Parties
is bound, or (II) any governmental license or permit or any law, administrative
regulation or authorization, approval, court decree, injunction or order
(subject to the satisfaction of the conditions imposed by the OTS
<PAGE>
Trident Securities, Inc.
Page 10
in connection with its approvals of the Conversion Application and Holding
Company Application).
(w) Subsequent to the respective dates as of which information is given in
the Prospectus and before the Closing Date, except as otherwise may be
specifically provided for or contemplated in the Prospectus, none of the Primary
Parties will (i) issue any securities or incur any liability or obligation,
direct or contingent for borrowed money, except (a) the shares of common stock
to be issued by the Company in the Conversion and Reorganization and (b)
borrowings from the FHLB of Dallas and other borrowings and liabilities in the
ordinary course of business, including, but not limited to, deposits, or (ii)
enter into any other transaction not in the ordinary course of business which is
material in light of the businesses and properties of the Primary Parties, taken
as a whole.
(x) On the Closing Date, the authorized, issued and outstanding equity
capital of the Company will be within the range set forth in the Prospectus
under the caption "Capitalization."
(y) When issued in accordance with the terms of the Plan, the Shares will
be validly issued, fully paid and nonassessable, will conform in all material
respects to the description thereof set forth in the Registration Statement and
the Prospectus and will be issued in compliance in all material respects with
all applicable securities laws. The issuance of the Shares is not subject to
preemptive rights other than for subscription rights granted pursuant to the
Plan. Upon issuance of the Shares thereof against payment therefor, the Company
shall transfer good title to such Shares free and clear of all claims,
encumbrances, security interests and liens caused or created by any act or
omission of the Company whatsoever. The certificates evidencing the Shares will
conform in all material respects to the requirements of applicable laws and
regulations.
(z) None of the Primary Parties has: (i) placed any securities within the
last 18 months (except for notes to evidence bank loans and mortgage-backed
securities in the ordinary course of business and except for shares of Common
Stock issued in connection with the intended capitalization of the Company,
which shares will be canceled upon consummation of the Conversion and
Reorganization); (ii) had any material dealings within the 12 months prior to
the date hereof with any member of the NASD, or any person related to or
associated with such member, other than discussions and meetings relating to the
Conversion and Reorganization and routine purchases and sales of securities for
or from its portfolio; (iii) an officer or director who has any affiliation with
the NASD; (iv) entered into a financial or management consulting agreement,
except for the engagement letter entered into with Trident on February 25, 1998;
(iv) engaged any intermediary between Trident, the Company and the Association
in connection with any offering of the Shares, and no person is being
compensated in any manner for such service.
(aa) Appropriate arrangements have been made for placing the funds
received from subscriptions for Shares in a segregated interest-bearing account
with the Association until all Shares are paid for, with provision (i) for
prompt refund to subscribers if the transactions
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Trident Securities, Inc.
Page 11
contemplated by the Plan and the Prospectus are otherwise not consummated or
(ii) for delivery to the Company if the transactions contemplated by the Plan
and the Prospectus are consummated.
(bb) No approval of any regulatory, supervisory or other public authority
is required of any of the Primary Parties in connection with the execution and
delivery of this Agreement or the issuance and sale of the Shares, except the
approval of the OTS, the Commission and the NASD and as may be otherwise
required under the securities laws of various states.
(cc) All contracts and other documents required to be filed as exhibits to
the Conversion Application and the Registration Statement have been filed with
the OTS and the Commission, respectively.
(dd) Hannis T. Bourgeois, L.L.P. the public accounting firm which has
certified the audited financial statements of the Association included in the
Prospectus, are independent certified public accountants within the meaning of
the Code of Professional Ethics of the American Institute of Certified Public
Accountants.
(ee) Since the consummation of the MHC Reorganization, each of the Primary
Parties has (i) timely filed all required federal and state tax returns and no
deficiency has been asserted with respect to such returns by any taxing
authorities, (ii) paid all taxes that have become due, and (iii) made adequate
reserves for similar current tax liabilities, except where the failure to make
such filings, payments and reserves, or the assertion of such a deficiency,
would not have a Material Adverse Effect.
(ff) The records of account holders, depositors, borrowers and other
members of the Association delivered to Trident by the Association or its agent
for use in connection with the Conversion and Reorganization are reliable and
accurate in all material respects.
(gg) RP Financial, Inc. ("Appraiser"), the corporation which prepared an
appraisal of the estimated pro forma fair market value of the Common Stock, is
independent with respect to the Primary Parties within the meaning of the
Conversion Regulations.
(hh) The Primary Parties comply in all material respects with applicable
financial record keeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970 as amended, and the regulations and rules
thereunder.
(ii) All supplemental sales literature, including but not limited to,
marketing materials, used by the Company in connection with the Offering, which
is required by the Conversion Regulations to be filed with the OTS or by the
1933 Act Regulations to be filed with the Commission, has been filed with the
OTS and the SEC, and such materials have been cleared for use by the OTS.
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Page 12
(jj) To their best knowledge, the Primary Parties comply with all laws,
rules and regulations relating to environmental protection, and none of the
Primary Parties has been notified or is otherwise aware that any of them is
potentially liable, or is considered potentially liable, under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
any similar state law, except for violations which, if asserted, would not have
a Material Adverse Effect. There are no actions, suits, regulatory
investigations or other proceedings pending or, to the best knowledge of the
Primary Parties, threatened against the Primary Parties relating to
environmental protection, nor do any of the Primary Parties have any reason to
believe any such proceedings may be brought against any of them. To the best
knowledge of the Primary Parties, no disposal, release or discharge of hazardous
or toxic substances, pollutants or contaminants, including petroleum and gas
products, as any of such terms may be defined under federal, state or local law,
has occurred on, at or about any of the facilities or properties owned or leased
by any of the Primary Parties, except such disposal, release or discharge which
would not have a Material Adverse Effect.
(kk) None of the Primary Parties has knowingly made any payment of funds
of the Primary Parties as a loan for the purpose of purchasing the Shares
(except for the loan to be made by the Company to the ESOP).
(ll) The financial statements of the Association which are included in the
Registration Statement, the Conversion Application and the Prospectus present
fairly the statements of financial condition, income, stockholders' equity and
cash flows of the Association at the respective dates thereof and for the
respective periods covered thereby, and comply as to form in all material
respects with the applicable accounting requirements of the Conversion
Regulations, Regulation S-X of the Commission, and generally accepted accounting
principles ("GAAP") consistently applied throughout the periods involved (except
as noted therein). Such financial statements are consistent with the most recent
financial statements and other reports filed by the Association with the OTS,
except that accounting principles employed in such regulatory filings conform to
the requirements of such authorities and not necessarily to GAAP. The other
financial, statistical and pro forma information and related notes included in
the Prospectus present fairly the information shown therein on a basis
consistent with the audited and unaudited financial statements of the
Association included in the Registration Statement and the Prospectus, and as to
the pro forma adjustments, the adjustments made therein have been consistently
applied on the bases described therein.
Section 3. Representations and Warranties of Trident. Trident represents
and warrants to the Primary Parties that:
(a) Trident is registered as a broker-dealer with the Commission and no
withdrawal of its registration is pending or, to the knowledge of Trident,
threatened. Trident is in good standing with the Commission and the NASD.
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Trident Securities, Inc.
Page 13
(b) Trident is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation.
(c) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of Trident, and this Agreement is a legal,
valid and binding obligation of Trident, enforceable in accordance with its
terms (except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally or the rights of creditors of
registered broker-dealers the accounts of whom may be protected by the
Securities Investor Protection Corporation or by general equity principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law, and except to the extent that the provisions of Sections 6 and
7 hereof may be unenforceable as against public policy. Trident has all
corporate power and authority necessary to perform all of its obligations under
this Agreement.
(d) Trident and, to Trident's knowledge, each of its employees, agents or
representatives who shall perform any of the services required hereunder to be
performed by Trident, is authorized and has all licenses, approvals and permits
necessary to perform the services to be rendered by it pursuant to this
Agreement. Trident is a registered selling agent in the jurisdictions listed on
Exhibit B hereto and no withdrawal of its registration is pending or, to the
knowledge of Trident, threatened. Trident will remain registered in such
jurisdictions in which the Company is relying on such registration for the sale
of the Shares, until the Conversion and Reorganization is consummated or
terminated.
(e) The execution and delivery of this Agreement by Trident, the
fulfillment of the terms set forth herein and the consummation of the
transactions contemplated hereby shall not violate or conflict with the
corporate charter or bylaws of Trident or violate, conflict with or constitute a
breach of, or default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, any material agreement, indenture or other
instrument to which Trident is a party or by which it or its property is bound
or under any governmental license or permit or any law, administrative
regulation, authorization, approval or order or court decree, injunction or
order by which Trident is bound, except where such events would not materially
and adversely affect the financial condition or operations of Trident.
(f) Any funds received by Trident to purchase Shares will be handled in
accordance with Rule 15c2-4 under the Securities Exchange Act of 1934, as
amended ("Exchange Act").
(g) No action or proceeding before the Commission, the NASD, any state
securities commission or any state or federal court is pending or, to Trident's
best knowledge, threatened concerning Trident's activities as a broker-dealer
(provided that for this purpose, Trident shall not regard any action as
"threatened" unless the Commission, the NASD, or any state securities
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Trident Securities, Inc.
Page 14
commission or such court has manifested to the management of Trident or to its
counsel the present intention to initiate such action or proceeding).
(h) No action, suit, charge or proceeding is pending or, to the knowledge
of Trident, threatened against Trident which, if determined adversely to
Trident, would have a material adverse effect upon the ability of Trident to
perform its obligations under this Agreement.
Section 4. Covenants and Agreements of the Primary Parties. The Primary
Parties, jointly and severally, covenant and agree that:
(a) The Company shall deliver to Trident, from time to time, such number
of copies of the Prospectus as Trident may reasonably request. The Company
hereby authorizes and directs Trident to use the Prospectus in any lawful manner
in connection with the offer and sale of the Shares.
(b) The MHC will notify Trident immediately upon obtaining knowledge of
the following, and confirm the notice in writing: (i) when any amendment or
supplement to the Conversion Application is filed with the OTS or when any
supplement to the Prospectus is filed with the OTS; (ii) of the issuance by the
OTS of any stop order relating to the Conversion Application or the Prospectus
or of the initiation or the threat of any proceedings for such purpose; (iii) of
the receipt of any notice with respect to the suspension of the qualification of
the Shares for offering or sale in any jurisdiction; and (iv) of the receipt of
any comments from the OTS relating to the Conversion Application or the
Prospectus. In the event the OTS enters a stop order relating to the Conversion
Application or the Prospectus at any time, the MHC will make every reasonable
effort to obtain the lifting of such order at the earliest possible moment.
(c) The Company will notify Trident immediately upon obtaining knowledge
of the following, and confirm the notice in writing: (i) when any amendment or
supplement to the Registration Statement is filed with the Commission or when
any supplement to the Prospectus is filed with the Commission; (ii) of the
issuance by the Commission of any stop order relating to the Registration
Statement or the Prospectus or of the initiation or the threat of any
proceedings for such purpose; (iii) of the receipt of any notice with respect to
the suspension of the qualification of the Shares for offering or sale in any
jurisdiction; and (iv) of the receipt of any comments from the Commission
relating to the Registration Statement or the Prospectus. In the event the
Commission enters a stop order relating to the Registration Statement or the
Prospectus at any time, the Company will make every reasonable effort to obtain
the lifting of such order at the earliest possible moment.
(d) During the time when the Prospectus is used in connection with the
offer and sale of the Shares, the Primary Parties will comply in all material
respects with all applicable requirements of the 1933 Act and the 1933 Act
Regulations, as now in effect and as hereafter amended, as from time to time in
force, so far as is necessary to permit the continuance of offers
<PAGE>
Trident Securities, Inc.
Page 15
and sales of or dealings in the Shares, in accordance with the provisions hereof
and the Prospectus. If, during the period when the Prospectus is used in
connection with the offer and sale of the Shares, any event relating to or
affecting any of the Primary Parties shall occur as a result of which it is
necessary to amend or supplement the Prospectus in order to make the Prospectus
not false or misleading in light of the circumstances existing at the time the
Prospectus is delivered to a purchaser of the Shares, the Primary Parties shall
prepare and furnish to Trident a reasonable number of copies of an amendment or
amendments or of a supplement or supplements to the Prospectus (in form and
substance reasonably satisfactory to counsel for Trident) which shall amend or
supplement the Prospectus so that, as amended or supplemented, the Prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a purchaser of
the Shares, not misleading. The Primary Parties will not file or use any
amendment or supplement to the Conversion Application, the Registration
Statement or the Prospectus of which Trident has not first been furnished a copy
or as to which Trident shall reasonably object after having been furnished such
copy. For the purpose of this subsection (d), the Primary Parties shall furnish
such information with respect to themselves as Trident from time to time
reasonably may request.
(e) The Company will take all reasonably necessary action as may be
required to qualify or register the Shares for offer and sale by the Company, if
necessary, under the state securities or "blue sky" laws of such jurisdictions
as Trident and the Company may agree upon; provided, however, that the Company
shall not be required to offer or sell Conversion Shares in any jurisdiction in
which the Company would be obligated to file any general consent to service of
process in such jurisdiction, to qualify as a foreign corporation to do business
under the laws thereof or to register its directors or officers as brokers,
dealers, salesmen or agents therein. In each jurisdiction in which such
qualification or registration will be effected, the Company, unless Trident
agrees that such action is not necessary or advisable in connection with the
distribution of the Shares, will file and make such statements or reports as
are, or reasonably may be, required by the laws of such jurisdiction.
(f) The Company shall file with the Commission a registration statement
for the Shares under Section 12(g) of the Exchange Act, prior to the completion
of the Conversion and Reorganization and will request that such registration
statement become effective upon the completion of the Conversion and
Reorganization, and the Company will maintain the effectiveness of such
registration under Section 12(g) of the Exchange Act for not less than three
years or such shorter period as may be permitted by law.
(g) For a period of three years from the date of this Agreement or for
such shorter period of time during which the Company has a class of securities
registered under the Exchange Act, the Company will furnish the following to
Trident: (i) as soon as publicly available after the end of each fiscal year, a
copy of the Annual Report to Stockholders for such year; (ii) as soon as
publicly available, a copy of each nonconfidential report or definitive proxy
statement of the
<PAGE>
Trident Securities, Inc.
Page 16
Company filed with the Commission under the Exchange Act or mailed to
stockholders; and (iii) from time to time, such other public information
concerning the Association and the Company as Trident may reasonably request.
(h) The Company and the Association will use the net proceeds from the
sale of the Shares in the manner set forth in the Prospectus under the caption
"Use of Proceeds."
(i) The Company will not deliver the Shares until each and every condition
set forth in Section 5 hereof has been satisfied in full, unless such condition
is waived in writing by Trident.
(j) The Primary Parties will take such actions and furnish such
information as are reasonably requested by Trident in order for Trident to
ensure compliance with the NASD's "Interpretation Relating to Free-Riding and
Withholding. "
(k) The liquidation account for the benefit of Eligible Account Holders
and Supplemental Eligible Account Holders will be duly established and
maintained in accordance with the requirements of the OTS.
(l) The Company and the Association will not sell, issue, contract to sell
or otherwise dispose of, for a period of 90 days after the Closing Date, without
Trident's prior written consent (which consent shall not be unreasonably
withheld), any shares of common stock other than (i) the Shares, (ii) any
Contingent Shares, or (iii) other than in connection with any plan or
arrangement described in the Prospectus, including existing stock benefit plans.
(m) The Company will use its best efforts to (i) encourage and assist at
least three market makers to establish and maintain a market for the Shares and
(ii) list the Shares on a national or regional securities exchange or on The
Nasdaq Stock Market effective on or prior to the Closing Date.
(n) The Company and the Association will maintain appropriate arrangements
for depositing all funds received from persons mailing subscriptions for or
orders to purchase Shares in the Offerings on an interest-bearing basis at the
rate described in the Prospectus until the Closing Date and satisfaction of all
conditions precedent to the release of their obligation to refund payments
received from persons subscribing for or ordering Shares in the Offerings in
accordance with the Plan and as described in the Prospectus or until refunds of
such funds have been made to the persons entitled thereto or withdrawal
authorizations canceled in accordance with the Plan and as described in the
Prospectus. The Primary Parties will maintain such records of all funds received
to permit the funds of each subscriber to be separately insured by the FDIC (to
the maximum extent allowable) and to enable the Association to make the
appropriate refunds of such funds in the event that such refunds are required to
be made in accordance with the Plan and as described in the Prospectus.
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Trident Securities, Inc.
Page 17
(o) The Company will promptly take all necessary action to register as a
savings and loan holding company under the HOLA within 90 days after the Closing
Date.
(p) None of the Primary Parties will amend the Plan without notifying
Trident prior thereto.
(q) The Primary Parties shall assist Trident, if necessary, in connection
with the allocation of the Shares in the event of an oversubscription and shall
provide Trident with any information necessary to assist the Company in
allocating the Shares in such event ("Allocation Instructions"), and to the best
knowledge of the Primary Parties, such information shall be accurate and
reliable in all material respects.
(r) The Primary Parties shall use all reasonable efforts to receive the
approval of the OTS of the Holding Company Application on or before the Closing
Date.
Section 5. Conditions of Trident's Obligations. Except as may be waived by
Trident, the obligations of Trident set forth in this Agreement shall be subject
to the accuracy of the representations and warranties contained in Section 2
hereof as of the date hereof and as of the Closing Date, to the performance by
the Primary Parties of their respective covenants and obligations hereunder and
to the following additional conditions:
(a) On the Closing Date, the Primary Parties shall have satisfied the
conditions precedent to, and will have conducted the Conversion and
Reorganization in all material respects in accordance with, the Plan, the
Conversion Regulations and all applicable laws, regulations, decisions and
orders, including all terms, conditions, requirements and conditions precedent
to the Conversion and Reorganization imposed by the OTS
(b) The Registration Statement shall have been declared effective by the
Commission and the Conversion Application approved by the OTS not later than
5:30 p.m. on the date of this Agreement or, with Trident's consent, at a later
time and date. At the Closing Date, no stop order suspending the effectiveness
of the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission or any state
authority, and no order or other action suspending the authorization of the
Prospectus or the consummation of the Conversion and Reorganization shall have
been issued or proceedings therefor initiated or, to the best knowledge of the
Primary Parties, threatened by the Commission, the OTS, the FDIC, or any state
authority.
(c) On the Closing Date, Trident shall receive an opinion of Elias Matz
Tiernan & Herrick, L.L.P., special counsel to the Primary Parties, as to those
matters of federal securities and banking laws and the Louisiana Business
Corporation Law, set forth in Exhibit C hereto, dated as of the Closing Date and
addressed to Trident.
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Trident Securities, Inc.
Page 18
(d) On the Closing Date, Trident shall receive a letter of Elias Matz
Tiernan & Herrick, L.L.P. dated as of the Closing Date, addressed to Trident, in
form and substance reasonably satisfactory to counsel for Trident and to the
effect that based upon such counsel's participation in conferences with
representatives of the Company and the Association, their counsel, the
independent appraiser and the independent public accountants for the Company and
the Association, Trident and Trident's counsel, review of various documents,
understanding of applicable law (including the requirements of form SB-2 and the
character of the Registration Statement contemplated thereby) and the experience
such counsel has gained in its practice under the Act, nothing has come to such
counsel's attention that would lead such counsel to believe (i) that the
Registration Statement (except as to information regarding Trident contained
therein and except as to the financial statements, notes to financial
statements, financial tables, pro forma and other financial and statistical data
and stock valuation information contained therein, with respect to which such
counsel need express no view), at the time it became effective and at the time
any post-effective amendment thereto became effective, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein not misleading
or (ii) that the Prospectus (except as to information regarding Trident
contained therein and except as to financial statements, notes to financial
statements, financial tables, pro forma and other financial and statistical data
and stock valuation information contained therein, with respect to which such
counsel need express no view), as of its date and as of the Closing Date
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. In issuing such letter, such counsel
may indicate that it has not confirmed the accuracy or completeness of or
otherwise verified the information contained in the Registration Statement or
the Prospectus, that it does not assume any responsibility for such information,
and that it is relying as to materiality as to factual matters on certificates
of officers and other factual representations by the Company and the
Association.
(e) Counsel for Trident shall have been furnished such documents as such
counsel reasonably may require for the purpose of enabling such counsel to
review or pass upon the matters required by Trident and for the purpose of
evidencing the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained, including, but not
limited to, resolutions of the Boards of Directors of the Primary Parties
regarding the authorization of this Agreement and the transactions contemplated
hereby.
(f) Prior to and at the Closing Date, in the reasonable opinion of
Trident: (i) there shall have been no material adverse change in the Primary
Parties, taken as a whole, from that as of the latest date as of which such
condition is set forth in the Prospectus except as referred to therein; (ii)
there shall have been no material transaction entered into by any of the Primary
Parties from the latest date as of which the financial condition of the Primary
Parties is set forth in the Prospectus, other than transactions referred to or
contemplated therein, transactions in the ordinary course of business and
transactions which are not material to the Primary Parties, taken as a whole;
(iii) the Primary Parties shall not have received from the OTS or the FDIC any
direction
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Trident Securities, Inc.
Page 19
(oral or written) to make any material change in the method of conducting their
respective businesses with which they have not complied (which direction if any,
shall have been disclosed to Trident) or which result in a Material Adverse
Effect; (iv) no action, suit or proceeding, at law or in equity, or before or by
any federal or state commission, board or other administrative agency, or before
any arbitrator or arbitrators, shall be pending or, to the best knowledge of the
Primary Parties, threatened against any of the Primary Parties or affecting any
of their respective assets that would result in a Material Adverse Effect; and
(v) the Shares shall have been qualified or registered, if necessary, for
offering and sale by the Company under the securities or "blue sky" laws of each
jurisdiction upon which Trident and the Company shall have agreed.
(h) At the Closing Date, Trident shall receive a certificate of the
President and the principal financial officer of each of the Primary Parties on
behalf of the Primary Parties, dated the Closing Date, to the effect that: (i)
they have carefully examined the Prospectus and, at the time the Prospectus
became authorized for use and at the Closing Date, the Prospectus (excluding
information contained therein with respect to Trident) did not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; (ii) since the date the Prospectus became
authorized for use, no event has occurred which should have been set forth in an
amendment or supplement to the Prospectus which has not been so set forth,
including, without limitation, any material adverse change in the business,
financial condition, income or operations of the Association; (iii) since the
date the Prospectus became authorized for use, the conditions set forth in
clauses (i) through (iv) inclusive of subsection (g) of this Section 5 have been
satisfied; (iv) no order has been issued by the Commission or the OTS to suspend
the effectiveness of the Prospectus or to terminate the Offerings and, to their
best knowledge, no action for such purposes has been instituted or threatened by
the Commission or the OTS; (v) to their best knowledge, no person has sought to
obtain review of the final action of the OTS approving the Plan pursuant to the
HOLA; and (vi) all of the representations and warranties contained in Section 2
hereof are true and correct with the same force and effect as though expressly
made on the Closing Date (except for those representations and warrants that are
as of a specific date) and all of the covenants and obligations of the Primary
Parties set forth in this Agreement have been fulfilled.
(i) At the Closing Date, Trident shall, if it has not already received,
receive, among other documents, (i) a copy of the order from the Commission
declaring the Registration Statement effective; (ii) a copy of the letters from
the OTS approving the Conversion Application and authorizing the use of the
Prospectus; and (iii) a copy of the letter from the OTS approving the Holding
Company Application.
(j) Concurrently with the execution of this Agreement, Trident shall have
received a letter from Hannis T. Bourgeois, L.L.P., independent certified public
accountants for the Association, dated the date hereof and addressed to Trident,
in substance and form reasonably satisfactory to counsel for Trident, with
respect to the financial statements and certain financial information contained
in the Prospectus.
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Page 20
(k) At the Closing Date, Trident shall receive a letter in form and
substance reasonably satisfactory to counsel for Trident from Hannis T.
Bourgeois, L.L.P., independent certified public accountants, dated the Closing
Date and addressed to Trident, confirming the statements made by them in the
letter delivered by them pursuant to the preceding subsection as of a specified
date not more than five (5) business days prior to the Closing Date.
(l) All opinions, certificates, letters and documents prepared for
Trident's reliance shall be in compliance with the provisions hereof only if
they are, in the reasonable opinion of Trident, satisfactory to Trident. Any
certificates signed by an officer or director of any of the Primary Parties
prepared for Trident's reliance and delivered to Trident or to counsel for
Trident that specifically references this Agreement, shall be deemed a
representation and warranty by the Primary Parties to Trident as to the
statements made therein. If any condition to Trident's obligations hereunder to
be fulfilled prior to or at the Closing Date is not so fulfilled, Trident may
terminate this Agreement or, if Trident so elects, may waive any such conditions
which have not been fulfilled, or may extend the time of their fulfillment. If
Trident terminates this Agreement in accordance with the foregoing, the
Association shall reimburse Trident for its accountable expenses as provided in
Section 1(b)(iv) hereof.
Section 6. Indemnification. (a) The Primary Parties, jointly and
severally, hereby agree to indemnify and hold harmless Trident, its officers,
directors and employees and each person, if any, who controls Trident within the
meaning of Section 15 of the 1933 Act or Section 20(a) of the Exchange Act:
(i) Against any and all loss, liability, claim, damage and expense
whatsoever, including but not limited to, legal fees and expenses, reasonably
incurred by any of them in investigating, preparing to defend or defending
against any action, proceeding or claim (whether commenced or threatened) (A)
arising out of or based upon any breach of any representation or warranty by the
Primary Parties contained in this Agreement, (B) arising out of or based upon
the failure of any of the Primary Parties to fulfill any covenant or obligation
set forth in this Agreement, (C) arising out of or based upon any untrue or
alleged untrue statement of a material fact or the omission or alleged omission
of a material fact required to be stated or necessary to make the statements, in
light of the circumstances under which they were made, not misleading in (I) the
Registration Statement or the Prospectus or (II) any application (including the
Conversion Application and the Holding Company Application) or other document or
communication (in this Section 6, collectively the "Application") prepared or
executed by or on behalf of any of the Primary Parties and based upon written
information furnished by or on behalf of any of the Primary Parties with the
consent of any of the Primary Parties to qualify the Shares under the securities
laws of the United States or any state or filed with the Commission or the OTS,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Primary Parties with respect to
Trident by or on behalf of Trident expressly for use in the Registration
Statement, the Prospectus or any Application, or any amendment or
<PAGE>
Trident Securities, Inc.
Page 21
supplement thereof, or (D) arising out of or based upon the Conversion and
Reorganization or the engagement of Trident under this Agreement. In no event,
however, shall the Primary Parties be liable to Trident under this Section 6(a)
if the loss, liability, claim, damage or expense is found in a final judgment by
a court of competent jurisdiction (not subject to further appeal) to have
principally and directly resulted from gross negligence or willful misconduct of
Trident. This indemnity shall be in addition to any liability that any of the
Primary Parties may have to Trident otherwise;
(ii) Against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any untrue
statement or omission referenced in subsection (i) of this Section 6(a), or any
alleged untrue statement or omission referenced in subsection (i) of this
Section 6(a), if such settlement is effected with the prior written consent of
the Primary Parties; and
(iii) Against any and all loss, liability, claim, damage and expense
whatsoever arising out of (A) any instructions given by the Primary Parties to
Trident with respect to the allocation of the Conversion Shares among
subscribers or (B) any records of any account holders, depositors, borrowers and
other members of the Association delivered to Trident by the Association or its
agents for use during the Conversion and Reorganization.
(b) Trident hereby agrees to indemnify and hold harmless the Primary
Parties, their respective officers, directors and employees and each person, if
any, who controls the Primary Parties within the meaning of Section 15 of the
1933 Act or Section 20(a) of the Exchange Act to the same extent as the
foregoing indemnity from the Primary Parties to Trident, but only with respect
to (A) statements or omissions, if any, made in the Prospectus, the Registration
Statement or any Application in reliance upon, and in conformity with, written
information furnished to the Primary Parties with respect to Trident by or on
behalf of Trident expressly for use in the Prospectus, the Registration
Statement, or any Application; (B) any breach of any representation or warranty
by Trident contained in the Agreement; or (C) any liability of the Primary
Parties found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) to have principally and directly resulted from gross
negligence or willful misconduct of Trident. This indemnity shall be in addition
to any liability that Trident may have to the Primary Parties otherwise.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, proceeding or claim (whether commenced
or threatened), such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under this Section 6, notify the
indemnifying party of the commencement thereof; provided, however, that the
omission to so notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party unless the
failure to provide
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such notice results in the forfeiture by such party of substantial rights or
defenses. In case any such action is brought against any indemnified party, and
the indemnified party notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that the indemnifying party may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, other than the reasonable cost of investigation, except as
otherwise provided herein. In the event the indemnifying party elects to assume
the defense of any such action and retain counsel acceptable to the indemnified
party, the indemnified party may retain additional counsel, but shall bear the
fees and expenses of such counsel, unless: (i) the indemnifying party shall have
specifically authorized the indemnified party to retain such counsel, or (ii)
the parties to such suit include such indemnifying party and the indemnified
party, and such indemnified party shall have been advised by counsel that one or
more material legal defenses may be available to the indemnified party which may
not be available to the indemnifying party, in which case the indemnifying party
shall not be entitled to assume the defense of such suit notwithstanding the
indemnifying party's obligation to bear the fees and expenses of such counsel.
In no event shall the indemnifying parties be liable for the fees and expenses
of more than one separate firm of attorneys (and any special counsel that said
firm may retain) for all indemnified parties in connection with any one action,
proceeding or claim or separate but similar or related actions, proceedings or
claims in the same jurisdiction arising out of the same general allegations or
circumstances. An indemnifying party against whom indemnity may be sought shall
not be liable to indemnify an indemnified party under this Section 6 if any
settlement of any such action is effected without such indemnifying party's
consent.
(d) To the extent applicable, this Section 6 is subject to and limited by
public policy and the provisions of applicable law, including but not limited to
Sections 23A and 23B of the Federal Reserve Act.
Section 7. Contribution. (a) In order to provide for just and equitable
contribution in circumstances in which the indemnity provided for in Section 6
hereof is for any reason held to be unavailable to Trident or the Primary
Parties other than in accordance with its terms, the Primary Parties, on the one
hand, and Trident, on the other, shall contribute to the aggregate losses,
liabilities, claims, damages, and expenses of the nature contemplated by such
indemnity incurred by the Primary Parties and Trident (i) in such proportion to
reflect the relative benefits received by the Primary Parties, on the one hand,
and Trident, on the other, from the offering of the Conversion Shares or (ii) if
the allocation provided by clause (i) in this Section 7 is not permitted by
applicable law, in such proportion as to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Primary
Parties, on the one hand, and Trident, on the other, in connection with the
actions that resulted in such losses, claims, damages,
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Page 23
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Primary Parties, on the
one hand, and Trident, on the other, shall be deemed to be in the same
proportion as the total gross proceeds from the sale of the Conversion Shares
received by the Primary Parties bear to the total fees received by Trident under
this Agreement. The relative fault of the Primary Parties, on the one hand, and
Trident, on the other, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Primary Parties or by Trident, the relative intent of the
parties, the knowledge of the parties, access to information and opportunity to
correct or prevent such statement or omission.
(b) The Primary Parties and Trident agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, Trident shall not be required
to contribute any amount in excess of the amount by which fees payable to
Trident pursuant to this Agreement exceed the amount of any damages which
Trident has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person adjudicated guilty
of fraudulent misrepresentation (within the meaning of Section ll(f) of the 1933
Act) shall be entitled to contribution from any person who is not adjudicated
guilty of such fraudulent misrepresentation.
(c) To the extent applicable, this Section 7 is subject to and limited by
public policy and the provisions of applicable law, including but not limited to
Sections 23A and 23B of the Federal Reserve Act.
Section 8. Survival of Agreements, Representations, Warranties and
Indemnities. The respective indemnities of the Primary Parties and of Trident
and the representations and warranties of the Primary Parties set forth in or
made pursuant to this Agreement shall remain in full force and effect regardless
of any termination or cancellation of this Agreement or any investigation made
by or on behalf of Trident or the Primary Parties or any controlling person or
indemnified party referred to in Section 6 hereof, and shall survive any
termination of this Agreement and/or the issuance of the Shares. Any successor
or assign of Trident or of the Primary Parties, any controlling person and any
legal representative of Trident or the Primary Parties shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations contained in this Agreement.
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Page 24
Section 9. Termination. (a) The obligations of Trident pursuant to this
Agreement shall terminate upon the earliest to occur of (i) completion,
termination or abandonment of the Plan by the Primary Parties, (ii) termination
of the Offerings, or (iii) 45 days after the completion of the Offerings unless
extended by written agreement of all parties.
(b) Notwithstanding the foregoing, Trident may terminate this Agreement by
giving notice at any time after this Agreement becomes effective, as follows:
(i) If the obligations of Trident cannot, in the reasonable opinion
of Trident, be fulfilled because of the material breach of any of the
representations or warranties contained in Section 2 hereof, the failure of the
Primary Parties to perform their covenants and obligations under this Agreement,
the failure of the Primary Parties to fulfill any of the covenants and
agreements set forth under Section 4 hereof or the failure of the Primary
Parties to fulfill conditions set forth at Section 5 hereof;
(ii) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets, such as to make it
impracticable, in the reasonable opinion of Trident, to proceed with the
Offerings; or if trading on the New York Stock Exchange shall have been
suspended; or if the United States shall have become involved in a war or major
hostilities; or if a general banking moratorium has been declared by a state or
federal authority; or if a moratorium in foreign exchange trading by major
international banks or persons has been declared; or if the Primary Parties
shall have sustained a material or substantial loss by, but not limited to,
fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity
or malicious act, whether or not said loss shall have been insured; or if there
shall have been a material adverse change in the condition or prospects of the
Primary Parties, taken as a whole.
(c) If Trident elects to terminate this Agreement as provided in Section
9(b), the Primary Parties shall be notified promptly by Trident by telephone or
telegram, confirmed by letter.
(d) (i) The Primary Parties may terminate this Agreement by giving notice
of a material breach of this Agreement by Trident or of a termination of the
Plan at any time after this Agreement becomes effective.
(ii) If the Primary Parties elect to terminate this Agreement as
provided in this Section 9(d), Trident shall be notified promptly by the Primary
Parties by telephone or telegram, confirmed by letter.
(e) If this Agreement is terminated for any of the reasons set forth in
this Section 9, the Primary Parties shall reimburse Trident for any expenses
incurred by Trident which are reimbursable in accordance with Section 1(b)(iv)
hereof.
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Page 25
Section 10. Notices. All communications hereunder, except as herein
otherwise specifically provided, shall be in writing and:
If sent to Trident, shall be mailed, delivered or telegraphed and
confirmed by letter to:
R. Lee Burrows, Jr.
Trident Securities, Inc.
4601 Six Forks Road, 4th Floor
Raleigh, North Carolina 27609
with a copy to:
Alan Schick, Esq.
Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
If sent to the Primary Parties, shall be mailed, delivered or telegraphed
and confirmed by letter to:
Lawrence Caldwell, Jr.
President and Chief Executive Officer
Ponchatoula Homestead Savings, F.A.
195 North Sixth Street
Ponchatoula, Louisiana 70454
with a copy to:
Gerald F. Heupel, Jr., Esq.
Elias Matz Tiernan & Herrick, L.L.P.
734 15th Street, N.W., 12th Floor
Washington, D.C. 20005
The Primary Parties shall be entitled to act and rely on any request,
notice, consent, waiver or agreement purportedly given on behalf of Trident when
the same shall have been given by the undersigned or any other officer of
Trident. Trident shall be entitled to act and rely on any request, notice,
consent, waiver, or agreement purportedly given on behalf of the Primary
Parties, when the same shall have been given by the undersigned or any other
officer of the Primary Parties.
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Page 26
Section 11. Parties. This Agreement shall inure solely to the benefit of,
and shall be binding upon, Trident, the Primary Parties, and their controlling
persons and indemnified parties referred to in Section 6 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under, or in respect of, or by virtue of, this Agreement or any provision herein
contained.
Section 12. Closing. At the Closing Date, Trident shall submit a list of
the persons subscribing for the Shares and the number of Shares so subscribed.
The Primary Parties shall deliver to Trident in next day funds the management
fee and remaining expenses due and owing to Trident as set forth in Section 1
hereof, and the opinions and certificates required hereby and other documents
deemed reasonably necessary by Trident shall be executed and delivered to effect
the sale of the Shares as contemplated hereby and pursuant to the terms of the
Prospectus.
Section 13. Partial Invalidity. In the event that any term, provision or
covenant of this Agreement or the application thereof to any circumstance or
situation shall be invalid or unenforceable in whole or in part, the remainder
hereof and the application of such term, provision or covenant to any other
circumstance or situation shall not be affected thereby, and each term,
provision or covenant of this Agreement shall be valid and enforceable to the
full extent permitted by law. If, however, any term, provision or covenant of
this Agreement is declared invalid as unenforceable by a court of competent
jurisdiction, then the parties hereto shall in good faith amend this Agreement
to include an alternative provision that accomplishes a similar result.
Section 14. Construction. Unless governed by preemptive federal law, this
Agreement shall be construed in accordance with the internal laws of the State
of North Carolina (without regard to conflicts of laws principles).
Section 15. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
Section 16. Amendment. This Agreement may be amended only by a subsequent
writing signed by all parties hereto.
* * *
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Page 27
If the foregoing correctly sets forth the arrangement between the Primary
Parties and Trident, please indicate acceptance thereof in the space provided
below for that purpose, whereupon this letter and Trident's acceptance shall
constitute a binding agreement.
Very truly yours,
HOMESTEAD BANCORP, INC.
By: _______________________________________
Its: President and Chief Executive Officer
HOMESTEAD MUTUAL HOLDING COMPANY
By: _______________________________________
Its: President and Chief Executive Officer
PONCHATOULA HOMESTEAD SAVINGS, F.A.
By: _______________________________________
Its: President and Chief Executive Officer
Agreed to and accepted as of
the date first above written
TRIDENT SECURITIES, INC.
By: ________________________________
Its:________________________________
<PAGE>
EXHIBIT A
HOMESTEAD BANCORP, INC.
HOMESTEAD MUTUAL HOLDING COMPANY
PONCHATOULA HOMESTEAD SAVINGS, F.A.
Up to 977,500 Shares of Common Stock
of Homestead Bancorp, Inc.
($.01 Par Value Per Share)
Selected Dealers' Agreement
_________________, 1998
Gentlemen:
We have agreed to assist Homestead Bancorp, Inc. ("Company"), a Louisiana
corporation, Homestead Mutual Holding Company, Ponchatoula, Louisiana ("MHC"), a
federally chartered mutual holding company, and Ponchatoula Homestead Savings,
F.A., Ponchatoula, Louisiana ("Association"), a federally chartered stock
savings association, in connection with the offer and sale of up to 977,500
shares of the common stock, par value $.01 per share ("Conversion Shares"), of
the Company to be issued in connection with the Plan of Conversion of the MHC
and Agreement and Plan of Reorganization between the Company and the Association
("Plan"). Pursuant to the Plan, the following transactions will be effected: (i)
the MHC will convert to an interim federal stock savings association and merge
with and into the Association, with the Association as the surviving entity and
with the cancellation of the shares of common stock of the Association, $1.00
par value per share ("Association Common Stock"), held by the MHC as of the
Closing Date (as hereinafter defined), (ii) an interim federal stock savings
association formed by the Company will merge with and into the Association,
resulting in (a) the Association becoming a wholly owned subsidiary of the
Company and (b) the outstanding shares of Association Common Stock held by
persons other than the MHC ("Public Association Shares") being exchanged for
shares of common stock, $.01 par value per share, of the Company ("Exchange
Shares") pursuant to a specified exchange ratio ("Exchange Ratio") ("Exchange
Offering"), all as described in the Plan, and (iii) the Company will offer
shares of its common stock as described below (collectively, the "Conversion and
Reorganization"). The MHC, Association and Company are collectively referred to
as the "Primary Parties."
The total number of Conversion Shares to be offered may be decreased to a
minimum of 722,500 shares and increased to a maximum of 1,124,125 shares. The
price per share has been fixed at $10.00. The Conversion Shares, the number of
shares to be issued, and certain of the terms on which they are being offered,
are more fully described in the enclosed Prospectus dated _______, 1998
("Prospectus"). In connection with the Conversion and Reorganization, the
Company is offering for sale such Conversion Shares in a Subscription Offering
(as defined in the
A-1
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Page 2
Prospectus). Any Shares not sold in the Subscription Offering shall be offered
to the general public in the Community Offering, including a syndicated
community offering as contemplated by the Agreement (as defined in the
Prospectus).
The Subscription and Community Offerings are being conducted under the
Plan adopted on February 25, 1998 by the Boards of Directors of the Association
and the MHC and on _________, 1998 by the Board of Directors of the Company. The
Subscription and Community Offerings are further being conducted in accordance
with the regulations of the OTS and subject to the provisions contained in the
Plan.
The Conversion Shares are also being offered in accordance with the Plan
by broker/dealers licensed by the National Association of Securities Dealers,
Inc. ("NASD") which have been approved by the Primary Parties ("Approved
Brokers").
We are offering the Approved Brokers (of which you are one) the
opportunity to participate in the solicitation of offers to buy the Conversion
Shares, and we shall pay you a fee in the amount of _____ percent (_____%) of
the dollar amount of the Conversion Shares sold on behalf of the Company by you,
as evidenced by the authorized designation of your firm on the order form or
forms for payment therefor to the special account established by the Association
for the purpose of holding such funds. It is understood, of course, that payment
of your fee shall be made only out of compensation received by us for the
Conversion Shares sold on behalf of the Company by you, as evidenced in
accordance with the preceding sentence. As soon as practicable after the closing
date of the offering, we shall remit to you, only out of our compensation as
provided above, the fees to which you are entitled hereunder.
Each order form for the purchase of Conversion Shares must set forth the
identity and address of each person to whom the certificates for such Conversion
Shares should be issued and delivered. Such order form also must clearly
identify your firm in order for you to receive compensation. You shall instruct
any subscriber who elects to send his order form to you to make any accompanying
check payable to "Homestead Bancorp, Inc."
This offer is made subject to the terms and conditions herein set forth
and is made only to Approved Brokers who are members in good standing of the
NASD who agree to comply with all applicable rules of the NASD, including,
without limitation, the NASD's Interpretation With Respect to Free-Riding and
Withholding and Section 24 of Article III of the NASD's Rules of Fair Practice.
Orders for Conversion Shares shall be subject to confirmation and we,
acting on behalf of the Primary Parties, reserve the right in our unfettered
discretion to reject any order in whole or in part, to accept or reject orders
in the order of their receipt or otherwise, and to allot. Neither
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Trident Securities, Inc.
Page 3
you nor any other person is authorized by the Primary Parties or by us to give
any information or make any representations other than those contained in the
Prospectus in connection with the sale of any of the Conversion Shares. No
Approved Broker is authorized to act as agent for us when soliciting offers to
buy the Conversion Shares from the public or otherwise. No Approved Broker shall
engage in any stabilizing (as defined in Rule 10b-7 promulgated under the
Securities Exchange Act of 1934) with respect to the Conversion Shares during
the offering.
We and each Approved Broker assisting in selling Conversion Shares
pursuant hereto agree to comply with the applicable requirements of the
Securities Exchange Act of 1934 and applicable state laws and regulations. Each
selected dealer that is not a $250,000 net capital reporting broker/dealer
agrees that it shall not use a sweep arrangement and that it shall transmit all
customer checks by noon of the next business day after receipt thereof. In
addition, we and each selected dealer confirm that the Securities and Exchange
Commission interprets Rule l5c2-8 promulgated under the Securities Exchange Act
of 1934 as requiring that a Prospectus be supplied to each person who is
expected to receive a confirmation of sale 48 hours prior to delivery of such
person's order form.
We and each Approved Broker further agree that to the extent that your
customers desire to pay for shares with funds held by or to be deposited with
us, in accordance with the interpretations of the Securities and Exchange
Commission of Rule l5c2-4 promulgated under the Securities Exchange Act of 1934,
either (a) upon receipt of an executed order form or direction to execute an
order form on behalf of a customer to forward the offering price of the
Conversion Shares ordered on or before noon of the next business day following
receipt or execution of an order form by us to the Company for deposit in a
segregated account or (b) to solicit indications of interest in which event (i)
we shall subsequently contact any customer indicating interest to confirm the
interest and give instructions to execute and return an order form or to receive
authorization to execute the order form on the customer's behalf, (ii) we shall
mail acknowledgments of receipt of orders to each customer confirming interest
on the business day following such confirmation, (iii) we shall debit accounts
of such customers on the third business day ("Debit Date") following receipt of
the confirmation referred to in (i), and (iv) we shall forward complete order
forms together with such funds to the Company on or before noon on the next
business day and each selected dealer acknowledges that if the procedure in (b)
is adopted, our customers' funds are not required to be in their accounts until
the Debit Date.
Unless earlier terminated by us, this Agreement shall terminate upon the
closing date of the Conversion and Reorganization. We may terminate this
Agreement or any provisions hereof any time by written or telegraphic notice to
you. Of course, our obligations hereunder are subject to the successful
completion of the Conversion and Reorganization.
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You agree that at any time or times prior to the termination of this
Agreement you shall, upon our request, report to us the number of Conversion
Shares sold on behalf of the Company by you under this Agreement.
We shall have full authority to take such actions as we may deem advisable
in respect of all matters pertaining to the offering. We shall be under no
liability to you except for lack of good faith and for obligations expressly
assumed by us in this Agreement.
Upon application to us, we shall inform you as to the states in which we
believe the Conversion Shares have been qualified for sale under, or are exempt
from the requirements of, the respective blue sky laws of such states, but we
assume no responsibility or obligation as to your rights to sell Conversion
Shares in any state.
Additional copies of the Prospectus and any supplements thereto shall be
supplied in reasonable quantities upon request.
Any notice from us to you shall be deemed to have been duly given if
mailed, telephoned, or telegraphed to you at the address to which this Agreement
is mailed.
This Agreement shall be construed in accordance with the laws of the State
of North Carolina.
Please confirm your agreement hereto by signing and returning the
confirmations accompanying this letter at once to us at Trident Securities,
Inc., 4601 Six Forks Road, 4th Floor, Raleigh, North Carolina 27609. The
enclosed duplicate copy shall evidence the agreement between us.
TRIDENT SECURITIES, INC.
By: ______________________________
Its: ______________________________
CONFIRMED AS OF:
_________________________, 1998
_______________________________________
A-4
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Page 5
(Name of Dealer)
By: __________________________________
Its: __________________________________
A-5
<PAGE>
EXHIBIT C
[Form of Opinion]
On the basis of and subject to the foregoing and the qualifications stated
below, we are of the following opinion.
(i) The Company has been incorporated and is validly existing as a
corporation under the laws of the State of Louisiana, and its Articles of
Incorporation and Bylaws comply in all material respects with Louisiana
law.
(ii) The Company has full power and authority to own, lease and
operate its properties and to conduct its business as such properties and
business are described in the Prospectus.
(iii) The Association is a stock savings association validly
existing under the HOLA with full power and authority to own its
properties and conduct its business as described in the Prospectus. To our
Actual Knowledge, the Association has obtained all federal banking
licenses, permits and other federal banking governmental authorizations
currently required for the conduct of its business as described in the
Prospectus, all of which are in full force and effect, except where the
failure to obtain such licenses, permits or governmental authorizations
would not have a Material Adverse Effect. The deposit accounts of the
Association are insured up to applicable limits by the FDIC, and the
Association is a member of the FHLB of Dallas.
(iv) The MHC is a federal mutual holding company validly existing
under the HOLA with full corporate power and authority to own its
properties and conduct its business as such properties and business are
described in the Prospectus. To our Actual Knowledge, the MHC has obtained
all federal banking licenses, permits and other federal banking
governmental authorizations currently required for the conduct of its
business as described in the Prospectus, all of which are in full force
and effect, except where the failure to obtain such licenses, permits or
governmental authorizations would not have a Material Adverse Effect.
(v) Upon consummation of the Conversion and Reorganization, the
Company will have authorized and outstanding Common Stock set forth in the
Prospectus, and the description of the Common Stock in the Prospectus is
accurate in all material respects.
(vi) The Plan complies in all material respects with the Conversion
Regulations (or appropriate waivers have been obtained) and has been duly
and validly approved and adopted by the Boards of Directors of the Primary
Parties. To our Actual Knowledge, the requisite number of votes of
stockholders of the Association, Public Stockholders and members of the
MHC, as the case may be, have been cast in favor of the Plan to approve it
under the terms of the Plan and applicable law. To our Actual Knowledge,
no person has
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Page 2
sought to obtain regulatory or judicial review of the final action of the
OTS in approving the Plan or the Conversion Application pursuant to the
HOLA or the Conversion Regulations.
(vii) To our Actual Knowledge, the Conversion and Reorganization
will not result in the termination of insurance of the Association's
deposit accounts by the FDIC and no proceedings for the termination or
revocation of FDIC insurance of accounts are pending or threatened. The
description of the liquidation account in the Prospectus is accurate in
all material respects.
(viii)The Agreement has been duly and validly executed and delivered
by the Primary Parties. The execution and delivery of the Agreement by the
Primary Parties and the consummation of the Conversion and Reorganization
have been duly and validly authorized by all necessary corporate action on
the part of the Primary Parties. The Agreement is a legal, valid and
binding obligation of the Primary Parties, enforceable in accordance with
its terms, except as the enforceability thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship or other laws relating to or affecting the enforcement of
creditors' rights generally or the rights of creditors of depository
institutions whose accounts are insured by the FDIC or savings and loan
holding companies the accounts of whose subsidiaries are insured by the
FDIC, (ii) general equity principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law, or (iii)
laws relating to the safety and soundness of insured depository
institutions and their affiliates, and except to the extent that the
provisions of Sections 6 and 7 of the Agreement may be unenforceable as
against public policy or applicable law, including but not limited to
Sections 23A and 23B of the Federal Reserve Act (as to which no opinion is
expressed hereby).
(ix) The Primary Parties have all corporate power and authority
necessary to perform all of their respective obligations under the
Agreement and to consummate the Conversion and Reorganization. Subject to
the satisfaction of the conditions to the OTS' approval of the Conversion
Application and the Holding Company Application, (A) the Company has the
corporate power and authority to enable the Company to offer, issue and
sell the Shares in accordance with the Plan and the Prospectus, (B) the
OTS has approved the Holding Company Application, and (C) to our Actual
Knowledge, no action has been taken or is pending and none is threatened
to revoke any such authorization or approval.
(x) Except as set forth in the Prospectus, (A) there are no pending
or, to our Actual Knowledge, threatened legal or governmental proceedings
against or involving the assets of the Primary Parties that would have a
Material Adverse Effect, (B) to our Actual Knowledge, the Primary Parties
are not in violation of their respective charter and bylaws,
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Trident Securities, Inc.
Page 3
which violation would have a Material Adverse Effect, and (C) to our
Actual Knowledge, no default exists, and no event has occurred which, with
notice or lapse of time, or both, would constitute a default, on the part
of the Primary Parties in any material respect in the performance of any
material obligation, agreement or condition contained in any material
contract or agreement, indenture or other instrument filed as an exhibit
to the Registration Statement, except where such a violation would not
have a Material Adverse Effect.
(xi) The execution, delivery and fulfillment of the terms of the
Agreement and the consummation of the Conversion and Reorganization by the
Primary Parties (A) do not and will not violate or conflict with the
respective Articles of Incorporation or Charter, as applicable, or Bylaws
of the Primary Parties or (B) to our Actual Knowledge, in any material
respect, violate, conflict with or constitute a breach of, or default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under (I) any material agreement, indenture or other instrument
filed as an exhibit to the Registration Statement or (II) any published
federal banking law (subject to the satisfaction of certain postConversion
and Reorganization conditions imposed by the OTS in connection with its
approval of the Conversion Application and the Holding Company
Application), except where such violation, conflict, breach or default
would not have a Material Adverse Effect.
(xii) The issuance and sale of the Conversion Shares have been duly
and validly authorized by all necessary corporate action on the part of
the Company. The Conversion Shares, upon receipt of payment and issuance
in accordance with the terms of the Plan and the Agreement, will be
validly issued, fully paid, nonassessable and, except as disclosed in the
Prospectus, free of preemptive rights, and good title thereto shall be
transferred by the Company free and clear of all claims, encumbrances,
security interests and liens created by the Company. The certificates for
the Conversion Shares are in proper form and comply in all material
respects with applicable Louisiana law and OTS regulations.
(xiii) Except where appropriate waivers have been received and with
respect to certain post-Conversion and Reorganization reports or other
materials required to be filed by the Primary Parties and any other
actions required to be performed after the Closing Date, the Primary
Parties have, in all material respects, satisfied, to our Actual
Knowledge, the conditions of approval of the Conversion Application and
the Holding Company Application contained in the approval letters dated
_________________, 1998 and ___________________, 1998, respectively.
(xiv) Subject to the satisfaction of the post-Conversion and
Reorganization conditions in the OTS approval of the Conversion
Application and Holding Company Application, no further approval,
authorization, consent or other order of any federal regulatory agency is
required in connection with the execution and delivery of the
C-3
<PAGE>
Trident Securities, Inc.
Page 4
Agreement, and the issuance of the Shares and consummation of the
Conversion and Reorganization, except with respect to the issuance to the
Association of its amended federal stock charter, except the filing or
submission of certain required post-Conversion and Reorganization reports
or other materials by the Primary Parties, except as may be required under
the securities laws of various jurisdictions, and except for any
approvals, authorizations, consents or other orders required to be
obtained by Trident or its employees (as to which no opinion in needed);
(xv) The statements in the Prospectus under the captions "Dividend
Policy," "The Conversion," "Regulation," "Taxation -- Federal Taxation,"
"Restrictions on Acquisition of the Company and Ponchatoula," and
"Description of Capital Stock of the Company," insofar as they are, or
refer to, statements of law or legal conclusions (excluding financial data
included therein, as to which no opinion is expressed hereby), have been
prepared or reviewed by us and are correct in all material respects;
(xvi) The Registration Statement is effective under the 1933 Act, no
stop order suspending its effectiveness has been issued under the 1933
Act, and, to our Actual Knowledge, no proceedings therefor have been
threatened by the Commission.
(xvii) The Conversion Application has been conditionally approved by
the OTS, and the Prospectus has been authorized for use by the OTS. To our
Actual Knowledge, no proceedings are pending by or before the OTS seeking
to revoke or rescind the orders approving the Conversion Application or
the Prospectus, nor are such proceedings threatened.
(xviii) At the time the Conversion Application, Regulation Statement
and Prospectus, in each case as amended, were approved or declared
effective, such documents complied as to form in all material respects
with the requirements of the Conversion Regulations, the rules and
regulations of the OTS, the 1933 Act and the 1933 Act Regulations, as the
case may be (in each case except as to financial statements, notes to
financial statements, financial tables and other financial and statistical
data and approved data included therein, and information with respect to
Trident included therein, as to which an opinion is not expressed). To our
Actual Knowledge, all documents and exhibits required to be filed with the
Conversion Application and the Registration Statement have been so filed.
In giving such opinion, such counsel may rely as to all matters of fact on
certificates of officers and directors of the Primary Parties and certificates
of public officials. Such counsel's opinion shall be limited to matters governed
by federal banking and securities laws and the State of Louisiana Business
Corporation Law. With respect to matters involving the application of
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<PAGE>
Trident Securities, Inc.
Page 5
Louisiana law, such counsel may rely, to the extent it deems proper and as
specified in its opinion, upon the opinion of local counsel satisfactory to
Trident's counsel. The opinion of Elias, Matz, Tiernan & Herrick, L.L.P. shall
be governed by the Legal Opinion Accord ("Accord") of the American Bar
Association Section of Business Law (1991). The term "Actual Knowledge" as used
herein shall have the meaning set forth in the Accord. In addition, such opinion
may be limited to present statutes, regulations and judicial interpretation and
to facts as they exist on the date the legal opinion is issued; in rendering
such opinion, such counsel need assume no obligation to revise or supplement it
should the present laws be changed by legislative or regulatory action, judicial
decision or otherwise.
C-5
<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
Section
Number Page
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
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 and amended on May 6, 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
9
<PAGE>
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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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 Tax-Qualified 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 and
except as may otherwise be required by the OTS, 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; provided, however, that a Public Stockholder who would
exceed an applicable purchase limitation may be precluded from purchasing
Conversion Stock in the Offerings.
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.
23
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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
<PAGE>
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
Tax-Qualified 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.
ss.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.
28
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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
<PAGE>
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. ss.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.
Name Term Expires
---- ------------
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
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 deposit-taking 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:
By:
- -------------------------- --------------------------------------
Barbara B. Theriot Lawrence C. Caldwell, Jr.
Secretary President and Chief Executive Officer
PONCHATOULA HOMESTEAD SAVINGS, F.A.
Attest:
By:
- -------------------------- --------------------------------------
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. ss.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.
Name Term Expires
---- ------------
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
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 deposit-taking 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
B-7
<PAGE>
Exhibit 8.1
Law Offices
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
12th Floor
734 15th Street, N.W.
Washington, D.C. 20005
-----
Telephone: (202) 347-0300
Facsimile: (202) 347-2172
WWW.EMTH.COM
TIMOTHY B. MATZ JEFFREY D. HAAS
STEPHEN M. EGE KEVIN M. HOULIHAN
RAYMOND A. TIERNAN KENNETH B. TABACH
W. MICHAEL HERRICK PATRICIA J. WOHL
GERARD L. HAWKINS JEFFREY R. HOULE
NORMAN B. ANTIN FIORELIO J. VICENCIO*
JOHN P. SOUKENIK* DAVID TEEPLES*
GERALD F. HEUPEL, JR. CRISTIN ZEISLER
JEFFREY A. KOEPPEL ANDREW ROSENSTEIN
DANIEL P. WEITZEL ____________
PHILIP ROSS BEVAN
HUGH T. WILKINSON May 11, 1998 OF COUNSEL
ALLIN P. BAXTER
JACK I. ELIAS
SHERYL JONES ALU
*NOT ADMITTED IN D.C. 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. 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 investigations as we have deemed relevant or necessary
for the purpose of this opinion. We have relied solely upon the examinations and
inquiries recited herein. In our examination, we have assumed, without
independent verification, (i) the genuineness of all signatures, the
authenticity of all documents submitted to us as original copies, the conformity
to original documents of all documents submitted to us as certified, conformed
or reproduction copies, and the authenticity of such originals of such latter
documents; (ii) the execution and acknowledgement as indicated thereon by all
parties thereto; (iii) that each party to the transactions contemplated by the
Plan of Conversion and Agreement and Plan of Reorganization (the "Plan of
Conversion" or the "Plan") has the full
<PAGE>
Boards of Directors
May 11, 1998
Page 2
power, authority and legal right under its articles of incorporation, charter,
bylaws or other governing documents and applicable laws and regulations to
execute and to perform its obligations under all documents executed by it in
connection with the transactions contemplated by the Plan; (iv) the accuracy and
completeness of all corporate records and documents and of all certificates and
statements of fact made available to us; and (v) that the foregoing documents,
in the form submitted to us for our review, have not been altered or amended in
any respect material to our opinions as stated herein. As to matters of fact
which are material to this opinion, we have relied upon the accuracy and
completeness of statements regarding factual matters (which statements we have
neither investigated nor verified) contained in the Registration Statement on
Form SB-2, as amended ("Form SB-2"), filed by Homestead Bancorp, Inc. (the
"Company") with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended. In addition, for purposes of such opinions,
we have assumed that the subject transactions will be consummated in accordance
with the descriptions thereof contained in the Form SB-2.
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 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
<PAGE>
Boards of Directors
May 11, 1998
Page 3
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 included as an exhibit to the Form SB-2. 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.
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
<PAGE>
Boards of Directors
May 11, 1998
Page 4
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 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").
<PAGE>
Boards of Directors
May 11, 1998
Page 5
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 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,
<PAGE>
Boards of Directors
May 11, 1998
Page 6
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 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
<PAGE>
Boards of Directors
May 11, 1998
Page 7
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)
<PAGE>
Boards of Directors
May 11, 1998
Page 8
because Company Common Stock will be conveyed to the Association's stockholders
in exchange for their Association Common Stock.
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.
<PAGE>
Boards of Directors
May 11, 1998
Page 9
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 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 captions "The Conversion - Tax
Aspects" and "Legal Matters" and to the filing of this legal opinion as an
exhibit to the Form AC and the Form SB-2.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ Gerald F. Heupel, Jr.
-----------------------------------------
Gerald F. Heupel, Jr., a Partner
<PAGE>
Exhibit 23.1
[Hannis T. Bourgeois, L.L.P. Letterhead]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent pubic 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 and to the references to our firm included in Amendment No. 1 to Form AC
and Amendment No. 2 to Form SB-2 filed on or about May 11, 1998.
We also consent to our opinion letter dated April 1, 1998 as to the state
income tax consequences being included as an exhibit to the Form AC and the Form
SB-2 and to the summary of the opinion included in such filings.
/s/ Hannis T. Bourgeois, L.L.P.
HANNIS T. BOURGEOIS, L.L.P.
May 11, 1998
<PAGE>
Exhibit 23.2
[RP Financial, LC. Letterhead]
May 8, 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 SB-2 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 and our letter
regarding subscription rights in such filings including the Prospectus of
Homestead Bancorp, Inc.
Sincerely,
RP FINANCIAL, LC.
By: /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 July 1, 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 July 1, 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 75.2% 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 May 4,
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
July 1, 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 July 1, 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 May __, 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 May 4, 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
<PAGE>
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 B 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
3
<PAGE>
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
4
<PAGE>
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
ss.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 ss.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 ss.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
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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.
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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.]
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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 JULY 1, 1998 AND ANY ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Association as of May 4, 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 July 1, 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.
(Continued and to be signed on other side)
<PAGE>
The undersigned hereby acknowledges receipt of a Notice of Special Meeting
of the Stockholders of Ponchatoula Homestead Savings, F.A. called for July 1,
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>
HOMESTEAD MUTUAL HOLDING COMPANY
195 North Sixth Street
Ponchatoula, Louisiana 70454
(504) 386-3379
NOTICE OF SPECIAL MEETING OF MEMBERS
To Be Held on July 1, 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
July 1, 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
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; (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 May 4, 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.
- --------------------------------------------------------------------------------
<PAGE>
HOMESTEAD MUTUAL HOLDING COMPANY
-------------------
PROXY STATEMENT
-------------------
SPECIAL MEETING OF MEMBERS
To Be Held On July 1, 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 July
1, 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. A copy of the Company's Prospectus accompanies this
Proxy Statement and is incorporated herein by reference. See "Incorporation of
Information by Reference," "How to Obtain Additional Information" and "Available
Information."
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 May 4, 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
4,137 Members, the holders of which are entitled to cast a total of
approximately 52,593 votes at the Special Meeting.
<PAGE>
3
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 75.2% 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.
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.
<PAGE>
4
INCORPORATION OF INFORMATION BY REFERENCE
The Company's Prospectus dated May 4, 1998 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 voted upon by the Association's stockholders to comply with applicable
regulations of the OTS.
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. See also "Selected Financial Data" and "Summary of Recent
Developments" 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.
The Prospectus also provides information regarding the names, ages,
business experience and compensation of the Association's directors and
executive officers, as well as the benefit plans and proposed employment
agreements. See "Management" in the Prospectus.
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>
5
HOW TO OBTAIN ADDITIONAL INFORMATION
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 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
June __, 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. 333-49277) 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. In addition, the SEC maintains a web
site that contains registration statements and other reports regarding
registrants that file electronically with the SEC (such as the Company). The
address of the SEC's web site is http://www.sec.gov. The statements contained in
the 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 contract or document.
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 JULY 1, 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 July 1, 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>
6
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 July 1, 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.
<PAGE>
EXHIBIT 99.4
HOMESTEAD BANCORP, INC.
STOCK ORDER FORM
- --------------------------------------------------------------------------------
Ponchatoula Homestead Savings EXPIRATION DATE
Stock Information Center for Stock Order Forms:
P.O. Drawer D June 23, 1998
195 North Sixth St 12:00 Noon, Central Time
Ponchatoula, LA 70454
(504) 386-
- --------------------------------------------------------------------------------
IMPORTANT -- PLEASE NOTE: A properly completed original stock order form must be
used to subscribe for common stock. Faxes or copies of this form will not be
accepted.
- --------------------------------------------------------------------------------
(1) NUMBER OF SHARES SUBSCRIPTION PRICE (2) TOTAL PAYMENT DUE
X $10.00 =
- ---------------------- -------------------------
The minimum purchase is 25 shares. The maximum purchase per priority category is
1% of the Conversion Stock sold in the Offerings (9,775 shares at the maximum),
and no person (together with associates of or persons acting in concert with
such person) may purchase more than the number of shares of Conversion Stock
that when combined with any Exchange Shares received aggregate more than 3% of
the total shares issued in the Conversion.
- --------------------------------------------------------------------------------
(3) EMPLOYEE/OFFICER/DIRECTOR INFORMATION
Check here if you are a director, officer or employee of Ponchatoula Homestead
Savings ("Ponchatoula") or a member of such person's immediate family.
- --------------------------------------------------------------------------------
(4) METHOD OF PAYMENT/CHECK Check Amount
Enclosed is a check, bank draft or money
order made payable to Homestead Bancorp. Inc.
(the "Company") in the amount of: $
-----------------------
- --------------------------------------------------------------------------------
(5) METHOD OF PAYMENT/WITHDRAWAL
The undersigned authorizes withdrawal from the following account(s) at
Ponchatoula. There is no penalty for early withdrawal used for this payment.
ACCOUNT NUMBER(S) WITHDRAWAL AMOUNT(S)
------------------------- --------------------
------------------------- --------------------
------------------------- --------------------
------------------------- --------------------
TOTAL WITHDRAWAL AMOUNT
--------------------
- --------------------------------------------------------------------------------
(6) MEMBER INFORMATION
A. / / Eligible Account Holder -- Check here if you were a depositor of at least
$50.00 at Ponchatoula on December 31, 1996.
B. / / Supplemental Eligible Account Holder -- Check here if you were a
depositor of at least $50.00 at Ponchatoula on March 31, 1998.
C. / / Other Member -- Check here if you held a deposit at Ponchatoula on May 4,
1998 but not on December 31, 1996 or March 31, 1998.
Enter information below for all deposit accounts that you had at Ponchatoula
as of the dates specified above for which you checked the appropriate box.
ACCOUNT TITLE (NAMES ON ACCOUNTS) ACCOUNT NUMBER(S)
----------------------------------- --------------------
----------------------------------- --------------------
----------------------------------- --------------------
PLEASE NOTE: FAILURE TO LIST ALL YOUR ACCOUNTS MAY RESULT IN THE LOSS OF PART OR
ALL OF YOUR SUBSCRIPTION RIGHTS. IF ADDITIONAL SPACE IS NEEDED, PLEASE UTILIZE
THE BACK OF THIS STOCK ORDER FORM.
- --------------------------------------------------------------------------------
(7) STOCK REGISTRATION/FORM OF STOCK OWNERSHIP
/ / Individual / / Co-Ownership (Louisiana residents)
/ / (Fiduciary (i.e. trust,estate, etc.) / / Corporation or Partnership
/ / Tenants in Common (non-Louisiana) / / Joint Tenants (non-Louisiana)
/ / Uniform Gifts to Minors Act / / Other ----------------
(8) NAME(S) IN WHICH STOCK IS TO BE REGISTERED Social Security # or Tax ID
(PLEASE PRINT CLEARLY)
- ------------------------------------------------ ------------------------------
Name(s) continued
- ------------------------------------------------
Street Address City State Zip Code
- ----------------------- ----------- -------------- --------------
(9) TELEPHONE INFORMATION
(Daytime) (Evening) Parish of Residence
( ) ( )
- ---------------- ---------------- ------------------------------
- --------------------------------------------------------------------------------
(10) NASD AFFILIATION
/ / Check here if you are a member of the National Association of Securities
Dealers, Inc. ("NASD"), a person associated with an NASD member, a member of
the immediate family of any such person to whose support such person
contributes, directly or indirectly, or the holder of an account in which an
NASD member or person associated with an NASD member has a beneficial
interest. To comply with conditions under which an exemption from the NASD's
Interpretation With Respect to Free-Riding and Withholding is available, you
agree, if you have checked the NASD Affiliation box, (i) not to sell,
transfer or hypothecate the stock for a period of 90 days following
issuance, and (ii) to report this subscription in writing to the applicable
NASD member within one day of payment therefor.
(11) ASSOCIATE--ACTING IN CONCERT
/ / Check here, and complete the reverse side of this Form, if you or any
associate (as defined on the reverse side of this Form) or persons acting in
concert with you have submitted other orders for shares in the Subscription
and/or Community Offerings.
- --------------------------------------------------------------------------------
(12) ACKNOWLEDGMENT
To be effective, this fully completed Stock Order Form must be actually received
by Ponchatoula no later than 12:00 Noon, Central Time, on June 23, 1998, unless
extended; otherwise, this Stock Order Form and all subscription rights will be
void. Completed Stock Order Forms, together with the required payment or
withdrawal authorization, may be delivered to any full service office of
Ponchatoula or may be mailed to the Post Office Box indicated on the enclosed
business reply envelope. All rights exercisable hereunder are not transferable
and shares purchased upon exercise of such rights must be purchased for the
account of the person exercising such rights.
It is understood that this Stock Order Form will be accepted in accordance with,
and subject to, the terms and conditions of the Plan of Conversion of Homestead
Mutual Holding Company (the "MHC") and Agreement and Plan of Reorganization of
the Company and Ponchatoula (the "Plan of Conversion"). If the Plan of
Conversion is not approved by the members of the MHC and the stockholders of
Ponchatoula at special meetings to be held on July 1, 1998 or any adjournment
thereof, or if certain other conditions set forth in the Plan of Conversion are
not satisfied, all orders will be cancelled and funds received as payment, with
accrued interest, will be returned promptly.
The undersigned agrees that after receipt by Ponchatoula, this Stock Order Form
may not be modified, withdrawn or cancelled (unless the conversion is not
completed within 45 days after the completion of the Subscription Offering)
without the consent of the Company and Ponchatoula, and if authorization to
withdraw from deposit accounts at Ponchatoula has been given as payment for
shares, the amount authorized for withdrawal shall not otherwise be available
for withdrawal by the undersigned.
Under penalty of perjury, I certify that the Social Security or Tax ID Number
and the other information provided under Number 8 of this Stock Order Form is
true, correct and complete, that I am purchasing for my own account and that
there is no agreement or understanding regarding the transfer of my subscription
rights or the sale or transfer of these shares.
Applicable regulations prohibit any person from transferring or entering into
any agreement directly or indirectly to transfer the legal or beneficial
ownership of conversion subscription rights, or the underlying securities to the
account of another. Ponchatoula and the Company may 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 such
transfer.
I acknowledge that the common stock offered is not a savings or deposit account
and is not federally insured or guaranteed.
I also acknowledge receipt of a Prospectus dated May , 1998.
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED TWICE: BELOW AND ON THE FORM
OF THE CERTIFICATION ON THE REVERSE HEREOF.
SIGNATURE DATE SIGNATURE DATE
- ------------------------------ ------------------------------
A SIGNED CERTIFICATION MUST ACCOMPANY ALL STOCK ORDER FORMS (SEE REVERSE SIDE)
- --------------------------------------------------------------------------------
FOR OFFICE USE ONLY
Date Category
- ------------------------------ ------------------------------
Batch Deposit
- ------------------------------ ------------------------------
Order O/C
- ------------------------------ ------------------------------
<PAGE>
ITEM (6)A, B, C -- (CONTINUED)
ACCOUNT TITLE (NAMES ON ACCOUNTS) ACCOUNT NUMBER(S)
- ----------------------------------- --------------------
- ----------------------------------- --------------------
- ----------------------------------- --------------------
- ----------------------------------- --------------------
- ----------------------------------- --------------------
ACCOUNT TITLE (NAMES ON ACCOUNTS) ACCOUNT NUMBER(S)
- ----------------------------------- --------------------
- ----------------------------------- --------------------
- ----------------------------------- --------------------
- ----------------------------------- --------------------
- ----------------------------------- --------------------
ITEM (12) -- (CONTINUED)
List below all other orders submitted by you or your Associates (as defined) or
by persons acting in concert with you.
NUMBER OF
NAMES(S) LISTED ON OTHER SHARES
STOCK ORDER FORMS ORDERED
- ----------------------------------- --------------------
- ----------------------------------- --------------------
- ----------------------------------- --------------------
- ----------------------------------- --------------------
- ----------------------------------- --------------------
"Associate" is defined as: (i) any corporation or organization (other than
Ponchatoula, the Company or a majority-owned subsidiary of Ponchatoula or the
Company) of which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any 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 a trustee
or in a similar fiduciary capacity; provided, however, such term shall not
include the Company's or Ponchatoula's employee benefit plans in which such
person has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary; 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 Ponchatoula, any of its subsidiaries or the Company.
YOU MUST SIGN THE FOLLOWING CERTIFICATION IN ORDER TO PURCHASE STOCK
FORM OF CERTIFICATION
I/WE ACKNOWLEDGE THAT THE COMMON STOCK OF HOMESTEAD BANCORP, INC. (THE
"COMPANY") IS NOT A DEPOSIT OR SAVINGS ACCOUNT, IS NOT FEDERALLY INSURED, AND IS
NOT GUARANTEED BY PONCHATOULA HOMESTEAD SAVINGS, F.A. ("PONCHATOULA"), THE
COMPANY OR THE FEDERAL GOVERNMENT.
If anyone asserts that the Company's Common Stock is federally insured or
guaranteed, or is as safe as an insured deposit, I should call the Office of
Thrift Supervision, Midwest Regional Director, 112 W. John Carpenter Freeway,
Dallas, Texas 75039-2010 at (972) 281-2000.
I/we further certify that, before purchasing the common stock, par value $.01
per share, of Homestead Bancorp, Inc., the proposed holding company for
Ponchatoula, I/we received a Prospectus dated May , 1998 (the "Prospectus").
The Prospectus that I/we received contains disclosure concerning the nature of
the security being offered and describes the risks involved in the investment,
including the following risks described under "Risk Factors" beginning on page
18 of the Prospectus:
1. Potential Low Return on Equity Following the Conversion; Uncertainty as
to Future Growth Opportunities
2. Absence of Market for the Common Stock
3. Potential Effects of Changes in Interest Rates and the Current Interest
Rate Environment
4. High Percentage of Assets in Mortgage-Backed Securities
5. Reduced Gains on Sales of Loans
6. Risks Related to Consumer Loans
7. Risks Related to Commercial Real Estate Loans, Construction and Land
Loans
8. Strong Competition Within Ponchatoula's Market Area
9. Geographic Concentration of Loans
10. Reliance on Key Officers
11. Certain Anti-Takeover Provisions
12. Legislation Limiting Deduction of Bad Debt Reserves
13. Regulatory Oversight and Legislation
14. Possible Increase in Number of Shares Issued in the Conversion
15. Possible Dilutive Effect of Issuance of Additional Shares
16. Increased Compensation Expense After the Conversion
17. Possible Adverse Income Tax Consequences of the Distribution of
Subscription Rights
18. Irrevocability of Orders; Potential Delay in Completion of Offerings
SIGNATURE DATE SIGNATURE DATE
- ------------------------------ ------------------------------
NAME (PLEASE PRINT) NAME (PLEASE PRINT)
- ------------------------------ ------------------------------
<PAGE>
HOMESTEAD BANCORP, INC.
Stock Ownership Guide
Individual
Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership rights,
such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
Co-Ownership
Co-Ownership may be used to identify two or more owners under the laws of the
State of Louisiana.
Joint Tenants
For non-Louisiana residents, joint tenants with right of survivorship may be
specified to identify two or more owners. When stock is held by joint tenants
with right of survivorship, ownership is intended to pass automatically to the
surviving joint tenant(s) upon the death of any joint tenant. All parties must
agree to the transfer or sale of shares held by joint tenants.
Tenants in Common
For non-Louisiana residents, tenants in common may also be specified to identify
two or more owners. When stock is held by tenants in common, upon the death of
one co-tenant, ownership of the stock will be held by the surviving co-tenant(s)
and by the heirs of the deceased co-tenant. All parties must agree to the
transfer or sale of shares held by tenants in common.
Uniform Transfers to Minors Act ("UTMA")
Stock may be held in the name of a custodian for a minor under the Uniform
Transfers to Minors Act of each state. There may be only one custodian and one
minor designated on a stock certificate. The standard abbreviation for Custodian
is "CUST", while the Uniform Transfers to Minors Act is "UTMA". Standard U.S.
Postal Service state abbreviations should be used to describe the appropriate
state. For example, stock held by John Doe as custodian for Susan Doe under the
Louisiana Uniform Transfers to Minors Act will be abbreviated John Doe, CUST
Susan Doe UTMA, LA (use minor's social security number).
Fiduciaries
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
<PAGE>
o The name(s) of the fiduciary. If an individual, list the first name,
middle initial and last name. If a corporation, list the full
corporate title (name). If an individual and a corporation, list the
corporation's title before the individual.
o The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
o A description of the document governing the fiduciary relationship,
such as a living trust agreement or court order. Documentation
establishing a fiduciary relationship may be required to register
your stock in a fiduciary capacity.
o The date of the document governing the relationship, except that the
date of trust created by a will need not be included in the
description.
o The name of the maker, donor or testator and the name of the
beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John Doe,
Trustee Under Agreement Dated 10-1-87 for Susan Doe.
STOCK ORDER FORM INSTRUCTIONS
Items 1 and 2 --
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares purchased
by the Purchase Price of $10.00 per share. The minimum purchase is 25 shares.
Management has the authority to increase or decrease the maximum purchase
limits.
Item 3 --
Please check this box to indicate whether you are a director, officer or
employee of Ponchatoula Homestead Savings or a member of such person's immediate
family.
Item 4 --
Payment for shares may be made in cash (only if delivered by you in person) or
by check, bank draft or money order made payable to Ponchatoula Homestead
Savings. Your funds will earn interest at Ponchatoula's passbook rate of
interest until the Conversion is completed. DO NOT MAIL CASH TO PURCHASE STOCK!
Please check this box if your method of payment is by check, bank draft or money
order.
2
<PAGE>
Item 5 --
If you pay for your stock by a withdrawal from a deposit account at Ponchatoula,
insert the account number(s) and the amount of your withdrawal authorization for
each account. There will be no penalty assessed for early withdrawals from
certificate accounts used for stock purchases. This form of payment may not be
used if your account is an Individual Retirement Account. Please contact the
Stock Information Center for information regarding purchases from an Individual
Retirement Account.
Item 6 --
Please check the appropriate box if you were:
(a) A depositor at Ponchatoula on December 31, 1996 (the "Eligibility Record
Date") with at least $50.00 on deposit.
(b) A depositor at Ponchatoula on March 31, 1998 (the "Supplemental
Eligibility Record Date") with at least $50.00 on deposit.
(c) A depositor at Ponchatoula on May 4, 1998 (the "Voting Record Date").
Items 7, 8 and 9 --
The stock transfer industry has developed a uniform system of shareholder
registrations that we will use in the issuance of your Homestead Bancorp, Inc.
Common Stock. Please complete items 7, 8 and 9 as fully and accurately as
possible, and be certain to supply your social security or Tax I.D. number(s)
and your daytime and evening telephone number(s). We will need to call you if we
cannot execute your order as given. If you have any questions regarding the
registration of your stock, please consult your legal advisor. Stock ownership
must be registered in one of the ways described above under "Stock Ownership
Guide."
Item 10 --
Please check this box if you are a member of the NASD or if this item otherwise
applies to you.
Item 11 --
Please check this box if you or any associate (as defined on the reverse side of
the Stock Order Form) or person acting in concert with you have submitted
another order for shares and complete the reverse side of the Stock Order Form.
3
<PAGE>
Item 12 --
Please sign and date the Stock Order Form and Certification Form where
indicated. Before you sign, review the Stock Order Form, including the
acknowledgement, and the Certification Form. Normally, one signature is required
on both sides. An additional signature is required only when payment is to be
made by withdrawal from a deposit account that requires multiple signatures to
withdraw funds.
You may mail your completed Stock Order Form and Certification Form in the
envelope that has been provided, or you may deliver your Stock Order Form and
Certification Form to Ponchatoula Homestead Savings. Your Stock Order Form and
Certification Form, property completed, and payment in full (or withdrawal
authorization) at the subscription price must be received by Ponchatoula
Homestead Savings no later than 12:00 Noon, Central Time, on June 23, 1998 or it
will become void. If you have any remaining questions, or if you would like
assistance in completing your Stock Order Form, you may call the Stock
Information Center at (504) 386-____. The Stock Information Center will be open
Monday through Friday during regular hours.
4
<PAGE>
Exhibit 99.5
Homestead Bancorp, Inc.
Proposed Holding Company for
Ponchatoula Homestead Savings, F.A.
Ponchatoula, LA
Proposed Marketing Materials
<PAGE>
Marketing Materials for
Homestead Bancorp, Inc.
Ponchatoula, Louisiana
Table of Contents
I. Press Release
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
A. Explanation
B. Quantity and Method of Distribution
C. Example
IV. Officer and Director Support Brochure
A. Explanation
B. Method of Distribution
C. Example
V. IRA Mailing
A. Explanation
B. Quantity and Method of Distribution
C. IRA Mailing Example
VI. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
VII. Invitations
A. Explanation
B. Quantity - Method of Distribution
C. Examples
VIII. Prospect Letters
A. Explanation
B. Method of Distribution
C. Examples
IX. Cover Letters for Initial Mailing
A. Explanation
<PAGE>
B. Method of Distribution
C. Examples
X. Proxygram
A. Explanation
B. Example
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers, community members and other
interested investors receive prompt accurate information in a simultaneous
manner, Trident advises the Association to forward press releases to area
newspapers, radio stations, etc. at various points during the Conversion
process.
Only press releases approved by Conversion Counsel and the OTS, if
necessary, will be forwarded for publication in any manner.
B. Schedule
1. OTS Approval of Conversion
2. Close of Stock Offering
<PAGE>
National and Local Distribution List
National Thrift News Wall Street Journal
212 West 35th Street World Financial Center
13th Floor 200 Liberty
New York, New York 10001 New York, NY 10004
Richard Chang
American Banker SNL Securities
One State Street Plaza Post Office Box 2124
New York, New York 10004 Charlottesville, Virginia 22902
Michael Weinstein
Barrons Investors Business Daily
Dow Jones & Company 12655 Beatrice Street
Barrons Statistical Information Post Office Box 661750
200 Burnett Road Los Angeles, California 90066
Chicopee, Massachusetts 01020
New York Times
229 West 43rd Street
New York, NY 10036
Business Wire
212 South Tryon
Suite 1460
Charlotte, North Carolina 28281
* Press releases will be distributed to all the applicable local media.
<PAGE>
Press Release FOR IMMEDIATE RELEASE
For More Information Contact:
Lawrence C. Caldwell, Jr.
President and Chief Executive Officer
Ponchatoula Homestead Savings, F.A.
(504) 386-3379
PONCHATOULA HOMESTEAD SAVINGS, F.A.
REORGANIZATION FROM MUTUAL HOLDING COMPANY TO STOCK
HOLDING COMPANY STRUCTURE APPROVED
Lawrence C. Caldwell, Jr., President and Chief Executive Officer of
Ponchatoula Homestead Savings, F.A. ("Ponchatoula" or the "Association"),
Ponchatoula, Louisiana, announced today that the Association has received
approval from the Office of Thrift Supervision in Washington, D.C. to reorganize
from the mutual holding company form of organization to the stock holding
company form of organization. In connection with the reorganization, the
Association has formed a company, Homestead Bancorp, Inc. (the "Company"), a
Louisiana corporation, to serve as the stock holding company of the Association.
Pursuant to a plan of conversion and agreement and plan of reorganization,
the Company is offering a minimum of 722,500 shares and a maximum of 977,500
shares, subject to adjustment, of its common stock at a price of $10.00 per
share. Certain depositors as of specified record dates, the Company's Employee
Stock Ownership Plan, directors, officers and employees and public stockholders
of the Association will have an opportunity to purchase stock through a
Subscription Offering that closes on June 23, 1998. Concurrent with the
Subscription Offering, stock will be offered to persons who reside in Louisiana
or to whomever else the prospectus is delivered to in a Community Offering with
first preference given to natural persons who reside in Tangipahoa Parish,
Louisiana. The Subscription and Community Offering (together, the "Offering")
will be managed by Trident Securities, Inc. of Raleigh, North
<PAGE>
Carolina. In addition, public stockholders of the Association as of the
effective date of the reorganization will receive shares of common stock in the
Company in exchange for their shares of common stock in Ponchatoula Homestead
Savings, F.A. at an exchange ratio specified in the Prospectus. A Prospectus
describing, among other things, the terms of the Offering will be mailed to
stockholders of the Association and members of Homestead Mutual Holding Company
on or about May _____, 1998. In addition, local community members will be given
an opportunity to request a copy of the Prospectus.
As a result of the conversion, the Association will operate as a
subsidiary of the Company. According to Mr. Caldwell, "Our day to day operations
will not change as a result of the conversion and deposits will continue to be
insured by the FDIC up to the applicable legal limits."
Customers or stockholders with questions concerning the conversion should
call the Stock Information Center at (504) 386-____, or visit the Association's
main office in Ponchatoula, Louisiana.
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Homestead Bancorp, Inc. The offer is made only by the Prospectus. The shares
of Common Stock are not deposits or savings accounts and will not be insured by
the Federal Deposit Insurance Corporation or any other governmental agency.
<PAGE>
Press Release FOR IMMEDIATE RELEASE
For More Information Contact:
Lawrence C. Caldwell, Jr.
President and Chief Executive Officer
Ponchatoula Homestead Savings, F.A.
(504) 386-3379
HOMESTEAD BANCORP, INC. COMPLETES STOCK OFFERING
Ponchatoula, Louisiana - (July __, 1998) Lawrence C. Caldwell, Jr.,
President and Chief Executive Officer of Ponchatoula Homestead Savings, F.A.
("Ponchatoula" or the "Association"), announced today that Homestead Bancorp,
Inc. (the "Company"), the holding company for the Association, recently
completed its stock offering on June __, 1998 in connection with the
Association's conversion from the mutual holding company form of organization to
the stock holding company form of organization. A total of __________ shares
were sold at $10.00 per share in connection with the stock offering, and
__________ shares will be issued in exchange for shares of common stock of the
Association, in each case subject to final approval of the independent appraisal
by the Office of Thrift Supervision.
On July 1, 1998, the Plan of Conversion of Homestead Mutual Holding
Company and Agreement and Plan of Reorganization between the Company and the
Association will be submitted to the voting members of Homestead Mutual Holding
Company and the stockholders of the Association at a Special Meeting of Members
and a Special Meeting of Stockholders, respectively.
Mr. Caldwell indicated that the officers and board of directors of the
Company and the Association want to express their thanks for the response to the
stock offering and that the Association looks forward to serving the needs of
its customers and stockholders as a community-based stock institution. The
offering was managed by Trident Securities, Inc. Assuming, among other things,
approval of the Plan by members and stockholders, the stock is expected to
commence trading on the Nasdaq SmallCap System under the symbol "HSTD" on or
about July __, 1998.
<PAGE>
II. Advertisements
A. Explanation
The intended use of the attached advertisement "A" is to notify the
Association's customers, stockholders and members of the local community
that the Conversion offering is underway.
The intended use of advertisement "B" is to remind the Association's
customers and stockholders of the closing date of the subscription
offering.
B. Media Schedule
1. Advertisement A - To be run immediately following OTS approval and
run weekly for the first three weeks.
2. Advertisement B - To be run during the last week of the subscription
offering.
Trident may feel it is necessary to run more ads in order to remind
customers, stockholders and community members of the close of the
Subscription/Community Offering.
Alternatively, Trident may, depending upon the response from the customer
and stockholder base, choose to run fewer ads or no ads at all.
<PAGE>
Advertisement (A)
- --------------------------------------------------------------------------------
This announcement is neither an offer to sell nor a solicitation of an
offer to buy these securities. The offer is made only by the Prospectus. These
shares have not been approved or disapproved by the Securities and Exchange
Commission, the Office of Thrift Supervision or the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation, nor has such
commission, office or corporation passed upon the accuracy or adequacy of the
prospectus. Any representation to the contrary is a criminal offense.
New Issue May __, 1998
Minimum of 722,500 Shares and Maximum of
977,500 Shares (Subject to Adjustment)
These shares are being offered pursuant
to a Plan of Conversion and Agreement and Plan of Reorganization whereby
Ponchatoula Homestead Savings, F.A.
Ponchatoula, Louisiana will
convert from the mutual holding company form of organization
and become a wholly-owned subsidiary of
Homestead Bancorp, Inc.
Common Stock
---------------
Price $10.00 Per Share
---------------
TRIDENT SECURITIES, INC.
For a copy of the prospectus call (504) 386-____.
- --------------------------------------------------------------------------------
<PAGE>
Advertisement (B)
- --------------------------------------------------------------------------------
PONCHATOULA HOMESTEAD SAVINGS, F.A.'S CUSTOMERS,
STOCKHOLDERS
AND MEMBERS OF THE GENERAL PUBLIC
JUNE 23, 1998, IS THE DEADLINE TO
ORDER STOCK OF HOMESTEAD BANCORP, INC.
Customers and stockholders of Ponchatoula Homestead Savings, F.A.
and members of the general public have the opportunity
to invest in Ponchatoula Homestead Savings, F.A. by subscribing
for common stock in its proposed holding company
HOMESTEAD BANCORP, INC.
A Prospectus relating to these securities is
available at our office or by calling our
Stock Information Center at (504) 386-____.
This announcement is not an offer to sell or a solicitation of an offer to
buy the stock of Homestead Bancorp, Inc. The offer is made only by the
Prospectus. The shares of Common Stock are not deposits or savings accounts and
will not be insured by the Federal Deposit Insurance Corporation or any other
governmental agency.
Copies of the Prospectus may be obtained in any state in which this
announcement is circulated from the undersigned or such other brokers and
dealers as may legally offer these securities in such state.
- --------------------------------------------------------------------------------
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
Conversion. It serves to answer some of the most commonly asked questions
in "plain, everyday language". Although most of the answers are taken
verbatim from the Prospectus, it saves the individual from searching for
the answer to a simple question.
B. Method of Distribution
There are five primary methods of distribution of the Question and Answer
brochure. However, regardless of the method the brochures are always
accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing to
all members and stockholders of the Association.
2. Question and Answer brochures are available at the Association.
3. Question and Answer brochures are distributed in information packets
at community meetings.
4. Question and Answer brochures are sent out in a standard information
packet to all members who request a copy of the Prospectus.
5. Question and Answer brochures are sent out in a standard information
packet to all interested investors who phone the Stock Information
Center requesting information.
<PAGE>
QUESTIONS AND ANSWERS
REGARDING THE PLAN OF CONVERSION AND AGREEMENT AND
PLAN OF REORGANIZATION
On February 25, 1998, the Boards of Directors of Ponchatoula Homestead
Savings, F.A. ("Ponchatoula" or the "Association") and Homestead Mutual Holding
Company (the "Mutual Holding Company") unanimously adopted the Plan of
Conversion and Agreement and Plan of Reorganization (the "Plan of Conversion")
pursuant to which the Mutual Holding Company will convert from mutual to stock
form and the Association will reorganize as a wholly owned subsidiary of a new
company -- Homestead Bancorp, Inc., a Louisiana corporation (the "Company").
This brochure is provided to answer basic questions regarding the
Conversion. Following the Conversion, the Association will continue to provide
financial services to its depositors, borrowers and other customers and will
operate with its existing management and employees. The Conversion will not
affect the terms, balances, interest rates or existing federal insurance
coverage on the Association's deposits or the terms or conditions of any loans
to existing borrowers under their individual contractual arrangements with the
Association.
For complete information regarding the Conversion, see the Prospectus
dated May __, 1998. Copies of the Prospectus may be obtained by calling the
Stock Information Center at (504) 386-____.
Background
On August 31, 1994, the Association reorganized into the mutual holding
company structure. In connection with this transaction, the Mutual Holding
Company was formed and the Association became a public company through an
offering of common stock.
The primary business of the Mutual Holding Company has been to hold shares
of the Association's common stock (the "Association Common Stock"). As majority
shareholder of the Association, it holds 456,240 shares or 75.2% of the shares
of Association Common Stock outstanding. The remaining shares (the "Public
Association Shares") are traded publicly. They are owned by the Association's
management, benefit plans, customers and members of the general public
(collectively, the "Public Stockholders").
In connection with the Conversion, the Company is offering a minimum of
722,500 shares and a maximum of 977,500 shares (which may be increased to up to
1,124,125 shares) of Company common stock (the "Conversion Stock") at a purchase
price of $10.00 per share (the "Purchase Price") in a Subscription and Community
Offering, and, if necessary, a Syndicated Community Offering (collectively, the
"Offerings"). Additional shares of the Company's common stock are designated for
an exchange offering whereby the shares of Association Common Stock held by the
Public Stockholders as of the effective date of the Conversion (the "Effective
Date") will be converted into shares of Company common stock (the "Exchange
Shares") at a stated Exchange Ratio (the "Exchange"). The Public Stockholders
will be mailed instructions with regard to effecting the Exchange. The
Conversion of the Mutual Holding Company, the Offerings and the Exchange are
referred to collectively herein as the "Conversion." As required by Office of
Thrift Supervision regulations, members of
<PAGE>
the Mutual Holding Company and the Association's stockholders are being asked to
approve the Plan of Conversion, as addressed below in the section entitled
"Voting."
1. Q. What will be the effect of the Conversion?
A. o The Company will replace the Mutual Holding Company as the
holding company for the Association.
o The Company will issue shares of common stock.
o The Company's common stock will be publicly held and will be
traded on the Nasdaq SmallCap System under the symbol "HSTD".
o The Public Stockholders will exchange their Association Common
Stock for common stock of the Company.
2. Q. What is the reason for the Conversion?
A. In 1994, the Association reorganized into the mutual holding company
structure for a number of reasons, including the ability to raise
capital on an incremental basis so that new capital could be
invested in a controlled manner. If the Association had undertaken a
standard conversion involving the formation of a stock holding
company in 1994, applicable Office of Thrift Supervision regulations
would have required a greater amount of common stock to be sold,
resulting in more proceeds than could have been utilized at the
time.
A principal purpose of the Conversion is to structure the Company in
the stock form of organization that is used by most other holding
companies of savings institutions and commercial banks. This
structure, along with the increased capital resulting from the
Offerings, will facilitate possible diversification into other
banking-related businesses and will provide the Company with
additional operating flexibility.
Additionally, the Conversion will result in an increase in the
number of outstanding shares of common stock that will increase the
likelihood of the development of an active and liquid trading
market.
The Board of Directors believes that the Conversion of the Mutual
Holding Company from the mutual to the stock form of organization
and the related Offerings and Exchange are consistent with the goal
of enhancing value for shareholders and customers.
2
<PAGE>
3. Q. Will the Conversion have any effect on my savings account or loan
account with the Association?
A. No, except with regard to voting and liquidation rights as described
in the Prospectus. Customers will be served in the same offices by
the same staff. The Conversion will not affect the amount, interest
rate or withdrawal rights of deposit accounts (except to the extent
funds are used to purchase Conversion Stock), which accounts will
continue to be insured by the Savings Association Insurance Fund of
the Federal Deposit Insurance Corporation to the maximum legal
limit. Likewise, the loan accounts and rights of borrowers will not
be affected.
4. Q. Will there be changes in directors, officers or employees as a
result of the Conversion?
A. No. Officers and employees of the Association will continue in their
current capacities. The directors of the Association will serve as
the initial directors of the Company.
5. Q. How has the Association performed recently?
A. For the three months ended March 31, 1998, the Association recorded
net income of $128,000 or $.21 per share. Net income represented a
.87% annualized return on average assets and a 8.45% annualized
return on average equity. For the years ended 1997 and 1996, net
income was $316,000 and $146,000, respectively.
6. Q. Does the Company anticipate paying cash dividends on the Company's
common stock?
A. After the completion of the Conversion, the Board of Directors of
the Company expects to pay cash dividends on its common stock at an
initial quarterly rate of $.05 per share commencing with the first
full quarter following the consummation of the Conversion. There can
be no assurance, however, that dividends will be paid or that, if
paid, such dividends will not be reduced or eliminated in future
periods.
7. Q. How will the proceeds of the Offerings be used?
A. Net proceeds from the sale of the Conversion Stock are estimated to
be between $6.8 million and $9.3 million. The Company plans to
contribute to the Association 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 an employee stock ownership plan (the "ESOP") to
enable the ESOP to purchase 8% of the Conversion Stock, and the
remainder of the net proceeds retained by the Company will initially
be invested in investment securities, mortgage-backed securities,
U.S. government and federal
3
<PAGE>
agency securities of various maturities, and deposits. Funds
retained by the Company may be used to support the future expansion
of operations and for other business or investment purposes. Subject
to applicable limitations, such funds also may be used in the future
to repurchase shares of common stock. Funds contributed to the
Association from the Company will be used to support the
Association's lending and investment activities.
VOTING - YOUR VOTE IS IMPORTANT
The Mutual Holding Company's Members (as defined below) are being asked to
approve the Plan of Conversion, which was adopted by the Boards of Directors of
the Association and the Mutual Holding Company and approved by the Office of
Thrift Supervision. The Association's stockholders are also being asked to
approve the Plan of Conversion. A copy of the Plan of Conversion may be obtained
from any Association office or by calling the Stock Information Center.
Voting on the Plan of Conversion does not affect deposit or loan accounts
at the Association, and does not obligate customers or stockholders to purchase
stock in the Offerings.
8. Q. Which customers of the Association are being asked to vote on the
Plan of Conversion?
A. Depositors of the Association as of May 4, 1998 who continue to be
members on the date of the Special Meeting or any adjournment
thereof (the "Members") are entitled to vote. Each Member has been
mailed a Proxy Card, a Proxy Statement and a Prospectus describing
the Plan of Conversion.
Each Member will be entitled to cast one vote for each $100 or
fraction thereof of the withdrawable value of any savings accounts
in the Association as of May 4, 1998. The maximum number of votes
eligible to be cast by a Member is 25. The affirmative vote of a
majority of the total outstanding votes of the Members is required
for approval of the Plan.
In accordance with Office of Thrift Supervision regulations, Members
are being solicited to vote. The Board of Directors urges Members to
vote FOR the Plan of Conversion. Not voting will have the same
effect as a vote against the Plan of Conversion. Without sufficient
favorable votes, the Conversion cannot be completed. In that event,
funds submitted by investors in connection with the Offerings would
be promptly returned with interest and the Exchange will not occur.
9. Q. Which stockholders of the Association may vote on the Plan of
Conversion?
A. Stockholders of the Association as of May 4, 1998 are entitled to
vote. Each stockholder has been mailed a Proxy Card, a Proxy
Statement and a Prospectus
4
<PAGE>
describing the Plan of Conversion and the transactions contemplated
thereby. The affirmative vote of at least a majority of the votes
cast by Public Stockholders and two-thirds of the total outstanding
Association Common Stock (including shares held by the Mutual
Holding Company) is required for approval of the Plan of Conversion.
The Board of Directors urges stockholders to vote FOR the Plan of
Conversion.
10. Q. How do I vote by proxy?
A. Please read the Proxy Statement that you received. You may vote by
completing, signing and returning the Proxy Card in the Proxy Return
Envelope provided. If you are a Public Stockholder and a Member, you
should have received two Proxy Statements and Proxy Cards and we
urge you to vote in both capacities.
Please respond promptly.
11. Q. Why may I have received several Proxy Cards?
A. If you have more than one deposit account at the Association, you
could receive more than one informational packet and each packet
should contain a separate Proxy Card, depending on the ownership
structure of your accounts.
If you owned shares of Association Common Stock under more than one
registration, you will receive more than one informational packet
and each packet should contain a separate Proxy Card. PLEASE VOTE,
SIGN AND PROMPTLY RETURN ALL PROXY CARDS.
12. Q. Am I obligated to purchase stock if I vote in favor of the Plan of
Conversion?
A. No. To purchase stock in the Offerings, you must place an order and
make a payment.
THE OFFERINGS
Investment in common stock involves certain risks. Before making an investment
decision, please carefully read the enclosed Prospectus, including the section
entitled "Risk Factors."
13. Q. Who may purchase Conversion Stock in the Offerings?
A. The Offerings consist of (i) a Subscription Offering to certain past
and current customers of the Association, the ESOP, directors,
officers and employees of the Mutual Holding Company and the
Association and the Public Stockholders and (ii) a possible
Community Offering to certain members of the general public, with
preference given to natural persons residing in Tangipahoa Parish,
Louisiana.
The Conversion Stock is being offered in the following order of
priority: (i)
5
<PAGE>
depositors of the Association 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 the
Association with account balances of $50.00 or more as of the close
of business on March 31, 1998 ("Supplemental Eligible Account
Holders"); (iv) depositors of the Association as of the close of
business on May 4, 1998 (other than Eligible Account Holders and
Supplemental Eligible Account Holders)("Other Members"); (v)
directors, officers and employees of the Mutual Holding Company and
the Association; (vi) Public Stockholders; (vii) natural persons
residing in Tangipahoa Parish, Louisiana; and (viii) members of the
general public residing elsewhere.
14. Q. What is the price per share?
A. The shares of Conversion Stock are being offered at a Purchase Price
of $10.00 per share. All subscribers will pay the same price per
share. No commission will be charged.
15. Q. How was the offering range and Purchase Price of the Conversion
Stock determined?
A. Federal regulations require that the aggregate purchase price of the
common stock in the Offerings be consistent with an independent
appraisal of the pro forma value of the Association and the Company.
An appraisal dated March 20, 1998 was conducted by RP Financial,
Inc., a firm experienced in valuations of financial institutions.
The appraisal indicated an estimated aggregate pro forma market
value of $11,175,390 (the "Independent Valuation"). Because the
Public Stockholders will receive approximately the same aggregate
percentage ownership interest in the Company as they held in the
Association as a result of the exchange (as adjusted for dividends
waived by the Mutual Holding Company), the Appraisal was multiplied
by the Mutual Holding Company's adjusted percentage interest in the
Association to determine the midpoint of the valuation price range
(the "Estimated Valuation Range") of $8,500,000. The Board of
Directors has determined to offer the Conversion Stock at a purchase
price of $10.00 per share. Based on this price and the independent
valuation, the Company is offering a range of between approximately
$7,225,000 and $9,775,000 of Conversion Stock, or between 722,500
shares and 977,500 shares of Conversion Stock, subject to a
potential 15% increase to up to 1,124,125 shares.
Upon consummation of the Conversion, shares of Conversion Stock
issued in the Offerings will represent approximately 76.06% of the
total shares of common stock outstanding, while Exchange Shares
issued pursuant to the Exchange will represent approximately 23.94%
of the total outstanding shares. Assuming the sale of 850,000
shares, the midpoint of the Estimated Valuation Range, it is
anticipated that there will be 1,117,539 shares of common stock
outstanding upon consummation of the Conversion, including the
shares to be issued in the Exchange.
6
<PAGE>
The Independent Valuation will be updated at the conclusion of the
Offerings. In the event that less than 722,500 shares of Conversion
Stock are subscribed for in the Offerings, a resolicitation of
subscribers may be necessary. Resolicitation may also be necessary
in the event that more than 1,124,125 shares of Conversion Stock are
subscribed for in the Offerings.
16. Q. When do the Offerings terminate?
A. The Offerings will terminate at noon, Central Time, on June 23,
1998, unless the Offerings are extended.
17. Q. How do I purchase Conversion Stock in the Offerings?
A. Please carefully read and complete the Stock Order Form. The
Association is not required to accept copies of Stock Order Forms.
You may hand deliver the Stock Order Form to any Association office,
or you may use the enclosed Order Form Reply Envelope. Payment may
be made by check or money order or by authorization of withdrawal
from your Association passbook or certificate of deposit account(s).
A hold will be placed on the designated account(s) for the
authorized amount(s). Withdrawal will be made at the consummation of
the Conversion. Any applicable penalty for early withdrawal will be
waived.
18. Q. Will I receive interest on funds I submit?
Yes. Funds received will be placed in a segregated account at the
Association, and interest will be paid at the Association's passbook
rate until the Offerings are consummated. With respect to authorized
account withdrawals, interest will continue to accrue at the
account's contractual rate until the Offerings are consummated.
19. Q. How may I purchase the common stock through a Ponchatoula Homestead
IRA?
If you have an IRA at Ponchatoula Homestead, you will need to
transfer your existing relationship to an independent trustee
authorized to hold self-directed IRA accounts. Please call the Stock
Information Center for assistance in transferring your account or
establishing a new self-directed IRA for the purchase of stock.
Because the IRA-related procedures take time, please contact the
Stock Information Center as early as possible.
20. Q. What is the minimum and maximum number of shares that I may
subscribe for in the Offerings?
Purchase limitations are described in detail in the Prospectus. The
minimum purchase is 25 shares ($250.00). No Eligible Account Holder,
Supplemental Account Holder, Other Member, director, officer, or
employee or Public Stockholder may purchase in their capacity as
such in the Subscription Offering
7
<PAGE>
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 any
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 Company common stock issued in
the Conversion (28,497 shares and 38,555 shares at the minimum and
maximum of the Estimated Valuation Range, respectively).
21. Q. What will happen to my order if orders are received for more stock
than is available?
A. The allocation method depends on the purchase priority category in
which the oversubscription takes place. Please read the Prospectus,
which includes details about the allocation procedures.
22. Q. Will the Company's common stock be insured by the Federal Deposit
Insurance Corporation?
A. No.
23. Q. Are directors and officers purchasing common stock in the Offerings?
A. Yes. In the Offerings, they expect to purchase an aggregate of
32,000 shares of Conversion Stock. After exchange of their shares of
Association Common Stock for Company common stock, directors and
executive officers are expected to own 7.7% of the outstanding
common stock of the Company, assuming the sale of 850,000 shares of
Conversion Stock in the Offerings.
24. Q. When will I receive my stock certificate for shares I purchased
in the Offerings?
A. Stock certificates will be mailed as soon as practicable after the
Offerings are consummated. Please be aware that you may not be able
to sell the shares you purchased until you have received a stock
certificate.
25. Q. How may I purchase or sell shares in the future?
A. You may purchase or sell shares through a stockbroker or discount
brokerage. The Company expects to have its common stock quoted on
the Nasdaq SmallCap System under the symbol "HSTD." It is expected
that the Company's common stock will be more liquid than the
Association's Common Stock has been, because
8
<PAGE>
there will be a larger number of shares owned by the public. There
can be no assurance, however, than an active and liquid market for
the common stock will develop or continue.
THE EXCHANGE
Upon the Effective Date, trading in the Association Common Stock will cease.
Each Public Stockholder as of the Effective Date will be contacted for the
purpose of exchanging Public Association Shares for shares of Company common
stock. Please refer to the Prospectus for a detailed discussion of the Exchange.
26. Q. What is the Exchange?
A. Each share of Association Common Stock owned by Public Stockholders
on the Effective Date will automatically be converted into shares of
the Company's common stock pursuant to an exchange ratio ("Exchange
Ratio").
27. Q. How will the Exchange Ratio be determined?
A. The Exchange Ratio is designed to ensure that each Public
Stockholder will own approximately the same percentage of the
Company's common stock as was owned of the Association's Common
Stock, as adjusted for dividends waived by the Mutual Holding
Company. The Public Stockholders own 23.94% of the Association
Common Stock as adjusted at March 31, 1998. Based on this percentage
and on the offering range of between 722,500 and 977,500 shares of
Conversion Stock, the Exchange Ratio is expected to range from
1.51499 to 2.04970 shares, respectively, of the Company's common
stock for each share of Association Common Stock. If the offering
range is increased 15% to 1,124,125 shares of Conversion Stock, the
Exchange Ratio would increase to 2.35715.
Assuming the sale of 850,000 shares of Conversion Stock, the
midpoint of the offering range, one share of Association Common
Stock would be exchanged for 1.78235 shares of Company common stock.
28. Q. How will the Exchange be accomplished?
A. As of the Effective Date, the shares of the Association Common Stock
held by the Mutual Holding Company will be cancelled, and the shares
of Association Common Stock owned by Public Stockholders will no
longer trade. As soon as practicable, the Association will send
transmittal forms to Public Stockholders. The transmittal forms are
expected to be mailed promptly following the Effective Date and will
contain instructions with respect to the surrender of certificates
representing the Association Common Stock to be exchanged for the
Company's common stock. It is expected that certificates for shares
of the Company's common stock will be distributed promptly after
receipt of the properly executed transmittal forms. Cash will be
issued in lieu of fractional shares.
9
<PAGE>
Shareholders should not forward certificates until they receive
instructions.
MUTUAL TO STOCK CONVERSION
29. Q. How can I get further information concerning the Conversion?
A. You may call the Stock Information Center at (504) 386-____ for
further information or to request a copy of the Prospectus, a Stock
Order Form, a Proxy Statement or a Proxy Card.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY HOMESTEAD BANCORP, INC. COMMON STOCK. OFFERS TO BUY OR TO SELL
MAY BE MADE ONLY BY THE PROSPECTUS. IF YOU ARE CONSIDERING PURCHASING STOCK, YOU
SHOULD READ THE PROSPECTUS PRIOR TO MAKING AN INVESTMENT DECISION. COPIES OF THE
PROSPECTUS MAY BE OBTAINED BY CALLING THE STOCK INFORMATION CENTER AT (504)
386-____.
THE SHARES OF HOMESTEAD BANCORP, INC. COMMON STOCK BEING OFFERED IN THE
OFFERINGS AND THE EXCHANGE ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
10
<PAGE>
IV. Officer and Director Support Brochure
A. Explanation
An Officer and Director Brochure merely highlights in brochure form the
purchase commitments shown in the Prospectus.
B. Quantity
An Officer and Director brochure is proposed to be sent out in the initial
mailing to all customers and stockholders of the Association along with
the Prospectus.
<PAGE>
DIRECTOR AND EXECUTIVE OFFICER
PURCHASE COMMITMENT
The following table sets forth, for each of the directors of Homestead
Bancorp, Inc. 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 Purchases of Total Common Stock
Conversion Stock to be Held
------------------- -------------------
Number of Exchange Number of Number of Percentage
Shares to be Held Amount Shares Shares of Total
----------------- ------ --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Name
John C. Bohning 4,881 $25,000 2,500 7,381 .7%
Lawrence C. Caldwell, Jr. 13,317 150,000 15,000 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>
<PAGE>
V. IRA Mailing
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of the
Association in order to alert the customers and stockholders that funds
held in an IRA can be used to purchase stock. Since this transaction is
not as simple as designating funds from a certificate of deposit like a
normal stock purchase, this letter informs the customer or stockholder
that this process is slightly more detailed and involves a personal visit
to the Association.
B. Quantity
One IRA letter is proposed to be mailed to each IRA customer or
stockholder of the Association. These letters would be mailed following
OTS approval for the Conversion and after each customer or stockholder has
received the initial mailing containing a Proxy Statement and a
Prospectus.
C. Example - See following page.
<PAGE>
Ponchatoula Homestead Savings, F.A. Letterhead
________, 1998
Dear Individual Retirement Account Participant:
As you know, Ponchatoula Homestead Savings, F.A. ("Ponchatoula" or the
"Association") is in the process of converting from the mutual holding company
form of organization to the stock holding company form of organization and has
formed Homestead Bancorp, Inc. (the "Company") to own all of the stock of the
Association. Through the Conversion, certain current and former customers and
stockholders have the opportunity to purchase shares of common stock of the
Company in a Subscription Offering. The Company currently is offering a minimum
of 722,500 shares and a maximum of 977,500 shares of Conversion Stock, subject
to adjustment, of the Company at a price of $10.00 per share.
As the holder of an individual retirement account ("IRA") at the
Association, you have an opportunity to become a stockholder in the Company
using some or all of the funds being held in your IRA. If you desire to purchase
shares of common stock of the Company through your IRA, the Association can
assist you in self-directing those funds. This process can be done without an
early withdrawal penalty and generally without a negative tax consequence to
your retirement account.
If you are interested in receiving more information on self-directing your
IRA, please contact our Stock Information Center at (504) 386- ____________.
Because it may take several days to process the necessary IRA forms, a response
is required by _______, 1998 to accommodate your interest.
Sincerely,
Lawrence C. Caldwell, Jr.
President and Chief Executive Officer
This letter is neither an offer to sell nor a solicitation of an offer to buy
Homestead Bancorp, Inc. Common Stock. The offer is made only by the Prospectus,
which was recently mailed to you. The shares of Homestead Bancorp, Inc. Common
Stock are not deposits or savings accounts and will not be insured by the
Federal Deposit Insurance Corporation or any other governmental agency.
<PAGE>
VI. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) as a notice to the
Association's customers, stockholders and members of the local community
that the stock sale is underway and (2) to remind the customers and
stockholders of the end of the Subscription Offering. Trident has learned
in the past that many people forget the deadline for subscribing and
therefore we suggest the use of these simple reminders.
B. Quantity
Approximately 2 - 3 Counter cards will be used on customer service
representatives' desks and in the lobby but not at the teller windows.
Approximately 1 - 2 Lobby posters will be used at the office of the
Association
C. Example
<PAGE>
C. POSTER
OR
COUNTER CARD
Homestead Bancorp, Inc.
Proposed Holding Company for
Ponchatoula Homestead Savings, F.A.
"STOCK OFFERING MATERIALS
AVAILABLE HERE"
Subscription Offering Ends
June 23, 1998
<PAGE>
VII. Invitations
A. Explanation
In order to educate the public about the stock offering, Trident suggests
holding several Community Meetings in various locations. In an effort to
target a group of interested investors, Trident requests that each
Director of the Association submit a list of friends that he would like to
invite to a Community Meeting.
Prospectuses are given to each prospect at the Community meeting.
B. Quantity and Method of Distribution
Each Director submits a list of their prospects. An invitation is mailed
to each director's prospect.
<PAGE>
The Directors, Officers & Employees
of
Ponchatoula Homestead Savings, F.A.
cordially invite you
to attend a brief presentation
regarding the stock offering of
Homestead Bancorp, Inc.
Please join us at
Place
Address
on
Date
at Time
for hors d'oeuvres
R.S.V.P.
(504) 386-____
<PAGE>
VIII. Prospect Letters
A. Explanation
Once the application for Conversion has been approved by the OTS, Trident
will send out a series of three letters to the Officer's and Director's
targeted prospects. These letters are used to help facilitate the
marketing effort to this group. All prospects will receive a Prospectus as
soon as they are available.
B. Method of Distribution
Each Director submits his list of prospects. Each prospect is sent the
series of three letters all during the Subscription and Community
Offering.
C. Examples
1. Introductory letter
2. A. Thank you letter
or
B. Sorry you were unable to attend letter
3. Final reminder letter
<PAGE>
Example 1
(Introductory Letter)
(Ponchatoula Homestead Savings, F.A. Letterhead)
_______, 1998
Name
Address
City, State, Zip
Dear Name:
You have probably read recently in the newspaper that Ponchatoula
Homestead Savings, F.A. ("Ponchatoula" or the "Association") will soon be
converting from the mutual holding company form of organization to the stock
holding company form of organization. This Conversion is the biggest step in the
history of the Association in that it allows customers, employee benefit plans,
community members, employees, officers, directors and current stockholders the
opportunity to subscribe for stock in our new holding company - Homestead
Bancorp, Inc. (the "Company").
I have enclosed a Prospectus and a Stock Order Form that will allow you to
subscribe for shares and possibly become a charter stockholder of the Company
should you so desire. In addition, we will be holding several presentations for
friends of the Association in order to review the Conversion and the merits of
becoming a charter stockholder of the Company. You will receive an invitation
shortly.
I hope that if you have any questions you will feel free to call me or the
Association's Stock Information Center at (504) 386- _____________. I look
forward to seeing you at our presentation.
Sincerely,
Lawrence C. Caldwell, Jr.
President and CEO
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured by the Federal Deposit Insurance Corporation, the
Savings Association Insurance Fund or any other governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
Example 2A
(Thank You Letter)
(Ponchatoula Homestead Savings, F.A. Letterhead)
___________, 1998
Name
Address
City, State, Zip
Dear Name:
On behalf of the Board of Directors and management of Ponchatoula
Homestead Savings, F.A., I would like to thank you for attending our recent
presentation regarding the stock offering by Homestead Bancorp, Inc. We are
enthusiastic about the stock offering and look forward to completing the
Subscription and Community Offerings on June 23, 1998.
I hope that you will join me in becoming a charter stockholder of
Homestead Bancorp, Inc., and once again thank you for your interest.
Sincerely,
Lawrence C. Caldwell, Jr.
President and Chief Executive Officer
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured by the Federal Deposit Insurance Corporation, the
Savings Association Insurance Fund or any other governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
Example 2B
(Sorry You Were Unable to Attend)
(Ponchatoula Homestead Savings, F.A. Letterhead)
_______________, 1998
Name
Address
City, State, Zip
Dear Name:
I am sorry you were unable to attend our recent presentation regarding
Ponchatoula Homestead Savings, F.A.'s (the "Association") Conversion from the
mutual holding company form of organization to the stock holding company form of
organization. The Board of Directors and management are committed to building
long-term stockholder value, and as a group we are investing over $320,000 of
our own funds in Homestead Bancorp, Inc. (the "Company"), which excludes the
value of shares of Association common stock to be exchanged for Company common
stock. We are enthusiastic about the stock offering and look forward to
completing the Subscription and Community Offerings on June 23, 1998.
We have established a Stock Information Center to answer any questions
regarding the stock offering. Should you require any assistance between now and
June 23, 1998 I encourage you either to stop by any office of the Association or
to call our Stock Information Center at (504) 386-____.
I hope you will join me in becoming a charter stockholder of Homestead
Bancorp, Inc.
Sincerely,
Lawrence C. Caldwell, Jr.
President and Chief Executive Officer
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured by the Federal Deposit Insurance Corporation, the
Savings Association Insurance Fund or any other governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
Example 3
(Final Reminder Letter)
(Ponchatoula Homestead Savings, F.A. Letterhead)
___________, 1997
Name
Address
City, State, Zip
Dear Name:
Just a quick note to remind you that the deadline is quickly approaching
for purchasing stock in Homestead Bancorp, Inc., the proposed holding company
for Ponchatoula Homestead Savings, F.A. I hope you will join me in becoming a
charter stockholder in Louisiana's newest publicly owned financial institution
holding company.
The deadline for subscribing for shares to become a stockholder is June
23, 1998. If you have any questions, I hope you will call our Stock Information
Center at (504) 386-____.
Once again, I look forward to having you join me as a stockholder of
Homestead Bancorp, Inc.
Sincerely,
Lawrence C. Caldwell, Jr.
President and Chief Executive Officer
The shares of Common Stock offered in the Conversion are not savings accounts or
deposits and are not insured by the Federal Deposit Insurance Corporation, the
Savings Association Insurance Fund or any other governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
IX. Cover Letters for Initial Mailing
A. Explanation
These cover letters are used as an introduction for the Offering and Proxy
materials mailed to potential investors.
B. Method of Distribution
Appropriate Cover Letters will be sent out in the initial mailing.
B. Examples
<PAGE>
(Ponchatoula Homestead Savings, F.A. Letterhead)
May __, 1998
Dear Valued Customer:
Ponchatoula Homestead Savings, F.A. and Homestead Mutual Holding Company,
the parent company of Ponchatoula Homestead Savings, F.A., are pleased to
announce that we have received regulatory approval to proceed with our plan to
convert from the mutual holding company form of organization to the stock
holding company form of organization. This stock conversion and reorganization
is the most significant event in the history of Ponchatoula Homestead Savings,
F.A. in that it allows customers, community members, directors, employees and
stockholders an opportunity to own stock in Homestead Bancorp, Inc., the
proposed stock holding company for Ponchatoula Homestead Savings, F.A.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage on deposits at
Ponchatoula, or the terms or conditions of any loans to existing borrowers under
their individual contractual arrangements with Ponchatoula. Let us also assure
you that the Conversion will not result in any changes in the management,
personnel or the Board of Directors of Ponchatoula.
As one of our valued members, you have the opportunity to invest in
Ponchatoula's future by purchasing stock in Homestead Bancorp, Inc. during the
Subscription Offering, without paying a sales commission.
If you decide to exercise your subscription rights to purchase shares, you
must return the properly completed stock order form together with full payment
for the subscribed shares so that it is received by Ponchatoula no later than
12:00 noon, Central Time on June 23, 1998.
Enclosed is a proxy card. Your Board of Directors solicits your vote "FOR"
Ponchatoula's Plan of Conversion and Agreement and Plan of Reorganization. A
vote in favor of the Plan does not obligate you to purchase stock. Please sign
and return your proxy card promptly; your vote is important to us.
We have also enclosed a Prospectus and a Proxy Statement which fully
describes Ponchatoula, its management, board and financial strength and the Plan
of Conversion and Agreement and Plan of Reorganization. Please review it
carefully before you vote or invest. For your convenience, we have established a
Stock Information Center. If you have any questions, please call the Stock
Information Center collect at (504) 386-____.
We look forward to continuing to provide quality financial services to you
in the future.
Sincerely,
Lawrence C. Caldwell, Jr.
President
Enclosures
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Homestead Bancorp, Inc. common stock offered in the Conversion.
Such offer and solicitation is made only by means of the Prospectus. There shall
be no sale of stock in any state in which any offer, solicitation of an offer or
sale of stock would be unlawful.
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
(Ponchatoula Homestead Savings, F.A. Letterhead)
May __, 1998
Dear Friend:
Ponchatoula Homestead Savings, F.A. and Homestead Mutual Holding Company,
the parent company of Ponchatoula Homestead Savings, F.A., are pleased to
announce that we have received regulatory approval to proceed with our plan to
convert from a mutual holding company form of organization to the stock holding
company form of organization. This stock conversion is the most significant
event in the history of Ponchatoula Homestead Savings, F.A. in that it allows
customers, community members, directors, employees and stockholders an
opportunity to own stock in Homestead Bancorp, Inc., the proposed stock holding
company for Ponchatoula Homestead Savings, F.A.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage on deposits at
Ponchatoula, or the terms or conditions of any loans to existing borrowers under
their individual contractual arrangements with Ponchatoula. Let us also assure
you that the Conversion will not result in any changes in the management,
personnel or the Board of Directors of Ponchatoula.
Our records indicate that you were a depositor of Ponchatoula on either
December 31, 1996 or March 31, 1998 but that you were not a member on May 4,
1998. Therefore, under applicable law, you are entitled to subscribe for Common
Stock in the Subscription Offering. Orders submitted by you and others in the
Subscription Offering are contingent upon the approval of the Plan of Conversion
and Agreement and Plan of Reorganization at special meetings of members of
Homestead Mutual Holding Company and stockholders of Ponchatoula Homestead
Savings, F.A., both to be held on July 1, 1998 and upon receipt of all required
regulatory approvals.
If you decide to exercise your subscription rights to purchase shares, you
must return the properly completed stock order form together with full payment
for the subscribed shares so that it is received by Ponchatoula no later than
12:00 noon, Central Time on June 23, 1998.
Enclosed is a Prospectus which fully describes Ponchatoula, its
management, board and financial strength. Please review it carefully before you
invest. For your convenience, we have established a Stock Information Center. If
you have any questions, please call the Stock Information Center collect at
(504) 386-____.
We look forward to continuing to provide quality financial services to you
in the future.
Sincerely,
Lawrence C. Caldwell, Jr.
President
Enclosures
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Homestead Bancorp, Inc. common stock offered in the Conversion.
Such offer and solicitation is made only by means of the Prospectus. There shall
be no sale of stock in any state in which any offer, solicitation of an offer or
sale of stock would be unlawful.
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
TRIDENT SECURITIES, INC.
4601 SIX FORKS ROAD, SUITE 400
RALEIGH, NORTH CAROLINA 27609
TELEPHONE (919) 781-8900
FACSIMILE (919) 787-1670
May __, 1998
To Members and Certain Former Members of
Homestead Mutual Holding Company and Stockholders
of Ponchatoula Homestead Savings, F.A.
At the request of Homestead Bancorp, Inc. and Ponchatoula Homestead
Savings, F.A., we have enclosed a Prospectus and a Stock Order Form for your use
should you decide to subscribe for shares of common stock of Homestead Bancorp,
Inc. being issued in connection with the conversion and reorganization of
Ponchatoula Homestead Savings, F.A. from the mutual holding company form of
organization to the stock holding company structure, which includes the
formation of Homestead Bancorp, Inc., the new holding company for Ponchatoula
Homestead Savings, F.A.
If you decide to exercise your subscription rights to purchase shares, you
must return the properly completed Stock Order Form together with full payment
for the subscribed shares (or appropriate instructions authorizing withdrawal in
such amount from your authorized deposit account(s) at Ponchatoula Homestead
Savings, F.A.) so that it is received no later than noon, Central Time, on June
23, 1998.
Homestead Bancorp, Inc. has asked us to forward these documents to you in
view of certain requirements of the securities laws in your state. If you have
any questions, you may contact the Stock Information Center at (504) 386-____.
Very truly yours,
Trident Securities, Inc.
This document does not constitute an offer to sell, or the solicitation of an
offer to buy, shares of Homestead Bancorp, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and Proxy Statement, respectively. There shall be no
sale of stock in any state in which any offer, solicitation of an offer or sale
of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
<PAGE>
Subscription Rights
Special Notice
Any transfer of, or attempt to transfer, a subscription right
to any other person is illegal and subject to civil fines and/or
penalties and even criminal fines and/or penalties. Ponchatoula
Homestead Savings intends to prosecute vigorously any transfer of,
or attempt to transfer, subscription rights that comes to its
attention.
If you are (or have been) contacted by anyone offering to give
you money to buy stock in exchange for transferring the stock to
them later or to share in any way the proceeds upon the sale of the
stock, or to transfer your subscription rights in any other way,
please call us immediately at (501)386-_______.
<PAGE>
(Ponchatoula Homestead Savings, F.A. Letterhead)
May __, 1998
Dear Voting Member:
Ponchatoula Homestead Savings, F.A. and Homestead Mutual Holding Company,
the parent company of Ponchatoula Homestead Savings, F.A., are pleased to
announce that we have received regulatory approval to proceed with our plan to
convert from the mutual holding company form of organization to the stock
holding company form of organization. This stock conversion and reorganization
is a significant event in the history of Ponchatoula Homestead Savings, F.A.
We want to assure you that the Conversion will not affect the terms,
balances, interest rates or existing FDIC insurance coverage on deposits at
Ponchatoula, or the terms or conditions of any loans to existing borrowers under
their individual contractual arrangements with Ponchatoula. Let us also assure
you that the Conversion will not result in any changes in the management,
personnel or the Board of Directors of Ponchatoula.
Enclosed is a proxy card. Your Board of Directors solicits your vote "FOR"
Ponchatoula's Plan of Conversion and Agreement and Plan of Reorganization.
Please sign and return your proxy card promptly; your vote is important to us.
We have also enclosed a Prospectus for your information and a Proxy
Statement which fully describes Ponchatoula, its management, board and financial
strength and the Plan of Conversion and Agreement and Plan of Reorganization.
Please review it carefully before you vote. If you have any questions, please
call collect at (504) 386-____.
Although you may vote on the Conversion, Homestead Bancorp, Inc. (the
"Company") is unfortunately unable to either offer or sell its common stock to
you (i) because the number of eligible subscribers in your state makes
registration or qualification of the common stock or the filing of a consent to
service of process under the securities laws of your state impracticable, for
reasons of cost or otherwise; (ii) because the number of eligible subscribers in
your state makes registration or qualification of the Company, Ponchatoula or
their officers, directors, employees and persons acting on their behalf as
broker-dealers or salesmen in your state impracticable, for reasons of cost or
otherwise, or (iii) because you reside in a foreign country. Accordingly,
neither this letter, the enclosed materials nor the materials that you may
request should be considered an offer to sell or a solicitation of an offer to
buy the Company's common stock.
We look forward to continuing to provide quality financial services to you
in the future.
Sincerely,
Lawrence C. Caldwell, Jr.
President
Enclosures
This does not constitute an offer to sell, or the solicitation of an offer
to buy, shares of Homestead Bancorp, Inc. common stock offered in the
Conversion. Such offer and solicitation is made only by means of the Prospectus.
There shall be no sale of stock in any state in which any offer, solicitation of
an offer or sale of stock would be unlawful.
<PAGE>
X. Proxygram
A. Explanation
A proxygram is used when the majority of votes needed to adopt the Plan of
Conversion is still outstanding. The proxygram is mailed to those "target
vote" depositors and stockholders who have not previously returned their
signed proxy.
The target vote depositors and stockholders are determined by the
Conversion agent and registrar.
B. Example
<PAGE>
B. Example
- --------------------------------------------------------------------------------
P R O X Y G R A M
Ponchatoula Homestead Savings, F.A.
Homestead Mutual Holding Company
YOUR VOTE ON OUR PLAN OF CONVERSION AND AGREEMENT AND PLAN OF REORGANIZATION HAS
NOT BEEN RECEIVED.
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO
VOTING AGAINST THE PLAN.
VOTING FOR THE CONVERSION WILL NOT AFFECT THE INSURANCE OF YOUR ACCOUNT. IT WILL
CONTINUE TO BE INSURED UP TO $100,000 BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION.
YOU MAY PURCHASE STOCK IF YOU WISH, BUT VOTING DOES NOT OBLIGATE YOU TO BUY
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL, OR DELIVER, THE
PROXY CARD TO PONCHATOULA HOMESTEAD SAVINGS, F.A. TODAY. PLEASE VOTE ALL PROXY
CARDS RECEIVED.
WE RECOMMEND THAT YOU VOTE "FOR" THE PLAN OF CONVERSION AND AGREEMENT AND PLAN
OF REORGANIZATION. THANK YOU.
THE BOARD OF DIRECTORS AND MANAGEMENT OF
PONCHATOULA HOMESTEAD SAVINGS, F.A.
AND HOMESTEAD MUTUAL HOLDING COMPANY
- --------------------------------------------------------------------------------
IF YOU RECENTLY MAILED THE PROXY, PLEASE ACCEPT
OUR THANKS AND DISREGARD THIS REQUEST.
FOR FURTHER INFORMATION CALL (504) 386-____.
